ROPES & GRAY LLP
ONE METRO CENTER
700 12TH STREET, N.W.
SUITE 900
WASHINGTON, DC 20005
WRITER'S DIRECT DIAL NUMBER: (202) 508-4615
April 28, 2006
VIA EDGAR
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Ms. Rebecca Marquigny
U.S. Securities and Exchange Commission
Division of Investment Management
901 E Street, N.W.
Washington, D.C. 20549-0504
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Re: REGISTRANT: BB&T Variable Insurance Funds
FILE NOS.: 811-21682; 333-121205
FILING TYPE: Post-Effective Amendment No. 2 to the Fund's Registration Statement on Form N-1A
FILING DATE: March 1, 2006
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Dear Ms. Marquigny:
Per your request, please find below our responses to your comments on
Post-Effective Amendment No. 2 to BB&T Variable Insurance Funds' Registration
Statement on Form N-1A. BB&T Variable Insurance Funds (the "Trust") acknowledges
that staff comment or changes in response to staff comment with respect to the
Trust's Registration Statement filed on March 1, 2006 do not foreclose the
Securities and Exchange Commission (the "Commission") from taking any action
with respect to the filing. BB&T Variable Insurance Funds hereby represents that
the Trust will not use the comment process between the Trust and the Commission
with respect to the Registration Statement as a defense in any securities
related litigation against the Trust. This representation should not be
construed as confirming that there is or is not, in fact, an inquiry or
investigation or other matter involving the Trust.
PROSPECTUSES
COMMENT: With respect to the BB&T Large Cap VIF Fund, please add
"preferred stocks" as a principal investment risk on page 3,
since it is mentioned in the Principal Investment Strategies
section.
RESPONSE: At your request, we have added risk disclosure regarding
preferred stocks. As we previously discussed, however, we do
not view the risks associated with the Fund's investments in
preferred stock to constitute "principal investment risks"
since the Fund does not invest heavily in such stocks, and
has no intention of doing so. For the fiscal year ended
December 31, 2005, 97.3% of the Fund's assets were in common
stocks; none were in preferred stocks. Further, as we
discussed, the portfolio managers have represented to us that
they do not intend to invest over 5% in preferred stocks in
the coming fiscal year. The inclusion of preferred stocks in
the Fund's 80% investment policy is intended to clarify that
the Fund considers such stocks to constitute "equity
securities issued by large capitalization
April 28, 2006
Page 2
companies" for purposes of application of the 80% policy.
COMMENT: With respect to the BB&T Large Cap VIF, clarify the Fund's
rationale for changing its benchmark indices.
RESPONSE: We have so clarified the disclosure.
COMMENT: For each Fund, specifically state in the preamble to each of
the performance chart, fee table and expense example the
effect of separate account or insurance contract fees and
charges on the figures shown.
RESPONSE: We have added disclosure to the fee table and expense
examples to clarify that separate account or insurance
contract fees and charges would result in higher costs. The
preamble to the performance chart already states, "This
information does not reflect charges and fees associated with
a separate account that invests in the Fund or any insurance
contract for which the Fund is an investment option. These
charges and fees will reduce returns." We believe that this
disclosure is responsive to your comment.
COMMENT: With respect to the BB&T Large Cap VIF, the BB&T Mid Cap
Growth VIF, and the BB&T Large Cap Growth VIF, add a
capitalization range to the "Principal Investment Strategies"
section to clarify what the respective fund considers to
constitute a "large" or "mid" capitalization company, as
appropriate.
RESPONSE: We have added capitalization ranges to the "Principal
Investment Strategies" section of those funds.
COMMENT: For each Fund, clarify in the "Market Timing/Short-Term
Trading" section the issues associated with application of
the policy to an omnibus account.
RESPONSE: This section already states "While the Fund discourages
market timing and excessive short-term trading, the Fund
cannot always know or reasonably detect such trading,
particularly if it is facilitated by financial intermediaries
or done through omnibus account arrangements or insurance
company separate accounts. In addition, monitoring and
discouraging market timing and excessive trading may require
the cooperation of insurance companies or other financial
intermediaries, which cannot necessarily be assured."
While we believe that this disclosure addresses the issues
associated with the application of each Fund's market timing
policy to omnibus accounts, in response to your comment, we
have added the following:
Insurance companies and other financial
intermediaries may be unable to enforce our market
timing policies for various reasons, including
contract restrictions. It is our intent that such
insurance companies and other financial
intermediaries apply our market timing policies
uniformly against underlying account holders.
COMMENT: On the back cover page of each Fund's prospectus, state
whether the Fund makes available its SAI and annual and
semi-annual reports, free of charge, on or through the Fund's
Web site at a specified Internet address, in accordance with
Item 1(b) of Form N-1A. If it does
April 28, 2006
Page 3
not, disclose the reasons why it does not do so.
RESPONSE: Each Fund is available as an underlying investment medium
only to insurance company separate accounts and to qualified
pension and retirement plans. Such entities represent the
primary contact by the underlying beneficial owners. As such,
the Trust does not maintain a Web site. We have added
disclosure to that effect on the back cover page.
COMMENT: On the back cover page of each Fund's prospectus, change the
telephone number for the Securities and Exchange Commission
from 1-202-942-8090 to 1-202-551-8090.
RESPONSE: We have revised the disclosure accordingly.
COMMENT: For the BB&T Capital Manager Equity VIF, briefly mention the
risks of investing in a fund-of-funds structure under
"Principal Investment Risks," and add a full discussion under
"Risk Considerations."
RESPONSE: We have added disclosure regarding the risks of investing in
a fund-of-funds structure in the section entitled "Principal
Investment Risks." Please note that the "Risk Considerations"
section already included a full discussion of the risks
associated with the fund-of-funds structure on page 8 under
the subheading "Investment in Underlying Funds." However, we
have expanded this disclosure in response to your comment.
COMMENT: For the BB&T Capital Manager Equity Fund, identify more
specifically the type of funds in which the Fund will invest
in the section entitled "Principal Investment Strategies."
RESPONSE: We have added a list of funds in which the BB&T Capital
Manager Equity Fund may invest. We have also added
permissible investment ranges for each underlying fund.
COMMENT: For the BB&T Capital Manager Equity Fund, reformat the
footnotes to the fee table to make clear that the second
paragraph of the footnote is a part of the footnote.
RESPONSE: We have modified the disclosure accordingly.
COMMENT: For the BB&T Capital Manager Equity Fund, clarify in the
footnotes to the fee table that the expense waivers for the
Underlying Funds do not extend for a full year from the
prospectus date.
RESPONSE: We have noted in the footnote that the expense waivers for
the Underlying Funds are contractual only through January 31,
2007, and that after that time, they are voluntary and may be
terminated at any time.
COMMENT: For the BB&T Capital Manager Equity Fund, add disclosure
under "Portfolio Manager" on page 10 clarifying each team
member's role on the portfolio management team.
RESPONSE: We have modified the disclosure accordingly.
COMMENT: For the BB&T Special Opportunities Equity VIF, add a "Foreign
Investment Risk" header on
April 28, 2006
Page 4
page 4 before the fourth paragraph under "Market Risk."
RESPONSE: We have added the appropriate header.
COMMENT: With respect to the BB&T Special Opportunities Equity VIF,
disclose the fee payable to the sub-adviser on page 7, under
"Management of the Fund -- Investment Adviser," in accordance
with Item 5(a)(1)(ii) of Form N-1A.
RESPONSE: Instruction No. 3 to Item 5(a)(1)(ii) states "If a Fund has
more than one investment adviser, disclose the aggregate fee
paid to all of the advisers, rather than the fees paid to
each adviser, in response to this Item." The prospectus
currently discloses the aggregate fee payable to the Fund's
investment adviser. Accordingly, we have not modified the
disclosure.
COMMENT: With respect to the BB&T Total Return Bond VIF, add a risk
regarding portfolio turnover since the portfolio turnover for
this Fund was 197% in the last fiscal year.
RESPONSE: We have added risk disclosure under "Principal Investment
Risks" on page 3. Please note that the prospectus already
contains risk disclosure regarding "Active Trading" on page 5
under "Investment Objectives, Strategies, and Risks."
STATEMENT OF ADDITIONAL INFORMATION
COMMENT: Under "Management Information," add the ages of each trustee
and officer.
RESPONSE: We have added such disclosure.
COMMENT: In the "Conflicts of Interest" section, specify whether
individual portfolio managers are subject to different
conflicts with respect to their management of the Funds. In
addition, state whether there is a policy in place to address
these potential conflicts.
RESPONSE: The conflicts described in this section are common to the
portfolio managers. The Fund does not consider any particular
conflicts to be unique to one manager rather than another,
and accordingly, have not disclosed any variances. In
addition, the statement of additional information discloses,
where applicable, whether a code of ethics or other
procedures have been adopted to address conflicts of
interest.
COMMENT: If the method of compensation varies between portfolio
managers, describe such variation.
RESPONSE: The method of compensation varies between portfolio managers
within the categories described in the Statement of
Additional Information. For example, one component of the
incentive compensation is the management of personnel.
Accordingly, a portfolio manager who manages other investment
professionals, such as a team leader in a fund that is
managed by a team (see, e.g., the BB&T Capital Manager Equity
VIF), may receive higher incentive compensation than an
individual who does not manage other personnel. We believe
that this variance is adequately described within the
statement of additional information.
April 28, 2006
Page 5
COMMENT: In the section entitled "Disclosure of Portfolio Holdings,"
provide the following information:
(1) Pursuant to Item 11(f)(1)(iii) -- the frequency of
disclosure and the lag, if any, between the date of
the information and the date on which the
information is disclosed;
(2) Pursuant to Item 11(f)(1)(vi) -- The procedures that
the Fund uses to ensure that disclosure of
information about portfolio securities is in the
best interests of Fund shareholders, including
procedures to address conflicts between the
interests of Fund shareholders, on the one hand, and
those of the Fund's investment adviser; principal
underwriter; or any affiliated person of the Fund,
its investment adviser, or its principal
underwriter, on the other.
(3) Pursuant to Item 11(f)(2) -- Modify the current
disclosure regarding service providers to
specifically identify the entities which might
receive information regarding portfolio holdings.
RESPONSE: (1) The statement of additional information currently
states two circumstances in which information
regarding portfolio holdings may be available to
third parties: (1) in the Fund's annual or
semi-annual report or Form N-Q; and (2) in marketing
materials, provided that the information is at least
fifteen days old. We believe that the frequency of
disclosure and the lag time is clear for these two
circumstances. With respect to situations in which
the Fund has a legitimate business purpose for
disclosing portfolio holdings information, it is not
possible to determine the frequency and/or lag time
in advance. We have added disclosure to that effect
in the SAI.
(2) We have added disclosure noting that the Fund's
policies permit disclosure of information only where
a legitimate business purpose exists for such
disclosure, and addresses the conflicts between the
interests of Fund shareholders and those of the
Fund's investment adviser, principal underwriter, or
affiliated persons of the Fund, its investment
adviser or its principal underwriter by imposing a
duty of confidentiality on the recipient of such
information.
(3) We have added the identities of the service
providers who may receive information where relevant
to duties to be performed for the Fund.
If you have any further questions or comments please call me at (202)
508-4615.
Sincerely,
/s/ KATHERINE S. MILIN
Katherine S. Milin