Statement of Additional Information (2006)Full Document 

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                          BB&T VARIABLE INSURANCE FUNDS

                                3435 Stelzer Road
                            Columbus, Ohio 43219-3035
                                 1-800-228-1872

                       STATEMENT OF ADDITIONAL INFORMATION

                                   May 1, 2006

This Statement of Additional Information ("SAI") describes six diversified
investment portfolios (the "Funds") of BB&T Variable Insurance Funds, a
Massachusetts business trust (the "Trust"). The Funds are the:

     -    BB&T Large Cap VIF (formerly the Large Cap Value VIF);

     -    BB&T Capital Manager Equity VIF;

     -    BB&T Large Cap Growth VIF;

     -    BB&T Mid Cap Growth VIF;

     -    BB&T Special Opportunities Equity VIF; and

     -    BB&T Total Return Bond VIF.

The Trust offers an indefinite number of transferable units of interest
("Shares") of each Fund. Shares of the Funds may be sold to segregated asset
accounts ("Separate Accounts") of insurance companies to serve as the investment
medium for variable life insurance policies and variable annuity contracts
("Variable Contracts") issued by the insurance companies. Shares of the Funds
also may be sold to qualified pension and retirement plans, certain insurance
companies, and the investment adviser or administrator of the Funds. The
Separate Accounts invest in Shares of the Funds in accordance with allocation
instructions received from owners of the Variable Contracts ("Variable Contract
Owners").

This SAI is not a Prospectus and is authorized for distribution only when
preceded or accompanied by a Prospectus of the Funds, dated May 1, 2006, as
supplemented from time to time. This SAI contains more detailed information than
that set forth in Prospectuses and should be read in conjunction with the
Prospectuses. Copies of the Prospectuses may be obtained by writing the Trust at
3435 Stelzer Road, Columbus, Ohio 43219-3035, or by telephoning the toll free
number set forth above.



                                TABLE OF CONTENTS


                                                                          
INVESTMENT OBJECTIVES AND POLICIES........................................    3
   Additional Information on the Capital Manager Equity VIF's Investment
      Policies............................................................    3
   Additional Information on Portfolio Instruments........................    3
   Bank Obligations.......................................................    3
   Commercial Paper.......................................................    4
   Variable Amount Master Demand Notes....................................    4
   Short-Term Obligations.................................................    4
   Corporate Debt Securities..............................................    4
   Short-Term Trading.....................................................    5
   Foreign Investments....................................................    5
   Money Market Funds.....................................................    7
   Standard & Poor's Depositary Receipts and Other Exchange-Traded Funds..    7
   U.S. Government Obligations............................................    8
   Options Trading........................................................    8
   Supranational Organizational Obligations...............................    9
   When-Issued and Delayed-Delivery Securities............................    9
   Mortgage-Related and Asset-Backed Securities...........................   10
   Bond Options...........................................................   11
   Restricted Securities..................................................   11
   Non-Investment Grade Debt Securities...................................   11
   Investments in Municipal Securities....................................   12
   Investment Companies...................................................   12
   Lending of Portfolio Securities........................................   12
   Convertible Securities.................................................   12
   Repurchase Agreements..................................................   13
   Reverse Repurchase Agreements and Dollar Roll Agreements...............   13
   Futures Contracts......................................................   14
   Foreign Currency Transactions..........................................   14
   Foreign Currency Options...............................................   15
   Foreign Currency Futures Transactions..................................   15
INVESTMENT RESTRICTIONS...................................................   16
   Portfolio Turnover.....................................................   17
NET ASSET VALUE...........................................................   17
   Valuation of the Funds.................................................   18
ADDITIONAL PURCHASE AND REDEMPTION INFORMATION............................   18
MANAGEMENT OF THE TRUST...................................................   19
   Management Information.................................................   19
   Board of Trustees......................................................   21
   Securities Ownership...................................................   22
   Trustee Compensation...................................................   22
   Investment Adviser.....................................................   24
   Investment Sub-Advisers................................................   25
   Proxy Voting Policies and Procedures...................................   31
   BB&T Asset Management's Proxy Voting Policies and Procedures...........   31
   Sterling Capital's Proxy Policy and Voting Procedures..................   33
   Portfolio Transactions.................................................   39
   Federal Banking Law....................................................   41
   Administrator..........................................................   41
   Sub-Administrator......................................................   42
   Expenses...............................................................   42
   Custodian, Transfer Agent and Fund Accounting Services.................   42
   Independent Registered Public Accounting Firm..........................   43
   Legal Counsel..........................................................   43
   Code of Ethics.........................................................   43
ADDITIONAL INFORMATION....................................................   43
   Description of Shares..................................................   43
   Vote of a Majority of the Outstanding Shares...........................   44
   Shareholder and Trustee Liability......................................   44
   Disclosure of Portfolio Holdings.......................................   44
   Additional Tax Information.............................................   45
   Miscellaneous..........................................................   51
FINANCIAL STATEMENTS......................................................   51
APPENDIX..................................................................   52



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The Trust is an open-end management investment company which currently offers
multiple separate portfolios, each with different investment objectives. This
SAI contains information about the following six diversified Funds which, along
with the "Underlying Funds" described below, are advised by BB&T Asset
Management, Inc. ("BB&T Asset Management" or "Adviser"): the BB&T Large Cap VIF
(the "Large Cap VIF"), the BB&T Capital Manager Equity VIF (the "Capital Manager
Equity VIF"), the BB&T Large Cap Growth VIF (the "Large Cap Growth VIF"), BB&T
Mid Cap Growth VIF (the "Mid Cap Growth VIF"), the BB&T Special Opportunities
Equity VIF (the "Special Opportunities Equity VIF") with Scott & Stringfellow,
Inc. (a "Sub-Adviser") serving as the sub-adviser, and the BB&T Total Return
Bond VIF (the "Total Return Bond VIF") with Sterling Capital Management LLC
(also a "Sub-Adviser") serving as the sub-adviser.

Much of the information contained in this SAI expands upon subjects discussed in
the Prospectuses of the Funds described above. Capitalized terms not defined
herein are defined in such Prospectuses. No investment in a Fund should be made
without first reading the Fund's Prospectus.

                       INVESTMENT OBJECTIVES AND POLICIES

Certain Funds have non-fundamental investment policies obligating such a Fund to
commit, under normal market conditions, at least 80% of its assets to particular
types of investments suggested by the Fund's name. For purposes of such an
investment policy, "assets" includes the Fund's net assets, as well as any
amounts borrowed for investment purposes. The following information supplements
the investment objectives and policies of the Funds as set forth in the
Prospectus.

ADDITIONAL INFORMATION ON THE CAPITAL MANAGER EQUITY VIF'S INVESTMENT POLICIES

The Capital Manager Equity VIF seeks its investment objective by investing in a
diversified portfolio of one or more of the following funds (the "Underlying
Funds"), all of which are series of the BB&T Funds, an affiliated open-end
management investment company: BB&T Equity Index Fund, the BB&T Large Cap Growth
Fund, the BB&T Large Cap Fund, the BB&T Mid Cap Growth Fund, the BB&T Mid Cap
Value Fund, the BB&T Small Cap Fund, the BB&T International Equity Fund, the
BB&T Short U.S. Government Fund (the "BB&T Short Fund"), the BB&T Intermediate
U.S. Government Fund, the BB&T Total Return Bond Fund, the BB&T Prime Money
Market Fund and the BB&T U.S. Treasury Money Market Fund (the "BB&T U.S.
Treasury Fund"). Accordingly, the investment performance of the BB&T Capital
Manager Equity VIF is directly related to the performance of the Underlying
Funds, which may engage in the investment techniques described below. In
addition to shares of the Underlying Funds, for temporary cash management
purposes, the BB&T Capital Manager Equity VIF may invest in short-term
obligations (with maturities of 12 months or less) consisting of commercial
paper (including variable amount master demand notes) and obligations issued or
guaranteed by the U.S. Government or its agencies or instrumentalities. These
investments are described below under "Additional Information on Portfolio
Instruments."

ADDITIONAL INFORMATION ON PORTFOLIO INSTRUMENTS

The following policies supplement the investment objectives and policies of the
Funds and the Underlying Funds as set forth in the Prospectuses.

The BB&T Equity Index Fund, the BB&T Large Cap Growth Fund, the BB&T Large Cap
Fund, the BB&T Mid Cap Growth Fund, the BB&T Mid Cap Value Fund, the BB&T Small
Cap Fund, and the BB&T International Equity Fund (each, an "Underlying Fund" as
defined above) are also referred to herein as the "BB&T Stock Funds."

Bank Obligations. The Funds and the Underlying Funds (except the BB&T U.S.
Treasury Fund) may invest in bank obligations consisting of bankers'
acceptances, certificates of deposit, and time deposits.

Bankers' acceptances are negotiable drafts or bills of exchange typically drawn
by an importer or exporter to pay for specific merchandise, which are "accepted"
by a bank, meaning, in effect, that the bank unconditionally agrees to pay the
face value of the instrument on maturity. Bankers' acceptances invested in by
the Funds and the Underlying Funds will be those guaranteed by domestic and
foreign banks having, at the time of investment, capital, surplus, and undivided
profits in excess of $100,000,000 (as of the date of their most recently
published financial statements).

Certificates of deposit are negotiable certificates issued against funds
deposited in a commercial bank or a savings and loan association for a definite
period of time and earning a specified return. Certificates of deposit and time
deposits will be those of domestic and foreign banks and savings and loan
associations, if (a) at the time of investment the depository institution has
capital, surplus, and undivided profits in excess of $100,000,000 (as of the
date of its most recently published financial statements), or (b) the


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principal amount of the instrument is insured in full by the Federal Deposit
Insurance Corporation.

Commercial Paper. Commercial paper consists of unsecured promissory notes issued
by corporations. Except as noted below with respect to variable amount master
demand notes, issues of commercial paper normally have maturities of less than
nine months and fixed rates of return.

The Funds and the Underlying Funds (except for the BB&T U.S. Treasury Fund), may
invest in short-term promissory notes (including variable amount master demand
notes) issued by corporations and other entities, such as municipalities, rated
at the time of purchase within the two highest categories assigned by a
nationally recognized statistical rating organization ("NRSRO") (e.g., A-2 or
better by Standard & Poor's Ratings Services ("S&P"), Prime-2 or better by
Moody's Investors Service, Inc. ("Moody's") or F-2 or better by Fitch Investors
Services ("Fitch")) or, if not rated, determined to be of comparable quality to
instruments that are so rated. Note, however, that neither the Large Cap Growth

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