UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------
FORM N-CSR
--------
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
INVESTMENT COMPANY ACT FILE NUMBER 811-9032
STI CLASSIC VARIABLE TRUST
(Exact name of registrant as specified in charter)
--------
2 Oliver Street
Boston, MA 02109
(Address of principal executive offices) (Zip code)
Trusco Capital Management, Inc.
50 Hurt Plaza; Suite 1400
Atlanta, Georgia 30303
(Name and address of agent for service)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: 1-800-428-6970
DATE OF FISCAL YEAR END: DECEMBER 31, 2003
DATE OF REPORTING PERIOD: DECEMBER 31, 2003
ITEM 1. REPORTS TO STOCKHOLDERS
ANNUAL
FINANCIAL REPORT
STI CLASSIC VARIABLE TRUST
DECEMBER 31, 2003
[LOGO OMITTED]
STI Classic Variable Trust
Dear Valued STI Classic Variable Trust Funds' Shareholder:
The financial markets enjoyed a good fourth quarter and an excellent 2003.
Stocks, as measured by the S&P 500 Composite Index rose 12.2% on a total return
basis in the fourth quarter, 15.1% in the second half, and 28.7% for all of
2003. The increase was more than double the long term average annual gain and
was the largest increase since 1997. Bonds also had a positive quarter, as
measured by the Lehman Aggregate Bond Index, gaining just over 1% and finished
its fourth consecutive up year with a total return of 4.1%. The strong returns,
particularly in equities, were welcomed following the prolonged three-year
post-bubble bear market.
Perhaps the most defining characteristic of the fourth quarter environment was
the breadth of growth in the economy. Clearly the antecedents were in place
during prior quarters, but businesses remained cautious and defensive for much
of the year. In the fourth quarter, however, companies increased inventories,
production, capital spending, and at long last, hiring. In short, the downside
risks to the current expansion faded significantly. The Federal Reserve kept
interest rates at a historically low 1%, and stated that short-term rates could
stay low "for a considerable period." Not all of the news was good, however. The
federal deficit rose sharply and some estimates project a fiscal year 2004
deficit of over $500 billion. The trade deficit also moved higher putting
downward pressure on the dollar. While overall inflation was low, commodity
prices and oil moved higher during the quarter.
In this environment, stocks moved higher in the fourth quarter led by the
small-cap and international categories. In the large-cap domestic market,
cyclically sensitive industrials, technology, and consumer discretionary stocks
as well as commodity price sensitive stocks such as materials and energy. A
theme that continued to play out during the quarter, as it did for all of 2003,
was an attraction to the "unattractive." The reduction of downside risks to the
economy tended to benefit the stocks of companies in the weakest financial
condition. Low rated "C" company stocks vastly outperformed stocks of high rated
"A" companies. Stocks of companies with no earnings outperformed companies with
earnings, and stocks with no dividends outperformed stocks with dividends. Our
equity
- ----------------------------------------------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST
NET OF FEES PERFORMANCE AS OF DECEMBER 31, 2002
- ----------------------------------------------------------------------------------------------------------------------
THREE
MONTHS ONE YEAR
- ----------------------------------------------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST CAPITAL APPRECIATION FUND 9.84% 18.45%
- ----------------------------------------------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST GROWTH AND INCOME FUND 14.03% 26.49%
- ----------------------------------------------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST INTERNATIONAL EQUITY FUND 17.88% 37.31%
- ----------------------------------------------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST MID-CAP EQUITY FUND 13.28% 29.72%
- ----------------------------------------------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST SMALL CAP VALUE EQUITY FUND 16.39% 38.44%
- ----------------------------------------------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST VALUE INCOME STOCK FUND 12.61% 23.12%
- ----------------------------------------------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST INVESTMENT GRADE BOND FUND (0.26)% 3.51%
- ----------------------------------------------------------------------------------------------------------------------
<FN>
Returns and principal values will fluctuate and shares at redemption may be worth more or less than their original cost.
Past performance is not a guarantee of future returns.
</FN>
1
selection process seeks quality companies, since time has demonstrated that the
"cream" rises to the top of the market. In this sense, 2003 was a frustrating
year. However, we continue to believe in our process, because it produces the
strongest results for our clients over time.
In the fixed-income markets, the stronger economy helped and hurt bonds during
the fourth quarter. A strengthening economy usually causes higher inflation and
a more restrictive monetary policy; both of which are bad for bonds. Longer term
treasury yields moved up reflecting this concern, causing the shape of the yield
curve to become steeper. However, the stronger economy reduced the default risk
of corporate bonds, particularly in the high yield market. So for the quarter,
the Treasury sector of the bond market fell on a total return basis, while the
credit and high yield sectors improved. The bottoming out in yields also
benefited the mortgage sector, because the volume of new bonds declined and risk
of prepayment fell.
Looking ahead at 2004, we continue to like stocks and retain an overweight
position in balanced accounts, though we acknowledge the risk of a near-term
consolidation following the sharp market rally since mid-March. The pace of
economic growth we believe will remain healthy; additionally, we believe that
interest rates will remain relatively low over the near term, but yields will
trend higher as the year progresses. Corporate profits should continue to rise,
but we believe that investors will be more focused on quality and sustainability
of earnings growth in 2004. Companies with successful, competitive business
models and earnings growth, the "cream", we feel will rise to the top of the
market. We will stick to our investment discipline which identifies those
companies. In fixed-income portfolios, we recommend a neutral duration for
portfolios during this time, emphasizing sectors that will improve current yield
in this low rate environment, mortgage-backed securities and to a lesser degree
corporate bonds.
2003 was a good year for investors, though it was long in coming. I want to take
this opportunity to thank you again for your support of the STI Classic Variable
Trust Funds. We value our relationship, and will continue to provide the high
level of service and support that you need and have come to expect from a
trusted financial adviser.
Sincerely,
/s/ Douglas S. Phillips
-----------------------
Douglas S. Phillips, CFA
President and Chief Executive Officer
Trusco Capital Management
2
CAPITAL APPRECIATION FUND
-------------------------
The STI Classic Variable Trust Capital Appreciation Fund (the "Fund") emphasizes
large and mid-cap stocks with superior profitability, strong current
fundamentals, reasonable valuations, and above-average existing growth dynamics.
Securities are selected on a "bottoms-up" bias based on these primary criteria.
The Adviser avoids market timing and top-down economic forecasting, believing
that remaining invested in growing companies at all times is conducive to
enhancement of long term shareholder capital.
The Fund returned 18.45% in 2003. The S&P 500 Composite Index returned 28.69%,
while the Lipper Large-Cap Core Funds Classification returned 25.59%. Nothing
changed in the Fund's investment process last year. Rather, the overall stock
market environment clearly favored the more volatile and speculative stocks
which are outside the domain of the Fund's investment mission. For example,
stocks ranked highest in quality by Standard and Poor's rose 26% on average,
while the lowest quality gained 81%. Dividend-paying stocks in the S&P 500
Composite Index rose 19%, while those with no dividends were up 49%. That said,
the Fund also was held back by uncharacteristically subpar stock selection,
especially in the Financial Services and Information Technology sectors. This in
turn was caused by our focus on more stable growth stocks with visible revenue
trends, while the market gravitated to less predictable stocks in those sectors.
Looking forward, we believe 2004 will be a year of continued favorable prospects
for common stocks. Corporate profits are expanding, interest rates and inflation
remain in check, and the Federal Reserve should remain a benign influence on the
capital markets. That said, equity valuations are less than compelling after a
significant recovery from market lows in October, 2002. Thus, we are intensely
focused on good stock selection. Our dedication to companies with strong
financial positions and robust earnings continues intact, even more so after
last year's stampede to the opposite, riskier end of the investment milieu.
[GRAPH OMITTED]
[PLOT POINTS FOR EDGAR PURPOSES ARE AS FOLLOWS:]
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
STI Classic Lipper
Variable Trust S&P 500 Large-Cap
Capital Appreciation Composite Core Funds
Fund Index Classification
10/31/95 $10,000 $10,000 $10,000
12/95 $10,632 $10,640 $10,518
12/96 $13,157 $13,084 $12,737
12/97 $17,964 $17,448 $16,296
12/98 $23,168 $22,435 $20,272
12/99 $25,191 $27,155 $24,697
12/00 $25,964 $24,684 $22,892
12/01 $24,578 $21,749 $19,556
12/02 $19,198 $16,943 $14,898
12/03 $22,740 $21,803 $18,712
Average Annual Total Returns(1)
(periods ended December 31, 2003)
--------------------------------------------------------
Annualized
One Year 3 Years 5 Years Inception
to Date
--------------------------------------------------------
18.45% -4.32% -0.37% 10.56%
--------------------------------------------------------
Past performance is no indication of future performance.
(1) Earnings from a variable annuity investment compound tax-free until
withdrawal, so no adjustments were made for income taxes.
3
GROWTH AND INCOME FUND
----------------------
For the 2003 equity market, the third time proved to be the charm. After good
fourth quarters in 2001 and 2002 failed to offset negative overall return years,
the 2003 market posted both a robust fourth quarter and a surprisingly good
equity year. We entered 2003 considerably more sanguine than the consensus,
anticipating returns that we characterized as worthwhile, although, not
dramatic. Acknowledging the understatement of that "conservative" forecast, we
are extremely gratified to report that the STI Classic Variable Trust Growth and
Income Fund (the "Fund") returned 26.49% in 2003. Results did not keep up with
the blistering pace set by the S&P 500/BARRA Value Index, which returned 31.79%.
The market recovery from the lows reached in early March was impressive and
broadbased, although the very best performing stocks tended to be of smaller
size, and/or lower financial quality, and/or no current earnings but large
expected earnings turnarounds. In contrast, the Fund is oriented toward a
diversified group of larger capitalization issues and toward issues with better
or improving financial quality. Neither of these attributes worked in our favor
versus the benchmark in 2003. However, the Fund's longstanding positioning
toward an emphasis on pro-cyclical issues did prove beneficial in the final
months of the year, as investors finally began to be convinced that economic
thaw had arrived and enthusiastically embraced economically sensitive sectors
and stocks. As a result, the Fund closed 2003 on a strong performance note and
continues to be well-positioned heading into 2004.
Looking ahead, the worldwide economic thaw; an intensifying stream of corporate
profits and cash-flows; a tenuous but largely event-free geopolitical picture;
historically low interest rates; inflation; and value of the dollar all are key
ingredients to the 2004 outlook. Given the dramatic upgrade in the economy, the
markets, and investor sentiment, it is hard to envision that conditions can
improve materially from current conditions, so in that regard, it appears that
the best may be "here" for the equity market. "Here" should not be misconstrued
with "over", as a healthy economic backdrop, supportable valuation and the
potential for additional upside surprise in corporate profits are likely to
carry the market further in the quarters ahead. Also, 2004 is a presidential
election year, historically a plus for the stock market. For now, we intend to
maintain the Fund's positioning, but we will also be sensitive to valuation and
continue to harvest positions that fully achieve our objectives or divert
significantly from our thesis for ownership -- business as usual. Finally, after
enduring both a grueling multi-year bear market and a surprisingly large rebound
year in equities, we want to thank our investors for their perseverance and
continued support.
[GRAPH OMITTED]
[PLOT POINTS FOR EDGAR PURPOSES ARE AS FOLLOWS:]
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
STI Classic
Variable Trust S&P 500/
Growth and Income BARRA Value
Fund Index
12/31/99 $10,000 $10,000
12/00 $10,932 $10,608
12/01 $10,323 $ 9,366
12/02 $ 8,198 $ 7,413
12/03 $10,369 $ 9,770
Average Annual Total Returns(1)
(periods ended December 31, 2003)
--------------------------------------------------------
Annualized
One Year 3 Years Inception
to Date
--------------------------------------------------------
26.49% -1.75% 0.91%
--------------------------------------------------------
Past performance is no indication of future performance.
(1) Earnings from a variable annuity investment compound tax-free until
withdrawal, so no adjustments were made for income taxes.
4
INTERNATIONAL EQUITY FUND
-------------------------
The STI Classic Variable Trust International Equity Fund (the "Fund") invests
primarily in common stocks and other equity securities of foreign issuers that
the Adviser believes have strong business fundamentals, such as revenue growth,
cash flows and earnings trends. The Adviser uses a "bottom-up" process based on
individual company earnings trends and fundamentals to determine the weighting
of the Fund's investments in various countries and equity market sectors. The
Fund seeks long-term capital appreciation by investing primarily in a
diversified portfolio of equity securities of foreign issuers.
The Fund returned 17.88% in the fourth quarter and returned 37.31% for 2003
versus the Morgan Stanley MSCI EAFE Index, which returned 17.08% in the fourth
quarter and returned 38.59% for 2003. One of the big stories of 2003 was the
weakness of the U.S. Dollar, which fell over 20% vs. the Euro. Leadership
rotated from Europe to Asia and back to Europe, but all developed markets were
up in 2003. From a quarterly perspective, the first quarter markets were down
about 8% on continued concerns over global stability. There was SARS, the North
Korean Nuclear issue, and the War in Iraq which kept investor risk averse. High
beta stocks did poorly, but smaller cap issues were strong. The second quarter
showed a quick rush of risk seeking investors into the markets driving a return
of 19%. High beta stocks and small caps both were leaders. The third quarter
provided returns of 8%, but in a deceiving way. There was a very large spread in
performance between the largest stocks and the smallest stocks. The largest 100
stocks were up only 3%, where the smallest 200 were on average up 19%. Beta also
had a dramatic spread with the highest beta stocks outperforming by a wide
margin. The fourth quarter return for the MSCI EAFE Index included leading large
caps but high beta stocks continued some leadership. So 2003 was a year of risk
seeking equity market expansion with leadership provided by higher beta, lower
quality, smaller cap stocks.
We believe 2004 will also provide good equity returns for investors. Leadership
may rotate back to larger cap, higher quality, lower beta stocks. Looking back
at 2003 the STI Classic Variable Trust International Equity Fund performed well
capturing much of the up market even though the market drivers were somewhat
perverse. Looking forward to 2004 we believe there will be an environment that
will allow continued success of the Fund.
We continue to invest in portfolio stocks that characteristically have lower
valuations and higher projected growth rates than our benchmark, the Morgan
Stanley MSCI EAFE Index. We believe successful results for the Fund will
continue to be based on a dedication to indepth fundamental research on
companies brought to light via a disciplined quantitative process. Inherent in
management of the Fund is a process designed to quickly identify sell candidates
where earnings trends are beginning to deteriorate. Our approach should provide
the opportunity to participate in long term growth of the international markets
via a diversified portfolio. We feel confident that disciplined execution of our
process will lead to competitive investment results over time.
[GRAPH OMITTED]
[PLOT POINTS FOR EDGAR PURPOSES ARE AS FOLLOWS:]
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
STI Classic
Variable Trust Morgan Stanley
International Equity MSCI EAFE
Fund Index(1)
11/30/96 $10,000 $10,000
12/96 $10,200 $ 9,871
12/97 $11,918 $10,047
12/98 $13,205 $12,056
12/99 $14,368 $15,306
12/00 $13,875 $13,137
12/01 $11,461 $10,321
12/02 $ 9,332 $ 8,676
12/03 $12,813 $12,024
Average Annual Total Returns(2)
(periods ended December 31, 2003)
--------------------------------------------------------
Annualized
One Year 3 Years 5 Years Inception
to Date
--------------------------------------------------------
37.31% -2.62% -0.60% 3.49%
--------------------------------------------------------
Past performance is no indication of future performance.
(1) "Morgan Stanley MSCI EAFE Index" is a registered service mark of Morgan
Stanley Capital International which does not sponsor, and is in no way
affiliated with, the International Equity Fund.
(2) Earnings from a variable annuity investment compound tax-free until
withdrawal, so no adjustments were made for income taxes.
5
MID-CAP EQUITY FUND
-------------------
The STI Classic Variable Trust Mid-Cap Equity Fund (the "Fund") seeks to provide
capital appreciation by investing primarily in a diversified portfolio of small-
to mid-sized companies (i.e. companies with market capitalizations of $500
million to $10 billion, or companies in the Russell Mid Cap Index). In selecting
investments for the Fund, companies are chosen that offer above average stock
appreciation relative to other companies in the same economic sector.
Proprietary, sector based models are utilized to rank stocks in each economic
sector. These models utilize fundamental stock characteristics such as growth
rates and cashflows. Fundamental research is utilized in the creation,
maintenance, and enhancement of the sector based models. Risk management is a
critical component of the overall investment process. The strategy is
diversified with 100 to 140 stocks in the portfolio. Each stock is generally
limited to no more than two percent of the portfolio. The portfolio's holdings
are managed to reduce tracking error and overall volatility to the Russell Mid
Cap Index.
In 2003, the Fund returned 29.72%. It was clearly more of a growth year than a
value year. The Nasdaq Index returned 50.01%. The Russell Mid Cap Growth Index
returned 42.71%. While the Russell Mid Cap Core and Russell Mid Cap Value
returned 40.06% and 38.07%, respectively. The investment strategy for the Fund
was revised in the second quarter of 2003 under a new portfolio manager.
Approximately one third of the underperformance in 2003 occurred prior to the
new strategy being implemented. Approximately two thirds of the underperformance
in 2003 occurred in the second quarter and beginning of the third quarter,
shortly after the transition. Performance improved to the top 38% versus the
Lipper Mid Cap Core strategy in Q4, 2003. The new strategy tends to have a bias
toward higher quality stocks, as measured by strong and improving cashflow. As
many have written, 2003 was a year of low quality, not high quality. For the
entire calendar year, S&P high quality A+ stocks returned 21.2% in 2003, while
S&P low quality C&D stocks returned 56.0%. This spread was only surpassed during
the peak of the Nasdaq bubble in 1999.
Coming off the bottom of a bear market, low quality stocks can outperform. In
the second year after a bear market, this trend often reverses itself. In the
second year after the bear market associated with the recession of the early
1990s, high quality stocks significantly outperformed low quality stocks. A
recent report by Prudential Securities showed that companies that had earnings
outperformed those without earnings by 23.0%. The highest return on equity
quintile of stocks outperformed the lowest ROE quintile of stocks by 24.3%. The
Fund has always had bias toward high quality. The bounce off the bottom has
already occurred. The Fund is well positioned for a reversion to the mean in
terms of rewarding Higher Quality Stocks.
[GRAPH OMITTED]
[PLOT POINTS FOR EDGAR PURPOSES ARE AS FOLLOWS:]
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
STI Classic
Variable Trust
Mid-Cap Equity Russell Mid Cap S&P MidCap
Fund Index 400 Index(2)
10/31/95 $10,000 $10,000 $10,000
12/95 $10,226 $10,558 $10,408
12/96 $11,868 $12,564 $12,408
12/97 $14,506 $16,209 $16,408
12/98 $15,545 $17,846 $19,545
12/99 $17,721 $21,099 $22,422
12/00 $17,202 $22,840 $26,348
12/01 $17,670 $21,556 $26,187
12/02 $12,643 $18,068 $22,387
12/03 $16,400 $25,306 $30,362
Average Annual Total Returns(1)
(periods ended December 31, 2003)
--------------------------------------------------------
Annualized
One Year 3 Years 5 Years Inception
to Date
--------------------------------------------------------
29.72% -1.58% 1.08% 6.30%
--------------------------------------------------------
Past performance is no indication of future performance.
(1) Earnings from a variable annuity investment compound tax-free until
withdrawal, so no adjustments were made for income taxes.
(2) The Fund previously used the S&P MidCap 400 Index as its broad based index.
Going forward, the Fund will use the Russell Mid Cap Index as its broad
based index because it is better suited to the Fund's strategy.
6
SMALL CAP VALUE EQUITY FUND
---------------------------
The STI Classic Variable Trust Small Cap Value Equity Fund (the"Fund") invests
in established but smaller companies with market capitalizations under $2
billion. These companies are typically followed by Wall Street and often out of
favor for various reasons. The Adviser requires that each security purchased pay
a dividend; this is an indication of financial stability of the company and an
important component of the total return. Also, the Adviser seeks companies
selling the lower one-third of their historical ranges on traditional relevant
valuation metrics such as price-to-earnings and price-to-book.
2003 posted some of the largest gains the stock market has ever experienced. The
Fund returned 38.44% for the year but it underperformed the Russell 2000 Value
Index (a small cap value index that measures the performance of stocks similar
to those purchased by the Fund). The Russell 2000 Value Index returned 46.03%,
the highest in its 25 year history. The Fund lagged the index but took on
considerably less risk as indicated by a 5-yr beta of 0.78. Many of the best
performing stocks in the index were unprofitable companies that were able to
avoid bankruptcy because of the all time low in interest rates. These companies
do not exhibit the financial stability warranted by our investment philosophy.
However, they outperformed the market rising over 70% and contributed
significantly to the performance of the index. If the index's returns are
adjusted for the level of risk taken, the Fund actually outperforms the
benchmark for the year. The Fund is by nature a more conservative investment
vehicle than the average small cap mutual fund. We also diversify our risk with
international holdings, that in a time of a U.S. economic boom, may dampen
performance. In turn, however, in years of a U.S. slow down (as we have had in
the very recent past) these international holdings provide the Fund considerable
cushion. Despite underperformance in a year of high flying stocks, we believe
our strict adherence to quality, lower risk companies allows the Fund to
outperform in the long run.
We continue to be over weighted with investments in many of the economically
sensitive sectors such as Industrials and Materials. Financials and Utilities
are under-weighted as we do not expect them to perform as well as other sectors
as the economy continues to expand. While stock prices certainly don't look
cheap and the breadth of opportunities has narrowed from the beginning of 2000,
we believe that there are still opportunities to be had. Mutual fund flows
should be strong in 2004, and more money is expected to flow into small caps.
Historically in the second year following the end of a bear market, high
quality, profitable companies outperform their counter parts. This bodes well
for our bottoms up, dividend paying investment process which prefers quality,
lower risk stocks over high risk companies expected to lose money. We believe
the market trend shows signs of changing and will favor the Fund in 2004.
[GRAPH OMITTED]
[PLOT POINTS FOR EDGAR PURPOSES ARE AS FOLLOWS:]
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
STI Classic
Variable Trust Russell 2000
Small Cap Value Equity Value
Fund Index
10/31/97 $10,000 $10,000
12/97 $10,214 $10,453
12/98 $ 8,970 $ 9,779
12/99 $ 8,541 $ 9,633
12/00 $ 9,939 $11,832
12/01 $12,074 $13,492
12/02 $11,929 $11,950
12/03 $16,515 $17,450
Average Annual Total Returns(1)
(periods ended December 31, 2003)
--------------------------------------------------------
Annualized
One Year 3 Years 5 Years Inception
to Date
--------------------------------------------------------
38.44% 18.44% 12.98% 7.71%
--------------------------------------------------------
Past performance is no indication of future performance.
(1) Earnings from a variable annuity investment compound tax-free until
withdrawal, so no adjustments were made for income taxes.
7
VALUE INCOME STOCK FUND
-----------------------
The STI Classic Variable Trust Value Income Stock Fund (the "Fund") seeks to
provide current income with capital appreciation by investing primarily in
dividend-paying equity securities.
The Fund's investment philosophy is based on our belief that dividends are not
only an important component of total return, but also a very useful tool that
can give us information regarding a company's future earnings potential. The
Fund employs a very disciplined and methodical approach to portfolio
construction. The bottom-up process has three key factors to consider in all
investment decisions: 1) minimum dividend criteria, 2) low historical valuation
and 3) a catalyst for improving fundamental momentum which could cause an upward
revaluation in the individual security.
Our process seeks dividend-paying stocks that are trading at the lower end of
their historical valuation ranges. The companies that we then focus on are in
the midst of fundamental change that we expect will re-ignite investor interest
in the near term. They tend to exhibit "Value" characteristics such as low
price-to-earnings ratios, low price-to-sales ratios and generally have higher
dividend yields.
The Fund returned 23.12% for the twelve month period ended December 31, 2003,
underperforming the S&P 500/Barra Value Index that returned 31.79%. The Fund
benefited from overweight positions in Materials and Consumer Staples. This was
offset by an underweight position in strong performing sectors Financials and
Information Technology.
Industrial stocks comprise 14.9% of the Fund, compared to the index at 9.2%. The
Fund is also overweight Materials, with a 9.5% weighting relative to the 3.6%
weighting in the index. Our overweight position in these sectors is based on
attractive valuations, strong balance sheets and significant operating leverage
to an improving economy. The Fund has a significant weighting in Financials at
27.5% but is substantially underweight the benchmark, which is 36.3%. Our
underweight position is based on our concerns that growth will be challenging in
a rising interest rate environment unless there is an increase in commercial
loan demand. Furthermore, overall valuations in the industry are not attractive.
The Fund is also underweight Information Technology with a 3.8% weighting
compared to benchmark weighting of 6.4%. The underweight position is due to the
few number of companies in this sector that meet our criteria of solid dividends
and balance sheets.
During 2003, 10-year U.S. Treasuries dropped to a 50 year low. These low
interest rates allowed marginal companies to survive, and the "beta play" to be
successful. In 2004, with interest rates expected to be stable to rising, the
"quality play" should be successful. As it has since its inception, the Fund
continues to target quality companies that have well formulated dividend
policies, solid balance sheets and proven management teams.
[GRAPH OMITTED]
[PLOT POINTS FOR EDGAR PURPOSES ARE AS FOLLOWS:]
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
STI Classic
Variable Trust S&P 500/ Lipper Equity
Value Income BARRA Value Income Funds
Stock Fund Index Classification
10/31/95 $10,000 $10,000 $10,000
12/95 $10,828 $10,816 $10,741
12/96 $12,846 $13,194 $12,595
12/97 $16,292 $17,149 $15,975
12/98 $17,871 $19,667 $17,897
12/99 $17,334 $22,169 $18,690
12/00 $19,142 $23,516 $20,338
12/01 $18,924 $20,763 $19,400
12/02 $15,711 $16,434 $16,353
12.03 $19,343 $21,658 $20,609
Average Annual Total Returns(1)
(periods ended December 31, 2003)
--------------------------------------------------------
Annualized
One Year 3 Years 5 Years Inception
to Date
--------------------------------------------------------
23.12% 0.35% 1.60% 8.21%
--------------------------------------------------------
Past performance is no indication of future performance.
(1) Earnings from a variable annuity investment compound tax-free until
withdrawal, so no adjustments were made for income taxes.
8
INVESTMENT GRADE BOND FUND
--------------------------
The STI Classic Variable Trust Investment Grade Bond Fund ("the Fund") seeks to
provide a high level of total return through current income and capital
appreciation as is consistent with the preservation of capital primarily through
investment in investment grade fixed income securities. Total return includes
not only current income but also the changes in value of the assets held by the
Fund. For the year ended December 31, 2003, the Fund has a total return of 3.51%
versus a return of 4.68% for the Lehman U.S. Government/Credit Index.
2003 began with moderate economic growth and low inflation. During the middle of
the year, concerns about deflation pushed interest rates to 40 year lows with
the ten year Treasury yield declining to nearly 3%. During the third quarter as
fiscal stimulus, monetary stimulus, and mortgage refinancing pushed up economic
growth interest rates increased nearly 11/2%. Interest rates finished the year
range bound after the substantial volatility seen earlier. The most remarkable
aspect of the fixed income markets during the year was that corporate securities
had one of the best years ever. Mortgages struggled during the first nine months
of the year as the extreme volatility caused them to underperform but came back
strong during the fourth quarter and basically matched Treasury returns for the
year.
The Fund's overweight in Corporate Obligations enhanced performance for the
year, but the higher quality of the portfolio limited the benefit somewhat. The
Fund's overweight in mortgages and barbell structure (underweighting
intermediate maturities) did not produce the benefits expected in 2003 but
should add to performance in 2004. As 2004 progresses, expectations are for
yields to gradually move up, and the yield curve to flatten. Incremental yield
from both mortgages and corporates are expected to benefit the Fund's return for
the year. The Fund continues to be managed with only moderate shifts in average
maturity and duration. The total return is enhanced with yield curve analysis
(monitoring and analyzing the risk/reward trade offs of different maturity
sectors), sector rotation, credit analysis, and other low risk strategies. By
actively pursuing these strategies, the Fund strives to add total return while
reducing risk.
[GRAPH OMITTED]
[PLOT POINTS FOR EDGAR PURPOSES ARE AS FOLLOWS:]
COMPARISON OF CHANGE IN THE VALUE OF A $10,000 INVESTMENT
STI Classic Lipper
Variable Trust Lehman Intermediate
Investment Grade U.S. Government/ Investment-Grade
Bond Fund Credit Index Debt Objective
10/31/95 $10,000 $10,000 $10,000
12/95 $10,295 $10,314 $10,284
12/96 $10,531 $10,615 $10,624
12/97 $11,462 $11,649 $11,575
12/98 $12,537 $12,753 $12,471
12/99 $12,328 $12,479 $12,320
12/00 $13,107 $13,956 $13,556
12/01 $14,312 $15,144 $14,597
12/02 $15,372 $16,812 $15,788
12/03 $15,911 $17,599 $16,507
Average Annual Total Returns(1)
(periods ended December 31, 2003)
--------------------------------------------------------
Annualized
One Year 3 Years 5 Years Inception
to Date
--------------------------------------------------------
3.51% 6.68% 4.88% 5.89%
--------------------------------------------------------
Past performance is no indication of future performance.
(1) Earnings from a variable annuity investment compound tax-free until
withdrawal, so no adjustments were made for income taxes.
9
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
CAPITAL APPRECIATION FUND
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
COMMON STOCK (97.8%)
CAPITAL GOODS (8.8%)
3M 8,800 $ 748
Agilent Technologies* 17,200 503
Danaher 8,400 771
Deere 12,000 781
General Dynamics 6,700 606
L-3 Communications Holdings* 16,500 847
Parker Hannifin 16,900 1,005
-------
5,261
-------
COMMUNICATION SERVICES (2.0%)
COX Communications, Cl A (B)* 17,800 613
Fox Entertainment Group, Cl A* 20,500 598
-------
1,211
-------
COMPUTER SOFTWARE (2.2%)
Fiserv (B)* 15,000 593
Veritas Software* 19,000 706
-------
1,299
-------
CONSUMER CYCLICALS (17.4%)
Bed Bath & Beyond* 22,630 981
Coach* 34,000 1,283
Costco Wholesale* 31,300 1,164
Dollar General 31,800 667
Gap 42,700 991
Home Depot 26,700 948
Lowe's 24,400 1,352
TJX 20,600 454
Wal-Mart Stores 15,000 796
Walgreen 16,000 582
Walt Disney 47,800 1,115
-------
10,333
-------
CONSUMER STAPLES (6.7%)
Avon Products 17,200 1,161
Gillette 24,700 907
Procter & Gamble 7,000 699
Starbucks* 14,200 469
Sysco 19,200 715
-------
3,951
-------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
ENERGY (7.3%)
Anadarko Petroleum 17,800 $ 908
Devon Energy 14,500 830
Exxon Mobil 27,000 1,107
Noble* 12,000 429
Schlumberger 19,000 1,040
-------
4,314
-------
FINANCE (20.1%)
Aflac 28,000 1,013
Allstate 26,100 1,123
AMBAC Financial Group 16,000 1,110
American Express 27,800 1,341
American International Group 17,700 1,173
Bank of America 7,300 587
Citigroup 23,500 1,141
JP Morgan Chase 30,700 1,128
MBNA 39,000 969
Morgan Stanley 11,000 636
State Street 22,000 1,146
Zions Bancorporation 9,300 570
-------
11,937
-------
HEALTH CARE (14.0%)
Allergan 5,000 384
Bausch & Lomb (B) 12,300 639
Biomet 27,000 983
Boston Scientific* 23,500 864
Health Management
Associates, Cl A 36,000 864
Johnson & Johnson 19,500 1,007
Pfizer 46,300 1,636
UnitedHealth Group 33,400 1,943
-------
8,320
-------
SERVICES (3.4%)
Cendant* 52,500 1,169
United Parcel Service, Cl B 11,300 843
-------
2,012
-------
10
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
TECHNOLOGY (15.9%)
Affiliated Computer
Services, Cl A (B)* 16,300 $ 888
Amdocs* 25,600 575
Analog Devices* 12,000 548
Apple Computer (B)* 45,000 961
Cisco Systems* 30,000 729
Dell* 32,000 1,087
EMC* 89,000 1,150
Intel 34,000 1,095
Microsoft 63,200 1,740
Oracle* 51,000 673
-------
9,446
-------
Total Common Stock
(Cost $47,181) 58,084
-------
SHORT-TERM INVESTMENT (4.0%)
Boston Global Investment Trust --
Enhanced Portfolio (A) 2,349,988 2,350
-------
Total Short-Term Investment
(Cost $2,350) 2,350
-------
MONEY MARKET FUNDS (2.5%)
Federated Prime Obligation
Money Market Fund 760,798 761
Federated Prime Value
Money Market Fund 728,049 728
-------
1,489
-------
Total Money Market Funds
(Cost $1,489) 1,489
-------
Total Investments (104.3%)
(Cost $51,020) 61,923
-------
- ------------------------------------------------------------
VALUE (000)
- ------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-4.3%)
Payable upon Return of Securities Loaned $(2,350)
Investment Advisory Fees Payable (42)
Administration Fees Payable (5)
Custodian Fees Payable (2)
Other Assets and Liabilities, Net (157)
-------
Total Other Assets and Liabilities (2,556)
-------
NET ASSETS:
Paid in Capital -- Trust Shares
(unlimited authorization -- no par value)
based on 3,852,900 outstanding shares
of beneficial interest 55,363
Accumulated net realized loss
on investments (6,899)
Net unrealized appreciation
on investments 10,903
-------
Total Net Assets (100.0%) $59,367
=======
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $15.41
======
* NON-INCOME PRODUCING SECURITY
CL -- CLASS
(A) THIS SECURITY WAS PURCHASED WITH CASH COLLATERAL HELD FROM SECURITIES
LENDING (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS).
(B) THIS SECURITY OR A PARTIAL POSITION OF THE SECURITY WAS ON LOAN AT DECEMBER
31, 2003 (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF
SECURITIES ON LOAN AT DECEMBER 31, 2003 WAS $2,298,910.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
11
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
GROWTH AND INCOME FUND
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
COMMON STOCK (96.7%)
BASIC MATERIALS (3.0%)
E.I. du Pont de Nemours 2,500 $ 115
International Paper 2,000 86
Praxair 2,000 76
------
277
------
CAPITAL GOODS (10.7%)
Boeing 800 34
Cooper Industries, Cl A 2,500 145
Emerson Electric 2,000 129
General Electric 5,000 155
Honeywell International 5,000 167
Illinois Tool Works 1,500 126
Precision Castparts 1,100 50
Rockwell Automation 3,000 107
United Technologies 800 76
------
989
------
COMMUNICATION SERVICES (6.3%)
Alltel 3,000 140
AT&T 5,000 102
SBC Communications 3,000 78
Verizon Communications 6,000 210
Vodafone Group ADR 2,000 50
------
580
------
CONSUMER CYCLICALS (10.0%)
Brunswick 2,106 67
Gannett 1,000 89
Johnson Controls 600 70
Jones Apparel Group 3,000 106
Kohl's* 3,500 157
Lowe's 1,000 55
May Department Stores 5,000 145
Target 3,000 115
Walt Disney 5,000 117
------
921
------
CONSUMER STAPLES (5.0%)
Gillette 2,000 73
HJ Heinz 3,000 109
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
CONSUMER STAPLES -- CONTINUED
Kimberly-Clark 1,500 $ 89
PepsiCo 1,000 47
Procter & Gamble 500 50
Sara Lee 2,500 54
Sysco 1,000 37
------
459
------
ENERGY (9.5%)
Burlington Resources 2,000 111
ChevronTexaco 1,500 129
ConocoPhillips 2,500 164
Exxon Mobil 6,000 246
Schlumberger 2,500 137
XTO Energy 3,000 85
------
872
------
FINANCE (21.6%)
American International Group 2,000 133
Bank of America 2,000 161
Berkshire Hathaway, Cl B* 60 169
Cincinnati Financial 2,000 84
Citigroup 3,000 146
Comerica (B) 2,000 112
Fannie Mae 500 37
Fifth Third Bancorp 1,000 59
Goldman Sachs Group 1,000 99
Jefferson-Pilot 2,500 127
MGIC Investment (B) 1,500 85
Morgan Stanley 1,500 87
PNC Financial Services Group 3,000 164
Prudential Financial 5,000 209
US Bancorp 7,500 223
Wells Fargo 1,600 94
------
1,989
------
HEALTH CARE (10.2%)
Abbott Laboratories 2,000 93
Barr Pharmaceuticals* 1,200 92
Bristol-Myers Squibb 5,000 143
C.R. Bard 2,000 163
Express Scripts* 1,000 66
12
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
HEALTH CARE -- CONTINUED
Johnson & Johnson 2,000 $ 103
Merck 1,000 46
Oxford Health Plans (B)* 3,000 131
Pfizer 3,000 106
------
943
------
SERVICES (1.5%)
Cendant* 6,000 134
------
TECHNOLOGY (11.9%)
Computer Sciences* 3,000 133
DST Systems* 1,000 42
First Data 3,500 144
Hewlett-Packard 5,000 115
Intel 2,500 80
International Business Machines 600 55
Microsoft 5,000 138
Nokia ADR 5,000 85
Storage Technology* 4,000 103
Sungard Data Systems* 4,000 111
Texas Instruments 3,000 88
------
1,094
------
TRANSPORTATION (2.8%)
Norfolk Southern 5,000 118
Ryder System 4,000 137
------
255
------
UTILITIES (4.2%)
American Electric Power 6,500 198
Exelon 2,000 133
Questar 1,500 53
------
384
------
Total Common Stock
(Cost $7,665) 8,897
------
MONEY MARKET FUND (2.9%)
Federated Prime Value
Money Market Fund 270,563 271
------
Total Money Market Fund
(Cost $271) 271
------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
SHORT-TERM INVESTMENT (2.7%)
Boston Global Investment Trust --
Enhanced Portfolio (A) 242,996 $ 243
------
Total Short-Term Investment
(Cost $243) 243
------
Total Investments (102.3%)
(Cost $8,179) 9,411
------
OTHER ASSETS AND LIABILITIES (-2.3%)
Payable upon Return of Securities Loaned (243)
Administration Fees Payable (5)
Investment Advisory Fees Payable (1)
Other Assets and Liabilities, Net 36
------
Total Other Assets and Liabilities (213)
------
NET ASSETS:
Paid in Capital -- Trust Shares
(unlimited authorization -- no par value)
based on 911,094 outstanding shares
of beneficial interest 8,846
Accumulated net realized loss
on investments (880)
Net unrealized appreciation
on investments 1,232
------
Total Net Assets (100.0%) $9,198
======
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $10.10
======
* NON-INCOME PRODUCING SECURITY
ADR -- AMERICAN DEPOSITARY RECEIPT
CL -- CLASS
(A) THIS SECURITY WAS PURCHASED WITH CASH COLLATERAL HELD FROM SECURITIES
LENDING (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS).
(B) THIS SECURITY OR A PARTIAL POSITION OF THE SECURITY WAS ON LOAN AT DECEMBER
31, 2003 (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF
SECURITIES ON LOAN AT DECEMBER 31, 2003 WAS $236,548.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
13
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
FOREIGN COMMON STOCK (97.6%)
AUSTRALIA (4.7%)
Australia & New Zealand
Banking Group 3,110 $ 41
Billabong International 5,700 31
BlueScope Steel 8,300 35
Boral 8,527 32
News Corp 2,797 25
Orica 1,539 16
Origin Energy 5,300 19
Publishing & Broadcasting 2,600 25
Qantas Airways 11,900 30
QBE Insurance Group (B) 4,700 38
Telstra 6,400 23
West Australian Newspapers 2,800 14
-------
329
-------
BELGIUM (0.7%)
Delhaize Group 300 15
Fortis 1,537 31
-------
46
-------
DENMARK (0.8%)
Danske Bank 2,200 52
-------
FINLAND (1.3%)
Nokia 3,825 66
Tietoenator 780 21
-------
87
-------
FRANCE (9.6%)
Alcatel* 2,600 34
Aventis 802 53
AXA 1,300 28
BNP Paribas 1,478 93
Compagnie de Saint-Gobain 700 34
Dassault Systemes 268 12
France Telecom* 1,300 37
Lafarge 243 22
Pernod-Ricard 250 28
Peugeot 655 33
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
FRANCE -- CONTINUED
Societe Generale 490 $ 43
Suez 1,538 31
Technip 70 8
Thomson 1,038 22
Total 635 118
Vinci 300 25
Vivendi Universal* 1,700 41
-------
662
-------
GERMANY (7.8%)
Allianz 488 62
BASF 977 55
Bayer 700 20
Bayerische Motoren Werke 453 21
Deutsche Bank 756 63
Deutsche Post 1,600 33
Deutsche Telekom* 3,182 58
E.ON 400 26
Infineon Technologies* 600 8
Metro 500 22
Muenchener
Rueckversicherungs 107 13
SAP 252 42
Schering 267 14
Siemens 1,056 85
Volkswagen 300 17
-------
539
-------
HONG KONG (1.6%)
Bank of East Asia 5,800 18
Cathay Pacific Airways 7,000 13
Cheung Kong Holdings 2,000 16
CLP Holdings 2,700 13
Esprit Holdings 8,500 28
Hutchison Whampoa 2,447 18
Sino Land 12,000 7
-------
113
-------
14
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
IRELAND (1.3%)
Anglo Irish Bank 2,667 $ 42
Bank of Ireland 3,400 46
-------
88
-------
ITALY (3.2%)
Banca Intesa 8,119 32
ENI-Ente Nazionale Idrocarburi 3,348 63
Mediaset 4,100 49
Saipem 1,253 10
Telecom Italia* 12,644 38
UniCredito Italiano 5,803 31
-------
223
-------
JAPAN (20.2%)
Advantest 100 8
Alps Electric 1,000 15
Asahi Breweries 4,300 39
Asahi Glass 3,000 25
Canon 700 33
Chugoku Electric Power 1,400 24
Daiwa House Industry 1,000 11
Denso 600 12
East Japan Railway 4 19
Eisai 1,200 32
Fast Retailing 500 30
Fujitsu* 2,000 12
Hitachi 4,000 24
Honda Motor 1,002 44
JFE Holdings 900 25
JGC 1,000 10
Kddi 3 17
Kirin Brewery 2,000 17
Komatsu 3,000 19
Kyushu Electric Power 700 12
Marubeni 10,000 19
Matsushita Electric Industrial 2,000 28
Mitsubishi 3,000 32
Mitsubishi Tokyo Financial Group 5 39
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
JAPAN -- CONTINUED
Mitsui 1,812 $ 15
Mitsui Fudosan 3,000 27
Mitsui OSK Lines 6,000 29
Mitsui Sumitomo Insurance 3,000 25
NEC 1,000 7
Nippon Express 3,000 14
Nippon Steel 11,000 24
Nippon Telegraph & Telephone 11 53
Nissan Motor 2,900 33
Nitto Denko 700 37
Nomura Holdings 2,000 34
NTT DoCoMo 11 25
Oki Electric Industry* 2,000 8
Olympus 1,000 22
Onward Kashiyama 1,000 12
ORIX 100 8
Pioneer 1,000 28
Ricoh 2,400 47
Sanyo Electric 2,000 10
Seiko Epson Corp 700 33
Sekisui House 2,000 21
Sharp 2,000 32
Shin-Etsu Chemical 400 16
Showa Shell Sekiyu 800 6
Sony 500 17
Sumitomo 2,000 15
Sumitomo Chemical 4,000 16
Sumitomo Mitsui Financial Group* 10 53
Takeda Chemical Industries 400 16
Tokyo Electric Power 1,300 28
Tokyo Gas 2,000 7
Toyota Motor 2,713 92
UFJ Holdings* 2 10
Yamaha 1,100 22
Yamanouchi Pharmaceutical 400 12
-------
1,400
-------
15
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
INTERNATIONAL EQUITY FUND--CONTINUED
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
NETHERLANDS (4.9%)
ABN AMRO Holding 2,998 $ 70
Akzo Nobel 943 36
ING Groep 2,513 59
Koninklijke Philips Electronics 1,796 52
Royal Dutch Petroleum 1,090 58
Royal KPN* 3,900 30
Unilever 284 19
United Services Group 751 17
-------
341
-------
NEW ZEALAND (0.6%)
Fletcher Building 14,131 39
-------
NORWAY (0.5%)
Telenor ASA 5,200 34
-------
SINGAPORE (0.8%)
DBS Group Holdings 2,000 17
Fraser & Neave 1,500 11
Jardine Cycle & Carriage 80 --
SembCorp Industries 12,000 9
Singapore Airlines 1,000 7
Singapore Telecommunications 11,000 13
-------
57
-------
SPAIN (5.0%)
Acciona 200 12
Altadis 1,010 29
Banco Santander Central Hispano 6,590 78
Endesa (B) 2,600 50
Gamesa Corp Tecnologica 600 20
Repsol 1,700 33
Sociedad General de Aguas de
Barcelona, Cl A 1,425 21
Telefonica 6,207 91
Union Fenosa 733 14
-------
348
-------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
SWEDEN (2.5%)
Autoliv 991 $ 38
Electrolux, Cl B 1,700 37
Sandvik 1,133 39
Svenska Handelsbanken, Cl A 1,200 25
Telefonaktiebolaget LM
Ericsson, Cl B* 19,800 35
-------
174
-------
SWITZERLAND (7.7%)
Credit Suisse Group 2,143 78
Nestle 380 95
Novartis 3,283 149
Roche Holding 450 45
STMicroelectronics 595 16
UBS 1,268 87
Zurich Financial Services* 413 60
-------
530
-------
UNITED KINGDOM (24.4%)
AstraZeneca 1,157 56
Aviva 5,300 47
Balfour Beatty 7,738 30
Barclays 8,500 76
BP 21,215 172
British American Tobacco 3,505 48
BT Group 8,530 29
Burberry Group 4,300 28
Centrica 12,000 45
Diageo 1,300 17
Emap 2,900 44
Galen Holdings 1,000 13
GlaxoSmithKline 6,612 152
HBOS 6,600 85
HSBC Holdings 10,239 161
Kidde 20,397 39
mmO2* 24,800 34
Next 1,900 38
16
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
UNITED KINGDOM -- CONTINUED
Royal Bank of Scotland Group 3,102 $ 91
Sage Group 5,400 17
Shell Transport & Trading 9,077 68
Shire Pharmaceuticals* 2,000 19
Tesco 13,567 63
Vodafone Group 70,218 174
Whitbread 2,000 26
William Hill 5,149 39
Wimpey George 8,696 58
WPP Group 2,100 21
-------
1,690
-------
Total Foreign Common Stock
(Cost $5,288) 6,752
-------
SHORT-TERM INVESTMENT (1.2%)
Boston Global Investment Trust --
Enhanced Portfolio (A) 84,070 84
-------
Total Short-Term Investment
(Cost $84) 84
-------
Total Investments (98.8%)
(Cost $5,372) 6,836
-------
OTHER ASSETS AND LIABILITIES (1.2%)
Payable upon Return of Securities Loaned (84)
Receivable from Investment Adviser 2
Administration Fees Payable (6)
Other Assets and Liabilities, Net 172
-------
Total Other Assets and Liabilities 84
-------
- ------------------------------------------------------------
VALUE (000)
- ------------------------------------------------------------
NET ASSETS:
Paid in Capital -- Trust Shares
(unlimited authorization -- no par value)
based on 733,703 outstanding shares
of beneficial interest $ 9,052
Undistributed net investment income 95
Accumulated net realized loss
on investments (3,694)
Net unrealized appreciation
on investments 1,464
Net unrealized appreciation on
forward foreign currency contracts,
foreign currencies and translation
of other assets and liabilities
denominated in foreign currencies 3
-------
Total Net Assets (100.0%) $ 6,920
=======
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $9.43
=====
* NON-INCOME PRODUCING SECURITY
CL -- CLASS
(A) THIS SECURITY WAS PURCHASED WITH CASH COLLATERAL HELD FROM SECURITIES
LENDING (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS).
(B) THIS SECURITY OR A PARTIAL POSITION OF THE SECURITY WAS ON LOAN AT DECEMBER
31, 2003 (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF
SECURITIES ON LOAN AT DECEMBER 31, 2003 WAS $79,537.
17
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
INTERNATIONAL EQUITY FUND--CONCLUDED
At December 31, 2003, sector diversification of the Fund was as follows
(unaudited):
% OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (000)
- ---------------------- ---------- -------
FOREIGN COMMON STOCK
Banks 12.6% $874
Drugs 4.9 341
Energy 4.9 340
Government Agencies 4.4 302
Financial Services 4.3 294
Building & Construction 4.2 292
Food, Beverage & Tobacco 4.2 291
Telephones & Telecommunications 4.2 289
Automotive 3.5 241
Communication Services 3.4 243
Aerospace & Defense 3.4 235
Insurance 3.1 216
Chemicals 3.0 208
Electrical Services 2.9 202
Metals & Mining 2.5 174
Apparel/Textiles 2.3 157
Machinery 1.9 134
Retail 1.9 134
Computer Software 1.9 133
Semiconductors 1.9 132
Commercial Banks 1.9 129
Services 1.8 125
Utilities 1.7 118
Real Estate 1.5 103
Wholesale 1.5 103
Office Furniture & Fixtures 1.2 80
Concrete & Mineral Products 1.0 73
Glass Products 0.9 59
% OF VALUE
SECTOR DIVERSIFICATION NET ASSETS (000)
- ---------------------- ---------- -------
FOREIGN COMMON STOCK -- CONTINUED
Household Products 0.8% $ 54
Gas/Natural Gas 0.8 52
Broadcasting 0.7 49
Steel & Steel Works 0.7 49
Mortgage Bankers & Brokers 0.7 46
Printing & Publishing 0.6 44
Investment Bankers/Broker Dealers 0.6 40
Entertainment 0.6 39
Lumber & Wood Products 0.6 39
Miscellaneous Manufacturing 0.6 39
Autoparts 0.6 38
Photographic Equipment & Supplies 0.5 33
Electric Products 0.4 30
Telephone 0.4 30
Marine Transportation 0.4 30
Beauty Products 0.4 28
Medical & Medical Products 0.3 22
Transportation 0.3 21
Railroads 0.3 19
Rubber & Plastic 0.2 16
Specialty Construction 0.2 12
------- ------
TOTAL FOREIGN COMMON STOCK 97.6 6,752
SHORT-TERM INVESTMENT 1.2 84
------- ------
TOTAL INVESTMENTS 98.8 6,836
TOTAL OTHER ASSETS AND
LIABILITIES 1.2 84
------- ------
TOTAL NET ASSETS 100.0% $6,920
======= ======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
18
- --------------------------------------------------------------------------------
MID-CAP EQUITY FUND
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
COMMON STOCK (95.3%)
BASIC MATERIALS (2.4%)
Lennar, Cl A 1,500 $ 144
Lubrizol 3,820 124
NVR* 240 112
-------
380
-------
CAPITAL GOODS (8.0%)
Acuity Brands 1,963 51
Advance Auto Parts* 800 65
BorgWarner 1,300 111
Eaton 1,410 152
Freeport-McMoRan Copper
& Gold, Cl B 1,590 67
Harsco 3,820 167
Hubbell, Cl B 3,470 153
Lear 1,670 102
Rockwell Collins 7,690 231
Textron 3,380 193
-------
1,292
-------
COMMUNICATION SERVICES (1.4%)
Avaya* 8,620 112
Harris 2,850 108
-------
220
-------
COMPUTER SOFTWARE (2.2%)
Quest Software* 3,600 51
Siebel Systems* 6,730 93
Storage Technology* 2,410 62
Veritas Software* 4,030 150
-------
356
-------
CONSUMER CYCLICALS (13.6%)
Albertson's (B) 2,400 54
Big 5 Sporting Goods* 3,500 73
Coach* 2,000 76
Dollar General 5,400 113
Ferro 5,720 156
Fortune Brands 1,200 86
Hasbro 4,320 92
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
CONSUMER CYCLICALS -- CONTINUED
Marvel Enterprises* 550 $ 16
May Department Stores 7,600 221
Neiman-Marcus Group, Cl A* 800 43
New York Times, Cl A 2,060 98
Park Place Entertainment* 5,890 64
Potlatch 7,720 268
RadioShack 2,410 74
Reader's Digest Association 4,890 72
Rent-A-Center* 2,720 81
Scholastic* 3,500 119
SCP Pool* 3,960 129
Sears Roebuck 1,700 77
Staples* 3,800 104
Xerox (B)* 6,660 92
Zale* 1,760 94
-------
2,202
-------
CONSUMER STAPLES (4.1%)
Archer-Daniels-Midland 2,090 32
Clorox 1,910 93
HJ Heinz 5,380 196
RJ Reynolds Tobacco Holdings 1,550 90
Starbucks* 4,600 152
UST 3,000 107
-------
670
-------
EDUCATIONAL SERVICES (0.2%)
Universal Technical Institute* 1,150 34
-------
ENERGY (4.9%)
Amerada Hess 3,660 194
Ashland 5,900 260
Marathon Oil 7,760 257
Tidewater 2,710 81
-------
792
-------
FINANCE (20.5%)
Ameritrade Holding* 5,960 84
AmSouth Bancorp 2,110 52
19
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
MID-CAP EQUITY FUND--CONTINUED
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
FINANCE -- CONTINUED
Annaly Mortgage Management
REIT (B) 7,120 $ 131
AON 2,810 67
Archstone-Smith Trust REIT 1,920 54
Bear Stearns 560 45
Brandywine Realty Trust REIT 2,700 72
Charter One Financial 1,340 46
Colonial Properties Trust REIT 4,580 181
Comerica 4,730 265
Commerce Bancshares 2,940 144
Countrywide Financial 990 75
E*Trade Financial* 6,590 83
Equity Office Properties Trust
REIT 5,880 168
Equity Residential REIT 2,720 80
First Industrial Realty Trust
REIT (B) 6,770 229
Jefferies Group 2,900 96
Legg Mason 800 62
Lexington Corporate Properties
Trust REIT 3,200 65
Lincoln National 4,960 200
Northern Trust 3,530 164
PMI Group (B) 3,270 122
St. Paul 3,570 142
State Street 3,210 167
UnionBanCal 1,800 104
Unitrin 3,580 148
UnumProvident 1,520 24
Webster Financial 5,440 249
-------
3,319
-------
HEALTH CARE (9.9%)
American Healthways* 2,160 51
Coventry Health Care* 1,220 79
Dade Behring Holdings* 1,480 53
DaVita* 2,100 82
Eon Labs* 1,500 76
Humana* 5,280 121
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
HEALTH CARE -- CONTINUED
IMS Health 3,900 $ 97
Invitrogen (B)* 1,700 119
IVAX* 3,370 80
Laboratory Corp of America
Holdings* 2,680 99
Pacificare Health Systems* 760 51
Select Medical 5,880 96
Therasense (B)* 2,890 59
Valeant Pharmaceuticals
International 6,350 160
Varian Medical Systems* 2,590 179
WellChoice* 1,470 51
Zimmer Holdings* 2,100 148
-------
1,601
-------
SEMICONDUCTORS (5.4%)
Altera* 3,715 84
Amkor Technology* 2,100 38
Arrow Electronics* 5,880 136
Intersil, Cl A 5,790 144
LSI Logic* 7,720 68
Molex (B) 3,110 109
National Semiconductor* 2,400 95
Sanmina-SCI* 13,030 164
Tessera Technologies* 2,100 40
-------
878
-------
SERVICES (5.6%)
Convergys* 2,580 45
Deluxe 2,930 121
Getty Images* 1,830 92
H&R Block 3,020 167
International Game Technology 2,700 97
Iron Mountain (B)* 1,000 40
National Processing* 4,800 113
Netflix* 2,310 126
ServiceMaster 9,460 110
-------
911
-------
20
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
TECHNOLOGY (9.1%)
Apple Computer* 1,530 $ 33
Avnet* 5,500 119
BMC Software* 3,040 57
Computer Associates International 3,260 89
Electronic Arts* 2,000 96
Electronic Data Systems 2,750 67
Intuit* 3,320 176
Lam Research* 3,600 116
Lexmark International* 640 50
Monsanto 3,920 113
Network Associates* 1,830 28
Novellus Systems* 4,050 170
Pitney Bowes 6,080 247
Sungard Data Systems* 2,200 61
Symantec* 1,540 53
-------
1,475
-------
TRANSPORTATION (1.4%)
Burlington Northern Santa Fe 3,700 120
Florida East Coast Industries 660 22
Quality Distribution* 4,200 82
-------
224
-------
UTILITIES (6.6%)
Citizens Communications* 14,810 184
Edison International 4,530 99
GrafTech International Ltd.* 10,200 138
Great Plains Energy 3,960 126
OGE Energy 12,420 301
PG&E* 2,700 75
Williams 3,060 30
WPS Resources 200 9
Xcel Energy 6,120 104
-------
1,066
-------
Total Common Stock
(Cost $12,709) 15,420
-------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
PREFERRED CONVERTIBLE STOCK (0.1%)
UnumProvident (C) 670 $ 22
-------
Total Preferred Convertible Stock
(Cost $21) 22
-------
EXCHANGE TRADED FUND (2.1%)
Midcap SPDR Trust, Ser 1 3,160 333
-------
Total Exchange Traded Fund
(Cost $302) 333
-------
SHORT-TERM INVESTMENT (4.6%)
Boston Global Investment Trust --
Enhanced Portfolio (A) 751,250 751
-------
Total Short-Term Investment
(Cost $751) 751
-------
MONEY MARKET FUNDS (2.6%)
Federated Prime Obligation
Money Market Fund 259,554 260
Federated Prime Value
Money Market Fund 164,708 165
-------
Total Money Market Funds
(Cost $425) 425
-------
Total Investments (104.7%)
(Cost $14,208) 16,951
-------
OTHER ASSETS AND LIABILITIES (-4.7%)
Payable upon Return of Securities Loaned (751)
Investment Advisory Fees Payable (7)
Administration Fees Payable (5)
Custodian Fees Payable (1)
Other Assets and Liabilities, Net (5)
-------
Total Other Assets and Liabilities (769)
-------
21
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
MID-CAP EQUITY FUND--CONCLUDED
- ------------------------------------------------------------
VALUE (000)
- ------------------------------------------------------------
NET ASSETS:
Paid in Capital -- Trust Shares
(unlimited authorization -- no par value)
based on 1,581,293 outstanding shares
of beneficial interest $17,537
Accumulated net realized loss
on investments (4,098)
Net unrealized appreciation
on investments 2,743
-------
Total Net Assets (100.0%) $16,182
=======
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $10.23
======
* NON-INCOME PRODUCING SECURITY
CL -- CLASS
LTD. -- LIMITED
REIT -- REAL ESTATE INVESTMENT TRUST
SER -- SERIES
SPDR -- STANDARD & POOR'S DEPOSITARY RECEIPT
(A) THIS SECURITY WAS PURCHASED WITH CASH COLLATERAL HELD FROM SECURITIES
LENDING (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS).
(B) THIS SECURITY OR A PARTIAL POSITION OF THE SECURITY WAS ON LOAN AT DECEMBER
31, 2003 (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF
SECURITIES ON LOAN AT DECEMBER 31, 2003 WAS $728,380.
(C) SECURITY SOLD WITHIN TERMS OF A PRIVATE PLACEMENT MEMORANDUM, EXEMPT FROM
REGISTRATION UNDER SECTION 144A OF THE SECURITIES ACT OF 1933, AS AMENDED,
AND MAY BE SOLD ONLY TO DEALERS IN THAT PROGRAM OR OTHER "ACCREDITED
INVESTORS."
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
22
- --------------------------------------------------------------------------------
SMALL CAP VALUE EQUITY FUND
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
COMMON STOCK (98.1%)
BASIC MATERIALS (8.3%)
Carpenter Technology 5,200 $ 154
Cia Siderurgica Nacional ADR 1,800 96
Lubrizol 5,000 163
Olin 8,400 168
Sappi ADR 13,300 182
Soc Quimica y Minera de
Chile ADR 2,200 91
Texas Industries 9,100 337
United States Steel 8,000 280
Valspar 3,800 188
Wellman 3,800 39
-------
1,698
-------
CAPITAL GOODS (17.6%)
Baldor Electric 8,100 185
BHA Group Holdings 1,900 48
BorgWarner 3,800 323
Briggs & Stratton (B) 2,400 162
Cummins (B) 2,700 132
Edelbrock 330 4
Empresa Brasileira de
Aeronautica ADR (B) 15,713 551
Goodrich 5,500 163
HON Industries 5,200 225
Lennox International 8,014 134
LSI Industries 15,062 203
Makita ADR 20,000 199
Oshkosh Truck 4,800 245
Quixote 9,000 220
Robbins & Myers 8,100 154
Roper Industries 2,300 113
Snap-On 4,500 145
Stewart & Stevenson Services 7,700 108
Tecumseh Products, Cl A 2,400 116
Tenaris ADR 2,652 89
York International 2,000 74
-------
3,593
-------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
COMMUNICATION SERVICES (3.9%)
Harris 21,077 $ 800
-------
CONSUMER CYCLICALS (20.1%)
Bassett Furniture Industries 6,400 106
Benetton Group ADR 7,000 161
Blyth 4,700 151
CBRL Group 7,000 268
Circuit City Stores 39,400 399
Ethan Allen Interiors 6,700 281
Fairmont Hotels & Resorts 7,200 195
Federal Signal 6,100 107
Harman International Industries 1,772 131
Intrawest (B) 12,900 238
John H. Harland (B) 6,800 186
John Wiley & Sons, Cl A 6,300 164
Libbey 4,400 125
Media General, Cl A 3,600 234
Movado Group 4,200 119
Natuzzi ADR 8,400 85
Nautilus Group (B) 17,100 240
Phillips-Van Heusen 10,100 179
Pier 1 Imports 9,000 197
Sturm Ruger (B) 5,500 63
Winnebago Industries (B) 6,700 461
-------
4,090
-------
CONSUMER STAPLES (6.9%)
Adolph Coors, Cl B 4,400 247
Church & Dwight 8,800 348
Dial 8,200 233
Ingles Markets, Cl A 7,400 76
Interstate Bakeries 4,600 65
JM Smucker 6,175 280
Sensient Technologies 7,920 157
-------
1,406
-------
ENERGY (3.4%)
Arch Coal 5,900 184
ENSCO International 3,700 100
23
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
SMALL CAP VALUE EQUITY FUND--CONCLUDED
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
ENERGY -- CONTINUED
Noble Energy 2,200 $ 98
Peabody Energy 7,200 300
-------
682
-------
FINANCE (12.5%)
American Financial Group 6,200 164
Banner 3,500 88
City National 3,300 205
Colonial BancGroup 11,700 203
FNB 4,509 160
Glacier Bancorp 4,591 149
HCC Insurance Holdings 7,800 248
Horizon Financial 7,256 127
Hub International 13,400 225
PXRE Group 5,300 125
Scottish Annuity & Life
Holdings 5,400 112
Seacoast Banking Corp of Florida 6,710 116
Stancorp Financial Group 2,400 151
Washington Federal (B) 5,261 149
West Coast Bancorp (B) 7,076 151
Wilmington Trust 4,800 173
-------
2,546
-------
HEALTH CARE (1.7%)
Alpharma, Cl A 6,254 126
Cambrex 8,900 225
-------
351
-------
SERVICES (7.5%)
ABM Industries 10,300 179
Brink's 25,400 574
Hollinger International 11,300 177
Reynolds & Reynolds, Cl A 15,500 450
Roto-Rooter 2,600 120
Standard Register 2,000 34
-------
1,534
-------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
TECHNOLOGY (8.9%)
Autodesk 30,300 $ 745
C&D Technologies 8,300 159
Fair Isaac (B) 3,600 177
Helix Technology 10,300 212
Keithley Instruments 7,700 141
Premier Farnell ADR 23,700 194
Symbol Technologies 10,800 182
-------
1,810
-------
TRANSPORTATION (5.3%)
Canadian Pacific Railway (B) 2,900 82
CHC Helicopter, Cl A (B) 11,800 299
CP Ships (B) 19,400 403
KLM Royal Dutch Air 13,800 224
USF 2,200 75
-------
1,083
-------
UTILITIES (2.0%)
Allete 9,246 283
Puget Energy 5,100 121
-------
404
-------
Total Common Stock
(Cost $13,983) 19,997
-------
SHORT-TERM INVESTMENT (11.8%)
Boston Global Investment Trust --
Enhanced Portfolio (A) 2,408,209 2,408
-------
Total Short-Term Investment
(Cost $2,408) 2,408
-------
MONEY MARKET FUND (2.0%)
Federated Prime Value
Money Market Fund 404,583 405
-------
Total Money Market Fund
(Cost $405) 405
-------
Total Investments (111.9%)
(Cost $16,796) 22,810
-------
24
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
VALUE (000)
- ------------------------------------------------------------
OTHER ASSETS AND LIABILITIES (-11.9%)
Payable upon Return of Securities Loaned $(2,408)
Investment Advisory Fees Payable (10)
Administration Fees Payable (5)
Custodian Fees Payable (1)
Other Assets and Liabilities, Net (5)
-------
Total Other Assets and Liabilities (2,429)
-------
NET ASSETS:
Paid in Capital -- Trust Shares
(unlimited authorization -- no par value)
based on 1,377,420 outstanding shares
of beneficial interest 14,830
Accumulated net realized loss
on investments (463)
Net unrealized appreciation
on investments 6,014
-------
Total Net Assets (100.0%) $20,381
=======
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $14.80
======
ADR -- AMERICAN DEPOSITARY RECEIPT
CL -- CLASS
(A) THIS SECURITY WAS PURCHASED WITH CASH COLLATERAL HELD FROM SECURITIES
LENDING (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS).
(B) THIS SECURITY OR A PARTIAL POSITION OF THE SECURITY WAS ON LOAN AT DECEMBER
31, 2003 (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF
SECURITIES ON LOAN AT DECEMBER 31, 2003 WAS $2,331,929.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
25
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
VALUE INCOME STOCK FUND
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
COMMON STOCK (94.4%)
BASIC MATERIALS (8.9%)
Alcoa 13,000 $ 494
Bemis 4,800 240
E.I. du Pont de Nemours 16,500 757
International Flavors &
Fragrances 9,600 335
International Paper 17,500 755
Nucor 4,300 241
PPG Industries 7,700 493
Rohm & Haas 11,300 483
Vulcan Materials 5,600 266
--------
4,064
--------
CAPITAL GOODS (12.2%)
Boeing 6,300 266
Dover 11,400 453
Emerson Electric 11,100 719
General Electric 23,000 713
Honeywell International 22,000 735
Lockheed Martin 9,500 488
Pall 8,800 236
Parker Hannifin 8,700 518
Rockwell Collins 8,100 243
Sonoco Products 10,200 251
Teleflex 7,500 363
W.W. Grainger 11,700 554
--------
5,539
--------
COMMUNICATION SERVICES (7.5%)
Alltel 14,700 685
BellSouth 27,700 784
Harris 11,500 436
SBC Communications 30,500 795
Verizon Communications 20,790 729
--------
3,429
--------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
CONSUMER CYCLICALS (13.0%)
Colgate-Palmolive 12,300 $ 616
Gannett 7,100 633
Genuine Parts 12,200 405
Leggett & Platt (B) 21,600 467
Limited Brands 35,200 635
Masco 16,200 444
Mattel 23,000 443
May Department Stores (B) 15,600 454
McGraw-Hill 8,100 566
Newell Rubbermaid 9,500 216
VF 13,100 566
Walt Disney 18,900 441
--------
5,886
--------
CONSUMER STAPLES (5.2%)
Clorox 10,000 486
HJ Heinz 14,300 521
Kimberly-Clark 12,000 709
Kraft Foods, Cl A 7,000 225
PepsiCo 9,200 429
--------
2,370
--------
ENERGY (7.6%)
Baker Hughes Incorporated 7,100 228
BP ADR 15,300 755
Exxon Mobil 24,100 988
GlobalSantaFe 20,100 499
Schlumberger 8,600 471
Tidewater (B) 16,900 505
--------
3,446
--------
FINANCE (26.0%)
Allstate 10,800 465
American Express 9,300 448
American International Group 10,305 683
Bank of America 11,500 925
Bank of New York 15,800 523
26
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
FINANCE -- CONTINUED
Bank One 15,600 $ 711
Citigroup 18,700 908
Comerica (B) 12,800 717
Hartford Financial Services
Group 8,300 490
Keycorp 24,900 730
Lehman Brothers Holdings 10,000 772
Merrill Lynch 11,100 651
Nationwide Financial
Services, Cl A 14,300 473
Safeco 19,500 759
Travelers Property
Casualty, Cl A 26,800 450
US Bancorp 23,100 688
Wachovia 14,400 671
Wells Fargo 12,600 742
--------
11,806
--------
HEALTH CARE (6.4%)
Abbott Laboratories 21,100 983
Becton Dickinson 12,100 498
Johnson & Johnson 15,000 775
Wyeth 15,900 675
--------
2,931
--------
TECHNOLOGY (5.1%)
Automatic Data Processing 8,600 341
Hewlett-Packard 21,100 485
Koninklijke Philips Electronics 15,300 445
Motorola 33,900 477
Pitney Bowes 13,700 556
--------
2,304
--------
TRANSPORTATION (1.0%)
Norfolk Southern 20,100 475
--------
- ------------------------------------------------------------
SHARES VALUE (000)
- ------------------------------------------------------------
UTILITIES (1.5%)
FPL Group (B) 3,400 $ 222
Progress Energy (B) 10,200 462
--------
684
--------
Total Common Stock
(Cost $36,209) 42,934
--------
MONEY MARKET FUNDS (5.7%)
Federated Prime Obligation
Money Market Fund 800,842 801
Federated Prime Value
Money Market Fund 1,759,548 1,760
--------
Total Money Market Funds
(Cost $2,561) 2,561
--------
SHORT-TERM INVESTMENT (5.0%)
Boston Global Investment Trust --
Enhanced Portfolio (A) 2,314,650 2,315
--------
Total Short-Term Investment
(Cost $2,315) 2,315
--------
Total Investments (105.1%)
(Cost $41,085) 47,810
--------
OTHER ASSETS AND LIABILITIES (-5.1%)
Payable upon Return of Securities Loaned (2,315)
Investment Advisory Fees Payable (23)
Administration Fees Payable (5)
Custodian Fees Payable (2)
Other Assets & Liabilities, Net 19
--------
Total Other Assets and Liabilities (2,326)
--------
27
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
VALUE INCOME STOCK FUND--CONCLUDED
- ------------------------------------------------------------
VALUE (000)
- ------------------------------------------------------------
NET ASSETS:
Paid in Capital -- Trust Shares
(unlimited authorization -- no par value)
based on 3,610,605 outstanding shares
of beneficial interest $ 55,992
Accumulated net realized loss
on investments (17,233)
Net unrealized appreciation
on investments 6,725
--------
Total Net Assets (100.0%) $ 45,484
========
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $12.60
======
ADR -- AMERICAN DEPOSITARY RECEIPT
CL -- CLASS
(A) THIS SECURITY WAS PURCHASED WITH CASH COLLATERAL HELD FROM SECURITIES
LENDING (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS).
(B) THIS SECURITY OR A PARTIAL POSITION OF THE SECURITY WAS ON LOAN AT DECEMBER
31, 2003 (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF
SECURITIES ON LOAN AT DECEMBER 31, 2003 WAS $2,264,345.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
28
- --------------------------------------------------------------------------------
INVESTMENT GRADE BOND FUND
- ------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
CORPORATE OBLIGATIONS (54.6%)
AEROSPACE & DEFENSE (1.0%)
General Dynamics
4.250%, 05/15/13 $ 100 $ 96
Northrop Grumman
7.000%, 03/01/06 100 109
-------
205
-------
AUTOMOTIVE (1.7%)
DaimlerChrysler
6.400%, 05/15/06 100 107
Ford Motor
7.450%, 07/16/31 115 116
General Motors
8.375%, 07/15/33 100 116
-------
339
-------
BANKS (7.4%)
Bank of America
6.500%, 03/15/06 275 299
Bank One (B)
5.500%, 03/26/07 100 108
KFW International Finance, Ser DTC
2.500%, 10/17/05 200 203
NB Capital Trust IV
8.250%, 04/15/27 200 232
Wachovia
6.800%, 06/01/05 175 187
Wells Fargo
3.500%, 04/04/08 310 311
Wells Fargo Capital I
7.960%, 12/15/26 150 171
-------
1,511
-------
BROADCASTING (2.2%)
Comcast Cablevision MTN
8.375%, 05/01/07 100 116
Cox Communications
7.125%, 10/01/12 90 104
- ------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
BROADCASTING -- CONTINUED
Liberty Media
3.500%, 09/25/06 $ 115 $ 116
Univision Communications
3.500%, 10/15/07 105 105
-------
441
-------
FINANCE (12.6%)
Boeing Capital (B)
5.650%, 05/15/06 100 107
CIT Group
4.125%, 02/21/06 275 285
Citicorp Capital I
7.933%, 02/15/27 175 202
General Electric Capital
3.500%, 05/01/08 415 415
Golden West Financial
4.125%, 08/15/07 100 104
Household Finance
5.750%, 01/30/07 190 205
International Lease Finance
3.750%, 08/01/07 305 311
MBNA America Bank
5.375%, 01/15/08 85 90
National Rural Utilities
3.000%, 02/15/06 275 278
SLM, MTN
3.625%, 03/17/08 255 254
Textron Financial, Ser E, MTN
2.750%, 06/01/06 100 100
Washington Mutual Financial
8.250%, 06/15/05 195 213
-------
2,564
-------
FOOD, BEVERAGE & TOBACCO (2.0%)
Albertson's
7.500%, 02/15/11 80 92
Kraft Foods
5.250%, 10/01/13 110 111
29
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
INVESTMENT GRADE BOND FUND--CONTINUED
- ------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
FOOD, BEVERAGE & TOBACCO -- CONTINUED
Kroger
7.800%, 08/15/07 $ 90 $ 103
Safeway
6.150%, 03/01/06 105 112
-------
418
-------
INDUSTRIAL (9.4%)
Alcan
6.125%, 12/15/33 200 201
Amerada Hess
7.125%, 03/15/33 105 106
Anadarko Petroleum
3.250%, 05/01/08 115 113
Computer Sciences
7.500%, 08/08/05 200 217
Conoco
6.950%, 04/15/29 200 227
Devon Financing
6.875%, 09/30/11 95 108
First Data (B)
3.375%, 08/01/08 130 129
International Paper
6.750%, 09/01/11 95 106
Kerr-McGee
5.375%, 04/15/05 50 52
Masco
5.875%, 07/15/12 100 106
Petroleos Mexicanos
9.250%, 03/30/18 100 116
Time Warner
6.125%, 04/15/06 100 108
Viacom
7.875%, 09/01/23 100 118
Weyerhaeuser
7.950%, 03/15/25 100 114
- ------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
INDUSTRIAL -- CONTINUED
Wyeth
6.500%, 02/01/34 $ 75 $ 77
-------
1,898
-------
INSURANCE (3.0%)
Allstate
7.875%, 05/01/05 160 173
Fund American
5.875%, 05/15/13 80 81
Metlife
5.375%, 12/15/12 215 221
Metlife
3.911%, 05/15/05 35 36
Safeco
6.875%, 07/15/07 90 100
-------
611
-------
INVESTMENT BANKERS/BROKER DEALERS (7.2%)
Bear Stearns
5.700%, 01/15/07 280 304
Citigroup Global Markets (B)
6.500%, 02/15/08 200 222
Goldman Sachs Group
4.750%, 07/15/13 215 210
JP Morgan Chase (B)
5.250%, 05/30/07 200 213
Merrill Lynch, Ser B, MTN
3.375%, 09/14/07 310 314
Morgan Stanley
3.625%, 04/01/08 195 195
-------
1,458
-------
REAL ESTATE (1.0%)
EOP Operating LP
8.375%, 03/15/06 90 101
Simon Property Group LP
6.375%, 11/15/07 90 99
-------
200
-------
30
- --------------------------------------------------------------------------------
- ------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
RETAIL (1.1%)
May Department Stores
7.450%, 09/15/11 $ 90 $ 104
Nordstrom
8.950%, 10/15/05 100 111
-------
215
-------
TELEPHONES & TELECOMMUNICATIONS (2.5%)
British Telecom
7.875%, 12/15/05 45 50
Sprint Capital
7.625%, 01/30/11 90 101
Verizon Global Funding
7.250%, 12/01/10 225 259
Verizon New York, Ser B (B)
7.375%, 04/01/32 90 99
-------
509
-------
TRANSPORTATION (1.1%)
Norfolk Southern
7.800%, 05/15/27 100 120
Union Pacific
5.750%, 10/15/07 100 108
-------
228
-------
UTILITIES (2.4%)
Alabama Power, Ser X
3.125%, 05/01/08 75 74
Carolina Power & Light
6.500%, 07/15/12 100 111
Deutsche Telekom
8.250%, 06/15/05 110 119
Pacificorp
6.900%, 11/15/11 75 86
Southern California Edison
8.000%, 02/15/07 90 103
-------
493
-------
Total Corporate Obligations
(Cost $10,896) 11,090
-------
- ------------------------------------------------------------
FACE
AMOUNT (000) VALUE (000)
- ------------------------------------------------------------
U.S. TREASURY OBLIGATIONS (18.2%)
U.S. Treasury Bonds
7.500%, 11/15/16 $ 750 $ 955
6.250%, 08/15/23 1,000 1,139
5.375%, 02/15/31 995 1,038
U.S. Treasury Note
4.375%, 08/15/12 550 561
-------
Total U.S. Treasury Obligations
(Cost $3,554) 3,693
-------
U.S. GOVERNMENT MORTGAGE-BACKED
OBLIGATIONS (15.5%)
FHLMC
5.875%, 03/21/11 365 396
5.250%, 01/15/06 315 335
FNMA
6.500%, 07/01/32 126 132
6.500%, 12/01/32 265 278
6.000%, 09/01/17 236 248
5.000%, 06/01/33 656 649
4.500%, 06/01/18 437 438
GNMA
8.500%, 04/15/31 173 188
8.000%, 08/15/31 233 253
8.000%, 09/15/31 213 232
-------
Total U.S. Government Mortgage-
Backed Obligations
(Cost $3,121) 3,149
-------
U.S. GOVERNMENT AGENCY OBLIGATION (3.5%)
FHLB
2.625%, 05/15/07 725 719
-------
Total U.S. Government Agency
Obligation
(Cost $712) 719
-------
ASSET-BACKED OBLIGATIONS (3.5%)
Capital Auto Receivables Asset Trust,
Ser 2002-4, Cl A4
2.640%, 03/17/08 200 201
31
STATEMENT OF NET ASSETS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
INVESTMENT GRADE BOND FUND--CONCLUDED
- ------------------------------------------------------------
FACE AMOUNT (000)/
SHARES VALUE (000)
- ------------------------------------------------------------
ASSET-BACKED OBLIGATIONS -- CONTINUED
GE Capital Commercial Mortgage
Trust, Ser 2002-1A, Cl A3 (B)
6.269%, 12/10/35 $ 245 $ 271
Harley-Davidson Motorcycle Trust,
Ser 2002-2, Cl A2
3.090%, 06/15/10 110 112
JPMorgan Chase Commercial
Mortgage Securities, Ser 2002-C3,
Cl A2
4.994%, 07/12/35 125 127
-------
Total Asset-Backed Obligations
(Cost $682) 711
-------
FOREIGN GOVERNMENT DEBT SECURITIES (3.0%)
CANADA (2.4%)
Province of Ontario
6.000%, 02/21/06 225 242
Province of Quebec, Ser NN
7.125%, 02/09/24 200 237
-------
479
-------
MEXICO (0.6%)
United Mexican States
4.625%, 10/08/08 125 127
-------
Total Foreign Government Debt Securities
(Cost $602) 606
-------
SHORT-TERM INVESTMENT (6.3%)
Boston Global Investment Trust --
Enhanced Portfolio (A) 1,280,047 1,280
-------
Total Short-Term Investment
(Cost $1,280) 1,280
-------
MONEY MARKET FUND (0.6%)
Federated Prime Value Money
Market Fund 133,430 133
-------
Total Money Market Fund
(Cost $133) 133
-------
- ------------------------------------------------------------
VALUE (000)
- ------------------------------------------------------------
Total Investments (105.2%)
(Cost $20,980) $21,381
-------
OTHER ASSETS AND LIABILITIES (-5.2%)
Payable upon Return of Securities Loaned (1,280)
Investment Advisory Fees Payable (6)
Administration Fees Payable (5)
Custodian Fees Payable (1)
Other Assets and Liabilities, Net 227
-------
Total Other Assets and Liabilities (1,065)
-------
NET ASSETS:
Paid in Capital -- Trust Shares
(unlimited authorization -- no par value)
based on 1,977,331 outstanding shares
of beneficial interest 20,458
Undistributed net investment income 1
Accumulated net realized loss
on investments (544)
Net unrealized appreciation
on investments 401
-------
Total Net Assets (100.0%) $20,316
=======
Net Asset Value, Offering and Redemption
Price Per Share -- Trust Shares $10.27
======
CL -- CLASS
FHLB -- FEDERAL HOME LOAN BANK
FHLMC -- FEDERAL HOME LOAN MORTGAGE CORPORATION
FNMA -- FEDERAL NATIONAL MORTGAGE ASSOCIATION
GNMA -- GOVERNMENT NATIONAL MORTGAGE ASSOCIATION
LP -- LIMITED PARTNERSHIP
MTN -- MEDIUM TERM NOTE
SER -- SERIES
(A) THIS SECURITY WAS PURCHASED WITH CASH COLLATERAL HELD FROM SECURITIES
LENDING (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS).
(B) THIS SECURITY OR A PARTIAL POSITION OF THE SECURITY WAS ON LOAN AT DECEMBER
31, 2003 (SEE NOTE 8 IN NOTES TO FINANCIAL STATEMENTS). THE TOTAL VALUE OF
SECURITIES ON LOAN AT DECEMBER 31, 2003 WAS $1,242,931.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
32
STATEMENTS OF OPERATIONS (000)
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FOR THE YEAR ENDED DECEMBER 31, 2003
SMALL CAP VALUE
CAPITAL GROWTH INTERNATIONAL MID-CAP VALUE INCOME INVESTMENT
APPRECIATION AND INCOME EQUITY EQUITY EQUITY STOCK GRADE
FUND FUND FUND FUND FUND FUND BOND FUND
------------- ---------- ------------- ------- --------- -------- ----------
Investment Income:
Dividend Income ......................... $ 501 $ 126 $ 162 $ 235 $ 292 $ 1,014 $ --
Interest Income ......................... 17 3 -- 4 2 23 896
Income from Securities Lending .......... 9 --(1) 9 7 3 3 3
Less: Foreign Taxes Withheld ............ (4) --(1) (17) -- (7) (6) --
------ ------ ------ ------ ------ ------- -----
Total Investment Income ................. 523 129 154 246 290 1,034 899
------ ------ ------ ------ ------ ------- -----
Expenses:
Investment Advisory Fees ................ 637 55 75 162 189 335 166
Administration Fees ..................... 63 63 75 63 63 63 63
Custodian Fees .......................... 31 3 65 8 10 22 13
Professional Fees ....................... 45 7 5 12 15 34 17
Transfer Agent Fees and
Out-of-Pocket Expenses ................ 27 3 3 7 8 20 11
Printing Fees ........................... 17 2 2 4 6 13 7
Trustee Fees ............................ 6 1 1 1 2 4 2
Other Fees .............................. 7 1 9 2 2 5 3
------ ------ ------ ------ ------ ------- -----
Total Expenses .......................... 833 135 235 259 295 496 282
Less: Investment Advisory Fees Waived ... (196) (55) (75) (97) (97) (99) (113)
Reimbursement from Advisor ............ -- (6) (63) -- -- -- --
------ ------ ------ ------ ------ ------- -----
Net Expenses ............................ 637 74 97 162 198 397 169
------ ------ ------ ------ ------ ------- -----
Net Investment Income (Loss) ............ (114) 55 57 84 92 637 730
------ ------ ------ ------ ------ ------- -----
Net Realized and Unrealized Gain on
Investments and Foreign Currency:
Net Realized Gain (Loss) on
Securities Sold ....................... 1,824 (122) (214) 1,350 633 (1,482) 614
Net Realized Gain on Foreign
Currency Transactions ................. -- -- 30 -- -- -- --
Net Change in Unrealized Depreciation
on Foreign Currency and Translation
of Other Assets and Liabilities in
Foreign Currency ...................... -- -- (3) -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments ......... 7,612 1,681 2,060 2,274 4,885 9,588 (572)
------ ------ ------ ------ ------ ------- -----
Total Net Realized and Unrealized Gain
on Investments and foreign currency ... 9,436 1,559 1,873 3,624 5,518 8,106 42
------ ------ ------ ------ ------ ------- -----
Net Increase in Net Assets
from Operations ......................... $9,322 $1,614 $1,930 $3,708 $5,610 $ 8,743 $ 772
====== ====== ====== ====== ====== ======= =====
Amount designated as "-" are $0 or have been rounded to $0.
(1) Amounts round to $0.
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
33
STATEMENTS OF CHANGES IN NET ASSETS (000)
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FOR THE YEARS ENDED DECEMBER 31,
CAPITAL APPRECIATION GROWTH AND
FUND INCOME FUND
------------------------ ------------------------
2003 2002 2003 2002
---------- ---------- ---------- ----------
Operations:
Net Investment Income (Loss) ....................................... $ (114) $ (287) $ 55 $ 30
Net Realized Gain (Loss) on Securities
Sold and Foreign Currency Transactions ........................... 1,824 (7,835) (122) (595)
Net Change in Unrealized Appreciation (Depreciation) on
Foreign Currency and Translation of
Other Assets and Liabilities in
Foreign Currency ................................................. -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments .................................... 7,612 (10,067) 1,681 (468)
-------- -------- ------- -------
Net Increase (Decrease) in Net Assets
from Operations .................................................. 9,322 (18,189) 1,614 (1,033)
-------- -------- ------- -------
Dividends and Distributions to Shareholders:
Net Investment Income .............................................. -- -- (55) (30)
Return of Capital .................................................. -- -- -- --
Net Realized Gains ................................................. -- (2,818) -- --
-------- -------- ------- -------
Total Dividends and Distributions .................................. -- (2,818) (55) (30)
-------- -------- ------- -------
Capital Transactions:
Proceeds from Shares Issued ........................................ 6,106 923 3,881 1,720
Value of Shares Issued in Connection with Merger (See Note 7) ...... -- 1,599 -- --
Reinvestment of Cash Distributions ................................. -- 2,818 55 30
Value of Shares Redeemed ........................................... (12,779) (14,114) (651) (611)
-------- -------- ------- -------
Increase (Decrease) in Net Assets from
Capital Transactions ............................................. (6,673) (8,774) 3,285 1,139
-------- -------- ------- -------
Total Increase (Decrease) in Net Assets ............................ 2,649 (29,781) 4,844 76
-------- -------- ------- -------
Net Assets:
Beginning of Year .................................................. 56,718 86,499 4,354 4,278
-------- -------- ------- -------
End of Year ........................................................ $ 59,367 $ 56,718 $ 9,198 $ 4,354
======== ======== ======= =======
Shares Issued and Redeemed:
Shares Issued ...................................................... 436 54 441 191
Shares Issued in Connection with Merger (See Note 7) ............... -- 118 -- --
Shares Issued in Lieu of Cash Distributions ........................ -- 211 6 4
Shares Redeemed .................................................... (943) (971) (77) (73)
-------- -------- ------- -------
Total Increase (Decrease) in Net Share Transactions ................ (507) (588) 370 122
======== ======== ======= =======
Amounts designated as "--" are either $0 or have been rounded to $0.
34
- ------------------------------------------------------------------------------------------------------------------------------------
INTERNATIONAL MID-CAP
EQUITY FUND EQUITY FUND
--------------------- ---------------------
01/01/03- 01/01/02- 01/01/03- 01/01/02-
06/30/03 12/31/02 06/30/03 12/31/02
--------- --------- --------- ---------
Operations:
Net Investment Income (Loss) ....................................... $ 57 $ 22 $ 84 $ (56)
Net Realized Gain (Loss) on Securities
Sold and Foreign Currency Transactions ........................... (184) (1,407) 1,350 (4,490)
Net Change in Unrealized Appreciation (Depreciation) on
Foreign Currency and Translation of
Other Assets and Liabilities in
Foreign Currency ................................................. (3) 6 -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments .................................... 2,060 (50) 2,274 (1,668)
------- -------- ------- -------
Net Increase (Decrease) in Net Assets
from Operations .................................................. 1,930 (1,429) 3,708 (6,214)
------- -------- ------- -------
Dividends and Distributions to Shareholders:
Net Investment Income .............................................. (47) -- (86) --
Return of Capital .................................................. -- -- -- --
Net Realized Gains ................................................. -- (43) -- (9)
------- -------- ------- -------
Total Dividends and Distributions .................................. (47) (43) (86) (9)
------- -------- ------- -------
Capital Transactions:
Proceeds from Shares Issued ........................................ 202 16,938 1,755 1,378
Value of Shares Issued in Connection with Merger (See Note 7) ...... -- -- -- --
Reinvestment of Cash Distributions ................................. 47 43 86 9
Value of Shares Redeemed ........................................... (1,442) (18,823) (3,243) (3,140)
------- -------- ------- -------
Increase (Decrease) in Net Assets from
Capital Transactions ............................................. (1,193) (1,842) (1,402) (1,753)
------- -------- ------- -------
Total Increase (Decrease) in Net Assets ............................ 690 (3,314) 2,220 (7,976)
------- -------- ------- -------
Net Assets:
Beginning of Year .................................................. 6,230 9,544 13,962 21,938
------- -------- ------- -------
End of Year ........................................................ $ 6,920 $ 6,230 $16,182 $13,962
======= ======== ======= =======
Shares Issued and Redeemed:
Shares Issued ...................................................... 28 2,189 194 150
Shares Issued in Connection with Merger (See Note 7) ............... -- -- -- --
Shares Issued in Lieu of Cash Distributions ........................ 6 6 9 1
Shares Redeemed .................................................... (201) (2,410) (383) (368)
------- -------- ------- -------
Total Increase (Decrease) in Net Share Transactions ................ (167) (215) (180) (217)
======= ======== ======= =======
SMALL CAP VALUE VALUE INCOME INVESTMENT GRADE
EQUITY FUND STOCK FUND BOND FUND
-------------------- -------------------- --------------------
01/01/03- 01/01/02- 01/01/03- 01/01/02- 01/01/03- 01/01/02-
06/30/03 12/31/02 06/30/03 12/31/02 06/30/03 12/31/02
--------- --------- --------- --------- --------- ---------
Operations:
Net Investment Income (Loss) .................................. $ 92 $ 85 $ 637 $ 727 $ 730 $ 892
Net Realized Gain (Loss) on Securities
Sold and Foreign Currency Transactions ...................... 633 441 (1,482) (3,671) 614 73
Net Change in Unrealized Appreciation (Depreciation) on
Foreign Currency and Translation of
Other Assets and Liabilities in
Foreign Currency ............................................ -- -- -- -- -- --
Net Change in Unrealized Appreciation
(Depreciation) on Investments ............................... 4,885 (885) 9,588 (7,319) (572) 537
------- ------- -------- -------- ------- -------
Net Increase (Decrease) in Net Assets
from Operations ............................................. 5,610 (359) 8,743 (10,263) 772 1,502
------- ------- -------- -------- ------- -------
Dividends and Distributions to Shareholders:
Net Investment Income ......................................... (93) (86) (637) (727) (821) (982)
Return of Capital ............................................. -- -- -- (4) -- --
Net Realized Gains ............................................ -- -- -- -- -- --
------- ------- -------- -------- ------- -------
Total Dividends and Distributions ............................. (93) (86) (637) (731) (821) (982)
------- ------- -------- -------- ------- -------
Capital Transactions:
Proceeds from Shares Issued ................................... 1,064 3,285 2,923 3,262 2,662 5,970
Value of Shares Issued in Connection with Merger (See Note 7) . -- -- -- -- -- --
Reinvestment of Cash Distributions ............................ 93 85 637 731 821 982
Value of Shares Redeemed ...................................... (1,579) (1,414) (10,081) (12,202) (6,244) (3,905)
------- ------- -------- -------- ------- -------
Increase (Decrease) in Net Assets from
Capital Transactions ........................................ (422) 1,956 (6,521) (8,209) (2,761) 3,047
------- ------- -------- -------- ------- -------
Total Increase (Decrease) in Net Assets ....................... 5,095 1,511 1,585 (19,203) (2,810) 3,567
------- ------- -------- -------- ------- -------
Net Assets:
Beginning of Year ............................................. 15,286 13,775 43,899 63,102 23,126 19,559
------- ------- -------- -------- ------- -------
End of Year ................................................... $20,381 $15,286 $ 45,484 $ 43,899 $20,316 $23,126
======= ======= ======== ======== ======= =======
Shares Issued and Redeemed:
Shares Issued ................................................. 85 286 266 277 258 595
Shares Issued in Connection with Merger (See Note 7) .......... -- -- -- -- -- --
Shares Issued in Lieu of Cash Distributions ................... 8 8 57 65 80 98
Shares Redeemed ............................................... (137) (131) (937) (1,085) (608) (392)
------- ------- -------- -------- ------- -------
Total Increase (Decrease) in Net Share Transactions ........... (44) 163 (614) (743) (270) 301
======= ======= ======== ======== ======= =======
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
35
FINANCIAL HIGHLIGHTS
- ------------------------------------------------------------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST FOR THE YEARS OR PERIODS ENDED DECEMBER 31,
FOR A SHARE OUTSTANDING THROUGHOUT EACH YEAR OR PERIOD
NET NET REALIZED AND
NET ASSET VALUE, INVESTMENT UNREALIZED GAINS (LOSSES) TOTAL FROM DIVIDENDS FROM
BEGINNING OF PERIOD INCOME (LOSS) ON INVESTMENTS OPERATIONS NET INVESTMENT INCOME
------------------- ------------- ------------------------- ---------- ----------------------
CAPITAL APPRECIATION FUND
2003 $13.01 $(0.03)* $ 2.43* $ 2.40 $ --
2002 17.48 (0.07) (3.74) (3.81) --
2001 20.02 (0.05) (1.27) (1.32) --
2000 20.27 0.03 0.65 0.68 (0.03)
1999 20.04 0.04 1.65 1.69 (0.04)
GROWTH AND INCOME FUND
2003 $ 8.05 $ 0.08* $ 2.04* $ 2.12 $(0.07)
2002 10.21 0.06 (2.16) (2.10) (0.06)
2001 10.86 0.04 (0.65) (0.61) (0.04)
2000 10.00 0.07 0.86 0.93 (0.07)
1999 (1) 10.00 -- -- -- --
INTERNATIONAL EQUITY FUND
2003 $ 6.92 $ 0.07* $ 2.50* $ 2.57 $(0.06)
2002 8.55 0.02 (1.61) (1.59) --
2001 10.36 -- (1.80) (1.80) --
2000 13.93 0.08 (0.58) (0.50) --
1999 13.05 0.03 1.11 1.14 (0.07)
MID-CAP EQUITY FUND
2003 $ 7.93 $ 0.05* $ 2.30* $ 2.35 $(0.05)
2002 11.09 (0.04) (3.11) (3.15) --
2001 13.30 -- (0.19) (0.19) --
2000 15.20 (0.04) (0.13) (0.17) --
1999 13.56 (0.03) 1.90 1.87 --
SMALL CAP VALUE EQUITY FUND
2003 $10.75 $ 0.07* $ 4.05* $ 4.12 $(0.07)
2002 10.94 0.06 (0.19) (0.13) (0.06)
2001 9.12 0.12 1.82 1.94 (0.12)
2000 7.97 0.14 1.15 1.29 (0.14)
1999 8.48 0.10 (0.51) (0.41) (0.10)
VALUE INCOME STOCK FUND
2003 $10.39 $ 0.17* $ 2.21* $ 2.38 $(0.17)
2002 12.70 0.16 (2.31) (2.15) (0.16)***
2001 13.06 0.16 (0.32) (0.16) (0.20)
2000 13.23 0.26 0.98 1.24 (0.26)
1999 15.08 0.29 (0.63) (0.34) (0.29)
INVESTMENT GRADE BOND FUND
2003 $10.29 $ 0.34* $ 0.02* $ 0.36 $(0.38)
2002 10.05 0.44 0.28 0.72 (0.48)
2001 9.69 0.52 0.36 0.88 (0.52)
2000 9.73 0.62 (0.04) 0.58 (0.62)
1999 10.58 0.56 (0.73) (0.17) (0.56)
<FN>
+ Returns are for the period indicated and have not been annualized.
* Amounts calculated using average shares method.
** Total return would have been (18.70)% without the payment by affiliate. During the fiscal year ended December 31, 2002, the
International Equity Fund was reimbursed by the Adviser for losses incurred of $5,807 due to the sale of shares in several
registered investment companies which were inadvertently purchased in excess of the amount permitted under applicable Securities
and Exchange Commission rules.
*** Includes Return of Capital of $0.0049 per share.
(1) Commenced operations on December 30, 1999. All ratios for the period have been annualized.
Amounts designated as "--" are either $0 or have been rounded to $0.
</FN>
TOTAL NET ASSETS, NET ASSETS, RATIO OF
DISTRIBUTIONS FROM DIVIDENDS AND VALUE, END TOTAL END OF NET EXPENSES TO
REALIZED CAPITAL GAINS DISTRIBUTIONS OF PERIOD RETURN+ PERIOD (000) AVERAGE NET ASSETS
---------------------- ------------- ----------- ------- ------------ ------------------
CAPITAL APPRECIATION FUND
2003 $ -- $ -- $15.41 18.45% $ 59,367 1.15%
2002 (0.66) (0.66) 13.01 (21.89) 56,718 1.15
2001 (1.22) (1.22) 17.48 (5.34) 86,499 1.15
2000 (0.90) (0.93) 20.02 3.07 101,964 1.15
1999 (1.42) (1.46) 20.27 8.73 134,072 1.15
GROWTH AND INCOME FUND
2003 $ -- $(0.07) $10.10 26.49% $ 9,198 1.20%
2002 -- (0.06) 8.05 (20.59) 4,354 1.20
2001 -- (0.04) 10.21 (5.57) 4,278 1.20
2000 -- (0.07) 10.86 9.32 1,784 1.20
1999 (1) -- -- 10.00 -- 10 1.20
INTERNATIONAL EQUITY FUND
2003 $ -- $(0.06) $ 9.43 37.31% $ 6,920 1.60%
2002 (0.04) (0.04) 6.92 (18.58)** 6,230 1.60
2001 (0.01) (0.01) 8.55 (17.40) 9,544 1.60
2000 (3.07) (3.07) 10.36 (3.43) 11,972 1.60
1999 (0.19) (0.26) 13.93 8.81 18,268 1.60
MID-CAP EQUITY FUND
2003 $ -- $(0.05) $10.23 29.72% $ 16,182 1.15%
2002 (0.01) (0.01) 7.93 (28.45) 13,962 1.15
2001 (2.02) (2.02) 11.09 2.72 21,938 1.15
2000 (1.73) (1.73) 13.30 (2.93) 23,714 1.15
1999 (0.23) (0.23) 15.20 14.00 30,744 1.15
SMALL CAP VALUE EQUITY FUND
2003 $ -- $(0.07) $14.80 38.44% $ 20,381 1.20%
2002 -- (0.06) 10.75 (1.20) 15,286 1.20
2001 -- (0.12) 10.94 21.48 13,775 1.20
2000 -- (0.14) 9.12 16.37 10,513 1.20
1999 -- (0.10) 7.97 (4.78) 11,047 1.20
VALUE INCOME STOCK FUND
2003 $ -- $(0.17) $12.60 23.12% $ 45,484 0.95%
2002 -- (0.16) 10.39 (16.98) 43,899 0.95
2001 -- (0.20) 12.70 (1.14) 63,102 0.95
2000 (1.15) (1.41) 13.06 10.43 67,594 0.95
1999 (1.22) (1.51) 13.23 (3.00) 101,741 0.95
INVESTMENT GRADE BOND FUND
2003 $ -- $(0.38) $10.27 3.51% $ 20,316 0.75%
2002 -- (0.48) 10.29 7.40 23,126 0.75
2001 -- (0.52) 10.05 9.20 19,559 0.75
2000 -- (0.62) 9.69 6.32 16,890 0.75
1999 (0.12) (0.68) 9.73 (1.67) 21,733 0.75
RATIO OF
RATIO OF EXPENSES TO
NET INVESTMENT AVERAGE NET ASSETS PORTFOLIO
INCOME (LOSS) TO (EXCLUDING WAIVERS TURNOVER
AVERAGE NET ASSETS AND/OR REIMBURSEMENTS) RATE
------------------ ---------------------- ---------
CAPITAL APPRECIATION FUND
2003 (0.21)% 1.50% 91%
2002 (0.41) 1.46 67
2001 (0.30) 1.44 88
2000 0.17 1.38 105
1999 0.20 1.36 168
GROWTH AND INCOME FUND
2003 0.92% 2.20% 22%
2002 0.68 2.56 51
2001 0.47 3.22 27
2000 0.69 8.04 34
1999 (1) -- 1.20 --
INTERNATIONAL EQUITY FUND
2003 0.99% 3.91% 75%
2002 0.27 2.59 115
2001 0.25 2.32 92
2000 0.64 2.08 126
1999 0.42 1.99 207
MID-CAP EQUITY FUND
2003 0.60% 1.84% 182%
2002 (0.32) 1.72 90
2001 0.04 1.66 93
2000 (0.18) 1.56 106
1999 (0.20) 1.50 122
SMALL CAP VALUE EQUITY FUND
2003 0.56% 1.79% 27%
2002 0.55 1.79 17
2001 1.05 1.91 55
2000 1.69 1.96 72
1999 1.23 1.83 63
VALUE INCOME STOCK FUND
2003 1.52% 1.19% 54%
2002 1.37 1.13 50
2001 1.20 1.12 73
2000 2.01 1.06 72
1999 1.95 0.96 80
INVESTMENT GRADE BOND FUND
2003 3.66% 1.25% 147%
2002 4.33 1.28 144
2001 5.15 1.32 139
2000 6.54 1.26 123
1999 5.56 1.19 243
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THE FINANCIAL STATEMENTS.
36 & 37
NOTES TO FINANCIAL STATEMENTS
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
1. Organization:
The STI Classic Variable Trust (the "Trust") was organized as a Massachusetts
business trust under a Declaration of Trust dated April 18, 1995. The Trust is
registered under the Investment Company Act of 1940, as amended, as an open-end
management investment company with seven funds (each referred to as a "Fund" or
collectively as the "Funds"): the Capital Appreciation Fund, the Growth and
Income Fund, the International Equity Fund, the Mid-Cap Equity Fund, the Small
Cap Value Equity Fund, the Value Income Stock 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. Sales of shares of the Funds may only be made to separate accounts of
various life insurance companies and certain qualified benefit plans. The Funds'
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 accounting principles generally
accepted in the United States of America.
USE OF ESTIMATES -- The preparation of the financial statements in
conformity with accounting principles generally accepted in the United
States of America 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.
SECURITY VALUATION -- Equity securities listed on a securities exchange,
market or automated quotation system for which quotations are readily
available (except for equity securities traded on NASDAQ), including equity
securities traded over the counter, are valued at the last quoted sale
price on the primary exchange or market (foreign or domestic) on which they
are traded on valuation date (or at approximately 4:00 pm ET if an equity
security's primary exchange is normally open at that time), or, if there is
no such reported sale on the valuation date, at the most recent quoted bid
price. For securities traded on NASDAQ, the NASDAQ Official Closing Price
will be used. If available, debt securities are priced based upon
valuations provided by independent, third-party pricing agents. Such values
generally reflect the last reported sale price if the security is actively
traded. The third-party pricing agents may also value debt securities at an
evaluated bid price by employing methodologies that utilize actual market
transactions, broker-supplied valuations, or other methodologies designed
to identify the market value for such securities. Debt obligations with
remaining maturities of sixty days or less may be valued at their amortized
cost, which approximates market value. Securities for which current market
quotations are not readily available, or whose values have been materially
affected by events occurring before the Fund's valuation time but after the
close of the securities' primary markets, of which there were none at
December 31, 2003, are valued at their fair value as determined in
accordance with procedures adopted by the Board of Trustees.
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 amortization of
premium or accretion of discount. The cost used in determining net realized
capital gains and losses on the sale of securities is that of the specific
securities sold, adjusted for the accretion and amortization of purchase
discounts and premiums during the applicable holding period.
REPURCHASE AGREEMENTS -- In connection with transactions involving
repurchase agreements, a third party custodian bank takes possession of the
underlying securities ("collateral"), the value of
38
- --------------------------------------------------------------------------------
which exceeds the principal amount of the repurchase transaction, including
accrued interest. In the event of default on the obligation to repurchase,
each Fund has the right to liquidate the collateral and apply the proceeds
in satisfaction of the obligation. In the event of default or bankruptcy by
the counterparty to the agreement, realization and/or retention of the
collateral or proceeds may be subject to legal proceedings. At fiscal year
end, there were no open repurchase agreements.
FOREIGN CURRENCY TRANSACTIONS -- With respect to the International Equity
Fund, the books and records are maintained in U.S. dollars. Foreign
currency amounts are translated into U.S. dollars on the following basis:
o market value of investment securities, assets and liabilities at the
current rate of exchange; and
o purchases and sales of investment securities, income, and expenses at the
relevant rates of exchange prevailing on the respective dates of such
transactions.
The International Equity Fund does not isolate the portion of gains and
losses on investments in equity securities that is due to changes in the
foreign exchange rates from that which is due to change in market prices of
equity securities.
The International Equity Fund reports certain foreign currency-related
transactions as components of realized gains and losses for financial
reporting purposes, whereas such components are treated as ordinary income
for Federal income tax purposes.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS -- Distributions to
shareholders, which are determined in accordance with Federal tax
regulations are recorded on the ex-dividend date. Dividends from net
investment income for the Investment Grade Bond Fund are declared daily and
paid monthly to shareholders. Dividends from net investment income for the
Capital Appreciation Fund, the Growth and Income Fund, the Mid-Cap Equity
Fund, the Small Cap Value Equity Fund and the Value Income Stock Fund are
declared and paid quarterly to shareholders. Dividends from net investment
income for the International Equity Fund are declared and paid annually to
shareholders. Any net realized capital gains are distributed to
shareholders at least annually.
EXPENSES -- 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.
3. Agreements and Other Transactions with Affiliates:
INVESTMENT ADVISORY AGREEMENT -- Investment advisory services are provided
to the Trust by Trusco Capital Management, Inc. ("Trusco"). Under the terms
of the Investment Advisory Agreement, Trusco is entitled to receive a fee
from the Funds, computed daily and paid monthly, at an annual rate of
1.15%, 0.90%, 1.25%, 1.15%, 1.15%, 0.80% and 0.74% of the average daily net
assets of the Capital Appreciation Fund, Growth and Income Fund,
International Equity Fund, Mid-Cap Equity Fund, Small Cap Value Equity
Fund, Value Income Stock Fund, and Investment Grade Bond Fund,
respectively. Trusco has agreed to waive all or a portion of its fees (and
to reimburse Funds' expenses) in order to limit operating expenses. Fee
waivers and expense reimbursements are voluntary (except for the Growth and
Income Fund, for which the expense limit is contractual) and may be
terminated at any time.
ADMINISTRATION AGREEMENT -- The Trust and SEI Investments Global Funds
Services (the "Administrator") are parties to an Administration Agreement
(the "Administration Agreement") dated August 18, 1995, as amended November
19, 1997 and March 1, 1999. Under the terms of the Administration
Agreement, the Administrator is entitled to an annual fee, subject to a
minimum of $62,500 for domestic funds and $75,000 for international funds
(expressed as a percentage of the combined average daily net assets of the
Trust and STI Classic Funds) of: 0.12% up to $1 billion, 0.09% on the next
$4 billion, 0.07% on on the next $3 billion, 0.065% on the next $2 billion
and 0.06% for over $10 billion.
39
NOTES TO FINANCIAL STATEMENTS--continued
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
DISTRIBUTION AGREEMENT -- The Trust and SEI Investments Distribution Co.
(the "Distributor") are parties to a Distribution Agreement dated August
18, 1995. The Distributor receives no fees for its services under this
agreement.
TRANSFER AGENCY AGREEMENT -- The Trust and Federated Services Company are
parties to a Transfer Agency servicing agreement dated August 2, 1995,
under which Federated Services Company provides transfer agency services to
the Trust.
CUSTODIAN AGREEMENTS -- SunTrust Bank, acts as custodian for all the Funds
except the International Equity Fund which utilizes Brown Brothers Harriman
& Co. as custodian. Prior to January 29, 2003, Bank of New York served as
custodian for the International Equity Fund. Custodians are paid on the
basis of the net assets and transaction costs of the Funds. The custodians
play no role in determining the investment policies of the Trust or which
securities are to be purchased or sold in the Funds.
OTHER -- Certain officers of the Trust are also officers of the Adviser,
the Administrator and/or the Distributor. Such officers are paid no fees by
the Trust for serving as officers of the Trust.
The Trust had entered into an agreement with the Distributor to act as an
agent in placing repurchase agreements for the Trust. As of October 24,
2003, this agreement was discontinued.
For the year ended December 31, 2003 the following Funds paid the
Distributor through a reduction in the yield earned by the Funds on those
repurchase agreements:
FEES
----
Capital Appreciation Fund .................. $ 991
Growth and Income Fund ..................... 125
Mid-Cap Equity Fund ........................ 165
Small Cap Value Equity Fund ................ 139
Value Income Stock Fund .................... 1,054
Investment Grade Bond Fund ................. 404
The Trust has entered into an agreement with SunTrust Robinson Humphrey, a
division of SunTrust Capital Markets, Inc. which is a direct non-bank subsidiary
of SunTrust Banks, Inc. to act as an agent in placing repurchase agreements for
the Trust. During the year, and at December 31, 2003, the Funds did not hold
repurchase agreements through SunTrust Robinson Humphrey.
4. Investment Transactions:
The cost of security purchases and the proceeds from security sales, excluding
short-term investments, for the year ended December 31, 2003, were as follows:
U.S. GOVT. U.S. GOVT.
PURCHASES SALES PURCHASES SALES
(000) (000) (000) (000)
--------- -------- -------- --------
Capital Appreciation Fund ....... $48,674 $56,540 $ -- $ --
Growth and Income Fund .......... 4,378 1,293 -- --
International Equity Fund ....... 4,335 5,446 -- --
Mid-Cap Equity Fund ............. 25,096 26,451 -- --
Small Cap Value Equity Fund ..... 4,450 4,927 -- --
Value Income Stock Fund ......... 21,333 28,642 -- --
Investment Grade
Bond Fund ..................... 13,189 14,027 18,685 18,867
5. Federal Tax Policies and Information:
It is each Fund's intention to continue to qualify as a regulated investment
company for Federal income tax purposes and distribute all of its taxable income
and net capital gains. Accordingly, no provisions for Federal income taxes are
required.
The Funds may be subject to taxes imposed by countries in which they invest with
respect to their investments in issuers existing or operating in such countries.
Such taxes are generally based on income earned. The Funds accrue such taxes
when the related income is earned.
The timing and characterization of certain income and capital gains
distributions are determined annually in accordance with Federal tax regulations
which may differ from accounting principles generally accepted in the United
States of America. As a result, net
40
- --------------------------------------------------------------------------------
investment income (loss) and net realized gain (loss) on investment transactions
for a reporting period may differ significantly from required distributions
during such period. These book/tax differences may be temporary or permanent. To
the extent these differences are permanent in nature, they are charged or
credited to paid-in-capital, undistributed net investment income (loss), or
accumulated net realized gain (loss), as appropriate, in the period that the
differences arise. Accordingly, the following permanent differences, primarily
attributable to net operating losses, Passive Foreign Investment Company (PFIC)
gains, foreign exchange gains and losses, return of capital distributions and
paydowns on mortgage-backed securities have been reclassified to/from the
following accounts.
UNDISTRIBUTED ACCUMULATED
NET INVESTMENT REALIZED PAID-IN-
INCOME (LOSS) GAIN (LOSS) CAPITAL
(000) (000) (000)
-------------- ----------- ----------
Capital Appreciation Fund ....... $114 $-- $(114)
International Equity Fund ....... 39 (39) --
Mid-Cap Equity Fund ............. 2 -- (2)
Small Cap Value Equity Fund ..... 1 -- (1)
Investment Grade Bond Fund ...... 91 (91) --
These reclassifications have no effect on net assets or net asset value per
share.
The tax character of dividends and distributions paid during the years ended
December 31, 2003 and December 31, 2002 were as follows (000):
Ordinary Income Long-Term Capital Gain Return of Capital Total
2003 2002 2003 2002 2003 2002 2003 2002
--------------- ---------------------- ----------------- ------------------
Capital Appreciation Fund .......... $-- $-- $-- $2,818 $-- $-- $-- $2,818
Growth and Income Fund ............. 55 30 -- -- -- -- 55 30
International Equity Fund .......... 47 43 -- -- -- -- 47 43
Mid-Cap Equity Fund ................ 84 9 -- -- 2 -- 86 9
Small Cap Value Equity Fund ........ 92 86 -- -- 1 -- 93 86
Value Income Stock Fund ............ 637 727 -- -- -- 4 637 731
Investment Grade Bond Fund ......... 821 982 -- -- -- -- 821 982
As of December 31, 2003, the components of Distributable Earnings (Accumulated
Losses) on a tax basis were as follows (000):
UNDISTRIBUTED CAPITAL POST UNREALIZED OTHER
ORDINARY LOSS OCTOBER APPRECIATION TEMPORARY
INCOME CARRYFORWARDS LOSSES (DEPRECIATION) DIFFERENCES
------- -------------- ------- -------------- -----------
Capital Appreciation Fund ................. $-- $ (6,779) $-- $10,783 $--
Growth and Income Fund .................... -- (874) -- 1,226 --
International Equity Fund ................. 105 (3,491) -- 1,254 --
Mid-Cap Equity Fund ....................... -- (4,047) -- 2,691 1
Small Cap Value Equity Fund ............... -- (454) -- 6,005 --
Value Income Stock Fund ................... 1 (17,123) -- 6,614 --
Investment Grade Bond Fund ................ 64 (446) (3) 306 (63)
Amounts designated as "--" are either $0 or have been rounded to $0.
41
NOTES TO FINANCIAL STATEMENTS--concluded
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST DECEMBER 31, 2003
Post-October losses represent losses realized on investments from November 1,
2003 through December 31, 2003 that, in accordance with Federal income tax
regulations, the Fund has elected to defer and treat as having arisen in the
following fiscal year.
For tax purposes, the capital losses in the Funds can be carried forward for a
maximum of eight years to offset future net realized capital gains. The capital
loss carryforwards are as follows (000):
EXPIRES EXPIRES EXPIRES EXPIRES EXPIRES
2011 2010 2009 2008 2007
------- ------- ------- ------- -------
Capital Appreciation Fund ......................... $ 515 $5,695 $ 223 $ 334 $ 12
Growth and Income Fund ............................ 260 483 128 3 --
International Equity Fund ......................... 497 1,471 1,208 315 --
Mid-Cap Equity Fund ............................... -- 4,047 -- -- --
Small Cap Value Equity Fund ....................... -- -- 55 -- 399
Value Income Stock Fund ........................... 2,432 3,046 -- 11,645 --
Investment Grade Bond Fund ........................ -- 189 119 138 --
Amounts designated as "-" are either $0 or have been rounded to $0.
During the year ended December 31, 2003, the Mid-Cap Equity, the Small Cap Value
Equity and the Investment Grade Bond Funds utilized $1,352,645, $631,339 and
$608,677 in capital loss carryforwards, respectively.
Included in the Capital Appreciation Fund are capital loss carryforwards
acquired in a merger (see Note 7). Utilization of these losses may be limited in
accordance with Federal tax regulations.
At December 31, 2003, the total cost of securities and the net realized gains or
losses on securities sold for Federal income tax purposes are different from
amounts reported for financial reporting purposes primarily due to wash sales
which cannot be used for Federal income tax purposes in the current year and
have been deferred for use in future years. The aggregate gross unrealized
appreciation and depreciation for securities held by the Funds at December 31,
2003, were as follows:
AGGREGATE AGGREGATE
GROSS GROSS NET
FEDERAL TAX UNREALIZED UNREALIZED UNREALIZED
COST APPRECIATION DEPRECIATION APPRECIATION
(000) (000) (000) (000)
----------- ------------ ------------ ------------
Capital Appreciation Fund ......................... $51,140 $11,133 $350 $10,783
Growth and Income Fund ............................ 8,185 1,371 145 1,226
International Equity Fund ......................... 5,585 1,546 295 1,251
Mid-Cap Equity Fund ............................... 14,260 2,758 67 2,691
Small Cap Value Equity Fund ....................... 16,805 6,326 321 6,005
Value Income Stock Fund ........................... 41,196 7,112 498 6,614
Investment Grade Bond Fund ........................ 21,075 460 154 306
42
- --------------------------------------------------------------------------------
6. Concentrations/Risks:
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 International Equity Fund invests in securities of foreign issuers in
various countries. These investments may involve certain considerations and
risks not typically associated with investments in the United States as a result
of, among other factors, the possibility of future political and economic
developments and the level of governmental supervision and regulation of
securities markets in the respective countries.
In the normal course of business, the Funds enter into contracts that provide
general indemnifications. The Funds' maximum exposure under these arrangements
is dependent on future claims that may be made against the Funds and, therefore,
cannot be estimated; however, based on experience, the risk of loss from such
claims is considered remote.
The Funds are intended to be funding vehicles for variable annuity contracts and
variable life insurance policies offered by life insurance companies. At
December 31, 2003, outstanding shares of the Funds were held by separate
accounts of participating insurance companies as follows:
% OF NUMBER OF
OWNERSHIP ACCOUNTS
--------- ---------
Capital Appreciation Fund ................ 87% 1
Growth and Income Fund ................... 95% 3
International Equity Fund ................ 96% 1
Mid-Cap Equity Fund ...................... 86% 1
Small Cap Value Equity Fund .............. 93% 2
Value Income Stock Fund .................. 89% 1
Investment Grade Bond Fund ............... 93% 1
7. Fund Reorganization:
On September 6, 2002, the assets of the STI Classic Variable Trust Quality
Growth Stock Fund (the "Quality Growth Stock Fund") were reorganized into the
Capital Appreciation Fund. Under the Agreement and Plan of Reorganization,
251,754 shares of the Quality Growth Stock Fund were exchanged for 118,418
shares of the Capital Appreciation Fund in a tax-free exchange.
The value of the Quality Growth Stock Fund on September 6, 2002 was $1,599,174,
which included $138,316 in unrealized losses and $621,130 in accumulated net
realized losses. The value of the Capital Appreciation Fund before the merger
was $60,173,046. Upon the business combination of such funds on September 6,
2002, the value of the Capital Appreciation Fund combined with the Quality
Growth Stock Fund was $61,772,220.
8. Securities Lending:
Each Fund may lend portfolio securities to brokers, dealers and other financial
organizations that meet capital and other credit requirements or other criteria
established by the Trust's Board of Trustees. These loans may not exceed 331/3%
of the total asset value of the Fund (including the loan collateral). No Fund
will lend portfolio securities to its investment adviser or its affiliates
unless it has applied for and received specific authority to do so from the SEC.
Loans of portfolio securities will be fully collateralized by cash. The value of
the collateral is at least equal to the market value of the securities loaned.
However, due to market fluctuations, the value of securities loaned on a
particular day may, during the course of the day, exceed the value of
collateral. On each business day, the amount of collateral is adjusted based on
the prior day's market fluctuations and the current day's lending activity.
Income from lending activity is determined by the amount of interest earned on
collateral, less any amounts payable to the borrowers of the securities and the
lending agent. Lending securities involves certain risks, including the risk
that the Fund may be delayed or prevented from recovering the collateral if the
borrower fails to return the securities.
Cash collateral received in connection with securities lending is invested in
the Boston Global Investment Trust-Enhanced Portfolio. This Portfolio consists
of money market instruments including money market mutual funds registered under
the Investment Company Act of 1940, commercial paper, repurchase agreements,
U.S. Treasury Bills and U.S. agency obligations.
43
REPORT OF INDEPENDENT PUBLIC AUDITORS
- --------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
STI Classic Variable Trust
In our opinion, the accompanying statements of net assets and the related
statements of operations and of changes in net assets and the financial
highlights present fairly, in all material respects, the financial position of
the Capital Appreciation Fund, Growth and Income Fund, International Equity
Fund, Mid-Cap Equity Fund, Small Cap Value Equity Fund, Value Income Stock Fund
and Investment Grade Bond Fund (constituting the STI Classic Variable Trust,
hereafter referred to as the "Trust") at December 31, 2003, the results of each
of their operations for the year then ended and the changes in each of their net
assets and the financial highlights for each of the two years in the period then
ended, in conformity with accounting principles generally accepted in the United
States of America. These financial statements and financial highlights
(hereafter referred to as "financial statements") are the responsibility of the
Trust's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with auditing standards generally accepted in
the United States of America, which require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 2003 by
correspondence with the custodians and brokers, provide a reasonable basis for
our opinion. The financial highlights for each of the three years (or periods)
ended December 31, 2001 were audited by other independent accountants who have
ceased operations. Those independent accountants expressed an unqualified
opinion on those financial statements in their report dated February 7, 2002.
PricewaterhouseCoopers LLP
Philadelphia, Pennsylvania
February 17, 2004
44
NOTICE TO SHAREHOLDERS (UNAUDITED)
- --------------------------------------------------------------------------------
STI CLASSIC VARIABLE TRUST
For shareholders that do not have a December 31, 2003 tax year end, this notice
is for informational purposes only. For shareholders with a December 31, 2003
tax year end, please consult your tax advisor as to the pertinence of this
notice. For the fiscal year ended December 31, 2003, each portfolio is
designating the following items with regard to distributions paid during the
year:
LONG TERM
(20% RATE) ORDINARY
CAPITAL GAIN QUALIFIED 5 YEAR INCOME TAX-EXEMPT TOTAL QUALIFYING
FUND DISTRIBUTION GAIN DISTRIBUTION DISTRIBUTIONS INTEREST DISTRIBUTIONS DIVIDENDS (1)
- ----- -------------- ----------------- ---------------- ----------- -------------- ------------
Capital Appreciation Fund.... -- -- -- -- -- --
Growth and Income Fund....... -- -- 100.00% -- 100.00% 100.00%
International Equity Fund.... -- -- 100.00% -- 100.00% --
Mid-Cap Equity Fund.......... -- -- 100.00% -- 100.00% 100.00%
Small Cap Value Equity Fund.. -- -- 100.00% -- 100.00% 100.00%
Value Income Stock Fund...... -- -- 100.00% -- 100.00% 100.00%
Investment Grade Bond Fund... -- -- 100.00% -- 100.00% --
FOREIGN
TAX
WITHHOLDING
PASS THROUGH (2)
----------------
Capital Appreciation Fund.... --
Growth and Income Fund....... --
International Equity Fund.... --
Mid-Cap Equity Fund.......... --
Small Cap Value Equity Fund.. --
Value Income Stock Fund...... --
Investment Grade Bond Fund... --
- ------------------------
(1) Qualifying dividends represent dividends which qualify for the corporate
dividends received deduction and is reflected as a percentage of "Ordinary
Income Distributions".
(2) Foreign tax credit pass through represents the amount eligible for the
foreign tax credit and is reflected as a percentage of "Ordinary Income
Distributions".
45
TRUSTEES AND OFFICERS OF THE STI CLASSIC VARIABLE TRUST (UNAUDITED)
- --------------------------------------------------------------------------------
Information pertaining to the trustees of the Trust is set forth below. Trustees
who are not deemed to be "interested persons" of the Trust as defined in the
1940 Act are referred to as "Independent Board Members." Trustees who are deemed
to be "interested persons" of the Trust are referred to as "Interested Board
Members." Messrs. Courts and Ridley are Trustees who may be deemed to be
"interested" persons of the Trust.
Term of Number of Portfolios Other
Position(s) Office and in STI Classic Directorship
Name, Address, Held with Length of Principal Occupation(s) Complex Overseen by Held by
Age1 the Trust Time Served2 During Past 5 Years Board Member3 Board Member4
- ------------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT
BOARD MEMBERS
- -------------
THOMAS Trustee May, 2000 President, Genuine Parts Company 51 Director, Oxford
GALLAGHER Wholesale Distribution, 1970 to Industries. Current
56 the present. Trustee of STI
Classic Funds.
F. WENDELL Trustee May, 1995 Retired. 51 Current Trustee on
GOOCH the Board of
71 Trustees for the SEI
Family of Funds,
The Capitol Mutual
Funds and STI
Classic Funds.
JAMES O. Trustee May, 2000 President and Chief Executive 51 Director, NCR;
ROBBINS Officer, Cox Communications, Inc., Director, Cox
61 1985 to the present. Communications.
Current Trustee of
STI Classic Funds.
JONATHAN T. Trustee February, Retired. 51 Trustee, W.K.
WALTON 1998 Kellogg Trust.
73 Current Trustee of
STI Classic Funds.
INTERESTED
BOARD MEMBERS5
- --------------
RICHARD W. Trustee November, Chairman of the Board, Atlantic 51 Current Trustee of
COURTS, II 2001 Investment Company, 1970 to the STI Classic Funds.
67 present.
CLARENCE H. Trustee November, Chairman of the Board; Haverty 51 Current Trustee of
RIDLEY 2001 Furniture Companies, 2001 to the STI Classic Funds.
61 present; Partner, King and
Spaulding LLP (law firm), 1977 to
2000.
- --------------------------
1 Each trustee may be contacted by writing to c/o STI Classic Variable Trust,
SEI Investments Company, Oaks, PA 19456.
2 Each trustee shall hold office during the lifetime of this Trust until the
election and qualification of his or her successor, or until he or she sooner
dies, resigns or is removed in accordance with the Trust's Declaration of
Trust. The president, treasurer and secretary shall hold office for a one year
term and until their respective successors are chosen and qualified, or in
each case until he or she sooner dies, resigns is removed, or becomes
disqualified in accordance with the Trust's by-laws.
3 The "STI Classic Complex" consists of all registered investment companies for
which Trusco Capital Management, Inc. serves as investment adviser. As of
December 31, 2003, the STI Classic Complex consisted of 51 Funds.
46
TRUSTEES AND OFFICERS OF THE STI CLASSIC VARIABLE TRUST (UNAUDITED)
- --------------------------------------------------------------------------------
Term of Number of Portfolios Other
Position(s) Office and in STI Classic Directorship
Name, Address, Held with Length of Principal Occupation(s) Complex Overseen by Held by
Age the Trust Time Served During Past 5 Years Board Member3 Board Member4
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS
- --------
JAMES F. VOLK, CPA President November, Senior Operations Officer, SEI N/A N/A
One Freedom 2003 Investments, Fund Accounting and
Valley Drive Administration since 1996; Assistant
Oaks, PA 19456 Chief Accountant of the Securities
41 and Exchange Commission's Division
of Investment Management (1993-1996).
TIMOTHY D. BARTO Vice November, Employed by SEI Investments since N/A N/A
One Freedom President 2001 October 1999. Vice President and
Valley Drive and Assistant Secretary of the Adviser
Oaks, PA 19456 Secretary and Administrator since December 1999;
35 Vice President of the Distributor
(1999-2003); Assistant Secretary of
the Distributor since 1999. Associate
at Dechert, Price & Rhoads (1997-1999).
LYDIA A. GAVALIS Vice May, 1998 Vice President and Assistant Secretary N/A N/A
One Freedom President of SEI Investments, the Adviser and
Valley Drive Administrator since 1998; Vice President
Oaks, PA 19456 of the Distributor (1998-2003); Assistant
39 Secretary of the Distributor since 1998.
Assistant General Counsel and Director of
Arbitration, Philadelphia Secretary Stock
Exchange (1989-1998).
CHRISTINE M. Vice May, 2000 Employed by SEI Investments since N/A N/A
MCCULLOUGH President November 1, 1999. Vice President and
One Freedom and Assistant Secretary of the Adviser and
Valley Drive Assistant Administrator since 1999. Vice President
Oaks, PA 19456 Secretary and Assistant Secretary of the Distributor
43 (1999-2003). Associate at White and Williams
LLP, 1991-1999.
- --------------------------
4 Directorships of companies required to report to the U.S. Securities and
Exchange Commission under the Securities Exchange Act of 1934 (i.e., "public
companies") or other investment companies registered under the 1940 Act.
5 Mr. Courts is deemed an interested trustee because of his directorships with
affiliates of the Adviser. Mr. Ridley is deemed an interested trustee because
of his material business relationships with the parent to the Adviser.
47
TRUSTEES AND OFFICERS OF THE STI CLASSIC VARIABLE TRUST (UNAUDITED)
- --------------------------------------------------------------------------------
Term of Number of Portfolios Other
Position(s) Office and in STI Classic Directorship
Name, Address, Held with Length of Principal Occupation(s) Complex Overseen by Held by
Age the Trust Time Served During Past 5 Years Board Member1 Board Member2
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS (CONTINUED)
- --------
JOHN MUNCH Vice November, Employed by SEI Investments (2001- N/A N/A
One Freedom President 2001 present); Vice President and
Valley Drive and Assistant Secretary of the
Oaks, PA 19456 Assistant Administrator (2001-present);
32 Secretary General Counsel and Vice President
of the Distributor (2003-present);
Vice President and Assistant
Secretary of the Distributor (2001-
2003); Associate, Howard Rice
Nemerovski Canady Falk & Rabkin, a
law firm (1998-2001); Associate,
Seward & Kissel, a law firm (1996-1998).
CORI DAGGETT Vice August, Employed by SEI Investments since 2003; N/A N/A
One Freedom President 2003 Vice President and Assistant Secretary
Valley Drive and of the Administrator (2003-present);
Oaks, PA 19456 Assistant Associate at Drinker Biddle & Reath
42 Secretary (1998-2003).
DOUGLAS Vice August, President, Chief Executive Officer and N/A N/A
PHILLIPS President 2003 Chief Investment Officer of Trusco
One Freedom and Capital Management, Inc. since its
Valley Drive Assistant inception in November 1984.
Oaks, PA 19456 Secretary
56
DEBORAH A. Vice November, Chief Compliance Officer and Vice N/A N/A
LAMB President 2003 President of Trusco Capital Management,
One Freedom and Inc. since March 2003 and President of
Valley Drive Assistant Investment Industry Consultants, LLC
Oaks, PA 19456 Secretary since June 2000. Director of Compliance
51 at INVESCO, Inc. from March 1995 to
June 2000.
KATHLEEN Vice November, Vice President and Manager of Special N/A N/A
LENTZ President 2003 Entities in Financial Intelligence Unit
One Freedom and of SunTrust Bank since 2002. Vice President
Valley Drive Assistant of the Third Party Mutual Funds Unit of
Oaks, PA 19456 Secretary SunTrust Bank from 1996 to 2002.
43
JOHN MUNERA Vice November, Middle Office Compliance Officer at SEI N/A N/A
One Freedom President 2003 Investments since 2000. Supervising Examiner
Valley Drive and at Federal Reserve Bank of Philadelphia
Oaks, PA 19456 Assistant 1998-2000.
41 Secretary
48
TRUSTEES AND OFFICERS OF THE STI CLASSIC VARIABLE TRUST (UNAUDITED)
- --------------------------------------------------------------------------------
Term of Number of Portfolios Other
Position(s) Office and in STI Classic Directorship
Name, Address, Held with Length of Principal Occupation(s) Complex Overseen by Held by
Age the Trust Time Served During Past 5 Years Board Member1 Board Member2
- ------------------------------------------------------------------------------------------------------------------------------------
OFFICERS (CONCLUDED)
- --------
WILLIAM E. Vice November, Vice President and Assistant Secretary N/A N/A
ZITELLI, JR. President 2000 of the Administrator since August 2000.
One Freedom and Vice President of the Distributor
Valley Drive Assistant (2000-2003); Assistant Secretary of the
Oaks, PA 19456 Secretary Distributor (2000-present). Vice President,
35 Merrill Lynch & Co. Asset Management Group
(1998-2000). Associate at Pepper Hamilton LLP
(1997-1998).
JENNIFER Treasurer May, 2000 Director, SEI Investments Fund Accounting N/A N/A
SPRATLEY, CPA and Accounting and Administration since 1999;
530 East CFO Audit Manager, Ernst & Young LLP (1991-1999).
Swedesford Road
Wayne, PA 19087
34
- --------------------------
1 The "STI Classic Complex" consists of all registered investment companies for
which Trusco Capital Management, Inc. serves as investment adviser. As of
December 31, 2003, the STI Classic Complex consisted of 51 Funds.
2 Directorships of companies required to report to the U.S. Securities and
Exchange Commission under the Securities Exchange Act of 1934 (i.e., "public
companies") or other investment companies registered under the 1940 Act.
49
NOTES
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
NOTES
- --------------------------------------------------------------------------------
Investment Adviser:
Trusco Capital Management, Inc.
STI Classic Variable Trust Funds are not deposits,
are not insured or guaranteed by the FDIC or any
other government agency, and are not endorsed by
and do not constitute obligations of SunTrust Banks,
Inc. or any other of its affiliates. Investment in the Funds
involves risk, including the possible loss of principal.
There is no guarantee that any STI Classic Variable
Trust Fund will achieve its investment objective.
The STI Classic Variable Trust Funds are advised by
Trusco Capital Management, Inc., an affiliate of SunTrust
Banks, Inc.
Distributor:
SEI Investments Distribution Co.
This information must be preceded or
accompanied by a current prospectus for
each fund described.
ITEM 2. CODE OF ETHICS
The registrant has adopted a code of ethics that applies to the registrant's
principal executive officer, principal financial officer, comptroller or
principal accounting officer, and any person who performs a similar function.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT
(a)(1) The registrant's Board of Trustees has determined that the Board's Audit
Committee does not have an "audit committee financial expert," as the Securities
and Exchange Commission has defined that term. After carefully considering all
of the factors involved in the definition of "audit committee financial expert,"
the Board determined that none of the members of the audit committee met all
five qualifications in the definition, although some members of the Audit
Committees met some of the qualifications. The Board also determined that while
the Audit Committee members have general financial expertise, given the size and
types of the STI Classic Variable Trust's funds, and in light of the nature of
the accounting and valuation issues they have presented over the past several
years, it did not appear that the Audit Committee members lacked any necessary
skill to serve on the Audit Committee.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES
Fees billed by PriceWaterhouseCoopers LLP Related to the Trust
PriceWaterhouseCoopers LLP billed the Trust aggregate fees for services rendered
to the Trust for the last two fiscal years as follows:
- ------------------ ----------------------------------------------------- -----------------------------------------------------
2003 2002
- ------------------ ----------------------------------------------------- -----------------------------------------------------
All fees and All fees and All other fees All fees and All fees and All other fees
services to the services to and services to services to the services to and services to
Trust that were service service Trust that were service service
pre-approved affiliates that affiliates that pre-approved affiliates that affiliates that
were did not require were did not require
pre-approved pre-approval pre-approved pre-approval
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(a) Audit $ 76,485 N/A $ 0 $ 71,697 N/A $ 0
Fees*
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(b) Audit- $ 10,500(1) $ 60,000(3) $ 771,250(4) $ 23,560(1)(2) $ 0 $2,685,000(5)
Related
Fees
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(c) Tax $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Fees
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
(d) All $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Other
Fees
- ------- ---------- ----------------- ----------------- ----------------- ----------------- ----------------- -----------------
Notes:
* Audit fees include amounts related to the audit of the registrant's
annual financial statements and services normally provided by the
accountant in connection with statutory and regulatory filings.
(1) Services related to security count examinations under Rule 17f-2 of the
Investment Company Act for 2003 and 2002.
(2) Services related to performance of agreed-upon procedures in connection
with the Fund's N-14 for the merger of Quality Growth Stock Fund into
the Capital Appreciation Fund in 2002.
(3) Services related to the audit of the controls around custody operations
at SunTrust Bank (SAS No. 70) in 2003.
(4) Non-audit services relate principally to certain technical accounting
advice on financial products of the Bank; Sarbanes-Oxley 404
implementation; and, tax compliance services to other entities
controlled by SunTrust Banks, Inc.
(5) Non-audit services relate principally to the implementation of
management reporting system completed by PWC Consulting (now IBM) in
1Q02; controls and process reviews; and, tax compliance services to
other entities controlled by SunTrust Bank.
(e)(1) The registrant has adopted an Audit and Non-Audit Services Pre-Approval
Policy, as follows:
I. Statement of Principles
As set forth in the chart below, the Sarbanes-Oxley Act of 2002 (the "Act"), and
rules adopted by the Securities and Exchange Commission ("SEC") require that the
Audit Committee of the Board of Trustees pre-approve all audit services and
non-audit services provided to the STI Classic Funds and the STI Classic
Variable Trust (the "Trusts") and their respective portfolios (the "Funds") by
its independent accountant ("Auditor"),1 as well as non-audit services provided
by the Auditor to the Funds' investment adviser and to affiliates of the adviser
that provide ongoing services to the Funds ("Service Affiliates") if the
services directly impact the Funds' operations and financial reporting.
WHERE PRE-APPROVAL IS REQUIRED
----------------------------- ----------------------- ------------------------------------------
AUDIT SERVICE NON-AUDIT SERVICE
----------------------------- ----------------------- ------------------------------------------
Fund Yes Yes
----------------------------- ----------------------- ------------------------------------------
Adviser No Yes, if directly related to Fund
operation and financial reporting
----------------------------- ----------------------- ------------------------------------------
Service Affiliate2 No Yes, if directly related to Fund
operation and financial reporting
----------------------------- ----------------------- ------------------------------------------
The following policies and procedures govern the ways in which the Audit
Committee will pre-approve audit and various types of non-audit services that
the Auditor provides to the Trusts and to Service Affiliates. These policies and
procedures do not apply in the case of audit services that the Auditor provides
to Service Affiliates, nor do they apply to services that an audit firm other
than the Auditor provides to such entities.
These policies and procedures comply with the requirements for pre-approval, but
also provide a mechanism by which management of the Trusts may request and
secure pre-approval of audit and non-audit services in an orderly manner with
minimal disruption to normal business operations. Pre-approval of non-audit
services may be achieved through a combination of the procedures described in
Sections II and VI below.
II. Delegation
As contemplated by the Act and applicable SEC rules, the Audit Committee hereby
delegates to the Chairperson of the Audit Committee the authority to approve the
engagement of the independent auditor to provide non-audit services as permitted
by the Act, to the extent that such non-audit services are not pre-approved by
the entire Audit Committee as set forth herein. The
- -------------------------------
1 The Audit Committee also is permitted to ratify the provision of
inadvertent non-audit services, BUT ONLY IF:
o the value of all such services do not exceed 5% of total revenues paid
by the Fund, the Adviser and Service Affiliates to the Auditor in the
fiscal year when services are provided;1
o the services were not recognized as non-audit services at the time they
were provided; and
o the services are promptly brought to the attention of the Audit
Committee and approved prior to the completion of the audit.
2 A list of Service Affiliates is set out in Exhibit I, below.
Chairman shall report, for informational purposes only, any pre-approval
decisions to the Audit Committee at its next scheduled meeting.
III. Audit Services
The annual Audit services engagement scope and terms will be subject to the
specific pre-approval of the Audit Committee. Audit services include the annual
financial statement audit (including required rating agency reviews) and other
procedures required to be performed by the independent auditor to be able to
form an opinion on the Trusts' financial statements. The Audit Committee will
monitor the Audit services engagement throughout the year and will also approve,
if necessary, any changes in terms and conditions resulting from changes in
audit scope, Fund structure or other items. The Audit Committee will pre-approve
all Audit services for the Trusts.
IV. Audit-related Services
Audit-related services are assurance and related services that are reasonably
related to the performance of the audit or review of the Trusts' financial
statements or that are traditionally performed by the Auditor. The Audit
Committee will pre-approve all Audit-related services for the Trusts.
V. Tax Services
Tax services to the Trusts include tax compliance, tax planning and tax advice.
The Audit Committee will review all proposed tax related services to assure that
their provision would not impair the independence of the Auditor. The Audit
Committee will pre-approve all tax services for the Trusts.
VI. All Other Services
The Audit Committee believes, based on the SEC's rules prohibiting the
independent auditor from providing specific non-audit services,3 that other
types of non-audit services are permitted. Accordingly, the Audit Committee
believes it may pre-approve those permissible non-audit services classified as
All Other Services that it believes would not impair the independence of the
auditor, and are consistent with the SEC's rules on auditor independence. The
Audit Committee will pre-approve all other services for the Trusts.
VII. Procedures
Annually, the Audit Committee will review and approve the types of services to
be provided by the Auditor and review the projected fees for the next fiscal
year at a regularly scheduled meeting. That approval will acknowledge that the
Audit Committee is in agreement with the specific types of services that the
Auditor will be permitted to perform.
If subsequent to the annual approval by the Audit Committee, the Funds' or the
Trusts or any Service Affiliate seeks to engage the Auditor to perform a service
that was not approved, the Auditor, upon learning of such proposed engagement,
should submit the proposed engagement to the Trusts' [Treasurer or the Adviser]
and if the service fits within the independence guidelines, the [Treasurer or
the Adviser] will arrange for a discussion of the service to be included on the
agenda for the next regularly scheduled Audit Committee meeting so that specific
approval can be obtained. If the timing of the project is critical and the
project needs to commence before the regularly scheduled meeting, the specific
pre-approval by the Chairperson of the Audit Committee must be obtained before
any services are provided. The [Treasurer or the Adviser] will arrange this. The
Auditor must not commence any such project until specific approval has been
given.
VIII. Recordkeeping
The Trusts shall maintain a written record of all decisions made by the Audit
Committee or by the Chairperson of the Audit Committee pursuant to these
procedures, together with appropriate supporting material. In connection with
the ratification of any inadvertent non-audit services, a record shall be made
indicating that each of the conditions for this exception to the pre-
- -------------------------------
3 A list of specific prohibited non-audit services is set out in Exhibit
II, below.
approval requirement has been satisfied.4
IX. Amendment
The Audit Committee may review and amend these policies and procedures from time
to time, as it deems appropriate.
EXHIBIT 1 - SERVICE AFFILIATES
SUBJECT TO PRE-APPROVAL OF NON-AUDIT SERVICES
o Trusco Capital Management, Inc.
o SunTrust Banks, Inc.
o SunTrust Securities Inc.
o SunTrust Robinson Humphrey
o [any other affiliates that provide services to the Trusts]
EXHIBIT 2 - PROHIBITED NON-AUDIT SERVICES
o Bookkeeping or other services related to the accounting records
or financial statements of the audit client
o Financial information systems design and implementation
o Appraisal or valuation services, fairness opinions or
contribution-in-kind reports
o Actuarial services
o Internal audit outsourcing services
o Management functions
o Human resources
o Broker-dealer, investment adviser or investment banking services
o Legal services
o Expert services unrelated to the audit
(e)(2) Percentage of fees billed applicable to non-audit services pursuant to
waiver of pre-approval requirement were as follows:
---------------------------- ----------------- ----------------
2003 2002
---------------------------- ----------------- ----------------
Audit-Related Fees 0 % 0 %
---------------------------- ----------------- ----------------
Tax Fees 0 % 0 %
---------------------------- ----------------- ----------------
All Other Fees 0 % 0 %
---------------------------- ----------------- ----------------
(f) Not applicable
(g) The aggregate non-audit fees and services billed by
PriceWaterhouseCoopers LLP for the last two fiscal years were $841,750 for 2003
and $2,708,560 for 2002.
(h) At a meeting of the Audit Committee held on February 20, 2004, the
registrant's Audit Committee of the Board of Trustees considered whether the
provision of non-audit services that were rendered to the registrant's
investment adviser, and any entity controlling, controlled by, or under common
control with the investment adviser that provides ongoing services to the
registrant that were not pre-approved pursuant to paragraph (c)(7) (ii) of Rule
2-01 of Regulation S-X are compatible with maintaining the principal
accountant's independence.
- -------------------------------
4 See footnote 1 herein.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS
Not applicable.
ITEM 6. (RESERVED)
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR
CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 8. PURCHASERS OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT
COMPANY AND AFFILIATED PURCHASERS
Not applicable.
ITEM 9. CONTROLS AND PROCEDURES
(a) The certifying officers, whose certifications are included herewith, have
evaluated the registrant's disclosure controls and procedures within 90 days of
the filing date of this report. In their opinion, based on their evaluation, the
registrant's disclosure controls and procedures are adequately designed, and are
operating effectively to ensure, that information required to be disclosed by
the registrant in the reports it files or submits under the Securities Exchange
Act of 1934 is recorded, processed, summarized and reported within the time
periods specified in the Securities and Exchange Commission's rules and forms.
(b) There were no significant changes in the registrant's internal control over
financial reporting that occurred during the registrant's last fiscal half-year
that has materially affected, or is reasonably likely to materially affect, the
registrant's internal control over financial reporting.
ITEMS 10. EXHIBITS
(a)(1) Code of Ethics attached hereto.
(a)(2) A separate certification for the principal executive officer and the
principal financial officer of the registrant as required by Rule 30a-2(a) under
the Investment Company Act of 1940, as amended (17 CFR 270.30a-2(a)), are filed
herewith.
(b) Officer certifications as required by Rule 30a-2(b) under the Investment
Company Act of 1940, as amended (17 CFR 270.30a-2(b)) also accompany this filing
as an Exhibit.
SIGNATURES
Pursuant to the requirements of the securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) STI Classic Variable Trust
By (Signature and Title)* /s/ James F. Volk
------------------------
James F. Volk, President
Date 02/17/04
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ James F. Volk
------------------------
James F. Volk, President
Date 02/17/04
By (Signature and Title)* /s/ Jennifer Spratley
------------------------
Jennifer Spratley, CFO
Date 02/17/04
o Print the name and title of each signing officer under his or her signature.