<PAGE>
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 30, 1997
FILE NO. 33-91476
FILE NO. 811-9032
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
------------------------
FORM N-1A
---------------
REGISTRATION STATEMENT UNDER THE
SECURITIES ACT OF 1933 /X/
POST-EFFECTIVE AMENDMENT NO. 3
AND
REGISTRATION STATEMENT UNDER THE
INVESTMENT COMPANY ACT OF 1940 /X/
AMENDMENT NO. 4
------------------------
STI CLASSIC VARIABLE TRUST
(Exact Name of Registrant as Specified in Charter)
C/O THE CT CORPORATION SYSTEM
2 Oliver Street
Boston, Massachusetts 02109
(Address of Principal Executive Offices, Zip Code)
Registrant's Telephone Number, including Area Code (610) 676-1000
DAVID G. LEE
C/O SEI INVESTMENTS COMPANY
OAKS, PENNSYLVANIA 19456
(Name and Address of Agent for Service)
COPIES TO:
<TABLE>
<S> <C>
RICHARD W. GRANT, ESQUIRE JOHN H. GRADY, JR., ESQUIRE
MORGAN, LEWIS & BOCKIUS LLP MORGAN, LEWIS & BOCKIUS LLP
2000 ONE LOGAN SQUARE 1800 M STREET, N.W.
PHILADELPHIA, PENNSYLVANIA 19103 WASHINGTON, D.C. 20036
</TABLE>
It is proposed that this filing will become effective (check appropriate box)
<TABLE>
<C> <S>
X immediately upon filing pursuant to paragraph (b)
- ---------
- --------- on pursuant to paragraph (b)
- --------- 60 days after filing pursuant to paragraph (a)
- --------- on [date] pursuant to paragraph (a); or
- --------- 75 days after filing pursuant to paragraph (a) of Rule 485
</TABLE>
PURSUANT TO THE PROVISIONS OF RULE 24F-2 UNDER THE INVESTMENT COMPANY ACT OF
1940, AN INDEFINITE NUMBER OF UNITS OF BENEFICIAL INTEREST IS BEING REGISTERED
BY THIS REGISTRATION STATEMENT. REGISTRANT'S RULE 24F-2 NOTICE FOR FISCAL YEAR
ENDED DECEMBER 31, 1996 WAS FILED ON FEBRUARY 27, 1997.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
STI CLASSIC VARIABLE TRUST
CROSS REFERENCE SHEET
<TABLE>
<CAPTION>
N-1A ITEM NO. LOCATION
- -------------------------------------------------- ----------------------------------------
<S> <C> <C>
PART A
Item 1. Cover Page.............................. Cover Page
Item 2. Synopsis................................ Summary
Item 3. Condensed Financial Information......... *
Item 4. General Description of Registrant....... The Trust; Investment Objective;
Investment Policies and Strategies;
General Investment Policies and
Strategies; Investment Risks;
Description of Permitted Investments;
Investment Limitations; STI Classic
Variable Trust Information
Item 5. Management of the Trust................. Board of Trustees; Investment Advisor;
Portfolio Manager; Administration;
Distribution
Item 5A. Management Discussion of Firm
Performance............................ *
Item 6. Capital Stock and Other Securities...... Other Information -- Voting Rights;
Other Information -- Shareholder
Inquiries; Performance Information;
Dividends and Distributions; Tax
Information
Item 7. Purchase of Securities Being Offered.... Purchase and Redemption of Fund Shares;
Net Asset Value
Item 8. Redemption or Repurchase................ Purchase and Redemption of Fund Shares;
Net Asset Value
Item 9. Pending Legal Proceedings............... *
PART B
Item 10. Cover Page.............................. Cover Page
Item 11. Table of Contents....................... Table of Contents
Item 12. General Information and History......... The Trust
Item 13. Investment Objectives and Policies...... Description of Permitted Investments;
Investment Limitations; Description of
Shares
Item 14. Management of the Registrant............ Directors and Officers of the Trust; The
Administrator
Item 15. Control Persons and Principal Holders of
Securities............................. Directors and Officers of the Trust
Item 16. Investment Advisory and Other
Services............................... Investment Advisor; The Administrator;
The Distributor
Item 17. Brokerage Allocation.................... Fund Transactions; Trading Practices and
Brokerage
Item 18. Capital Stock and Other Securities...... Description of Shares
Item 19. Purchase, Redemption, and Pricing of
Securities Being Offered............... Purchase and Redemption of Shares;
Determination of Net Asset Value
Item 20. Tax Status.............................. Taxes
Item 21. Underwriters............................ The Distributor
Item 22. Calculation of Yield Quotations......... Computation of Yield; Computation of
Total Return
Item 23. Financial Statements.................... *
</TABLE>
PART C
Information required to be included in Part C is set forth under the appropriate
item, so numbered, in Part C of this Registration Statement.
* Not Applicable
<PAGE>
STI CLASSIC VARIABLE TRUST
INVESTMENT GRADE BOND FUND
CAPITAL GROWTH FUND
VALUE INCOME STOCK FUND
MID-CAP EQUITY FUND
INTERNATIONAL EQUITY FUND
INVESTMENT ADVISOR TO THE FUNDS:
STI CAPITAL MANAGEMENT, N.A.
The STI Classic Variable Trust (the "Trust") is a mutual fund that offers shares
in a number of separate investment portfolios. This Prospectus sets forth
concisely the information about the shares of the above-referenced Funds (each a
"Fund" and, collectively, the "Funds"). The Funds are available to the public
only through the purchase of certain variable annuity and variable life
insurance contracts ("Contracts") issued by various life insurance companies
("Insurers").
A Statement of Additional Information relating to the Funds dated the same date
as this Prospectus has been filed with the Securities and Exchange Commission
and is available without charge by writing to the Trust at Oaks, Pennsylvania
19456, or by calling 1-800-453-6038. The Statement of Additional Information is
incorporated into this Prospectus by reference.
The purchaser of a Contract should read this Prospectus in conjunction with the
prospectus for his or her Contract.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION PASSED UPON
THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
THE TRUST'S SHARES ARE NOT SPONSORED, ENDORSED, OR GUARANTEED BY, AND DO NOT
CONSTITUTE OBLIGATIONS OR DEPOSITS OF, THE ADVISOR OR ANY OF ITS AFFILIATES OR
CORRESPONDENTS INCLUDING SUNTRUST BANKS, INC., ARE NOT GUARANTEED OR INSURED BY
THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY
OTHER GOVERNMENTAL AGENCY, AND INVOLVE INVESTMENT RISKS, INCLUDING THE POSSIBLE
LOSS OF THE PRINCIPAL AMOUNT INVESTED.
APRIL 30, 1997
<PAGE>
2
No person has been authorized to give any information or to make any
representations not contained in this Prospectus, or in the Trust's Statement of
Additional Information relating to the Funds incorporated herein by reference,
in connection with the offering made by this Prospectus and, if given or made,
such information or representations must not be relied upon as having been
authorized by the Trust or SEI Financial Services Company (the "Distributor").
This Prospectus does not constitute an offering by the Trust or by the
Distributor in any jurisdiction in which such offering may not lawfully be made.
Throughout this Prospectus, the Investment Grade Bond Fund, which invests
primarily in bonds and other fixed income instruments, may be referred to as the
"Bond Fund" and the Capital Growth, Value Income Stock, Mid-Cap Equity and
International Equity Funds may be referred to as the "Equity Funds."
TABLE OF CONTENTS
<TABLE>
<S> <C>
Expense Summary........................................................... 3
The Trust................................................................. 5
Funds and Investment Objectives........................................... 5
Investment Policies and Strategies........................................ 5
General Investment Policies and
Strategies.............................................................. 8
Investment Risks.......................................................... 9
Investment Limitations.................................................... 11
Performance Information................................................... 11
Purchase and Redemption of Fund
Shares.................................................................. 11
Net Asset Value........................................................... 12
Dividends and Distributions............................................... 12
Tax Information........................................................... 12
STI Classic Variable Trust Information.................................... 13
The Trust................................................................. 13
Board of Trustees......................................................... 13
Investment Advisor........................................................ 13
Portfolio Managers........................................................ 14
Banking Laws.............................................................. 15
Distribution.............................................................. 15
Administration............................................................ 15
Transfer Agent and Dividend Disbursing Agent.............................. 15
Custodians................................................................ 16
Legal Counsel............................................................. 16
Independent Public Accountants............................................ 16
Other Information......................................................... 16
Voting Rights............................................................. 16
Reporting................................................................. 16
Shareholder Inquiries..................................................... 16
Description of Permitted Investments...................................... 16
Appendix.................................................................. A-1
Addresses................................................................. A-3
</TABLE>
<PAGE>
3
EXPENSE SUMMARY
Below is a summary of the estimated annual operating expenses for each Fund.
Actual expenses may vary.
FUND EXPENSES (AS A PERCENTAGE OF FUND ASSETS)
(NET OF VOLUNTARY REDUCTIONS AND REIMBURSEMENTS)(1)
<TABLE>
<CAPTION>
OTHER TOTAL FUND OPERATING
PORTFOLIO ADVISORY FEES EXPENSES EXPENSES
- ---------------------------------------- ------------- ------------ ---------------------
<S> <C> <C> <C>
Investment Grade Bond................... 0.0% .75% .75%
Capital Growth.......................... 0.0% 1.15% 1.15%
Value Income Stock...................... 0.0% .95% .95%
Mid-Cap Equity.......................... 0.0% 1.15% 1.15%
International Equity.................... 0.0% 1.60% 1.60%
</TABLE>
- ------------
(1) Absent voluntary reductions and reimbursements, advisory fees, other
expenses and total operating expenses expressed as a percentage of average
net assets of each Fund would be: Investment Grade Bond Fund -- .74%, 2.04%
and 2.78%; Capital Growth Fund -- 1.15%, 1.28% and 2.43%; Value Income Stock
Fund -- .80%, 1.15% and 1.95%; and Mid-Cap Equity Fund -- 1.15%, 1.64% and
2.79%; and International Equity Fund -- 1.25%, 2.35% and 3.60%.
EXAMPLE
An investor would pay the following expenses on a $1,000 investment, assuming
(1) a 5% annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
PORTFOLIO 1 YEAR 3 YEARS 5 YEARS 10 YEARS
- ---------------------------------------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Grade Bond................... $ 8 $ 24 $ 42 $ 93
Capital Growth.......................... $ 12 $ 37 $ 63 $ 140
Value Income Stock...................... $ 10 $ 30 $ 53 $ 117
Mid-Cap Equity.......................... $ 12 $ 37 $ 63 $ 140
International Equity.................... $ 16 $ 50 -- --
</TABLE>
THE EXAMPLE IS BASED UPON THE TOTAL OPERATING EXPENSES OF THE FUNDS AND SHOULD
NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES. ACTUAL EXPENSES
MAY BE GREATER OR LESS THAN THOSE SHOWN. The purpose of this table is to assist
the investor in understanding the various costs and expenses that may be
directly or indirectly borne by investors in the Trust.
<PAGE>
4
FINANCIAL HIGHLIGHTS
The following information has been audited by Arthur Andersen LLP, the Trust's
independent public accountants, whose report thereon was unqualified. This
information should be read in conjunction with the Trust's financial statements
and notes thereto, which are included in the Trust's Statement of Additional
Information and which appear, along with the Report of Arthur Andersen LLP, in
the Trust's 1996 Annual Report to Shareholders. Additional performance
information regarding each Fund is contained in the Trust's Annual Report to
Shareholders and is available upon request and without charge by calling
1-800-453-6038.
For a Share Outstanding Throughout Each Period Ended December 31
<TABLE>
<CAPTION>
NET REALIZED
NET ASSET AND DISTRIBUTIONS
VALUE NET UNREALIZED FROM NET DISTRIBUTIONS NET ASSET
BEGINNING INVESTMENT GAINS ON INVESTMENT FROM REALIZED VALUE END TOTAL
OF PERIOD INCOME INVESTMENTS INCOME CAPITAL GAINS OF PERIOD RETURN
--------- ---------- ------------ ------------- ------------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
VALUE INCOME STOCK FUND
1996...................... $10.67 $0.23 $1.74 $ (0.23) $ -- $12.41 18.64%
1995 (1).................. $10.00 $0.06 $0.67 $ (0.06) $ -- $10.67 7.31%*
MID-CAP EQUITY FUND(A)
1996...................... $10.27 $0.06 $1.59 $ (0.06) $ -- $11.86 16.05%
1995 (1).................. $10.00 $0.05 $0.27 $ (0.05) $ -- $10.27 3.19%*
CAPITAL GROWTH FUND
1996...................... $10.66 $0.12 $2.40 $ (0.12) $ -- $13.06 23.75%
1995 (1).................. $10.00 $0.04 $0.66 $ (0.04) $ -- $10.66 6.96%*
INVESTMENT GRADE BOND FUND
1996...................... $10.25 $0.54 $(0.33) $ (0.54) $ -- $ 9.92 2.29%
1995 (1).................. $10.00 $0.13 $0.25 $ (0.13) $ -- $10.25 3.68%*
INTERNATIONAL EQUITY FUND
1996(2)................... $10.00 $0.01 $0.16 $ (0.01) $ -- $10.16 1.70%*
<CAPTION>
RATIO OF NET
INVESTMENT INCOME
RATIO OF NET RATIO OF EXPENES (LOSS) TO AVERGE
RATIO OF INVESTMENT TO AVERAGE NET NET ASSETS
NET ASSETS EXPENSES TO INCOME TO ASSETS (EXCLUDING (EXCLUDING PORTFOLIO
END OF AVERAGE NET AVERAGE NET WAIVERS AND WAIVERS AND TURNOVER
PERIOD (000) ASSETS ASSETS REIMBURSEMENTS) REIMBURSMENTS) RATE
------------ ----------- ------------ ----------------- ----------------- ---------
<S> <C>
VALUE INCOME STOCK FUND
1996...................... $ 31,216 0.95% 2.45% 1.95% 1.45% 79.80%
1995 (1).................. $ 4,015 0.95% 2.98% 5.72% (1.79)% 7.17%
MID-CAP EQUITY FUND(A)
1996...................... $ 14,294 1.15% 0.58% 2.79% (1.06)% 139.60%
1995 (1).................. $ 3,409 1.15% 2.22% 6.34% (2.97)% 13.29%
CAPITAL GROWTH FUND
1996...................... $ 25,189 1.15% 1.15% 2.43% (0.13)% 148.48%
1995 (1).................. $ 3,778 1.15% 1.69% 6.18% (3.34)% 8.05%
INVESTMENT GRADE BOND FUND
1996...................... $ 8,039 0.75% 5.54% 2.78% 3.51% 303.30%
1995 (1).................. $ 3,115 0.75% 5.04% 6.05% (0.26)% 108.55%
INTERNATIONAL EQUITY FUND
1996(2)................... $ 995 1.60% 1.83% 31.39% (27.96)% --%
<CAPTION>
AVERAGE
COMMISSION
RATE(3)
---------
VALUE INCOME STOCK FUND
1996...................... $ 0.054
1995 (1).................. N/A
MID-CAP EQUITY FUND(A)
1996...................... $ 0.053
1995 (1).................. N/A
CAPITAL GROWTH FUND
1996...................... $ 0.053
1995 (1).................. N/A
INVESTMENT GRADE BOND FUND
1996...................... N/A
1995 (1).................. N/A
INTERNATIONAL EQUITY FUND
1996(2)................... $ 0.062
</TABLE>
(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)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 zero or rounded to zero.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
<PAGE>
5
THE TRUST
STI CLASSIC VARIABLE TRUST (the "Trust") is a diversified, open-end management
investment company that provides a convenient and economical means of investing
in several professionally managed portfolios of securities. The Trust currently
offers units of beneficial interest ("shares") in a number of separate Funds.
The Trust is intended exclusively as an investment vehicle for variable annuity
or variable life insurance contracts offered by the separate accounts of various
insurance companies. Each share of each Fund represents an undivided,
proportionate interest in that Fund.
FUNDS AND INVESTMENT OBJECTIVES
BOND FUND:
THE INVESTMENT GRADE BOND FUND seeks to provide as high a 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.
EQUITY FUNDS:
THE CAPITAL GROWTH FUND seeks to provide capital appreciation by investing
primarily in a portfolio of common stocks, warrants and securities convertible
into common stock which in the Advisor's opinion are undervalued in the
marketplace at the time of purchase.
THE VALUE INCOME STOCK FUND seeks to provide current income with the secondary
goal of achieving capital appreciation by investing primarily in equity
securities.
THE MID-CAP EQUITY FUND seeks to provide capital appreciation by investing
primarily in a diversified portfolio of common stocks, preferred stocks and
securities convertible into common stock of small to mid-size companies with
above-average growth of earnings. Current income will not be an important
criterion of investment selection and any such income should be considered
incidental.
THE INTERNATIONAL EQUITY FUND seeks to provide long term capital appreciation by
investing primarily in a diversified portfolio of equity securities of foreign
issuers.
There can be no assurance that a Fund will achieve its investment objective. The
investment objectives of each Fund are nonfundamental and may be changed without
investor approval.
INVESTMENT POLICIES AND STRATEGIES
INVESTMENT GRADE BOND FUND
The Investment Grade Bond Fund will invest exclusively in investment grade
obligations rated in one of the four highest rating categories by a nationally
recognized statistical rating organization ("NRSRO") or, if unrated, determined
by the Advisor to be of comparable quality at the time of purchase, including
corporate debt obligations; mortgage-backed securities, collateralized mortgage
obligations ("CMOs") and asset-backed securities; obligations issued or
guaranteed as to principal and interest by the U.S. Government or its agencies
or instrumentalities; custodial receipts involving U.S. Treasury obligations;
securities of the government of Canada and its provincial and local governments;
securities issued or guaranteed by foreign governments, their political
subdivisions, agencies or instrumentalities; obligations of supranational
entities and sponsored American Depositary Receipts ("ADRs") that are traded on
exchanges or listed on National Association of Securities Dealers Automated
Quotations ("NASDAQ"). Under normal circumstances, at least 65% of the Fund's
total assets will be invested in corporate and government bonds and debentures.
No more than 25% of the Fund's assets will be invested in securities rated below
the fourth highest rating category by an NRSRO or, if unrated, determined by the
Advisor to be of comparable quality at the time of purchase (see "Investment
Risks -- High Yield, Lower Rated Bonds").
<PAGE>
6
The Fund may purchase mortgage-backed securities issued or guaranteed as to the
payment of principal and interest by the U.S. Government or its agencies or
instrumentalities or, subject to a limit of 25% of the Fund's assets,
mortgage-backed securities issued by private issuers. These mortgage-backed
securities may be backed or collateralized by fixed, adjustable or floating rate
mortgages. The Fund may also invest in asset-backed securities which consist of
securities backed by company receivables, truck and auto loans, leases, credit
card receivables and home equity loans.
In order to reduce interest rate risk, and subject to a general limit of 25% of
the Fund's assets, the Fund may purchase floating or variable rate securities.
Some floating or variable rate securities will be subject to interest rate
"caps" or "floors." It may also buy securities on a when-issued basis, medium
term notes, putable securities and zero coupon securities. The Fund may also
invest up to 10% of its assets in restricted securities. The Fund may also
engage in futures and options transactions.
Under normal market conditions, it is anticipated that the Fund's average
weighted maturity will range from 4 to 10 years. In the case of mortgage-related
securities and asset-backed securities, maturity will be determined based on the
expected average life of the security. The Fund may shorten its average weighted
maturity to as little as 90 days if deemed appropriate for temporary defensive
purposes. By so limiting the maturity of its investments, the Fund expects that
its net asset value will experience less price movement in response to changes
in interest rates than the net asset values of mutual funds investing in similar
credit quality securities with longer maturities.
The Fund's portfolio turnover rate for the fiscal year ended December 31, 1996
was 303%. This rate of turnover will likely result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate were lower.
CAPITAL GROWTH FUND
The Capital Growth Fund invests primarily in a diversified portfolio of common
stocks, warrants, and securities convertible into common stocks which, in the
Advisor's opinion, are undervalued in the marketplace at the time of purchase.
In selecting securities for the Fund, the Advisor will evaluate factors believed
to affect capital appreciation such as the issuer's background, industry
position, historical returns on equity and experience and qualifications of the
management team. Dividend and interest income is incidental to growth of
capital. The Advisor will rotate the Capital Growth Fund's holdings between
various market sectors based on economic analysis of the overall business cycle.
Under normal conditions, at least 65% of the total assets of the Capital Growth
Fund will be invested in common stocks.
All of the common stocks in which the Fund invests are traded on registered
exchanges or on the over-the-counter market in the United States. Assets of the
Capital Growth Fund not invested in the securities described above may be
invested in U.S. dollar denominated equity securities of foreign issuers
(including sponsored ADRs that are traded on exchanges or listed on NASDAQ),
pay-in-kind securities and bonds. The bonds that the Capital Growth Fund may
purchase may be rated in any rating category or may be unrated, provided that no
more than 10% of the Fund's total assets will be invested in bonds rated below
the fourth highest rating category by an NRSRO or unrated securities of
comparable quality (see "Investment Risks -- High Yield, Lower Rated Bonds"). In
addition, the Fund may invest up to 10% of its assets in restricted securities
and may purchase securities on a when-issued basis.
The Fund's turnover rate for the fiscal year ended December 31, 1996 was 148%.
This rate of turnover will likely result in higher brokerage commissions and
higher levels of realized capital gains than if the turnover rate were lower.
VALUE INCOME STOCK FUND
The Value Income Stock Fund seeks to provide current income by structuring its
investments in an attempt to maintain the Fund's yield at a level above the
average dividend yield of the securities comprising the S&P 500 Stock Index.
Achieving such a yield will be the Fund's primary consideration when purchasing
securities. A secondary objective of the Fund will be capital appreciation.
<PAGE>
7
The Fund will invest at least 80% of its total assets in equity securities.
Investments will consist primarily of common stocks, and, under normal market
conditions, at least 65% of the Fund's assets will be invested in common stocks
issued by corporations which have a history of paying regular dividends,
although there can be no assurance that such corporations will continue to pay
dividends. Other equity securities in which the Fund may invest are convertible
debt securities, preferred stocks and warrants which are convertible into or
exchangeable for common stocks; and U.S. dollar denominated equity securities of
foreign issuers (including sponsored ADRs that are traded on exchanges or listed
on NASDAQ). All of the common stocks in which the Fund invests are traded on
registered exchanges such as the New York or American Stock Exchange or on the
over-the-counter market in the United States (i.e., NASDAQ). The Fund may also
purchase debt securities (corporate debt obligations and U.S. Treasury
obligations) which may be rated in any rating category or may be unrated,
provided that no more than 10% of the Fund's total assets will be invested in
bonds rated below the fourth highest rating category by an NRSRO or unrated
securities of comparable quality (see "Investment Risks -- High Yield, Lower
Rated Bonds"). The Fund may also invest in futures and options and may purchase
securities on a when-issued basis.
The Fund will invest primarily in stocks of companies operating in all aspects
of the U.S. and world economies that have a market capitalization of at least
$500 million or more, that the Advisor believes possess fundamentally favorable
long-term characteristics. However, stocks of companies with smaller market
capitalizations and stocks that are out of favor in the financial community and
in which little opportunity for price appreciation is recognized by the
financial community may also be purchased if the Advisor believes they are
undervalued.
MID-CAP EQUITY FUND
The Mid-Cap Equity Fund invests primarily in a diversified portfolio of common
stocks, preferred stocks, and securities convertible into common stocks of small
to mid-size companies, (i.e., $50 million to $1 billion and $500 million to $5
billion, respectively, as measured by their market capitalization), with
above-average growth of earnings. Under normal conditions, at least 80% of the
total assets of the Fund will be invested in equity securities, and as a matter
of non-fundamental policy, the Fund will invest at least 65% of its assets in
mid-size companies. Current income will not be an important criterion of
investment selection and any such income should be considered incidental. In
selecting securities for the Fund, the Advisor will evaluate factors such as the
issuer's background, industry position, historical returns on equity and
experience and qualifications of the management team.
Most of the common stocks in which the Fund invests are traded on registered
exchanges or in the over-the-counter market in the United States. Assets of the
Fund not invested in the securities described above may be invested in U.S.
dollar denominated equity securities of foreign issuers (including sponsored
ADRs that are traded on exchanges or listed on NASDAQ), securities issued by
mutual funds, repurchase agreements, warrants and bonds. The bonds that the Fund
may purchase, including any variable or floating rate instruments, must be rated
in at least the sixth highest rating category by an NRSRO, provided that this
requirement shall not apply to the Fund's purchase of bonds issued by the
government of Canada or by various supranational entities, and provided further
that no more than 10% of the Fund's total assets will be invested in bonds rated
below the fourth highest rating category by an NRSRO (see "Investment Risks --
High Yield, Lower Rated Bonds"). The Fund may invest up to 10% of its assets in
restricted securities and may purchase securities on a when-issued basis.
The Fund's turnover rate for the fiscal year ended December 31, 1996 was 140%.
This rate of turnover, if achieved, will likely result in higher brokerage
commissions and higher levels of realized capital gains than if the turnover
rate were lower.
INTERNATIONAL EQUITY FUND
The Fund, under normal market conditions will invest at least 65% of its assets
in equity securities of foreign issuers consisting of common and preferred
stocks, warrants, options and securities convertible into common stock.
<PAGE>
8
Securities of foreign issuers purchased by the Fund may be purchased in foreign
markets, on United States registered exchanges, the over-the-counter market or
in the form of sponsored or unsponsored ADRs traded on registered exchanges or
listed on NASDAQ, or sponsored or unsponsored European Depositary Receipts
("EDRs").
The Fund may enter into forward foreign currency contracts as a hedge against
possible variations in foreign exchange rates. A forward foreign currency
contract is a commitment to purchase or sell a specified currency, at a
specified future date, at a specified price. The Fund may enter into forward
foreign currency contracts to hedge a specific security transaction or to hedge
a portfolio position. The Fund also may purchase and write put and call options
on foreign currencies (traded on U.S. and foreign exchanges or over-the-counter
markets) to manage the portfolios exposure to changes in dollar exchange rates.
The Fund expects to be fully invested in the investments described above, but
may invest up to 35% of its total assets in bonds and debentures issued by
non-U.S. or U.S. companies, securities issued or guaranteed by foreign or U.S.
governments and foreign and U.S. commercial paper. The Fund may invest in
futures contracts, including stock index futures contracts, and options on
futures contracts. The bonds that the Fund may purchase may be rated in any
rating category or may be unrated provided that no more than 10% of the Fund's
total assets will be rated below BBB by Standard & Poor's Corporation ("S&P") or
below Baa by Moody's Investor Service, Inc. ("Moody's") or securities not rated
by S&P or Moody's of comparable quality (see "Investment Risks -- High Yield,
Lower Rated Bonds"). When investing in bonds, the Fund may seek capital gains by
taking advantage of price appreciation caused by interest rate and credit
quality changes. The Fund may also purchase shares of closed-end investment
companies that invest in the securities of issuers in a single country or
region. The Fund is also permitted to acquire floating and variable rate
securities, purchase securities on a when-issued basis, purchase restricted
securities and purchase illiquid securities.
The Fund will invest in the foreign issues of at least three different countries
outside the United States. A foreign issue is one the issuer of which (1) is
organized under the laws of a specific country, (2) for which the principal
securities trading market is in a specific country or (3) derives a significant
proportion (at least 50 percent) of its revenues or profits from goods produced
or sold, investments made, or services performed in a specific country or which
have at least 50 percent of its assets situated in that country. The Fund will
invest primarily in developed countries (for example Japan, Canada and the
United Kingdom). In addition, the Fund may invest in securities of issuers whose
principal activities are in countries with emerging markets. The Fund defines an
emerging market country as any country the economy and market of which the World
Bank or the United Nations considers to be emerging or developing.
The annual portfolio turnover rate for the Fund is not expected to exceed 100%.
GENERAL INVESTMENT POLICIES AND STRATEGIES
For temporary defensive purposes during periods when the Advisor(s) determines
that market conditions warrant, each Fund may invest up to 100% of its assets in
money market instruments consisting of securities issued or guaranteed as to
principal and interest by the U.S. Government, its agencies or
instrumentalities, custodial receipts involving U.S. Treasury obligations,
repurchase agreements, certificates of deposit, bankers' acceptances, and time
deposits issued by banks or savings and loan associations and commercial paper
rated in the highest rating category, and may hold a portion of its assets in
cash. A Fund may not be pursuing its investment objective when it is engaged in
temporary defensive investing.
In the event that a security owned by a Fund is downgraded below the stated
rating categories, the Advisor will review and take appropriate action with
regard to the security.
Each Fund may purchase securities issued by money market mutual funds. A Fund's
purchase of shares of other investment companies is limited by the Investment
Company Act of 1940 (the "1940 Act") and will ordinarily result in an additional
layer of charges and expenses.
Each of the Funds may engage in securities lending and will limit such practice
to 33 1/3% of its total assets.
<PAGE>
9
Each Fund may borrow money for temporary or emergency purposes in an amount not
to exceed one-third of the value of its total assets. No Fund may purchase
additional securities while its outstanding borrowings exceed 5% of its assets.
It is a non-fundamental policy of each Fund to invest no more than 15% of its
net assets in illiquid securities. An illiquid security is a security which
cannot be disposed of within seven days in the usual course of business at a
price approximating its carrying value.
The Equity Funds may invest in money market instruments for liquidity purposes.
Each Fund intends to comply in all material respects with current insurance laws
and regulations applicable to separate accounts investing in the Fund. This
operating policy is nonfundamental and can be changed by the Trustees at any
time.
For additional information regarding permitted investments, see "Description of
Permitted Investments" in this Prospectus and in the Statement of Additional
Information.
INVESTMENT RISKS
ZERO COUPON OBLIGATIONS
Zero coupon obligations are sold at original issue discount and do not make
periodic payments. Zero coupon obligations may be subject to greater
fluctuations in value due to interest rate changes than interest bearing
obligations. A Fund will be required to include the imputed interest in zero
coupon obligations in its current income. Because each Fund distributes all of
its net investment income to investors, a Fund may have to sell portfolio
securities to distribute the income attributable to these obligations and
securities at a time when the Advisor would not have chosen to sell such
obligations or securities and which only result in a taxable gain or loss.
FOREIGN SECURITIES AND FOREIGN CURRENCY CONTRACTS
Investing in the securities of foreign companies and the utilization of forward
foreign currency contracts involves special risks and considerations not
typically associated with investing in U.S. companies. These risks and
considerations include differences in accounting, auditing and financial
reporting standards, generally higher commission rates on foreign portfolio
transactions, the possibility of expropriation or confiscatory taxation, adverse
changes in investment or exchange control regulations, political instability
which could affect U.S. investment in foreign countries and potential
restrictions of the flow of international capital and currencies. Foreign
companies may also be subject to less government regulation than U.S. companies.
Moreover, the dividends payable on the foreign securities may be subject to
foreign withholding taxes, thus reducing the net amount of income available for
distribution to the Fund's investors. Further, foreign securities often trade
with less frequency and volume than domestic securities and, therefore, may
exhibit greater price volatility. Changes in foreign exchange rates will affect,
favorably or unfavorably, the value of those securities which are denominated or
quoted in currencies other than the U.S. dollar.
By entering into forward foreign currency contracts, the International Equity
Fund will seek to protect the value of its investment securities against a
decline in the value of a currency. However, these forward foreign currency
contracts will not eliminate fluctuations in the underlying prices of the
securities. Rather, they simply establish a rate of exchange which one can
obtain at some future point in time. Although such contracts tend to minimize
the risk of loss due to a decline in the value of the hedged currency, also,
they tend to limit any potential gain which might result should the value of
such currency increase.
<PAGE>
10
The International Equity Fund's investments in emerging markets can be
considered speculative, and therefore may offer higher potential for gains and
losses than investments in developed markets of the world. With respect to any
emerging country, there is the greater potential for nationalization,
expropriation or confiscatory taxation, political changes, government
regulation, social instability or diplomatic developments (including war) which
could affect adversely the economies of such countries or investments in such
countries. In addition, it may be difficult to obtain and enforce a judgment in
the courts of such countries. The economies of developing countries generally
are heavily dependent upon international trade and, accordingly, have been and
may continue to be adversely affected by trade barriers, exchange controls,
managed adjustments in relative currency values and other protectionist measures
imposed or negotiated by the countries with which they trade.
EQUITY SECURITIES
Investments in equity securities in general are subject to market risks that may
cause their prices to fluctuate over time. The value of convertible equity
securities is also affected by prevailing interest rates, the credit quality of
the issuer and any call provision. Fluctuations in the value of equity
securities in which a Fund invests will cause the net asset value of the Fund to
fluctuate.
MORTGAGE-BACKED SECURITIES
Mortgage-backed securities are subject to prepayment of the underlying
mortgages. During periods of declining interest rates, prepayment of mortgages
underlying these securities can be expected to accelerate. When the
mortgage-backed securities held by a Fund are prepaid, the Fund must reinvest
the proceeds in securities the yield of which reflects prevailing interest
rates, which may be lower than the prepaid security.
FIXED INCOME SECURITIES
The market value of a Fund's fixed income investments (i.e., bonds, debt
instruments, debentures) will change in response to interest rate changes and
other factors. During periods of falling interest rates, the values of
outstanding fixed income securities generally rise. Conversely, during periods
of rising interest rates, the values of such securities generally decline.
Securities with longer maturities are subject to greater fluctuations in value
than securities with shorter maturities. Changes by an NRSRO in the rating of
any fixed income security and in the ability of an issuer to make payments of
interest and principal also affect the value of these investments. Changes in
the value of a Fund's portfolio securities are not likely to affect cash income
derived from these securities but will affect the Fund's net asset value.
Securities rated BBB by S&P or Baa by Moody's (the lowest respective ratings of
investment grade bonds) are deemed to have speculative characteristics.
Guarantees of a Fund's portfolio securities by the U.S. Government or its
agencies or instrumentalities guarantee only the payment of principal and
interest on the guaranteed securities, and do not guarantee the securities'
yield or value or the yield or value of a Fund's shares.
There is a risk that the current interest rate on floating and variable rate
instruments may not accurately reflect existing market interest rates.
HIGH YIELD, LOWER RATED BONDS
A Fund's investments in high yield, lower rated bonds ("junk bonds") involve
greater risk of default or price declines than investments in investment grade
securities (rated in one of the four highest rating categories by an NRSRO) due
to changes in the issuer's creditworthiness. The market for high risk, high
yield securities may be thinner and less active, causing market price volatility
and limited liquidity in the secondary market. This may limit the ability of the
Fund to sell such securities at their fair market value either to meet
redemption requests or in response to changes in the economy or the financial
markets. Market prices for high risk, high yield securities may also be affected
by investors' perception of credit quality and the outlook
<PAGE>
11
for economic growth. Thus, prices for high risk, high yield securities may move
independently of interest rates and the overall bond market. In addition, the
market for high risk, high yield securities may be adversely affected by
legislative and regulatory developments.
INVESTMENT LIMITATIONS
The following investment limitations constitute fundamental policies of each
Fund. Fundamental policies cannot be changed with respect to a Fund without the
consent of the holders of a majority of the Fund's outstanding shares. The term
"majority of the outstanding shares" means the vote of (i) 67% or more of a
Fund's shares present at a meeting, if more than 50% of the outstanding shares
of the Fund are present or represented by proxy, or (ii) more than 50% of a
Fund's outstanding shares, whichever is less.
Each Fund may not:
1. Purchase securities of any issuer (except securities issued or
guaranteed by the United States, its agencies or instrumentalities and
repurchase agreements involving such securities) if as a result more than
5% of the total assets of a Fund would be invested in the securities of
such issuer; provided, however, that a Fund may invest up to 25% of its
total assets without regard to this restriction as permitted by
applicable law.
2. Purchase any securities which would cause more than 25% of the total
assets of a Fund to be invested in the securities of one or more issuers
conducting their principal business activities in the same industry,
provided that this limitation does not apply to investments in
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities, repurchase agreements involving such securities or
tax-exempt securities issued by governments or political subdivisions of
governments. For purposes of this limitation, (i) utility companies will
be divided according to their services, for example, gas, gas
transmission, electric and telephone will each be considered a separate
industry; (ii) financial service companies will be classified according
to the end users of their services, for example, automobile finance, bank
finance and diversified finance will each be considered a separate
industry; and (iii) supranational entities will be considered to be a
separate industry.
The foregoing percentages will apply at the time of the purchase of a security.
Additional investment limitations are set forth in the Statement of Additional
Information.
PERFORMANCE INFORMATION
From time to time, the Funds may advertise yield and total return. These figures
will be based on historical earnings and are not intended to indicate future
performance. The yield of a Fund refers to the annualized income generated by an
investment in that Fund over a specified 30-day period. The yield is calculated
by assuming that the income generated by the investment during that period is
generated over one year and is shown as a percentage of the investment.
The total return of a Fund refers to the average compounded rate of return to a
hypothetical investment, including any sales charge imposed, for designated time
periods (including but not limited to, the period from which a Fund commenced
operations through the specified date), assuming that the entire investment is
redeemed at the end of each period and assuming the reinvestment of all dividend
and capital gains distributions.
Each Fund may periodically compare its performance to other mutual funds tracked
by mutual fund rating services, to broad groups of comparable mutual funds or to
unmanaged indices which may assume reinvestment of dividends but generally do
not reflect deductions for administrative and management costs.
PURCHASE AND REDEMPTION OF FUND SHARES
Shares of each Fund cannot be purchased directly, but only through a Contract
offered through an insurance company separate account. Please refer to the
prospectus for the Contract for information on how to make
<PAGE>
12
investments and redemptions. Shares of the Funds are sold in a continuous
offering to separate accounts of insurance companies to fund Contracts.
The separate accounts purchase and redeem Shares of each Fund based on, among
other things, the amount of net Contract premiums or purchase payments
transferred to the separate accounts, transfers to or from a separate account
investment division, policy loans, loan repayments, and benefit payments to the
terms of the Contracts, at the Fund's net asset value per share calculated as of
that same day.
All redemption requests will be processed and payment with respect thereto will
be made within seven days after tender. The Trust may suspend redemption, if
permitted by the 1940 Act, for any period during which the New York Stock
Exchange ("NYSE") is closed or during which trading is restricted by the
Securities and Exchange Commission ("SEC") or the SEC declares that an emergency
exists. Redemptions may also be suspended during other periods permitted by the
SEC for the protection of the Trust's investors.
NET ASSET VALUE
The net asset value of each Fund's Shares is determined at the close of regular
trading on the NYSE (currently 4:00 p.m., Eastern time), each business day. Net
asset value per share is calculated for purchases and redemptions of Shares of
each Fund by dividing the value of total Fund assets, less liabilities
(including Trust expenses, which are accrued daily), by the total number of
Shares of that Fund outstanding. Values of assets in each Fund's portfolio are
determined on the basis of market value or by means of valuation methods
approved by the Board of Trustees and described in the Statement of Additional
Information.
DIVIDENDS AND DISTRIBUTIONS
Dividends from net investment income (exclusive of capital gains) are declared
on each business day and paid monthly by the Bond Fund. Dividends from net
investment income (exclusive of capital gains) are declared and paid quarterly
by each Equity Fund, except the International Equity Fund. Dividends for the
International Equity Fund are declared and paid annually by the Fund. Each
Fund's net realized capital gains (including net short-term capital gains) are
distributed at least annually. Net income for dividend purposes consists of (i)
interest accrued and original issue discount earned on the Fund's assets, (ii)
plus the accrued market discount and minus the amortization of market premium on
such assets, (iii) plus dividend or distribution income on such assets, (iv)
less accrued expenses directly attributable to the Fund and the general expenses
of the Trust prorated to the Fund on the basis of its relative net assets.
Shareholders of record on the record date will be entitled to receive dividends.
The net asset value of Shares of the Funds will be reduced by the amount of any
dividend or distribution. Dividends and distributions are paid in the form of
additional Shares of the same Fund.
TAX INFORMATION
For more information about the tax consequences of an investment in a Contract,
see the attached prospectus for that Contract. The following discussion is only
a brief summary of the federal income tax consequences to the Funds and their
insurance company shareholders based on current tax laws and regulations, which
may be changed by subsequent legislative, judicial, or administrative action.
Each Fund intends to qualify separately each year as a "regulated investment
company" ("RIC") as defined under Subchapter M of the Code. The requirements for
qualification may cause a Fund to restrict the extent of its short-term trading
or its transactions in options or futures contracts.
As a RIC, each Fund will not be subject to federal income tax on its net
investment income and net realized capital gains which are timely distributed to
its insurance company shareholders. Accordingly, each Fund intends to distribute
all or substantially all of its net investment income and net realized capital
gains to its shareholders. Very generally, an insurance company which is a
shareholder of a Fund will determine its federal income tax liability with
respect to distributions from that Fund pursuant to the special rules of
Subchapter L of the Code.
<PAGE>
13
Although the Trust intends that it and the Funds will be operated so that they
will have no federal income tax liability, if any such liability is nevertheless
incurred, the investment performance of the Fund or Funds incurring such
liability will be adversely affected. In addition, Funds investing in foreign
securities may be subject to foreign taxes. These taxes would reduce the
investment performance of such Funds.
Each Fund intends to comply with the diversification requirements imposed by
Section 817(h) of the Code and the regulations thereunder. These requirements
are in addition to the diversification requirements imposed on each Fund by
Subchapter M of the Code and the 1940 Act. These requirements place certain
limitations on the assets of each separate account that may be invested in
securities of a single issuer, and, because Section 817(h) and the regulations
thereunder treat a Fund's assets as assets of the related separate account,
these limitations also apply to the Fund's assets that may be invested in
securities of a single issuer. Generally, the regulations provide that, as of
the end of each calendar quarter, or within 30 days thereafter, no more than 55%
of a Fund's total assets may be represented by any one investment, no more than
70% by any two investments, no more than 80% by any three investments, and no
more than 90% by any four investments. Failure of a Fund to satisfy the Section
817(h) requirements could result in adverse tax consequences to the Insurers and
Owners of Contracts. Federal income taxation of Owners of Contracts is discussed
in Federal Tax Matters.
Certain additional tax information appears in the Statement of Additional
Information.
STI CLASSIC VARIABLE TRUST INFORMATION
THE TRUST
The Trust was organized as a Massachusetts Business Trust under a Declaration of
Trust dated April 18, 1995. The Declaration of Trust permits the Trust to offer
separate portfolios of shares. All consideration received by the Trust for
Shares of any Fund and all assets of such Fund belong to that Fund and would be
subject to liabilities related thereto.
The Trust's Board of Trustees will monitor potential conflicts between variable
life insurance policies and variable annuity contracts or among insurance
company shareholders and will determine what, if any, action should be taken to
resolve any conflicts. Such action could include the redemption of shares by one
or more of the separate accounts, which could have adverse consequences.
Material conflicts could result from, for example: (1) changes in state
insurance laws; (2) changes in federal income tax laws; or (3) differences in
voting instructions between those given by variable life insurance policyowners
and those given by variable annuity contractowners. In such circumstances, the
Trustees of the Trust were to conclude that separate funds should be established
for variable life and variable annuity separate accounts, variable life
insurance policyowners and variable annuity contractowners would no longer have
the economies of scale resulting from a larger combined fund. The Trust pays its
expenses, including fees of its service providers, audit and legal expenses,
expenses of preparing prospectuses, proxy solicitation material and reports to
shareholders, costs of custodial services and registering the Shares under
federal and state securities laws, pricing, insurance expenses, litigation and
other extraordinary expenses, brokerage costs, interest charges, taxes and
organization expenses.
BOARD OF TRUSTEES
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees have approved contracts under which, as described below, certain
companies provide essential management services to the Trust.
INVESTMENT ADVISOR
STI Capital Management, N.A. ("STI Capital") serves as the Advisor to the Funds.
As of December 31, 1996, STI Capital had discretionary management authority with
respect to assets of approximately $11.5 billion. The principal business address
of STI Capital is P.O. Box 3808, Orlando, Florida 32802.
<PAGE>
14
The Advisor is an indirect wholly-owned subsidiary of SunTrust Banks, Inc.
("SunTrust"), a southeastern regional bank holding company with assets of $52.5
billion as of December 31, 1996. SunTrust ranks among the twenty five largest
U.S. banking companies. Its three principal subsidiaries--operating in Florida,
Georgia, and Tennessee--provide a wide range of personal and corporate banking,
trust, and investment services through more than 600 locations in the
three-state area. Total discretionary assets under management with SunTrust
Banks, Inc. equalled approximately $53.4 billion as of December 31, 1996.
The Trust and the Advisor have entered into an advisory agreement (the "Advisory
Agreement"). Under the Advisory Agreement, the Advisor makes the investment
decisions for the assets of the Funds it advises and continuously reviews,
supervises and administers its Funds' investment program. The Advisor discharges
its responsibilities subject to the supervision of, and policies established by,
the Trustees of the Trust. 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 OR GUARANTEED BY AND DO NOT CONSTITUTE OBLIGATIONS OF SUNTRUST
BANKS, INC. OR ANY OF ITS AFFILIATES. INVESTMENTS IN THE FUNDS INVOLVE RISK,
INCLUDING THE POSSIBLE LOSS OF PRINCIPAL. RETURNS AND PRINCIPAL VALUES WILL
FLUCTUATE AND SHARES AT REDEMPTION MAY BE WORTH MORE OR LESS THAN THEIR ORIGINAL
COST. THERE IS NO GUARANTEE THAT ANY STI CLASSIC VARIABLE TRUST FUND WILL
ACHIEVE ITS INVESTMENT OBJECTIVE. With respect to all Funds, the Advisor may
execute brokerage or other agency transactions through affiliates of the
Advisor.
For the services provided and expenses incurred pursuant to the Advisory
Agreement, STI Capital is entitled to receive advisory fees computed daily and
paid monthly at the annual rate of .74%, 1.15%, .80%, 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 and International Equity Fund,
respectively. For the period since inception to the fiscal year end, the Trust
paid no advisory fees.
From time to time, the Advisor may voluntarily waive advisory fees payable by a
Fund. Currently, the Advisor has agreed to voluntary reductions in its fees at
the amounts set forth in the Expense Summary. Voluntary reductions of fees may
be terminated at any time.
PORTFOLIO MANAGERS
Mr. L. Earl Denney has been responsible for the day-to-day management of the
Investment Grade Bond Fund since its inception. Mr. Denney has served as
Managing Director of STI Capital since 1983.
Mr. Anthony Gray has been responsible for the day-to-day management of the
Capital Growth Fund since its inception. Mr. Gray has served as Chief Executive
Officer and Chief Investment Officer of STI Capital since 1980.
Mr. Mills Riddick has been responsible for the day-to-day management of the
Value Income Stock Fund since its inception. Mr. Riddick has served as Managing
Director of STI Capital from 1989.
Mr. Elliott A. Perny has been responsible for the day-to-day management of the
Mid-Cap Equity Fund since October 1, 1996. Mr. Perny has served as Managing
Director of STI Capital since 1992 and has served as a portfolio manager with
STI Capital since 1982.
Mr. Ned Dau has been responsible for the day-to-day management of the
International Equity Fund since May 1, 1997. Prior to joining STI Capital, he
was an international equity analyst for American Express Financial Advisors from
1995 to 1997 and the Principal Financial Group from 1992 to 1995.
<PAGE>
15
BANKING LAWS
Banking laws and regulations, including the Glass-Steagall Act as presently
interpreted by the Board of Governors of the Federal Reserve System, presently
(a) prohibit a bank holding company registered under the Federal Bank Holding
Company Act of 1956 or its affiliates from sponsoring, organizing, controlling,
or distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and generally prohibit banks
from underwriting securities, but (b) do not prohibit such a bank holding
company or affiliate or banks generally from acting as an investment advisor,
transfer agent, or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of a customer. The
Advisor believes that each may perform the services for the STI Classic Variable
Trust contemplated by their agreements described in this Prospectus without
violation of applicable banking laws or regulations. However, future changes in
legal requirements relating to the permissible activities of banks and their
affiliates, as well as future interpretations of present requirements, could
prevent the Advisors from continuing to perform services for the STI Classic
Variable Trust. If the Advisor was prohibited from providing services to the STI
Classic Variable Trust, the Board of Trustees would consider selecting other
qualified firms. Any new investment advisory agreements would be subject to
investor approval.
If current restrictions preventing a bank or its affiliates from legally
sponsoring, organizing, controlling, or distributing shares of an investment
company were relaxed, the Advisor, or its affiliates, would consider the
possibility of offering to perform additional services for the STI Classic
Variable Trust. It is not possible, of course, to predict whether or in what
form such legislation might be enacted or the terms upon which the Advisor, or
such affiliates, might offer to provide such services.
DISTRIBUTION
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI Investments Company ("SEI") distributes the Funds' Shares to the separate
accounts, which purchase and redeem these shares at net asset value without
sales or redemption charges.
The Trust reserves the right to reject a purchase order when the Fund determines
that it is not in the best interest of the Trust to accept such order.
With respect to each of the Funds, the Distributor may, from time to time and at
its own expense, provide promotional incentives, in the form of cash or other
compensation, to financial institutions whose representatives have sold or are
expected to sell significant amounts of these Funds.
ADMINISTRATION
SEI Fund Resources (the "Administrator"), a wholly-owned subsidiary of SEI, and
the Trust are parties to an Administration Agreement (the "Administration
Agreement"). Under the terms of the Administration Agreement, the Administrator
provides the Trust with certain administrative services, other than investment
advisory services, including regulatory reporting, all necessary office space,
equipment, personnel, and facilities.
The Administrator is entitled to a fee, which is calculated daily and paid
monthly, at an annual rate of .10% of the Trust's average aggregate daily net
assets on the first $1 billion, .07% of the assets in excess of $1 billion but
less than $5 billion, .05% of the assets in excess of $5 billion but less than
$8 billion, .045% of the assets in excess of $8 billion but less than $10
billion, and .04% of the assets in excess of $10 billion. From time to time, the
Administrator may voluntarily waive all or a portion of the administration fee
payable with respect to the Trust.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779, is the Transfer Agent for the shares of the Trust and dividend
disbursing agent for the Trust.
<PAGE>
16
CUSTODIANS
SunTrust Bank, Park Place, P.O. Box 105504, Atlanta, Georgia, serves as
Custodian of the assets of each Fund of the Trust except the International
Equity Fund. The Bank of New York, One Wall Street, New York, New York serves as
Custodian of the assets of the International Equity Fund. The Custodians hold
cash, securities and other assets of the Trust as required by the 1940 Act.
LEGAL COUNSEL
Morgan, Lewis & Bockius LLP, Philadelphia, Pennsylvania, serves as legal counsel
to the Trust.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountants to the Trust are Arthur Andersen LLP,
Philadelphia, Pennsylvania.
OTHER INFORMATION
VOTING RIGHTS
Each Share held entitles the investor of record to one vote. Each Fund will vote
separately on matters relating solely to that Fund. As a Massachusetts Business
Trust, the Trust is not required to hold annual meetings of investors but
approval will be sought for certain changes in the operation of the Trust and
for the election of Trustees under certain circumstances. In addition, a Trustee
may be removed by the remaining Trustees or by investors at a special meeting
called upon written request of investors owning at least 10% of the outstanding
shares of the Trust. In the event that such a meeting is requested the Trust
will provide appropriate assistance and information to the investors requesting
the meeting.
The Insurers have advised the Trust that, whenever an investor vote is taken,
the Insurer will give Contract owners and annuitants the opportunity to instruct
them how to vote the number of Shares attributable to such Contracts. The
Insurers have also stated that they will vote any Shares that they are entitled
to vote directly, because of their attributable interests in the Trust, and any
Shares attributable to Contracts for which instructions are not received, in the
same proportion that Contract owners vote.
REPORTING
The Trust issues unaudited financial information semi-annually and audited
financial statements annually. The Trust furnishes proxy statements and other
reports to investors of record.
SHAREHOLDER INQUIRIES
Investors may contact the respective Insurers in order to obtain information on
account statements, procedures and other related information.
DESCRIPTION OF PERMITTED INVESTMENTS
AMERICAN DEPOSITARY RECEIPTS ("ADRs") -- ADRs are securities, typically issued
by a U.S. financial institution (a "depositary"), that evidence ownership
interests in a security or a pool of securities issued by a foreign issuer and
deposited with the depositary. ADRs may be available through "sponsored" or
"unsponsored" facilities. A sponsored facility is established jointly by the
issuer of the security underlying the receipt and a depositary, whereas an
unsponsored facility may be established by a depositary without participation by
the issuer of the underlying security. Holders of unsponsored depositary
receipts generally bear all the costs of the unsponsored facility. The
depositary of an unsponsored facility frequently is under no obligation to
distribute shareholder communications received from the issuer of the deposited
security or to pass through, to the holders of the receipts, voting rights with
respect to the deposited securities.
<PAGE>
17
ASSET-BACKED SECURITIES -- Asset-backed securities are securities secured by
non-mortgage assets such as company receivables, truck and auto loans, leases
and credit card receivables. Such securities are generally issued as
pass-through certificates, which represent undivided fractional ownership
interests in the underlying pools of assets. Such securities also may be debt
instruments, which are also known as collateralized obligations and are
generally issued as the debt of a special purpose entity, such as a trust,
organized solely for the purpose of owning such assets and issuing such debt.
Asset-backed securities are not issued or guaranteed by the U.S. Government or
its agencies or instrumentalities; however, the payment of principal and
interest on such obligations may be guaranteed up to certain amounts and for a
certain period by a letter of credit issued by a financial institution (such as
a bank or insurance company) unaffiliated with the issuers of such securities.
The purchase of asset-backed securities raises risk considerations peculiar to
the financing of the instruments underlying such securities. For example, there
is a risk that another party could acquire an interest in the obligations
superior to that of the holders of the asset-backed securities. There also is
the possibility that recoveries on repossessed collateral may not, in some
cases, be available to support payments on those securities. Asset-backed
securities entail prepayment risk, which may vary depending on the type of
asset, but is generally less than the prepayment risk associated with
mortgage-backed securities. In addition, credit card receivables are unsecured
obligations of the card holder.
The market for asset-backed securities is at a relatively early stage of
development. Accordingly, there may be a limited secondary market for such
securities.
BANKERS' ACCEPTANCES -- Bankers' acceptances are bills of exchange or time
drafts drawn on and accepted by a commercial bank. Bankers' acceptances are used
by corporations to finance the shipment and storage of goods. Maturities are
generally six months or less.
CERTIFICATES OF DEPOSIT -- Certificates of deposit are interest bearing
instruments with a specific maturity. They are issued by banks and savings and
loan institutions in exchange for the deposit of funds and normally can be
traded in the secondary market prior to maturity. Certificates of deposit with
penalties for early withdrawal will be considered illiquid.
COMMERCIAL PAPER -- Commercial paper is a term used to describe unsecured
short-term promissory notes issued by banks, municipalities, corporations and
other entities. Maturities on these issues vary from a few to 270 days.
CONVERTIBLE SECURITIES -- Convertible securities are corporate securities that
are exchangeable for a set number of another security at a prestated price.
Convertible securities typically have characteristics similar to both fixed
income and equity securities. Because of the conversion feature, the market
value of a convertible security tends to move with the market value of the
underlying stock. The value of a convertible security is also affected by
prevailing interest rates, the credit quality of the issuer, and any call
provisions.
CORPORATE DEBT OBLIGATIONS -- Debt instruments issued by corporations with
maturities exceeding 270 days. Such instruments may include putable corporate
bonds and zero coupon bonds.
CUSTODIAL RECEIPTS -- Interests in separately traded interest and principal
component parts of U.S. Treasury obligations that are issued by banks or
brokerage firms and are created by depositing U.S. Treasury obligations into a
special account at a custodian bank. The custodian holds the interest and
principal payments for the benefit of the registered owners of the certificates
or receipts. The custodian arranges for the issuance of the certificates or
receipts evidencing ownership and maintains the register. Receipts include
Treasury Receipts ("TRs"), Treasury Investment Growth Receipts ("TIGRs"), and
Certificates of Accrual on Treasury Securities ("CATS").
Receipts are sold as zero coupon securities which means that they are sold at a
substantial discount and redeemed at face value at their maturity date without
interim cash payments of interest or principal. This discount is accreted over
the life of the security, and such accretion will constitute the income earned
on the security for both accounting and tax purposes. Because of these features,
such securities may be subject to greater interest rate volatility than interest
paying investments. See "Zero Coupon Obligations."
<PAGE>
18
EUROPEAN DEPOSITARY RECEIPTS ("EDRs") -- EDRs are securities, typically issued
by a non-U.S. financial institution, that evidence ownership interests in a
security or a pool of securities issued by either a U.S. or foreign issuer. EDRs
may be available for investment through "sponsored" or "unsponsored" facilities.
See also "ADRs."
FORWARD FOREIGN CURRENCY CONTRACTS -- A forward foreign currency contract
involves an obligation to purchase or sell a specific currency amount at a
future date, agreed upon by the parties, at a price set at the time of the
contract. The Fund may also enter into a contract to sell, for a fixed amount of
U.S. dollars or other appropriate currency, the amount of foreign currency
approximating the value of some or all of the Fund's securities denominated in
such foreign currency.
At the maturity of a forward contract, the Fund may either sell a portfolio
security and make delivery of the foreign currency, or it may retain the
security and terminate its contractual obligation to deliver the foreign
currency by purchasing an "offsetting" contract with the same currency trader,
obligating it to purchase, on the same maturity date, the same amount of the
foreign currency. The Fund may realize a gain or loss from currency
transactions.
A Fund may purchase and write put and call options on foreign currencies (traded
on U.S. and foreign exchanges or over-the-counter markets) to manage its
exposure to exchange rates. Call options on foreign currency written by a Fund
will be "covered," which means that the Fund will own an equal amount of the
underlying foreign currency. With respect to put options on foreign currency
written by a Fund, the Fund will establish a segregated account with its
custodian bank consisting of cash, cash equivalents or liquid securities in an
amount equal to the amount the Fund would be required to pay upon exercise of
the put.
FUTURES CONTRACTS AND OPTIONS ON FUTURES CONTRACTS -- Futures contracts provide
for the future sale by one party and purchase by another party of a specified
amount of a specific security at a specified future time and at a specified
price. An option on a futures contract gives the purchaser the right, in
exchange for a premium, to assume a position in a futures contract at a
specified exercise price during the term of the option. A Fund may use futures
contracts and related options for bona fide hedging purposes, to offset changes
in the value of securities held or expected to be acquired, to minimize
fluctuations in foreign currencies, or to gain exposure to a particular market
or instrument. A Fund will minimize the risk that it will be unable to close out
a futures contract by only entering into futures contracts which are traded on
national futures exchanges.
Stock index futures are futures contracts for various stock indices that are
traded on registered securities exchanges. A stock index futures contract
obligates the seller to deliver (and the purchaser to take) an amount of cash
equal to a specific dollar amount times the difference between the value of a
specific stock index at the close of the last trading day of the contract and
the price at which the agreement is made.
There are risks associated with these activities, including the following: (1)
the success of a hedging strategy may depend on an ability to predict movements
in the prices of individual securities, fluctuations in markets and movements in
interest rates, (2) there may be an imperfect or no correlation between the
changes in market value of the securities held by the Fund and the prices of
futures and options on futures, (3) there may not be a liquid secondary market
for a futures contract or option, (4) trading restrictions or limitations may be
imposed by an exchange, and (5) government regulations may restrict trading in
futures contracts and futures options.
ILLIQUID SECURITIES -- Illiquid securities are securities that cannot be
disposed of within seven business days at approximately the price at which they
are being carried on the Fund's books. An illiquid security includes a demand
instrument with a demand notice period exceeding seven days, where there is no
secondary market for such security, and repurchase agreements with durations (or
maturities) over seven days in length.
MEDIUM TERM NOTES -- Periodically or continuously offered corporate or agency
debt that differs from traditionally underwritten corporate bonds only in the
process by which they are issued.
MORTGAGE-BACKED SECURITIES -- Mortgage-backed securities are instruments that
entitle the holder to a share of all interest and principal payments from
mortgages underlying the security. The
<PAGE>
19
mortgages backing these securities include conventional thirty-year fixed rate
mortgages, graduated payment mortgages, and adjustable rate mortgages. During
periods of declining interest rates, prepayment of mortgages underlying
mortgage-backed securities can be expected to accelerate. Prepayment of
mortgages which underlie securities purchased at a premium often results in
capital losses, while prepayment of mortgages purchased at a discount often
results in capital gains. Because of these unpredictable prepayment
characteristics, it is often not possible to predict accurately the average life
or realized yield of a particular issue.
GOVERNMENT PASS-THROUGH SECURITIES: These are securities that are issued or
guaranteed by a U.S. Government agency representing an interest in a pool of
mortgage loans. The primary issuers or guarantors of these mortgage-backed
securities are GNMA, Fannie Mae and FHLMC. Fannie Mae and FHLMC obligations are
not backed by the full faith and credit of the U.S. Government as GNMA
certificates are, but Fannie Mae securities are supported only by the credit of
the instrumentality and FHLMC securities are supported by the instrumentalities'
right to borrow from the U.S. Treasury. GNMA, Fannie Mae and FHLMC each
guarantees timely distributions of interest to certificate holders. GNMA and
Fannie Mae also each guarantees timely distributions of scheduled principal.
FHLMC has in the past guaranteed only the ultimate collection of principal of
the underlying mortgage loan; however, FHLMC now issues mortgage-backed
securities (FHLMC Gold PCs) which also guarantee timely payment of monthly
principal reductions. Government and private guarantees do not extend to the
securities' value, which is likely to vary inversely with fluctuations in
interest rates.
PRIVATE PASS-THROUGH SECURITIES: These are mortgage-backed securities issued by
a non-governmental entity, such as a trust. These securities include
collateralized mortgage obligations ("CMOs") and real estate mortgage investment
conduits ("REMICs") that are rated in one of the top two rating categories.
While they are generally structured with one or more types of credit
enhancement, private pass-through securities typically lack a guarantee by an
entity having the credit status of a governmental agency or instrumentality.
COLLATERALIZED MORTGAGE OBLIGATIONS ("CMOS"): CMOs are debt obligations or
multiclass pass-through certificates issued by agencies or instrumentalities of
the U.S. Government or by private originators or investors in mortgage loans. In
a CMO, series of bonds or certificates are usually issued in multiple classes.
Principal and interest paid on the underlying mortgage assets may be allocated
among the several classes of a series of a CMO in a variety of ways. Each class
of a CMO, often referred to as a "tranche," is issued with a specific fixed or
floating coupon rate and has a stated maturity or final distribution date.
Principal payments on the underlying mortgage assets may cause CMOs to be
retired substantially earlier then their stated maturities or final distribution
dates, resulting in a loss of all or part of any premium paid.
REMICS: A REMIC is a CMO that qualifies for special tax treatment under the
Internal Revenue Code and invests in certain mortgages principally secured by
interests in real property. Investors may purchase beneficial interests in
REMICs, which are known as "regular" interests, or "residual" interests.
Guaranteed REMIC pass-through certificates ("REMIC Certificates") issued by
Fannie Mae or FHLMC represent beneficial ownership interests in a REMIC trust
consisting principally of mortgage loans or Fannie Mae, FHLMC or GNMA-guaranteed
mortgage pass-through certificates. For FHLMC REMIC Certificates, FHLMC
guarantees the timely payment of interest, and also guarantees the payment of
principal as payments are required to be made on the underlying mortgage
participation certificates. Fannie Mae REMIC Certificates are issued and
guaranteed as to timely distribution of principal and interest by Fannie Mae.
STRIPPED MORTGAGE-BACKED SECURITIES ("SMBS"): SMBs are usually structured with
two classes that receive specified proportions of the monthly interest and
principal payments from a pool of mortgage securities. One class may receive all
of the interest payments and is thus termed an interest-only class ("IO"), while
the other class may receive all of the principal payments and thus is termed the
principal-only class ("PO"). The value of IOs tends to increase as rates rise
and decrease as rates fall; the opposite is true of POs. SMBs are extremely
sensitive to changes in interest rates because of the impact thereon of
prepayment of principal on the underlying mortgage securities. The market for
SMBs is not as fully developed as other markets; SMBs therefore may be illiquid.
RISK FACTORS: Due to the possibility of prepayments of the underlying mortgage
instruments, mortgage-backed securities generally do not have a known maturity.
In the absence of a known maturity, market
<PAGE>
20
participants generally refer to an estimated average life. An average life
estimate is a function of an assumption regarding anticipated prepayment
patterns, based upon current interest rates, current conditions in the relevant
housing markets and other factors. The assumption is necessarily subjective, and
thus different market participants can produce different average life estimates
with regard to the same security. There can be no assurance that estimated
average life will be a security's actual average life.
OBLIGATIONS OF SUPRANATIONAL ENTITIES -- Supranational entities are entities
established through the joint participation of several governments, and include
the Asian Development Bank, the Inter-American Development Bank, International
Bank for Reconstruction and Development (World Bank), African Development Bank,
European Economic Community, European Investment Bank and the Nordic Investment
Bank.
PAY-IN-KIND SECURITIES -- Pay-in-Kind securities are bonds or preferred stock
that pay interest or dividends in the form of additional bonds or preferred
stock.
REPURCHASE AGREEMENTS -- Repurchase agreements are agreements by which a Fund
obtains a security and simultaneously commits to return the security to the
seller at an agreed upon price on an agreed upon date within a number of days
from the date of purchase. The custodian will hold the security as collateral
for the repurchase agreement. A Fund bears a risk of loss in the event the other
party defaults on its obligations and the Fund is delayed or prevented from
exercising its right to dispose of the collateral or if the Fund realizes a loss
on the sale of the collateral. A Fund will enter into repurchase agreements only
with financial institutions deemed to present minimal risk of bankruptcy during
the term of the agreement based on established guidelines. Repurchase agreements
are considered loans under the Investment Company Act of 1940.
RESTRICTED SECURITIES -- Restricted securities are securities that may not be
sold freely to the public absent registration under the Securities Act of 1933
or an exemption from registration. Rule 144A securities are securities that have
not been registered under the Securities Act of 1933 but which may be traded
between certain institutional investors including investment companies. The
Trust's Board of Trustees is responsible for developing guidelines and
procedures for determining the liquidity of restricted securities, and for
monitoring the Advisor's implementation of the guidelines and procedures. Under
these guidelines, the Advisor will consider the frequency of trades and quotes
for the security, the number of dealers in, and potential purchasers for, the
securities, dealer undertakings to make a market in the security, and the nature
of the security and of the marketplace trades. In purchasing such Restricted
Securities, the Advisor intends to purchase securities that are exempt from
registration under Rule 144A under the 1933 Act.
SECURITIES LENDING -- In order to generate additional income, a Fund may lend
securities which it owns pursuant to agreements requiring that the loan be
continuously secured by collateral consisting of cash, securities of the U.S.
Government or its agencies equal to at least 100% of the market value of the
securities lent. A Fund continues to receive interest on the securities lent
while simultaneously earning interest on the investment of cash collateral.
Collateral is marked to market daily. There may be risks of delay in recovery of
the securities or even loss of rights in the collateral should the borrower of
the securities fail financially or become insolvent.
STANDBY COMMITMENTS AND PUTS -- Securities subject to standby commitments or
puts permit the holder thereof to sell the securities at a fixed price prior to
maturity. Securities subject to a standby commitment or put may be sold at any
time at the current market price. However, unless the standby commitment or put
was an integral part of the security as originally issued, it may not be
marketable or assignable; therefore, the standby commitment or put would only
have value to the Fund owning the security to which it relates. In certain
cases, a premium may be paid for a standby commitment or put, which premium will
have the effect of reducing the yield otherwise payable on the underlying
security. The Fund will limit standby commitment or put transactions to
institutions believed to present minimal credit risk.
TIME DEPOSITS -- Time deposits are non-negotiable receipts issued by a bank in
exchange for the deposit of funds. Like a certificate of deposit, it earns a
specified rate of interest over a definite period of time; however, it cannot be
traded in the secondary market. Time deposits are considered to be illiquid
securities.
<PAGE>
21
U.S. GOVERNMENT AGENCIES -- Obligations issued or guaranteed by agencies of the
U.S. Government, including, among others, the Federal Farm Credit Bank, the
Federal Housing Administration and the Small Business Administration, and
obligations issued or guaranteed by instrumentalities of the U.S. Government,
including, among others, the Federal Home Loan Mortgage Corporation, the Federal
Land Banks and the U.S. Postal Service. Some of these securities are supported
by the full faith and credit of the U.S. Treasury (e.g., Government National
Mortgage Association), others are supported by the right of the issuer to borrow
from the Treasury (e.g., Federal Farm Credit Bank), while still others are
supported only by the credit of the instrumentality (e.g., Federal National
Mortgage Association). Guarantees of principal by agencies or instrumentalities
of the U.S. Government may be a guarantee of payment at the maturity of the
obligation so that in the event of a default prior to maturity there might not
be a market and thus no means of realizing on the obligation prior to maturity.
Guarantees as to the timely payment of principal and interest do not extend to
the value or yield of these securities nor to the value of the Fund's shares.
U.S. GOVERNMENT SUBSIDIARY CORPORATIONS -- Securities of wholly-owned
corporations of the U.S. Government (within the Department of Housing and Urban
Development) which are secured by the full faith and credit of the U.S.
Government (e.g., GNMA).
U.S. TREASURY OBLIGATIONS -- U.S. Treasury obligations consist of bills, notes
and bonds issued by the U.S. Treasury and separately traded interest and
principal component parts of such obligations that are transferable through the
Federal book-entry system known as Separately Traded Registered Interest and
Principal Securities ("STRIPS") and Coupon Under Book Entry Safekeeping
("CUBES").
VARIABLE AND FLOATING RATE INSTRUMENTS -- Certain obligations may carry variable
or floating rates of interest, and may involve a conditional or unconditional
demand feature. Such instruments bear interest at rates which are not fixed, but
which vary with changes in specified market rates or indices. The interest rates
on these securities may be reset daily, weekly, quarterly or some other reset
period, and may have a floor or ceiling on interest rate changes. There is a
risk that the current interest rate on such obligations may not accurately
reflect existing market interest rates. A demand instrument with a demand notice
exceeding seven days may be considered illiquid if there is no secondary market
for such security.
WARRANTS -- Instruments giving holders the right, but not the obligation, to buy
shares of a company at a given price during a specified period.
WHEN-ISSUED AND DELAYED DELIVERY SECURITIES -- When-issued or delayed delivery
basis transactions involve the purchase of an instrument with payment and
delivery taking place in the future. Delivery of and payment for these
securities may occur a month or more after the date of the purchase commitment.
The Fund will maintain with the custodian a separate account with liquid high
grade debt securities or cash in an amount at least equal to these commitments.
The interest rate realized on these securities is fixed as of the purchase date
and no interest accrues to the Fund before settlement. These securities are
subject to market fluctuation due to changes in market interest rates and it is
possible that the market value at the time of settlement could be higher or
lower than the purchase price if the general level of interest rates has
changed. Although a Fund generally purchases securities on a when-issued or
forward commitment basis with the intention of actually acquiring securities for
its portfolio, a Fund may dispose of a when-issued security or forward
commitment prior to settlement if it deems appropriate.
ZERO COUPON OBLIGATIONS -- Zero coupon obligations are debt securities that do
not bear any interest, but instead are issued at a deep discount from par. The
value of a zero coupon obligation increases over time to reflect the interest
accreted. Such obligations will not result in the payment of interest until
maturity, and will have greater price volatility than similar securities that
are issued at par and pay interest periodically.
<PAGE>
A-1
APPENDIX
I. BOND RATINGS
*CORPORATE BONDS
The following are descriptions of Standard & Poor's Corporation ("S&P") and
Moody's Investors Service, Inc. ("Moody's") corporate bond ratings.
Bonds rated AAA have the highest rating S&P assigns to a debt obligation. Such a
rating indicates an extremely strong capacity to pay principal and interest.
Bonds rated AA also qualify as high-quality debt obligations. Capacity to pay
principal and interest is very strong, and in the majority of instances they
differ from AAA issues only in small degree. Debt rated A has a strong capacity
to pay interest and repay principal although it is somewhat more susceptible to
the adverse effects of changes in circumstances and economic conditions than
debt in higher rated categories.
Bonds which are rated BBB are considered to be medium-grade obligations (i.e.,
they are neither highly protected nor poorly secured). Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Debt rated BB, B, CCC, CC and C is regarded as having predominately speculative
characteristics with respect to capacity to pay interest and repay principal. BB
indicates the least degree of speculation and C the highest degree of
speculation. While such debt will likely have some quality and protective
characteristics, these are outweighed by large uncertainties or major risk
exposure to adverse conditions.
Bonds which are rated Aaa by Moody's are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edge." Interest payments are protected by a large, or an exceptionally
stable, margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues. Bonds rated Aa by
Moody's are judged by Moody's to be of high quality by all standards. Together
with bonds rated Aaa, they comprise what are generally known as high-grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long-term risks appear somewhat larger than in Aaa securities.
Bonds which are rated A possess many favorable investment attributes and are to
be considered as upper-medium grade obligations. Factors giving security to
principal and interest are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future.
Debt rated Baa is regarded as having an adequate capacity to pay interest and
repay principal. Whereas it normally exhibits adequate protection parameters,
adverse economic conditions or changing circumstances are more likely to lead to
a weakened capacity to pay interest and repay principal for debt in this
category than in higher rated categories.
Bonds which are rated Ba are judged to have speculative elements; their future
cannot be considered as well-assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class. Bonds which are rated B generally lack characteristics of
the desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may be
small. Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal and
interest. Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings. Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
<PAGE>
A-2
II. COMMERCIAL PAPER AND SHORT-TERM RATINGS
The following descriptions of commercial paper ratings have been published by
S&P, Moody's, Fitch Investors Service, Inc. ("Fitch"), Duff and Phelps ("Duff")
and IBCA Limited ("IBCA"), respectively.
Commercial paper rated A by S&P is regarded by S&P as having the greatest
capacity for timely payment. Issues rated A are further refined by use of the
numbers 1+ and 1. Issues rated A-1+ are those with an "overwhelming degree" of
credit protection. Those rated A-1 reflect a "very strong" degree of safety
regarding timely payment. Those rated A-2 reflect a safety regarding timely
payment but not as high as A-1.
Commercial paper issues rated Prime-1 and Prime-2 by Moody's are judged by
Moody's to have superior ability and strong ability for repayment, respectively.
The rating Fitch-1+ (Exceptionally Strong Credit Quality) is the highest
commercial rating assigned by Fitch. Paper rated Fitch-1+ is regarded as having
the strongest degree of assurance for timely payment. The rating Fitch-1 (Very
Strong Credit Quality) is the second highest commercial paper rating assigned by
Fitch which reflects an assurance of timely payment only slightly less in degree
than issues rated F-1+.
The rating Duff-1 is the highest commercial paper rating assigned by Duff. Paper
rated Duff-1 is regarded as having very high certainty of timely payment with
excellent liquidity factors which are supported by ample asset protection. Risk
factors are minor. Paper rated Duff-2 is regarded as having good certainty of
timely payment, good access to capital markets and sound liquidity factors and
company fundamentals. Risk factors are small.
The designation A1 by IBCA indicates that the obligation is supported by a very
strong capacity for timely repayment. Those obligations rated A1+ are supported
by the highest capacity for timely repayment. Obligations rated A2 are supported
by a strong capacity for timely repayment, although such capacity may be
susceptible to adverse changes in business, economic or financial conditions.
<PAGE>
A-3
<TABLE>
<S> <C> <C>
STI CLASSIC VARIABLE TRUST ORGANIZATIONAL OVERVIEW
* INVESTMENT ADVISOR
STI Capital Management, N.A. P.O. Box 3808
Orlando, FL 32802
* DISTRIBUTOR
SEI Financial Services Company Oaks, PA 19456
* ADMINISTRATOR
SEI Fund Resources Oaks, PA 19456
* TRANSFER AGENT
Federated Services Company Federated Investors Tower
Pittsburgh, PA 15222-3779
* CUSTODIANS
SunTrust Bank, Atlanta Park Place
P.O. Box 105504
Atlanta, GA 30348
Bank of New York One Wall Street
(International Equity Fund only) New York, NY 10286
* LEGAL COUNSEL
Morgan, Lewis & Bockius LLP 2000 One Logan Square
Philadelphia, PA 19103
* INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP 1601 Market Street
Philadelphia, PA 19103
</TABLE>
<PAGE>
STI CLASSIC VARIABLE TRUST
Investment Advisor:
STI CAPITAL MANAGEMENT, N.A.
This Statement of Additional Information is not a prospectus. It is intended to
provide additional information regarding the activities and operations of the
Trust and should be read in conjunction with the Trust's prospectus dated April
30, 1997. Prospectuses may be obtained through the Distributor, SEI Financial
Services Company, Oaks, Pennsylvania 19456 or by calling 1-800-453-6038.
TABLE OF CONTENTS
<TABLE>
<S> <C>
The Trust........................... B-2
Description of Permitted
Investments....................... B-2
Investment Limitations.............. B-9
The Investment Advisor.............. B-11
The Distributor..................... B-12
Trustees and Officers of the
Trust............................. B-12
Computation of Yield................ B-14
Calculation of Total Return......... B-14
Purchase and Redemption of Shares... B-15
Determination of Net Asset Value.... B-15
Taxes............................... B-16
Fund Transactions................... B-17
Trading Practices and Brokerage..... B-17
Description of Shares............... B-19
Shareholder Liability............... B-20
5% and 25% Shareholders............. B-20
Limitation of Trustees' Liability... B-21
Experts............................. B-21
Financial Statements................ F-1
</TABLE>
April 30, 1997
<PAGE>
B-2
THE TRUST
STI CLASSIC VARIABLE TRUST (the "Trust") is an open-end management investment
company established under Massachusetts law as a Massachusetts business trust
under a Declaration of Trust dated April 18, 1995. The Declaration of Trust
permits the Trust to offer separate series ("Funds") of units of beneficial
interest ("shares"). Each share of each Fund represents an equal proportionate
interest in that portfolio. Shares of the Trust are issued and redeemed only in
connection with investments in and payments under variable annuity contracts and
variable life insurance policies of various life insurance companies. This
Statement of Additional Information relates to the Investment Grade Bond Fund,
Capital Growth Fund, Value Income Stock Fund, Mid-Cap Equity Fund (prior to
April 30, 1996, the Aggressive Growth Fund) and International Equity Fund. These
various series are collectively referred to herein as the "Funds."
DESCRIPTION OF PERMITTED INVESTMENTS
VARIABLE RATE MASTER DEMAND NOTES
The Mid-Cap Equity Fund, Investment Grade Bond Fund and International Equity
Fund may invest in variable rate master demand notes which may or may not be
backed by bank letters of credit. These notes permit the investment of
fluctuating amounts at varying market rates of interest pursuant to direct
arrangements between the Fund, as lender, and the borrower. Such notes provide
that the interest rate on the amount outstanding varies on a daily, weekly or
monthly basis depending upon a stated short-term interest rate index. Both the
lender and the borrower have the right to reduce the amount of outstanding
indebtedness at any time. There is no secondary market for the notes and it is
not generally contemplated that such instruments will be traded. The quality of
the note or the underlying credit must, in the opinion of the Advisor, be
equivalent to the ratings applicable to permitted investments for each Fund. The
Advisor will monitor on an ongoing basis the earning power, cash flow and
liquidity ratios of the issuers of such instruments and will similarly monitor
the ability of an issuer of a demand instrument to pay principal and interest on
demand.
STRIPS
Each Fund may invest in Separately Traded Interest and Principal Securities
("STRIPS"), which are component parts of U.S. Treasury Securities traded through
the Federal Book-Entry System. The Advisor will purchase only STRIPS that it
determines are liquid or, if illiquid, do not violate the Fund's investment
policy concerning investments in illiquid securities.
U.S. GOVERNMENT AGENCY SECURITIES
Certain investments of each of the Funds may include U.S. Government Agency
Securities. Agencies of the United States Government which issue obligations
consist of, among others, the Export Import Bank of the United States, Farmers
Home Administration, Federal Farm Credit Bank, Federal Housing Administration,
Government National Mortgage Association ("GNMA"), Maritime Administration,
Small Business Administration, and The Tennessee Valley Authority. Obligations
of instrumentalities of the United States Government include securities issued
by, among others, Federal Home Loan Banks, Federal Home Loan Mortgage
Corporation ("FHLMC"), Federal Intermediate Credit Banks, Federal Land Banks,
Fannie Mae and the United States Postal Service as well as government trust
certificates. Some of these securities are supported by the full faith and
credit of the United States Treasury (E.G., GNMA Securities), others are
supported by the right of the issuer to borrow from the Treasury (E.G., FHLMC
Securities) and still others are supported only by the credit of the
instrumentality (E.G., Fannie Mae). Guarantees of principal by agencies or
instrumentalities of the U.S. Government may be a guarantee of payment at the
maturity of the obligation so that in the event of a default prior to maturity
there might not be a market and thus no means of realizing the value of the
obligation prior to maturity.
MORTGAGE-BACKED SECURITIES
The Investment Grade Bond Fund and International Equity Fund may invest in
mortgage-backed securities issued or guaranteed by U.S. Government agencies or
instrumentalities such as GNMA, Fannie Mae, and
<PAGE>
B-3
FHLMC. Obligations of GNMA are backed by the full faith and credit of the United
States Government. Obligations of Fannie Mae and FHLMC are not backed by the
full faith and credit of the United States Government but are considered to be
of high quality since they are considered to be instrumentalities of the United
States. The market value and interest yield of these mortgage-backed securities
can vary due to market interest rate fluctuations and early prepayments of
underlying mortgages. These securities represent ownership in a pool of
federally insured mortgage loans with a maximum maturity of 30 years. However,
due to scheduled and unscheduled principal payments on the underlying loans,
these securities have a shorter average maturity and, therefore, less principal
volatility than a comparable 30-year bond. Since prepayment rates vary widely,
it is not possible to accurately predict the average maturity of a particular
mortgage-backed
security. The scheduled monthly interest and principal payments relating to
mortgages in the pool will be "passed through" to investors. Government
mortgage-backed securities differ from conventional bonds in that principal is
paid back to the certificate holders over the life of the loan rather than at
maturity. As a result, there will be monthly scheduled payments of principal and
interest. In addition, there may be unscheduled principal payments representing
prepayments on the underlying mortgages. Although these securities may offer
yields higher than those available from other types of U.S. Government
securities, mortgage-backed securities may be less effective than other types of
securities as a means of "locking in" attractive long-term rates because of the
prepayment feature. For instance, when interest rates decline, the value of
these securities likely will not rise as much as comparable debt securities due
to the prepayment feature. In addition, these prepayments can cause the price of
a mortgage-backed security originally purchased at a premium to decline in price
to its par value, which may result in a loss.
The Investment Grade Bond Fund may also invest in privately issued
mortgage-backed securities. Two principal types of mortgage-backed securities
are collateralized mortgage obligations ("CMOs") and real estate mortgage
investment conduits ("REMICs"), which are rated in one of the two highest
categories by Standard & Poor's Corporation ("S&P") or Moody's Investors
Service, Inc. ("Moody's"). CMOs are securities collateralized by mortgages,
mortgage pass-throughs, mortgage pay-through bonds (bonds representing an
interest in a pool of mortgages where the cash flow generated from the mortgage
collateral pool is dedicated to bond repayment), and mortgage-backed bonds
(general obligations of the issuers payable out of the issuers' general funds
and additionally secured by a first lien on a pool of single family detached
properties). Many CMOs are issued with a number of classes or series which have
different expected maturities. Investors purchasing such CMOs are credited with
their portion of the scheduled payments of interest and principal on the
underlying mortgages plus all unscheduled prepayments of principal based on a
predetermined priority schedule. Accordingly, the CMOs in the longer maturity
series are less likely than other mortgage pass-throughs to be prepaid prior to
their stated maturity. Although some of the mortgages underlying CMOs may be
supported by various types of insurance, and some CMOs may be backed by GNMA
certificates or other mortgage pass-throughs issued or guaranteed by U.S.
Government agencies or instrumentalities, the CMOs themselves are not generally
guaranteed.
REMICs, which were authorized under the Tax Reform Act of 1986, are private
entities formed for the purpose of holding a fixed pool of mortgages secured by
an interest in real property. REMICs are similar to CMOs in that they issue
multiple classes of securities.
DETERMINING MATURITIES OF MORTGAGE-BACKED SECURITIES
Due to prepayments of the underlying mortgage instruments, mortgage-backed
securities do not have a known actual maturity. In the absence of a known
maturity, market participants generally refer to an estimated average life. The
Advisor believes that the estimated average life is the most appropriate measure
of the maturity of a mortgage-backed security. Accordingly, in order to
determine whether such security is a permissible investment for the Funds, it
will be deemed to have a remaining maturity equal to its average life as
estimated by the Advisor. An average life estimate is a function of an
assumption regarding anticipated prepayment patterns. The assumption is based
upon current interest rates, current conditions in the relevant housing markets
and other factors. The assumption is necessarily subjective, and thus different
market participants could produce somewhat different average life estimates with
regard to the same security. There can be no assurance that the average life as
estimated by the Advisor will be the actual average life.
<PAGE>
B-4
ASSET-BACKED SECURITIES
In addition to mortgage-backed securities, the Investment Grade Bond Fund may
invest in other asset-backed securities rated in one of the two highest rating
categories by S&P or Moody's, including company receivables, truck and auto
loans, leases, and credit card receivables. The Investment Grade Bond Fund may
invest in other asset-backed securities that may be created in the future if the
Advisor determines they are suitable. These issues may be traded
over-the-counter and typically have a short-intermediate maturity structure
depending on the paydown characteristics of the underlying financial assets
which are passed through to the security holder.
REPURCHASE AGREEMENTS
Each of the Funds may enter into repurchase agreements. Repurchase agreements
are agreements by which a person (E.G., a Fund) obtains a security and
simultaneously commits to return the security to the seller (a primary
securities dealer as recognized by the Federal Reserve Bank of New York or a
national member bank as defined in Section 3(d)(1) of the Federal Deposit
Insurance Act, as amended) at an agreed upon price (including principal and
interest) on an agreed upon date within a number of days (usually not more than
seven) from the date of purchase. The resale price reflects the purchase price
plus an agreed upon market rate of interest which is unrelated to the coupon
rate or maturity of the underlying security. A repurchase agreement involves the
obligation of the seller to pay the agreed upon price, which obligation is in
effect secured by the value of the underlying security.
Repurchase agreements are considered to be loans by a Fund for purposes of its
investment limitations. The repurchase agreements entered into by a Fund will
provide that the underlying security at all times shall have a value at least
equal to 102% of the resale price stated in the agreement (the Advisor monitors
compliance with this requirement). Under all repurchase agreements entered into
by a Fund, the Custodian or its agent must take possession of the underlying
collateral. However, if the seller defaults, a Fund could realize a loss on the
sale of the underlying security to the extent that the proceeds of the sale
including accrued interest are less than the resale price provided in the
agreement including interest. In addition, even though the Bankruptcy Code
provides protection for most repurchase agreements, if the seller should be
involved in bankruptcy or insolvency proceedings, a Fund may incur delay and
costs in selling the underlying security or may suffer a loss of principal and
interest if a Fund is treated as an unsecured creditor and required to return
the underlying security to the seller's estate.
STANDBY COMMITMENTS AND PUTS
The Investment Grade Bond Fund may purchase securities at a price which would
result in a yield to maturity lower than that generally offered by the seller at
the time of purchase when they can simultaneously acquire the right to sell the
securities back to the seller, the issuer, or a third party (the "writer") at an
agreed-upon price at any time during a stated period or on a certain date. Such
a right is generally denoted as a "standby commitment" or a "put." The purpose
of engaging in transactions involving puts is to maintain flexibility and
liquidity to permit the Investment Grade Bond Fund to meet redemptions and
remain as fully invested as possible in debt securities. The Investment Grade
Bond Fund reserves the right to engage in put transactions. The right to put the
securities depends on the writer's ability to pay for the securities at the time
the put is exercised. The Investment Grade Bond Fund would limit its put
transactions to institutions which the Advisor believes present minimal credit
risks, and the Advisor would use its best efforts to initially determine and
continue to monitor the financial strength of the sellers of the options by
evaluating their financial statements and such other information as is available
in the marketplace. It may, however be difficult to monitor the financial
strength of the writers because adequate current financial information may not
be available. In the event that any writer is unable to honor a put for
financial reasons, the Fund would be a general creditor (I.E., on a parity with
all other unsecured creditors) of the writer. Furthermore, particular provisions
of the contract between the Fund and the writer may excuse the writer from
repurchasing the securities; for example, a change in the published rating of
the underlying securities or any similar event that has an adverse effect on the
issuer's credit or a provision in the contract that the put will not be
exercised except in certain special cases, for example, to maintain portfolio
liquidity. The Fund could, however, at any
<PAGE>
B-5
time sell the underlying portfolio security in the open market or wait until the
portfolio security matures, at which time it should realize the full par value
of the security.
The securities purchased subject to a put, may be sold to third persons at any
time, even though the put is outstanding, but the put itself, unless it is an
integral part of the security as originally issued, may not be marketable or
otherwise assignable. Therefore, the put would have value only to the Fund. Sale
of the securities to third parties or lapse of time with the put unexercised may
terminate the right to put the securities. Prior to the expiration of any put
option, the Fund could seek to negotiate terms for the extension of such an
option. If such a renewal cannot be negotiated on terms satisfactory to the
Fund, the Fund could, of course, sell the portfolio security. The maturity of
the underlying security will generally be different from that of the put. There
will be no limit to the percentage of portfolio securities that the Fund may
purchase subject to a standby commitment or put, but the amount paid directly or
indirectly for all standby commitments or puts which are not integral parts of
the security as originally issued held in the Fund will not exceed 1/2 of 1% of
the value of the total assets of such Fund calculated immediately after any such
put is acquired.
OBLIGATIONS OF SUPRANATIONAL AGENCIES
The Investment Grade Bond Fund and the Mid-Cap Equity Fund may purchase
obligations of supranational agencies. Currently the Investment Grade Bond Fund
intends to invest only in obligations issued or guaranteed by the Asian
Development Bank, Inter-American Development Bank, International Bank for
Reconstruction and Development (World Bank), African Development Bank, European
Coal and Steel Community, European Economic Community, European Investment Bank
and Nordic Investment Bank.
WHEN-ISSUED SECURITIES
Each of the Funds may purchase securities on a when-issued basis, in which case
delivery and payment normally take place within 45 days after the date of
commitment to purchase. These Funds will only make commitments to purchase
obligations on a when-issued basis with the intention of actually acquiring the
securities, but may sell them before the settlement date. The when-issued
securities are subject to market fluctuation, and no interest accrues on these
securities to the purchaser during this period. The payment obligation and the
interest rate that will be received on these securities are each fixed at the
time the purchaser enters into the commitment. Purchasing when-issued securities
entails leveraging and can involve a risk that the yields available in the
market when the delivery takes place may actually be higher than those obtained
in the transaction itself. In that case there could be an unrealized loss at the
time of delivery.
Segregated accounts will be established with the Custodian, and the Funds will
maintain high quality, liquid assets in an amount at least equal in value to the
Funds' commitments to purchase when-issued securities. If the value of these
assets declines, the Funds will place additional liquid assets in the account on
a daily basis so that the value of the assets in the account is equal to the
amount of such commitments.
SECURITIES LENDING
Each Fund may lend securities pursuant to agreements which require that the
loans be continuously secured by collateral at all times equal to 100% of the
market value of the loaned securities which consist of: cash, securities of the
U.S. Government or its agencies, or any combination of cash and such securities.
Such loans will not be made if, as a result, the aggregate amount of all
outstanding securities loans for a Fund exceed one-third of the value of the
Fund's total assets taken at fair market value. A Fund will continue to receive
interest on the securities lent while simultaneously earning interest on the
investment of the cash collateral in U.S. Government securities. However, a Fund
will normally pay lending fees to such broker-dealers and related expenses from
the interest earned on invested collateral. There may be risks of delay in
receiving additional collateral or risks of delay in recovery of the securities
or even loss of rights in the collateral should the borrower of the securities
fail financially. However, loans are made only to borrowers deemed by the
Advisor to be of good standing and when, in the judgment of the Advisor, the
consideration which can be earned currently from such securities loans justifies
the attendant risk. Any loan may be terminated by either
<PAGE>
B-6
party upon reasonable notice to the other party. The Funds may use the
Distributor or a broker-dealer affiliate of the Advisor as a broker in these
transactions.
FUTURES CONTRACTS AND OPTIONS ON FUTURES
The Investment Grade Bond Fund, Value Income Stock Fund and International Equity
Fund may invest in futures contracts and options on futures. Although futures
contracts by their terms call for actual delivery or acceptance of the
underlying securities, in most cases the contracts are closed out before the
settlement date without the making or taking of delivery. Closing out an open
futures position is done by taking an opposite position ("buying" a contract
which has previously been "sold" or "selling" a contract previously "purchased")
in an identical contract to terminate the position. Brokerage commissions are
incurred when a futures contract is bought or sold.
Futures traders are required to make a good faith margin deposit in cash or
government securities with or for the account of a broker or custodian to
initiate and maintain open positions in futures contracts. A margin deposit is
intended to assure completion of the contract (delivery or acceptance of the
underlying security) if it is not terminated prior to the specified delivery
date. Minimal initial margin requirements are established by the futures
exchange and may be changed. Brokers may establish deposit requirements which
are higher than the exchange minimums. Deposit requirements on futures contracts
customarily range upward from less than 5% of the value of the contract being
traded.
After a futures contract position is opened, the value of the contract is marked
to market daily. If the futures contract price changes to the extent that the
margin on deposit does not satisfy the required margin, payment of additional
"variation" margin will be required. Conversely, changes in the contract value
may reduce the required margin, resulting in a repayment of excess margin to the
contract holder. Variation margin payments are made to and from the futures
broker for as long as the contract remains open. The Funds expect to earn
interest income on their margin deposits.
Traders in futures contracts and related options may be broadly classified as
either "hedgers" or "speculators." Hedgers use the futures markets primarily to
offset unfavorable changes in the value of securities otherwise held or expected
to be acquired for investment purposes. Speculators are less inclined to own the
securities underlying the futures contracts which they trade, and use futures
contracts with the expectation of realizing profits from fluctuations in the
prices of underlying securities. The Funds intend to use futures contracts and
related options only for bona fide hedging purposes.
Regulations of the Commodity Futures Trading Commission applicable to the Funds
require that the futures transactions and related options constitute bona fide
hedging transactions, except that the International Equity Fund may enter into
such transactions, except that the International Equity Fund may enter into such
transactions for other than bona fide hedging purposes if the aggregate initial
margin and premiums required to establish such positions do not exceed five
percent of the liquidation value of the Fund's portfolio, after taking into
account unrealized profits and unrealized losses on any such contracts it has
entered into. The Funds will only sell futures contracts to protect securities
they own against price declines or purchase contracts to protect against an
increase in the price of securities they intend to purchase. As evidence of this
hedging interest, each Fund expects that approximately 75% of its futures
contract purchases will be "completed," that is, equivalent amounts of related
securities will have been purchased or are being purchased by the Fund upon sale
of open futures contracts.
Although techniques other than the sale and purchase of futures contracts and
options on futures contracts could be used to control the Funds' exposure to
market fluctuations, the use of futures contracts may be a more effective means
of hedging this exposure. While the Funds will incur commission expenses in both
opening and closing out futures positions, these costs are lower than
transaction costs incurred in the purchase and sale of the underlying
securities.
RISK FACTORS IN FUTURES TRANSACTIONS
Positions in futures contracts may be closed out only on an exchange which
provides a secondary market for such futures. However, there can be no assurance
that a liquid secondary market will exist for any particular futures contract at
any specific time. Thus, it may not be possible to close a futures position. In
the event of
<PAGE>
B-7
adverse price movements, a Fund would continue to be required to make daily cash
payments to maintain its required margin. In such situations, if a Fund has
insufficient cash, it may have to sell portfolio securities to meet daily margin
requirements at a time when it may be disadvantageous to do so. In addition, the
Funds may be required to make delivery of the instruments underlying futures
contracts they hold. The inability to close options and futures positions also
could have an adverse impact on the ability to effectively hedge it.
The Funds will minimize the risk that they will be unable to close out a futures
contract by entering into futures contracts only if they are traded on national
futures exchanges and for which there appears to be a liquid secondary market.
The risk of loss in trading futures contracts can be substantial, due both to
the low margin deposits required and the extremely high degree of leverage
involved in futures pricing. As a result, a relatively small price movement in a
futures contract may result in immediate and substantial loss (or gain) to a
Fund. For example, if at the time of purchase, 10% of the value of the futures
contract is deposited as margin, a subsequent 10% decrease in the value of the
futures contract would result in a total loss of the margin deposit, before any
deduction for the transaction costs, if the account were then closed out. A 15%
decrease would result in a loss equal to 150% of the original margin deposit if
the contract were closed out. Thus, a purchase or sale of a futures contract may
result in losses in excess of the amount invested in the contract. However,
because the Funds will be engaged in futures transactions only for hedging
purposes, the Advisor does not believe that the Funds will generally be subject
to the risks of loss frequently associated with futures transactions. The Funds
presumably would have sustained comparable losses if, instead of the futures
contract, they had invested in the underlying financial instrument and sold it
after the decline. The risk of loss from the purchase of options is less as
compared with the purchase or sale of futures contracts because the maximum
amount at risk is the premium paid for the option.
Utilization of futures transactions by the Funds does involve the risk of
imperfect or no correlation where the securities underlying futures contracts
have different maturities than the fund securities being hedged. It is also
possible that the Funds could both lose money on futures contracts and
experience a decline in value of its fund securities. There is also the risk of
loss by the Funds of margin deposits in the event of the bankruptcy of a broker
with whom the Funds have an open position in a futures contract or related
option.
Most futures exchanges limit the amount of fluctuation permitted in futures
contract prices during a single trading day. The daily limit establishes the
maximum amount that the price of a futures contract may vary either up or down
from the previous day's settlement price at the end of a trading session. Once
the daily limit has been reached in a particular type of contract, no trades may
be made on that day at a price beyond that limit. The daily limit governs only
price movement during a particular trading day and therefore does not limit
potential losses because the limit may prevent the liquidation of unfavorable
positions. Futures contract prices have occasionally moved to the daily limit
for several consecutive trading days with little or no trading, thereby
preventing prompt liquidation of future positions and subjecting some futures
traders to substantial losses.
OPTIONS
The Investment Grade Bond Fund, Value Income Stock Fund and International Equity
Fund may write call options on a covered basis only, and will not engage in
option writing strategies for speculative purposes. A call option gives the
purchaser of such option the right to buy, and the writer, in this case the
Fund, the obligation to sell the underlying security at the exercise price
during the option period. The advantage to the Funds of writing covered calls is
that the Funds receive a premium which is additional income. However, if the
security rises in value, the Funds may not fully participate in the market
appreciation.
During the option period, a covered call option writer may be assigned an
exercise notice by the broker-dealer through whom such call option was sold
requiring the writer to deliver the underlying security against payment of the
exercise price. This obligation is terminated upon the expiration of the option
period or at such earlier time in which the writer effects a closing purchase
transaction. A closing purchase transaction is one in which the Fund, when
obligated as a writer of an option, terminates its obligation by purchasing an
option of the same series as the option previously written.
<PAGE>
B-8
A closing purchase transaction cannot be effected with respect to an option once
the option writer has received an exercise notice for such option.
Closing purchase transactions will ordinarily be effected to realize a profit on
an outstanding call option, to prevent an underlying security from being called,
to permit the sale of the underlying security or to enable a Fund to write
another call option on the underlying security with either a different exercise
price or expiration date or both. A Fund may realize a net gain or loss from a
closing purchase transaction depending upon whether the net amount of the
original premium received on the call option is more or less than the cost of
effecting the closing purchase transaction. Any loss incurred in a closing
purchase transaction may be partially or entirely offset by the premium received
from a sale of a different call option on the same underlying security. Such a
loss may also be wholly or partially offset by unrealized appreciation in the
market value of the underlying security. Conversely, a gain resulting from a
decline in the market value of the underlying security.
If a call option expires unexercised, a Fund will realize a short-term capital
gain in the amount of the premium on the option, less the commission paid. Such
a gain, however, may be offset by depreciation in the market value of the
underlying security during the option period. If a call option is exercised, a
Fund will realize a gain or loss from the sale of the underlying security equal
to the difference between the cost of the underlying security, and the proceeds
of the sale of the security plus the amount of the premium on the option, less
the commission paid.
The market value of a call option generally reflects the market price of an
underlying security. Other principal factors affecting market value include
supply and demand, interest rates, the price volatility of the underlying
security and the time remaining until the expiration date.
The Funds will write call options only on a covered basis, which means that a
Fund will own the underlying security subject to a call option at all times
during the option period. Unless a closing purchase transaction is effected, a
Fund would be required to continue to hold a security which it might otherwise
wish to sell, or deliver a security it would want to hold. Options written by
the Funds will normally have expiration dates between one and nine months from
the date written. The exercise price of a call option may be below, equal to or
above the current market value of the underlying security at the time the option
is written.
FOREIGN INVESTMENTS
Each Fund may invest primarily in certain obligations or securities of foreign
issuers. Possible investments include equity securities of foreign entities,
obligations of foreign branches of U.S. banks and of foreign banks, including,
without limitation, European Certificates of Deposit, European Time Deposits,
European Bankers' Acceptances, Canadian Time Deposits and Yankee Certificates of
Deposit, and investments in Canadian Commercial Paper, and foreign securities.
These instruments may subject the Fund to investment risks that differ in some
respects from those related to investments in obligations of U.S. domestic
issuers. Such risks include future adverse political and economic developments,
the possible imposition of withholding taxes on interest or other income,
possible seizure, nationalization, or expropriation of foreign deposits, the
possible establishment of exchange controls or taxation at the source, greater
fluctuations in value due to changes in exchange rates, or the adoption of other
foreign governmental restrictions which might adversely affect the payment of
principal and interest on such obligations. Such investments may also entail
higher custodial fees and sales commissions than domestic investments. Foreign
issuers of securities or obligations are often subject to accounting treatment
and engage in business practices different from those respecting domestic
issuers of similar securities or obligations. Foreign branches of U.S. banks and
foreign banks may be subject to less stringent reserve requirements than those
applicable to domestic branches of U.S. Banks.
By investing in foreign securities, a Fund attempts to take advantage of
differences between both economic trends and the performance of securities
markets in the various countries, regions and geographic areas as prescribed by
the Fund's investment objective and policies. During certain periods the
investment return on securities in some or all countries may exceed the return
on similar investments in the United States, while at other times the investment
return may be less than that on similar U.S. securities. Shares of a Fund that
invests in foreign securities, when included in appropriate amounts in a
portfolio otherwise consisting of
<PAGE>
B-9
domestic securities, may provide a source of increased diversification. Each
Fund seeks increased diversification by combining securities from various
countries and geographic areas that offer different investment opportunities and
are affected by different economic trends. The international investments of the
Fund may reduce the effect that events in any one country or geographic area
will have on its investment holdings. Of course, negative movement by a Fund's
investments in one foreign market represented in its portfolio may offset
potential gains from a Fund's investments in another country's markets.
INVESTMENT COMPANY SHARES
Investment companies typically incur fees that are separate from those fees
incurred directly by a Fund. A Fund's purchase of such investment company
securities results in the layering of expenses, such that Shareholders would
indirectly bear a proportionate share of the operating expenses of such
investment companies, including advisory fees.
OTHER INVESTMENTS
The Trust is not prohibited from investing in obligations of banks which are
clients of SEI Investments Company ("SEI"), the parent company of the
Administrator and the Distributor. However, the purchase of shares of the Trust
by such banks or by their customers will not be a consideration in determining
which bank obligations the Trust will purchase. The Trust will not purchase
obligations issued by the Advisor.
Investors will receive written notification at least thirty days prior to any
change in a Fund's investment objective.
INVESTMENT LIMITATIONS
The following are fundamental policies of each Fund and cannot be changed with
respect to a Fund without the consent of the holders of a majority of a Fund's
outstanding shares.
A Fund may not:
1. Acquire more than 10% of the voting securities of any one issuer.
2. Invest in companies for the purpose of exercising control.
3. Borrow money except for temporary or emergency purposes and then only in an
amount not exceeding one-third of the value of total assets. Any borrowing
will be done from a bank and, to the extent that such borrowing exceeds 5%
of the value of the Fund's assets, asset coverage of at least 300% is
required. In the event that such asset coverage shall at any time fall below
300%, the Fund shall, within three days thereafter or such longer period as
the Securities and Exchange Commission ("SEC") may prescribe by rules and
regulations, reduce the amount of its borrowings to such an extent that the
asset coverage of such borrowings shall be at least 300%. This borrowing
provision is included solely to facilitate the orderly sale of portfolio
securities to accommodate heavy redemption requests if they should occur and
is not for investment purposes. All borrowings in excess of 5% of the value
of a Fund's total assets will be repaid before making additional investments
and any interest paid on such borrowings will reduce income.
4. Make loans, except that (a) a Fund may purchase or hold debt instruments in
accordance with its investment objective and policies; (b) a Fund may enter
into repurchase agreements; and (c) the Investment Grade Bond Fund and the
Value Income Stock Fund may engage in securities lending as described in the
Prospectus and in this Statement of Additional Information.
5. Pledge, mortgage or hypothecate assets except to secure temporary borrowings
permitted by (3) above in aggregate amounts not to exceed 10% of the Fund's
total assets, taken at current value at the time of the incurrence of such
loan, except as permitted with respect to securities lending.
6. Purchase or sell real estate, real estate limited partnership interests,
commodities or commodities contracts (except for financial futures
contracts) and interests in a pool of securities that are secured by
interests in real estate (except that the Investment Grade Bond Fund may
purchase mortgage-backed
<PAGE>
B-10
and other mortgage-related securities, including collateralized obligations
and REMICs). However, subject to the permitted investment spectrum, a Fund
may purchase marketable securities issued by companies which own or invest
in real estate, commodities or commodities contracts, and commodities
contracts relating to financial instruments, such as financial futures
contracts (except the International Equity Fund) and options on such
contracts.
7. Make short sales of securities, maintain a short position or purchase
securities on margin, except that the Trust may obtain short-term credits as
necessary for the clearance of security transactions.
8. Act as an underwriter of securities of other issuers except as it may be
deemed an underwriter in selling a security.
9. Except for the International Equity Fund, purchase securities of other
investment companies except for money market funds and CMOs and REMICs
deemed to be investment companies and then only as permitted by the
Investment Company Act of 1940 (the "1940 Act") and the rules and
regulations thereunder. Under these rules and regulations, a Fund is
prohibited from acquiring the securities of other investment companies if,
as a result of such acquisition, the Fund owns more than 3% of the total
voting stock of the company; securities issued by any one investment company
represent more than 5% of the total assets of a Fund; or securities (other
than treasury stock) issued by all investment companies represent more than
10% of the total assets of the Fund.
10. Issue senior securities (as defined in the 1940 Act) except in connection
with permitted borrowings as described above or as permitted by rule,
regulation or order of the SEC.
NON-FUNDAMENTAL POLICIES
No Fund may purchase or retain securities of an issuer if, to the knowledge of
the Trust, an officer, trustee, partner or director of the Trust or any
investment advisor of the Trust owns beneficially more than 1/2 of 1% of the
shares or securities of such issuer and all such officers, trustees, partners
and directors owning more than 1/2 of 1% of such shares or securities together
own more than 5% of such shares or securities.
No Fund may invest in warrants except that the Value Income Stock, Mid-Cap
Equity, Capital Growth and International Equity Funds may invest in warrants in
an amount not exceeding 5% of the Fund's net assets as valued at the lower of
cost or market value. Included in that amount, but not to exceed 2% of the
Fund's net assets, may be warrants not listed on the New York Stock Exchange or
American Stock Exchange.
No Fund may invest in illiquid securities in an amount exceeding, in the
aggregate, 15% of a Fund's assets. An illiquid security is a security which
cannot be disposed of promptly (within seven days), and in the usual course of
business without a loss, and includes repurchase agreements maturing in excess
of seven days, time deposits with a withdrawal penalty, non-negotiable
instruments and instruments for which no market exists.
No Fund may invest in interests in oil, gas or other mineral exploration or
development programs and oil, gas or mineral leases.
No Fund may write or purchase puts, calls, options or combinations thereof,
except that the Investment Grade Bond Fund, Value Income Stock Fund and
International Equity Fund may write covered call options with respect to any or
all parts of their Fund securities, The International Equity Fund may purchase
putable securities. Funds may sell options previously purchased and enter into
closing transactions with respect to covered call options. The Value Income Fund
and Investment Grade Bond Fund may engage in futures transactions and options on
futures, subject only to the investment policies described with respect futures
contracts and options on futures.
No Fund may invest in securities of issuers which together with predecessors
have a record of less than three years continuous operation or equity securities
of issuers which are not readily marketable if such investments will exceed 5%
of the Fund's total assets.
With the exception of the limitations on liquidity standards, the foregoing
percentages will apply at the time of the purchase of a security and shall not
be considered violated unless an excess occurs or exists immediately after and
as a result of a purchase of such security.
<PAGE>
B-11
THE INVESTMENT ADVISOR
The Trust and STI Capital Management, N.A. (the "Advisor") have entered into an
advisory agreement with the Trust (the "Advisory Agreement"). The Advisory
Agreement provides that the Advisor shall not be protected against any liability
to the Trust or its Shareholders by reason of willful misfeasance, bad faith or
gross negligence on its part in the performance of its duties or from reckless
disregard of its obligations or duties thereunder.
The Advisory Agreement provides that if, for any fiscal year, the ratio of
expenses of any Fund (including amounts payable to the Advisor but excluding
interest, taxes, brokerage, litigation, and other extraordinary expenses)
exceeds limitations established by certain states, the Advisor and/or the
Administrator will bear the amount of such excess. The Advisor will not be
required to bear expenses of the Trust to an extent which would result in a
Fund's inability to qualify as a regulated investment company under provisions
of the Internal Revenue Code.
The continuance of the Advisory Agreement, after the first two years, must be
specifically approved at least annually (i) by the vote of the Trustees, and
(ii) by the vote of a majority of the Trustees who are not parties to the
Agreement or "interested persons" of any party thereto, cast in person at a
meeting called for the purpose of voting on such approval. The Advisory
Agreement will terminate automatically in the event of its assignment, and is
terminable at any time without penalty by the Trustees of the Trust or, with
respect to the Funds, by a majority of the outstanding shares of the Funds, on
not less than 30 days' nor more than 60 days' written notice to the Advisor, or
by the Advisor on 90 days' written notice to the Trust.
For the period from commencement of operations to the fiscal years ended
December 31, 1995 and 1996, the Trust paid the following advisory fees:
<TABLE>
<CAPTION>
FEES PAID FEES WAIVED FEES REIMBURSED
------------------------ --------------------- --------------------
FUND 1996 1995 1996 1995 1996 1995
- ------------------------------------ ----- ----- ---------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Bond Fund.......... $ 0 $ 0 $ 43,428 $ 5,158 $ 75,378 $ 31,786
Capital Growth Fund................. $ 0 $ 0 $ 139,019 $ 8,469 $ 15,315 $ 28,546
Value Income Stock Fund............. $ 0 $ 0 $ 117,840 $ 6,015 $ 29,252 $ 29,872
Mid-Cap Equity Fund*................ $ 0 $ 0 $ 93,734 $ 8,203 $ 39,742 $ 28,811
International Equity Fund........... $ 0 * $ 650 * $ 14,878 *
</TABLE>
- ------------
* Not in operation.
THE ADMINISTRATOR
The Trust and SEI Fund Resources (the "Administrator") have entered into an
Administration Agreement (the "Administration Agreement"). The Administration
Agreement provides that the Administrator shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the matters to which the Administration Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on the part of
the Administrator in the performance of its duties or from reckless disregard by
it of its duties and obligations thereunder.
The Administrator, a Delaware business trust has its principal business offices
at Oaks, Pennsylvania 19456. SEI Financial Management Corporation ("SFM"), a
wholly-owned subsidiary of SEI Investments Company ("SEI"), is the owner of all
beneficial interest in the Administrator. SEI and its subsidiaries and
affiliates, including the Administrator, are leading providers of funds
evaluation services, trust accounting systems, and brokerage and information
services to financial institutions, institutional investors, and money managers.
The Administrator and its affiliates also serve as administrator to the
following other mutual funds: The Achievement Funds Trust, The Advisors' Inner
Circle Fund, The Arbor Fund, ARK Funds, Bishop Street Funds, Conestoga Family of
Funds, CoreFunds, Inc., CrestFunds, Inc., CUFUND, FMB Funds, Inc., First
American Funds, Inc., First American Investment Funds, Inc., First American
Strategy Funds, Inc., HighMark Funds, Marquis Funds-Registered Trademark-,
Monitor Funds, Morgan Grenfell Investment Trust, The PBHG Funds, Inc., The
Pillar Funds, Profit Funds Investment Trust, Rembrandt
Funds-Registered Trademark-, Santa Barbara Group of Mutual Funds, Inc., 1784
Funds-Registered Trademark-, SEI Asset Allocation Trust, SEI Daily Income Trust,
SEI Index Funds, SEI Institutional Investments Trust, SEI Daily Income Trust,
SEI Index Funds, SEI Institutional Investments
<PAGE>
B-12
Trust, SEI Institutional Managed Trust, SEI International Trust, SEI Liquid
Asset Trust, SEI Tax Exempt Trust, Stepstone Funds, STI Classic Funds, and
Turner Funds.
For the period from commencement of operations to the fiscal year ended December
31, 1995, the Funds paid the following administrative fees:
<TABLE>
<CAPTION>
FEES PAID FEES WAIVED
-------------------- ------------------------
FUND 1996 1995 1996 1995
- ---------------------------------------------------------- --------- --------- ----- -----
<S> <C> <C> <C> <C>
Investment Grade Bond Fund................................ $ 62,500 $ 15,625 $ 0 $ 0
Capital Growth Fund....................................... $ 62,500 $ 15,625 $ 0 $ 0
Value Income Stock Fund................................... $ 62,500 $ 15,625 $ 0 $ 0
Mid-Cap Equity Fund*...................................... $ 62,500 $ 15,625 $ 0 $ 0
International Equity Fund................................. $ 11,066 * $ 0 *
</TABLE>
- ------------
* Not in operation.
THE DISTRIBUTOR
SEI Financial Services Company (the "Distributor"), a wholly-owned subsidiary of
SEI, and the Trust are parties to a distribution agreement ("Distribution
Agreement").
The Distribution Agreement is renewable annually and may be terminated by the
Distributor, the Qualified Trustees (as defined in the Distribution Agreement)
or by a majority vote of the outstanding securities of the Trust upon not more
than 60 days' written notice by either party. No compensation is paid to the
Distributor under the Distribution Agreement.
TRUSTEES AND OFFICERS OF THE TRUST
The management and affairs of the Trust are supervised by the Trustees under the
laws governing business trusts in the Commonwealth of Massachusetts. The
Trustees and executive officers of the Trust and their dates of birth and their
principal occupations for the last five years are set forth below. Unless
otherwise noted, the principal business address for each officer listed below is
Oaks, Pennsylvania 19456.
DANIEL S. GOODRUM (7/11/26) -- Trustee -- 48 Cayuga Road, Fort Lauderdale,
Florida 33308. Chairman & CEO, SunBank/South Florida, N.A., 1985-1991; Chairman,
Audit Committee and Director, Holy Cross Hospital; Executive Committee Member
and Director, Honda Classic Foundation; Director, Broward Community College
Foundation.
WILTON LOONEY (4/18/19) -- Trustee -- 2999 Circle 75 Parkway, Atlanta, Georgia
30339. President, Genuine Parts Company, 1961-1964; Chairman of the Board,
1964-1990; Honorary Chairman of the Board, 1990 to present. Rollins, Inc.; RPC
Energy Services, Inc.
CHAMPNEY A. MCNAIR (10/30/24) - Trustee* - 1405 Trust Co. of Georgia Building,
Atlanta, Georgia 30303. Director and Chairman of Investment Committee and member
of Executive Committee, Cotton States Life and Health Insurance Company;
Director and Chairman of Investment Committee and member of Executive Committee,
Cotton States Mutual Insurance Company; Chairman, Trust Company of Georgia
Advisory Council.
F. WENDELL GOOCH (12/3/32) -- Trustee -- P.O. Box 190, Paoli, Indiana 47454.
President, Orange County Publishing Co., Inc., since October 1981. Publisher of
the Paoli News and the Paoli Republican and Editor of the Paoli Republican,
1981-1997, President, H & W Distribution, Inc. since July 1984. Current Trustee
on the Board of Trustees for the SEI Family of Funds and The Capitol Mutual
Funds. Executive Vice President, Trust Department, Harris Trust and Savings Bank
and Chairman of the Board of Directors of The Harris Trust Company of Arizona
before January 1981. Trustee, SEI Asset Allocation Trust, SEI Daily Income
Trust, SEI Index Funds, SEI Institutional Investments Trust, SEI Institutional
Managed Trust, SEI International Trust, SEI Liquid Asset Trust, SEI Tax Exempt
Trust and STI Classic Funds.
- ------------
* Champney A. McNair and Jesse S. Hall may be deemed to be "interested
persons" of the Trust as defined in the Investment Company Act of 1940.
<PAGE>
B-13
T. GORDY GERMANY (11/28/25) -- Trustee -- 17 Windy Point, Alexander City,
Alabama 35010. Retired President, Chairman, and CEO of Crawford & Company, held
these positions 1973-1987. Member of the Board of Directors, 1970-1990, joined
company in 1948; spent entire career at Crawford, currently Currently serves on
Boards of Norrell Corporation and Mercy Health Services, the latter being the
holding company of St. Joseph's Hospitals.
DR. BERNARD F. SLIGER (9/30/24) -- Trustee -- Florida State University, The Gus
A. Stavros Center, 250 South Woodward Avenue, Tallahassee, Florida 32306-4035.
Currently on sabbatical leave from Florida State University (1991-1992); now
serves as visiting professor at the University of New Orleans. President of
Florida State University, 1976-91; previous 4 years EVP and Chief Academic
Officer. During educational career, taught at Florida State, Michigan State,
Louisiana State and Southern University. Spent 19 years as faculty member and
administrator at Louisiana State University and served as Head of Economics
Department, member and Chairman of the Graduate Council, Dean of Academic
Affairs and Vice Chancellor. Member of Board of Directors of Federal Reserve
Bank of Atlanta, 1983-1988.
JESSE HALL (9/26/29) -- Trustee* -- 988 Winall Down Road, NE, Atlanta, Georgia
30318. Executive Vice President, SunTrust Banks, Inc., 1985-1994; Director of
Crawford & Company since 1979; Member, Atlanta Estate Planning Council,
1988-1993.
DAVID G. LEE (4/16/52) -- President, Chief Executive Officer -- Senior Vice
President of the Administrator and Distributor since 1993. Vice President of the
Administrator and Distributor (1991-1993). President, GW Sierra Trust Funds
before 1991.
STEPHEN G. MEYER (7/12/65) -- Controller, Chief Financial Officer -- Vice
President & Controller of SEI Corporation since 1994, Director, Internal Audit
and Risk Management, SEI Corporation, 1992-1994. Senior Associate, Coopers &
Lybrand, 1990-1992. Internal Audit, Vanguard Group of Investment Prior to 1992.
RICHARD W. GRANT (10/25/45) -- Secretary -- 2000 One Logan Square, Philadelphia,
Pennsylvania 19103, Partner, Morgan, Lewis & Bockius LLP (law firm). Counsel to
the Trust, Administrator and Distributor.
SANDRA K. ORLOW (10/18/53) -- Vice President, Assistant Secretary -- Vice
President and Assistant Secretary of the Administrator and Distributor since
1983.
KEVIN P. ROBINS (4/15/61) -- Vice President, Assistant Secretary -- Senior Vice
President & General Counsel of SEI, the Administrator and the Distributor since
1994. Vice President of SEI, the Administrator and the Distributor 1992-1994.
Associate, Morgan, Lewis & Bockius LLP (law firm) prior to 1992.
KATHRYN L. STANTON (11/19/58) -- Vice President, Assistant Secretary -- Vice
President, Assistant Secretary of SEI, the Administrator and Distributor since
1994. Associate, Morgan, Lewis & Bockius LLP (law firm) 1989-1994.
TODD CIPPERMAN (01/14/66) -- Vice President, Assistant Secretary -- Vice
President and Assistant Secretary of SEI, the Administrator and the Distributor
since 1995. Associate, Dewey Ballantine (law firm), 1994-1995. Associate,
Winston & Strawn (law firm), 1991-1994.
BARBARA A. NUGENT (06/18/56) -- Vice President, Assistant Secretary -- Vice
President and Assistant Secretary of SEI, the Administrator and Distributor
since 1996. Associate, Drinker, Biddle & Reath (law firm). Assistant Vice
President/Administration, Delaware Service Company, Inc., 1992-1993. Assistant
Vice President of Operations, Delaware Service Company, Inc., 1988-1992.
MARC H. CAHN (06/19/57) -- Vice President, Assistant Secretary -- Vice President
and Assistant Secretary of SEI, the Administrator and the Distributor since
1996. Associate General Counsel, Barclays Bank PLC, 1995-1996. ERISA counsel,
First Fidelity Bancorporation, 1994-1995. Associate, Morgan, Lewis & Bockius LLP
(law firm), 1989-1994.
- ------------
* Champney A. McNair and Jesse S. Hall may be deemed to be "interested
persons" of the Trust as defined in the Investment Company Act of 1940.
<PAGE>
B-14
JOHN H. GRADY, JR. (6/1/61) -- Assistant Secretary -- 1800 M Street, N.W.
Washington, DC 20036. Partner, Morgan, Lewis & Bockius LLP (law firm) since
1995. Associate, Morgan, Lewis & Bockius LLP, 1993-1995. Associate, Ropes & Gray
(law firm), 1988-1993.
The Trustees and officers of the Trust own less than 1% of the outstanding
shares of the Trust.
For the period from the commencement of operations to the fiscal year ended
December 31, 1996, the Trustees received the following compensation from the
Trust:
<TABLE>
<CAPTION>
PENSION OR
AGGREGATE RETIREMENT
COMPENSATION BENEFITS ESTIMATED
FROM ACCRUED AS ANNUAL TOTAL COMPENSATION
REGISTRANT PART OF FUND BENEFITS UPON FROM REGISTRANT AND FUND COMPLEX
NAME OF PERSON AND POSITION FOR FYE 96 EXPENSES RETIREMENT PAID TO DIRECTORS FOR FYE 96
- ------------------------------------ ------------- ------------- ------------- ------------------------------------
<S> <C> <C> <C> <C>
T. Gordy Germany, Trustee........... $ 2,000 $ 0 $ 0 $ 13,500 for services on 2 boards
F. Wendell Gooch, Trustee........... $ 2,000 $ 0 $ 0 $ 13,500 for services on 2 boards
Daniel S. Goodrum, Trustee.......... $ 2,000 $ 0 $ 0 $ 16,000 for services on 2 boards
Jesse S. Hall, Trustee.............. $ 2,000 $ 0 $ 0 $ 13,500 for services on 2 boards
Wilton Looney, Trustee.............. $ 2,000 $ 0 $ 0 $ 13,500 for services on 2 boards
Champney McNair, Trustee............ $ 2,000 $ 0 $ 0 $ 13,500 for services on 2 boards
Bernard F. Sliger, Trustee.......... $ 2,000 $ 0 $ 0 $ 13,500 for services on 2 boards
</TABLE>
COMPUTATION OF YIELD
From time to time, a Fund may advertise yield. These figures will be based on
historical earnings and are not intended to indicate future performance. The
yield of a Fund refers to the annualized income generated by an investment in
such Fund over a specified 30-day period. The yield is calculated by assuming
that the income generated by the investment during that period is generated over
a one year period and is shown as a percentage of the investment. In particular,
yield will be calculated according to the following formula:
Yield = 2[(a-b/cd + 1)6 - 1], where a = dividends and interest earned
during the period; b = expenses accrued for the period (net of
reimbursement); c = the current daily number of shares outstanding
during the period that were entitled to receive dividends; and d = the
maximum offering price per share on the last day of the period.
Actual yield will depend on such variables as asset quality, average asset
maturity, the type of instruments in which a Fund invests, changes in interest
rates on money market instruments, changes in the expenses of the Fund and other
factors.
CALCULATION OF TOTAL RETURN
From time to time, a Fund may advertise total return. The total return of a Fund
refers to the average compounded rate of return to a hypothetical investment for
designated time periods (including, but not limited to, the period from which
the Fund commenced operations through the specified date), assuming that the
entire investment is redeemed at the end of each period. In particular, total
return will be calculated according to the following formula:
P(1 + T)n = ERV, where P = a hypothetical initial payment of $1,000; T =
average annual total return; n = number of years; and ERV = ending
redeemable value of a hypothetical $1,000 payment made at the beginning
of the designated time period as of the end of such period.
From time to time, the Trust may include the names of clients of the Advisor in
advertisements and/or sales literature for the Trust. The SEI Funds Evaluation
database tracks the total return of numerous tax-exempt pension accounts. The
range of returns in these accounts determines the percentile rankings. STI has
been in
<PAGE>
B-15
the top 1% of the SEI Funds Evaluation database for equity managers over the
past ten years. SEI's database includes research data on over 1,000 investment
managers responsible for over $450 billion in assets.
For the 30-day period ended December 31, 1996, yields on the Funds were as
follows:
<TABLE>
<CAPTION>
FUND YIELD
- -------------------------------------------------------------------- ---------------
<S> <C>
Investment Grade Bond Fund.......................................... 5.78%
Capital Growth Fund................................................. 0.79%
Value Income Stock Fund............................................. 2.42%
Mid-Cap Equity Fund................................................. 0.42%
International Equity Fund........................................... N/A
</TABLE>
Based on the foregoing, the average annual total returns for the Funds from
commencement of operations through December 31, 1996 was as follows:
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
-----------------------------
FUND ONE YEAR SINCE INCEPTION
- --------------------------------------------------------- ----------- ----------------
<S> <C> <C>
Investment Grade Bond Fund............................... 2.29% 4.83%
Capital Growth Fund...................................... 23.75% 25.21%
Value Income Stock Fund.................................. 18.64% 21.37%
Mid-Cap Equity Fund...................................... 16.05% 15.56%
International Equity Fund................................ * 1.70%**
</TABLE>
- ------------
* Not a full year of operations.
** Cumulative, not annualized.
PURCHASE AND REDEMPTION OF SHARES
Purchases and redemptions of shares of the Funds may be made on any day the New
York Stock Exchange ("NYSE") is open for business. Currently, the NYSE is closed
on the days the following holidays are observed: New Year's Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving Day
and Christmas Day.
It is currently the Trust's policy to pay for all redemptions in cash. The Trust
retains the right, however, to alter this policy to provide for redemptions in
whole or in part by a distribution in-kind of readily marketable securities held
by the Funds in lieu of cash. Shareholders may incur brokerage charges on the
sale of any such securities so received in payment of redemptions. A Shareholder
will at all times be entitled to aggregate cash redemptions from all Funds of
the Trust during any 90-day period of up to the lesser of $250,000 or 1% of the
Trust's net assets.
The Trust reserves the right to suspend the right of redemption and/or to
postpone the date of payment upon redemption for any period on which trading on
the New York Stock Exchange ("NYSE") is restricted, or during the existence of
an emergency (as determined by the SEC by rule or regulation) as a result of
disposal or valuation of a Fund's securities is not reasonably practicable, or
for such other periods as the SEC has by order permitted. The Trust also
reserves the right to suspend sales of shares of a Fund for any period during
which the NYSE, the Advisor, the Administrator and/or the Custodian are not open
for business.
Certain state securities laws may require those financial institutions providing
certain distribution services to the Trust to register as dealers pursuant to
state law.
DETERMINATION OF NET ASSET VALUE
The net asset value per share of the Funds is determined at the close of regular
trading on the NYSE (currently 4:00 p.m., Eastern Time), each business day the
NYSE is open. Net asset value per share is calculated for purchases and
redemptions of Shares of each Fund by dividing the value of total Fund assets,
less liabilities (including Trust expenses, which are accrued daily), by the
total number of Shares of that Fund
<PAGE>
B-16
outstanding. The net asset value per share of each Fund is determined each
business day at the close of business.
The securities of the Funds are valued by the Administrator pursuant to
valuations provided by an independent pricing service. The pricing service
relies primarily on prices of actual market transactions as well as trader
quotations. However, the service may also use a matrix system to determine
valuations of fixed income securities, which system considers such factors as
security prices, yields, maturities, call features, ratings and developments
relating to specific securities in arriving at valuations. The procedures of the
pricing service and its valuations are reviewed by the officers of the Trust
under the general supervision of the Trustees.
TAXES
FEDERAL INCOME TAX
In order to qualify for treatment as a regulated investment company ("RIC")
under the Internal Revenue Code of 1986, as amended (the "Code"), the Funds must
distribute annually to its Shareholders at least the sum of 90% of its net
interest income excludable from gross income plus 90% of its investment company
taxable income (generally net investment income plus net short-term capital
gain) ("Distribution Requirement") and also must meet several additional
requirements. Among these requirements are the following: (i) at least 90% of a
Fund's gross income each taxable year from must be derived from dividends,
interest, payments with respect to securities loans, and gains from the sale or
other disposition of stock or securities, or certain other income, (ii) a Fund
must derive less than 30% of its gross income each taxable year from the sale or
other disposition of stocks or securities held for less than three months, (iii)
at the close of each quarter of a Fund's taxable year, at least 50% of the value
of its total assets must be represented by cash and cash items, U.S. Government
securities, securities of other RIC's and other securities, with such other
securities limited, in respect to any one issuer, to an amount that does not
exceed 5% of the value of a Fund's assets and that does not represent more than
10% of the outstanding voting securities of such issuer; and (iv) at the close
of each quarter of a Fund's taxable year, not more than 25% of the value of its
assets may be invested in securities (other than U.S. Government securities or
the securities of other RIC's) of any one issuer, or of two or more issuers
engaged in same or similar businesses if a Fund owns at least 20% of the voting
power of such issuers.
Notwithstanding the Distribution Requirement described above, which only
requires a Fund to distribute at least 90% of its annual investment company
taxable income and does not require any minimum distribution of net capital
gains (the excess of net long-term capital gains over net short-term capital
loss), a Fund will be subject to a nondeductible 4% excise tax to the extent it
fails to distribute by the end of any calendar year 98% of its ordinary income
for that year and 98% of its capital gain net income for the on-year period
ending on October 31 of that calendar year, plus certain other amounts.
Any gain or loss recognized on a sale or redemption of Shares of a Fund by a
Shareholder who is not a dealer in securities will generally be treated as a
long-term capital gain or loss if the shares have been held for more than twelve
months and otherwise will be generally treated as a short-term capital gain or
loss. If shares on which a net capital gain distribution has been received are
subsequently sold or redeemed and such shares have been held for six months or
less, any loss recognized will be treated as a long-term capital loss to the
extent of the long-term capital gain distribution.
STATE TAXES
A Fund is not liable for any income or franchise tax in Massachusetts if it
qualifies as a RIC for federal income tax purposes. Distributions by the Funds
to Shareholders and the ownership of shares may be subject to state and local
taxes.
<PAGE>
B-17
FOREIGN TAXES
Dividends and interests received by a Fund may be subject to income, withholding
or other taxes imposed by foreign countries and U.S. possessions that would
reduce the yield on the Fund's securities. Tax conventions between certain
countries and the United States may reduce or eliminate these taxes. Foreign
countries generally do not impose taxes on capital gains with respect to
investments by foreign investors.
A Fund's transactions in foreign currencies and forward foreign currency
contracts will be subject to special provisions of the Code that, among other
things, may affect the character of gains and losses realized by the Fund (I.E.,
may effect whether gains or losses are ordinary or capital), accelerate
recognition of income to the Fund and defer Fund losses. These rules could
therefore affect the character, amount and timing of distributions to
Shareholders. These provisions also may require the Fund to mark-to-market
certain types of the positions in its portfolio (I.E., treat them as if they
were closed out) which may cause the Fund to recognize income without receiving
cash with which to make distributions in amounts necessary to satisfy the 90%
and 98% distribution requirements for avoiding income and excise taxes. The Fund
will monitor its transactions, will make the appropriate tax elections, and will
make the appropriate entries in the books and records when it acquires any
foreign currency or forward foreign currency contract in order to mitigate the
effect of these rules and prevent disqualification of the Fund as a regulated
investment company and minimize the imposition of income and excise taxes.
FUND TRANSACTIONS
The Trust has no obligation to deal with any dealer or group of dealers in the
execution of transactions in portfolio securities. Subject to policies
established by the Trustees, the Advisor is responsible for placing the orders
to execute transactions for a Fund. In placing orders, it is the policy of the
Trust to seek to obtain the best net results taking into account such factors as
price (including the applicable dealer spread), the size, type and difficulty of
the transaction involved, the firm's general execution and operational
facilities, and the firm's risk in positioning the securities involved. While
the Advisor generally seeks reasonably competitive spreads or commissions, the
Trust will not necessarily be paying the lowest spread or commission available.
The money market securities in which the Funds invest are traded primarily in
the over-the-counter market. Bonds and debentures are usually traded
over-the-counter, but may be traded on an exchange. Where possible, the Advisor
will deal directly with the dealers who make a market in the securities involved
except in those circumstances where better prices and execution are available
elsewhere. Such dealers usually are acting as principal for their own account.
On occasion, securities may be purchased directly from the issuer. Money market
securities are generally traded on a net basis and do not normally involve
either brokerage commissions or transfer taxes. The cost of executing portfolio
securities transactions of the Trust will primarily consist of dealer spreads
and underwriting commissions.
TRADING PRACTICES AND BROKERAGE
The Trust selects brokers or dealers to execute transactions for the purchase or
sale of portfolio securities on the basis of its judgment of their professional
capability to provide the service. The primary consideration is to have brokers
or dealers provide transactions at best price and execution for the Trust. Best
price and execution includes many factors, including the price paid or received
for a security, the commission charged, the promptness and reliability of
execution, the confidentiality and placement accorded the order and other
factors affecting the overall benefit obtained by the account on the
transaction. The Trust's determination of what are reasonably competitive rates
is based upon the professional knowledge of its trading department as to rates
paid and charged for similar transactions throughout the securities industry. In
some instances, the Trust pays a minimal share transaction cost when the
transaction presents no difficulty. Some trades are made on a net basis where
the Trust either buys securities directly from the dealer or sells them to the
dealer. In these instances, there is no direct commission charged but there is a
spread (the difference between the buy and sell price) which is the equivalent
of a commission.
The Trust may allocate out of all commission business generated by all of the
funds and accounts under management by the Advisor, brokerage business to
brokers or dealers who provide brokerage and research
<PAGE>
B-18
services. These research services include advice, either directly or through
publications or writings, as to the value of securities, the advisability of
investing in, purchasing or selling securities, and the availability of
securities or purchasers or sellers of securities; furnishing of analyses and
reports concerning issuers, securities or industries; providing information on
economic factors and trends, assisting in determining portfolio strategy,
providing computer software used in security analyses, and providing portfolio
performance evaluation and technical market analyses. Such services are used by
the Advisor in connection with its investment decision-making process with
respect to one or more funds and accounts managed by it, and may not be used
exclusively with respect to the fund or account generating the brokerage.
As provided in the Securities Exchange Act of 1934 (the "1934 Act") higher
commissions may be paid to broker-dealers who provide brokerage and research
services than to broker-dealers who do not provide such services if such higher
commissions are deemed reasonable in relation to the value of the brokerage and
research services provided. Although transactions are directed to broker-dealers
who provide such brokerage and research services, the Trust believes that the
commissions paid to such broker-dealers are not, in general, higher than
commissions that would be paid to broker-dealers not providing such services and
that such commissions are reasonable in relation to the value of the brokerage
and research services provided. In addition, portfolio transactions which
generate commissions or their equivalent are directed to broker-dealers who
provide daily portfolio pricing services to the Trust. Subject to best price and
execution, commissions used for pricing may or may not be generated by the funds
receiving the pricing service.
The Advisor may place a combined order for two or more accounts or funds engaged
in the purchase or sale of the same security if, in its judgment, joint
execution is in the best interest of each participant and will result in best
price and execution. Transactions involving commingled orders are allocated in a
manner deemed equitable to each account or fund. It is believed that the ability
of the accounts to participate in volume transactions will generally be
beneficial to the accounts and funds. Although it is recognized that, in some
cases, the joint execution of orders could adversely affect the price or volume
of the security that a particular account or trust may obtain, it is the opinion
of the Advisor and the Trust's Board of Trustees that the advantages of combined
orders outweigh the possible disadvantages of separate transactions.
Consistent with the Conduct Rules of Fair Practice of the National Association
of Securities Dealers, Inc., and subject to seeking best price and execution,
the Funds, at the request of the Distributor, give consideration to sales of
shares of the Trust as a factor in the selection of brokers and dealers to
execute Trust portfolio transactions.
It is expected that the Trust may execute brokerage or other agency transactions
through the Distributor or an affiliate of the Advisor, both of which are
registered broker-dealers, for a commission in conformity with the 1940 Act, the
1934 Act and rules promulgated by the SEC. Under these provisions, the
Distributor or an affiliate of the Advisor is permitted to receive and retain
compensation for effecting portfolio transactions for the Trust on an exchange
if a written contract is in effect between the Distributor and the Trust
expressly permitting the Distributor or an affiliate of the Advisor to receive
and retain such compensation. These rules further require that commissions paid
to the Distributor by the Trust for exchange transactions not exceed "usual and
customary" brokerage commissions. The rules define "usual and customary"
commissions to include amounts which are "reasonable and fair compared to the
commission, fee or other remuneration received or to be received by other
brokers in connection with comparable transactions involving similar securities
being purchased or sold on a securities exchange during a comparable period of
time." In addition, the Trust may direct commission business to one or more
designated broker-dealers in connection with such broker-dealer's provision of
services to the Trust or payment of certain Trust expenses (E.G., custody,
pricing and professional fees). The Trustees, including those who are not
"interested persons" of the Trust, have adopted procedures for evaluating the
reasonableness of commissions paid to the Distributor and will review these
procedures periodically.
<PAGE>
B-19
For the period from the commencement of operations to the fiscal year ended
December 31, 1996, the Funds paid the following brokerage commissions with
respect to portfolio transactions:
<TABLE>
<CAPTION>
TOTAL $ AMOUNT % OF TOTAL
TOTAL $ TOTAL $ AMOUNT OF BROKERED % OF TOTAL BROKERED
AMOUNT OF BROKERAGE TOTAL $ AMOUNT TRANSACTIONS BROKERAGE TRANSACTIONS
BROKERAGE COMMISSIONS PAID OF BROKERED EFFECTED THROUGH COMMISSIONS PAID EFFECTED THROUGH
COMMISSIONS TO AFFILIATED TRANSACTIONS AFFILIATED TO AFFILIATED AFFILIATED
PAID BROKERS IN IN BROKERS IN BROKERS FOR BROKERS FOR
PORTFOLIO FY 96 FY 96 FY 96 FY 96 FY 96 FY96
- ---------------------- ------------ ----------------- -------------- ----------------- ----------------- -----------------
<S> <C> <C> <C> <C> <C> <C>
Investment Grade Bond
Fund................. $ 332 $ 0 $ 238,737,000 $ 0 $ 0 $ 0
Capital Growth Fund... $ 48,683 $ 0 $ 735,266,384 $ 0 $ 0 $ 0
Value Income Stock
Fund................. $ 68,004 $ 0 $ 562,829,735 $ 0 $ 0 $ 0
Mid-Cap Equity Fund... $ 35,536 $ 0 $ 445,352,134 $ 0 $ 0 $ 0
International Equity
Fund................. $ 1,566 $ 0 $ 710,288 $ 0 $ 0
<CAPTION>
TOTAL
BROKERAGE
COMMISSIONS
PAID TO SFS
IN CONNECTION
WITH
REPURCHASE
AGREEMENT
TRANSACTIONS
FOR
PORTFOLIO FY 96
- ---------------------- -------------
<S> <C>
Investment Grade Bond
Fund................. $ 332
Capital Growth Fund... $ 1,051
Value Income Stock
Fund................. $ 773
Mid-Cap Equity Fund... $ 547
International Equity
Fund................. $ 0
</TABLE>
For the fiscal year ended December 31, 1995, the Funds paid the following
brokerage fees:
<TABLE>
<CAPTION>
TOTAL $ AMOUNT OF BROKERAGE
TOTAL $ AMOUNT OF BROKERAGE COMMISSIONS PAID TO AFFILIATES
PORTFOLIO COMMISSIONS PAID IN 1995 IN 1995
- ------------------------------------ --------------------------- ---------------------------------
<S> <C> <C>
Investment Grade Bond Fund.......... $ 0 $ 0
Capital Growth Fund................. $ 3,745 $ 0
Value Income Stock Fund............. $ 5,587 $ 0
Mid-Cap Equity Fund................. $ 3,973 $ 0
International Equity Fund........... * *
</TABLE>
- ------------
* Not in operation.
For the period from the commencement of operations to the fiscal years ended
December 31, 1995 and 1996, the portfolio turnover rate for each of the Funds
was as follows:
<TABLE>
<CAPTION>
FUND 1996 1995
- ------------------------------------------------------------ ---------- ----------
<S> <C> <C>
Investment Grade Bond Fund.................................. 303.30% 108.55%
Capital Growth Fund......................................... 148.48% 8.05%
Value Income Fund........................................... 79.80% 7.17%
Mid-Cap Equity Fund......................................... 139.60% 13.29%
International Equity Fund................................... 0% *
</TABLE>
- ------------
* Not in operation.
DESCRIPTION OF SHARES
The Declaration of Trust authorizes the issuance of an unlimited number of
shares of the Funds each of which represents an equal proportionate interest in
that Fund with each other share. Shares are entitled upon liquidation to a PRO
RATA share in the net assets of the Funds. Shareholders have no preemptive
rights. The Declaration of Trust provides that the Trustees of the Trust may
create additional series of shares. All consideration received by the Trust for
shares of any additional series and all assets in which such consideration is
invested would belong to that series and would be subject to the liabilities
related thereto. Share certificates representing shares will not be issued.
<PAGE>
B-20
SHAREHOLDER LIABILITY
The Trust is an entity of the type commonly known as a "Massachusetts business
trust." Under Massachusetts law, shareholders of such a trust could, under
certain circumstances, be held personally liable as partners for the obligations
of the trust. Even if, however, the Trust were held to be a partnership, the
possibility of the Shareholders' incurring financial loss for that reason
appears remote because the Trust's Declaration of Trust contains an express
disclaimer of Shareholder liability for obligations of the Trust and requires
that notice of such disclaimer be given in each agreement, obligation or
instrument entered into or executed by or on behalf of the Trust or the
Trustees, and because the Declaration of Trust provides for indemnification out
of the Trust property for any Shareholder held personally liable for the
obligations of the Trust.
5% AND 25% SHAREHOLDERS
As of April 18, 1997, the following persons were the only persons who were
record owners (or to the knowledge of the Trust, beneficial owners) of 5% or 25%
or more of the shares of the Funds. Persons who owned of record or beneficially
more than 25% of a Fund's outstanding shares may be deemed to control the Fund
within the meaning of the 1940 Act. The Trust believes that most of the shares
of the Funds were held for the record owner's fiduciary, agency or custodial
customers.
INVESTMENT GRADE BOND FUND
<TABLE>
<S> <C>
Glenbrook Life and Annuity Company 911,434.2620
98.83%
Attn: Financial Control Dept. N4A
P.O. Box 94040
Palatine, IL 60094-4040
</TABLE>
CAPITAL GROWTH FUND
<TABLE>
<S> <C>
Glenbrook Life and Annuity Company 2,591,157.5600
100.00%
Attn: Financial Control Dept. N4A
P.O. Box 94040
Palatine, IL 60094-4040
</TABLE>
VALUE INCOME STOCK FUND
<TABLE>
<S> <C>
Glenbrook Life and Annuity Company 3,377,748.2920
100.00%
Attn: Financial Control Dept. N4A
P.O. Box 94040
Palatine, IL 60094-4040
</TABLE>
MID-CAP EQUITY FUND
<TABLE>
<S> <C>
Glenbrook Life and Annuity Company 1,431,630.9110
100.00%
Attn: Financial Control Dept. N4A
P.O. Box 94040
Palatine, IL 60094-4040
</TABLE>
<PAGE>
B-21
INTERNATIONAL EQUITY FUND
<TABLE>
<S> <C>
Glenbrook Life and Annuity Company 504,668.5560
100.00%
Attn: Financial Control Dept. N4A
P.O. Box 94040
Palatine, IL 60094-4040
</TABLE>
LIMITATION OF TRUSTEES' LIABILITY
The Declaration of Trust provides that a Trustee shall be liable only for his
own willful defaults and, if reasonable care has been exercised in the selection
of officers, agents, employees or investment advisors, shall not be liable for
any neglect or wrongdoing of any such person. The Declaration of Trust also
provides that the Trust will indemnify its Trustees and officers against
liabilities and expenses incurred in connection with actual or threatened
litigation in which they may be involved because of their offices with the Trust
unless it is determined in the manner provided in the Declaration of Trust that
they have not acted in good faith in the reasonable belief that their actions
were in the best interests of the Trust. However, nothing in the Declaration of
Trust shall protect or indemnify a Trustee against any liability for his willful
misfeasance, bad faith, gross negligence or reckless disregard of his duties.
EXPERTS
The financial statements in this Statement of Additional Information have been
audited by Arthur Andersen LLP, independent public accountants to the Trust, as
indicated in their report with respect thereto, and are included herein in
reliance upon the authority of said firm as experts in accounting and auditing.
<PAGE>
- --------------------------------------------------------------------------------
CAPITAL GROWTH FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
MARKET
SHARES VALUE (000)
--------------------------------------------------------------------------
<S> <C> <C>
COMMON STOCK -- 86.9%
AIRCRAFT -- 3.9%
Allied Signal 1,000 $ 48
Boeing 400 31
Textron 300 20
United Technologies 500 47
-----------
Total Aircraft 146
-----------
AUTOMOTIVE -- 0.8%
General Motors 600 32
-----------
BANKS -- 4.2%
H.F. Ahmanson 600 16
Bank of Boston 600 28
Bank South 400 12
Chase Manhattan 500 30
First Interstate 100 14
Integra Financial 400 25
Signet Banking 700 16
Summit Bancorporation 500 16
-----------
Total Banks 157
-----------
BROADCASTING, NEWSPAPERS & ADVERTISING -- 3.2%
Capital Citites/ABC 400 49
Tele-Communications,
Class A* 1,300 26
Viacom, Class B* 1,000 47
-----------
Total Broadcasting, Newspapers & Advertising
122
-----------
BUILDING & CONSTRUCTION -- 0.8%
Foster Wheeler 300 13
Halliburton 300 15
-----------
Total Building & Construction 28
-----------
CHEMICALS -- 3.0%
Air Products & Chemicals 500 26
Dow Chemical 200 14
DuPont (E.I.) de Nemours 800 56
Praxair 500 17
-----------
Total Chemicals 113
COMMUNICATIONS EQUIPMENT -- 2.4%
ITT* 500 26
ITT Industries* 500 12
Motorola 800 46
Scientific-Atlanta 500 8
-----------
Total Communications Equipment 92
-----------
COMPUTERS & SERVICES -- 5.2%
Cisco Systems 200 15
Computer Sciences* 200 14
<CAPTION>
--------------------------------------------------------------------------
MARKET
SHARES VALUE (000)
--------------------------------------------------------------------------
<S> <C> <C>
Digital Equipment* 300 $ 20
General Motors, Class E 600 31
Hewlett Packard 300 25
International Business Machines 600 55
Microsoft* 400 35
-----------
Total Computers & Services 195
-----------
CONTAINERS & PACKAGING -- 0.4%
Newell 600 16
-----------
DRUGS -- 9.8%
Abbott Labs 700 29
Allergan 500 16
American Home Products 200 19
Amgen* 600 36
Bristol-Myers Squibb 400 34
Bush Boake Allen* 500 14
Johnson & Johnson 400 34
Merck 500 33
Pfizer 400 25
Schering Plough 300 16
SmithKline Beecham 1,200 67
Upjohn 500 19
Warner Lambert 300 29
-----------
Total Drugs 371
-----------
ELECTRICAL & ELECTRONIC PRODUCTS -- 2.6%
Emerson Electric 500 41
General Electric 800 57
-----------
Total Electrical & Electronic Products 98
-----------
ENVIRONMENTAL SERVICES -- 1.0%
Wheelabrator Technologies 700 12
WMX Technologies 800 24
-----------
Total Environmental Services 36
-----------
ENTERTAINMENT -- 1.2%
Carnival 1,900 46
-----------
FINANCIAL SERVICES -- 1.9%
Federal Home Loan Mortgage Corporation 600 50
ITT Hartford Group* 500 24
-----------
Total Financial Services 74
-----------
FOOD, BEVERAGE & TOBACCO -- 7.7%
Campbell Soup 300 18
CPC International 300 21
Coca Cola 400 30
ConAgra 400 17
General Mills 300 17
</TABLE>
F-1
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS DECEMBER 31, 1995
CAPITAL GROWTH FUND --CONTINUED
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
MARKET
SHARES VALUE (000)
--------------------------------------------------------------------------
<S> <C> <C>
Hershey Foods 200 $ 13
Kellogg 200 15
PepsiCo 500 28
Philip Morris 900 81
RJR Nabisco 500 15
Sara Lee 1,100 35
-----------
Total Food, Beverage & Tobacco 290
-----------
HOUSEHOLD PRODUCTS -- 4.0%
American Standard* 900 25
Gillette 800 42
Procter & Gamble 1,000 83
-----------
Total Household Products 150
-----------
INSURANCE -- 4.6%
American International Group 200 18
Chubb 300 29
General Re Corporation 400 62
MGIC Investment 400 22
Travelers 700 44
-----------
Total Insurance 175
-----------
LEISURE PRODUCTS -- 0.8%
Mattel 1,000 31
-----------
MACHINERY -- 3.0%
Deere 400 14
General Signal 1,400 45
Tyco Labs 1,500 54
-----------
Total Machinery 113
-----------
MEDICAL PRODUCTS & SERVICES -- 3.6%
Columbia/HCA Healthcare 1,000 51
Cordis* 200 20
Healthsouth Rehabilitation* 600 17
Medtronic 300 17
Tenet Healthcare* 800 17
Varian Associates 300 14
-----------
Total Medical Products & Services 136
-----------
METALS AND MINING -- 0.8%
Aluminum Company of America 200 10
Molten Metal Technology* 600 20
-----------
Total Metals & Mining 30
-----------
<CAPTION>
--------------------------------------------------------------------------
MARKET
SHARES VALUE (000)
--------------------------------------------------------------------------
<S> <C> <C>
MISCELLANEOUS BUSINESS SERVICES -- 0.6%
First Data 200 $ 13
Oracle Systems* 200 9
-----------
Total Miscellaneous Business Services 22
-----------
PETROLEUM & FUEL PRODUCTS -- 1.9%
Exxon 200 16
Occidental Petroleum 1,000 21
Schlumberger 300 21
Union Texas Petroleum Holdings 600 12
-----------
Total Petroleum & Fuel Products 70
-----------
PETROLEUM REFINING -- 4.6%
Amoco 300 22
Atlantic Richfield 300 33
Chevron 700 37
Kerr-McGee 300 19
Phillips Petroleum 500 17
Texaco 300 24
Unocal 800 23
-----------
Total Petroleum Refining 175
-----------
PHOTOGRAPHIC EQUIPMENT & SUPPLIES -- 2.1%
Eastman Kodak 600 40
Xerox 300 41
-----------
Total Photographic Equipment & Supplies
81
-----------
PRINTING & PUBLISHING -- 0.2%
American Greetings, Class A 300 8
-----------
RAILROADS -- 1.9%
Burlington Northern Santa Fe 200 16
Conrail 300 21
Union Pacific 500 33
-----------
Total Railroads 70
-----------
RETAIL -- 4.6%
Barnes & Noble* 400 12
Federated Department Stores* 500 14
Home Depot 900 43
Kroger* 500 19
Marriott International 800 30
Office Depot* 700 14
</TABLE>
F-2
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
MARKET
SHARES VALUE (000)
--------------------------------------------------------------------------
<S> <C> <C>
Wal-Mart Stores 1,200 $ 27
Wendy's International 700 15
-----------
Total Retail 174
-----------
RUBBER & PLASTIC -- 0.7%
Goodyear Tire & Rubber 600 27
-----------
SEMI-CONDUCTORS/INSTRUMENTS -- 1.6%
AMP 800 31
Intel 500 28
-----------
Total Semi-Conductors/Instruments 59
-----------
STEEL & STEEL WORKS -- 0.5%
Worthington Industries 900 19
-----------
TELEPHONES &
TELECOMMUNICATION -- 2.0%
Alltel 600 18
AT&T 900 58
-----------
Total Telephones & Telecommunication
76
-----------
WHOLESALE -- 1.3%
Arrow Electronics* 600 26
Sysco 800 26
-----------
Total Wholesale 52
-----------
Total Common Stock
(Cost $3,088,684) 3,284
-----------
<CAPTION>
--------------------------------------------------------------------------
SHARES
MARKET
VALUE (000)
--------------------------------------------------------------------------
<S> <C> <C>
REPURCHASE AGREEMENT -- 17.7%
Lehman Brothers Incorporated,
5.54%, dated 12/29/95, matures 01/02/96,
repurchase price $666,534 (collateralized by
U.S. Treasury Note, par value $675,655,
5.625%, maturity date 10/31/97, market value
$686,530) $ 667 $ 667
-----------
Total Repurchase Agreements
(Cost $666,534) 667
-----------
Total Investments -- 104.6%
(Cost $3,755,218) 3,951
-----------
OTHER ASSETS AND LIABILITIES -- (4.6%)
Total Other Assets and Liabilities (173)
-----------
NET ASSETS:
Portfolio shares (unlimited authorization - no
par value) based on 354,566 outstanding shares
of beneficial interest 3,595
Accumulated realized loss on investments (13)
Unrealized appreciation on investments 196
Total Net Asset: -- 100% $ 3,778
-----------
-----------
Net Asset Value, Offering Price and Redemption
Price Per Share $ 10.66
-----------
-----------
</TABLE>
* NON-INCOME PRODUCING SECURITY
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-3
<PAGE>
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS DECEMBER 31, 1995
INVESTMENT GRADE BOND FUND
<TABLE>
<CAPTION>
--------------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
--------------------------------------------------------------------------
<S> <C> <C>
U.S. TREASURY OBLIGATIONS -- 91.6%
U.S. Treasury Note
8.880%, 02/15/99 $ 1,000 $ 1,102
5.750%, 08/15/03 400 405
7.880%, 11/15/04 1,000 1,157
U.S. Treasury Bond
8.130%, 08/15/19 150 189
-----------
Total U.S. Treasury Obligations
(Cost $2,783,310) 2,853
-----------
REPURCHASE AGREEMENTS -- 3.9%
Lehman Brothers Incorporated,
5.54%, dated 12/29/95, matures 01/02/96,
repurchase price $121,934 (collateralized by
U.S. Treasury Note, par value $123,601,
5.625%, maturity date 10/31/97, market value
$125,592) 123 123
-----------
Total Repurchase Agreements
(Cost $121,934) 123
-----------
<CAPTION>
--------------------------------------------------------------------------
FACE AMOUNT MARKET
(000) VALUE (000)
--------------------------------------------------------------------------
<S> <C> <C>
CASH EQUIVALENT -- 2.6%
SEI Liquid Asset Trust Prime Money Market $ 80 $ 80
-----------
Total Cash Equivalent
(Cost $80,368) 80
-----------
Total Investments -- 98.1%
(Cost $2,985,612) 3,056
-----------
OTHER ASSETS AND LIABILITIES -- 1.9%
Total Other Assets and Liabilities 59
-----------
NET ASSETS:
Portfolio shares (unlimited authorization -- no
par value) based on 304,027 outstanding shares
of beneficial interest 3,045
Unrealized appreciation on investments 70
-----------
Total Net Assets: -- 100% $ 3,115
-----------
-----------
Net Asset Value, Offering Price and Redemption
Price Per Share $ 10.25
-----------
-----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
F-4
<PAGE>
STATEMENT OF OPERATIONS (000)
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS FOR THE PERIOD FROM INCEPTION THROUGH DECEMBER
31, 1995
<TABLE>
<CAPTION>
VALUE INCOME AGGRESSIVE CAPITAL INVESTMENT
STOCK FUND GROWTH FUND GROWTH FUND BOND FUND
------------ ----------- ------------ ------------
10/02/95-* 10/02/95-* 10/02/95-* 10/02/95-*
12/31/95 12/31/95 12/31/95 12/31/95
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Investment Income:
Interest Income..................................................... $ 6 $ 20 $ 10 $ 40
Dividend Income..................................................... 24 4 11 --
------------ ----------- ------------ ------------
Total Investment Income......................................... 30 24 21 40
------------ ----------- ------------ ------------
Expenses:
Investment Advisory Fees.............................................. 6 8 8 5
Investment Advisory Fees Waived..................................... (6) (8) (8) (5)
Reimbursement from Advisor.......................................... (30) (29) (29) (32)
Administrator Fees.................................................. 16 16 16 16
Custody Fees........................................................ 1 1 1 1
Transfer Agent Fees................................................. 3 3 3 3
Professional Fees................................................... 10 10 10 10
Trustee Fees........................................................ -- -- -- --
Registration Fees................................................... 1 1 1 1
Printing Expenses................................................... 3 3 3 3
Insurance and Other Fees............................................ 1 1 1 1
Amortization of Deferred Organization Costs......................... 2 2 2 2
------------ ----------- ------------ ------------
Total Expenses.................................................. 7 8 8 5
------------ ----------- ------------ ------------
Net Investment Income (Loss).................................. 23 16 13 35
------------ ----------- ------------ ------------
Net Realized Gain (Loss) on Securities Sold......................... 5 9 (13) --
Net Unrealized Appreciation on Investments:......................... 197 66 196 70
------------ ----------- ------------ ------------
Net Realized and Unrealized Gain on Investments............... 202 75 183 70
------------ ----------- ------------ ------------
Increase in Net Assets from Operations................................ $ 225 $ 91 $ 196 $ 105
------------ ----------- ------------ ------------
------------ ----------- ------------ ------------
</TABLE>
Amounts designated as "-- " are either $0 or have been rounded to $0.
* Commencement of operations.
F-5
<PAGE>
STATEMENT OF CHANGES IN NET ASSETS (000)
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS FOR THE PERIOD FROM INCEPTION THROUGH DECEMBER
31, 1995
<TABLE>
<CAPTION>
INVESTMENT
VALUE INCOME AGGRESSIVE CAPITAL GRADE
STOCK FUND GROWTH FUND GROWTH FUND BOND FUND
------------- ------------- ------------- -------------
10/02/95-* 10/02/95-* 10/02/95-* 10/02/95-*
12/31/95 12/31/95 12/31/95 12/31/95
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
Operations:
Net Investment Income............. $ 23 $ 16 $ 13 $ 35
Net Realized Gain (Loss) on
Investments..................... 5 9 (13) --
Net Change in Unrealized
Appreciation on Investments..... 197 66 196 70
------------- ------------- ------------- -------------
Increase in Net Assets from
Operations................... 225 91 196 105
------------- ------------- ------------- -------------
Distributions to Shareholders:
Net Investment Income:............ (23) (16) (13) (35)
Capital Gains:.................... -- -- -- --
------------- ------------- ------------- -------------
Total Distributions........... (23) (16) (13) (35)
------------- ------------- ------------- -------------
Capital Transactions:
Proceeds from Shares Issued....... 3,790 3,318 3,582 3,010
Reinvestment of Cash
Distributions................... 23 16 13 35
Cost of Shares Repurchased........ -- -- -- --
------------- ------------- ------------- -------------
Increase in Net Assets from Share
Transactions.................... 3,813 3,334 3,595 3,045
------------- ------------- ------------- -------------
Total Increase in Net
Assets....................... 4,015 3,409 3,778 3,115
------------- ------------- ------------- -------------
Net Assets:
Beginning of Period............... -- -- -- --
------------- ------------- ------------- -------------
End of Period..................... $ 4,015 $ 3,409 $ 3,778 $ 3,115
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
Shares Issued and Redeemed:
Shares Issued..................... 374 330 354 301
Shares Issued in Lieu of Cash
Distributions................... 2 2 1 3
Shares Redeemed................... -- -- -- --
------------- ------------- ------------- -------------
Net Share Transactions........ 376 332 355 304
------------- ------------- ------------- -------------
------------- ------------- ------------- -------------
</TABLE>
Amounts designated as "-- " are either $0 or have been rounded to $0.
*Commencement of operations.
F-6
<PAGE>
THIS PAGE INTENTIONALLY LEFT BLANK.
F-7
<PAGE>
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDS FOR THE PERIOD FROM INCEPTION THROUGH DECEMBER
31, 1995
FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD
<TABLE>
<CAPTION>
NET NET REALIZED AND
NET ASSET VALUE INVESTMENT UNREALIZED GAINS DISTRIBUTIONS FROM DISTRIBUTIONS FROM
BEGINNING OF PERIOD INCOME ON INVESTMENTS NET INVESTMENT INCOME REALIZED CAPITAL GAINS
------------------- ---------- ---------------- --------------------- ----------------------
<S> <C> <C> <C> <C> <C> <C>
VALUE INCOME STOCK FUND
1995(1) $10.00 $ 0.06 $ 0.67 $(0.06) $ --
AGGRESSIVE GROWTH FUND
1995(1) $10.00 $ 0.05 $ 0.27 $(0.05) $ --
CAPITAL GROWTH FUND
1995(1) $10.00 $ 0.04 $ 0.66 $(0.04) $ --
INVESTMENT GRADE BOND FUND
1995(1) $10.00 $ 0.13 $ 0.25 $(0.13) $ --
</TABLE>
(1) Commenced operations on October 2, 1995.
* Annualized
+ Cumulative since inception.
Amounts designated as "-- " are either zero or rounded to zero.
F-8
<PAGE>
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
RATIO OF
RATIO TO NET INVESTMENT
RATIO OF EXPENSES TO INCOME (LOSS) TO
NET ASSET NET ASSETS RATIO OF NET INVESTMENT AVERAGE NET ASSETS NET ASSETS PORTFOLIO
VALUE END TOTAL END OF EXPENSES TO INCOME TO (EXCLUDING WAIVERS (EXCLUDING WAIVERS TURNOVER
OF PERIOD RETURN PERIOD (000) AVERAGE NET ASSETS AVERAGE NET ASSETS AND REIMBURSEMENTS) AND REIMBURSEMENTS) RATE
- --------- -------- ------------ ------------------ ------------------ ------------------- ------------------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
$10.67 7.31%+ 4,015 0.95%* 2.98%* 5.72%* (1.79)%* 7.17%
$10.27 3.19%+ 3,409 1.15%* 2.22%* 6.34%* (2.97)%* 13.29%
$10.66 6.96%+ 3,778 1.15%* 1.69%* 6.18%* (3.34)%* 8.05%
$10.25 3.68%+ 3,115 0.75%* 5.04%* 6.05%* (0.26)%* 108.55%
</TABLE>
F-9
<PAGE>
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FUNDSDECEMBER 31, 1995
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 Trust Act of 1940, as amended, as
an open-end management investment Trust with four funds: the Capital Growth
Fund, the Value Income Stock Fund, the Aggressive Growth 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 which are traded on a
national securities exchange (or reported on the NASDAQ national market
system) are stated 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.
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 by complying with the appropriate provisions of the
Internal Revenue Code of 1986, as amended. 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
the shares of the Investment Grade Bond and Equity Funds is the net asset
value per share.
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 Equity Funds are declared and paid
quarterly 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.
USE OF ESTIMATE--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 Financial Management Corporation (the "Administrator") are
parties to an administration agreement (the "Administration Agreement") dated
F-10
<PAGE>
3. ADMINISTRATION AND DISTRIBUTION AGREEMENTS (CONTINUED)
May 29, 1995. 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 Trust) of:
.10% up to $1 billion, .07% on the next $4 billion, .05% on the next $3 billion,
.045% on the next $2 billion, and .04% for over $10 billion.
The Trust and Federated Services Company are parties to a Transfer Agency
servicing agreement dated May 29, 1995 under which Federated Services Company
provides transfer agency services to the Trust.
The Trust and SEI Financial Services Company ("the Distributor") are parties to
a Distribution Agreement dated May 29, 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% and 1.15% of the
average daily net assets of the Investment Grade Bond Fund, Capital Growth Fund,
Value Income Stock Fundand Aggressive Growth Fund, respectively.
SunTrust Bank, Atlanta acts as Custodian for all the Funds. 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
Organizational costs have been capitalized by the Trust and are being
amortized on a straight line basis over a maximum of sixty months following
commencement of operations. 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 SEI
Financial Services Company (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 period ended December 31, 1995 were as
follows:
<TABLE>
<CAPTION>
U.S. GOVT. U.S. GOVT.
PURCHASES SALES PURCHASES SALES
(000) (000) (000) (000)
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Investment Grade Bond Fund........ $ 2,791 $ -- $ 2,791 $ --
Capital Growth Fund............... 3,323 222 -- --
Value Income Stock Fund........... 3,626 209 -- --
Aggressive Growth Fund............ 3,085 267 -- --
</TABLE>
The aggregate gross unrealized appreciation and depreciation for securities
held by the Investment Grade Bond and Equity Funds at December 31, 1995 was
as follows:
<TABLE>
<CAPTION>
NET UNREALIZED
APPRECIATED DEPRECIATED APPRECIATION --
SECURITIES SECURITIES (DEPRECIATION)
(000) (000) (000)
------------- ------------- ---------------
<S> <C> <C> <C>
Investment Grade Bond
Fund................. $ 70 $ 0 $ 70
Capital Growth Fund... 231 35 196
Value Income Stock
Fund................. 230 33 197
Aggressive Growth
Fund................. 148 82 66
</TABLE>
At December 31, 1995 the Capital Growth Fund had $10,224 available realized
capital losses to offset future net capital gains.
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. The following is a summary
of credit quality ratings for securities held by the Fund at December 31, 1996:
<TABLE>
<CAPTION>
% OF PORTFOLIO
MOODY'S VALUE
- -------------------------------------------- -----------------
<S> <C>
US Government Securities.................... 93.38%
Repurchase Agreements....................... 6.62%
-----------------
100%
-----------------
-----------------
<CAPTION>
% OF PORTFOLIO
S & P VALUE
- -------------------------------------------- -----------------
<S> <C>
US Government Securities.................... 93.38%
Repurchase Agreements....................... 6.62%
-----------------
100%
-----------------
-----------------
</TABLE>
F-11
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Trustees of
STI Classic Variable Trust:
We have audited the accompanying statements of net assets of the Value
Income Stock, Aggressive Growth, Capital Growth, and Investment Grade Bond
Funds of the STI Classic Variable Trust (the "Trust") as of December 31,
1995, and the related statements of operations, changes in net assets and
financial highlights for the period 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, 1995, by correspondence with the
custodian. 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, Aggressive Growth, Capital Growth, and Investment
Grade Bond Funds of the STI Classic Variable Trust as of December 31, 1995,
the results of their operations, changes in their net assets, and financial
highlights for the period presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Philadelphia, Pa.
February 9, 1996
F-12
<PAGE>
C-1
PART C: OTHER INFORMATION
ITEM 24. FINANCIAL STATEMENTS AND EXHIBITS:
(a) Financial Statements
Part A: Financial Highlights
Part B: The Registrant's audited Financial Statements for the Investment
Grade Bond Fund, Capital Growth Fund, Value Income Fund, Mid-Cap Equity
Fund and International Fund for the fiscal year ended December 31, 1996,
including Arthur Andersen LLP's report thereon are filed herewith. The
Financial Statements included are:
Statement of Net Assets
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Financial Highlights
Notes to Financial Statements
(b) Additional Exhibits
1 Agreement and Declaration of Trust of the Registrant (incorporated
herein by reference to Post-Effective Amendment No. 1 filed April
2, 1996).
2 By-Laws of the Registrant (incorporated herein by reference to
Post-Effective Amendment No. 1 filed April 2, 1996).
3 Not applicable.
4 Not applicable.
5 Investment Advisory Agreement between the Registrant and STI
Capital Management, N.A., dated August 18, 1995, (incorporated
herein by reference to Post-Effective Amendment No. 1 filed April
2, 1996).
6 Distribution Agreement between the Registrant and SEI Financial
Services Company, dated August 18, 1995, (incorporated herein by
reference to Post-Effective Amendment No. 1 filed April 2, 1996).
7 Not applicable.
8(a) Custodian Agreement between the Registrant and SunTrust Bank,
Atlanta, dated August 18, 1995, (incorporated herein by reference
to Post-Effective Amendment No. 1 filed April 2, 1996).
8(b) Custody Agreement with Bank of New York incorporated by reference
to Post-Effective Amendment No. 2 filed August 21, 1996.
9(a) Administration Agreement between the Registrant and SEI Financial
Management Corporation, dated August 18, 1995 (incorporated herein
by reference to Post-Effective Amendment No. 1 filed April 2,
1996).
9(b) Form of Participation Agreement among the Registrant, SEI Financial
Services Company, Glenbrook Life and Annuity Company, dated October
2, 1995 (incorporated herein by reference to Post-Effective
Amendment No. 1 filed April 2, 1996).
9(c) Agreement for Shareholder Recordkeeping between the Registrant and
Federated Services Company, dated August 2, 1995 (incorporated
herein by reference to Post-Effective Amendment No. 1 filed April
2, 1996).
10 Opinion of Counsel, (incorporated herein by reference to
Post-Effective Amendment No. 1 filed April 2, 1996).
11 Consent of Independent Public Accountants, filed herewith.
<PAGE>
C-2
<TABLE>
<S> <C> <C>
12 Not applicable.
13 Not applicable.
14 Not applicable.
15 Not applicable.
16 Performance Calculations.
17 Not applicable.
18 Not applicable.
24 Powers of attorney, filed herewith.
27 Financial Data Schedules, filed herewith.
</TABLE>
ITEM 25. PERSONS CONTROLLED BY OR UNDER COMMON CONTROL WITH REGISTRANT:
See the Prospectuses and the Statement of Additional Information regarding the
Registrant's control relationships. The Administrator is a subsidiary of SEI
Corporation, which also controls the distributor of the Registrant, SEI
Financial Services Company, other corporations engaged in providing various
financial and recordkeeping services, primarily to bank trust departments,
pension plan sponsors, and investment managers.
ITEM 26. NUMBER OF HOLDERS OF SECURITIES:
The number of record holders of each class as of April 18, 1997:
<TABLE>
<CAPTION>
NUMBER OF
FUND RECORD HOLDERS
- ---------------------------------------------------------------- --------------
<S> <C>
Investment Grade Bond Fund...................................... 3
Capital Growth Fund............................................. 3
Value Income Stock Fund......................................... 3
Mid-Cap Equity Fund............................................. 3
International Equity Fund....................................... 3
</TABLE>
ITEM 27. INDEMNIFICATION:
Article VIII of the Agreement of Declaration of Trust filed as Exhibit 1 to the
Registration Statement is incorporated by reference. Insofar as indemnification
liabilities arising under the Securities Act of 1933, as amended, may be
permitted to trustees, directors, officers and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust or otherwise,
the Registrant is aware that in the opinion of the Securities and Exchange
Commission, such indemnification is against public policy as expressed in the
Act and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by trustees, directors, officers or
controlling persons of the Registrant in connection with the successful defense
of any act, suit or proceeding) is asserted by such trustees, directors,
officers or controlling persons in connection with the shares being registered,
the Registrant will, unless in the opinion of its counsel the matter has been
settled by controlling precedent, submit to a court of appropriate jurisdiction
the question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issues.
<PAGE>
C-3
ITEM 28. BUSINESS AND OTHER CONNECTIONS OF THE INVESTMENT ADVISERS:
Other business, profession, vocation, or employment of a substantial nature in
which each director or principal executive officer of the Adviser is or has
been, at any time during the last two fiscal years, engaged for his own account
or in the capacity of director, officer, employee, partner or trustee are as
follows:
<TABLE>
<CAPTION>
NAME OF CONNECTION WITH
NAME OTHER COMPANY OTHER COMPANY
- ---------------------------------- ------------------- -----------------------
<S> <C> <C>
STI CAPITAL MANAGEMENT
Anthony R. Gray -- --
Chairman & Chief Investment
Officer
James Wood -- --
President
Elliott A. Perny -- --
Executive Vice President & Chief
Portfolio Manager
Stuart F. Van Arsdale -- --
Senior Vice President
Jonathan D. Rich -- --
Director
Robert Buhrmann -- --
Senior Vice President
Larry M. Cole -- --
Senior Vice President
L. Earl Denney -- --
Senior Vice President
Thomas A. Edgar -- --
Senior Vice President
Daniel G. Shannon -- --
Senior Vice President
Ronald Schwartz -- --
Vice President
Ryan R. Burrow Catalina Lighting Director/25% owner
Vice President
Mills A. Riddick -- --
Senior Vice President
Christopher A. Jones -- --
Vice President
Michael R. Scoffone -- --
Vice President
David E. West -- --
Vice President
Dan Jaworski -- --
Vice President
</TABLE>
<PAGE>
C-4
ITEM 29. PRINCIPAL UNDERWRITERS:
(a) Furnish the name of each investment company (other than the Registrant) for
which each principal underwriter currently distributing securities of the
Registrant also acts as a principal underwriter, distributor or investment
adviser.
<TABLE>
<S> <C>
SEI Daily Income Trust July 15, 1982
SEI Liquid Asset Trust November 29, 1982
SEI Tax Exempt Trust December 3, 1982
SEI Index Funds July 10, 1985
SEI Institutional Managed Trust January 22, 1987
SEI International Trust August 30, 1988
Stepstone Funds January 30, 1991
The Advisors' Inner Circle Fund November 14, 1991
The Pillar Funds February 28, 1992
CUFUND May 1, 1992
STI Classic Funds May 29, 1992
CoreFunds, Inc. October 30, 1992
First American Funds, Inc. November 1, 1992
First American Investment Funds, Inc. November 1, 1992
The Arbor Fund January 28, 1993
1784 Funds-Registered Trademark- June 1, 1993
The PBHG Funds, Inc. July 16, 1993
Marquis Funds-Registered Trademark- August 17, 1993
Morgan Grenfell Investment Trust January 3, 1994
The Achievement Funds Trust December 27, 1994
Bishop Street Funds January 27, 1995
CrestFunds, Inc. March 1, 1995
ARK Funds November 1, 1995
Monitor Funds January 11, 1996
FMB Funds, Inc. March 1, 1996
SEI Asset Allocation Trust April 1, 1996
Turner Funds April 28, 1996
SEI Institutional Investments Trust June 14, 1996
First American Strategy Funds, Inc. October 1, 1996
HighMark Funds February 15, 1997
Armada Funds March 8, 1997
</TABLE>
SFS provides numerous financial services to investment managers, pension plan
sponsors, and bank trust departments. These services include portfolio
evaluation, performance measurement and consulting services ("Funds Evaluation")
and automated execution, clearing and settlement of securities transactions
("MarketLink").
(b) Furnish the Information required by the following table with respect to
each director, officer or partner of each principal underwriter named in the
answer to Item 21 of Part B. Unless otherwise noted, the business address of
each director or officer is Oaks, PA 19456.
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME POSITION AND OFFICE WITH UNDERWRITER WITH REGISTRANT
- ------------------------- ----------------------------------------- -----------------------------------------
<S> <C> <C>
Alfred P. West, Jr. Director, Chairman & Chief Executive --
Officer
Henry H. Greer Director, President & Chief Operating --
Officer
Carmen V. Romeo Director, Executive Vice President & --
Treasurer
Gilbert L. Beebower -- Executive Vice President
</TABLE>
<PAGE>
C-5
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME POSITION AND OFFICE WITH UNDERWRITER WITH REGISTRANT
- ------------------------- ----------------------------------------- -----------------------------------------
<S> <C> <C>
Richard B. Lieb -- Executive Vice President, President --
Investment Services Division
Leo J. Dolan, Jr. -- Senior Vice President
Carl A. Guarino -- Senior Vice President
Jerome Hickey Senior Vice President --
Larry Hutchison -- Senior Vice President
Steven Kramer -- Senior Vice President
David G. Lee Senior Vice President President & Chief Executive Officer
William Madden -- Senior Vice President
Jack May Senior Vice President --
A. Keith McDowell Senior Vice President --
Dennis J. McGonigle Senior Vice President --
Hartland J. McKeown Senior Vice President --
Barbara J. Moore -- Senior Vice President
James V. Morris -- Senior Vice President
Steven Onofrio Senior Vice President --
Kevin P. Robins Senior Vice President, General Counsel & Secretary
Vice President & Assistant Secretary
Robert Wagner -- Senior Vice President
Patrick K. Walsh -- Senior Vice President
Kenneth Zimmer -- Senior Vice President
Robert Aller -- Vice President
Marc H. Cahn Vice President & Assistant Secretary Vice President & Assistant Secretary
Gordon W. Carpenter Vice President --
Todd Cipperman Vice President & Assistant Secretary Vice President & Assistant Secretary
Robert Crudup -- Vice President & Managing Director
Ed Daly -- Vice President
Jeff Drennen Vice President --
Mick Duncan Vice President and Team Leader --
Vic Galef Vice President & Managing Director --
Kathy Heilig Vice President --
Michael Kantor -- Vice President
Samuel King Vice President --
Kim Kirk Vice President & Managing Director --
Donald H. Korytowski Vice President --
John Krzeminski -- Vice President & Managing Director
Robert S. Ludwig -- Vice President and Team Leader
Vicki Malloy Vice President and Team Leader --
Carolyn McLaurin Vice President & Managing Director --
W. Kelso Morrill -- Vice President
Barbara A. Nugent Vice President & Assistant Secretary Vice President & Assistant Secretary
Sandra K. Orlow Vice President & Assistant Secretary Vice President & Assistant Secretary
Donald Pepin Vice President & Managing Director --
Larry Pokora Vice President --
</TABLE>
<PAGE>
C-6
<TABLE>
<CAPTION>
POSITIONS AND OFFICES
NAME POSITION AND OFFICE WITH UNDERWRITER WITH REGISTRANT
- ------------------------- ----------------------------------------- -----------------------------------------
<S> <C> <C>
Kim Rainey Vice President --
Paul Sachs Vice President --
Mark Samuels Vice President & Managing Director --
Steve Smith Vice President --
Daniel Spaventa -- Vice President
Kathryn L. Stanton Vice President & Assistant Secretary Vice President & Assistant Secretary
Wayne M. Withrow Vice President & Managing Director --
William Zawaski -- Vice President
James Dougherty -- Director of Brokerage Services
</TABLE>
ITEM 30. LOCATION OF ACCOUNTS AND RECORDS:
Books or other documents required to be maintained by Section 31(a) of the
Investment Company Act of 1940, and the rules promulgated thereunder, are
maintained as follows:
(a) With respect to Rules 31a-1(a); 31a-1(b)(1); (2)(a) and (b); (3); (6); (8);
(12); and 31a-1(d), the required books and records will be maintained at the
offices of Registrant's Custodian:
<TABLE>
<S> <C>
The Bank of New York SunTrust Bank, Atlanta
One Wall Street Park Place
New York, NY 10286 P.O. Box 105504
Atlanta, GA 30348
</TABLE>
(b)/(c) With respect to Rules 31a-1(a); 31a-1(b)(1),(4); (2)(C) and (D); (4);
(5); (6); (8); (9); (10); (11); and 31a-1(f), the required books and records are
maintained at the offices of Registrant's Administrator:
SEI Investments Company
Oaks, PA 19456
(c) With respect to Rules 31a-1(b)(5), (6), (9) and (10) and 31a-1(f), the
required books and records are maintained at the principal offices of the
Registrant's Advisers:
STI Capital Management, N.A.
P.O. Box 3808
Orlando, FL 32802
ITEM 31. MANAGEMENT SERVICES: None
ITEM 32. UNDERTAKINGS:
Registrant hereby undertakes that whenever shareholders meeting the requirements
of Section 16(c) of the Investment Company Act of 1940 inform the Board of
Trustees of their desire to communicate with Shareholders of the Trust, the
Trustees will inform such Shareholders as to the approximate number of
Shareholders of record and the approximate costs of mailing or afford said
Shareholders access to a list of Shareholders.
Registrant hereby undertakes to call a meeting of Shareholders for the purpose
of voting upon the question of removal of a Trustee(s) when requested in writing
to do so by the holders of at least 10% of Registrant's outstanding shares and
in connection with such meetings to comply with the provisions of Section 16(c)
of the Investment Company Act of 1940 relating to Shareholder communications.
Registrant undertakes to furnish each person to whom a prospectus is delivered
with a copy of the Registrant's latest annual report to Shareholders, upon
request and without charge.
<PAGE>
NOTICE
A copy of the Agreement and Declaration of Trust for STI Classic Variable Trust
is on file with the Secretary of State of The Commonwealth of Massachusetts and
notice is hereby given that this Registration Statement has been executed on
behalf of the Trust by an officer of the Trust as an officer and by its Trustees
as trustees and not individually and the obligations of or arising out of this
Registration Statement are not binding upon any of the Trustees, officers, or
Shareholders individually but are binding only upon the assets and property of
the Trust.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the Investment
Company Act of 1940, as amended, the Registrant certifies that it meets all of
the requirements for effectiveness of this Registration Statement pursuant to
Rule 485(b) under the Securities Act of 1933 and has duly caused this
Post-Effective Amendment No. 3 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Oaks, Commonwealth of Pennsylvania, on
the 28th day of April, 1997.
STI CLASSIC VARIABLE TRUST
By: /s/ DAVID G. LEE
---------------------------------------
David G. Lee, PRESIDENT
Pursuant to the requirements of the Securities Act of 1933, this Post-Effective
Amendment to the Registration Statement has been signed below by the following
person in the capacity on the dates indicated.
*
- ---------------------------------------- Trustee April 28, 1997
F. Wendell Gooch
*
- ---------------------------------------- Trustee April 28, 1997
Daniel S. Goodrum
*
- ---------------------------------------- Trustee April 28, 1997
Jesse S. Hall
*
- ---------------------------------------- Trustee April 28, 1997
Wilton Looney
*
- ---------------------------------------- Trustee April 28, 1997
Champney A. McNair
*
- ---------------------------------------- Trustee April 28, 1997
T. Gordy Germany
*
- ---------------------------------------- Trustee April 28, 1997
Dr. Bernard F. Sliger
/s/ STEPHEN G. MEYER
- ---------------------------------------- Controller April 28, 1997
Stephen G. Meyer
/s/ DAVID G. LEE President & Chief
- ---------------------------------------- Executive Officer April 28, 1997
David G. Lee
*By: /s/ DAVID G. LEE
- ----------------------------------------
DAVID G. LEE,
POWER OF ATTORNEY
<PAGE>
STI CLASSIC VARIABLE TRUST
EXHIBIT INDEX
<TABLE>
<CAPTION>
NAME EXHIBIT
- ---------------------------------------------------------------------- -------------
<S> <C>
Agreement and Declaration of Trust of the Registrant (incorporated
herein by reference to Post-Effective Amendment No. 1 filed April 2,
1996)................................................................ EX-99.B1
By-Laws of the Registrant (incorporated herein by reference to
Post-Effective Amendment No. 1 filed April 2, 1996).................. EX-99.B2
Not applicable........................................................ EX-99.B3
Not applicable........................................................ EX-99.B4
Investment Advisory Agreement between the Registrant and STI Capital
Management, N.A., dated August 18, 1995, (incorporated herein by
reference to Post-Effective Amendment No. 1 filed April 2, 1996)..... EX-99.B5
Distribution Agreement between the Registrant and SEI Financial
Services Company, dated August 18, 1995, (incorporated herein by
reference to Post-Effective Amendment No. 1 filed April 2, 1996)..... EX-99.B6
Not applicable........................................................ EX-99.B7
Custodian Agreement between the Registrant and SunTrust Bank, Atlanta,
dated August 18, 1995, (incorporated herein by reference to
Post-Effective Amendment No. 1 filed April 2, 1996).................. EX-99.B8
Administration Agreement between the Registrant and SEI Financial
Management Corporation, dated August 18, 1995, (incorporated herein
by reference to Post-Effective Amendment No. 1 filed April 2,
1996)................................................................ EX-99.B91
Form of Participation Agreement among the Registrant, SEI Financial
Services Company, Glenbrook Life and Annuity Company, dated October
2, 1995, (incorporated herein by reference to Post-Effective
Amendment No. 1 filed April 2, 1996)................................. EX-99.B92
Agreement for Shareholder Recordkeeping between the Registrant and
Federated Services Company, dated August 2, 1995, (incorporated
herein by reference to Post-Effective Amendment No. 1 filed April 2,
1996)................................................................ EX-99.B93
Opinion of Counsel, (incorporated herein by reference to
Post-Effective Amendment No. 1 filed April 2, 1996).................. EX-99.B10
Consent of Independent Public Accountants, filed herewith............. EX-99.B11
Not applicable........................................................ EX-99.B12
Not applicable........................................................ EX-99.B13
Not applicable........................................................ EX-99.B14
Not applicable........................................................ EX-99.B15
Performance Calculations.............................................. EX-99.B16
Not applicable........................................................ EX-99.B17
Not applicable........................................................ EX-99.B18
Powers of attorney, filed herewith.................................... EX-99.B24
Financial Data Schedules, filed herewith
Capital Growth Fund................................................. EX-27.1
Value Income Fund................................................... EX-27.2
Mid-Cap Equity Fund................................................. EX-27.3
Investment Grade Bond Fund.......................................... EX-27.4
International Equity Fund........................................... EX-27.5
</TABLE>
<PAGE>
[LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our report
dated February 4, 1997, on the December 31, 1996 financial statements of STI
Classic Variable Trust, included in the Post-Effective Amendment No. 3 to the
Registration Statement on Form N-1A of STI Classic Variable Trust (File No.
33-91476), and to all references to our Firm included in or made part of
Post-Effective Amendment No. 3 to Registration Statement File No. 33-91476.
/s/ Arthur Andersen LLP
Philadelphia, Pa.
April 30, 1997
<PAGE>
STI CLASSIC VARIABLE TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Variable Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Carmen V. Romeo, Kevin P. Robins and Stephen G. Meyer,
and each of them singly, his or her true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, to sign for him or her and
in his or her name, place and stead, and in the capacity indicated below, to
sign any or all amendments (including post-effective amendments) to the Trust's
Registration Statement on Form N-1A under the provisions of the Investment
Company Act of 1940 and the Securities Act of 1933, each such Act as amended,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, acting alone, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ Jesse S. Hall Date: 6/5/95
Jesse S. Hall
Trustee
<PAGE>
STI CLASSIC VARIABLE TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Variable Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Carmen V. Romeo, Kevin P. Robins and Stephen G. Meyer,
and each of them singly, his or her true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, to sign for him or her and
in his or her name, place and stead, and in the capacity indicated below, to
sign any or all amendments (including post-effective amendments) to the Trust's
Registration Statement on Form N-1A under the provisions of the Investment
Company Act of 1940 and the Securities Act of 1933, each such Act as amended,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, acting alone, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ F. Wendell Gooch Date: 6-2-95
F. Wendell Gooch
Trustee
<PAGE>
STI CLASSIC VARIABLE TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Variable Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Carmen V. Romeo, Kevin P. Robins and Stephen G. Meyer,
and each of them singly, his or her true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, to sign for him or her and
in his or her name, place and stead, and in the capacity indicated below, to
sign any or all amendments (including post-effective amendments) to the Trust's
Registration Statement on Form N-1A under the provisions of the Investment
Company Act of 1940 and the Securities Act of 1933, each such Act as amended,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, acting alone, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ Daniel S. Goodrum Date: 6-6-95
Daniel S. Goodrum
Trustee
<PAGE>
STI CLASSIC VARIABLE TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Variable Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Carmen V. Romeo, Kevin P. Robins and Stephen G. Meyer,
and each of them singly, his or her true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, to sign for him or her and
in his or her name, place and stead, and in the capacity indicated below, to
sign any or all amendments (including post-effective amendments) to the Trust's
Registration Statement on Form N-1A under the provisions of the Investment
Company Act of 1940 and the Securities Act of 1933, each such Act as amended,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, acting alone, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ Wilton Looney Date: 6-2-95
Wilton Looney
Trustee
<PAGE>
STI CLASSIC VARIABLE TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Variable Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Carmen V. Romeo and Stephen G. Meyer, his true and lawful
attorneys-in-fact and agents with full power of substitution and resubstitution,
to sign for him and in his name, place and stead, and in the capacity indicated
below, to sign any or all amendments (including post-effective amendments) to
the Trust's Registration Statement on Form N-1A under the provisions of the
Investment Company Act of 1940 and the Securities Act of 1933, each such Act as
amended, and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, acting alone, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he might or could do in person, hereby ratifying and confirming all
that said attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ Kevin P. Robins Date:
Kevin P. Robins
Vice President and
Assistant Secretary
<PAGE>
STI CLASSIC VARIABLE TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Variable Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints Carmen V. Romeo, Kevin P. Robins and Stephen G. Meyer, his true and
lawful attorneys-in-fact and agents with full power of substitution and
resubstitution, to sign for him and in his name, place and stead, and in the
capacity indicated below, to sign any or all amendments (including
post-effective amendments) to the Trust's Registration Statement on Form N-1A
under the provisions of the Investment Company Act of 1940 and the Securities
Act of 1933, each such Act as amended, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, acting alone, full power and authority to do and perform each and every
act and thing requisite or necessary to be done in and about the premises, as
fully to all intents and purposes as he might or could do in person, hereby
ratifying and confirming all that said attorneys-in-fact and agents or any of
them, or their substitute or substitutes, may lawfully do or cause to be done by
virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand and seal as
of the date set forth below.
/s/ David G. Lee Date:
David G. Lee
President
<PAGE>
STI CLASSIC VARIABLE TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Variable Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Carmen V. Romeo, Kevin P. Robins and Stephen G. Meyer,
and each of them singly, his or her true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, to sign for him or her and
in his or her name, place and stead, and in the capacity indicated below, to
sign any or all amendments (including post-effective amendments) to the Trust's
Registration Statement on Form N-1A under the provisions of the Investment
Company Act of 1940 and the Securities Act of 1933, each such Act as amended,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, acting alone, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ Champney A. McNair Date: 6-2-95
Champney A. McNair
Trustee
<PAGE>
STI CLASSIC VARIABLE TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Variable Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Carmen V. Romeo, Kevin P. Robins and Stephen G. Meyer,
and each of them singly, his or her true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, to sign for him or her and
in his or her name, place and stead, and in the capacity indicated below, to
sign any or all amendments (including post-effective amendments) to the Trust's
Registration Statement on Form N-1A under the provisions of the Investment
Company Act of 1940 and the Securities Act of 1933, each such Act as amended,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, acting alone, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ T. Gordy Germany Date: 6-5-95
T. Gordy Germany
Trustee
<PAGE>
STI CLASSIC VARIABLE TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Variable Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Carmen V. Romeo, Kevin P. Robins and Stephen G. Meyer,
and each of them singly, his or her true and lawful attorneys-in-fact and agents
with full power of substitution and resubstitution, to sign for him or her and
in his or her name, place and stead, and in the capacity indicated below, to
sign any or all amendments (including post-effective amendments) to the Trust's
Registration Statement on Form N-1A under the provisions of the Investment
Company Act of 1940 and the Securities Act of 1933, each such Act as amended,
and to file the same, with all exhibits thereto, and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, acting alone, full power
and authority to do and perform each and every act and thing requisite or
necessary to be done in and about the premises, as fully to all intents and
purposes as he or she might or could do in person, hereby ratifying and
confirming all that said attorneys-in-fact and agents or any of them, or their
substitute or substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ Bernard F. Sliger Date: 6-2-95
Bernard F. Sliger
Trustee
<PAGE>
STI CLASSIC VARIABLE TRUST
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that the undersigned trustee and/or
officer of STI Classic Variable Trust (the "Trust"), a business trust organized
under the laws of The Commonwealth of Massachusetts, hereby constitutes and
appoints David G. Lee, Carmen V. Romeo and Kevin P. Robins, and each of them
singly, his or her true and lawful attorneys-in-fact and agents with full power
of substitution and resubstitution, to sign for him or her and in his or her
name, place and stead, and in the capacity indicated below, to sign any or all
amendments (including post-effective amendments) to the Trust's Registration
Statement on Form N-1A under the provisions of the Investment Company Act of
1940 and the Securities Act of 1933, each such Act as amended, and to file the
same, with all exhibits thereto, and other documents in connection therewith,
with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents, and each of them, acting alone, full power and
authority to do and perform each and every act and thing requisite or necessary
to be done in and about the premises, as fully to all intents and purposes as he
or she might or could do in person, hereby ratifying and confirming all that
said attorneys-in-fact and agents or any of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
IN WITNESS WHEREOF, the undersigned has hereunto set his or her hand and
seal as of the date set forth below.
/s/ Stephen G. Meyer Date: 6-16-95
Stephen G. Meyer
Controller
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000944487
<NAME> STI CLASSIC VARIABLE ANNUITY TRUST FUNDS
<SERIES>
<NUMBER> 010
<NAME> CAPITAL GROWTH FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 23365
<INVESTMENTS-AT-VALUE> 24760
<RECEIVABLES> 0
<ASSETS-OTHER> 429
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 25189
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22449
<SHARES-COMMON-STOCK> 1929
<SHARES-COMMON-PRIOR> 355
<ACCUMULATED-NII-CURRENT> 1
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1344
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1395
<NET-ASSETS> 25189
<DIVIDEND-INCOME> 179
<INTEREST-INCOME> 99
<OTHER-INCOME> 0
<EXPENSES-NET> 139
<NET-INVESTMENT-INCOME> 139
<REALIZED-GAINS-CURRENT> 1357
<APPREC-INCREASE-CURRENT> 1199
<NET-CHANGE-FROM-OPS> 2695
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (138)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1567
<NUMBER-OF-SHARES-REDEEMED> (4)
<SHARES-REINVESTED> 11
<NET-CHANGE-IN-ASSETS> 31411
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> (13)
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 139
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 293
<AVERAGE-NET-ASSETS> 12135
<PER-SHARE-NAV-BEGIN> 10.66
<PER-SHARE-NII> .12
<PER-SHARE-GAIN-APPREC> 2.40
<PER-SHARE-DIVIDEND> (.12)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.06
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000944487
<NAME> STI CLASSIC VARIABLE ANNUITY TRUST FUNDS
<SERIES>
<NUMBER> 020
<NAME> VALUE INCOME FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 31611
<INVESTMENTS-AT-VALUE> 32941
<RECEIVABLES> 0
<ASSETS-OTHER> 47
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 31216
<PAYABLE-FOR-SECURITIES> 1772
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 1772
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 28753
<SHARES-COMMON-STOCK> 2516
<SHARES-COMMON-PRIOR> 376
<ACCUMULATED-NII-CURRENT> 6
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1127
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1330
<NET-ASSETS> 31216
<DIVIDEND-INCOME> 428
<INTEREST-INCOME> 73
<OTHER-INCOME> 0
<EXPENSES-NET> 140
<NET-INVESTMENT-INCOME> 361
<REALIZED-GAINS-CURRENT> 1122
<APPREC-INCREASE-CURRENT> 1133
<NET-CHANGE-FROM-OPS> 2616
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (355)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2116
<NUMBER-OF-SHARES-REDEEMED> (6)
<SHARES-REINVESTED> 30
<NET-CHANGE-IN-ASSETS> 27201
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 5
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 118
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 287
<AVERAGE-NET-ASSETS> 14790
<PER-SHARE-NAV-BEGIN> 10.67
<PER-SHARE-NII> .23
<PER-SHARE-GAIN-APPREC> 1.74
<PER-SHARE-DIVIDEND> (.23)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 12.41
<EXPENSE-RATIO> .95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000944487
<NAME> STI CLASSIC VARIABLE ANNUITY TRUST FUNDS
<SERIES>
<NUMBER> 030
<NAME> MID-CAP EQUITY FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 14011
<INVESTMENTS-AT-VALUE> 14714
<RECEIVABLES> 0
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14714
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 420
<TOTAL-LIABILITIES> 420
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 12880
<SHARES-COMMON-STOCK> 1206
<SHARES-COMMON-PRIOR> 332
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 711
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 703
<NET-ASSETS> 14294
<DIVIDEND-INCOME> 82
<INTEREST-INCOME> 59
<OTHER-INCOME> 0
<EXPENSES-NET> 94
<NET-INVESTMENT-INCOME> 47
<REALIZED-GAINS-CURRENT> 702
<APPREC-INCREASE-CURRENT> 637
<NET-CHANGE-FROM-OPS> 1386
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (47)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 877
<NUMBER-OF-SHARES-REDEEMED> (7)
<SHARES-REINVESTED> 4
<NET-CHANGE-IN-ASSETS> 10885
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 9
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 94
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 228
<AVERAGE-NET-ASSETS> 6172
<PER-SHARE-NAV-BEGIN> 10.27
<PER-SHARE-NII> .06
<PER-SHARE-GAIN-APPREC> 1.59
<PER-SHARE-DIVIDEND> (.06)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.86
<EXPENSE-RATIO> 1.15
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000944487
<NAME> STI CLASSIC VARIABLE ANNUITY TRUST FUNDS
<SERIES>
<NUMBER> 040
<NAME> INVESTMENT GRADE BOND FUND
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 7911
<INVESTMENTS-AT-VALUE> 7947
<RECEIVABLES> 0
<ASSETS-OTHER> 92
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 8039
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 0
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 8043
<SHARES-COMMON-STOCK> 810
<SHARES-COMMON-PRIOR> 304
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> (40)
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 36
<NET-ASSETS> 8039
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 369
<OTHER-INCOME> 0
<EXPENSES-NET> 44
<NET-INVESTMENT-INCOME> 335
<REALIZED-GAINS-CURRENT> (40)
<APPREC-INCREASE-CURRENT> (34)
<NET-CHANGE-FROM-OPS> 251
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (325)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 506
<NUMBER-OF-SHARES-REDEEMED> (33)
<SHARES-REINVESTED> 33
<NET-CHANGE-IN-ASSETS> 4924
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 43
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 163
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.26
<PER-SHARE-NII> .54
<PER-SHARE-GAIN-APPREC> (.33)
<PER-SHARE-DIVIDEND> (.54)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 9.92
<EXPENSE-RATIO> .75
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 6
<CIK> 0000944487
<NAME> STI CLASSIC VARIABLE TRUST
<SERIES>
<NUMBER> 050
<NAME> INTERNATIONAL EQUITY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> NOV-07-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 711
<INVESTMENTS-AT-VALUE> 725
<RECEIVABLES> 0
<ASSETS-OTHER> 338
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 1063
<PAYABLE-FOR-SECURITIES> 57
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 11
<TOTAL-LIABILITIES> 68
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 980
<SHARES-COMMON-STOCK> 98
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 1
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 14
<NET-ASSETS> 995
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2
<OTHER-INCOME> 0
<EXPENSES-NET> (1)
<NET-INVESTMENT-INCOME> 1
<REALIZED-GAINS-CURRENT> 1
<APPREC-INCREASE-CURRENT> 14
<NET-CHANGE-FROM-OPS> 16
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (1)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 98
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 0
<NET-CHANGE-IN-ASSETS> 995
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 1
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 16
<AVERAGE-NET-ASSETS> 352
<PER-SHARE-NAV-BEGIN> 10.00
<PER-SHARE-NII> .01
<PER-SHARE-GAIN-APPREC> .16
<PER-SHARE-DIVIDEND> (.01)
<PER-SHARE-DISTRIBUTIONS> 0
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 10.16
<EXPENSE-RATIO> 1.60
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
