<PAGE>
BB&T MUTUAL FUNDS
To Shareholders
SEPTEMBER 30, 1996
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<PAGE>
TABLE OF CONTENTS
Letter From the Chairman
Page 2
Letter From the Investment Adviser
Page 4
Performance Report
Page 6
Independent Auditors' Report
Page 18
Statements of Assets and Liabilities
Page 19
Statements of Operations
Page 23
Statements of Changes in Net Assets
Page 25
Schedules of Portfolio Investments
Page 29
Notes to Financial Statements
Page 41
Financial Highlights
Page 50
-1-
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<PAGE>
LETTER FROM THE CHAIRMAN
Dear Shareholders:
We are pleased to report that the year ended September 30, 1996, was a strong
one for the financial markets and for the BB&T Mutual Funds. During the period,
the Dow Jones Industrial Average gained more than 900 points --and all
industries participated in the market's climb. While the environment in the
fixed-income markets was more difficult, bonds, too, posted positive returns
for the period.
The past year also saw investors entrusting record amounts to mutual funds.
We're pleased to report that because of our fund family's solid performance
during its first four years of operation, many chose to invest with us. Total
net assets under management grew by 53%, climbing from $540 million to $826
million over the 12-month period ended September 30, 1996.
BB&T FUNDS WIN RECOGNITION
We're also pleased to announce that several of the BB&T Funds have been awarded
four-star ratings from Morningstar in recent weeks. The BB&T North Carolina
Tax-Exempt Fund (Trust Shares), the BB&T Balanced Fund (Trust Shares) and the
BB&T Growth and Income Fund (Trust Shares and Class A Shares) all received this
above-average rating. (The North Carolina Tax-Exempt Fund was rated among 1,013
municipal funds for the 3-year period ending September, 30, 1996, the Balanced
Fund among 3,059 hybrid funds, and the Growth and Income Fund among 1,708
equity funds for the same period.)/1/
In addition, while it is just under two years old and too new to be tracked by
Morningstar, the BB&T Small Company Fund has also been recognized as an
outstanding performer. In the October 4, 1996, edition of The Wall Street
Journal, the Fund was ranked fifth among the top 15 small-company mutual funds
in the Mutual Fund Scorecard based on its total return for the year ended
September 30, 1996, by Lipper Analytical Services. In addition, the Fund was
ranked 24th among the 50 top-performing stock funds (in all stock fund
categories) by Lipper Analytical Services for the year ended September 30, 1996
(The Wall Street Journal, October 4, 1996)./2/
INTERNATIONAL EQUITY FUND TO BE LAUNCHED IN JANUARY*
Many investment experts recommend that a well-balanced portfolio include an
international component. Consequently, in our continuing effort to provide our
shareholders with a wide range of investment opportunities to better serve
their needs, we plan to launch the BB&T International Equity Fund in early
January 1997. Intended for long-term growth investors, the Fund will invest in
Japan, the United Kingdom and Continental Europe, as well as a number of
emerging markets around the world./3/
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/1/Morningstar proprietary ratings reflect historical risk-adjusted performance
through 9/30/96. The ratings are subject to change every month. Morningstar
ratings are calculated from a fund's 3-, 5- and 10-year returns (with fee
adjustments) in excess of 90-day Treasury bill returns. The 1-year rating is
calculated using the same methodology, but is not a component of the overall
rating. Ten percent of the funds in an investment category receive 5 stars,
22.5% receive 4 stars and 35% receive 3 stars. For the 1-year period, the
North Carolina Tax-Exempt Fund (Trust Shares) received 3 stars and was rated
among 1,745 municipal funds; the Balanced Fund (Trust Shares) received 4
stars and was rated among 5,251 hybrid funds; and the Growth & Income Fund
(Trust and Class A Shares) received 5 and 4 stars, respectively, and was
rated among 3,006 equity funds.
/2/The Fund was ranked among 348 small-company funds. Performance rankings are
based on total returns for the period. Rankings apply to Trust Shares.
A portion of the Fund's fees have been voluntarily waived. If the fees had not
been waived, the Fund's total return for the period would have been lower. Past
performance is no guarantee of future results.
/3/International investing involves special risks.
-2-
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NEW FUNDS FOR 401(K) INVESTORS*
In the first quarter of 1997, we also expect to launch three asset allocation
funds designed to meet the needs of 401(k) investors. The BB&T Capital Manager
Growth Fund is intended for aggressive long-term growth investors, the BB&T
Moderate Growth Fund for more cautious growth investors and the BB&T
Conservative Growth Fund, for those with shorter time horizons. The portfolios
of these three funds will be allocated among the BB&T Mutual Funds according to
their investment objectives.
IN CLOSING . . .
We urge you to read the following report closely. In it, you will find a
detailed discussion of the performance of each of the BB&T Mutual Funds during
the year ended September 30, 1996.
Finally, we thank you for your continued confidence in us. We look forward to
providing you with the investment management you expect and serving your
investment needs now and in the future. As always, if you have any questions or
require any assistance, please don't hesitate to call us at 1-800-228-1872.
Sincerely,
/s/ J. David Huber
J. David Huber
Chairman
BB&T Mutual Funds Group
- --------------------------------------------------------------------------------
*Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This communication shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any State in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
Shares of the BB&T Mutual Funds are NOT FDIC INSURED and are not deposits or
obligations of, or guaranteed or endorsed by, Branch Banking and Trust Company
or its affiliates. Investment products involve investment risk, including the
possible loss of principal.
For more complete information on any of the BB&T Mutual Funds, including fees,
expenses and sales charges, please call 1-800-228-1872 for a prospectus. Please
read the prospectus carefully before investing or sending money.
-3-
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LETTER FROM THE INVESTMENT ADVISER
Dear Shareholders:
The year ended September 30, 1996, was a very good one for U.S. companies and,
in turn, for the financial markets. The economic recovery entered its sixth
year--making it the third longest recovery in the past 50 years. This
recovery, which has been marked by modest growth, low inflation and growing
corporate earnings, continued to provide the backdrop as the Dow Jones
Industrial Average rose through 5000 and approached 6000.
The environment in the bond markets was more challenging as interest rates
spiked on news of the economy's continued and surprising strength. Nonetheless,
while the year was a bumpy one at times for fixed-income investors, it was also
a positive one overall.
FUNDAMENTALS ARE STILL SOLID
Accounting for some two-thirds of all economic activity, consumers were, as
always, key to the economy's strength -- and it was a good year for consumers,
too. As the pace of job creation held steady and unemployment declined,
consumer confidence rose and spending increased. Industries across the board
benefited, including those that generally do not do well in rising interest-
rate environments. In fact, in recent months, auto sales rose and housing
starts reached their highest levels in two years. Clearly, consumers are still
optimistic about their own prospects and the economy's in the year ahead.
All this good news, however, has been worrisome for the bond markets.
Traditionally, high consumer confidence and increased economic activity have
foreshadowed an acceleration in inflation. But evidence to date of rising
inflationary pressures along the production pipeline has been scarce. Commodity
prices are down. Wholesale prices are climbing, but at tame levels. Wage
pressure is growing, but not at a pace significantly higher than inflation. In
addition, this recovery has been production-led over the past six years. More
efficient and profitable after years of modernizing and downsizing,
corporations are well positioned to pay higher wages. Higher wages could help
sustain the economy's growth and, in fact, fuel further advances in the year
ahead.
COOLING, BUT HARDLY COLD
Beyond this possibility of a slight inflationary push from wage increases, we
see very little on the horizon that would indicate our economy is about to
enter a superheated or runaway phase. Nor do we expect to see a recession. Of
course, there are some areas that bear watching. Despite the improving
competitive position of U.S. firms and the relatively low trade-weighted value
of the dollar, our trade deficit is at a five-year high. In addition, in recent
months, credit-card delinquencies have reached record levels. Traditionally,
this has not been the case in a strong economy.
A POSITIVE ENVIRONMENT FOR STOCKS AND BONDS
A slow-growth, low-inflation environment should be good for stocks and bonds.
Over the past several years, market volatility has moved in one direction--
upward. At current valuations, stocks are not cheap. Moreover, after years of
accelerating earnings, investors' expectations for many stocks are
extraordinarily high--and earnings are beginning to decelerate, which may
disappoint investors.
In addition, on a risk-adjusted basis, bonds continue to appear attractive. The
stock market is richly valued, while bond yields remain high relative to
historical inflation-adjusted levels.
-4-
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<PAGE>
The performance reports of the individual Funds follow this letter. These
reports contain a brief review of each Fund's respective market and recent
performance, as well as the strategic positioning for each Fund.
Sincerely,
/s/ David C. McMahon
David C. McMahon
Executive Vice President and Chief Investment Officer
Branch Banking and Trust Company
-5-
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<PAGE>
PERFORMANCE REPORT
THE GROWTH AND INCOME STOCK FUND
Crashing through the 5000 level and then moving to within a hairsbreadth of
6000 on the Dow, the market raced higher during the year ended September 30,
1996. However, in sectors of the market where expectations were high, such as
technology and large-capitalization companies, the ride upward was a bumpy one.
However, our diversified value investing approach helped cushion some of the
stock market's recent volatility, while allowing investors to participate in
its rise.
For the 12 months ended September 30, 1996, the Fund outperformed its
benchmark, posting a total return of 20.97% (Class A Shares without the sales
charge)/4/ versus a return of 20.24% for the S&P 500 Stock Index. Even more
impressively, this gain was achieved at a level of risk below that of the S&P
500 (as measured by standard deviation).
A MOVE TO MID-CAPS
Given the current heady levels of stock prices, we expect to approach the
markets cautiously in the months ahead. Moreover, as the market has moved
significantly higher throughout the past year, value among larger-
capitalization stocks has become harder to find. On the other hand, mid-
capitalization companies -- those slightly smaller -- appear to offer some
interesting opportunities.
We continue to invest in a broad range of stocks with every major economic
sector of our economy represented in your portfolio. We believe these stocks
are attractively priced and will participate in a rising market, but are less
exposed to earnings disappointments. In other words, we feel that they offer
solid growth potential at a reasonable level of risk.
As of September 30, 1996, the Fund's top five holdings were SAFECO (2.60%),
Pitney Bowes (2.59%), Harris (2.43%), Anheuser-Busch (2.38%) and Phillips
Petroleum (2.31%)./5/
- --------------------------------------------------------------------------------
/4/With the maximum sales charge of 4.50%, the Fund's total return for the 12-
month period was 15.54% (Class A Shares).
/5/The composition of the Fund's portfolio is subject to change.
-6-
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BB&T GROWTH AND INCOME STOCK FUND
<TABLE>
<CAPTION>
================================================================================
Average Annual Total Return
As of 9/30/96
- --------------------------------------------------------------------------------
Inception Since
Class Date 1 Year Inception
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class* 10/9/92 15.54% 13.69%
Class B Shares** 1/2/96 N/A 7.01%
Trust Shares 10/9/92 21.31% 15.30%
================================================================================
* Reflects 4.50% Maximum Sales Charge
** Reflects CDSC of 5.00%. Total returns of less than 1 year are aggregate.
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Value of $10,000 Investment
------------------------------------------------------------------------
Trust Shares Class A Shares* S&P 500 Stock
<S> <C> <C> <C>
10/9/92 10000 9551 10000
9/30/93 11606 11052 11714
9/30/94 12021 11420 12147
9/30/95 14531 13775 15759
9/30/96 17628 16664 18949
</TABLE>
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Value of $10,000 Investment
------------------------------------------------------------------------
Class B Shares** S&P 500 Stock
<S> <C> <C>
1/2/96 10000 10000
9/30/96 10701 10979
</TABLE>
Past performance is not predictive of future results. Investment return and the
principal value of shares in the BB&T Mutual Funds will fluctuate so that the
shares, when redeemed, may be worth more or less than their original cost. A
portion of the Fund's fees have been voluntarily waived. If the fees had not
been waived, the Fund's total return for the period would have been lower. Past
performance is no guarantee of future results.
The performance of the BB&T Growth and Income Stock Fund is measured against
the S&P 500 Stock Index, an unmanaged index generally considered to be
representative of the performance of the U.S. stock market as a whole. 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 value-added
services.
-7-
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<PAGE>
THE BB&T SMALL COMPANY GROWTH FUND/6/
Strong stock selection and sector allocation were the keys to the Fund's
exceptional performance during the year ended September 30, 1996. In the second
half of 1995 and throughout the early part of 1996, the portfolio's exposure in
technology was gradually reduced, and we shifted our focus to the software and
telecommunication industries.
Also, early in the period, we moved aggressively into the outsourcing sector.
Consequently, the Fund benefited handsomely as the popularity of
nontraditional, sophisticated temporary employment firms soared. The Fund's
holdings in health-care stocks, particularly in smaller pharmaceutical
companies, also made substantial contributions to performance. As a result, for
the year ended September 30, 1996, the Fund beat its industry benchmark
handily, posting a gain of 44.94% (Class A Shares without the sales charge)/7/,
versus a gain of 13.13% for the Russell 2000.
OPTIMISTIC ON SMALL-CAP PROSPECTS
While we expect the Fund to continue to perform well as it follows its present
strategy, we also believe there is some reason for caution. After six years of
a bull market, investors' expectations are now extremely high -- and the
performance of some stocks could disappoint investors in the months ahead as
earnings slow. In addition, any increase in interest rates could put pressure
on stocks.
Nonetheless, we are optimistic about the prospects for small-capitalization
stocks. Historically, in periods of slow growth, investors have turned to this
sector for growth they can't find elsewhere. Moreover, even in the toughest
markets, we have been able to find many interesting and attractive
possibilities in the small-cap arena. In the months ahead, we expect to find
such opportunities in industries involved in moving information, such as the
fiber-optic, wireless communication and software sectors.
As of September 30, 1996, the Fund's top five holdings were: Jones Medical
Industries (2.40%), APAC Teleservices (2.12%), Dura Pharmaceuticals (2.04%),
Accustaff (1.98%) and Aspen Technologies (1.93%)./8/
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/6/Small-capitalization companies typically carry additional risks since smaller
companies generally have a higher risk of failure. Historically, stocks of
smaller companies have experienced a greater degree of market volatility than
stocks on average.
/7/With the maximum sales charge of 4.50%, the Fund's total return for the 12-
month period was 38.46% (Class A Shares).
/8/The composition of the Fund's holdings is subject to change.
-8-
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BB&T SMALL COMPANY GROWTH FUND
=======================================================
Average Annual Total Return
As of 9/30/96
- -------------------------------------------------------
Inception Since
Class Date 1 Year Inception
- -------------------------------------------------------
Class A Shares* 12/7/94 38.46% 46.84%
Class B Shares** 1/2/96 N/A 32.27%
Trust Shares 12/7/94 45.37% 51.06%
=======================================================
* Reflects 4.50% Maximum Sales Charge
**Reflects CDSC of 5.00%. Total returns of less than
1 year are aggregate.
------------------------------------------------------------------------
VALUE OF $10,000 INVESTMENT
------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Trust Shares Class A Shares Russell 2000 Index
12/7/94 10000 9551 10000
9/30/95 14570 13878 12923
9/30/96 21180 20115 14620
------------------------------------------------------------------------
VALUE OF $10,000 INVESTMENT
------------------------------------------------------------------------
[LINE GRAPH APPEARS HERE]
Class B Shares** Russell 2000 Index
1/2/96 10000 10000
9/30/96 13227 11089
Past performance is not predictive of future results. Investment return and the
principal value of shares in the BB&T Mutual Funds will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost. A
portion of the Fund's fees have been voluntarily waived. If the fees had not
been waived, the Fund's total return for the period would have been lower. Past
performance is no guarantee of future results.
The performance of the BB&T Small Company Growth Fund is measured against the
Russell 2000, an unmanaged index generally representative of the performance of
small-capitalization stocks. 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 value-added services.
-9-
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<PAGE>
THE BB&T BALANCED FUND
Our value-oriented approach to stock selection helped the Fund's performance
during the fiscal year ended September 30, 1996. While stocks across the board
moved higher, stocks selected based on value-oriented strategies were less
vulnerable to earnings disappointments and subsequent investor disenchantment
than those of many of the companies that dominated the headlines. Consequently,
the Fund's equity holdings performed strongly and steadily throughout the year.
The environment for bonds was more challenging as interest rates spiked higher
when news of the economy's strength surprised investors in early 1996.
Nonetheless, for the period, the Fund's fixed-income securities, too, posted
positive returns.
As a result, for the year ended September 30, 1996, we are pleased to report
that the Fund outperformed industry averages for funds of this type. The total
return of 12.43% (Class A Shares without the sales charge)/9/ fell between the
returns of its two benchmarks, the S&P 500 Stock Index and the Lehman Brothers
Intermediate Government Bond Index, which had returns of 20.24% and 5.10%,
respectively.
POSITIONED FOR GROWTH AND STABILITY
In managing the Fund, we seek to provide our investors with growth while
controlling risks. To this end, as stock prices have skyrocketed in recent
months, we have redoubled our efforts to seek value -- and we are finding
opportunities among second-tier "blue-chip" companies, companies just slightly
smaller than the very largest "blue-chip" firms.
Also, we believe that bonds now offer investors slightly better returns than
stocks on a risk-adjusted basis. As a result, in recent months we have reduced
the equity allocation of the portfolio slightly in favor of fixed-income
investments, more specifically, securities in the intermediate range. In
addition, in an effort to dampen the volatility of the fixed-income portion of
the portfolio, we have added positions in mortgage pass-through securities.
Consequently, as of September 30, 1996, approximately 44% of the portfolio was
invested in stocks, 51% in bonds and 5% in cash or cash equivalents.
As of the same date, the Fund's top five equity holdings were Phillips
Petroleum (1.42%), Bristol-Myers Squibb (1.37%), SAFECO (1.16%), Schering-
Plough (1.10%) and Abbott Laboratories (1.02%). The Fund's fixed-income
holdings remained concentrated in U.S. Treasury securities. The average
maturity of the securities in the portfolio was about 5 years, and the average
credit quality was AAA./10/
- --------------------------------------------------------------------------------
/9/With the maximum sale charge of 4.50%, the Fund's total return for the 12-
month period was 7.37% (Class A Shares).
/10/The composition of the Fund's portfolio is subject to change.
-10-
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BB&T BALANCED FUND
=======================================================
Average Annual Total Return
As of 9/30/96
- -------------------------------------------------------
Inception Since
Class Date 1 Year Inception
- -------------------------------------------------------
Class A Shares* 7/1/93 7.37% 8.27%
Class B Shares** 1/2/96 N/A 0.67%
Trust Shares 7/1/93 12.74% 10.00%
=======================================================
* Reflects 4.50% Maximum Sales Charge
**Reflects CDSC of 5.00%. Total returns of less than
1 year are aggregate.
[GRAPH APPEARS HERE]
------------------------------------------------------------------------
VALUE OF $10,000 INVESTMENT
------------------------------------------------------------------------
S&P 500 Lehman Bros. Int.
Trust Shares Class A Shares* Stock Index Govt. Bond Index
7/1/93 10000 9551 10000 10000
9/30/93 10274 9826 10257 10211
9/30/94 10231 9763 10637 10058
9/30/95 12095 11521 13800 11124
9/30/96 13637 12953 16593 11691
[GRAPH APPEARS HERE]
------------------------------------------------------------------------
VALUE OF $10,000 INVESTMENT
------------------------------------------------------------------------
Lehman Bros. Int.
Class B Shares S&P 500 Stock Govt. Bond Index
1/2/96 10000 10000 10000
9/30/96 10067 10979 10085
Past performance is not predictive of future results. Investment return and the
principal value of shares in the BB&T Mutual Funds will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost. A
portion of the Fund's fees have been voluntarily waived. If the fees had not
been waived, the Fund's total return for the period would have been lower. Past
performance is no guarantee of future results.
The performance of the BB&T Balanced Fund is measured against the S&P 500 Stock
Index, an unmanaged index generally considered to be representative of the
performance of the stock market as a whole, and against the Lehman Brothers
Intermediate Government Bond Index, widely used as a broad measure of the
performance of U.S. Government bonds with maturities of less than 10 years. The
indices are unmanaged and do 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 value-added
services.
-11-
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<PAGE>
THE BB&T INTERMEDIATE U.S. GOVERNMENT BOND FUND AND
THE BB&T SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
After posting tremendous gains in 1995, the fixed-income markets reversed
direction in 1996 as interest rates rose on news of the economy's continued
strength and uncertainty surrounding the Federal Reserve Board's possible next
move. We have responded to weakness in the fixed-income markets by shortening
our interest-rate sensitivity (duration) and increasing exposure to other
sectors, such as corporate bonds and mortgage-backed securities, to improve
yield and total return.
Investors' interest in yield-enhancing securities has propelled sectors other
than U.S. Treasury debt to perform better on a relative basis. Corporate bonds,
riding a wave of reasonably strong profitability reports, benefitted. In
addition, mortgage-backed securities responded favorably to limited supply and
an overall decline in volatility levels.
The BB&T Intermediate U.S. Government Bond Fund posted a total return of 3.17%
(Class A Shares without the sales charge)/11/ for the year ended September
30, 1996, and the BB&T Short-Intermediate U.S. Government Income Fund advanced
4.09% (Class A Shares without the sales charge)/12/ during the same period.
SLOWER GROWTH BODES WELL
In the future, we expect to see bonds strengthen as the economy's growth slows
and inflationary pressures ease. We look forward to extending the duration of
the portfolios given solid evidence of a slowdown in economic activity combined
with moderate inflation. In the short term, however, uncertainty over the
direction of interest rates has led us to maintain average maturities in both
funds that are somewhat shorter than the Funds' benchmarks, making them less
vulnerable to changes in interest rates. As always, we continue to seek out
opportunities to enhance the total return to our shareholders.
As of September 30, 1996, the average maturity of the Intermediate U.S.
Government Bond Fund was 6.4 years; for the Short-Intermediate U.S. Government
Income Fund, it was 2.7 years. As is characteristic of our investment process,
the fixed-income portfolios remain fully invested and are heavily concentrated
in debt obligations of the U.S. Government and its agencies./13/
- --------------------------------------------------------------------------------
/11/With the maximum sales charge of 4.50%, the Fund's total return for the
12-month period was -1.52% (Class A Shares).
/12/With the maximum sales charge of 2.00%, the Fund's total return for the
12-month period was 2.03% (Class A Shares).
/13/The composition of the Funds' portfolios is subject to change.
-12-
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BB&T INTERMEDIATE U.S. GOVERNMENT BOND FUND
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
--------------------------------------------------------
--------------------------------------------------------
Average Annual Total Return
As of 9/30/96
--------------------------------------------------------
Inception Since
Class Date 1 Year Inception
--------------------------------------------------------
<S> <C> <C> <C>
Class A Shares* 10/9/92 -1.52% 4.06%
Class B Shares** 1/2/96 N/A -7.20%
Trust Shares 10/9/92 3.43% 5.52%
--------------------------------------------------------
--------------------------------------------------------
</TABLE>
* Reflects 4.50% Maximum Sales Charge
** Reflects CDSC of 5.00%. Total returns of less than 1 year are aggregate.
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Value of $10,000 Investment
------------------------------------------------------------------------
Lehman Bros. Int.
Trust Shares Class A Shares* Govt. Bond Index
<S> <C> <C> <C>
10/9/92 10000 9551 10000
9/30/93 11076 10557 10823
9/30/94 10607 10083 10661
9/30/95 11976 11357 11791
9/30/96 12386 11717 12392
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Value of $10,000 Investment
------------------------------------------------------------------------
Lehman Bros. Int.
Class B Shares** Govt. Bond Index
<S> <C> <C>
1/2/96 10000 10000
9/30/96 9280 10085
</TABLE>
Past performance is not predictive of future results. Investment return and the
principal value of shares in the BB&T Mutual Funds will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost. A
portion of the Fund's fees have been voluntarily waived. If the fees had not
been waived, the Fund's total return for the period would have been lower. Past
performance is no guarantee of future results.
The performance of the BB&T Intermediate U.S. Government Bond Fund is measured
against the Lehman Brothers Intermediate Government Bond Index, widely used as
a broad measure of the performance of the U.S. Government bonds with maturities
of less than 10 years. 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 value-added services.
-13-
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<PAGE>
BB&T SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
====================================================
Average Annual Total Return
As of 9/30/96
- ----------------------------------------------------
Inception Since
Class Date 1 Year Inception
- ----------------------------------------------------
Class A Shares* 11/30/92 2.03% 4.27%
Trust Shares 11/30/92 4.36% 5.05%
====================================================
*Reflects 2.00% Maximum Sales Charge
[GRAPH APPEARS HERE]
------------------------------------------------------------------------
Value of $10,000 Investment
------------------------------------------------------------------------
Lehman Bros Merrill Lynch
1-3 Year 1-3 Year
Trust Shares Class A Shares* Govt. Bond Index Govt. Index
11/30/92 10000 9804 10000 10000
9/30/93 10801 10569 10570 10579
9/30/94 10622 10373 10692 10702
9/30/95 11579 11280 11568 11588
9/30/96 12083 11741 12238
Past performance is not predictive of future results. Investment return and the
principal value of shares in the BB&T Mutual Funds will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost. A
portion of the Fund's fees have been voluntarily waived. If the fees had not
been waived, the Fund's total return for the period would have been lower. Past
performance is no guarantee of future results.
The performance of the BB&T Short-Intermediate U.S. Government Income Fund was
previously measured against the Lehman Brothers 1-3 Year Government Bond Index.
Due to the discontinuation of this index, the Fund is now measured against the
Merrill Lynch 1-3 Year Government Index, widely used as a measure of the
performance of U.S. Government bonds in that maturity range. 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 value-added services.
-14-
[LOGO OF BB&T MUTUTAL FUNDS APPEARS HERE]
<PAGE>
THE BB&T NORTH CAROLINA INTERMEDIATE TAX-FREE FUND/14/
Along with the taxable fixed-income markets, municipal markets across the
country weakened as interest rates rose in 1996. Supply was relatively light as
rates began moving upward and dwindled noticeably as higher interest rates made
it difficult for many municipalities to bring new issues to market. As a
result, bond prices in the municipal markets -- particularly in those markets
known for high quality such as North Carolina -- were more stable than in the
taxable markets throughout the period.
Given the environment, however, we approached the market cautiously during the
12 months ended September 30, 1996. As interest rates rose, maturities were
gradually extended in an effort to enhance yield. As always, however, quality
was our chief concern in the selection of all securities. For the year ended
September 30, 1996, the Fund posted a total return of 2.61% (Class A Shares
without the sales charge)./15/
STRONG DEMAND FOR NORTH CAROLINA SECURITIES CONTINUES
At the current level of interest rates, we expect supply to tighten in the
months ahead. Moreover, given the scrutiny that each issue is subjected to by
the Local Government Commission in North Carolina, issues from the state have a
well-deserved reputation for high quality -- which has led investors around the
country to the North Carolina market. As a result, strong demand should support
prices of North Carolina municipal securities in the coming months.
As of September 30, 1996, the Fund held laddered maturities of high-quality
North Carolina bonds. The average maturity of these holdings was 6.04 years;
the average credit quality was AA. Approximately 87% of the Fund's assets are
invested in general obligations bonds and 8% in high-quality revenue bonds. The
remainder is held in cash or cash equivalents. Currently, no one issuer
accounts for more than 9% of the portfolio./16/
- --------------------------------------------------------------------------------
/14/The Fund's income may be subject to certain state and local taxes and,
depending on your tax status, to the federal alternative minimum tax.
/15/With the maximum sales charge of 2.00%, the Fund's total return for the
12-month period was 0.53% (Class A Shares).
/16/The composition of the Fund's portfolio is subject to change.
-15-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
BB&T NORTH CAROLINA INTERMEDIATE TAX-FREE FUND
<TABLE>
<CAPTION>
Average Annual Total Return
As of 9/30/96
================================================================================
Inception Since
Class Date 1 Year Inception
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares* 10/16/92 0.53% 3.33%
Trust Shares 10/16/92 2.77% 3.97%
================================================================================
* Reflects 2.00% Maximum Sales Charge
</TABLE>
[GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
------------------------------------------------------------------------
Value Of $10,000 Investment
------------------------------------------------------------------------
Lehman Bros. 5-Year
Trust Shares Class A Shares* General Oblig. Index
<S> <C> <C> <C>
10/16/92 10000 9804 10000
9/30/93 10662 10451 10833
9/30/94 10537 10313 10850
9/30/95 11355 11097 11856
9/30/96 11669 11386 12366
</TABLE>
Past performance is not predictive of future results. Investment return and the
principal value of shares in the BB&T Mutual Funds will fluctuate so that
shares, when redeemed, may be worth more or less than their original cost. A
portion of the Fund's fees have been voluntarily waived. If the fees had not
been waived, the Fund's total return for the period would have been lower. Past
performance is no guarantee of future results.
The performance of the BB&T North Carolina Tax-Free Fund is measured against
the Lehman Brothers 5-Year General Obligations Index, widely used as a broad
measure of the performance of tax-exempt municipal securities with an average
maturity of five years. 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 value-added services.
-16-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
THE BB&T U.S. TREASURY MONEY MARKET FUND/17/
The economy's strength continually surprised investors throughout the year
ended September 30, 1996. As a result, the markets were volatile as investors
spent much of the period expecting some action by the Federal Reserve.
Given the environment, we remained flexible during the period. While
approximately 50% of the Fund's assets were invested in Treasury notes and
bills, the remainder was held in overnight securities in an effort to maximize
our ability to respond rapidly to changes in the market. As a result,
throughout the period, the Fund was well positioned to capture opportunities to
enhance yield.
Given the mixed signals the economy is currently sending, we continue to
emphasize flexibility in the selection of all investments. As of September 30,
1996, the average maturity of the Fund's holdings was 40 days; the average
credit quality was AAA.
10/96
- --------------------------------------------------------------------------------
/17/An investment in the Fund is neither insured nor guaranteed by the U.S.
Government. There can be no assurance that the Fund will be able to maintain
a stable net asset value of $1.00 per share.
Some of the fees of the Funds are currently being waived, resulting in higher
total returns than would occur if the full fees were charged.
Shares in the Funds involve investment risks, including possible loss of
principal, so that an investor's shares, when redeemed, may be worth more or
less than their original cost. Fund shares are not deposits or obligations of,
or guaranteed or endorsed by, Branch Banking and Trust Company or its
affiliates, nor are they insured by the FDIC or any other agency.
The BB&T Mutual Funds are distributed by BISYS Fund Services.
-17-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Trustees of
BB&T Mutual Funds Group:
We have audited the accompanying statements of assets and liabilities of the
BB&T Mutual Funds Group-U.S. Treasury Money Market Fund, Short-Intermediate
U.S. Government Income Fund, Intermediate U.S. Government Bond Fund, North
Carolina Intermediate Tax-Free Fund, Growth and Income Stock Fund, Balanced
Fund and Small Company Growth Fund, including the schedules of portfolio
investments, as of September 30, 1996, and the related statements of
operations, statements of changes in net assets and the financial highlights
for each of the periods indicated herein. These financial statements and the
financial highlights are the responsibility of the BB&T Mutual Funds Group's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits 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 verification of securities
owned as of September 30, 1996, by confirmation with the custodian and other
appropriate audit 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 each
of the aforementioned funds comprising the BB&T Mutual Funds Group at September
30, 1996, the results of their operations, the changes in their nets assets and
the financial highlights for each of the periods indicated herein, in
conformity with generally accepted accounting principles.
KPMG Peat Marwick LLP
Columbus, Ohio
November 8, 1996
-18-
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<PAGE>
Statements of Assets and Liabilities
September 30, 1996
<TABLE>
<CAPTION>
U.S. Treasury Short-Intermediate Intermediate
Money Market U.S. Government U.S. Government
Fund Income Fund Bond Fund
-------------- ------------------ -----------------
ASSETS:
<S> <C> <C> <C>
Investments, at value (Amortized cost $118,757,258;
cost $68,917,857; and $124,082,549, respectively)...... $ 118,757,258 $ 68,372,719 $ 122,548,269
Repurchase agreements, at cost......................... 117,372,191 -- --
------------- ----------- -------------
Total Investments...................................... 236,129,449 68,372,719 122,548,269
Interest receivable.................................... 111,458 999,247 1,819,677
Prepaid expenses and other............................. 6,811 2,354 3,455
------------- ----------- ------------
Total Assets................................. 236,247,718 69,374,320 124,371,401
------------- ----------- ------------
LIABILITIES:
Dividends payable...................................... 865,628 331,984 615,773
Accrued expenses and other payables:
Investment advisory fees........................... 76,392 28,174 50,912
Administration fees................................ 38,196 11,270 20,365
Distribution fees.................................. 5,361 1,298 1,016
Accounting and transfer agent fees................. 20,150 12,198 16,970
Other.............................................. 31,396 11,910 21,254
------------- ----------- ------------
Total Liabilities............................ 1,037,123 396,834 726,290
------------- ----------- ------------
NET ASSETS:
Capital................................................ 235,210,595 71,003,107 127,115,765
Undistributed net investment income.................... -- -- 5,718
Net unrealized depreciation on investments............. -- (545,138) (1,534,280)
Accumulated undistributed net realized losses on
investment transactions................................ -- (1,480,483) (1,942,092)
============= =========== ============
Net Assets $ 235,210,595 $ 68,977,486 $ 123,645,111
============= =========== ============
</TABLE>
Continued
-19-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Statements of Assets and Liabilities, (Continued)
September 30, 1996
<TABLE>
<CAPTION>
U.S. Treasury Short-Intermediate Intermediate
Money Market U.S. Government U.S. Government
Fund Income Fund Bond Fund
-------------- ------------------ -----------------
<S> <C> <C> <C>
Net Assets
Class A....................................... $ 27,931,354 $ 6,356,000 $ 3,659,147
Class B....................................... 1,304,785 -- 353,334
Trust Class................................... 205,974,456 62,621,486 119,632,630
============= =========== =============
Total..................................... $ 235,210,595 $ 68,977,486 $ 123,645,111
============= ============ =============
Outstanding units of beneficial interest (shares)
Class A....................................... 27,931,354 653,039 380,071
Class B....................................... 1,304,785 -- 36,791
Trust Class................................... 205,974,456 6,430,579 12,411,224
============ =========== ============
Total..................................... 235,210,595 7,083,618 12,828,086
============ =========== ============
Net asset value
Class A--redemption price per share........... $ 1.00 $ 9.73 $ 9.63
Class B--offering price per share*............ 1.00 -- 9.60
Trust Class--offering and redemption price per
share............................. 1.00 9.74 9.64
============ =========== ============
Maximum Sales Charge (Class A)......................... 2.00% 4.50%
=========== ============
Maximum Offering Price (100%/ (100%-Maximum Sales
Charge) of net asset value adjusted to nearest cent)
per share--Class A..................................... $ 1.00(a) $ 9.93 $ 10.08
============ =========== ============
</TABLE>
- ----------
* Redemption price per share (Class B) varies by length of time shares are
held.
(a) Offering price and redemption price are the same for the U.S. Treasury Money
Market Fund.
See notes to financial statements
-20-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Statement of Assets and Liabilities
September 30, 1996
<TABLE>
<CAPTION>
North Carolina Growth and Small Company
Intermediate Stock Income Balanced Growth
Tax-Free Fund Fund Fund Fund
-------------- ------------ ----------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value (Cost $38,239,071;
$182,180,043; $75,172,426; and $31,600,228,
respectively)..................................... $ 38,344,894 $ 229,746,482 $ 83,721,546 $ 47,530,175
Cash.............................................. -- -- -- 603
Interest and dividends receivable................. 505,044 480,905 802,367 1,346
Receivable for capital shares issued.............. -- 11,672 -- 8,172
Receivable from brokers for investments sold...... -- -- -- 155,737
Unamortized organization costs.................... -- -- -- 2,099
Prepaid expense and other......................... 3,840 6,854 2,255 21,262
----------- ------------ ----------- ----------
Total Assets............................. 38,853,778 230,245,913 84,526,168 47,719,394
----------- ------------ ----------- ----------
LIABILITIES:
Dividends payable................................. 113,896 254,872 270,535 --
Payable for capital shares redeemed............... -- -- 665 --
Payable to brokers for investments purchased...... 994,750 301,705 -- 655,782
Accrued expenses and other payables:
Investment advisory fees................. 15,331 93,590 34,068 36,192
Administration fees...................... 4,599 37,436 13,627 7,238
Distribution fees........................ 1,139 6,721 4,349 3,744
Accounting and transfer agent fees....... 10,604 27,468 20,882 20,517
Other.................................... 9,205 36,132 13,447 10,521
----------- ------------ ----------- ----------
Total Liabilities........................ 1,149,524 757,924 357,573 733,994
----------- ------------ ----------- ----------
NET ASSETS:
Capital........................................... 37,723,453 172,703,921 73,805,105 31,650,081
Undistributed net investment loss................. -- -- -- (421,082)
Net unrealized appreciation on investments........ 105,823 47,566,439 8,549,120 15,929,947
Accumulated undistributed net realized gains
(losses) on investment transactions............... (125,022) 9,217,629 1,814,370 (173,546)
----------- ------------ ----------- ----------
Net Assets............................... $37,704,254 $229,487,989 $84,168,595 $46,985,400
=========== ============ =========== ==========
</TABLE>
Continued
-21-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Statements of Assets and Liabilities, Continued
September 30, 1996
<TABLE>
<CAPTION>
North Carolina Growth and Small Company
Intermediate Income Stock Balanced Growth
Tax-Free Fund Fund Fund Fund
------------- ------------- ------------ --------------
<S> <C> <C> <C> <C>
Net Assets
Class A .............................................. $ 9,261,340 $ 18,948,734 $12,455,697 $ 7,412,707
Class B .............................................. -- 3,879,945 2,338,795 3,199,557
Trust Class .......................................... 28,442,914 206,659,310 69,374,103 36,373,136
----------- ------------ ----------- -----------
Total ............................................ $37,704,254 $229,487,989 $84,168,595 $46,985,400
=========== ============ =========== ===========
Outstanding units of beneficial interest (shares)
Class A .............................................. 921,898 1,237,278 1,041,648 351,971
Class B .............................................. -- 253,687 196,298 152,963
Trust Class .......................................... 2,830,793 13,468,959 5,812,814 1,717,398
----------- ------------ ----------- -----------
Total ............................................ 3,752,691 14,959,924 7,050,760 2,222,332
=========== ============ =========== ===========
Net asset value
Class A--redemption price per share .................. $ 10.05 $ 15.31 $ 11.96 $ 21.06
Class B--offering price per share .................... -- 15.29 11.91 20.92
Trust Class--offering and redemption price per share.. 10.05 15.34 11.93 21.18
=========== ============ =========== ===========
Maximum Sales Charge (Class A) ................................ 2.00% 4.50% 4.50% 4.50%
=========== ============ =========== ===========
Maximum Offering Price (100%/(100%-Maximum Sales
Charge) of net asset value adjusted to nearest cent) per
share--Class A $ 10.26 $ 16.03 $ 12.52 $ 22.05
=========== ============ =========== ===========
</TABLE>
- ----------
* Redemption price per share (Class B) varies by length of time shares are
held.
See notes to financial statements
-22-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Statements of Operations
For the year ended September 30, 1996
<TABLE>
<CAPTION>
U.S. Treasury Short-Intermediate Intermediate
Money Market U.S. Government U.S. Government
Fund Income Fund Bond Fund
------------- ------------------ ---------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Interest income................................................. $ 9,828,598 $ 3,889,555 $ 7,251,688
---------- ---------- ----------
Total Income.................................. 9,828,598 3,889,555 7,251,688
----------- ----------- -----------
EXPENSES:
Investment advisory fees........................................ 731,113 346,207 638,632
Administration fees............................................. 365,557 115,305 212,620
Distribution fees--Class A...................................... 108,449 33,463 21,772
Distribution fees--Class B...................................... 5,530 -- 1,386
Custodian and accounting fees................................... 89,880 50,611 62,412
Legal and audit fees............................................ 55,738 19,458 33,048
Organization costs.............................................. 9 216 90
Trustees' fees and expenses..................................... 8,220 2,706 5,262
Transfer agent fees............................................. 66,210 46,788 59,736
Registration and filing fees.................................... 16,331 4,554 3,744
Printing costs.................................................. 39,552 7,447 13,566
Other........................................................... 4,218 2,208 3,349
----------- ----------- -----------
Gross Expenses................................ 1,490,807 628,963 1,055,617
Expenses voluntarily reduced.................................... (56,370) (74,671) (117,853)
----------- ----------- -----------
Total Expenses................................ 1,434,437 554,292 937,764
----------- ----------- -----------
Net Investment Income........................................... 8,394,161 3,335,263 6,313,924
----------- ----------- -----------
REALIZED/UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized losses on investment transactions.................. -- (162,759) (725,469)
Change in unrealized depreciation on investments................ -- (686,269) (2,757,133)
----------- ----------- -----------
Net realized/unrealized losses on investments................... -- (849,028) (3,482,602)
----------- ----------- -----------
Change in net assets resulting from operations.................. $ 8,394,161 $ 2,486,235 $ 2,831,322
=========== =========== ===========
</TABLE>
See notes to financial statements
-23-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Statements of Operations
For the year ended September 30, 1996
<TABLE>
<CAPTION>
North
Carolina Growth and Small Company
Intermediate Income Stock Balanced Growth
Tax-Free Fund Fund Fund Fund
------------- ------------ ----------- -------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income.................................................. $ 1,681,672 $ 451,511 $ 2,702,304 $ 233,058
Dividend income.................................................. -- 5,439,921 996,840 9,282
----------- ------------ ----------- ------------
Total Income............................................ 1,681,672 5,891,432 3,699,144 242,340
----------- ------------ ----------- ------------
EXPENSES:
Investment advisory fees......................................... 215,256 1,490,003 549,962 308,711
Administration fees.............................................. 71,752 402,293 148,506 61,583
Distribution fees--Class A....................................... 45,087 73,234 56,073 18,773
Distribution fees--Class B....................................... -- 14,031 11,185 10,500
Custodian and accounting fees.................................... 36,073 95,174 62,173 76,747
Legal and audit fees............................................. 19,806 63,054 24,576 8,040
Organization costs............................................... 37 73 -- 11,130
Trustees' fees and expenses...................................... 1,974 9,552 3,450 1,170
Transfer agent fees.............................................. 43,518 98,334 74,592 75,282
Registration and filing fees..................................... 3,936 20,754 8,166 5,832
Printing costs................................................... 5,549 22,290 8,310 3,095
Other............................................................ 1,524 5,436 2,136 522
----------- ------------ ----------- ------------
Gross expenses.......................................... 444,512 2,294,228 949,129 581,385
Expenses voluntarily reduced..................................... (85,394) (520,946) (206,753) (10,226)
----------- ------------ ----------- ------------
Total expenses.......................................... 359,118 1,773,282 742,376 571,159
----------- ------------ ----------- ------------
Net Investment Income (Loss)..................................... 1,322,554 4,118,150 2,956,768 (328,819)
----------- ------------ ----------- ------------
REALIZED/UNREALIZED GAINS (LOSSES) ON INVESTMENTS:
Net realized gains (losses) on investment transactions........... (47,072) 9,428,482 2,206,261 90,971
Change in unrealized appreciation (depreciation) on investments.. (302,527) 24,542,390 3,503,931 12,148,737
---------- ------------ ----------- -----------
Net realized/unrealized gains (losses) on investments............ (349,599) 33,970,872 5,710,192 12,239,708
---------- ------------ ----------- -----------
Change in net assets resulting from operations................... $ 972,955 $ 38,089,022 $ 8,666,960 $11,910,889
========== ============ =========== ===========
</TABLE>
See notes to financial statements
-24-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
U.S. Treasury Short-Intermediate
Money Market U.S. Government
Fund Income Fund
---------------------------- ---------------------------
For the For the For the For the
year year year year
ended ended ended ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................................... $ 8,394,161 $ 5,085,963 $ 3,335,263 $ 2,904,229
Net realized losses on investment transactions.......... -- -- (162,759) (1,125,416)
Net change in unrealized appreciation...................
(depreciation) on investments.......................... -- -- (686,269) 2,643,412
------------- ------------- ------------ ------------
Change in net assets resulting from operations............ 8,394,161 5,085,963 2,486,235 4,422,225
------------- ------------- ------------ ------------
DISTRIBUTIONS TO CLASS A SHAREHOLDERS:
From net investment income.............................. (948,869) (285,363) (371,250) (421,136
DISTRIBUTIONS TO CLASS B SHAREHOLDERS(a):
From net investment income.............................. (19,543) -- -- --
DISTRIBUTIONS TO TRUST CLASS SHAREHOLDERS:
From net investment income.............................. (7,425,749) (4,800,600) (2,964,013) (2,483,093)
------------- ------------- ------------ ------------
Change in net assets from shareholder distributions....... (8,394,161) (5,085,963) (3,335,263) (2,904,229)
------------- ------------- ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued............................. 449,946,776 413,983,846 32,001,311 16,642,791
Dividends reinvested.................................... 1,721,604 507,038 1,448,084 778,260
Cost of shares redeemed................................. (350,488,723) (359,409,516) (15,729,346) (15,385,757)
------------- ------------- ------------ ------------
Change in net assets from share transactions.............. 101,179,657 55,081,368 17,720,049 2,035,294
------------- ------------- ------------ ------------
Change in net assets...................................... 101,179,657 55,081,368 16,871,021 3,553,290
NET ASSETS:
Beginning of period..................................... 134,030,938 78,949,570 52,106,465 48,553,175
------------- ------------- ------------ ------------
End of period........................................... $ 235,210,595 $ 134,030,938 $ 68,977,486 $ 52,106,465
============= ============= ============ ============
SHARE TRANSACTIONS:
Issued.................................................. 449,946,776 413,983,846 3,264,121 1,718,480
Reinvested.............................................. 1,721,604 507,038 146,965 80,130
Redeemed................................................ (350,488,723) (359,409,516) (1,597,468) (1,581,451)
------------- ------------- ------------ ------------
Change in shares.......................................... 101,179,657 55,081,368 1,813,618 217,159
============= ============= ============ ============
</TABLE>
- ----------
(a) From January 1, 1996 (commencement of operations) through September 30,
1996.
See notes to financial statements
-25-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Intermediate U.S. North Carolina
Government Bond Intermediate Tax-Free
Fund Fund
------------------------------- ------------------------------
For the For the For the For the
year year year year
ended ended ended ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
-------------- --------------- --------------- --------------
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
<S> <C> <C> <C> <C>
Net investment income................................ $ 6,313,924 $ 5,024,624 $ 1,322,554 $ 1,416,162
Net realized losses on investment transactions....... (725,469) (1,194,343) (47,072) (77,950)
Net change in unrealized appreciation (depreciation)
on investments...................................... (2,757,133) 5,832,579 (302,527) 1,483,907
------------ ------------ ------------ ------------
Change in net assets resulting from operations......... 2,831,322 9,662,860 972,955 2,822,119
------------ ------------ ------------ ------------
DISTRIBUTIONS TO CLASS A SHAREHOLDERS:
From net investment income........................... (247,352) (377,937) (322,468) (330,842)
DISTRIBUTIONS TO CLASS B SHAREHOLDERS(a):
From net investment income........................... (6,966) -- -- --
DISTRIBUTIONS TO TRUST CLASS SHAREHOLDERS:
From net investment income........................... (6,059,606) (4,646,687) (1,000,086) (1,085,320)
------------ ------------ ------------ ------------
Change in net assets from shareholder distributions.... (6,313,924) (5,024,624) (1,322,554) (1,416,162)
------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued.......................... 66,845,451 23,171,044 11,820,669 10,916,979
Dividends reinvested................................. 4,689,472 3,929,840 268,478 278,161
Cost of shares redeemed.............................. (28,159,031) (23,210,413) (10,843,225) (14,646,808)
------------ ------------ ------------ ------------
Change in net assets from share transactions........... 43,375,892 3,890,471 1,245,922 (3,451,668)
------------ ------------ ------------ ------------
Change in net assets................................... 39,893,290 8,528,707 896,323 (2,045,711)
NET ASSETS:
Beginning of period.................................. 83,751,821 75,223,114 36,807,931 38,853,642
------------ ------------ ------------ ------------
End of period........................................ $123,645,111 $ 83,751,821 $ 37,704,254 $ 36,807,931
============ ============ ============ ============
SHARE TRANSACTIONS:
Issued............................................... 6,757,431 2,419,901 1,171,335 1,107,634
Reinvested........................................... 478,491 414,007 26,506 28,266
Redeemed............................................. (2,876,321) (2,420,431) (1,071,579) (1,480,683)
------------ ------------ ------------ ------------
Change in shares....................................... 4,359,601 413,477 126,262 (344,783)
============ ============ ============ ============
</TABLE>
______________
(a) From January 1, 1996 (commencement of operations) through September 30,
1996.
See notes to financial statements
-26-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Growth and Income Stock Balanced
Fund Fund
-------------------------------- ---------------------------------
For the For the For the For the
year year year year
ended ended ended ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income................................... $ 4,118,150 $ 2,757,443 $ 2,956,768 $ 2,228,732
Net realized gains (losses) on investment transactions.. 9,428,482 1,084,821 2,206,261 (361,045)
Net change in unrealized appreciation on investments.... 24,542,390 18,939,826 3,503,931 6,451,498
------------ ------------ ------------ ------------
Change in net assets resulting from operations........... 38,089,022 22,782,090 8,666,960 8,319,185
------------ ------------ ------------ ------------
DISTRIBUTIONS TO CLASS A SHAREHOLDERS:
From net investment income.............................. (270,458) (187,792) (421,901) (355,479)
From net realized gains from investment transactions.... (76,748) (83,203) -- --
In excess of net realized gains from investment
transactions........................................... -- (108,268) -- --
DISTRIBUTIONS TO CLASS B SHAREHOLDERS (a):
From net investment income.............................. (19,098) -- (39,026) --
DISTRIBUTIONS TO TRUST CLASS SHAREHOLDERS:
From net investment income.............................. (3,828,594) (2,569,651) (2,495,841) (1,873,253)
From net realized gains from investment transactions.... (1,044,981) (1,001,618) -- --
In excess of net realized gains from investment
transactions........................................... -- (1,152,654) -- --
------------ ------------ ------------ ------------
Change in net assets from shareholder distributions...... (5,239,879) (5,103,186) (2,956,768) (2,228,732)
------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares issued............................. 78,886,812 57,688,354 30,350,061 18,039,983
Dividends reinvested.................................... 3,546,244 3,097,037 2,471,085 1,590,880
Cost of shares redeemed................................. (42,239,195) (19,347,795) (13,413,504) (14,945,721)
------------ ------------ ------------ ------------
Change in net assets from share transactions............. 40,193,861 41,437,596 19,407,642 4,685,142
------------ ------------ ------------ ------------
Change in net assets..................................... 73,043,004 59,116,500 25,117,834 10,775,595
NET ASSETS:
Beginning of period..................................... 156,444,985 97,328,485 59,050,761 48,275,166
------------ ------------ ------------ ------------
End of period........................................... $229,487,989 $156,444,985 $ 84,168,595 $ 59,050,761
============ ============ ============ ============
SHARE TRANSACTIONS:
Issued.................................................. 5,587,933 4,774,121 2,636,434 1,719,005
Reinvested.............................................. 252,319 275,871 214,800 156,859
Redeemed................................................ (2,926,808) (1,633,604) (1,159,914) (1,469,697)
------------ ------------ ------------ ------------
Change in shares......................................... 2,913,444 3,416,388 1,691,320 406,167
============ ============ ============ ============
</TABLE>
- ----------
(a) From January 1, 1996 (commencement of operations) through September 30,
1996.
See notes to financial statements
-27-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Small Company
Growth Fund
------------------------------
For the For the period
year December 7, 1994
ended to
September 30, September 30,
1996 (a)5
------------- ----------------
<S> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment loss........................................................... $ (328,819) $ (92,263)
Net realized gains (losses) on investment transactions........................ 90,971 (264,517)
Net change in unrealized appreciation on investments.......................... 12,148,737 3,781,210
----------- -----------
Change in net assets resulting from operations.................................. 11,910,889 3,424,430
----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued................................................... 22,938,972 15,189,335
Cost of shares redeemed....................................................... (5,922,093) (556,133)
----------- -----------
Change in net assets from share transactions.................................... 17,016,879 14,633,202
----------- -----------
Change in net assets............................................................ 28,927,768 18,057,632
NET ASSETS:
Beginning of period........................................................... 18,057,632 -
----------- -----------
End of period................................................................. $46,985,400 $ 18,057,632
=========== ===========
SHARE TRANSACTIONS:
Issued........................................................................ 1,298,090 1,280,823
Redeemed...................................................................... (315,568) (41,013)
----------- -----------
Change in shares................................................................ 982,522 1,239,810
=========== ===========
</TABLE>
- -------------
(a) Period from commencement of operations.
See notes to financial statements
-28-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
U.S. TREASURY MONEY MARKET FUND
Schedule of Portfolio Investments
September 30, 1996
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
- ----------- ---------------------------- ------------
<S> <C> <C>
U.S. Treasury Bills (47.9%):
$12,000,000 10/17/96 ................. $11,972,922
6,000,000 11/7/96 .................. 5,968,581
12,000,000 11/14/96 ................. 11,925,200
6,000,000 11/21/96 ................. 5,956,055
12,000,000 12/5/96 .................. 11,887,550
8,000,000 12/12/96 ................. 7,916,780
6,000,000 12/19/96 ................. 5,930,941
6,000,000 12/26/96 ................. 5,925,897
6,000,000 1/2/97 ................... 5,918,315
8,000,000 1/9/97 ................... 7,883,472
8,000,000 1/16/97 .................. 7,878,971
8,000,000 1/23/97 .................. 7,871,053
8,000,000 1/30/97 .................. 7,860,850
8,000,000 2/6/97 ................... 7,852,231
------------
Total U.S. Treasury Bills 112,748,818
------------
U.S. Treasury Notes (2.6%):
6,000,000 6.13%, 12/31/96......... 6,008,440
------------
Total U.S. Treasury Notes 6,008,440
------------
Total Investments 118,757,258
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Security Amortized
Amount Description Cost
----------- ---------------------------- ------------
<S> <C> <C>
Repurchase Agreements (49.9%):
$40,000,000 H.S.B.C. Securities,5.70%,
10/1/96 (Collateralized by
41,250,000 U.S. Treasury
Notes, 6.13%, 9/30/00, market
value-$40,831,550)...................... $ 40,000,000
25,000,000 Lehman Brothers, 5.70%, 10/1/96
(Collateralized by 19,055,000
U.S. Treasury Notes, 11.86%,
11/15/03, market value--
$25,501,143)............................ 25,000,000
52,372,191 NationsBank, 5.70%, 10/1/96
(Collateralized by 53,600,000
U.S.Treasury Notes, 6.38%,
9/30/01, market value--
$53,408,387)............................ 52,372,191
------------
Total Repurchase Agreements 117,372,191
------------
Total (Amortized Cost--$236,129,449)(a) $ 236,129,449
============
</TABLE>
- ----------
Percentages indicated are based on net assets of $235,210,595.
(a) Cost for federal income tax and financial reporting purposes are the same.
See notes to financial statements
-29-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
Schedule of Portfolio Investments
September 30, 1996
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
- ---------- ------------------------------ -----------
<S> <C> <C>
Corporate Bonds (2.8%):
Automotive (2.8%):
$2,000,000 Ford Motor Credit, 6.38%, 10/6/00.. $ 1,962,500
-----------
Total Corporate Bonds 1,962,500
-----------
Pass-through Mortgage Securities (3.1%):
Federal National Mortgage Assoc.:
2,172,875 7.00%, 6/1/08, Pool # 50751........ 2,155,883
-----------
Total Pass-through Mortgage Securities 2,155,883
-----------
U.S. Government Agencies (5.8%):
Federal Home Loan Bank:
3,000,000 6.17%, 3/8/01....................... 2,948,280
1,000,000 7.28%, 7/25/01...................... 1,025,410
-----------
Total U.S. Government Agencies 3,973,690
-----------
U.S. Treasury Notes (85.2%):
4,250,000 6.88%, 3/31/97...................... 4,280,473
4,250,000 8.88%, 11/15/97..................... 4,385,277
</TABLE>
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
- ---------- ----------------------------- -----------
<S> <C> <C>
U.S. Treasury Notes , continued:
$4,500,000 5.63%, 1/31/98 ...............$ 4,480,515
6,500,000 7.25%, 2/15/98 ............... 6,603,935
7,000,000 8.25%, 7/15/98 ............... 7,251,510
4,500,000 5.88%, 3/31/99 ............... 4,466,520
6,500,000 6.50%, 4/30/99 ............... 6,542,315
6,000,000 8.00%, 8/15/99 ............... 6,263,400
8,000,000 6.75%, 4/30/00 ............... 8,090,160
6,000,000 6.38%, 8/15/02 ............... 5,956,680
500,000 5.88%, 11/15/05 .............. 472,140
-----------
Total U.S. Treasury Notes 58,792,925
-----------
Investment Companies (2.2%):
1,487,721 Federated Cash Reserves U.S.
Treasury Fund............. 1,487,721
-----------
Total Investment Companies 1,487,721
-----------
Total (Cost-$68,917,857)(a) $68,372,719
===========
</TABLE>
- ----------
Percentages indicated are based on net assets of $68,977,486.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized depreciation of securities as follows:
Unrealized appreciation........... $ 297,466
Unrealized depreciation........... (842,604)
----------
Net unrealized depreciation....... $(545,138)
==========
See notes to financial statements
-30-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
INTERMEDIATE U.S. GOVERNMENT BOND FUND
Schedule of Portfolio Investments
September 30, 1996
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
- ----------- ---------------------------- ------------
<S> <C> <C>
Corporate Bonds (3.2%):
Automotive (3.2%):
$4,000,000 Ford Motor Credit, 6.38%,
10/6/00............................ $ 3,925,000
------------
Total Corporate Bonds 3,925,000
------------
Pass-through Mortgage Securities (15.9%):
Federal Home Loan Mortgage Corp.:
2,722,664 7.50%, 7/1/07, Pool #E00108.......... 2,749,890
Federal National Mortgage Assoc.:
5,295,084 6.00%, 6/1/08, Pool #124885.......... 5,078,303
4,035,340 7.00%, 6/1/08, Pool # 50751.......... 4,003,784
Government National Mortgage Assoc.:
3,701,128 7.50%, 3/15/23, Pool # 342553........ 3,676,811
4,286,375 7.00%, 8/15/23, Pool # 354627........ 4,151,054
------------
Total Pass-through Mortgage Securities 19,659,842
------------
U.S. Government Agencies (4.2%):
Federal Home Loan Bank:
2,000,000 8.38%, 10/25/99...................... 2,108,080
3,000,000 7.36%, 7/1/04........................ 3,086,520
------------
Total U.S. Government Agencies 5,194,600
------------
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
- ----------- ---------------------------- ------------
<S> <C> <C>
U.S. Treasury Bonds (14.2%):
$ 3,000,000 12.00%, 5/15/05...................... $ 4,026,270
6,000,000 9.38%, 2/15/06...................... 7,108,440
1,500,000 9.13%, 5/15/09...................... 1,705,530
4,500,000 7.50%, 11/15/16..................... 4,712,535
------------
Total U.S. Treasury Bonds 17,552,775
------------
U.S. Treasury Notes (60.6%):
5,000,000 6.13%, 3/31/98...................... 5,008,750
11,500,000 7.00%, 4/15/99...................... 11,707,230
8,000,000 6.88%, 7/31/99...................... 8,116,640
10,500,000 7.88%, 8/15/01...................... 11,104,905
11,000,000 6.38%, 8/15/02...................... 10,920,580
8,000,000 6.25%, 2/15/03...................... 7,866,720
9,500,000 7.25%, 8/15/04...................... 9,838,010
11,000,000 5.88%, 11/15/05..................... 10,387,080
------------
Total U.S. Treasury Notes 74,949,915
------------
Investment Companies (1.0%):
1,266,137 Federated Cash Reserves
U.S. Treasury Fund................ 1,266,137
------------
Total Investment Companies 1,266,137
------------
Total (Cost-$124,082,549)(a) $ 122,548,269
============
</TABLE>
- ----------
Percentages indicated are based on net assets of $123,645,111.
(a) Represents cost for financial reporting purposes and differs from cost basis
for federal income tax purposes by the amount of losses recognized for
financial reporting in excess of federal income tax reporting of $35,586.
Cost for federal income tax purposes differs from value by net unrealized
depreciation of securities as follows:
Unrealized appreciation $ 726,410
Unrealized depreciation (2,296,276)
===========
Net unrealized depreciation $(1,569,866)
===========
See notes to financial statements
-31-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
NORTH CAROLINA INTERMEDIATE TAX-FREE FUND
Schedule of Portfolio Investments, Continued
September 30, 1996
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
- ---------- ------------------------------------------------------------------------------------------ -----------
<S> <C> <C>
Municipal Bonds (95.2%):
General Obligation Bonds (87.0%):
$ 500,000 Asheville, 4.80%, 6/1/06 ...................................................... $ 481,875
470,000 Buncombe County, 5.00%, 3/1/00 ................................................ 478,225
500,000 Buncombe County, 5.00%, 3/1/03 ................................................ 506,250
1,000,000 Buncombe County, 5.10%, 3/1/07 ................................................ 991,250
1,000,000 Cary, 5.50%, 2/1/01 ........................................................... 1,033,750
545,000 Charlotte, 6.80%, 10/1/97 ..................................................... 561,072
395,000 Charlotte, 5.20%, 7/1/01 ...................................................... 406,850
1,000,000 Charlotte, 5.30%, 4/1/10, Callable 4/1/05 @ 102 ............................... 986,250
500,000 Chatham County, 5.40%, 4/1/11, Callable 4/1/06 @ 102*, (b) .................... 490,625
1,000,000 City of Durham, 4.90%, 2/1/04 ................................................. 997,500
500,000 City of Durham, 5.00%, 2/1/05 ................................................. 498,750
275,000 Cleveland County, 7.10%, 6/1/99 ............................................... 293,906
600,000 Cleveland County, 5.10%, 6/1/03 ............................................... 604,500
500,000 Craven County, 5.50%, 6/1/09, Callable 6/1/06 @ 102* .......................... 503,750
500,000 Durham & Wake Counties, 5.75%, 4/1/02 ......................................... 528,125
400,000 Durham County, 5.20%, 3/1/01 .................................................. 409,500
340,000 Durham County, 5.20%, 3/1/05, Callable 3/1/02 @ 101.50 ........................ 346,800
1,000,000 Fayetteville, 4.80%, 5/1/05, Callable 5/1/03 @ 101* ........................... 975,000
265,000 Forsyth County, 5.40%, 6/1/04, Callable 6/1/02 @ 101 .......................... 273,613
500,000 Gaston County, 5.00%, 3/1/08, Callable 3/1/06 @ 101* .......................... 481,250
450,000 Goldsboro, 4.90%, 6/1/99 ...................................................... 454,500
550,000 Greensboro, 6.00%, 3/1/98 ..................................................... 564,438
1,000,000 Guilford County, 4.80%, 4/1/99 ................................................ 1,013,750
300,000 Hickory, 6.50%, 5/1/99 ........................................................ 314,625
680,000 High Point, 4.40%, 4/1/02 ..................................................... 662,150
500,000 Lee County, 5.50%, 2/1/00 ..................................................... 514,375
1,000,000 Lincoln County, 4.70%, 6/1/01 ................................................. 1,005,000
1,000,000 Lincoln County, 4.80%, 6/1/04 ................................................. 992,500
700,000 Mecklenburg County, 5.75%, 3/1/03, Callable 3/1/02 @ 100.50.................... 735,875
1,000,000 Mecklenburg County, 5.00%, 4/1/08 ............................................. 982,500
500,000 Moore County, 4.75%, 6/1/03 ................................................... 495,000
500,000 New Hanover County, 4.30%, 1/1/02 ............................................. 489,375
1,000,000 New Hanover County, 4.50%, 9/1/03 ............................................. 975,000
1,500,000 North Carolina State, 5.75%, 3/1/98 ........................................... 1,533,750
500,000 North Carolina State, 4.70%, 2/1/01 ........................................... 501,875
1,000,000 North Carolina State, 4.70%, 2/1/06, Callable 2/1/04 @ 101..................... 970,000
670,000 Orange County, 5.10%, 6/1/00 .................................................. 684,238
500,000 Orange County, 5.10%, 6/1/06, Callable 6/1/03 @ 101.5 ......................... 498,125
500,000 Orange County, 5.10%, 6/1/07, Callable 6/1/03 @ 102 ........................... 496,250
1,000,000 Pitt County, 4.80%, 2/1/00 .................................................... 1,007,500
500,000 Raleigh, 5.00%, 2/1/08, Callable 2/1/00 @ 102 ................................. 490,625
400,000 Rocky Mount, 5.50%, 5/1/97 .................................................... 403,980
700,000 Rowan County, 5.50%, 4/1/05 ................................................... 727,125
</TABLE>
Continued
-32-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
NORTH CAROLINA INTERMEDIATE TAX-FREE FUND
Schedule of Portfolio Investments Continued
September 30, 1996
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
- ---------- ------------------------------------------------------------------------------------------ -----------
Municipal Bonds, continued:
General Obligation Bonds, continued:
<S> <C> <C>
$ 225,000 Rowan County, 5.50%, 2/1/07, Callable 2/1/06 @ 100.5 ................................ $ 231,188
200,000 Union County, 5.80%, 3/1/05, Callable 3/1/02 @ 101.5 ................................ 208,250
1,000,000 Wake County, 4.50%, 4/1/03 .......................................................... 985,000
1,000,000 Wayne County, 4.80%, 4/1/03 ......................................................... 992,500
500,000 Wilkes County, 5.00%, 6/1/01 ........................................................ 502,500
1,000,000 Wilmington, 4.60%, 3/1/02 ........................................................... 990,000
505,000 Winston Salem, 6.50%, 6/1/99 ........................................................ 532,775
-----------
32,803,610
-----------
Health Care Bonds (5.9%):
650,000 Charlotte Mecklenburg Hospital Revenue, 5.70%, 1/1/01.................................. 678,437
500,000 Charlotte Mecklenburg Hospital Revenue, 5.90%, 1/1/02.................................. 526,250
400,000 Medical Care Commission, Presbyterian Hospital Services, 5.70%, 10/1/04, Callable
10/01/02 @ 102......................................................................... 416,000
600,000 Medical Care Commission, Rex Hospital, 4.70%, 6/1/98................................... 603,000
-----------
2,223,687
-----------
Housing Bonds (1.0%):
365,000 Housing Finance Authority Revenue, 3.85%**, 9/1/16..................................... 365,000
-----------
Utility Bonds (1.3%):
500,000 Asheville Revenue, 5.30%, 8/1/09, Callable 8/1/06 @ 102*,(b)........................... 495,000
-----------
Total Municipal Bonds 35,887,297
-----------
Investment Companies (6.5%):
1,408,264 Compass Capital Funds North Carolina Municipal Money Market Portfolio(c)............... 1,408,264
1,049,333 North Carolina Municipal Cash Trust(c)................................................. 1,049,333
-----------
Total Investment Companies 2,457,597
-----------
Total (Cost-$38,239,071)(a) $38,344,894
===========
</TABLE>
- ----------
Percentages indicated are based on net assets of $37,704,254.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation............ $ 332,873
Unrealized depreciation............ (227,050)
---------
Net unrealized appreciation........ $ 105,823
=========
(b) When-Issued security
(c) 499,900 Shares of the Compass Capital Funds North Carolina Municipal Money
Market and 497,069 shares of the North Carolina Municipal Cash Trust were
segregated due to the "When-Issued" securities purchased.
* Additional put and demand features exist allowing the Fund to require the
purchase of the instrument within variable time periods including daily,
weekly, monthly, or semiannually.
** Variable rate investments. The rate reflected on the Schedule of Investments
is the rate in effect at September 30, 1996.
See notes to financial statements
-33-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
GROWTH AND INCOME STOCK FUND
Schedule of Portfolio Investments
September 30, 1996
<TABLE>
<CAPTION>
Security Market
Shares Description Value
- ---------- ---------------------------- ------------
<S> <C> <C>
Common Stocks (96.6%):
Apparel (1.0%):
38,500 V.F. Corp............................. $ 2,314,812
------------
Banks (6.0%):
83,800 Barnett Banks, Inc.................... 2,828,250
58,400 Boatmens Bancshares, Inc.............. 3,263,100
39,500 J. P. Morgan & Co..................... 3,510,562
82,400 Wachovia Corp......................... 4,078,800
------------
13,680,712
------------
Beverages (2.4%):
145,200 Anheuser-Busch Co..................... 5,463,150
------------
Business Equipment & Services (3.8%):
95,400 John H. Harland Co.................... 2,862,000
113,100 Pitney Bowes,Inc...................... 5,951,887
------------
8,813,887
------------
Chemicals (3.7%):
79,300 Air Products & Chemicals, Inc......... 4,619,225
18,500 Monsanto Corp......................... 675,250
53,800 Vulcan Materials Co................... 3,228,000
------------
8,522,475
------------
Communications Equipment (2.4%):
85,600 Harris Corp........................... 5,574,700
------------
Computers (4.7%):
40,900 Apple Computer, Inc................... 907,469
79,600 Hewlett Packard Co.................... 3,880,500
77,000 Honeywell, Inc........................ 4,860,625
9,600 IBM Corp.............................. 1,195,200
------------
10,843,794
------------
Construction Materials (0.9%):
34,400 PPG Industries........................ 1,870,500
------------
Containers (1.6%):
120,100 Ball Corp............................. 2,942,450
30,000 Sonoco Products Co.................... 825,000
------------
3,767,450
------------
Defense (2.2%):
56,600 Lockheed Martin Corp.................. 5,101,075
------------
Electrical Equipment (1.8%):
45,200 Emerson Electric...................... 4,073,650
------------
Electronic Components (1.4%):
64,400 Avnet, Inc............................ 3,123,400
------------
Electronic Instruments (0.2%):
10,500 Tektronix, Inc........................ 429,187
------------
Food & Related (3.4%):
121,400 Dean Foods Co......................... $ 3,429,550
161,400 SUPERVALU, Inc........................ 4,438,500
------------
7,868,050
------------
Forest & Paper Products (1.9%):
95,900 Weyerhaeuser Co....................... 4,423,388
------------
Health Care (3.7%):
60,000 Abbott Laboratories................... 2,955,000
50,100 Glaxo Holdings ADR.................... 1,559,363
79,000 Johnson & Johnson..................... 4,048,750
------------
8,563,113
------------
Household--Major Appliances (1.0%):
43,700 Whirlpool Corp........................ 2,212,313
------------
Household Products (1.6%):
22,650 Unilever NV, New York Shares.......... 3,570,206
------------
Insurance (6.4%):
93,000 Aon Corp.............................. 5,045,250
83,300 Lincoln National Corp................. 3,654,788
170,400 SAFECO Corp........................... 5,963,999
------------
14,664,037
------------
Leisure Time Industry (1.2%):
75,400 Hasbro, Inc........................... 2,799,225
------------
Manufacturing (0.5%):
25,000 Parker Hannifin Corp.................. 1,050,000
------------
Metal Fabrication (1.4%):
98,200 Trinity Industries.................... 3,277,425
------------
Metals (0.8%):
28,600 Phelps Dodge Corp..................... 1,833,975
------------
Motor Vehicles (1.2%):
91,200 Ford Motor Co......................... 2,850,000
------------
Multiple Industry (1.4%):
81,900 Corning Glass......................... 3,194,100
------------
Petroleum (8.8%):
62,000 Ashland, Inc.......................... 2,464,500
68,200 Chevron Corp.,Inc..................... 4,271,025
27,600 Mobil Corp............................ 3,194,700
124,200 Phillips Petroleum Co................. 5,309,549
31,600 Royal Dutch Petroleum Co.............. 4,933,550
------------
20,173,324
------------
Pharmaceuticals (6.6%):
54,300 Bristol Myers Squibb Co............... 5,233,163
67,700 Rhone-Poulenc Rorer................... 4,984,413
</TABLE>
Continued
-34-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
GROWTH AND INCOME STOCK FUND
Schedule of Portfolio Investments, Continued
September 30, 1996
<TABLE>
<CAPTION>
Security Market
Shares Description Value
- ----------- ---------------------------- ------------
<S> <C> <C>
Common Stocks, continued:
Pharmaceuticals, continued:
78,100 Schering Plough Corp............... $ 4,803,150
-------------
15,020,726
-------------
Photographic Equipment (0.6%):
16,900 Eastman Kodak Co................... 1,326,650
-------------
Publishing (2.8%):
38,000 American Greetings................. 1,087,750
48,800 Houghton Mifflin Co................ 2,299,700
103,400 Lee Enterprises.................... 2,365,275
17,400 Media General, Inc................. 548,100
-------------
6,300,825
-------------
Railroad (0.6%):
26,000 CSX Corp........................... 1,313,000
-------------
Restaurants (0.6%):
110,000 Bob Evans Farms.................... 1,471,250
-------------
Retail (4.5%):
111,100 American Stores Co................. 4,444,000
91,569 Limited, Inc....................... 1,751,257
85,500 May Department Stores Co........... 4,157,438
-------------
10,352,695
-------------
Securities Brokers & Dealers (1.5%):
120,925 AG Edwards......................... 3,521,941
-------------
Tobacco (0.8%):
20,700 Philip Morris Cos., Inc............ 1,857,825
-------------
Common Stocks, continued:
Trucking & Shipping (0.8%):
75,000 Alexander & Baldwin................ $ 1,837,500
-------------
Utilities--Electric (4.3%):
65,900 FPL Group, Inc..................... 2,850,175
68,000 Public Service Co. Of Colorado..... 2,414,000
160,200 Western Resources, Inc............. 4,665,825
-------------
9,930,000
-------------
Utilities--Gas (3.5%):
61,400 Consolidated Natural Gas Co........ 3,292,575
141,000 NICOR, Inc......................... 4,758,750
-------------
8,051,325
-------------
Utilities--Telephone (4.6%):
25,400 AT&T Corp.......................... 1,327,150
92,200 SBC Communications Inc............. 4,437,125
123,000 Sprint Corp........................ 4,781,625
-------------
10,545,900
-------------
Total Common Stocks............................ 221,587,585
-------------
Investment Companies (3.6%):
8,158,897 Federated Cash Reserves U.S.
Treasury Fund...................... 8,158,897
-------------
Total Investment Companies 8,158,897
-------------
Total (Cost--$182,180,043)(a) $ 229,746,482
=============
</TABLE>
- ----------
Percentages indicated are based on net assets of $229,487,989.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation $ 50,699,151
Unrealized depreciation (3,132,712)
==========
Net unrealized appreciation $ 47,566,439
==========
ADR - American Depository Receipt
See notes to financial statements
-35-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
BALANCED FUND
Schedule of Portfolio Investments
September 30, 1996
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
- ---------- ------------------------------ -----------
<S> <C> <C>
Common Stocks (43.5%):
Apparel (0.7%):
10,000 V.F. Corp..................... $ 601,250
-----------
Banks (2.5%):
11,000 Banc One Corp................. 451,000
10,000 Boatmens Bancshares, Inc...... 558,750
5,000 J. P. Morgan & Co............. 444,375
14,000 Wachovia Corp................. 693,000
-----------
2,147,125
-----------
Beverages (0.9%):
20,000 Anheuser-Busch Co............. 752,500
-----------
Business Equipment & Services (1.2%):
10,000 John H. Harland Co............ 300,000
13,000 Pitney Bowes, Inc............. 684,125
-----------
984,125
-----------
Chemicals (2.3%):
8,000 Air Products & Chemicals, Inc. 466,000
7,500 E. I. Dupont de Nemours Co.... 661,875
23,000 Monsanto Corp................. 839,500
-----------
1,967,375
-----------
Communications Equipment (0.7%):
9,000 Harris Corp................... 586,125
-----------
Computers (2.4%):
15,000 Hewlett Packard Co............ 731,250
11,500 Honeywell, Inc................ 725,938
10,500 Xerox Corp.................... 563,063
-----------
2,020,251
-----------
Construction-Engineering (0.6%):
10,000 Ingersol-Rand Co.............. 475,000
-----------
Construction Materials (0.8%):
12,000 PPG Industries................ 652,500
-----------
Containers (0.5%):
12,300 Ball Corp..................... 301,350
3,000 Sonoco Products Co............ 82,500
-----------
383,850
-----------
Defense (0.8%):
4,000 Lockheed Martin Corp.......... 360,500
6,000 Raytheon Co................... 333,750
-----------
694,250
-----------
Electrical Equipment (0.5%):
4,500 Emerson Electric.............. 405,563
-----------
Electronic Components (0.8%):
14,200 Avnet, Inc.................... 688,700
-----------
Food & Related (2.6%):
20,000 Dean Foods Co................. 565,000
14,500 H. J. Heinz Co................ 489,375
22,500 Sara Lee Corp................. 804,375
13,000 SUPERVALU, Inc................ 357,500
-----------
2,216,250
-----------
Forest & Paper Products (0.7%):
13,000 Weyerhaeuser Co............... 599,625
-----------
Health Care (2.1%):
17,500 Abbott Laboratories........... 861,875
7,400 Glaxo Holdings ADR............ 230,325
13,000 Johnson & Johnson............. 666,250
-----------
1,758,450
-----------
Household-Major Appliances (0.5%):
9,000 Whirlpool Corp................ 455,625
-----------
Household Products (0.5%):
2,500 Unilever New York Shares...... 394,062
-----------
Insurance (3.0%):
14,000 American General Corp......... 528,500
18,500 Lincoln National Corp......... 811,687
28,000 SAFECO Corp................... 980,000
7,500 USLIFE Corp................... 225,000
-----------
2,545,187
-----------
Leisure Time Industry (0.3%):
7,500 Hasbro, Inc................... 278,437
-----------
Metal Fabrication (0.6%):
15,000 Trinity Industries............ 500,625
-----------
Motor Vehicles (0.4%):
11,000 Ford Motor Co................. 343,750
-----------
Multiple Industry (0.7%):
12,500 Corning Glass................. 487,500
7,000 Hanson Trust ADR.............. 86,625
-----------
574,125
-----------
Petroleum (4.2%):
6,000 Ashland, Inc.................. 238,500
4,400 Atlantic Richfield Co......... 561,000
8,000 Chevron Corp.................. 501,000
5,500 Mobil Corp.................... 636,625
28,000 Phillips Petroleum Co......... 1,197,000
2,500 Royal Dutch Petroleum Co...... 390,313
-----------
3,524,438
-----------
Pharmaceuticals (2.5%):
12,000 Bristol Myers Squibb Co....... 1,156,500
15,000 Schering Plough Corp.......... 922,500
-----------
2,079,000
-----------
Publishing (1.1%):
4,000 Gannett Co., Inc.............. 281,500
</TABLE>
Continued
-36-
[LOGO OF BB&T MUTUAL FUNDS AOOEARS HERE]
<PAGE>
BALANCED FUND
Schedule of Portfolio Investments, Continued
September 30, 1996
Shares
or
Principal Security Market
Amount Description Value
- ---------- ----------------------------------- -----------
Common Stocks, continued:
Publishing, continued:
8,000 Tribune Co......................... $ 624,000
-----------
905,500
-----------
Railroad (0.6%):
5,500 Norfolk Southern Corp.............. 502,563
-----------
Retail (2.5%):
15,000 Dayton Hudson Corp................. 495,000
7,500 J.C. Penney, Inc................... 405,937
7,000 May Department Stores Co........... 340,375
11,000 Melville Corp...................... 485,375
11,300 Rite-Aid........................... 409,625
-----------
2,136,312
-----------
Securities Brokers & Dealers (0.4%):
11,000 AG Edwards......................... 320,375
-----------
Tobacco (0.7%):
7,000 Philip Morris Cos., Inc............ 628,250
-----------
Trucking & Shipping (0.2%):
5,500 Alexander & Baldwin................ 134,750
-----------
Utilities-Electric (1.5%):
6,000 American Electric Power, Inc....... 243,750
2,500 Duke Power Co...................... 116,562
11,000 FPL Group, Inc..................... 475,750
16,000 Scana Corp......................... 420,000
-----------
1,256,062
-----------
Utilities-Gas (2.0%):
25,000 NICOR, Inc......................... 843,750
16,000 Williams Cos., Inc................. 816,000
-----------
1,659,750
-----------
Utilities-Telephone (1.7%):
6,600 Ameritech Corp..................... 347,325
4,000 AT&T Corp.......................... 209,000
22,000 Sprint Corp........................ 855,250
-----------
1,411,575
-----------
Total Common Stocks 36,583,325
-----------
Pass-through Mortgage Securities (4.6%):
Federal Home Loan Mortgage Corp.:
$ 960,527 7.50%, 7/1/07, Pool # E00108.... $ 970,133
Federal National Mortgage Assoc.:
1,423,123 6.50%, 1/1/09, Pool # 50974..... 1,386,648
1,510,469 7.00%, 5/1/09, Pool # 250055.... 1,498,657
-----------
Total Pass-through Mortgage Securities..... 3,855,438
-----------
U.S. Treasury Bonds (6.4%):
1,500,000 11.13%, 8/15/03.................. 1,868,040
3,000,000 9.38%, 2/15/06.................. 3,554,220
-----------
Total U.S. Treasury Bonds 5,422,260
-----------
U.S. Treasury Notes (39.5%)
2,000,000 7.13%, 10/15/98.................. 2,039,040
4,000,000 8.00%, 8/15/99.................. 4,175,600
4,000,000 8.50%, 11/15/00.................. 4,295,600
3,500,000 7.75%, 2/15/01.................. 3,671,080
2,500,000 7.50%, 11/15/01.................. 2,607,825
2,500,000 7.50%, 5/15/02.................. 2,616,675
2,500,000 6.38%, 8/15/02.................. 2,481,950
2,500,000 6.25%, 2/15/03.................. 2,458,350
2,500,000 7.25%, 5/15/04.................. 2,588,250
3,000,000 7.88%, 11/15/04.................. 3,223,560
2,000,000 7.50%, 2/15/05.................. 2,103,660
1,000,000 6.50%, 8/15/05.................. 986,690
-----------
Total U.S. Treasury Notes 33,248,280
-----------
Investment Companies (5.5%):
2,171,201 Federated Cash Reserves U.S.
Treasury Fund................... 2,171,201
2,441,042 Federated Short-Term U.S.
Government Trust................ 2,441,042
-----------
Total Investment Companies................ 4,612,243
-----------
Total (Cost-$75,172,426)(a)............... $ 83,721,546
===========
- ---------------------
Percentages indicated are based on net assets of $84,168,595.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation.......... $ 9,450,507
Unrealized depreciation.......... (901,387)
----------
Net unrealized appreciation...... $ 8,549,120
==========
ADR - American Depository Receipt
See notes to financial statements
-37-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
SMALL COMPANY GROWTH FUND
Schedule of Portfolio Investments
September 30, 1996
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
- ---------- ------------------------------ -----------
<S> <C> <C>
Common Stocks (93.4%):
Advertising (0.2%):
7,400 Leap Group Inc.(b)..................... $ 75,850
-----------
Beverages (0.8%):
20,000 Boston Beer Co., Inc.(b)............... 387,500
-----------
Business Services (9.3%):
36,000 Accustaff, Inc.(b)..................... 931,500
14,000 Acxiom Corp.(b)........................ 575,750
19,400 APAC Teleservices, Inc.(b)............. 994,250
16,600 Norrell Corp........................... 522,900
13,000 Robert Half International, Inc. (b).... 479,375
19,600 Sitel Corp.(b)......................... 872,200
-----------
4,375,975
-----------
Commercial Goods & Services (3.9%):
9,000 Access Health, Inc.(b)................. 506,250
11,450 Apollo Group, Inc.(b).................. 306,287
23,100 Cambridge Technology Partners,
Inc.(b)............................... 698,775
13,800 Wackenhut Corrections Corp.(b)......... 307,050
-----------
1,818,362
-----------
Commercial Services (2.2%):
2,000 Abacus Direct Corp.(b)................. 39,000
14,800 May & Speh, Inc.(b).................... 296,000
17,600 Precision Response Corp.(b)............ 677,600
400 Vincam Group, Inc.(b).................. 15,300
-----------
1,027,900
-----------
Computer Hardware (0.6%):
10,100 Network Appliance, Inc.(b)............. 303,000
-----------
Computer Software (17.5%):
13,400 Aspen Technologies, Inc.(b)............ 907,850
3,000 Baan Co. NV(b)......................... 100,125
10,200 Bisys Group, Inc.(b)................... 418,200
17,900 CBT Group PLC ADR(b)................... 841,300
3,500 Citrix Systems, Inc.(b)................ 174,563
6,000 Electronics for Imaging, Inc.(b)....... 430,500
3,700 HCIA, Inc.(b).......................... 222,000
17,600 Legato Systems, Inc.(b)................ 836,000
13,900 Manugistics Group, Inc.(b)............. 559,475
12,500 National Techteam Inc.(b).............. 339,063
12,400 Pegasystems Inc.(b).................... 322,400
16,600 Rational Software Corp.(b)............. 566,475
20,000 Saville Systems ADR(b)................. 705,000
12,700 Transaction Systems Architects,
Inc.(b)............................... 536,575
5,400 Vantive Corp.(b)....................... 349,650
12,000 Veritas Software Corp.(b).............. 849,000
4,200 Xionics Document Technologies,
Inc.(b)............................... 59,850
-----------
8,218,026
-----------
Computers (2.9%):
17,900 Converse Technology, Inc.(b)........... 695,862
18,500 Technology Solutions Co.(b)............ 645,188
-----------
1,341,050
-----------
Construction Materials (1.7%):
23,700 Systemsoft Corp.(b).................... 811,725
-----------
Consumer Goods & Services (1.0%):
5,600 Gemstar International Group
Limited(b)............................ 165,200
7,500 USA Detergents, Inc.(b)................ 298,125
-----------
463,325
-----------
Distribution Services (0.5%):
20,000 Keystone Automotive Industries,
Inc.(b)............................... 245,000
-----------
Electronics (3.2%):
9,300 Dynatech Corp.(b)...................... 425,475
8,300 Sawtek, Inc.(b)........................ 215,800
10,400 Ultrak, Inc.(b)........................ 286,000
14,600 Vitesse Semiconductor Corp.(b)......... 563,925
-----------
1,491,200
-----------
Entertainment (1.2%):
16,725 Regal Cinemas, Inc.(b)................. 418,125
6,000 Speedway Motorsports, Inc.(b).......... 157,500
-----------
575,625
-----------
Environmental Services (2.9%):
16,666 Continental Waste Industries,
Inc.(b).............................. 372,902
16,800 United Waste Systems, Inc.(b).......... 583,800
13,090 USA Waste Services, Inc.(b)............ 412,335
-----------
1,369,037
-----------
Financial Services (5.4%):
15,000 Aames Financial Corp................... 755,625
</TABLE>
Continued
-38-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
SMALL COMPANY GROWTH FUND
Schedule of Portfolio Investments, Continued
September 30, 1996
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
- --------- --------------------------- ----------
<S> <C> <C>
Common Stocks, continued:
Financial Services, continued:
18,500 Amresco, Inc.................. $ 423,188
10,300 Cityscape Financial Corp.(b).. 272,950
7,000 Envoy Corp.(b)................ 271,250
10,500 IMC Mortgage Co.(b)........... 336,000
9,250 The Money Store, Inc.......... 245,125
11,000 Oxford Resources Corp.,
Class A(b).................. 235,125
----------
2,539,263
----------
Health Care--General (0.2%):
2,000 CRA Managed Care, Inc.(b)..... 108,000
----------
Homebuilders--Mobile Homes (1.6%):
14,000 Oakwood Homes................. 385,000
22,500 Southern Energy Homes, Inc.(b) 360,000
----------
745,000
----------
Hospital Supply & Management (0.2%):
3,500 FPA Medical Management, Inc.(b) 92,313
----------
Hotel Management & Related Services (0.3%):
7,350 Studio Plus Hotels, Inc.(b)... 121,275
----------
Hotels & Gaming (0.8%):
10,000 Doubletre Corp.(b)............ 398,750
----------
Insurance (1.5%):
15,000 HCC Insurance Holdings, Inc... 433,125
7,600 United Dental Care, Inc.(b)... 274,550
----------
707,675
----------
Leisure Time Industry (0.8%):
14,200 The North Face, Inc.(b)....... 401,150
----------
Manufactured Housing (0.9%):
18,000 Champion Enterprises, Inc.(b). 407,250
----------
Medical (2.7%):
10,800 Clintrial Research(b)......... 440,100
6,400 Quintiles Transnational Corp.(b) 468,800
10,000 Serologicals Corp.(b)......... 347,500
----------
1,256,400
----------
Medical--Hospital Management & Services (5.5%):
16,000 NCS Healthcare, Inc., Class A(b) 502,000
11,300 Occusystems, Inc.(b).......... 339,000
5,200 Omnicare, Inc................. 158,600
14,000 Orthodontic Centers of
America, Inc.(b)............ 285,250
12,700 Pediatrix Medical Group, Inc.(b) 630,237
8,025 Phycor, Inc................... 305,452
11,600 Renal Treatment Centers, Inc.(b) 385,700
----------
2,606,239
----------
Medical Equipment & Supplies (0.6%):
6,600 MiniMed Inc.(b)............... 165,825
6,000 Techne Corp.(b)............... 140,250
----------
306,075
----------
Oil & Gas (1.1%):
7,200 Marine Drilling Co., Inc.(b).. 69,300
5,000 Reading & Bates Corp.(b)...... 135,625
6,000 Seacor Holdings(b)............ 304,500
----------
509,425
----------
Pharmaceuticals (6.6%):
26,000 Dura Pharmaceuticals, Inc.(b). 958,750
23,250 Jones Medical Industries, Inc. 1,127,625
9,250 Medicis Pharmaceutical Corp.(b) 446,312
3,000 Noven Pharmaceuticals(b)...... 37,875
8,300 Parexel International Corp.(b) 522,900
----------
3,093,462
----------
Publishing (0.5%):
7,000 Gartner Group, Inc.(b)........ 238,000
----------
Restaurants (4.7%):
5,400 CKE Restaurants, Inc.......... 166,050
14,000 Einstein/Noah Bagel Corp.(b).. 430,500
17,000 Landry's Seafood Restaurants(b) 425,000
16,050 Logan Roadhouse, Inc.(b)...... 323,006
9,150 Papa John's International,Inc.(b) 480,375
13,000 Quality Dining, Inc.(b)....... 370,500
----------
2,195,431
----------
Retail (5.9%):
600 Cost Plus, Inc.(b)............ 13,875
5,400 Gadzooks, Inc.(b)............. 187,650
4,400 Gargoyles, Inc.(b)............ 90,475
3,000 Global Directmail Corp.(b).... 143,250
7,400 Inacom Corp.(b)............... 253,450
5,100 Just For Feet, Inc.(b)........ 255,638
2,000 Oakley, Inc.(b)............... 85,000
7,000 Pacific Sunwear of California. 230,125
9,000 Petco Animal Supplies, Inc.(b) 245,250
16,400 Rexall Sundown, Inc.(b)....... 598,600
6,000 The Finish Line, Inc.(b)...... 285,000
</TABLE>
Continued
-39-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
SMALL COMPANY GROWTH FUND
Schedule of Portfolio Investments, Continued
September 30, 1996
<TABLE>
<CAPTION>
Shares
or
Principal Security Market
Amount Description Value
- ---------- ----------------------------------------- -----------
<S> <C> <C>
Common Stocks, continued:
Retail, continued:
11,000 West Marie Inc.(b).................. $ 363,000
-----------
2,751,313
-----------
Telecommunications (3.3%):
3,300 Boston Communications Group(b)...... 53,625
8,400 DSP Communications, Inc.(b)......... 469,350
9,000 Natural Microsystems Corp.(b)....... 433,125
8,500 P-COM, Inc.(b)...................... 210,375
13,700 Tel-Save Holdings, Inc.(b).......... 393,875
-----------
1,560,350
-----------
Textile (1.6%):
3,400 Donna Karan Intl, Inc.(b)........... 77,775
9,000 Nautica Enterprises, Inc.(b)........ 290,250
7,600 St. John Knits, Inc................. 380,950
-----------
748,975
-----------
Transportation (1.3%):
4,800 American Medical Response, Inc.(b).. 172,800
12,000 Rural/Metro Corp.(b)................ 438,000
-----------
610,800
-----------
Total Common Stocks 43,900,721
-----------
U.S. Government Agencies (7.7%):
Federal Home Loan Mortgage Corp.:
$3,630,000 10/1/96................................... $ 3,629,454
-----------
Total U.S. Government Agencies 3,629,454
-----------
Total (Cost-$31,600,228)(a) $47,530,175
===========
</TABLE>
- ----------
Percentages indicated are based on net assets of $46,985,400.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
Unrealized appreciation $16,418,979
Unrealized depreciation (489,032)
-----------
Net unrealized appreciation $15,929,947
===========
(b)Represents non-income producing securities.
See notes to financial statements
-40-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Notes to Financial Statements
September 30, 1996
1. Organization:
The BB&T Mutual Funds Group ("The Group") was organized on October 1, 1987
and is registered under the Investment Company Act of 1940, as amended ("the
1940 Act"), as a diversified, open-end investment company established as a
Massachusetts business trust.
The Group is authorized to issue an unlimited number of shares without par
value. The Group offers shares of the U.S. Treasury Money Market Fund, the
Short-Intermediate U.S. Government Income Fund, the Intermediate U.S.
Government Bond Fund, the North Carolina Intermediate Tax-Free Fund, the
Growth and Income Stock Fund, the Balanced Fund and the Small Company Growth
Fund (referred to individually as a "Fund" and collectively as the "Funds").
The Group offers three classes of shares: Class A Shares, Class B Shares,
and Trust Shares. Class A Shares are offered with a front-end sales charge
on the Short-Intermediate U.S. Government Income Fund, the Intermediate U.S.
Government Bond Fund, the North Carolina Intermediate Tax-Free Fund, the
Growth and Income Stock Fund, the Balanced Fund and the Small Company Growth
Fund (collectively, "the variable net asset funds"). Class B Shares are
offered subject to a contingent deferred sales charge which varies based on
the length of time Class B Shares are held in accordance with the Prospec-
tus Prospectus. Each class of shares has identical rights and privileges
except with respect to the distribution fees borne by the Class A Shares and
Class B Shares, expenses allocable exclusively to each class of shares,
voting rights on matters affecting a single class of shares and the exchange
privilege of each class of shares. Sales of shares of the Group may be made
to customers of Branch Banking & Trust Company (BB&T) and its affiliates, to
all accounts of correspondent banks of BB&T and to the general public. BB&T
serves as investment adviser to the Group.
The U.S. Treasury Money Market Fund (the "money market fund") seeks current
income with liquidity and stability of principle. The Short-Intermediate
U.S. Government Income Fund and the Intermediate U.S. Government Bond Fund
seek current income consistent with preservation of capital. The North
Carolina Intermediate Tax-Free Fund seeks to produce a high level of current
interest income that is exempt from both federal income tax and North
Carolina personal income tax. The Growth and Income Stock Fund seeks capital
growth, current income or both. The Balanced Fund seeks long-term capital
growth and current income. The Small Company Growth Fund seeks long-term
capital appreciation.
2. Significant Accounting Policies:
The following is a summary of significant accounting policies followed by
the Group in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The preparation
of financial statements requires management to make estimates and assump-
tions that affect the reported amounts of 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.
Securities Valuation:
Investments of the money market fund are valued at either amortized cost,
which approximates market value, or at original cost which, combined with
accrued interest, approximates market value. Under the amortized cost
method, discount or premium is amortized on a constant basis to the maturity
of the security. In addition the U.S. Treasury Money Market Fund may not (a)
purchase any instrument with a remaining maturity greater than
Continued
-41-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Notes to Financial Statements, Continued
September 30, 1996
397 days unless such instrument is subject to a demand feature, or (b)
maintain a dollar-weighted-average portfolio maturity which exceeds 90 days.
Investments in common stocks, commercial paper, corporate bonds, municipal
securities, U.S. Government securities, and U.S. Government agency securi-
ties of the variable net asset funds are valued at their market values
determined on the latest available bid prices in the principal market
(closing sales prices if the principal market is an exchange) in which such
securities are normally traded. Investments in investment companies are
valued at their respective net asset values as reported by such companies.
The differences between cost and market values of investments are reflected
as unrealized appreciation or depreciation.
Securities Transactions and Related Income:
Securities transactions are accounted for on the date the security is
purchased or sold (trade date). Interest income is recognized on the accrual
basis and includes, where applicable, the pro rata amortization 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 and Forward Commitments:
The Funds may purchase securities on a "when-issued" basis and may also
purchase or sell securities on a forward commitment. The Funds record
when-issued securities on the trade date and maintain security positions
such that sufficient liquid assets will be available to make payment for the
securities purchased. The value of the securities underlying when-issued or
forward commitments to purchase securities, and any subsequent fluctuation
in their 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. The Funds do not accrue interest or dividends on when-issued
securities until the underlying securities are received.
Repurchase Agreements:
Each Fund may enter into repurchase agreements with member banks of the
Federal Deposit Insurance Corporation and with registered broker/dealers
that BB&T deems creditworthy under guidelines 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 Fund plus interest negotiated on the basis of current
short-term rates, which may be more or less than the rate on the underlying
portfolio securities. 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 Fund's custodian or another
qualified custodian or in the Federal Reserve/Treasury book-entry system.
Dividends to Shareholders:
Dividends from net investment income are declared daily and paid monthly
for the U.S. Treasury Money Market Fund, the Short-Intermediate U.S.
Government Income Fund, the Intermediate U.S. Government Bond Fund and the
North Carolina Intermediate Tax-Free Fund. Dividends from net investment
income are declared and paid monthly for the Growth and Income Stock Fund
and the Balanced Fund. Dividends from net investment income
Continued
-42-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Notes to Financial Statements, Continued
September 30, 1996
are declared and paid quarterly for the Small Company Growth Fund.
Distributable net realized capital gains, if any, are declared and
distributed at least annually.
Dividends from net investment income and from net realized capital gains are
determined in accordance with income tax regulations which may differ from
generally accepted accounting principles. These differences are primarily
due to differing treatments for mortgage-backed securities and deferrals of
certain losses. Permanent book and tax basis differences have been
reclassified among the components of net assets.
Federal Income Taxes:
It is the policy of each Fund of the Group 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 make distributions of net investment income
and net realized capital gains sufficient to relieve it from all, or
substantially all, federal income taxes.
Other:
Expenses that are directly related to one of the Funds are charged directly
to that Fund. Other operating expenses for the Group are prorated to the
Funds on the basis of relative net assets. All expenses in connection with
the Small Company Growth Fund's organization and registration under the 1940
Act and the Securities Act of 1933 were paid by the Fund. Such expenses are
being amortized over a period of two years commencing with the initial
public offering.
3. Purchases and Sales of Securities:
Purchases and sales of securities (excluding short-term securities) for the
year ended September 30, 1996 are as follows:
<TABLE>
<CAPTION>
Purchases Sales
--------- -----
<S> <C> <C>
Short-Intermediate U.S. Government Income Fund................ $ 47,303,841 $30,588,880
Intermediate U.S. Government Bond Fund........................ $122,080,365 $79,358,988
North Carolina Intermediate Tax-Free Fund..................... $ 8,627,355 $ 7,219,005
Growth and Income Stock Fund.................................. $ 76,878,732 $38,074,744
Balanced Fund................................................. $ 31,689,074 $13,676,157
Small Company Growth Fund..................................... $ 35,554,010 $19,820,616
</TABLE>
4. Related Party Transactions:
Investment advisory services are provided to the Group 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 net assets of each of the Funds.
Pursuant to a Sub-Advisory Agreement with BB&T, PNC Bank manages the Small
Company Growth Fund subject to the general supervision of the Group's Board
of Trustees and BB&T. For its services, PNC Bank is entitled to a fee,
payable by BB&T, at the following annual rates as a percentage of the
average daily net assets: (1) 0.50% of net assets up to $50 million, (2)
0.45% of net assets in excess of $50 million and less than or equal to $100
million, and (3) 0.40% of net assets in excess of $100 million.
Continued
-43-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Notes to Financial Statements, Continued
September 30, 1996
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, whom certain
officers of the Funds are affiliated, serves the Funds as administrator.
Such officers and trustees are paid no fees directly by the Funds for
serving as officers of the Funds. Fees payable to BISYS for administration
services are established under terms of the administration contract at the
annual rate of 0.20% as a percentage of the average daily net assets of each
Fund. BISYS Ohio, serves the Funds as transfer agent and mutual fund
accountant.
The Funds have adopted a Distribution and Shareholder Services Plan in
accordance with Rule 12b-1 under the 1940 Act, pursuant to which the Funds
are authorized to pay or reimburse BISYS, as distributor, a periodic amount,
calculated at an annual rate not to exceed 0.50% and 1.00% of the average
daily net assets of the Class A Shares and Class B Shares, respectively. The
fees may be used by BISYS to pay banks, including the adviser, broker
dealers and other institutions. As distributor, BISYS is entitled to receive
commissions on sales of shares of the variable net asset funds. For the year
ended September 30, 1996, BISYS received $730,054 from commissions earned on
sales of shares of the Funds' variable net asset value funds, of which
$693,683 was allowed to affiliated broker/dealers of the Funds.
BB&T and BISYS may voluntarily reduce or reimburse fees to assist the Funds
in maintaining competitive expense ratios.
Information regarding these transactions is as follows for the year ended
September 30, 1996.
<TABLE>
<CAPTION>
Administration Distribution
Investment Advisory Fees Fees Fees
------------------------------- --------------- -------------
(As a Transfer Agent
Percentage Voluntary Voluntary Voluntary and
of Average Fee Fee Fee Mutual Fund
Net Assets) Reductions Reductions Reductions Accounting Fees
-------------- --------------- --------------- ------------- ----------------
<S> <C> <C> <C> <C> <C>
U.S. Treasury Money Market Fund 0.40% $56,370 $138,570
Short-Intermediate U.S. Government
Income Fund 0.60% $ 57,944 $16,727 $ 88,537
Intermediate U.S. Government
Bond Fund 0.60% $106,977 $10,876 $112,686
North Carolina Intermediate Tax-
Free Fund 0.60% $ 35,889 $17,942 $31,563 $ 71,503
Growth and Income Stock Fund 0.74% $484,272 $36,674 $178,406
Balanced Fund 0.74% $178,695 $28,058 $126,691
Small Company Growth
Fund..................................... 1.00% $ 796 $ 9,430 $126,517
</TABLE>
Continued
-44-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Notes to Financial Statements, Continued
September 30, 1996
5. Capital Share Transactions:
Transactions in capital shares for the Group were as follows:
<TABLE>
<CAPTION>
U.S. Treasury Short Intermediate U.S.
Money Market Fund Government Income Fund
------------------------------- ---------------------------------
For the For the For the For the
year year year year
ended ended ended ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
--------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Class A Shares:
Proceeds from shares issued........................... $ 61,519,685 $ 39,015,125 $ 780,331 $ 238,092
Dividends reinvested.................................. 893,083 235,433 292,456 335,908
Cost of shares redeemed............................... (48,429,306) (26,788,169) (1,717,615) (4,008,351)
--------------- -------------- --------------- ---------------
Change in net assets from Class A share transactions.. $ 13,983,462 $ 12,462,389 $ (644,828) $ (3,434,35)
=============== ============== =============== ===============
Class B Shares (a):
Proceeds from shares issued........................... $ 1,957,034 --
Dividends reinvested.................................. 16,070 --
Cost of shares redeemed............................... (668,319) --
--------------- --------------
Change in net assets from Class B share transactions.. $ 1,304,785 --
=============== ==============
Trust Shares:
Proceeds from shares issued........................... $ 386,470,057 $ 374,968,721 $ 31,220,980 $ 16,404,699
Dividends reinvested.................................. 812,451 271,605 1,155,628 442,352
Cost of shares redeemed............................... (301,391,098) (332,621,347) (14,011,731) (11,377,406)
--------------- -------------- --------------- ---------------
Change in net assets from Trust share transactions.... $ 85,891,410 $ 42,618,979 $ 18,364,877 $ 5,469,645
=============== ============== =============== ===============
SHARE TRANSACTIONS:
Class A Shares:
Issued................................................ 61,519,685 39,015,125 79,521 24,465
Reinvested............................................ 893,083 235,433 29,675 34,730
Redeemed.............................................. (48,429,306) (26,788,169) (174,736) (417,677)
--------------- -------------- --------------- ---------------
Change in Class A Shares.............................. 13,983,462 12,462,389 (65,540) (358,482)
=============== ============== =============== ===============
Class B Shares (a):
Issued................................................ 1,957,034 --
Reinvested............................................ 16,070 --
Redeemed.............................................. (668,319) --
--------------- --------------
Change in Class B Shares.............................. 1,304,785 --
=============== ==============
Trust Shares:
Issued................................................ 386,470,057 374,968,721 3,184,600 1,694,015
Reinvested............................................ 812,451 271,605 117,290 45,400
Redeemed.............................................. (301,391,098) (332,621,347) (1,422,732) (1,163,774)
--------------- -------------- --------------- ---------------
Change in Trust Shares................................ 85,891,410 42,618,979 1,879,158 575,641
=============== ============== =============== ===============
</TABLE>
(a) The Fund commenced offering Class B Shares January 1, 1996.
Continued
-45-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Notes to Financial Statements, Continued
September 30, 1996
<TABLE>
<CAPTION>
Intermediate U.S. North Carolina
Government Bond Fund Intermediate Tax-Free Fund
--------------------------- ---------------------------
For the For the For the For the
year year year year
ended ended ended ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Class A Shares:
Proceeds from shares issued.......................................... $ 923,832 $ 322,927 $ 1,510,448 $ 560,783
Dividends reinvested................................................. 207,800 320,094 268,478 278,140
Cost of shares redeemed.............................................. (2,521,905) (2,597,921) (1,143,115) (3,505,541)
------------ ------------ ----------- ------------
Change in net assets from Class A share transactions................. $ (1,390,273) $ (1,954,900) $ 635,811 $ (2,666,618)
============ ============ =========== ============
Class B Shares(a):
Proceeds from shares issued.......................................... $ 359,519 --
Dividends reinvested................................................. 5,665 --
Cost of shares redeemed.............................................. (8,010) --
------------ ------------
Change in net assets from Class B share transactions................. $ 357,174 --
============ ============
Trust Shares:
Proceeds from shares issued.......................................... $ 65,562,100 $ 22,848,117 $10,310,221 $ 10,356,196
Dividends reinvested................................................. 4,476,007 3,609,746 -- 21
Cost of shares redeemed.............................................. (25,629,116) (20,612,492) (9,700,110) (11,141,267)
------------ ------------ ----------- ------------
Change in net assets from Trust share transactions................... $ 44,408,991 $ 5,845,371 $ 610,111 $ (785,050)
============ ============ =========== ============
SHARE TRANSACTIONS:
Class A Shares:
Issued............................................................... 93,847 34,521 149,219 56,493
Reinvested........................................................... 21,069 33,838 26,506 28,264
Redeemed............................................................. (258,458) (270,549) (112,758) (358,791)
------------ ------------ ----------- ------------
Change in Class A Shares............................................. (143,542) (202,190) 62,967 (274,034)
============ ============ =========== ============
Class B Shares(a):
Issued............................................................... 37,041 --
Reinvested........................................................... 591 --
Redeemed............................................................. (841) --
------------ ------------
Change in Class B Shares............................................. 36,791 --
============ ============
Trust Shares:
Issued............................................................... 6,626,544 2,385,380 1,022,116 1,051,141
Reinvested........................................................... 456,830 380,169 -- 2
Redeemed............................................................. (2,617,022) (2,149,882) (958,821) (1,121,892)
------------ ------------ ----------- ------------
Change in Trust Shares............................................... 4,466,352 615,667 63,295 (70,749)
============ ============ =========== ============
</TABLE>
(a) The Fund commenced offering Class B Shares January 1, 1996.
Continued
-46-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Notes to Financial Statements, Continued
September 30, 1996
<TABLE>
<CAPTION>
Growth and Income
Stock Fund Balanced Fund
-------------------------------- ----------------------------
For the For the For the For the
year year year year
ended ended ended ended
September 30, September 30, September 30, September 30,
1996 1995 1996 1995
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
Class A Shares:
Proceeds from shares issued............................ $ 6,811,567 $ 2,464,804 $ 3,871,025 $ 1,398,339
Dividends reinvested................................... 338,523 378,623 402,738 350,315
Cost of shares redeemed................................ (1,427,065) (1,270,600) (1,928,670) (2,079,598)
------------ ------------ ------------- ------------
Change in net assets from Class A share transactions... $ 5,723,025 $ 1,572,827 $ 2,345,093 $ (330,944)
============ ============ ============= ============
Class B Shares(a):
Proceeds from shares issued............................ $ 3,738,136 -- $ 2,332,596 --
Dividends reinvested................................... 17,476 -- 33,079 --
Cost of shares redeemed................................ (82,260) -- (77,715) --
------------ ------------ ------------- ------------
Change in net assets from Class B share transactions... $ 3,673,352 -- $ 2,287,960 --
============ ============ ============= ============
Proceeds from shares issued............................ $ 68,337,109 $ 55,223,550 $ 24,146,440 $ 16,641,644
Dividends reinvested................................... 3,190,245 2,718,414 2,035,268 1,240,565
Cost of shares redeemed................................ (40,729,870) (18,077,195) (11,407,119) (12,868,123)
------------ ------------ ------------- -------------
Change in net assets from Trust share transactions..... $ 30,797,484 $ 39,864,769 $ 14,774,589 $ 5,014,086
============ =========== ============= =============
SHARE TRANSACTIONS:
Class A Shares:
Issued................................................. 477,889 205,305 334,248 133,311
Reinvested............................................. 24,085 33,975 34,933 34,562
Redeemed............................................... (100,847) (111,033) (166,329) (206,078)
------------ ------------ ------------- -------------
Change in Class A Shares............................... 401,127 128,247 202,852 (38,205)
============ ============ ============= =============
Class B Shares(a):
Issued................................................. 258,055 -- 200,160 --
Reinvested............................................. 1,200 -- 2,850 --
Redeemed............................................... (5,567) -- (6,712) --
------------ ------------ ------------- -------------
Change in Class B Shares............................... 253,688 -- 196,298 --
============ ============ ============= =============
Trust Shares:
Issued................................................. 4,851,989 4,568,816 2,102,026 1,585,694
Reinvested............................................. 227,034 241,896 177,017 122,297
Redeemed............................................... (2,820,394) (1,522,571) (986,873) (1,263,619)
------------ ------------ ------------- -------------
Change in Trust Shares................................. 2,258,629 3,288,141 1,292,170 444,372
============ ============ ============= =============
</TABLE>
(a) The Fund commenced offering Class B Shares January 1, 1996.
Continued
-47-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Notes to Financial Statements, Continued
September 30, 1996
<TABLE>
<CAPTION>
Small Company Growth Fund
------------------------------
For the For the period
year December 7,1994
ended to
September 30, September 30,
1996 1995(a)
------------- ----------------
<S> <C> <C>
CAPITAL TRANSACTIONS:
Class A Shares:
Proceeds from shares issued................................................... $ 5,198,893 $ 938,909
Dividends reinvested.......................................................... - -
Cost of shares redeemed....................................................... (321,183) (30,211)
=========== ===========
Change in net assets from Class A share transactions.......................... $ 4,877,710 $ 908,698
=========== ===========
Class B Shares(b):
Proceeds from shares issued................................................... $ 2,870,037 -
Dividends reinvested.......................................................... - -
Cost of shares redeemed....................................................... (41,375) -
=========== ===========
Change in net assets from Class B share transactions.......................... $ 2,828,662 -
=========== ===========
Trust Shares:
Proceeds from shares issued...................................................$ 14,870,042 $ 14,250,426
Dividends reinvested.......................................................... - -
Cost of shares redeemed....................................................... (5,559,535) (525,922)
=========== ===========
Change in net assets from Trust share transactions............................$ 9,310,507 $ 13,724,504
=========== ===========
SHARE TRANSACTIONS:
Class A Shares:
Issued........................................................................ 294,124 77,577
Reinvested.................................................................... - -
Redeemed...................................................................... (17,579) (2,151)
=========== ===========
Change in Class A Shares...................................................... 276,545 75,426
=========== ===========
Class B Shares(b):
Issued........................................................................ 155,105 -
Reinvested.................................................................... - -
Redeemed...................................................................... (2,142) -
=========== ===========
Change in Class B Shares...................................................... 152,963 -
=========== ===========
Trust Shares:
Issued........................................................................ 848,861 1,203,246
Reinvested.................................................................... - -
Redeemed...................................................................... (295,847) (38,862)
=========== ===========
Change in Trust Shares........................................................ 553,014 1,164,384
=========== ===========
</TABLE>
(a) Period from commencement of operations.
(b) The Fund commenced offering Class B Shares January 1, 1996.
Continued
-48-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
Notes to Financial Statements, Continued
September 30, 1996
6. Federal Income Taxes:
The Growth & Income Stock Fund declared $1,121,729 in capital gain dividend
distributions from long-term capital gains for the year ended September 30,
1996.
At September 30, 1996, the following Funds have capital loss carryforwards
which are available to offset future capital gains, if any:
<TABLE>
<CAPTION>
Short
Intermediate North Carolina Small Intermediate
U.S. Government Intermediate Company U.S. Government
Income Fund Tax-Free Fund Growth Fund Bond Fund
----------------- ----------------- --------------- ------------------
<S> <C> <C> <C> <C>
Expires in 2004.............. $ 77,950 $172,143 $1,274,796
Expires in 2003.............. $312,074 $ 16,562
Expires in 2002.............. $990,728
</TABLE>
Under current tax law, capital losses realized after October
31 may be deferred and treated as occurring on the first day of the fiscal
year ended September 30, 1997. The following Funds had such losses:
<TABLE>
<CAPTION>
Short Intermediate North Carolina Intermediate
U.S. Government Intermediate U.S. Government
Income Fund Tax-Free Fund Bond Fund
------------------- ----------------- -------------------
<S> <C> <C> <C>
Post October Loss Deferred... $156,556 $47,072 $631,270
</TABLE>
7. Eligible Distributions (Unaudited):
For the taxable year ended September 30, 1996, 100.00% and 33.71% of the
income dividends paid by the Growth and Income Stock Fund and the Balanced
Fund, respectively, qualify for the dividends received deduction available
to corporations.
8. Exempt-Interest Income Designations (Unaudited):
The BB&T Mutual Funds Group designates the following exempt-interest
dividends for the North Carolina Intermediate Tax-Free Fund's taxable year
ended September 30, 1996:
<TABLE>
<S> <C>
Exempt-Interest Dividends........................... $1,681,672
Exempt-Interest Dividends Per Share - Class A....... $ 0.362
Exempt-Interest Dividends Per Share - Trust......... $ 0.377
</TABLE>
100% of the exempt interest income for the North Carolina Intermediate Tax-
Free Fund's taxable year ended September 30, 1996 was from North Carolina
securities.
Continued
-49-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
U.S. TREASURY MONEY MARKET FUND
Class A Shares
Financial Highlights
<TABLE>
<CAPTION>
For the year ended September 30,
-------------------------------------------------- October 5, 1992 to
1996 1995 1994 September 30, 1993 (a)
---------------- -------------- ------------- ----------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........ $ 1.00 $ 1.00 $ 1.00 $ 1.00
------- ------- -------- -------
Investment Activities
Net investment income..................... 0.044 0.047 0.027 0.026
------- ------- -------- -------
Total from Investment Activities........ 0.044 0.047 0.027 0.026
------- ------- -------- -------
Distributions
Net investment income..................... (0.044) (0.047) (0.027) (0.026)
------- ------- -------- -------
Total Distributions..................... (0.044) (0.047) (0.027) (0.026)
------- ------- -------- -------
Net Asset Value, End of Period.............. $ 1.00 $ 1.00 $ 1.00 $ 1.00
======= ======= ======== =======
Total Return................................ 4.49% 4.81% 2.76% 2.60%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)........... $27,931 $13,948 $ 1,486 $ 279
Ratio of expenses to average net assets... 0.99% 0.98% 0.94% 0.51%(c)
Ratio of net investment income to
average net assets....................... 4.37% 4.81% 2.89% 2.58%(c)
Ratio of expenses to average net assets*.. 1.25% 1.24% 1.32% 1.32%(c)
Ratio of net investment income to
average net asset*....................... 4.11% 4.55% 2.51% 1.77%(c)
</TABLE>
- ----------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-50-
[LOGO OF BB&T FUNDS APPEARS HERE]
<PAGE>
U.S. TREASURY MONEY MARKET FUND
Class B Shares
<TABLE>
<CAPTION>
Financial Highlights
January 1, 1996 to
September 30, 1996 (a)
----------------------
<S> <C>
Net Asset Value, Beginning of Period ........................................................ $ 1.00
----------
Investment Activities
Net investment income ..................................................................... 0.025
----------
Total from Investment Activities ...................................................... 0.025
----------
Distributions
Net investment income ..................................................................... (0.025)
----------
Total Distributions ................................................................... (0.025)
----------
Net Asset Value, End of Period .............................................................. $ 1.00
==========
Total Return (excludes redemption charge) ................................................... 2.53%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000) ........................................................... $ 1,305
Ratio of expenses to average net assets ................................................... 1.75%(c)
Ratio of net investment income to average net assets ...................................... 3.55%(c)
</TABLE>
- ----------
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-51-
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<PAGE>
U.S. TREASURY MONEY MARKET FUND
Trust Shares
Financial Highlights
<TABLE>
<CAPTION>
For the year ended September 30,
------------------------------------------------- October 5, 1992 to
1996 1995 1994 September 30, 1993 (a)
------------- ------------- ------------- ---------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ................ $ 1.00 $ 1.00 $ 1.00 $ 1.00
-------- -------- -------- --------
Investment Activities
Net investment income ............................. 0.046 0.050 0.030 0.027
-------- -------- -------- --------
Total from Investment Activities .............. 0.046 0.050 0.030 0.027
-------- -------- -------- --------
Distributions
Net investment income ............................. (0.046) (0.050) (0.030) (0.027)
-------- -------- -------- --------
Total Distributions ........................... (0.046) (0.050) (0.030) (0.027)
-------- -------- -------- --------
Net Asset Value, End of Period ...................... $ 1.00 $ 1.00 $ 1.00 $ 1.00
======== ======== ======== ========
Total Return ........................................ 4.74% 5.07% 3.01% 2.70%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000) ................... $205,974 $120,083 $77,464 $74,962
Ratio of expenses to average net assets ........... 0.75% 0.72% 0.67% 0.38%(c)
Ratio of net investment income to average
net assets ....................................... 4.63% 4.97% 2.97% 2.71%(c)
Ratio of expenses to average net assets* .......... 0.75% 0.75% 0.83% 0.81%(c)
Ratio of net investment income to average
net assets* ...................................... 4.63% 4.95% 2.82% 2.27%(c)
</TABLE>
- ----------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-52-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
Class A Shares
Financial Highlights
<TABLE>
<CAPTION>
For the year ended September 30,
--------------------------------------------- November 30, 1992 to
1996 1995 1994 September 30, 1993 (a)
----------- ----------- ------------ ----------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............ $ 9.88 $ 9.60 $ 10.29 $ 10.00
------ ------- ------- -------
Investment Activities
Net investment income......................... 0.55 0.53 0.50 0.47
Net realized and unrealized losses on
investments.................................. (0.15) 0.29 (0.68) 0.30
------ ------- ------- -------
Total from Investment Activities........... 0.40 0.82 (0.18) 0.77
------ ------- ------- -------
Distributions
Net investment income......................... (0.55) (0.54) (0.50) (0.48)
Net realized gains............................ - - (0.01) -
------ ------- ------- -------
Total Distributions........................ (0.55) (0.54) (0.51) (0.48)
------ ------- ------- -------
Net Asset Value, End of Period.................. $ 9.73 $ 9.88 $ 9.60 $ 10.29
====== ======= ======= =======
Total Return (excludes sales charge)............ 4.09% 8.74% (1.86)% 7.80%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000).............. $6,356 $ 7,102 $10,345 $14,915
Ratio of expenses to average net
assets..................................... 1.19% 1.17% 0.89% 0.56%(c)
Ratio of net investment income to
average net assets......................... 5.55% 5.50% 5.01% 5.43%(c)
Ratio of expenses to average net assets*..... 1.54% 1.58% 1.58% 1.56%(c)
Ratio of net investment income to
average net assets*........................ 5.20% 5.09% 4.32% 4.42%(c)
Portfolio turnover(d)........................ 54.82% 106.81% 7.06% 14.06%
- ----------
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
See notes to financial statements
-53-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
Trust Shares
Financial Highlights
<TABLE>
<CAPTION>
For the year ended September 30,
-------------------------------------------------- November 30, 1992 to
1996 1995 1994 September 30, 1993 (a)
---------------- -------------- ------------- -----------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period............ $ 9.89 $ 9.61 $ 10.30 $ 10.00
------- -------- ------- -------
Investment Activities
Net Investment Income......................... 0.57 0.56 0.52 0.49
Net realized and unrealized losses on
investments................................. (0.15) 0.28 (0.68) 0.30
------- -------- ------- -------
Total from Investment Activities.......... 0.42 0.84 (0.16) 0.79
------- -------- ------- -------
Distributions
Net investment income......................... (0.57) (0.56) (0.52) (0.49)
Net realized gains............................ - - (0.01) -
------- -------- ------- -------
Total Distributions....................... (0 .57) (0.56) (0.53) (0.49)
------- -------- ------- -------
Net Asset Value, End of Period.................. $ 9.74 $ 9.89 $ 9.61 $ 10.30
======= ======== ======= =======
Total Return.................................... 4.36% 9.01% (1.66)% 8.01%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)............... $62,621 $ 45,005 $38,208 $34,646
Ratio of expenses to average net assets....... 0.93% 0.93% 0.71% 0.39%(c)
Ratio of net investment income to average
net assets.................................. 5.81% 5.78% 5.20% 5.60%(c)
Ratio of expenses to average net assets/*/.... 1.03% 1.08% 1.08% 1.05%(c)
Ration of net investment income to average
net assets*................................. 5.71% 5.64% 4.83% 4.94%(c)
Portfolio turnover(d)......................... 54.82% 106.81% 7.06% 14.06%
</TABLE>
- ----------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
See notes to financial statements
-54-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
INTERMEDIATE U.S. GOVERNMENT BOND FUND
Class A Shares
Financial Highlights
<TABLE>
<CAPTION>
For the year ended September 30,
----------------------------------------------- October 9, 1992 to
1996 1995 1994 September 30, 1993 (a)
-------------- --------------- -------------- ----------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period......... $ 9.88 $ 9.33 $ 10.39 $ 10.00
------- ------- -------- --------
Investment Activities
Net investment income...................... 0.56 0.59 0.59 0.63
Net realized and unrealized gains
(losses) on investments.................. (0.25) 0.55 (1.04) 0.39
------- ------- -------- --------
Total from Investment Activities......... 0.31 1.14 (0.45) 1.02
------- ------- -------- --------
Distributions
Net investment income...................... (0.56) (0.59) (0.59) (0.63)
Net realized gains......................... -- -- (0.02) --
------- ------- -------- --------
Total Distributions...................... (0.56) (0.59) (0.61) (0.63)
------- ------- -------- --------
Net Asset Value, End of Period............... $ 9.63 $ 9.88 $ 9.33 $ 10.39
======= ======= ======== ========
Total Return (excludes sales charge)......... 3.17% 12.63% (4.48)% 10.53%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)............ $ 3,659 $ 5,173 $ 6,772 $ 5,238
Ratio of expenses to
average net assets....................... 1.13% 1.09% 0.96% 0.59%(c)
Ratio of net investment income
to average net assets.................... 5.68% 6.22% 6.03% 6.26%(c)
Ratio of expenses to
average net assets*...................... 1.48% 1.50% 1.56% 1.55%(c)
Ratio of net investment income
to average net assets*................... 5.33% 5.81% 5.43% 5.30%(c)
Portfolio turnover(d)...................... 76.29% 68.91% 0.38% 15.27%
</TABLE>
- ----------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
See notes to financial statements
-55-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
INTERMEDIATE U.S. GOVERNMENT BOND FUND
Class B Shares
Financial Highlights
<TABLE>
<CAPTION>
January 1, 1996 to
September 30, 1996 (a)
----------------------
<S> <C>
Net Asset Value, Beginning of Period.................. $10.17
------
Investment Activities
Net investment income.............................. 0.31
Net realized and unrealized losses on investments.. (0.57)
------
Total from Investment Activities................. (0.26)
------
Distributions
Net investment income.............................. (0.31)
------
Total Distributions.............................. (0.31)
------
Net Asset Value, End of Period........................ $ 9.60
======
Total Return (excludes redemption charge)............. (2.48)%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)....................... $ 353
Ratio of expenses to average net assets............... 1.85%(c)
Ratio of net investment income to average net assets.. 5.01%(c)
Ratio of expenses to average net assets*.............. 1.95%(c)
Ratio of net investment income to average net assets*. 4.91%(c)
Portfolio turnover(d)................................. 76.29%
</TABLE>
- -------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
See notes to financial statements
-56-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
INTERMEDIATE U.S. GOVERNMENT BOND FUND
Trust Shares
<TABLE>
<CAPTION>
Financial Highlights
For the year ended September 30,
---------------------------------------- October 9, 1992 to
1996 1995 1994 September 30, 1993 (a)
------------- ------------ ------------ -----------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period....................... $ 9.89 $ 9.34 $ 10.40 $ 10.00
------- ------- ------- --------
Investment Activities
Net investment income................................... 0.58 0.61 0.62 0.64
Net realized and unrealized gains (losses)
on investments........................................ (0.25) 0.55 (1.04) 0.40
------- ------- ------- --------
Total from Investment Activities.................... 0.33 1.16 (0.42) 1.04
------- ------- ------- --------
Distributions
Net investment income................................... (0.58) (0.61) (0.62) (0.64)
Net realized gains...................................... -- -- (0.02) --
------- ------- ------- --------
Total Distributions................................. (0.58) (0.61) (0.64) (0.64)
------- ------- ------- --------
Net Asset Value, End of Period............................. $ 9.64 $ 9.89 $ 9.34 $ 10.40
======= ======= ======= ========
Total Return............................................... 3.43% 12.91% (4.23)% 10.76%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)......................... $119,633 $78,578 $68,451 $ 59,816
Ratio of expenses to average net assets................. 0.87% 0.85% 0.70% 0.39%(c)
Ratio of net investment income to average net assets.... 5.94% 6.43% 6.27% 6.45%(c)
Ratio of expenses to average net assets*................ 0.97% 1.00% 1.06% 1.03%(c)
Ratio of net investment income to average net assets*... 5.84% 6.28% 5.91% 5.82%(c)
Portfolio turnover(d)................................... 76.29% 68.91% 0.38% 15.27%
</TABLE>
- -------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
See notes to financial statements
-57-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
NORTH CAROLINA INTERMEDIATE TAX-FREE FUND
Class A Shares
Financial Highlights
<TABLE>
<CAPTION>
For the year ended September 30,
--------------------------------------- October 16, 1992 to
1996 1995 1994 September 30, 1993 (a)
--------------------------------------- ----------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $10.15 $ 9.78 $ 10.29 $ 10.00
------ ------ ------- -------
Investment Activities
Net investment income.................................. 0.36 0.36 0.36 0.36
Net realized and unrealized losses on investments...... (0.10) 0.37 (0.50) 0.29
------ ------ ------- -------
Total from Investment Activities..................... 0.26 0.73 (0.14) 0.65
------ ------ ------- -------
Distributions
Net investment income.................................. (0.36) (0.36) (0.36) (0.36)
Net realized gains..................................... -- -- (0.01) --
------ ------ ------- -------
Total Distributions.................................. (0.36) (0.36) (0.37) (0.36)
------ ------ ------- -------
Net Asset Value, End of Period........................... $10.05 $10.15 $ 9.78 $ 10.29
====== ====== ======= =======
Total Return (excludes sales charge)..................... 2.61% 7.61% (1.33)% 6.60%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000) $9,261 $8,717 $11,083 $13,695
Ratio of expenses to average net assets 1.11% 1.05% 0.75% 0.43%(c)
Ratio of net investment income to average net assets 3.58% 3.63% 3.63% 3.80%(c)
Ratio of expenses to average net assets* 1.61% 1.63% 1.66% 1.77%(c)
Ratio of net investment income to average net assets 3.08% 3.05% 2.72% 2.45%(c)
Portfolio turnover(d) 20.90% 9.38% 0.56% 5.92%
</TABLE>
- ------------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
See notes to financial statements
-58-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
NORTH CAROLINA INTERMEDIATE TAX-FREE FUND
Trust Shares
Financial Highlights
<TABLE>
<CAPTION>
For the year ended September 30,
------------------------------------------ October 16, 1992 to
1996 1995 1994 September 30, 1993 (a)
------------ ------------ ------------ ----------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period........... $ 10.15 $ 9.78 $ 10.29 $ 10.00
------- ------- ------- -------
Investment Activities
Net investment income........................ 0.38 0.37 0.38 0.36
Net realized and unrealized losses on
investments................................ (0.10) 0.37 (0.50) 0.29
------- ------- ------- -------
Total from Investment Activities......... 0.28 0.74 (0.12) 0.65
------- ------- ------- -------
Distributions
Net investment income........................ (0.38) (0.37) (0.38) (0.36)
Net realized gains........................... -- -- (0.01) --
------- ------- ------- -------
Total Distributions...................... (0.38) (0.37) (0.39) (0.36)
------- ------- ------- -------
Net Asset Value, End of Period................. $ 10.05 $ 10.15 $ 9.78 $ 10.29
======= ======= ======= =======
Total Return................................... 2.77% 7.77% (1.18)% 6.62%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000).............. $28,443 $28,091 $27,770 $20,128
Ratio of expenses to average net assets...... 0.96% 0.91% 0.63% 0.42%(c)
Ratio of net investment income to average
net assets................................. 3.72% 3.78% 3.77% 3.80%(c)
Ratio of expenses to average net assets*..... 1.11% 1.13% 1.17% 1.30%(c)
Ratio of net investment income to average
net assets*................................ 3.57% 3.55% 3.24% 2.92%(c)
Portfolio turnover(d)........................ 20.90% 9.38% 0.56% 5.92%
</TABLE>
- -----------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
See notes to financial statements
-59-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
GROWTH AND INCOME STOCK FUND
Class A Shares
Financial Highlights
<TABLE>
<CAPTION>
For the year ended September 30,
-------------------------------------------------------- October 9, 1992 to
1996 1995 1994 September 30, 1993 (a)
--------------- --------------- --------------- ----------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning
of Period .............................. $ 12.97 $ 11.26 $11.26 $10.00
Investment Activities ------- ------- ------ ------
Net investment income ................. 0.26 0.25 0.25 0.28
Net realized and unrealized gains on
investments .......................... 2.43 1.98 0.12 1.27
------- ------- ------ ------
Total from Investment Activities ... 2.69 2.23 0.37 1.55
Distributions
Net investment income ................ (0.26) (0.25) (0.26) (0.29)
Net realized gains .................... (0.09) (0.12) (0.11) --
In excess of net realized gains ....... -- (0.15) -- --
------- ------- -------
Total Distributions................. (0.35) (0.52) (0.37) (0.29)
Net Asset Value, End of Period........... $ 15.31 $ 12.97 $11.26 $11.26
Total Return (excludes sales charge)..... 20.97% 20.62% 3.33% 15.72%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)........ $ 18,949 $10,842 $7,973 $6,009
Ratio of expenses to average net assets 1.11% 1.07% 0.92% 0.63%(c)
Ratio of net investment income to
average net assets 1.82% 2.15% 2.26% 2.85%(c)
Ratio of expenses to average net assets* 1.60% 1.60% 1.65% 1.68%(c)
Ratio of net investment income to
average net assets*................... 1.33% 1.62% 1.52% 1.81%(c)
Portfolio turnover(d).................... 19.82% 8.73% 21.30% 27.17%
Average commission rate(e)............... $0.0721
</TABLE>
- ---------------
* During the period, certain fees were voluntarily reduced. If such
voluntary fee reductions had not occurred, the ratios would have been as
indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on security
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
See notes to financial statements
-60-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
GROWTH AND INCOME STOCK FUND
Class B Shares
Financial Highlights
<TABLE>
<CAPTION>
January 1, 1996 to
September 30, 1996 (a)
------------------------
<S> <C>
Net Asset Value, Beginning of Period.................... $ 13.78
-------
Investment Activities
Net investment income................................ 0.13
Net realized and unrealized gains on investments..... 1.52
-------
Total from Investment Activities................... 1.65
-------
Distributions
Net investment income................................ (0.14)
-------
Total Distributions................................ (0.14)
-------
Net Asset Value, End of Period.......................... $ 15.29
=======
Total Return (excludes redemption charge)............... 12.01%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)...................... $ 3,880
Ratio of expenses to average net assets.............. 1.85%(c)
Ratio of net investment income to average net assets. 1.13%(c)
Ratio of expenses to average net assets*............. 2.09%(c)
Ratio of net investment income to average net assets* 0.89%(c)
Portfolio turnover(d)................................ 19.82%
Average commission rate(e)........................... $0.0721
</TABLE>
_____________
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on security
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
See notes to financial statements
-61-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
GROWTH AND INCOME STOCK FUND
Trust Shares
Financial Highlights
<TABLE>
<CAPTION>
For the year ended September 30,
----------------------------------- October 9, 1992 to
1996 1995 1994 September 30, 1993 (a)
----------- --------- ------------ ------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period.................. $ 12.99 $ 11.28 $ 11.28 $ 10.00
-------- -------- ------- -------
Investment Activities
Net investment income............................... 0.29 0.28 0.28 0.30
Net realized and unrealized gains on investments.... 2.44 1.98 0.11 1.28
-------- -------- ------- -------
Total from Investment Activities................. 2.73 2.26 0.39 1.58
-------- -------- ------- -------
Distributions
Net investment income............................... (0.29) (0.28) (0.28) (0.30)
Net realized gains.................................. (0.09) (0.12) (0.11) --
In excess of net realized gains..................... -- (0.15) -- --
-------- -------- ------- -------
Total Distributions (0.38) (0.55) (0.39) (0.30)
-------- -------- ------- -------
Net Asset Value, End of Period........................ $ 15.34 $ 12.99 $ 11.28 $ 11.28
======== ======== ======= =======
Total Return.......................................... 21.31% 20.88% 3.58% 16.06%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)..................... $206,659 $145,603 $89,355 $82,358
Ratio of expenses to average net assets............. 0.86% 0.82% 0.66% 0.40%(c)
Ratio of net investment income to average net assets 2.07% 2.40% 2.51% 3.08%(c)
Ratio of expenses to average net assets*............ 1.10% 1.10% 1.15% 1.17%(c)
Ratio of net investment income to average net
assets*........................................... 1.83% 2.11% 2.02% 2.31%(c)
Portfolio turnover(d)............................... 19.82% 8.73% 21.30% 27.17%
Average commission rate(e).......................... $0.0721
</TABLE>
_________________
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on security
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
See notes to financial statements
-62-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
BALANCED FUND
Class A Shares
Financial Highlights
<TABLE>
<CAPTION>
For the year ended September 30,
------------------------------------- July 1, 1993 to
1996 1995 1994 September 30, 1993 (a)
------------- -------- ---------- -------------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period................... $ 11.04 $ 9.76 $ 10.20 $10.00
------- ------ ------- ------
Investment Activities..................................
Net investment income................................ 0.43 0.44 0.38 0.08
Net realized and unrealized gains on investments..... 0.92 1.27 (0.44) 0.21
------- ------ -------- ------
Total from Investment Activities.................. 1.35 1.71 (0.06) 0.29
------- ------ -------- ------
Distributions
Net investment income................................ (0.43) (0.43) (0.38) (0.09)
------- ------ -------- ------
Total Distributions............................... (0.43) (0.43) (0.38) (0.09)
------- ------ -------- ------
Net Asset Value, End of Period......................... $ 11.96 $11.04 $ 9.76 $10.20
======= ====== ======= ======
Total Return (excludes sales charge)................... 12.43% 18.00% (0.64)% 2.88%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)...................... $12,456 $9,257 $ 8,560 $2,569
Ratio of expenses to average net assets.............. 1.20% 1.17% 0.98% 0.50%(c)
Ratio of net investment income to average net assets. 3.78% 4.27% 4.02% 4.39%(c)
Ratio of expenses to average net assets*............. 1.69% 1.71% 1.75% 2.00%(c)
Ratio of net investment income to average net assets* 3.29% 3.73% 3.25% 2.89%(c)
Portfolio turnover(d)................................ 19.87% 23.68% 12.91% 8.32%
Average commission rate(e)........................... $0.0749
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on security
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
See notes to financial statements
-63-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
BALANCED FUND
Class B Shares
Financial Highlights
<TABLE>
<CAPTION>
January 1, 1996 to
September 30, 1996 (a)
------------------------
<S> <C>
Net Asset Value, Beginning of Period.................. $ 11.54
-------
Investment Activities
Net investment income............................... 0.27
Net realized and unrealized gains on investments.... 0.37
-------
Total from Investment Activities.................. 0.64
-------
Distributions
Net investment income............................... (0.27)
-------
Total Distributions............................... (0.27)
=======
Net Asset Value, End of Period........................ $ 11.91
=======
Total Return (excludes redemption charge)............. 5.67%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)..................... $ 2,339
Ratio of expenses to average net assets............. 1.95%(c)
Ratio of net investment income to average net assets 3.13%(c)
Ratio of expenses to average net assets*............ 2.18%(c)
Ratio of net investment income to average net assets* 2.90%(c)
Portfolio turnover(d)............................... 19.87%
Average commission rate(e).......................... $0.0749
</TABLE>
________
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole
without distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on security
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
See notes to financial statements
-64-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
BALANCED FUND
Trust Shares
Financial Highlights
<TABLE>
<CAPTION>
For the year ended September 30,
--------------------------------- July 1, 1993 to
1996 1995 1994 September 30, 1993 (a)
--------- --------- ---------- ----------------------
<S> <C> <C> <C> <C>
Net Asset Value, Beginning of Period..................... $ 11.01 $ 9.74 $ 10.18 $ 10.00
------- ------- ------- -------
Investment Activities
Net investment income.................................. 0.46 0.46 0.40 0.09
Net realized and unrealized gains on investments....... 0.92 1.27 (0.44) 0.18
------- ------- ------- -------
Total from Investment Activities.................... 1.38 1.73 (0.04) 0.27
------- ------- ------- -------
Distributions
Net investment income.................................. (0.46) (0.46) (0.40) (0.09)
------- ------- ------- -------
Total Distributions................................. (0.46) (0.46) (0.40) (0.09)
------- ------- ------- -------
Net Asset Value, End of Period........................... $ 11.93 $ 11.01 $ 9.74 $ 10.18
======= ======= ======= =======
Total Return............................................. 12.74% 18.23% (0.42)% 2.74%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)........................ $69,374 $49,794 $39,715 $20,374
Ratio of expenses to average net assets................ 0.95% 0.92% 0.73% 0.44%(c)
Ratio of net investment income to average net assets... 4.03% 4.51% 4.22% 4.44%(c)
Ratio of expenses to average net assets*............... 1.19% 1.21% 1.25% 1.47%(c)
Ratio of net investment income to average net assets*.. 3.79% 4.22% 3.70% 3.42%(c)
Portfolio turnover(d).................................. 19.87% 23.68% 12.91% 8.32%
Average commission rate(e)............................. $0.0749
</TABLE>
___________
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on security
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
See notes to financial statements
-65-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
SMALL COMPANY GROWTH FUND
Class A Shares
Financial Highlights
<TABLE>
<CAPTION>
For the year
ended
September 30, December 7, 1994 to
1996 September 30, 1995 (a)
------------------- -----------------------
<S> <C> <C>
Net Asset Value, Beginning of Period..................................... $ 14.53 $10.00
------- ------
Investment Activities
Net investment loss.................................................... (0.20) (0.08)
Net realized and unrealized gains on investments....................... 6.73 4.61
------- ------
Total from Investment Activities................................... 6.53 4.53
------- ------
Net Asset Value, End of Period........................................... $ 21.06 $14.53
======= ======
Total Return (excludes sales charge)..................................... 44.94% 45.30%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)........................................ $ 7,413 $1,096
Ratio of expenses to average net assets................................ 2.01% 2.50%(c)
Ratio of net investment loss to average net assets..................... (1.26)% (1.56)%(c)
Ratio of expenses to average net assets*............................... 2.26% 2.84%(c)
Ratio of net investment loss to average net assets*.................... (1.51)% (1.90)%(c)
Portfolio turnover(d).................................................. 71.62% 46.97%
Average commission rate(e)............................................. $0.0562
</TABLE>
- --------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on security
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
See notes to financial statements
-66-
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<PAGE>
SMALL COMPANY GROWTH FUND
Class B Shares
Financial Highlights
<TABLE>
<CAPTION>
January 1, 1996 to
September 30, 1996 (a)
------------------------
<S> <C>
Net Asset Value, Beginning of Period $ 15.24
-------
Investment Activities
Net investment loss..................................................... (0.21)
Net realized and unrealized gains on investments........................ 5.89
-------
Total from Investment Activities..................................... 5.68
-------
Net Asset Value, End of Period............................................ $ 20.92
=======
Total Return (excludes redemption charge)................................. 37.27%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)......................................... $ 3,200
Ratio of expenses to average net assets................................. 2.72%(c)
Ratio of net investment loss to average net assets...................... (2.01)%(c)
Ratio of expenses to average net assets*................................ 2.72%(c)
Ratio of net investment loss to average net assets*..................... (2.01)%(c)
Portfolio turnover(d)................................................... 71.62%
Average commission rate(e).............................................. $0.0562
</TABLE>
- -----------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on security
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
See notes to financial statements
-67-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
SMALL COMPANY GROWTH FUND
Trust Shares
Financial Highlights
<TABLE>
<CAPTION>
For the year
ended
September 30, December 7, 1994 to
1996 September 30, 1995 (a)
------------- ----------------------
<S> <C> <C>
Net Asset Value, Beginning of Period................ $ 14.57 $ 10.00
------- -------
Investment Activities
Net investment loss................................. (0.17) (0.07)
Net realized and unrealized gains on investments.... 6.78 4.64
------- -------
Total from Investment Activities................. 6.61 4.57
------- -------
Net Asset Value, End of Period........................ $ 21.18 $ 14.57
======= =======
Total Return.......................................... 45.37% 45.70%(b)
Ratios/Supplementary Data:
Net Assets, End of Period (000)..................... $36,373 $16,962
Ratio of expenses to average net assets............. 1.79% 2.33%(c)
Ratio of net investment loss to average net assets.. (1.00)% (1.34)%(c)
Ratio of expenses to average net assets*............ 1.79% 2.42%(c)
Ratio of net investment loss to average net assets*. (1.00)% (1.43)%(c)
Portfolio turnover(d)............................... 71.62% 46.97%
Average commission rate(e).......................... $0.0562
</TABLE>
- ----------
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratios would have been as indicated.
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
(d) Portfolio turnover is calculated on the basis of the Fund as a whole without
distinguishing between the classes of shares issued.
(e) Represents the total dollar amount of commissions paid on security
transactions divided by total number of shares purchased and sold by the
Fund for which commissions were charged.
See notes to financial statements
-68-
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
<PAGE>
BB&T Mutual Funds
ANNUAL
REPORT
To Shareholders
INVESTMENT ADVISER
Branch Banking and Trust
Company
434 Fayetteville Street Mall
Raleigh, NC 27601
DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, OH 43219
LEGAL COUNSEL
Ropes & Gray
1301 K Street, N.W.
Suite 800 E.
Washington D.C. 20005
TRANSFER AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, OH 43219
AUDITORS
KPMG Peat Marwick LLP
Two Nationwide Plaza, Suite 1600
Columbus, OH 43215
SEPTEMBER 30, 1996
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
