Exhibit 17 (viii)

ANNUAL REPORT
AND MANAGER DISCUSSIONS

DECEMBER 31, 2005

"Photo of Deer and American Flag"

for

Tax-Deferred Variable Annuities

Issued by Hartford Life Insurance Company

BB&T Variable Insurance Funds

"BB&T ASSET MANAGEMENT"

ARE NOT INSURED BY FDIC OR ANY FEDERAL GOVERNMENT AGENCY MAY LOSE VALUE
"FDIC" "BANK"
ARE NOT A DEPOSIT OF OR GUARANTEED BY ANY BANK OR ANY BANK AFFILIATE

BB&T VARIABLE INSURANCE FUNDS

TABLE OF CONTENTS

FUND SUMMARY
Large Cap Value VIF .................................................... 1
Mid Cap Growth VIF ..................................................... 2
Large Company Growth VIF ............................................... 3
Capital Manager Equity VIF ............................................. 4
Special Opportunities Equity VIF ....................................... 5
Total Return Bond VIF .................................................. 7

SUMMARY OF PORTFOLIO HOLDINGS ............................................. 9

EXPENSE EXAMPLE ........................................................... 10

SCHEDULE OF PORTFOLIO INVESTMENTS
Large Cap Value VIF .................................................... 11
Mid Cap Growth VIF ..................................................... 12
Large Company Growth VIF ............................................... 13
Capital Manager Equity VIF ............................................. 14
Special Opportunities Equity VIF ....................................... 15
Total Return Bond VIF .................................................. 16

FINANCIAL STATEMENTS ...................................................... 20

NOTES TO FINANCIAL STATEMENTS ............................................. 26

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ................... 31

(This page has been left blank intentionally.)

BB&T LARGE CAP VALUE VIF

PERFORMANCE OVERVIEW 6/3/1997 - 12/31/2005
Growth of a $10,000 investment

"Performance Overview"

PORTFOLIO MANAGER
RICK B. JONES, CFA
Senior Vice President - Director, Value Equities
BB&T Asset Management, Inc.

AVERAGE ANNUAL RETURNS (Inception 6/3/1997)

1 YEAR 5 YEAR SINCE INCEPTION
------ ------ ---------------

BB&T Large Cap
Value VIF 6.90% 3.78% 6.43%
Russell 1000 Value Index 7.05% 5.28% 8.74%

The chart represents a comparison of a hypothetical $10,000 investment in the
indicated Fund versus a similar investment in the Fund's benchmark, and includes
the reinvestment of dividends and capital gains. (The returns include the Fund
level expenses, but exclude the insurance charges). Past performance does not
guarantee future results. The value of the contract will fluctuate so that when
redeemed, it may be worth more or less than the original investment.

INVESTMENT CONCERNS

Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of the Fund will fluctuate as the
value of the securities in the portfolio changes. Common stocks, and funds
investing in common stocks, generally provide greater return potential when
compared with other types of investments. Value-based investments are subject to
the risk that the broad market may not recognize their intrinsic value.

The Fund's 6.90% total return comfortably outpaced the S&P 500 Index which
returned 4.91% for the one-year period, but slightly trailed its primary
benchmark, the Russell 1000(R) Value Index(1), which rose 7.05%.

Overall the Fund's returns were solid as traditionally value oriented sectors of
the stock market, like Energy and Utilities, continued to do well.

The portfolio carried a full weighting in energy throughout the period and not
surprisingly our two top contributors to performance were energy stocks:
ConocoPhillips and Anadarko Corp. A significant contribution was also made by
Hewlett Packard Co., which underwent a management change.

Because we have had difficulty finding reasonably valued utility stocks, the
portfolio was underweighted in a sector that did very well in 2005. Our consumer
stock sector selection was also challenged. Specifically, the Albertson's Inc.
stock position performed poorly, as the company rejected a buy-out bid late in
the period (has since accepted a sweetened offer) and its Sara Lee holding had a
bumpy start to a dramatic reshaping program, registering disappointing
performance.

As of December 31, 2005, the top five equity holdings in the Fund were Bank of
America Corp. (3.1% of the portfolio's net assets), ConocoPhillips (2.7%),
Citigroup, Inc. (2.7%), J.P. Morgan Chase & Co. (2.6%) and ChevronTexaco Corp.
(2.5%)(2).

We continue to be disciplined in applying our diversified value investment
approach. We are steadfastly focused on maintaining a diversified portfolio of
financially strong companies that we believe are currently trading at reasonable
valuation levels given our assessment of their prospects. The portfolio enters
the new-year being overweighted healthcare and technology stocks while being
most underweighted in financial and utility stocks.

(1) The Fund is measured against the Russell 1000 Value Index an unmanaged
index which consists of 1,000 of the largest capitalized U.S. domiciled
companies. Companies in this index generally have low price-to-book and
price-to-earnings ratios, higher dividend yields and lower forecasted
growth values. The index does not reflect the deduction of expenses
associated with a mutual fund, such as investment management and fund
accounting fees. The Fund's performance reflects the deduction of fees for
these services. Investors cannot invest directly in an index, although they
can invest in its underlying securities.

(2) Portfolio composition is as of December 31, 2005, and is subject to change.

A portion of the Fund's fees have been reduced. If fees had not been reduced,
the Fund's total return for the period would have been lower.

BB&T MID CAP GROWTH VIF

PERFORMANCE OVERVIEW 10/15/2001 - 12/31/2005
Growth of a $10,000 investment

"Performance Overview"

PORTFOLIO MANAGER
DAVID P. NOLAN
Senior Vice President and Portfolio Manager
BB&T Asset Management, Inc.

AVERAGE ANNUAL RETURNS (Inception 10/15/2001)

1 YEAR SINCE INCEPTION
------ ---------------

BB&T Mid Cap Growth VIF 14.38% 11.26%
Russell MidCap Growth Index 12.10% 10.55%

INVESTMENT CONCERNS

Mid-capitalization funds typically carry additional risks since smaller
companies generally have a higher risk of failure, and historically, their
stocks have experienced a greater degree of market volatility than stocks on
average

The Fund produced robust performance of 14.38% during the last 12 months, nearly
tripling the 2005 return of 4.91% for the S&P 500 Index and notably outpacing
the Russell MidCap(R) Growth Index1 return of 12.10%.

Our investments in the energy sector, such as Peabody Energy Corp. (1.7% of the
portfolio's net assets), were especially productive, as we were overweight in
energy for much of the period. At one point, the Fund's allocation to energy was
roughly 50% higher than the allocation of our benchmark, and we reaped the
benefits of energy stocks' steady climb. Another positive factor in our
performance was our decision to underweight the consumer discretionary and
consumer staples sectors in the second half of the year as concerns grew over
the consumer's allocation of discretionary income in the face of rising fuel
prices. Technology holdings such as Apple Computer (sold) and Marvell Technology
Group, Ltd. (2.0%) were strong performers for the period. Other standouts were
Celgene Corp. (2.0%) and the Chicago Mercantile Exchange Holdings, Inc. (1.8%).

The mid cap arena has been on a roll for quite some time, outperforming large
and small cap stocks for much of the last decade. To some extent, our strong
gains reflected a continuation of this long-term trend.

The greatest detractors from performance during the period were found in the
technology sector. Negative returns were experienced in F5 Networks (sold), and
in semiconductor companies Cree, Inc. (sold) and Tessera Technologies (sold).

As of December 31, 2005, the top five individual equity holdings in the Fund
were American Tower Corp. - Class A (3.0%), Cognizant Technology Solutions Corp.
- Class A (2.3%), Comverse Technology, Inc. (2.2%), UTI Worldwide (2.1%), and
Celgene Corp. (2.0%)(2).

We think energy will continue to play a key role in the market going forward,
and we hope to see a further upward revision of earnings estimates. Energy
stocks will swing, sometimes dramatically, on short-term movements in the prices
of crude oil and natural gas. But we believe energy prices are not going to
retreat significantly and that positive earning "surprises" will continue. The
energy sector is expected by analysts to lead the mid cap area in 2006 earnings
per share growth.

For now, as long as higher energy prices and the Fed's tightening bias do not
contribute to a recessionary environment and the economy keeps growing at a
three percent-or-better pace, then we believe that mid cap growth stocks in
general should continue to provide competitive returns. In that environment, we
believe that investment opportunities will be found in numerous sectors in
addition to energy. Among these would be technology, health care, industrial and
select financial stocks which should all show strong year-over-year earnings
gains.

(1) The Fund is measured against the Russell MidCap Growth Index, an unmanaged
index which measures the performance of those securities in the Russell
1000 Index with higher price-to-book ratios and lower forecasted growth
values. The index does not reflect the deduction of expenses associated
with a mutual fund, such as investment management and fund accounting fees.
The Fund's performance reflects the deduction of fees for these services.
Investors cannot invest directly in an index, although they can invest in
its underlying securities.

(2) Portfolio composition is as of December 31, 2005, and is subject to change.

A portion of the Fund's fees have been reduced. If fees had not been reduced,
the Fund's total return for the period would have been lower.

BB&T LARGE COMPANY GROWTH VIF

PERFORMANCE OVERVIEW 10/15/2001 - 12/31/2005
Growth of a $10,000 investment

"Performance Overview"

PORTFOLIO MANAGER
JEFFERY J. SCHAPPE, CFA
Senior Vice President and Chief Investment Officer
BB&T Asset Management, Inc.

AVERAGE ANNUAL RETURNS (Inception 10/15/2001)

1 YEAR SINCE INCEPTION
------ ---------------

BB&T Large Company
Growth VIF 1.88% 0.88%
Russell 1000 Growth Index 5.26% 2.69%

INVESTMENT CONCERNS

We were not completely satisfied with the Fund's performance during the last 12
months. Although we posted a positive total return of 1.88%, we trailed our
primary benchmark, the Russell 1000(R) Growth Index1 by 3.38%.

The Fund underperformed its benchmark due to security selection but also because
we have focused on higher quality names, which have lagged for much of the year.
We believe, however, that a continued bias towards quality companies boosts
return potential over the long run. Lagging behind the broader market was a
group of historically strong growth stocks, such as General Electric Co. (4.2%
of the portfolio's net assets), Microsoft Corp. (4.2%), Cisco Systems, Inc.
(2.2%), Dell, Inc. (1.0%), and Home Depot, Inc. (1.0%); all of these stocks
produced returns for the period that were below the benchmark's performance.

We did, however, enjoy strong returns in a number of traditional growth sectors.
In health care, such stalwarts as UnitedHealth Group, Inc. (+41% total return),
WellPoint, Inc. (+32%), and Gilead Sciences, Inc. (+50%) delivered results that
ranged from robust to outstanding. Technology stocks such as Motorola, Inc.
(+32%) and Texas Instruments, Inc. (31%) enhanced fund returns.

As of December 31, 2005, the top five equity holdings in the Fund were General
Electric Co. (4.2% of the portfolio's net assets), Microsoft Corp. (4.2%), Intel
Corp. (3.3%), Johnson & Johnson (3.0%), and Wal Mart Stores, Inc. (2.4%)(2).

Looking out over the next six to 12 months, we believe conditions point to a
relatively constructive environment for the type of high-quality growth stocks
we favor.

Respectable economic growth, low inflation, and the Fed adopting a neutral bias
should provide a favorable backdrop for equities, in general. Because growth
stocks have trailed value equities the past several years, we hope that a more
normal valuation relationship between growth and value will emerge this year.

As is our practice, we continue to invest in the stocks of financially strong
companies with reasonable earnings growth prospects. We feel this approach
should serve our shareholders well through our next fiscal year.

(1) The Fund is measured against the Russell 1000 Growth Index an unmanaged
index which is comprised of 1,000 of the largest capitalized U.S. domiciled
companies with higher price-to-book ratios and higher forecasted growth
values whose common stock is traded in the United States on the New York
Stock Exchange, American Stock Exchange and NASDAQ. The index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. The Fund's performance
reflects the deduction of fees for these services. Investors cannot invest
directly in an index, although they can invest in its underlying
securities.

(2) Portfolio composition is as of December 31, 2005, and is subject to change.

A portion of the Fund's fees have been reduced. If fees had not been reduced,
the Fund's total return for the period would have been lower.

BB&T CAPITAL MANAGER EQUITY VIF

PERFORMANCE OVERVIEW 5/1/2001 - 12/31/2005
Growth of a $10,000 investment

"Performance Overview"

PORTFOLIO MANAGEMENT TEAM
Managed by the BB&T Balanced Portfolio Management Team

AVERAGE ANNUAL RETURNS (Inception 5/1/2001)

1 YEAR SINCE INCEPTION
------ ---------------

BB&T Capital Manager
Equity VIF 6.77% 1.76%
S&P 500 Index 4.91% 1.44%

INVESTMENT CONCERNS

For the twelve-month period ended December 31, 2005, the BB&T Capital Manager
Equity VIF provided a total return of 6.77%. In comparison, the S&P 500 Index
returned 4.91% for the same period.

The Fund invests in a diversified selection of underlying portfolios from the
BB&T family of mutual funds. As such, our allocation decisions play a big role
in the Fund's performance.

In 2005, we benefited from strong, absolute returns from the shares we owned in
the BB&T Large Company Value Fund and BB&T International Equity Fund. We have a
long-term strategic overweight in the value arena, which did well versus growth.
Also, our strategic overweights in mid-cap and small-cap significantly
contributed to our outperformance in 2005.

Our substantial weighting in the BB&T International Equity Fund demonstrated the
potential value of diversifying outside the U.S., as the MSCI EAFE Index(1),
which tracks international stocks, gained over twice as much as the S&P 500
Index(2), our domestic equity benchmark.

As of December 31, 2005, the portfolio's five largest allocations in underlying
BB&T portfolios were the Large Company Value Fund (30.3% of portfolio's net
assets), the Large Company Growth Fund (20.3%), the International Equity Fund
(14.6%), the Equity Index Fund (12.6%), and the Mid Cap Value Fund (7.0%)(3).

These five funds are the same, and in the same order, as the allocations we had
one year earlier. This similarity reflects our practice of rebalancing the
Fund's assets back to our strategic weightings on a regular basis.

While still providing positive returns, our investment in the BB&T Large Company
Growth Fund underperformed the other asset classes for the year.

Looking ahead to the next twelve months, we have positive expectations for
stocks, and we expect stocks to outperform bonds.

Steady economic growth, relatively contained inflation, low long-term interest
rates, and reasonable valuation levels all contribute to a favorable backdrop
for stocks.

One of the risks to this view is that corporate profit margins, currently near
record levels, are being pressured by higher short-term interest rates and
higher commodity prices. Although decelerating, earnings growth continues and
remains healthy in a number of sectors. Other risks to our view include lower
housing affordability and a peaking housing market. However, we believe capital
management activity will increase. Cash on corporate balance sheets is high,
which should support continued solid merger and acquisition activity, as well as
potential dividend increases and share repurchases.

(1) The MSCI EAFE Index is an unmanaged index which is generally representative
of the performance of stock markets in that region. The index does not
reflect the deduction of expenses associated with a mutual fund, such as
investment management and fund accounting fees. The Fund's performance
reflects the deduction of fees for these services. Investors cannot invest
directly in an index, although they can invest in its underlying
securities.

(2) The Fund is measured against the S&P 500 Index, an unmanaged index
generally representative of the U.S. stock market as a whole. The Index
does not reflect the deduction of expenses associated with a mutual fund,
such as investment management and fund accounting fees. The Fund's
performance reflects the deduction of fees for these services. Investors
cannot invest directly in an index, although they can invest in its
underlying securities.

(3) Portfolio composition is as of December 31, 2005, and is subject to change.

A portion of the Fund's fees have been reduced. If fees had not been reduced,
the Fund's total return for the period would have been lower.

BB&T SPECIAL OPPORTUNITIES EQUITY VIF

PERFORMANCE OVERVIEW 7/22/04 - 12/31/05
Growth of a $10,000 investment

"Performance Overview"

PORTFOLIO MANAGER
GEORGE F. SHIPP, CFA
Chief Investment Officer Scott & Stringfellow, Inc.

AVERAGE ANNUAL RETURNS (Inception 7/22/04)

1 YEAR SINCE INCEPTION
------ ---------------

BB&T Special
Opportunities Equity VIF 6.29% 19.18%
S&P 500 Index 4.91% 11.40%

INVESTMENT CONCERNS

Equity securities (stocks) are more volatile and carry more risk than other
forms of investments, including investments in high-grade fixed income
securities. The net asset value per share of this Fund will fluctuate as the
value of the securities in the portfolio changes. A concentrated portfolio may
add a measure of volatility to performance, as major fluctuations in any one
holding will likely affect the Fund more than a fund with greater
diversification.

For the full year 2005, the BB&T Special Opportunities Equity VIF produced a
6.29% gain, outpacing both the 4.91% total return of the S&P 500 Index(1) and
the 6.1% result of the Russell 3000 Index. This was also only slightly ahead of
the Lipper Multi-Cap Value group, which posted a 6.2% gain for the year.

We manage a concentrated portfolio and were fortunate to have a few more big
winners than losers. We entered October with a decent performance advantage
against the market, but Hurricanes Katrina and Rita knocked a few of our
companies off track. We became mesmerized by the associated spike in energy
quotes and determined to hold our Apache Corp. and Pioneer Natural Resources Co.
positions, even though we were well aware their Gulf of Mexico operations had
been hard hit. Oil and gas quotes soon topped out due to the "demand
destruction" caused by refinery and chemical outages in tandem with $3/gallon
gasoline, causing the energy group to under-perform the S&P 500 by 9% in the 4th
quarter. In the short term both of these stocks lagged land-focused exploration
and production companies (such as Burlington, EOG, or XTO). Another fund
holding, MedCath Corp. had a cardiovascular-focused hospital in Hurricane
Katrina's path. Although it managed to keep its doors open throughout the
disaster, that facility in a New Orleans suburb contributed to a reduced
outlook. MedCath Corp. shares fell 22% during the quarter and the year. At the
end of the year, though, our admiration of energy had served our clients well,
as Apache Corp., Pioneer Natural Resources Co. and Weatherford International,
Ltd. (a driller for energy) all posted gains exceeding 35% over the period.

Late in 2005 we waved good-bye to our biggest gainer of the year, managed
healthcare leader Coventry Health Care, Inc. Coventry shares were up over 50%
from our original purchase price towards the end of 2005, on top of 23% gains in
2004 and a 122% rebound in 2003. That adds up to a cumulative +357%, whereas
earnings have advanced 170% over those three years. The resultant doubling in
P/E valuation raises risks, while at the same time logic would say that margin
gains will become increasingly difficult. Healthcare risk underwriting used to
be a cyclical business, so despite our strong admiration for the company's
management, we decided to move on.

Digital Insight, Inc. was another of our original purchases for the Fund, after
shares fell on some negative short-term news just before our inception date,
giving us a chance to enter around $14. Since then, we have trimmed the position
on a few occasions to manage risk (wish we hadn't but hindsight is always
20/20). As much as we like the company and its prospects, today we find
ourselves uncomfortable initiating positions at current levels around $33 (up
30% in 2005 alone), so we sold out of our position and took our profits. Digital
Insight, Inc. sees non-GAAP EPS in a $1.04-1.06 range in 2006 (+21%), which puts
the stock's P/E valuation at a "full" 35x forecasts.

There was bad with the good, as there will likely always be. Mistakes will be
made, learned from, and actions taken. We can forgive ourselves for riding out
the energy storm, but not for the red ink we spilled in printer maker Lexmark
International, Inc., which reported two major reductions in its earnings outlook
in 2005 on the way to seeing its value nearly cut in half. We should have taken
the hint the first time, i.e. "fool me twice, shame on us." That second miss
(October 3) cost us about 30% on our Lexmark position in the quarter as
investors (including us) lost faith in the "razor and blade" thesis that had
carried the company for about nine years. A 23% quarterly decline in security
and storage software leader Symantec Corp. and 12% drop in cable operator
Comcast Corp. - Class A were a little more frustrating, only because we did not
see material news ("increasing competition" often is cited for both) to fully
explain the serious depreciation.

Ours is not a dividend-oriented portfolio, but 15 of our 28 year-end equity
holdings raised their payouts in 2005, by an average 35% (median +17%). If
fourth quarter earnings estimates generally are accurate, our companies' profits
grew by an average 17% in 2005, superior to the still-impressive +13%
expectation for the S&P 500. We believe that should be encouraging for our
portfolio's 2006 prospects.

As of December 31, 2005, the top five equity holdings in the Fund were
Smithfield Foods, Inc. (4.2% of the portfolio's net assets), CONSOL Energy, Inc.
(4.1%), Weatherford International, Ltd. (3.9%), PACCAR, Inc. (3.8%), and Comcast
Corp.- Class A (3.8%)(2).

(1) The Fund is measured against the S&P 500 Index, an unmanaged index
generally representative of the U.S. stock market as a whole. The Index
does not reflect the deduction of expenses associated with a mutual fund,
such as investment management and fund accounting fees. The Fund's
performance reflects the deduction of fees for these services. Investors
cannot invest directly in an index, although they can invest in its
underlying securities.

(2) Portfolio composition is as of December 31, 2005, and is subject to change.

A portion of the Fund's fees have been reduced. If fees had not been reduced,
the Fund's total return for the period would have been lower.

BB&T TOTAL RETURN BOND VIF

PERFORMANCE OVERVIEW 7/22/04 - 12/31/05
Growth of a $10,000 investment

"Performance Overview"

PORTFOLIO MANAGER
DAVID M RALSTON, CFA
Managing Director and Chief Investment Officer
Sterling Capital Management, LLC

AVERAGE ANNUAL RETURNS (Inception 7/22/04)

1 YEAR SINCE INCEPTION
------ ---------------

BB&T Total
Return Bond VIF 2.29% 2.81%

Lehman Bros.
Agg. Bond Index 2.43% 3.98%

INVESTMENT CONCERNS

Bonds offer a relatively stable level of income, although bond prices will
fluctuate providing the potential for principal gain or loss. Intermediate-term,
higher-quality bonds generally offer less risk than longer-term bonds and a
lower rate of return.

The Fund is subject to the risk that principal value reacts in opposition to the
movement of interest rates and that a rising interest rate environment increases
the risk of loss of principal.

For the twelve-month period ended December 31, 2005, the BB&T Total Return Bond
VIF produced a total return of 2.29%, compared to 2.43% for the Lehman Brothers
Aggregate Bond Index(1).

Effective July 18, 2005, Sterling Capital Management LLC began serving as
subadviser to the Fund*.

2005 will be remembered as the year of an active Federal Reserve, a flatter
yield curve and a benevolent foreign investor. Throughout the year the Fed
continued on its "measured" path of removing prior years of monetary
accommodation. The Fed raised the overnight borrowing rate a total of eight
times in 2005 to 4.25%.

As the Fed removed monetary accommodation from an economy exhibiting amazing
resilience, yields on Treasury securities from 3 months to approximately 15
years rose. The rather benign increase in core inflation along with a continued
inflow of foreign capital provided a consistent bid for the long end of the
Treasury curve. In fact, when looking at total returns for the year (coupon and
price appreciation), long Treasury securities had the best relative returns, up
approximately 9% for the year. Due to the flattening of the curve, the distant
second place segment of the yield curve was the return on 6 month Treasury bills
which returned 3.1% for the same time period.

In 2005 the U.S. became increasingly more dependent upon the foreign investor.
Spending to finance the Iraq war and the rebuilding cost associated with
hurricanes in the gulf coast led to a further deterioration of the budget
deficit. Increased reliance on foreign oil and Americans' preferences for
imported goods led to a ballooning of the trade deficit. The inflow of foreign
funds has had an increasing degree of importance in helping fund our internal
shortfall. It is estimated that in 2005 70% of all new Treasuries issued were
bought by foreign investors. This support has been critically important in
maintaining low long-term interest rates, but the magnitude of these flows is
worrisome and is a significant risk looking forward.

Another important influence on rates during 2005 was the energy price spike due
to the dislocation of oil and refinery capacity. The Iraq war and the
unprecedented back to back hurricanes hitting the refinery rich gulf coast had a
severe impact on prices and consumer confidence. However, the economy weathered
these storms and appears to be once again expanding at a healthy pace.

As we look forward to the year ahead the economy continues to expand at a pace
that is expected to be above trend. While consensus expectations are for a
slight slowing of domestic growth, the global economy is solidly gaining
momentum. In 2006 corporate spending and manufacturing are expected to have a
more prominent leadership role in the economy. The improved health of Corporate
America that is flush with liquidity is expected to facilitate the generation of
new jobs in the coming year. It is our belief that the strength of the
production side of the economy will continue to create new jobs in 2006. During
the last few years many of these new jobs have been created by the housing
sector. While we acknowledge that there are pockets of excessive residential
price appreciation, we do not believe we have a bubble in home values that is
getting ready to burst. Yet we do expect the economic contribution of housing to
be weaker in 2006 than in 2005. However, nearly every measure of the sector is
stronger than where it was a year ago.

Continued new job creation is critical to our positive outlook on the economy
moving forward. With lower rates and increased refinancing, consumers extracted
a great deal of equity from their homes over the last several years. As rates
rise, this stimulus of personal consumption will decline. Another source of
optimism for us toward economic expansion is the continued growth of federal
spending. Support for reconstruction of the Gulf states region is expected to go
on for years. Spending for defense is expected to remain at elevated levels.

On top of robust growth, we are anticipating a higher level of core inflation
over the next twelve months. We feel several factors will contribute to an
increase in prices. First, we believe the Chinese will eventually capitulate to
political pressure from Congress and allow a second more realistic revaluation
of their currency. This will reduce the downward pressure we have seen on import
prices over the last several years. Second, we believe that the economy is
approaching full employment and the pressure on wages will continue to rise.

In addition, the "output gap", or the slack in the economy, is narrowing as the
production side of the economy accelerates. History has shown that with capacity
utilization above 80%, producers will be able to raise prices.

Our belief that the economy is healthy and advancing combined with our
expectations of higher inflation leads us to a cynical view of the current level
of interest rates. Simply stated, we do not believe an investor is being
sufficiently paid to have exposure to current yield levels. We view the interest
rate market as range-bound with current prices at the high end and yields at the
low end of the range for the next several months. Therefore, we are currently
short duration in our core portfolios.

From a yield curve perspective, we have shifted our positioning over the last
two months. After being barbelled for most of 2005 we have moved to more of a
bullet approach.

Since we expect the Fed to continue to raise short rates we remain overweight in
floating rate securities to participate in the anticipated upward adjustment
that accompanies Fed rate increases. Security selection in the treasury, agency
and taxable muni sectors detracted about 5 basis points relative to the
benchmark, and sector allocations to the taxable muni sector cost us another 2
basis points of excess return. Convexity choice across all sectors was also a
small detractor from performance.

From a sector perspective, we remain convinced that having a portfolio that is
of higher quality and higher yield is the proper strategy. We still believe that
the restructuring risk in the market due to the emerging importance of private
equity funds favors equity investors over bondholders. As such we are
underweight credit and expect to remain so over the next few months.

Due to our range-bound view towards interest rates and our concern about credit,
we are overweight mortgages and structure product. We believe the high quality
and superior yields offered by direct issue mortgages, commercial
mortgage-backed securities and AAA rated home equity Asset Backed Securities
will provide superior return opportunities over time.

As of December 31, 2005, the Fund's effective duration was 4.30 years(2).
Approximately 40.1% of the portfolio was invested in corporate obligations,
32.7% in U.S. Treasury and agency securities, 24.8% in collateralized
mortgage-backed securities, 7.5% in cash and cash equivalents and 2.2% in
municipal bonds. The Fund's average credit quality was Aa1 (as rated by
Moody's)(3,4).

We expect a challenging market environment for bonds in the first half of 2006.
We feel our conservative posturing of the portfolio will provide us extension
opportunities in the months ahead. We believe the Fed will raise rates a few
more times and pause when the Fed funds rate reaches 4.75% to 5%. At this point
we believe the yield curve will once again steepen and we expect to more heavily
invest in Treasury securities in the intermediate part of the curve.

* Sterling Capital Management LLC is a majority owned, non-bank subsidiary of
BB&T Corporation, and is an affiliate of BB&T Asset Management, Inc.

(1) The Fund is measured against Lehman Brothers Aggregate Bond Index which is
a market value-weighted performance benchmark for investment-grade
fixed-rate debt issues, including government, corporate, asset-backed and
mortgage-backed securities, with maturities of at least one year. The index
is unmanaged and does not reflect the deduction of expenses associated with
a mutual fund, such as investment management and fund accounting fees. The
Fund's performance reflects the deduction of fees for these services.
Investors cannot invest directly in an index, although they can invest in
its underlying securities.

(2) Duration is a measure of a bond's or a bond fund's price risk that is
adjusted for any optionality.

(3) Portfolio composition is as of December 31, 2005 and is subject to change.

(4) Moody's Fund Ratings represent an opinion only, not a recommendation to buy
or sell.

A portion of the Fund's fees have been reduced. If fees had not been reduced,
the Fund's total return for the period would have been lower.

BB&T VARIABLE INSURANCE FUNDS

SUMMARY OF PORTFOLIO HOLDINGS (UNAUDITED)
DECEMBER 31, 2005

THE BB&T VARIABLE INSURANCE FUNDS PORTFOLIO COMPOSITION WAS AS FOLLOWS AT
DECEMBER 31, 2005:

PERCENTAGE
OF NET ASSETS
-------------

BB&T LARGE CAP VALUE VIF
Consumer Discretionary ................................................ 7.8%
Consumer Staples ...................................................... 6.1
Energy ................................................................ 13.0
Financials ............................................................ 30.5
Health Care ........................................................... 9.0
Industrials ........................................................... 7.4
Information Technology ................................................ 8.3
Materials ............................................................. 4.9
Repurchase Agreement .................................................. 2.7
Telecommunication Services ............................................ 5.0
Utilities ............................................................. 5.3
-----
100.0%
=====

BB&T MID CAP GROWTH VIF
Consumer Discretionary ................................................ 12.6%
Energy ................................................................ 13.1
Exchange Traded Funds ................................................. 4.3
Financials ............................................................ 8.3
Health Care ........................................................... 16.1
Industrials ........................................................... 13.2
Information Technology ................................................ 21.9
Materials ............................................................. 2.5
Repurchase Agreement .................................................. 3.6
Telecommunication Services ............................................ 4.8
-----
100.4%
=====

BB&T LARGE COMPANY GROWTH VIF
Consumer Discretionary ................................................ 9.2%
Consumer Staples ...................................................... 8.8
Energy ................................................................ 5.6
Financials ............................................................ 4.8
Health Care ........................................................... 20.2
Industrials ........................................................... 17.3
Information Technology ................................................ 28.8
Repurchase Agreement .................................................. 4.4
Telecommunication Services ............................................ 0.9
-----
100.0%
=====

BB&T CAPITAL MANAGER EQUITY VIF
Equity Index .......................................................... 12.6%
International Equity .................................................. 14.7
Large Company Equity .................................................. 50.6
Mid Cap Equity ........................................................ 11.6
Money Market .......................................................... 3.0
Small Cap ............................................................. 7.4
-----
99.9%
=====

BB&T SPECIAL OPPORTUNITIES EQUITY VIF
Commercial Services ................................................... 6.8%
Consumer Discretionary ................................................ 20.4
Energy ................................................................ 15.0
Financials ............................................................ 8.2
Health Care ........................................................... 13.2
Industrials ........................................................... 7.6
Information Technology ................................................ 18.5
Repurchase Agreement .................................................. 10.7
-----
100.4%
=====

BB&T TOTAL RETURN BOND VIF
Corporate Bonds ....................................................... 40.1%
Federal Home Loan Bank ................................................ 4.4
Federal Home Loan Mortgage Corporation--Mortgage Backed Securities .... 7.6
Federal Home Loan Mortgage Corporation--U.S. Government Agencies ...... 3.2
Federal National Mortgage Association--Mortgage Backed Securities ..... 17.2
Federal National Mortgage Association--U.S. Government Agencies ....... 4.7
Government National Mortgage Association .............................. 8.4
Municipal Bonds ....................................................... 2.2
Repurchase Agreement .................................................. 7.5
Student Loan Marketing Association .................................... 1.6
U.S. Treasury Bonds ................................................... 9.5
U.S. Treasury Notes ................................................... 0.9
-----
107.3%
=====

BB&T VARIABLE INSURANCE FUNDS

EXPENSE EXAMPLE (UNAUDITED)
DECEMBER 31, 2005

As a shareholder of the BB&T Variable Insurance Funds, you incur two types of
costs: (1) transaction costs, and (2) ongoing costs, including management fees;
and other Fund expenses.

These examples are intended to help you understand your ongoing costs (in
dollars) of investing in the BB&T Variable Insurance Funds and to compare these
costs with the ongoing costs of investing in other mutual funds.

These examples are based on an investment of $1,000 invested at the beginning of
the period and held for the entire period from July 1, 2005 through December 31,
2005.

Actual Example

The table below provides information about actual account values and actual
expenses. You may use the information below, together with the amount you
invested, to estimate the expenses that you paid over the period. Simply divide
your account value by $1,000 (for example, an $8,600 account value divided by
$1,000 = 8.6), then multiply the result by the number in the table under the
heading entitled "Expenses Paid During Period" to estimate the expenses you paid
on your account during this period.

BEGINNING ENDING EXPENSES PAID EXPENSE RATIO
ACCOUNT VALUE ACCOUNT VALUE DURING PERIOD* DURING PERIOD
7/1/05 12/31/05 7/1/05 - 12/31/05 7/1/05 - 12/31/05
------------- ------------- ----------------- -----------------

BB&T Large Cap Value VIF ................ $1,000.00 $1,054.40 $4.09 0.79%
BB&T Mid Cap Growth VIF ................. 1,000.00 1,129.00 4.19 0.78%
BB&T Large Company Growth VIF ........... 1,000.00 1,031.30 3.94 0.77%
BB&T Capital Manager Equity VIF ......... 1,000.00 1,062.50 0.99 0.19%
BB&T Special Opportunities Equity VIF ... 1,000.00 1,029.00 6.03 1.18%
BB&T Total Return Bond VIF .............. 1,000.00 998.80 4.43 0.88%

----------
* Expenses are equal to the average account value times the Fund's annualized
expense ratio multiplied by the number of days in the most recent fiscal
half-year divided by the number of days in the fiscal year.

Hypothetical Example for Comparison Purposes

The table below provides information about hypothetical account values and
hypothetical expenses based on each BB&T Variable Insurance Funds' actual
expense ratio and an assumed rate of return of 5% per year before expenses,
which is not the Fund's actual return. The hypothetical account values and
expenses may not be used to estimate the actual ending account balance or
expenses you paid for the period. You may use this information to compare this
5% hypothetical example with the 5% hypothetical examples that appear in the
shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your
ongoing costs only and do not reflect any transactional costs. Therefore, the
table is useful in comparing ongoing costs only, and will not help you determine
the relative total costs of owning different funds. In addition, if these
transactional costs were included, your costs would have been higher.

BB&T Large Cap Value VIF ................ $1,000.00 $1,021.22 $4.02 0.79%
BB&T Mid Cap Growth VIF ................. 1,000.00 1,021.27 3.97 0.78%
BB&T Large Company Growth VIF ........... 1,000.00 1,021.32 3.92 0.77%
BB&T Capital Manager Equity VIF ......... 1,000.00 1,024.25 0.97 0.19%
BB&T Special Opportunities Equity VIF ... 1,000.00 1,019.26 6.01 1.18%
BB&T Total Return Bond VIF .............. 1,000.00 1,020.77 4.48 0.88%

BB&T LARGE CAP VALUE VIF

SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 2005

SHARES FAIR VALUE
---------- ------------

COMMON STOCKS (97.3%)
CONSUMER DISCRETIONARY (7.8%)
8,223 Federated Department Stores, Inc. .................. $ 545,432
45,000 Gannett Co., Inc. .................................. 2,725,649
70,000 Mattel, Inc. ....................................... 1,107,400
17,475 V.F. Corp. ......................................... 967,067
99,000 Walt Disney Co. (The) .............................. 2,373,030
13,100 Whirlpool Corp. .................................... 1,097,256
------------
8,815,834
------------
CONSUMER STAPLES (6.1%)
55,400 Albertson's, Inc. .................................. 1,182,790
24,000 Altria Group, Inc. ................................. 1,793,280
38,000 Kimberly-Clark Corp. ............................... 2,266,700
90,452 Sara Lee Corp. ..................................... 1,709,543
------------
6,952,313
------------
ENERGY (13.0%)
19,000 Anadarko Petroleum Corp. ........................... 1,800,250
9,000 Burlington Resources, Inc. ......................... 775,800
50,800 ChevronTexaco Corp. ................................ 2,883,916
53,400 ConocoPhillips ..................................... 3,106,812
47,632 Exxon Mobil Corp. .................................. 2,675,489
38,500 Royal Dutch Shell PLC, A Shares, ADR ............... 2,367,365
12,000 Schlumberger, Ltd. ................................. 1,165,800
------------
14,775,432
------------
FINANCIALS (30.5%)
6,000 Ambac Financial Group, Inc. ........................ 462,360
17,000 American International Group, Inc. ................. 1,159,910
76,000 Bank of America Corp. .............................. 3,507,400
37,000 Bank of New York Co., Inc. (The) ................... 1,178,450
62,333 Citigroup, Inc. .................................... 3,025,020
15,000 Equity Residential, REIT ........................... 586,800
34,000 Fannie Mae ......................................... 1,659,540
11,500 Franklin Resources, Inc. ........................... 1,081,115
44,677 ING Groep NV, ADR .................................. 1,555,653
74,490 J.P. Morgan Chase & Co. ............................ 2,956,508
23,200 Lincoln National Corp. ............................. 1,230,296
30,000 Merrill Lynch & Company, Inc. ...................... 2,031,900
37,000 Northern Trust Corp. ............................... 1,917,340
45,000 Old Republic International Corp. ................... 1,181,700
38,000 PNC Financial Services Group, Inc. ................. 2,349,540
56,600 St. Paul Travelers Cos, Inc. (The) ................. 2,528,322
26,000 SunTrust Banks, Inc. ............................... 1,891,760
52,000 Washington Mutual, Inc. ............................ 2,262,000
22,900 Wells Fargo & Co. .................................. 1,438,807
16,400 Willis Group Holdings, Ltd. ........................ 605,816
------------
34,610,237
------------
HEALTH CARE (9.0%)
29,200 Abbott Laboratories ................................ 1,151,356
43,600 Bristol-Myers Squibb Co. ........................... 1,001,928
17,000 Cigna Corp. ........................................ 1,898,900
25,000 HCA, Inc. .......................................... 1,262,500
17,400 Johnson & Johnson .................................. 1,045,740
61,000 Merck & Co., Inc. .................................. 1,940,410
51,000 Pfizer, Inc. ....................................... 1,189,320
15,000 Wyeth .............................................. 691,050
------------
10,181,204
------------

SHARES OR
PRINCIPAL
AMOUNT FAIR VALUE
---------- ------------

COMMON STOCKS -- (CONTINUED)
INDUSTRIALS (7.4%)
15,000 CSX Corp. .......................................... $ 761,550
9,500 Emerson Electric Co. ............................... 709,650
31,000 General Electric Co. ............................... 1,086,550
18,900 Parker-Hannifin Corp. .............................. 1,246,644
3,500 Phelps Dodge Corp. ................................. 503,545
27,600 Pitney Bowes, Inc. ................................. 1,166,100
47,000 Raytheon Co. ....................................... 1,887,050
14,000 Textron, Inc. ...................................... 1,077,720
------------
8,438,809
------------
INFORMATION TECHNOLOGY (8.3%)
25,400 Automatic Data Processing, Inc. .................... 1,165,606
29,000 First Data Corp. ................................... 1,247,290
82,200 Hewlett-Packard Co. ................................ 2,353,386
4,800 IBM Corp. .......................................... 394,560
40,000 Microsoft Corp. .................................... 1,046,000
87,000 Nokia Corp., ADR ................................... 1,592,100
96,000 Time Warner, Inc. .................................. 1,674,240
------------
9,473,182
------------
MATERIALS (4.9%)
17,000 Air Products & Chemicals, Inc. ..................... 1,006,230
41,000 Alcoa, Inc. ........................................ 1,212,370
5,000 E.I. DuPont de Nemours & Co. ....................... 212,500
39,800 Sonoco Products Co. ................................ 1,170,120
30,000 Weyerhaeuser Co. ................................... 1,990,200
------------
5,591,420
------------
TELECOMMUNICATION SERVICES (5.0%)
72,399 AT&T, Inc. ......................................... 1,773,052
36,800 BellSouth Corp. .................................... 997,280
60,000 Sprint Nextel Corp. ................................ 1,401,600
52,000 Verizon Communications, Inc. ....................... 1,566,240
------------
5,738,172
------------
UTILITIES (5.3%)
16,000 Dominion Resources, Inc. ........................... 1,235,200
30,000 Duke Energy Corp. .................................. 823,500
38,200 National Fuel Gas Co. .............................. 1,191,458
70,000 NiSource, Inc. ..................................... 1,460,200
6,450 SCANA Corp. ........................................ 254,001
59,910 Xcel Energy, Inc. .................................. 1,105,939
------------
6,070,298
------------
Total Common Stocks (Cost $90,964,299) ............. 110,646,901
------------
REPURCHASE AGREEMENT (2.7%)
$3,042,954 U.S. Bank N.A., 4.05%, dated 12/30/05,
maturing 1/3/06, with a maturity value of
$3,044,323 (Collateralized fully by
U.S. Government Agencies) .......................... 3,042,954
------------
Total Repurchase Agreement
(Cost $3,042,954) ............................... 3,042,954
------------
Total Investments (Cost $94,007,253) -- 100.0% .................. 113,689,855
Net other assets (liabilities) -- 0.0% .......................... (41,859)
------------
NET ASSETS -- 100.0% ............................................ $113,647,996
============

See accompanying notes to schedules of portfolio investments and notes to the
financial statements.

BB&T MID CAP GROWTH VIF

SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 2005

SHARES FAIR VALUE
---------- ------------

COMMON STOCKS (92.5%)
CONSUMER DISCRETIONARY (12.6%)
9,850 Abercrombie & Fitch Co., Class A ................... $ 642,023
11,550 Advance Auto Parts, Inc. (a) ....................... 501,963
10,000 Carter's, Inc. (a) ................................. 588,500
14,400 Chico's FAS, Inc. (a) .............................. 632,592
17,100 Coach, Inc. (a) .................................... 570,114
5,700 Getty Images, Inc. (a) ............................. 508,839
3,625 Harman International Industries, Inc. .............. 354,706
6,500 Starwood Hotels & Resorts Worldwide, Inc. .......... 415,090
28,000 Urban Outfitters, Inc. (a) ......................... 708,680
------------
4,922,507
------------
ENERGY (13.1%)
7,300 Arch Coal, Inc. .................................... 580,350
15,000 Cal Dive International, Inc. (a) ................... 538,350
9,700 Cameco Corp. ....................................... 614,883
19,700 Chesapeake Energy Corp. ............................ 625,081
15,600 Cooper Cameron Corp. (a) ........................... 645,840
16,000 Grant Prideco, Inc. (a) ............................ 705,920
5,950 National-Oilwell Varco, Inc. (a) ................... 373,065
8,100 Peabody Energy Corp. ............................... 667,602
10,300 Rowan Cos., Inc. ................................... 367,092
1 XTO Energy, Inc. ................................... 44
------------
5,118,227
------------
FINANCIALS (8.3%)
9,700 Affiliated Managers Group, Inc. (a) ................ 778,425
27,000 Ameritrade Holding Corp. (a) ....................... 648,000
1,950 Chicago Mercantile Exchange Holdings, Inc. ......... 716,606
6,000 Legg Mason, Inc. ................................... 718,140
5,500 T. Rowe Price Group, Inc. .......................... 396,165
------------
3,257,336
------------
HEALTH CARE (16.1%)
6,100 Aetna, Inc. ........................................ 575,291
13,500 Caremark Rx, Inc. (a) .............................. 699,165
12,250 Celgene Corp. (a) .................................. 793,800
4,600 Cerner Corp. (a) ................................... 418,186
11,700 Covance, Inc. (a) .................................. 568,035
9,500 Coventry Health Care, Inc. (a) ..................... 541,120
16,000 Dade Behring Holdings, Inc. ........................ 654,240
8,000 Genzyme Corp. (a) .................................. 566,240
8,400 Humana, Inc. (a) ................................... 456,372
9,100 Omnicare, Inc. ..................................... 520,702
13,400 ResMed, Inc. (a) ................................... 513,354
------------
6,306,505
------------
INDUSTRIALS (13.2%)
9,500 Canadian Pacific Railway, Ltd. ..................... 398,525
24,500 Gol-Linhas Aereas Inteligentes, ADR ................ 691,145
9,300 Goodrich Corp. ..................................... 382,230
10,300 JLG Industries, Inc. ............................... 470,298
18,300 Joy Global, Inc. ................................... 732,000
16,700 Monster Worldwide, Inc. (a) ........................ 681,694
11,400 Precision Castparts Corp. .......................... 590,634
6,800 Rockwell Automation, Inc. .......................... 402,288

SHARES OR
PRINCIPAL
AMOUNT FAIR VALUE
---------- ------------

COMMON STOCKS -- (CONTINUED)
INDUSTRIALS -- (CONTINUED)
8,750 UTI Worldwide, Inc. ................................ $ 812,350
------------
5,161,164
------------
INFORMATION TECHNOLOGY (21.9%)
16,950 Advanced Micro Devices, Inc. (a) ................... 518,670
11,300 Amphenol Corp., Class A ............................ 500,138
11,400 ATI Technologies, Inc. (a) ......................... 193,686
13,300 AutoDesk, Inc. ..................................... 571,235
10,500 Broadcom Corp., Class A (a) ........................ 495,075
26,500 CNET Networks, Inc. (a) ............................ 389,285
17,500 Cognizant Technology Solutions Corp., Class A (a) .. 881,125
32,000 Comverse Technology, Inc. (a) ...................... 850,880
14,800 Harris Corp. ....................................... 636,548
31,700 Intersil Corp., Class A ............................ 788,696
19,700 Jabil Circuit, Inc. (a) ............................ 730,673
14,000 Marvell Technology Group, Ltd. (a) ................. 785,260
27,500 MEMC Electronic Materials, Inc. (a) ................ 609,675
13,400 Varian Semiconductor Equipment
Associates, Inc. (a) ............................... 588,662
------------
8,539,608
------------
MATERIALS (2.5%)
18,700 Airgas, Inc. ....................................... 615,230
7,750 Florida Rock Industries, Inc. ...................... 380,215
------------
995,445
------------
TELECOMMUNICATION SERVICES (4.8%)
43,000 American Tower Corp., Class A (a) .................. 1,165,300
16,600 NII Holdings, Inc. (a) ............................. 725,088
1,890,388
------------
Total Common Stocks (Cost $ 25,441,356) ............ 36,191,180
------------
EXCHANGE TRADED FUNDS (4.3%)
17,700 iShares Russell Midcap Growth Index Fund ........... 1,664,508
------------
Total Exchange Traded Funds (Cost $1,633,913) ...... 1,664,508
------------
REPURCHASE AGREEMENT (3.6%)
$1,408,006 U.S. Bank N.A., 4.05%, dated 12/30/05,
maturing 1/3/06, with a maturity value of
$1,408,640 (Collateralized fully by
U.S. Government Agencies) .......................... 1,408,006
------------
Total Repurchase Agreement (Cost $1,408,006) ....... 1,408,006
------------
Total Investments (Cost $28,483,275) -- 100.4% .................. 39,263,694
Net other assets (liabilities) -- (0.4)% ........................ (173,196)
------------
NET ASSETS -- 100.0% ............................................ $ 39,090,498
============

See accompanying notes to schedules of portfolio investments and notes to the
financial statements.

BB&T LARGE COMPANY GROWTH VIF

SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 2005

SHARES FAIR VALUE
---------- -----------

COMMON STOCKS (95.6%)
CONSUMER DISCRETIONARY (9.2%)
3,397 Chico's FAS, Inc. (a) ............................... $ 149,230
3,671 Coach, Inc. (a) ..................................... 122,391
2,300 eBay, Inc. (a) ...................................... 99,475
3,933 Hershey Co., (The) .................................. 217,298
5,814 Home Depot, Inc. .................................... 235,351
6,410 Kohl's Corp. (a) .................................... 311,526
1,855 Lowe's Companies, Inc. .............................. 123,654
1,594 Nike, Inc., Class B ................................. 138,343
17,297 Starbucks Corp. (a) ................................. 519,084
2,174 Target Corp. ........................................ 119,505
3,049 Williams Sonoma, Inc. (a) ........................... 131,564
-----------
2,167,421
-----------
CONSUMER STAPLES (8.8%)
3,182 Altria Group, Inc. .................................. 237,759
5,749 Coca-Cola Co. ....................................... 231,742
8,753 PepsiCo, Inc. ....................................... 517,127
9,033 Procter & Gamble Co. ................................ 522,830
11,936 Wal-Mart Stores, Inc. ............................... 558,605
-----------
2,068,063
-----------
ENERGY (5.6%)
3,737 Anadarko Petroleum Corp. ............................ 354,081
5,136 Apache Corp. ........................................ 351,919
6,270 Baker Hughes, Inc. .................................. 381,090
3,842 ConocoPhillips ...................................... 223,528
-----------
1,310,618
-----------
FINANCIALS (4.8%)
4,399 American International Group, Inc. .................. 300,143
2,355 CIT Group, Inc. ..................................... 121,942
2,553 Franklin Resources, Inc. ............................ 240,008
1,890 Goldman Sachs Group, Inc. (The) ..................... 241,372
3,699 PNC Financial Services Group, Inc. .................. 228,709
-----------
1,132,174
-----------
HEALTH CARE (20.2%)
6,940 Abbott Laboratories ................................. 273,644
6,253 Amgen, Inc. (a) ..................................... 493,112
5,865 Caremark Rx, Inc. (a) ............................... 303,748
2,385 Genentech, Inc. (a) ................................. 220,613
2,870 Genzyme Corp. (a) ................................... 203,139
5,502 Gilead Sciences, Inc. (a) ........................... 289,570
11,846 Johnson & Johnson ................................... 711,944
4,449 Medco Health Solutions, Inc. (a) .................... 248,254
8,608 Medtronic, Inc. ..................................... 495,562
5,400 Novartis AG, ADR .................................... 283,392
9,865 Pfizer, Inc. ........................................ 230,052
6,811 UnitedHealth Group, Inc. ............................ 423,236
3,056 Wellpoint, Inc. (a) ................................. 243,838
7,140 Wyeth ............................................... 328,940
-----------
4,749,044
-----------
INDUSTRIALS (17.3%)
4,514 Boeing Co. .......................................... 317,063
6,201 Caterpillar, Inc. ................................... 358,232

SHARES OR
PRINCIPAL
AMOUNT FAIR VALUE
---------- -----------

COMMON STOCKS -- (CONTINUED)
INDUSTRIALS -- (CONTINUED)
2,245 Danaher Corp. ....................................... $ 125,226
6,296 Dow Chemical Co. (The) .............................. 275,891
1,406 FedEx Corp. ......................................... 145,366
28,213 General Electric Co. ................................ 988,866
3,300 Honeywell International, Inc. ....................... 122,925
2,892 Illinois Tool Works, Inc. ........................... 254,467
11,774 National Semiconductor Corp. ........................ 305,889
2,415 Phelps Dodge Corp. .................................. 347,446
4,661 Precision Castparts Corp. ........................... 241,486
3,158 United Parcel Service, Inc., Class B ................ 237,324
6,096 United Technologies Corp. ........................... 340,827
-----------
4,061,008
-----------
INFORMATION TECHNOLOGY (28.8%)
4,941 3M Co. .............................................. 382,928
1,887 Apple Computer, Inc. (a) ............................ 135,656
30,747 Cisco Systems, Inc. (a) ............................. 526,389
12,768 Corning, Inc. (a) ................................... 251,019
7,767 Dell, Inc. (a) ...................................... 232,932
8,530 EMC Corp. (a) ....................................... 116,179
605 Google, Inc. (a) .................................... 250,990
6,442 IBM Corp. ........................................... 529,532
31,504 Intel Corp. ......................................... 786,340
37,536 Microsoft Corp. ..................................... 981,567
9,956 Monster Worldwide, Inc. (a) ......................... 406,404
19,939 Motorola, Inc. ...................................... 450,422
10,094 Nokia Corp., ADR .................................... 184,720
30,800 Oracle Corp. (a) .................................... 376,068
6,100 QUALCOMM, Inc. ...................................... 262,788
11,579 Texas Instruments, Inc. ............................. 371,339
23,776 Time Warner, Inc. ................................... 414,653
3,116 Yahoo!, Inc. (a) .................................... 122,085
-----------
6,782,011
-----------
TELECOMMUNICATION SERVICES (0.9%)
9,423 Sprint Nextel Corp. ................................. 220,121
-----------
Total Common Stocks (Cost $20,175,360) .............. 22,490,460
-----------
REPURCHASE AGREEMENT (4.4%)
$1,026,296 U.S. Bank N.A., 4.05% dated 12/30/05,
maturing 1/3/06, with a maturity value of
$1,026,758 (Collateralized fully by
U.S. Government Agencies) ........................ 1,026,296
-----------
Total Repurchase Agreement
(Cost $1,026,296) .. ............................. 1,026,296
-----------
Total Investments (Cost $21,201,656) -- 100.0% ................... 23,516,756
Net other assets (liabilities) -- 0.0% ........................... 6,415
-----------
NET ASSETS -- 100.0% ............................................. $23,523,171
===========

See accompanying notes to schedules of portfolio investments and notes to the
financial statements.

BB&T CAPITAL MANAGER EQUITY VIF

SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 2005

SHARES FAIR VALUE
---------- -----------

INVESTMENT COMPANIES (99.9%)
432,590 BB&T Equity Index Fund, Class A ..................... $ 3,629,430
416,286 BB&T International Equity Fund,
Institutional Class .............................. 4,204,486
632,624 BB&T Large Company Growth Fund,
Institutional Class .............................. 5,820,140
475,413 BB&T Large Company Value Fund,
Institutional Class .............................. 8,695,304
99,177 BB&T Mid Cap Growth Fund,
Institutional Class (a) .......................... 1,334,918
163,034 BB&T Mid Cap Value Fund,
Institutional Class .............................. 2,002,055
56,293 BB&T Small Company Growth Fund,
Institutional Class (a) .......................... 853,958

SHARES FAIR VALUE
---------- -----------

INVESTMENT COMPANIES -- (CONTINUED)
89,284 BB&T Small Cap Fund,
Institutional Class .............................. $ 1,279,442
865,285 BB&T U.S. Treasury Money Market Fund,
Institutional Class .............................. 865,285
-----------
Total Investment Companies (Cost $27,080,066) ....... 28,685,018
-----------
Total Investments (Cost $27,080,066) -- 99.9% .................... 28,685,018
Net other assets (liabilities) -- 0.1% ........................... 36,990
-----------
NET ASSETS -- 100.0% ............................................. $28,722,008
===========

See accompanying notes to schedules of portfolio investments and notes to the
financial statements.

BB&T SPECIAL OPPORTUNITIES EQUITY VIF

SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 2005

SHARES FAIR VALUE
---------- -----------

COMMON STOCKS (89.7%)
COMMERCIAL SERVICES (6.8%)
54,500 Cendant Corp. ....................................... $ 940,125
44,900 WCI Communities, Inc. (a) ........................... 1,205,565
-----------
2,145,690
-----------
CONSUMER DISCRETIONARY (20.4%)
20,500 Anheuser-Busch Companies, Inc. ...................... 880,680
46,450 Comcast Corp., Class A (a) .......................... 1,205,842
16,500 Costco Wholesale Corp. .............................. 816,255
10,000 Hain Celestial Group, Inc. (a) ...................... 211,600
65,340 News Corp., Class A ................................. 1,016,037
43,100 Smithfield Foods, Inc. (a) .......................... 1,318,860
22,200 YUM! Brands, Inc. ................................... 1,040,736
-----------
6,490,010
-----------
ENERGY (15.0%)
16,800 Apache Corp. ........................................ 1,151,136
19,900 CONSOL Energy, Inc. ................................. 1,297,082
20,600 Pioneer Natural Resources Co. ....................... 1,056,162
34,600 Weatherford International, Ltd. (a) ................. 1,252,520
-----------
4,756,900
-----------
FINANCIALS (8.2%)
2,600 Markel Corp. (a) .................................... 824,330
11,000 MBIA, Inc. .......................................... 661,760
18,000 Wells Fargo & Co. ................................... 1,130,940
-----------
2,617,030
-----------
HEALTH CARE (13.2%)
111,448 Emdeon Corp. (a) .................................... 942,850
18,900 Laboratory Corporation of America Holdings(a) ....... 1,017,765
28,000 Manor Care, Inc. .................................... 1,113,560
60,503 MedCath Corp. (a) ................................... 1,122,331
-----------
4,196,506
-----------

SHARES OR
PRINCIPAL
AMOUNT FAIR VALUE
---------- -----------

COMMON STOCKS -- (CONTINUED)
INDUSTRIALS (7.6%)
16,000 L-3 Communications Holdings, Inc. ................... $ 1,189,600
17,500 PACCAR, Inc. ........................................ 1,211,525
-----------
2,401,125
-----------
INFORMATION TECHNOLOGY (18.5%)
42,400 Activision, Inc. (a) ................................ 582,576
175,880 ARM Holdings PLC, ADR ............................... 1,092,215
49,200 ATI Technologies, Inc. (a) .......................... 835,908
17,000 Fair Issac Corp. .................................... 750,890
27,840 First Data Corp. .................................... 1,197,398
33,000 Packeteer, Inc. (a) ................................. 256,410
66,400 Symantec Corp. (a) .................................. 1,162,000
-----------
5,877,397
-----------
Total Common Stocks (Cost $ 25,531,936) ............. 28,484,658
-----------
REPURCHASE AGREEMENT (10.7%)
$3,403,712 U.S. Bank N.A., 4.05%, dated 12/30/05, maturing
1/3/06, with a maturity value of $3,405,244
(Collateralized fully by U.S. Government
Agencies) ........................ 3,403,712
-----------
Total Repurchase Agreement (Cost $3,403,712) ........ 3,403,712
-----------
Total Investments (Cost $28,935,648) -- 100.4% ................... 31,888,370
Net other assets (liabilities) -- (0.4)% ......................... (120,128)
-----------
NET ASSETS -- 100.0% ............................................. $31,768,242
===========

See accompanying notes to schedules of portfolio investments and notes to the
financial statements.

BB&T TOTAL RETURN BOND VIF

SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 2005

PRINCIPAL
AMOUNT FAIR VALUE
---------- -----------

CORPORATE BONDS (40.1%)
AEROSPACE & DEFENSE (0.5%)
$ 85,000 Raytheon Co., 6.15%, 11/1/08 ........................ $ 88,215
-----------
AIRLINES (0.6%)
125,000 Southwest Airlines Co., 5.25%, 10/1/14 .............. 121,219
-----------
AUTO -- CARS/LIGHT TRUCKS (0.7%)
125,000 DaimlerChrysler NA Holdings, 4.875%, 6/15/10 ........ 122,048
-----------
BANKING & FINANCIAL SERVICES (32.5%)
87,000 Associates Corp. NA, 6.25%, 11/1/08 ................. 90,121
355,000 Bank of America Commercial Mortgage, Inc.,
Series 2004-6, Class A5, 4.81%, 12/10/42 ......... 346,119
155,000 Bank of America Corp., 4.25%, 10/1/10 ............... 150,723
184,000 Centex Home Equity, Series 2005-C,
Class AF6, 4.64%, 6/25/35 ........................ 178,782
345,000 Chase Funding Mortgage Loan Asset-Backed,
Series 2003-4, Class 1A5, 5.42%, 5/25/33 ......... 345,104
500,000 Chase Issuance Trust, Series 2005-A1,
Class A1, 4.38%, 12/15/10 (c)* ................... 500,050
82,000 CIT Group, Inc., 5.00%, 2/13/14 ..................... 80,209
200,000 CIT Group, Inc., Series MTN, 4.73%, 9/20/07* ........ 200,661
490,000 Countrywide Asset-Backed Certificates,
Series 2004-3, Class 3A3, 4.76%, 8/25/34 (c)* .... 491,375
284,000 Countrywide Asset-Backed Certificates,
Series 2005-4, Class 3AV2,
4.59%, 10/25/35 (c)* ............................. 284,050
250,000 CS First Boston Mortgage Securities Corp.,
Series 2004-C1, Class A2, 3.52%, 1/15/37 ......... 241,005
182,000 Gatx Financial Corp., 5.125%, 4/15/10 ............... 180,201
166,000 GE Capital Commercial Mortgage Corp.,
Series 2005-C4, Class A4, 5.33%, 11/10/45 ........ 168,962
173,912 GE Capital Commercial Mortgage Corp.,
Series 2001-3, Class A1, 5.56%, 6/10/38 .......... 175,602
310,000 GE Capital Commercial Mortgage Corp.,
Series 2004-C1, Class A2, 3.915%, 11/10/38 ....... 297,767
184,000 General Motors Acceptance Corp., 6.75%, 12/1/14 ..... 165,530
130,000 Goldman Sachs Group, Inc., 4.125%, 1/15/08 .......... 128,004
175,000 Household Automotive Trust,
Series 2005-1, Class A4, 4.35%, 6/18/12 .......... 172,122
150,000 HSBC Finance Corp., 4.75%, 7/15/13 .................. 144,927
265,000 Lehman Brothers Holdings, Series MTNG,
4.80%, 3/13/14 ................................... 258,744
190,000 Merrill Lynch & Co., 6.00%, 2/17/09 ................. 195,935
170,000 Morgan Stanley, 4.25%, 5/15/10 ...................... 164,326
251,602 Residential Asset Mortgage Products, Inc.,
Series 2003-RZ5, Class A3, 3.80%, 7/25/30 ........ 250,607
408,000 Residential Asset Securities Corp.,
Series 2005-KS6, Class A2, 4.53%, 7/25/35 (c)* ... 407,814
147,000 Synovus Financial, 4.875%, 2/15/13 .................. 144,383
200,000 Wachovia Corp., 4.28%, 10/28/08* .................... 199,979
140,000 Wachovia Corp., 4.375%, 6/1/10 ...................... 136,951
-----------
6,100,053
-----------
TELECOMMUNICATIONS (4.1%)
175,000 America Movil SA de CV, 5.75%, 1/15/15 .............. 175,595
320,000 Motorola, Inc., 7.50%, 5/15/25 ...................... 385,028
200,000 Sprint Capital Corp., 6.875%, 11/15/28 .............. 218,538
-----------
779,161
-----------

PRINCIPAL
AMOUNT FAIR VALUE
---------- -----------

CORPORATE BONDS -- (CONTINUED)
UTILITIES (1.7%)
$ 215,000 American Electric Power, Series C,
5.375%, 3/15/10 ..................................... $ 216,731
105,000 General Electric Co., 5.00%, 2/1/13 ................. 104,945
-----------
321,676
-----------
Total Corporate Bonds (Cost $7,590,167) ............. 7,532,372
-----------
MORTGAGE-BACKED SECURITIES (33.2%)
FEDERAL HOME LOAN MORTGAGE CORP. (7.6%)
795,375 6.00%, 10/1/19, Pool # G11679 ....................... 811,633
94,665 5.50%, 11/1/20, Pool # J02711 ....................... 95,239
166,833 4.50%, 6/1/35, Pool # G01842 ........................ 156,962
152,766 5.50%, 7/1/35, Pool # A36540 ........................ 151,397
121,706 6.00%, 7/1/35, Pool # A36304 ........................ 122,936
91,001 5.50%, 12/1/35, Pool # A40359 ....................... 90,186
-----------
1,428,353
-----------
FEDERAL NATIONAL MORTGAGE ASSOC. (17.2%)
134,396 4.50%, 10/1/18, Pool # 752030 ....................... 130,782
90,659 5.50%, 11/1/20, Pool # 843972 ....................... 91,250
1,451,321 5.50%, 1/1/34, Pool # 757571 ........................ 1,437,367
351,628 6.50%, 9/1/34, Pool # 796569 ........................ 360,765
505,313 6.00%, 2/1/35, Pool # 735269 ........................ 510,114
125,019 6.00%, 5/1/35, Pool # 821037 ........................ 126,207
256,470 7.00%, 6/1/35, Pool # 255820 ........................ 267,597
132,227 5.00%, 9/1/35, Pool # 757857 ........................ 128,122
89,399 6.00%, 11/1/35, Pool # 843803 ....................... 90,249
93,186 6.00%, 11/1/35, Pool # 817636 ....................... 94,072
-----------
3,236,525
-----------
GOVERNMENT NATIONAL MORTGAGE ASSOC. (8.4%)
1,590,00 5.00%, 1/1/36 (b) ................................... 1,568,634
-----------
Total Mortgage-Backed Securities (Cost $6,281,141) .. 6,233,512
-----------
MUNICIPAL BONDS (2.2%)
ILLINOIS (0.4%)
85,000 Illinois State, 3.75%, 6/1/12 ....................... 79,865
-----------
NEW YORK (0.5%)
100,000 Sales Tax Asset Receivables Corp.,
Series B, 4.06%, 10/15/10, FGIC ..................... 96,694
-----------
OREGON (0.5%)
95,000 Oregon School Boards Association,
4.76%, 6/30/28, AMBAC ............................... 89,122
-----------
TEXAS (0.8%)
155,000 Brownsville Texas Utility System,
Series B, 4.92%, 9/1/14, AMBAC ...................... 154,525
-----------
Total Municipal Bonds (Cost $424,345) ............... 420,206
-----------
U.S. GOVERNMENT AGENCIES (13.9%)
FEDERAL HOME LOAN BANK (4.4%)
200,000 4.25%, 9/28/06, Callable 3/28/06 @ 100* ............. 199,767
150,000 4.25%, 3/24/08, Callable 3/24/06 @ 100 .............. 148,260
220,000 3.75%, 8/15/08 ...................................... 214,770
245,000 Series FB11, 5.875%, 2/15/11 ........................ 255,989
-----------
818,786
-----------

Continued

BB&T TOTAL RETURN BOND VIF

SCHEDULE OF PORTFOLIO INVESTMENTS -- (CONTINUED)
DECEMBER 31, 2005

PRINCIPAL
AMOUNT FAIR VALUE
---------- -----------

U.S. GOVERNMENT AGENCIES -- (CONTINUED)
FEDERAL HOME LOAN MORTGAGE CORP. (3.2%)
$ 100,000 3.75%, 2/25/08, Callable 2/25/06 @ 100* ............. $ 99,371
196,000 4.625%, 8/15/08, Callable 8/15/06 @ 100 ............. 194,994
210,000 4.125%, 7/12/10 ..................................... 204,782
109,000 5.50%, 8/20/19, Callable 8/20/07 @ 100 .............. 108,142
-----------
607,289
-----------
FEDERAL NATIONAL MORTGAGE ASSOC. (4.7%)
385,000 6.625%, 11/15/10 .................................... 416,054
439,000 6.00%, 5/15/11 ...................................... 464,302
-----------
880,356
-----------
STUDENT LOAN MARKETING ASSOC. (1.6%)
150,000 Series MTNA, 4.28%, 1/25/08* ........................ 150,096
150,000 Series MTNA, 4.00%, 1/15/09 ......................... 145,970
-----------
296,066
-----------
Total U.S. Government Agencies (Cost $2,614,263) .... 2,602,497
-----------
U.S. TREASURY BONDS (9.5%)
455,000 8.875%, 8/15/17 ..................................... 632,272
314,000 7.875%, 2/15/21 ..................................... 424,955
283,000 7.25%, 8/15/22 ...................................... 368,541
300,000 6.25%, 8/15/23 ...................................... 358,242
-----------
Total U.S. Treasury Bonds (Cost $1,790,054) ......... 1,784,010
-----------
U.S. TREASURY NOTES (0.9%)
167,000 4.50%, 11/15/10 ..................................... 167,900
-----------
Total U.S. Treasury Notes (Cost $166,661) ........... 167,900
-----------

PRINCIPAL
AMOUNT FAIR VALUE
---------- -----------

REPURCHASE AGREEMENT (7.5%)
$1,409,886 U.S. Bank N.A., 4.05%, dated 12/30/05,
maturing 1/3/06, with a maturity value of
$1,410,520 (Collateralized fully by
U.S. Government Agencies) ........................ $ 1,409,886
-----------
Total Repurchase Agreement (Cost $1,409,886) ........ 1,409,886
-----------
Total Investments (Cost $20,276,517) -- 107.3% ................... 20,150,383
Net other assets (liabilities) -- (7.3)% ....................... (1,373,668)
-----------
NET ASSETS -- 100.0% ............................................. $18,776,715
===========

See accompanying notes to schedules of portfolio investments and notes to the
financial statements.

SCHEDULE OF PORTFOLIO INVESTMENTS

NOTES TO SCHEDULES OF PORTFOLIO INVESTMENTS
DECEMBER 31, 2005

(a) Represents non-income producing security.

(b) Represents a security purchased on a when-issued basis. At December 31,
2005, total cost of investments purchased on a when-issued basis for the
BB&T Total Return Bond VIF was $1,552,304.

(c) Represents that all or a portion of the security was pledged as collateral
for securities purchased on a when-issued basis.

* The interest rate for this variable rate note, which will change
periodically, is based either on the prime rate or an index of market
rates. The reflected rate is the rate in effect as of December 31, 2005.
The maturity date reflected is the final maturity date.

ADR -- American Depository Receipt.

AMBAC -- Insured by AMBAC Indemnity Corp.

FGIC -- Insured by Financial Guaranty Insurance Corp.

REIT -- Real Estate Investment Trust.

See accompanying notes to financial statements.

(This page has been left blank intentionally.)

BB&T VARIABLE INSURANCE FUNDS

STATEMENTS OF ASSETS AND LIABILITIES
DECEMBER 31, 2005

BB&T BB&T
BB&T BB&T BB&T CAPITAL SPECIAL BB&T
LARGE CAP MID CAP LARGE COMPANY MANAGER OPPORTUNITIES TOTAL RETURN
VALUE VIF GROWTH VIF GROWTH VIF EQUITY VIF EQUITY VIF BOND VIF
------------ ----------- ------------- ----------- ------------- ------------

ASSETS:
Investments:
Unaffiliated investments, at cost ..... $ 90,964,299 $27,075,269 $20,175,360 $ -- $25,531,936 $18,866,631
Investment in affiliates, at cost ..... -- -- -- 27,080,066 -- --
------------ ----------- ----------- ----------- ----------- -----------
Total investments, at cost ......... 90,964,299 27,075,269 20,175,360 27,080,066 25,531,936 18,866,631
Unrealized appreciation
(depreciation) .................. 19,682,602 10,780,419 2,315,100 1,604,952 2,952,722 (126,134)
------------ ----------- ----------- ----------- ----------- -----------
Investments, at value .............. 110,646,901 37,855,688 22,490,460 28,685,018 28,484,658 18,740,497
Repurchase agreements, at cost ........ 3,042,954 1,408,006 1,026,296 -- 3,403,712 1,409,886
Cash .................................. 4,402 1,865 -- -- 4,478 1,180
Interest and dividends receivable ..... 209,507 15,779 22,682 41,244 40,516 158,991
Receivable for investments sold ....... -- -- -- -- 320,851 --
Receivable from Investment Advisor .... -- -- -- 1,357 -- --
Receivable for capital shares issued .. 14,717 30,512 67 -- 2,834 41,119
Prepaid expenses ...................... 5,069 1,675 1,054 1,267 1,358 805
------------ ----------- ----------- ----------- ----------- -----------
Total Assets .................... 113,923,550 39,313,525 23,540,559 28,728,886 32,258,407 20,352,478
------------ ----------- ----------- ----------- ----------- -----------
LIABILITIES:
Covered options written
(premiums received
$0; $0; $0; $0; $4,501; $0) ........ -- -- -- -- 325 --
Payable for investments purchased ..... 182,906 194,297 -- -- 391,801 1,557,162
Payable for capital shares redeemed ... 9,085 143 1,258 907 58,792 217
Accrued expenses and other payables:
Investment advisory fees ........... 47,412 14,978 8,109 -- 21,544 6,273
Administration fees ................ 11,004 3,724 2,280 -- 3,003 1,759
Fund accounting fees ............... 1,133 488 358 247 424 432
Transfer agency fees ............... 2,094 1,449 1,319 1,517 1,385 1,273
Compliance service fees ............ 1,317 435 274 329 352 209
Other .............................. 20,603 7,513 3,790 3,878 12,539 8,438
------------ ----------- ----------- ----------- ----------- -----------
Total Liabilities ............... 275,554 223,027 17,388 6,878 490,165 1,575,763
------------ ----------- ----------- ----------- ----------- -----------
NET ASSETS:
Capital ............................... 94,851,983 25,934,212 21,265,528 26,027,366 27,002,115 18,930,134
Accumulated undistributed
(distributions in excess
of) net investment income .......... 24,377 -- -- 43,617 -- 77,712
Accumulated realized
gains/(losses) from investment
transactions ....................... (910,966) 2,375,867 (57,457) 1,046,073 1,809,229 (104,997)
Net unrealized appreciation/
depreciation on investments ........ 19,682,602 10,780,419 2,315,100 1,604,952 2,956,898 (126,134)
------------ ----------- ----------- ----------- ----------- -----------
Net Assets ...................... $113,647,996 $39,090,498 $23,523,171 $28,722,008 $31,768,242 $18,776,715
============ =========== =========== =========== =========== ===========
Outstanding units of beneficial
interest (shares) .................. 8,120,486 2,494,185 2,285,271 2,732,880 2,501,466 1,891,876
============ =========== =========== =========== =========== ===========
Net asset value -- offering and
redemption price per share ......... $ 14.00 $ 15.67 $ 10.29 $ 10.51 $ 12.70 $ 9.92
============ =========== =========== =========== =========== ===========

See accompanying notes to the financial statements.

BB&T VARIABLE INSURANCE FUNDS

STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 2005

BB&T BB&T
BB&T BB&T BB&T CAPITAL SPECIAL BB&T
LARGE CAP MID CAP LARGE COMPANY MANAGER OPPORTUNITIES TOTAL RETURN
VALUE VIF GROWTH VIF GROWTH VIF EQUITY VIF EQUITY VIF BOND VIF
---------- ----------- ------------- ---------- ------------- ------------

INVESTMENT INCOME:
Interest income ........................ $ 117,232 $ 55,396 $ 30,269 $ -- $ 61,557 $ 747,023
Dividend income ........................ 2,957,911 117,711 241,567 -- 192,618 1,377
Dividend income from affiliates ........ -- -- -- 522,657 -- --
---------- ---------- --------- ---------- ---------- ---------
Total investment income: ............... 3,075,143 173,107 271,836 522,657 254,175 748,400
---------- ---------- --------- ---------- ---------- ---------

EXPENSES:
Investment advisory fees (See Note 4) .. 831,024 253,849 169,101 67,370 216,096 102,477
Administration, transfer agency, and
fund accounting fees (See Note 4) ... 93,267 38,338 31,486 14,888 32,320 27,649
Administration fees (See Note 4) ....... 85,967 27,014 17,717 21,023 21,960 13,412
Fund accounting fees (See Note 4) ...... 11,917 6,965 5,751 4,009 6,886 7,432
Transfer agency fees (See Note 4) ...... 13,051 7,878 6,879 7,649 7,335 6,318
Compliance service fees (See Note 4) ... 9,936 3,074 2,001 2,329 2,374 1,461
Custodian fees ......................... 14,306 4,345 2,862 3,305 3,293 2,019
Professional fees ...................... 68,366 20,437 13,420 15,803 20,255 13,924
Trustee fees ........................... 15,148 4,606 3,005 3,497 3,865 2,409
Other .................................. 34,906 11,266 7,782 9,087 16,707 13,943
---------- ---------- --------- ---------- ---------- ---------
Total expenses before waivers .......... 1,177,888 377,772 260,004 148,960 331,091 191,044
Less expenses reimbursed or waived
by the Investment Advisor ........... (235,503) (109,799) (78,732) (58,964) -- (20,342)
Less expenses waived by the
Administrator and its affiliates .... (54,844) -- -- (21,023) -- --
---------- ---------- --------- ---------- ---------- ---------
Net expenses ........................ 887,541 267,973 181,272 68,973 331,091 170,702
---------- ---------- --------- ---------- ---------- ---------
Net investment income (loss) ........... 2,187,602 (94,866) 90,564 453,684 (76,916) 577,698
---------- ---------- --------- ---------- ---------- ---------

REALIZED/UNREALIZED GAINS (LOSSES)
ON INVESTMENTS:
Net realized gains (losses) on option
contract transactions ............... -- -- -- -- 34,400 --
Net realized gains (losses) from
investment security transactions .... 5,648,845 2,740,583 761,512 -- 1,851,743 (4,837)
Net realized gains (losses) on
investments with affiliates ......... -- -- -- 12,893 -- --
Net realized gain distributions
from underlying funds ............... -- -- -- 1,484,532 -- --
Change in unrealized appreciation/
depreciation of investments ......... (351,242) 2,171,358 (393,355) (123,802) (87,895) (180,295)
---------- ---------- --------- ---------- ---------- ---------
Net realized/unrealized gains
(losses) on investments ............. 5,297,603 4,911,941 368,157 1,373,623 1,798,248 (185,132)
---------- ---------- --------- ---------- ---------- ---------
Change in net assets from
operations .......................... $7,485,205 $4,817,075 $ 458,721 $1,827,307 $1,721,332 $ 392,566
========== ========== ========= ========== ========== =========

See accompanying notes to the financial statements.

BB&T VARIABLE INSURANCE FUNDS

STATEMENTS OF CHANGES IN NET ASSETS

BB&T BB&T
LARGE CAP MID CAP
VALUE VIF GROWTH VIF
--------------------------- ---------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2005 2004 2005 2004
------------ ------------ ------------ ------------

FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) ................................... $ 2,187,602 $ 1,778,050 $ (94,866) $ (117,831)
Net realized gains (losses) from investment transactions ....... 5,648,845 890,277 2,740,583 1,562,831
Net realized gains (losses) on investments with affiliates ..... -- -- -- --
Net realized gain distributions from underlying funds .......... -- -- -- --
Change in unrealized appreciation/depreciation of investments .. (351,242) 10,154,949 2,171,358 3,098,166
------------ ------------ ----------- -----------
Change in net assets from operations ........................... 7,485,205 12,823,276 4,817,075 4,543,166
------------ ------------ ----------- -----------
DIVIDENDS TO SHAREHOLDERS:
Net investment income .......................................... (2,163,186) (1,778,089) -- --
Net realized gains from investment transactions ................ -- -- -- --
------------ ------------ ----------- -----------
Change in net assets from shareholder dividends ................ (2,163,186) (1,778,089) -- --
------------ ------------ ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued .................................... 2,804,935 8,206,444 3,785,288 5,075,670
Dividends reinvested ........................................... 2,712,897 1,648,020 -- --
Value of shares redeemed ....................................... (8,803,839) (3,970,967) (1,919,195) (1,114,583)
------------ ------------ ----------- -----------
Change in net assets from capital transactions ................. (3,286,007) 5,883,497 1,866,093 3,961,087
------------ ------------ ----------- -----------
Change in net assets ........................................... 2,036,012 16,928,684 6,683,168 8,504,253
------------ ------------ ----------- -----------
NET ASSETS:
Beginning of Period ............................................ 111,611,984 94,683,300 32,407,330 23,903,077
------------ ------------ ----------- -----------
End of Period .................................................. $113,647,996 $111,611,984 $39,090,498 $32,407,330
============ ============ =========== ===========
SHARE TRANSACTIONS:
Issued ......................................................... 208,216 657,552 266,255 415,359
Reinvested ..................................................... 199,567 134,624 -- --
Redeemed ....................................................... (646,756) (322,025) (138,285) (93,117)
------------ ------------ ----------- -----------
Change in shares ............................................... (238,973) 470,151 127,970 322,242
============ ============ =========== ===========
Accumulated undistributed (distributions in excess of)
net investment income ....................................... $ 24,377 $ (39) $ -- $ --
============ ============ =========== ===========

----------
(a) Period from commencement of operations.

See accompanying notes to the financial statements.

BB&T BB&T
LARGE COMPANY CAPITAL MANAGER
GROWTH VIF EQUITY VIF
--------------------------- ---------------------------

FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2005 2004 2005 2004
------------ ------------ ------------ ------------

FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) ................................... $ 90,564 $ 93,252 $ 453,684 $ 169,566
Net realized gains (losses) from investment transactions ....... 761,512 1,043,147 -- --
Net realized gains (losses) on investments with affiliates ..... -- -- 12,893 (18,558)
Net realized gain distributions from underlying funds .......... -- -- 1,484,532 35,810
Change in unrealized appreciation/depreciation of investments .. (393,355) 62,677 (123,802) 2,482,753
----------- ----------- ----------- -----------
Change in net assets from operations ........................... 458,721 1,199,076 1,827,307 2,669,571
----------- ----------- ----------- -----------
DIVIDENDS TO SHAREHOLDERS:
Net investment income .......................................... (91,612) (93,247) (410,067) (169,566)
Net realized gains from investment transactions ................ -- -- -- --
----------- ----------- ----------- -----------
Change in net assets from shareholder dividends ................ (91,612) (93,247) (410,067) (169,566)
----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued .................................... 1,803,928 3,514,255 2,201,817 3,400,142
Dividends reinvested ........................................... 183,178 1,683 481,528 134,465
Value of shares redeemed ....................................... (1,130,736) (786,493) (989,412) (1,029,876)
----------- ----------- ----------- -----------
Change in net assets from capital transactions ................. 856,370 2,729,445 1,693,933 2,504,731
----------- ----------- ----------- -----------
Change in net assets ........................................... 1,223,479 3,835,274 3,111,173 5,004,736
----------- ----------- ----------- -----------
NET ASSETS:
Beginning of Period ............................................ 22,299,692 18,464,418 25,610,835 20,606,099
----------- ----------- ----------- -----------
End of Period .................................................. $23,523,171 $22,299,692 $28,722,008 $25,610,835
=========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued ......................................................... 180,801 363,360 218,620 369,676
Reinvested ..................................................... 18,107 179 46,889 14,730
Redeemed ....................................................... (111,804) (81,015) (96,369) (112,905)
----------- ----------- ----------- -----------
Change in shares ............................................... 87,104 282,524 169,140 271,501
=========== =========== =========== ===========
Accumulated undistributed (distributions in excess of)
net investment income ....................................... $ -- $ 5 $ 43,617 $ --
=========== =========== =========== ===========

BB&T BB&T
SPECIAL OPPORTUNITIES TOTAL RETURN
EQUITY VIF BOND VIF
---------------------------- ----------------------------
FOR THE FOR THE
PERIOD PERIOD
FOR THE JULY 22, 2004 FOR THE JULY 22, 2004
YEAR ENDED THROUGH YEAR ENDED THROUGH
DECEMBER 31, DECEMBER 31, DECEMBER 31, DECEMBER 31,
2005 2004 (A) 2005 2004 (A)
------------ ------------- ------------ -------------

FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss) ................................... $ (76,916) $ (57,905) $ 577,698 $ 157,989
Net realized gains (losses) from investment transactions ....... 1,886,143 480,367 (4,837) 51,592
Net realized gains (losses) on investments with affiliates ..... -- -- -- --
Net realized gain distributions from underlying funds .......... -- -- -- --
Change in unrealized appreciation/depreciation of investments .. (87,895) 3,044,793 (180,295) 54,161
----------- ----------- ----------- -----------
Change in net assets from operations ........................... 1,721,332 3,467,255 392,566 263,742
----------- ----------- ----------- -----------
DIVIDENDS TO SHAREHOLDERS:
Net investment income .......................................... -- -- (617,780) (144,938)
Net realized gains from investment transactions ................ (425,936) -- (50,547) --
----------- ----------- ----------- -----------
Change in net assets from shareholder dividends ................ (425,936) -- (668,327) (144,938)
----------- ----------- ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued .................................... 9,603,027 17,578,780 2,753,417 15,425,182
Dividends reinvested ........................................... 425,882 -- 704,135 109,130
Value of shares redeemed ....................................... (599,801) (2,297) (57,671) (521)
----------- ----------- ----------- -----------
Change in net assets from capital transactions ................. 9,429,108 17,576,483 3,399,881 15,533,791
----------- ----------- ----------- -----------
Change in net assets ........................................... 10,724,504 21,043,738 3,124,120 15,652,595
----------- ----------- ----------- -----------
NET ASSETS:
Beginning of Period ............................................ 21,043,738 -- 15,652,595 --
----------- ----------- ----------- -----------
End of Period .................................................. $31,768,242 $21,043,738 $18,776,715 $15,652,595
=========== =========== =========== ===========
SHARE TRANSACTIONS:
Issued ......................................................... 779,800 1,736,446 274,427 1,542,200
Reinvested ..................................................... 33,720 -- 70,239 10,818
Redeemed ....................................................... (48,297) (203) (5,756) (52)
----------- ----------- ----------- -----------
Change in shares ............................................... 765,223 1,736,243 338,910 1,552,966
=========== =========== =========== ===========
Accumulated undistributed (distributions in excess of)
net investment income ....................................... $ -- $ -- $ 77,712 $ 45,634
=========== =========== =========== ===========

BB&T VARIABLE INSURANCE FUNDS

FINANCIAL HIGHLIGHTS

Selected data for a share of beneficial interest outstanding throughout the
periods indicated.

INVESTMENT ACTIVITIES
---------------------------------------------
NET ASSET NET REALIZED/
VALUE, NET UNREALIZED GAINS TOTAL FROM
BEGINNING INVESTMENT (LOSSES) ON INVESTMENT
OF PERIOD INCOME (LOSS) INVESTMENTS ACTIVITIES
--------- ------------- ---------------- ----------

BB&T LARGE CAP VALUE VIF
Year Ended December 31, 2005 ............... $13.35 0.26 0.65 0.91
Year Ended December 31, 2004 ............... $12.00 0.22 1.35 1.57
Year Ended December 31, 2003 ............... $ 9.88 0.19 2.12 2.31
Year Ended December 31, 2002 ............... $12.50 0.17 (2.62) (2.45)
Year Ended December 31, 2001 ............... $12.66 0.17 (0.16) 0.01

BB&T MID CAP GROWTH VIF
Year Ended December 31, 2005 ............... $13.70 (0.04) 2.01 1.97
Year Ended December 31, 2004 ............... $11.69 (0.05) 2.06 2.01
Year Ended December 31, 2003 ............... $ 8.56 (0.06) 3.19 3.13
Year Ended December 31, 2002 ............... $10.70 (0.09) (2.05) (2.14)
October 15, 2001 to December 31, 2001 (a) .. $10.00 (0.01) (0.71) 0.70

BB&T LARGE COMPANY GROWTH VIF
Year Ended December 31, 2005 ............... $10.14 0.04 0.15 0.19
Year Ended December 31, 2004 ............... $ 9.64 0.04 0.50 0.54
Year Ended December 31, 2003 ............... $ 7.53 (0.02) 2.13 2.11
Year Ended December 31, 2002 ............... $10.83 (0.06) (3.24) (3.30)
October 15, 2001 to December 31, 2001 (a) .. $10.00 (0.01) 0.84 0.83

BB&T CAPITAL MANAGER EQUITY VIF***
Year Ended December 31, 2005 ............... $ 9.99 0.17 0.50 0.67
Year Ended December 31, 2004 ............... $ 8.99 0.07 1.00 1.07
Year Ended December 31, 2003 ............... $ 7.19 0.03 1.80 1.83
Year Ended December 31, 2002 ............... $ 9.28 0.01 (1.98) (1.97)
May 1, 2001 to December 31, 2001 (a) ....... $10.00 0.01 (0.72) (0.71)

BB&T SPECIAL OPPORTUNITIES EQUITY VIF
Year Ended December 31, 2005 ............... $12.12 (0.03) 0.79 0.76
July 22, 2004 to December 31, 2004 (a) ..... $10.00 (0.04) 2.16 2.12

BB&T TOTAL RETURN BOND VIF
Year Ended December 31, 2005 ............... $10.08 0.33 (0.10) 0.23
July 22, 2004 to December 31, 2004 (a) ..... $10.00 0.10 0.08 0.18

----------
* During the period certain fees were reduced. If such reductions had not
occurred, the ratios would have been as indicated.

** Total return ratios are based on a share outstanding throughout the period
and assume reinvestment of distributions at a net asset value. Total return
ratios do not reflect charges pursuant to the terms of the insurance
contracts funded by separate accounts that invest in the Fund's shares.

*** The expense ratios exclude the impact of fees/expenses paid at the
underlying fund level.

(a) Period from commencement of operations.

(b) Amount is less than $0.005.

(d) Annualized for periods less than one year.

See accompanying notes to the financial statements.

DIVIDENDS
------------------------------------------------- NET ASSET
NET NET REALIZED VALUE,
INVESTMENT RETURN OF GAINS ON TOTAL END OF TOTAL
INCOME CAPITAL INVESTMENTS DIVIDENDS PERIOD RETURN** (C)
---------- --------- ------------ --------- --------- ------------

BB&T LARGE CAP VALUE VIF
Year Ended December 31, 2005 ............... (0.26) -- -- (0.26) $14.00 6.90%
Year Ended December 31, 2004 ............... (0.22) -- -- (0.22) $13.35 13.18%
Year Ended December 31, 2003 ............... (0.19) (0.00)(b) -- (0.19) $12.00 23.62%
Year Ended December 31, 2002 ............... (0.17) -- -- (0.17) $ 9.88 (19.64)%
Year Ended December 31, 2001 ............... (0.17) -- -- (0.17) $12.50 0.16%

BB&T MID CAP GROWTH VIF
Year Ended December 31, 2005 ............... -- -- -- -- $15.67 14.38%
Year Ended December 31, 2004 ............... -- -- -- -- $13.70 17.19%
Year Ended December 31, 2003 ............... -- -- -- -- $11.69 36.57%
Year Ended December 31, 2002 ............... -- -- -- -- $ 8.56 (20.00)%
October 15, 2001 to December 31, 2001 (a) .. -- -- -- -- $10.70 7.00%

BB&T LARGE COMPANY GROWTH VIF
Year Ended December 31, 2005 ............... (0.04) -- -- (0.04) $10.29 1.88%
Year Ended December 31, 2004 ............... (0.04) -- -- (0.04) $10.14 5.63%
Year Ended December 31, 2003 ............... -- -- -- -- $ 9.64 28.02%
Year Ended December 31, 2002 ............... -- -- -- -- $ 7.53 (30.47)%
October 15, 2001 to December 31, 2001 (a) .. -- -- -- -- $10.83 8.30%

BB&T CAPITAL MANAGER EQUITY VIF***
Year Ended December 31, 2005 ............... (0.15) -- -- (0.15) $10.51 6.77%
Year Ended December 31, 2004 ............... (0.07) -- -- (0.07) $ 9.99 11.91%
Year Ended December 31, 2003 ............... (0.03) -- -- (0.03) $ 8.99 25.47%
Year Ended December 31, 2002 ............... (0.01) -- (0.11) (0.12) $ 7.19 (21.25)%
May 1, 2001 to December 31, 2001 (a) ....... (0.01) -- -- (0.01) $ 9.28 (7.08)%

BB&T SPECIAL OPPORTUNITIES EQUITY VIF
Year Ended December 31, 2005 ............... -- -- (0.18) (0.18) $12.70 6.29%
July 22, 2004 to December 31, 2004 (a) ..... -- -- -- -- $12.12 21.20%

BB&T TOTAL RETURN BOND VIF
Year Ended December 31, 2005 ............... (0.36) -- (0.03) (0.39) $ 9.92 2.29%
July 22, 2004 to December 31, 2004 (a) ..... (0.10) -- -- (0.10) $10.08 1.76%

RATIOS/SUPPLEMENTAL DATA
--------------------------------------------------------------------------------
RATIO OF NET
RATIO OF INVESTMENT RATIO OF
NET ASSETS, NET EXPENSES INCOME (LOSS) EXPENSES TO
END OF TO AVERAGE TO AVERAGE AVERAGE PORTFOLIO
PERIOD (000) NET ASSETS (D) NET ASSETS (D) NET ASSETS* (D) TURNOVER RATE
------------ -------------- -------------- --------------- -------------

BB&T LARGE CAP VALUE VIF
Year Ended December 31, 2005 ............... $113,648 0.79% 1.95% 1.05% 21.76%
Year Ended December 31, 2004 ............... $111,612 0.81% 1.77% 1.10% 12.91%
Year Ended December 31, 2003 ............... $ 94,683 0.88% 1.82% 1.17% 13.96%
Year Ended December 31, 2002 ............... $ 63,667 0.84% 1.57% 1.13% 15.24%
Year Ended December 31, 2001 ............... $ 77,796 0.86% 1.17% 1.15% 14.47%

BB&T MID CAP GROWTH VIF
Year Ended December 31, 2005 ............... $ 39,090 0.78% (0.28)% 1.10% 113.04%
Year Ended December 31, 2004 ............... $ 32,407 0.83% (0.44)% 1.22% 135.55%
Year Ended December 31, 2003 ............... $ 23,903 0.98% (0.78)% 1.37% 113.75%
Year Ended December 31, 2002 ............... $ 10,864 1.23% (1.05)% 1.62% 96.89%
October 15, 2001 to December 31, 2001 (a) .. $ 10,713 1.19% (0.55)% 1.58% 3.82%

BB&T LARGE COMPANY GROWTH VIF
Year Ended December 31, 2005 ............... $ 23,523 0.79% 0.40% 1.14% 91.61%
Year Ended December 31, 2004 ............... $ 22,300 0.86% 0.46% 1.26% 119.90%
Year Ended December 31, 2003 ............... $ 18,464 1.04% (0.32)% 1.44% 90.57%
Year Ended December 31, 2002 ............... $ 9,328 1.31% (0.73)% 1.71% 93.65%
October 15, 2001 to December 31, 2001 (a) .. $ 10,876 1.19% (0.32)% 1.59% 16.20%

BB&T CAPITAL MANAGER EQUITY VIF***
Year Ended December 31, 2005 ............... $ 28,722 0.26% 1.68% 0.55% 3.24%
Year Ended December 31, 2004 ............... $ 25,611 0.34% 0.75% 0.54% 1.09%
Year Ended December 31, 2003 ............... $ 20,606 0.56% 0.40% 0.66% 10.06%
Year Ended December 31, 2002 ............... $ 14,804 0.64% 0.15% 0.74% 3.47%
May 1, 2001 to December 31, 2001 (a) ....... $ 16,295 0.54% 0.18% 0.63% 9.18%

BB&T SPECIAL OPPORTUNITIES EQUITY VIF
Year Ended December 31, 2005 ............... $ 31,768 1.23% (0.28)% 1.23% 42.15%
July 22, 2004 to December 31, 2004 (a) ..... $ 21,044 1.45% (0.76)% 1.45% 13.81%

BB&T TOTAL RETURN BOND VIF
Year Ended December 31, 2005 ............... $ 18,777 1.00% 3.38% 1.12% 196.66%
July 22, 2004 to December 31, 2004 (a) ..... $ 15,653 1.29% 2.34% 1.29% 36.74%

BB&T VARIABLE INSURANCE FUNDS

NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 2005

1. ORGANIZATION:

The BB&T Variable Insurance Funds (the "Trust") was organized on November
8, 2004, and is registered under the Investment Company Act of 1940, as
amended (the "1940 Act"), as an open-end investment company established as
a Massachusetts business trust. The Trust commenced operations on May 1,
2005 and presently offers shares of the BB&T Large Cap Value VIF, the BB&T
Mid Cap Growth VIF, the BB&T Large Company Growth VIF, the BB&T Capital
Manager Equity VIF, the BB&T Special Opportunities Equity VIF, and the BB&T
Total Return Bond VIF (referred to individually as a "Fund" and
collectively as the "Funds"). The Trust is authorized to issue an unlimited
number of shares of beneficial interest without par value. Shares of the
Funds are offered through variable annuity contracts offered through the
separate accounts of participating insurance companies. The BB&T Capital
Manager Equity VIF (the "Fund of Funds") invests in other Fund Portfolios
as opposed to individual securities. Prior to May 1, 2005 the Funds
operated as a separate series of the Variable Insurance Funds, an
investment company organized as a Massachusetts business trust, and
registered under the 1940 Act as a diversified, open-end management
investment company.

Under the Funds' organizational documents, its Officers and Trustees are
indemnified against certain liabilities arising out of the performance of
their duties to the Funds. In addition, in the normal course of business,
the Funds may enter into contracts with their vendors and others that
provide for general indemnifications. The Funds' maximum exposure under
these arrangements is unknown as this would involve future claims that may
be made against the Funds. However, based on experience, the Funds expect
that risk of loss to be remote.

2. SIGNIFICANT ACCOUNTING POLICIES:

The following is a summary of significant accounting policies followed by
the Trust in the preparation of its financial statements. The policies are
in conformity with accounting principles generally accepted in the United
States of America ("GAAP"). The preparation of financial statements
requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent
assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses for the period. Actual results
could differ from those estimates. The Fund of Funds seeks its investment
objective of capital appreciation by investing solely in a diversified
portfolio of mutual funds (the "Underlying Funds"). The Fund of Funds
purchases shares of the Underlying Funds at net asset value and without
sales charge.

Securities Valuation--Investments in common stocks, commercial paper,
corporate bonds, municipal securities, U.S. Government securities, and U.S.
Government agency securities, the principal market for which is a
securities exchange or an over-the-counter market, are valued at their
latest available sale price (except for those securities that are traded on
NASDAQ, which will be valued at the NASDAQ official closing price) or in
the absence of such a price, by reference to the latest available bid
quotations in the principal market in which such securities are normally
traded. The Funds may also use an independent pricing service approved by
the Board of Trustees to value certain securities. Such prices reflect fair
values which may be established through the use of electronic and matrix
techniques. Short-term obligations that mature in 60 days or less are
valued at either amortized cost or original cost plus interest, which
approximates fair value. Investments in open-end investment companies,
including the Fund of Funds, are valued at their respective net asset
values as reported by such companies. Investments in closed-end investment
companies are valued at their fair values based upon the latest available
bid prices in the principal market in which such securities are normally
traded. The differences between cost and fair values of investments are
reflected as either unrealized appreciation or depreciation. Securities for
which market quotations are not readily available will be valued at fair
value using methods determined in good faith by the Pricing Committee under
the supervision of the Board of Trustees. Fair value pricing may be used
for significant events such as securities whose trading has been suspended,
whose price has become stale or for which there is no currently available
price.

Securities Transactions and Related Income--Securities transactions are
accounted for no later than one business day after trade date. However, for
financial reporting purposes security transactions are accounted for on
trade date. Interest income is recognized on the accrual basis and
includes, where applicable, the pro rata amortization/accretion of premium
or discount. Dividend income is recorded on the ex-dividend date. Gains or
losses realized from sales of securities are determined by comparing the
identified cost of the security lot sold with the net sales proceeds.

When-Issued--The Funds, may purchase securities on a "when-issued" basis.
The Funds record when-issued securities on the trade date and pledge assets
with a value equal to the purchase commitment for payment of the securities
purchased. The value of the securities underlying when-issued securities
and any subsequent fluctuation in their fair value is taken into account
when determining the net asset value of the Funds, commencing with the date
the Funds agree to purchase the securities.

Repurchase Agreements--The Funds may acquire repurchase agreements from
member banks of the Federal Deposit Insurance Corporation and from
registered broker/dealers that BB&T Asset Management, Inc. ("BB&T") deems
creditworthy under guidelines

BB&T VARIABLE INSURANCE FUNDS

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2005

approved by the Board of Trustees, subject to the seller's agreement to
repurchase such securities at a mutually agreed-upon date and price. The
repurchase price generally equals the price paid by the Funds plus interest
negotiated on the basis of current short-term rates, which may be more or
less than the rate on the underlying collateral. The seller under a
repurchase agreement is required to maintain the value of collateral held
pursuant to the agreement at not less than the repurchase price, including
accrued interest. Securities subject to repurchase agreements are held by
the Funds' custodian or another qualified custodian or in the Federal
Reserve/Treasury book-entry system.

Option Contracts--The Funds may write or purchase option contracts. These
transactions are to hedge against changes in interest rates, security
prices, currency fluctuations, and other market developments, or for the
purposes of earning additional income (i.e. speculation).

The risk associated with purchasing an option is that the Fund pays a
premium whether or not the option is exercised. Additionally, the Funds
bear the risk of loss of the premium and change in fair value should the
counterparty not perform under the contract. Put and call options purchased
are accounted for in the same manner as other securities owned. The cost of
securities acquired through the exercise of call options is increased by
the premiums paid. The proceeds from securities sold through the exercise
of put options are decreased by the premiums paid.

In writing an option, the Funds contract with a specified counterparty to
purchase (written put option) or sell (written call option) a specified
quantity (notional amount) of an underlying asset at a specified price
during a specified period upon demand of the counterparty. The risk
associated with writing an option is that the Funds bear the market risk of
an unfavorable change in the price of an underlying asset, and may be
required to buy or sell an underlying asset under the contractual terms of
the option at a price different from the current fair value. The BB&T
Special Opportunities Equity VIF had the following transactions in written
covered call options during the year ended December 31, 2005.

BB&T
SPECIAL
OPPORTUNITIES
EQUITY VIF
-------------------------
SHARES SUBJECT
COVERED CALL OPTIONS TO CONTRACT PREMIUMS
-------------------- -------------- --------

Balance at beginning of period .. 291 $ 43,616
Options written ................. 939 47,965
Options closed .................. (90) (6,030)
Options expired ................. (574) (29,091)
Options exercised ............... (501) (51,959)
---- --------
Balance at end of period ........ 65 $ 4,501
==== ========

The following is a summary of options outstanding as of December 31, 2005:

SECURITY
---------------------------
SECURITY SHARES SUBJECT
BB&T SPECIAL OPPORTUNITIES EQUITY VIF TO CONTRACT FAIR VALUE
------------------------------------- -------------- ----------

Fair Isaac Corp., $50.00, 1/21/06 ... 65 $325
----
$325
====

Dividends and Distributions--Dividends from net investment income are
declared and paid quarterly for the Funds, with the exception of the BB&T
Total Return Bond VIF, in which case dividends from net investment income
are declared daily and paid monthly. Distributable net realized gains, if
any, are declared and distributed at least annually.

The character of income and gains distributed are determined in accordance
with federal income tax regulations, which may differ from GAAP. These
"book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature (i.e.
reclass of market discounts, gain/loss, paydowns and distributions), such
amounts are reclassified within the composition of net assets based on
their federal tax-basis treatment; temporary differences do not require
reclassification. Dividends to shareholders which exceed net investment
income and net realized gains for tax purposes are reported as
distributions of capital or return of capital.

Federal Income Taxes --It is the policy of each Fund to continue to qualify
as a regulated investment company by complying with the provisions
available to certain investment companies, as defined in applicable
sections of the Internal Revenue Code, and to

BB&T VARIABLE INSURANCE FUNDS

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2005

make distributions of net investment income and net realized capital gains
sufficient to relieve it from all, or substantially all, federal income
taxes. Accordingly, no provision for federal income tax is required. Under
the applicable foreign tax law, a withholding tax may be imposed on
interest, dividends and capital gains earned on foreign investments at
various rates. Where available, the Funds will file for claims on foreign
taxes withheld.

Other--Expenses directly attributable to a Fund are charged to that Fund.
Expenses not directly attributable to a Fund are allocated proportionately
among all Funds daily in relation to the net assets of each Fund or on
another reasonable basis. Expenses which are attributable to more than one
Trust are allocated across the BB&T Variable Insurance Funds and BB&T Funds
Trusts, based upon relative net assets or on another reasonable basis. BB&T
Asset Management, Inc. ("BB&T") serves as the Investment Advisor for each
the BB&T Variable Insurance Fund, and BB&T Funds Trusts.

3. PURCHASES AND SALES OF SECURITIES:

Purchases and sales of securities (excluding short-term and U.S. Government
securities) for the year ended December 31, 2005 are as follows:

PURCHASES SALES
----------- -----------

BB&T Large Cap Value VIF ............... $23,585,332 $26,774,467
BB&T Mid Cap Growth VIF ................ 38,174,380 36,499,528
BB&T Large Company Growth VIF .......... 20,590,270 19,523,582
BB&T Capital Manager Equity VIF ........ 3,964,111 845,000
BB&T Special Opportunities Equity VIF .. 16,505,874 10,580,567
BB&T Total Return Bond VIF ............. 37,247,547 33,207,843

Purchases and sales of long-term U.S. Government Securities for the year
ended December 31, 2005 for the BB&T Total Return Bond VIF were $3,315,463
and $4,207,126, respectively.

4. RELATED PARTY TRANSACTIONS:

Investment advisory services are provided to the Funds by BB&T. Under the
terms of the Investment Advisory Agreement, BB&T is entitled to receive
fees based on a percentage of the average daily net assets of the Funds.
These fees are accrued daily and payable on a monthly basis.

Information regarding these transactions is as follows for the year ended
December 31, 2005:

FEE RATE AFTER FEE RATE AFTER
CONTRACTUAL CONTRACTUAL CONTRACTUAL
FEE RATE WAIVER(1) WAIVER(2)*
----------- -------------- --------------

BB&T Large Company Value VIF ........... 0.74% 0.60% 0.50%
BB&T Mid Cap Growth VIF ................ 0.74% 0.35% 0.50%
BB&T Large Company Growth VIF .......... 0.74% 0.34% 0.50%
BB&T Capital Manager Equity VIF ........ 0.25% 0.15% 0.00%
BB&T Special Opportunities Equity VIF .. 0.80% 0.80% 0.80%
BB&T Total Return Bond VIF ............. 0.60% 0.60% 0.50%

----------
* Effective May 1, 2005, BB&T has contractually agreed to waive a portion of
the investment advisory fee as disclosed in the table above. For the period
ended December 31, 2005, BB&T voluntarily agreed to waive an additional
portion of the investment advisory fees. All contractual and voluntary
investment advisory fee waivers are not subject to recoupment in subsequent
fiscal periods.

(1) For the period January 1, 2005 through April 30, 2005.

(2) For the period May 1, 2005 through December 31, 2005.

Pursuant to a Sub-Advisory agreement with BB&T, Scott & Stringfellow, Inc., a
wholly owned subsidiary of BB&T Corporation, serves as the Sub-Advisor to the
BB&T Special Opportunities Equity VIF, subject to the general supervision of the
Trusts' Board of Trustees and BB&T. Pursuant to a Sub-Advisory agreement with
BB&T effective July 18, 2005, Sterling Capital Management LLC, a wholly owned
subsidiary of BB&T Corporation, serves as the Sub-Advisor to the BB&T Total
Return Bond VIF, subject to the general supervision of the Trusts' Board of
Trustees and BB&T. For their services, the Sub-Advisors are entitled to a fee,
payable by BB&T.

Effective May 1, 2005, BB&T began serving the Funds as administrator. BB&T
receives compensation for providing administration services at a rate of 0.12%
of the BB&T Variable Insurance Funds and BB&T Funds aggregate average daily net
assets up to

BB&T VARIABLE INSURANCE FUNDS

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2005

$5 billion, and a rate of 0.08% of the average daily net assets in excess
of $5 billion. This fee is accrued daily and payable on a monthly basis.
Expenses incurred are reflected on the Statements of Operations as
"Administration fees." During the period ended December 31, 2005, BB&T
voluntarily waived administration fees of $21,023 for the BB&T Capital
Manager Equity VIF, and this waiver is not subject to recoupment in
subsequent fiscal periods. Pursuant to a sub-administration agreement with
BB&T, BISYS serves as Sub-Administrator to the Trust subject to the general
supervision of the Trusts' Board of Trustees and BB&T. For these services,
BISYS is entitled to a fee, payable by BB&T.

BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services
("BISYS"), an Ohio Limited Partnership, and BISYS Fund Services Ohio, Inc.
("BISYS Ohio") are subsidiaries of the BISYS Group, Inc. BISYS, with whom
certain officers of the Funds are affiliated, serves the Funds as
distributor. BISYS Ohio serves the Funds as fund accountant and transfer
agent. Prior to May 1, 2005, BISYS and BISYS Ohio received compensation for
providing administration, fund accounting and transfer agency services at a
percentage of the average net assets of each Fund. In addition, for each
Fund an additional flat fee was charged. The fee was accrued daily and
payable on a monthly basis. Expenses incurred are reflected on the
Statements of Operations as "Administration, transfer agency and fund
accounting fees". BISYS voluntarily waived fees totaling $54,844 of
administration fees for the period January 1, 2005 through April 30, 2005,
for the BB&T Large Cap Value VIF, and this waiver is not subject to
recoupment in subsequent fiscal periods.

Effective May 1, 2005, BISYS Ohio serves the Funds as fund accountant and
transfer agent and receives compensation for providing fund accounting and
transfer agency services at a rate of 0.02% (0.01% for each service) of the
average daily net assets of each Fund, the fee is accrued daily and payable
on a monthly basis. Expenses incurred are reflected on the Statements of
Operations as "Fund accounting fees" and "Transfer agency fees",
respectively.

Under a Compliance Services Agreement between the Funds' and BISYS Ohio
(the "CCO Agreement"), BISYS Ohio makes an employee available to serve as
the Funds' Chief Compliance Officer (the "CCO"). Under the CCO Agreement,
BISYS Ohio also provides infrastructure and support in implementing the
written policies and procedures comprising the Funds' compliance program,
including support services to the CCO. For the services provided under the
CCO Agreement, the Funds paid BISYS Ohio $19,750 for the reporting period
ended December 31, 2005, plus certain out of pocket expenses. Effective
September 24, 2005, the CCO Agreement was increased to $35,000, plus
certain out of pocket expenses. Expenses incurred are reflected on the
Statements of Operations as "Compliance service fees". BISYS Ohio pays the
salary and other compensation earned by any such individuals as employees
of BISYS Ohio.

For the year ended December 31, 2005, the Funds' paid $34,335 in brokerage
fees to Scott & Stringfellow, Inc., a wholly owned subsidiary of BB&T
Corporation, on the execution of purchases and sales of the Funds'
portfolio investments.

The Trust has adopted a Variable Contract Owner Servicing Plan (the
"Service Plan") under which the Funds may pay a fee computed daily and paid
monthly, at an annual rate of up to 0.25% of the average daily net assets
of the Fund. A servicing agent may periodically waive all or a portion of
its servicing fees. For the year ended December 31, 2005 the Funds did not
participate in any service plans.

Certain Officers and Trustees of the Trust are affiliated with the Adviser
or the Administrator. Such Officers and Trustees receive no compensation
from the Funds for serving in their respective roles. Each of the
non-interested Trustees who served both on the Board and the audit
committee are compensated $1,750 ($33,250 in total) for meeting or retainer
fees, plus reimbursement for certain expenses.

5. FEDERAL INCOME TAX INFORMATION:

At December 31, 2005, the following Funds have net capital loss
carryforwards to offset future net capital gains, if any, to the extent
provided by the Treasury regulations. To the extent that these
carryforwards are used to offset future capital gains, it is probable that
the gains that are offset will not be distributed to shareholders.

AMOUNT EXPIRES
-------- -------

BB&T Large Cap Value VIF .... $891,424 2011
BB&T Total Return Bond VIF .. 96,285 2013

BB&T VARIABLE INSURANCE FUNDS

NOTES TO FINANCIAL STATEMENTS -- (CONTINUED)
DECEMBER 31, 2005

The tax character of dividends paid to shareholders during the fiscal year
ended December 31, 2005 were as follows:

DISTRIBUTIONS PAID FROM
NET ----------------------------- TOTAL
ORDINARY LONG-TERM TOTAL TAXABLE TAX EXEMPT DISTRIBUTIONS
INCOME GAINS DISTRIBUTIONS DISTRIBUTIONS PAID*
---------- --------- ------------- ------------- -------------

BB&T Large Cap Value VIF ............... $2,712,891 $-- $2,712,891 $-- $2,712,891
BB&T Large Company Growth VIF .......... 183,178 -- 183,178 -- 183,178
BB&T Capital Manager Equity VIF ........ 481,528 -- 481,528 -- 481,528
BB&T Special Opportunities Equity VIF .. 425,882 -- 425,882 -- 425,882
BB&T Total Return Bond VIF ............. 704,135 -- 704,135 -- 704,135

The tax character of dividends paid to shareholders during the fiscal year
ended December 31, 2004, were as follows:

BB&T Large Cap Value VIF ......... $1,648,020 $-- $1,648,020 $-- $1,648,020
BB&T Large Company Growth VIF .... 1,683 -- 1,683 -- 1,683
BB&T Capital Manager Equity VIF .. 134,465 -- 134,465 -- 134,465
BB&T Total Return Bond VIF ....... 109,130 -- 109,130 -- 109,130

----------
* Total Distributions paid may differ from the Statement of Changes in Net
Assets because distributions are recognized when actually paid for tax
purposes.

As of December 31, 2005, the components of accumulated earnings (deficit)
on a tax basis were as follows:

UNDISTRIBUTED ACCUMULATED TOTAL
UNDISTRIBUTED LONG TERM CAPITAL AND UNREALIZED ACCUMULATED
ORDINARY CAPITAL GAINS ACCUMULATED DIVIDENDS OTHER APPRECIATION EARNINGS
INCOME (LOSSSES) EARNINGS PAYABLE LOSSES (DEPRECIATION) (DEFICIT)
------------- ------------- ----------- --------- ----------- -------------- -----------

BB&T Large Cap
Value VIF........... $ 24,377 $ -- $ 24,377 $-- $(891,424) $19,663,060 $18,796,013
BB&T Mid Cap
Growth VIF.......... -- 2,384,160 2,384,160 -- -- 10,772,126 13,156,286
BB&T Large Company
Growth VIF.......... -- 62,259 62,259 -- -- 2,195,384 2,257,643
BB&T Capital Manager
Equity VIF.......... 143,333 967,984 1,111,317 -- -- 1,583,325 2,694,642
BB&T Special
Opportunities Equity
VIF................. 283,514 1,526,429 1,809,943 -- -- 2,956,184 4,766,127
BB&T Total Return
Bond VIF............ 77,712 -- 77,712 -- (96,285) (134,846) (153,419)

At December 31, 2005, the cost, gross unrealized appreciation and gross
unrealized depreciation on securities for federal income tax purposes were
as follows:

NET
TAX TAX UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
----------- ------------ ------------ --------------

BB&T Large Cap Value VIF ............... $94,026,795 $22,625,981 $(2,962,921) $19,663,060
BB&T Mid Cap Growth VIF ................ 28,491,568 10,907,628 (135,502) 10,772,126
BB&T Large Company Growth VIF .......... 21,321,372 2,588,396 (393,012) 2,195,384
BB&T Capital Manager Equity VIF ........ 27,101,693 1,908,444 (325,119) 1,583,325
BB&T Special Opportunities Equity VIF .. 28,936,362 3,435,042 (483,034) 2,952,008
BB&T Total Return Bond VIF ............. 20,285,229 29,231 (164,077) (134,846)

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and Board of Trustees of
BB&T Variable Insurance Funds:

We have audited the accompanying statements of assets and liabilities of BB&T
Variable Insurance Funds (previously the Variable Insurance Funds) - BB&T Large
Cap Value Variable Insurance Fund, BB&T Mid Cap Growth Variable Insurance Fund,
BB&T Large Company Growth Variable Insurance Fund, BB&T Capital Manager Equity
Variable Insurance Fund, BB&T Special Opportunities Equity Variable Insurance
Fund and BB&T Total Return Bond Variable Insurance Fund (referred to
individually as a Fund and collectively as the Funds) including the schedules of
portfolio investments, as of December 31, 2005, and the related statements of
operations for the year then ended, the statements of changes in net assets for
each period in the two-year period then ended, and the financial highlights for
each period in the four-year period then ended. These financial statements and
financial highlights are the responsibility of the Funds' management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audits. The accompanying financial highlights
for the periods ended December 31, 2001 were audited by other auditors whose
report thereon dated February 15, 2002, expressed an unqualified opinion on
those financial highlights.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. Our procedures included confirmation of
securities owned as of December 31, 2005, by correspondence with custodians and
brokers; where replies were not received from brokers, we performed other
auditing procedures. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Funds as of December 31, 2005, the results of its operations for the year then
ended, the changes in their net assets for each period in the two-year period
then ended, and the financial highlights for each period in the four-year period
then ended, in conformity with U.S. generally accepted accounting principles.

KPMG LLP

Columbus, Ohio
February 17, 2006

BB&T VARIABLE INSURANCE FUNDS

OTHER INFORMATION (UNAUDITED)
DECEMBER 31, 2005

OTHER FEDERAL INCOME TAX INFORMATION (UNAUDITED):

For corporate shareholders, the following percentage of the total ordinary
income dividends paid during the fiscal year ended December 31, 2005
qualify for the corporate dividends received deduction for the following
Funds:

DIVIDENDS
RECEIVED
DEDUCTION
---------

BB&T Large Cap Value VIF .......... 100.00%
BB&T Large Company Growth VIF ..... 100.00%
BB&T Capital Manager Equity VIF ... 100.00%

SPECIAL MEETING OF SHAREHOLDERS (UNAUDITED):

On July 8, 2005, there was a special meeting of the shareholders of the
BB&T Variable Insurance Funds. The purpose of the meeting was: (1) to
approve Investment Sub-Advisory Agreements between the Advisor and Sterling
Capital Management LLC with respect to the BB&T Total Return Bond VIF. A
description of the proposal and the number of shares voted is as follows:

1. Approve Investment Sub-Advisory Agreements between the Advisor and
Sterling Capital Management with respect to the BB&T Total Return Bond
VIF.

AFFIRMATIVE AGAINST ABSTAIN
----------- ------- -------

BB&T Total Return Bond Fund ....... 1,655,759 -- --

OTHER INFORMATION (UNAUDITED):

A description of the policies and procedures that the Funds use to
determine how to vote proxies relating to portfolio securities is available
(i) without charge, upon request, by calling 1-800-228-1872; and (ii) on
the Securities and Exchange Commission's ("the Commission") website at
http://www.sec.gov.

Information regarding how the Funds voted proxies relating to portfolio
securities during the most recent 12-month period ended June 30th is
available (i) without charge, upon request, by calling 1-800-228-1872 and
(ii) on the Commission's website at http://www.sec.gov.

The BB&T Variable Insurance Funds file complete Schedules of Portfolio
Holdings with the Commission for the first and third quarters of each
fiscal year on Form N-Q. The Funds' Forms N-Q are available without charge
on the Commission's website at http://www.sec.gov, or may be reviewed and
copied at the Commission's Public Reference Room in Washington, D.C.
Information on the operation of the Public Reference Room, may be obtained
by calling 1-800-SEC-0330.

BOARD CONSIDERATION OF ADVISORY AND SUB-ADVISORY AGREEMENTS (UNAUDITED)

The Board of Trustees, at a meeting held on August 30, 2005, formally
considered the Trust's investment advisory agreement with BB&T Asset Management,
Inc. ("BB&TAM" or the "Adviser") with respect to all funds of the Trust and
sub-advisory agreement of BB&TAM with Scott & Stringfellow, Inc. (the
"Sub-Adviser" or, collectively with the Adviser, the "Advisers") with respect to
the Special Opportunities Equity VIF (collectively, the "Advisory Agreements").
The Trustees reviewed extensive material in connection with their review of the
Advisory Agreements, including data from an independent provider of mutual fund
data which included comparisons with industry averages for comparable funds for
advisory fees and total fund expenses. The data reflected BB&TAM fee waivers in
place, as well as BB&TAM's contractual investment advisory fee levels. The Board
was assisted in its review by independent legal counsel, who provided a
memorandum detailing the legal standards for review of the Advisory Agreements.
The Board received a detailed presentation by BB&TAM, which included a
fund-by-fund analysis of performance. A presentation was also provided by the
Sub-Adviser. The Board also deliberated outside the presence of management and
the Advisers.

In their deliberations, each Trustee attributed different weights to
various factors involved in an analysis of whether each Advisory Agreement
should be continued, and no factor alone was considered determinative. The
Trustees determined that the overall arrangements between the Trust and the
Advisers, as provided in the Advisory Agreements, were fair and reasonable and
that continuance of the Advisory Agreements was in the best interests of each
Fund and its shareholders.

The matters addressed below were considered and discussed by the Trustees
in reaching their conclusions.

Nature, Extent and Quality of Services Provided by the Adviser

The Trustees received and considered information regarding the nature,
extent, and quality of the services provided to each Fund under the Advisory
Agreements. The Trustees took into account information furnished throughout the
year at Trustee meetings, as well as materials furnished specifically in
connection with the annual review process. The Trustees considered the
background and experience of each Adviser's senior management and the expertise
of investment personnel of each Adviser responsible for the day-to-day
management of each Fund. The Trustees considered the overall reputation, and the
capabilities and commitment of the Advisers to provide high quality service to
the Trust, and the Trustees' overall confidence in each Adviser's integrity.

The Trustees received information concerning the investment philosophy and
investment processes applied by the Advisers in managing the Funds. The Trustees
also considered information regarding regulatory compliance and compliance with
the investment policies of the Funds. The Trustees evaluated the trading
practices of Scott & Stringfellow, which engages in affiliated brokerage for a
majority of the portfolio trades for the Fund it sub-advises. As part of this
evaluation, the Trustees received information regarding safeguards employed,
such as prohibitions on principal and cross-agency trades. The Trustees also
evaluated the procedures of the Advisers designed to fulfill the Advisers'
fiduciary duty to the Funds with respect to possible conflicts of interest,
including the Advisers' codes of ethics (regulating the personal trading of its
officers and employees).

With respect to BB&TAM, the Trustees particularly noted recent increased
staffing and enhancements to the investment processes and systems and
administration, including the retention of, and improvements initiated by, a
chief investment officer. Based on their review, the Trustees concluded that,
with respect to the quality and nature of services to be provided by the
Advisers, the scope of responsibilities was typical of those of investment
advisers and sub-advisers to open-end mutual funds generally, and that the
quality of the services was very satisfactory.

Investment Performance

The Trustees considered performance results of each Fund in absolute terms
and relative to each Fund's benchmark index. It was noted that performance of
the Funds over the last twelve months was generally strong. During their review,
the Trustees particularly considered the strong one-year performance of the
Special Opportunities Equity VIF relative to its benchmark index.

After reviewing the performance of each Fund, and taking into consideration
the management style, investment strategies, and prevailing market conditions
during the prior year and for longer periods, the Trustees concluded that the
performance of each of the Funds was satisfactory or better.

Cost of Services, Including the Profits Realized by the Advisers and Affiliates

The Trustees considered peer group comparable information with respect to
the advisory fees charged by BB&TAM to each of the Funds, taking into
consideration both contractual and actual (i.e., after waiver) fee levels. The
Trustees concluded that the investment advisory fees fell within an acceptable
range as compared to peer groups. The Trustees particularly noted, however, that
investment advisory fees for the Special Opportunities Equity VIF exceeded the
industry average. The Trustees considered that the total expense ratio for the
Special Opportunities Equity VIF exceeded the industry average by only 10 basis
points. The Trustees also considered the strong performance of this fund over
the past twelve months, as compared to its benchmark index, and concluded that
the strong performance supported the somewhat higher investment advisory fee.

As part of their review, the Trustees considered benefits to the Adviser
aside from investment advisory fees. The Trustees reviewed administration fees
received by BB&TAM and considered the fallout benefits to BB&TAM such as the
research services available to the Adviser by reason of brokerage commissions
generated by the Funds' turnover. The Trustees also considered benefits to
BB&TAM's affiliates, including brokerage commissions received by Scott &
Stringfellow for executing trades on behalf of the Special Opportunities Equity
VIF. With respect to Scott & Stringfellow, the Trustees noted that brokerage
commissions were paid on the same commission schedule as employed by BB&TAM and
that such brokerage arrangements were considered by the Sub-Adviser to be
advantageous in terms of superior access to the market.

Consideration of the reasonableness of advisory fees also took into
account, where relevant, the profitability of the Advisers. In determining
whether the investment advisory and sub-advisory fees (collectively, the
"investment advisory fees") were reasonable, the Trustees reviewed profitability
information provided by the Advisers with respect to investment advisory
services. With respect to such information, the Trustees recognized that such
profitability data was generally unaudited and represented an Adviser's own
determination of its and its affiliates' revenues from the contractual services
provided to the Funds, less expenses of providing such services. Expenses
include direct and indirect costs and were calculated using an allocation
methodology developed by the Adviser. The Trustees also recognized that it is
difficult to make comparisons of profitability from fund investment advisory and
sub-advisory contracts, because comparative information is not generally
publicly available and is affected by numerous factors. Based on their review,
the Trustees concluded that the profitability to BB&TAM and its affiliates as a
result of their relationships with the Funds was acceptable. With respect to
Sub-Adviser profitability, the Trustees noted that sub-advisory fees are paid by
BB&TAM, rather than directly from the Trust's assets. The Board also concluded
that the fees under the Advisory Agreements were fair and reasonable, in light
of the services and benefits provided to each Fund.

Economies of Scale

The Trustees also considered whether fee levels reflect economies of scale
and whether economies of scale would be produced by the growth of the Trust's
assets. The Trustees noted that the Funds were not of a comparable size and had
yet to attract assets sufficient to generate economies of scale.

INFORMATION ABOUT TRUSTEES AND OFFICERS (UNAUDITED)

Overall responsibility for the management of the Funds rests with its Board
of Trustees', who are elected by the Shareholders of the Funds. The
Trustees' elect the officers of the Funds to supervise its day-to-day
operations. The names of the Trustees', their addresses, birthdate, length
of tenure, principal occupations during the past five years, number of
portfolios overseen and directorships held outside of the Funds are set
below:

NUMBER OF
PORTFOLIOS
TERM OF OFFICE/ OVERSEEN IN
POSITION(S) HELD LENGTH OF PRINCIPAL OCCUPATION COMPLEX BY
NAME, ADDRESS, AND BIRTHDATE WITH BB&T TIME SERVED DURING THE PAST 5 YEARS TRUSTEE
---------------------------- --------------------- --------------- --------------------------- -----------

Thomas W. Lambeth Trustee, Chairman of Indefinite, From January 2001 to 31
700 Yorkshire Road the Board of Trustees 8/92--present present, Senior Fellow,
Winston-Salem, NC 27106 Z. Smith Reynolds
Birthdate: 1/35 Foundation; From 1978 to
January 2001, Executive
Director, Z. Smith
Reynolds Foundation.

Drew T. Kagan Trustee Indefinite, From December 2003 to 31
Montecito Advisors, Inc. 8/00--present present, President and
810 N. Jefferson St., Director, Montecito
Ste 101. Lewisburg, Advisors, Inc..; from
WV 24901 March 1996 to December
Birthdate: 2/48 2003, President,
Investment Affiliate, Inc.

Laura C. Bingham Trustee Indefinite, From July 1998 to present, 31
Peace College 2/01--present President of Peace College.
Office of the President
15 East Peace Street
Raleigh, NC 27604-1194
Birthdate: 11/56

Douglas R. Van Scoy Trustee Indefinite, Retired; From November 31
841 Middle St. 5/04--present 1974 to July 2001, Deputy
Sullivans Island, SC 26481 Director of Private Client
Birthday: 11/43 Group and Senior Execu-
tive Vice President of
Smith Barney (investment
banking).

James L. Roberts Trustee Indefinite, Retired; From January 31
207 Highland Terrace 11/04--present 1999 to December 2003
Breckenridge, CO 80424 President, CEO and
Birthday: 11/42 Director, Covest
Bancshares, Inc.

The Funds Statement of Additional Information includes information about the
Fund's Trustees. To receive your free copy of the Statement of Additional
Information, call toll free: 1-800-453-7348.

The following table shows information for trustees who are "interested persons"
of BB&T Variable Insurance Funds as defined in the 1940 act:

TERM OF OFFICE/
POSITION(S) HELD LENGTH OF PRINCIPAL OCCUPATION OVERSEEN IN
NAME, ADDRESS, AND BIRTHDATE WITH BB&T TIME SERVED DURING THE PAST 5 YEARS COMPLEX
---------------------------- --------------------- --------------- --------------------------- -----------

*Kenneth L. Miller Trustee Indefinite, From August 1997 to 31
200 W. Second Street, 11/03--present present, Executive Vice
16th Floor Winston-Salem, President, Branch Banking
NC 2710 and Trust Company;
Birthdate: 9/46 Employee of Branch
Banking and Trust Company
since 1989.

----------
* Mr. Miller is treated by the Funds as an "interested person" (as defined in
Section 2(e)(19) of the 1940 Act) of the Funds. Mr. Miller is an
"interested person" because he owns shares of BB&T Corporation and is an
Executive Vice President of Branch Banking and Trust Company, the parent of
the adviser.

The following table shows information for officers of BB&T Variable Insurance
Funds:

TERM OF OFFICE/
POSITION(S) HELD LENGTH OF PRINCIPAL OCCUPATION
NAME AND BIRTHDATE WITH BB&T FUND TIME SERVED DURING THE PAST 5 YEARS
------------------ --------------------- --------------- --------------------------

Keith F. Karlawish President Indefinite, From May 2002 to present,
Birthdate: 8/64 2/05--Present President, BB&T Asset
Management, Inc.; from
1996 to 2002, Senior Vice
President and Director of
Fixed Income, BB&T
Asset Management, Inc.

E.G. Purcell, III Vice President Indefinite, From 1995 to present,
Birthdate: 1/55 11/00--Present Senior Vice President,
BB&T Asset Management,
Inc. and its predecessors

James T. Gillespie Vice President Indefinite, From February 2005 to
Birthdate: 11/66 5/02--Present present, Vice President of
BB&T Asset Management;
from 1992 to 2005,
Director, BISYS Fund
Services

Todd M. Miller Vice President Indefinite, From June 2005 to
Birthdate: 9/71 8/05--Present present, Mutual Fund
Administrator, BB&T
Asset Management; from
May 1993 to May 2005,
Manager, BISYS Fund
Services

Rodney Ruehle Anti-Money Laundering Indefinite, From August 1995 to
Birthdate: 4/68 Officer and Chief 2/06--Present present, Fund Compliance
Compliance Officer Officer, BISYS Fund
Services.

C. David Bunstine Secretary Indefinite, From December 1987 to
Birthdate: 7/65 5/05--Present present, Vice President,
BISYS Fund Services

Troy A. Sheets Treasurer Indefinite, From April 2002 to
Birthdate: 5/71 5/02--Present present, Vice President,
BISYS Fund Services;
from September 1993 to
April 2002, Senior
Manager, KPMG LLP

Christopher E. Sabato Assistant Treasurer Indefinite From February 1993 to
Birthdate: 12/68 11/02--Present present, Director, BISYS
Fund Services

Alaina V. Metz Assistant Secretary Indefinite From June 1995 to
Birthdate: 4/67 9/95--Present present, Vice President of
BISYS Fund Services.

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