<PAGE>
[PHOTOGRAPH OF TREES APPEARS HERE]
BB&T Mutual Funds
ANNUAL REPORT
To Shareholders
September 30,1997
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
TABLE OF CONTENTS
Letter From the Chairman and the Investment Adviser
Page 2
Performance Report
Page 4
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 49
Financial Highlights
Page 61
-1-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
LETTER FROM THE CHAIRMAN AND THE INVESTMENT ADVISOR
Dear Shareholders:
We are pleased to send you this annual report for the year ended September 30,
1997, a profitable time for stocks and bonds in general and the BB&T Mutual
Funds in particular. During the fiscal year, the markets bore a strong
resemblance to a world-class roller-coaster ride; an adventure that was packed
with breathtaking ups-and-downs but one that, ultimately, turned out to be a
pleasant, profitable experience for investors who were aboard for the entire
journey. By nearly every measure, the stock market enjoyed another banner year,
emulating the robust performances of 1995 and 1996. Bonds provided fixed-income
investors with "real returns" (returns minus modest inflation) that were high
by historical standards.
As investors maintained a generally bullish posture and the markets climbed
upward, our fund family's assets also continued to grow. During the year ended
September 30, 1997, BB&T's total assets under management rose 50%, to $1.24
billion from $826 million a year earlier. We are gratified that our
shareholders, both old and new, demonstrated such trust in our ability to
manage their money.
NEW FUNDS OFFER DIVERSIFICATION AND OPPORTUNITY
This growth encouraged us to provide shareholders with an even wider spectrum
of mutual funds, and 1997 saw the addition of seven new portfolios to the BB&T
fund family. In January, the BB&T International Equity Fund was successfully
launched and just nine months later was managing $54 million of shareholders'
money through investments in 22 markets around the world.
In early October, we were committed to helping shareholders further enjoy the
benefits of broad diversification, by introducing six more new funds:
THE BB&T LARGE COMPANY GROWTH FUND follows a quantitative approach to
investing, mostly in the type of large-capitalized growth companies that have
led the stock market in recent years. The Fund is most appropriate for long-
term investors whose primary goal is capital appreciation, with less concern
about current income.
THE BB&T SOUTH CAROLINA INTERMEDIATE TAX-FREE FUND enables South Carolina
residents to diversify among many different municipal issues with a single
investment.
THREE BB&T CAPITAL MANAGER FUNDS -- Growth Fund, Moderate Growth Fund and
Conservative Growth Fund -- invests at least 65% of their assets in seven other
underlying BB&T equity, fixed-income and money market mutual funds. The Capital
Manager portfolios, which are best described as "funds of funds," are designed
to capture the benefits of diversification through a strategic asset allocation
process. As listed above, they represent a scale -- ranging from more
aggressive to more conservative -- that can be employed by investors to suit a
particular level of risk tolerance or to help achieve a specific objective. If
you know how you feel about risk and understand your investing needs at this
stage in your life, but do not have the time to figure out how to invest in an
appropriate mix of asset classes, the Capital Manager Funds can offer an
attractive option.
THE BB&T PRIME MONEY MARKET FUND invests in a diversified portfolio of high-
quality commercial paper -- offering a potentially higher yield than what is
available from our U.S. Treasury Money Market Fund, though with slightly more
risk. Shareholders could use the Fund as part of a cash-management strategy:
investing a lump sum amount that would be dollar-cost averaged (refer to
prospectus for more details on dollar-cost averaging) into stock and/or bond
funds over time.*
THE ANSWER TO VOLATILITY COULD BE ASSET ALLOCATION
Why have we added these portfolios to a group of funds already enjoying
considerable success? The answer is simple: we believe that the key to
profitable investing is asset allocation, diversifying an individual portfolio
among a number of funds with diverse underlying investments and different
risk/reward characteristics.
- --------------------------------------------------------------------------------
* This type of strategy does not guarantee a profit nor protect against loss.
Yields will fluctuate with changes in market conditions, and there can be no
assurance that the Fund will be able to maintain a stable NAV of $1.00 per
share. An investment in the Fund is neither insured nor guaranteed by the
U.S. Government.
-2-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
All investments come with some degree of risk and volatility. By mixing
dissimilar types of investments, and using volatility to his or her advantage,
an investor can perhaps reduce a portfolio's overall, year-to-year
fluctuations. If you would like more information, including prospectuses, on
any of our new Funds, please call us at 1-800-228-1872. Read it carefully
before investing.
THE OUTLOOK FOR STOCKS AND BONDS
Unlike some investment advisors, we are not market timers, darting in and out
of markets in often-vain attempts to catch short-term moves. We are long-term
investors, striving to keep all of our Funds as fully invested as possible.
Still, as part of our investment discipline, we formulate carefully reasoned
perspectives of the economy in general, and of the equity and fixed-income
markets in which we invest. As we write this letter we have experienced
volatility in the market, however we believe the economy is still strong, and
we do not see it faltering on a near-term basis. The current, productivity-led
recovery remains fueled by a remarkable blend of stable growth, almost
invisible inflation and global competitive forces.
By fundamental, traditional valuation measures, stocks -- large-capitalization
equities, in particular -- are very expensive. However, we continue to find
opportunities, especially below the top tier of "blue chip" stocks, that meet
our value-driven models. On the fixed-income side, we believe that bonds
continue to offer good value, especially relative to their risk and volatility.
Overall, we feel that the climate for investing remains attractive on a long-
term basis, and that is how we will approach the markets in the coming year.
As always, if you have any questions or require assistance in any way, please
do not hesitate to call us at 1-800-228-1872. We remain dedicated to helping
you successfully meet your investment needs, now and in the future.
Sincerely,
/s/ Walter B. Grimm
Walter B. Grimm
Chairman
BB&T Mutual Funds Group
/s/ David C. McMahon
David C. McMahon
Executive Vice President and Chief Investment Officer
Branch Banking and Trust Company
- --------------------------------------------------------------------------------
This report is authorized for distribution only when preceded or accompanied by
a prospectus. Please read the prospectus carefully before investing or sending
money.
The BB&T Mutual Funds are distributed by BISYS Fund Services.
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.
-3-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
PERFORMANCE REPORT
THE BB&T GROWTH AND INCOME STOCK FUND
Despite some volatility, especially during the early part of the Spring, the
year ended September 30, 1997, was a rewarding period for the Fund. It was
interesting that during the last three months of our fiscal year, market
leadership rotated away from the top 50 stocks that had been driving the market
earlier and shifted instead toward mid- and small-cap stocks. Investors'
enthusiasm for smaller stocks benefited the Fund, as we had already moved a
significant portion of our assets into equities whose fundamentals met our
criteria for value.
MID-CAPS REMAIN THE PLACE TO BE
Due in large measure to our overweighting in mid-cap issues, the Fund turned in
an excellent performance in the most recent quarter, producing a 9.25% gain (A
Shares without load)/1/ versus a 7.49% return for the S&P 500. However, even
though mid-cap stocks have gained considerable ground recently, we believe this
sector continues to offer the best value. This emphasis on large, financially
strong, second-tier companies has also allowed the fund to continue to provide
shareholders with less than market volatility.
As of September 30, 1997, the top five equity holdings in the Fund were SAFECO
Corp. (2.8% of the portfolio's holdings), Harris Corp. (2.6%), Bristol-Myers
Squibb Co. (2.6%), Phillips Petroleum Corp. (2.5%) and SUPERVALU, Inc. (2.3%).*
- --------------------------------------------------------------------------------
/1/ With a maximum sales charge of 4.50%, the Fund's total return would have
been 4.36%.
* The composition of the Fund's portfolio is subject to change.
-4-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
BB&T Growth and Income Stock Fund
<TABLE>
<CAPTION>
====================================================================
Average Annual Total Return
As of 9/30/97
- --------------------------------------------------------------------
Inception Since
Class Date 1 Year Inception
- --------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares* 10/9/92 31.15% 18.16%
Class B Shares** 1/1/96 32.70% 25.68%
Trust Shares 10/9/92 38.13% 19.56%
====================================================================
</TABLE>
* Reflects 4.50% Maximum Sales Charge
** Reflects CDSC of 4.00% assuming redemption in 2nd year. Total
returns of less than 1 year are aggregate.
[GRAPH APPEARS HERE]
Value of $10,000 Investment
<TABLE>
<CAPTION>
Date Trust Shares Class A Shares* S&P 500 Stock Index
---- ------------ --------------- -------------------
<S> <C> <C> <C>
10/9/92 10,000 9,551 10,000
9/30/93 11,606 11,052 11,714
9/30/94 12,021 11,420 12,147
9/30/95 14,531 13,775 15,759
9/30/96 17,628 16,664 18,949
9/30/97 24,350 22,963 26,610
</TABLE>
[GRAPH APPEARS HERE]
Value of $10,000 Investment
<TABLE>
<CAPTION>
Date Class B Shares** S&P 500 Stock Index
---- ---------------- -------------------
<S> <C> <C>
1/1/96 10,000 10,000
9/30/96 11,201 10,979
9/30/97 14,911 15,418
</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.
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.
-5-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
THE BB&T SMALL COMPANY GROWTH FUND/1/
After difficult times earlier in the year, the small-cap growth stocks in
general, and the Fund in particular, enjoyed an outstanding rebound in the last
two quarters and posted a satisfactory return for the year ended September 30,
1997. Investors recognized that valuations for large companies had become
fairly excessive, while smaller stocks remained fundamentally more attractive.
The market responded to this disparity, and money began to shift into mid-cap
and small-cap stocks.
With small-cap growth investing, you have to have a little bit of fortitude and
stay the course. Even when the market was moving against us early in the year,
we stuck to our strategy. We are strictly small-cap growth investors. We
continually search for the most dynamic, financially sound small companies we
can find.
CONDITIONS LOOK TO BE FAVORABLE
Over the next six months to one year, we do not anticipate the market is going
to give us the dramatic returns that we have enjoyed for the last six months,
and there could be some periods of volatility. Generally speaking, we believe
the environment for small-company stocks remains positive. Valuations are not
as dynamic as they were last April or May, but they are still favorable on a
historical basis. We also see signs that the economy is beginning to slow
somewhat, which means that small companies may be able to deliver growth rates
higher than those of large companies. Also, the dollar is strong, and
historically, that has a negative impact on large companies, which depend to a
greater degree on revenues from abroad.
We continue to hold meaningful positions in technology (38.8% of the portfolio
holdings), health care (16.8%), consumer goods (15.7%) and commercial/business
services (7.5%). As of September 30, 1997, the top five equity holdings in the
Fund were Jabil Circuit (2.7%), Tel-Save Holdings (2.4%), CBT Group PLC (1.8%),
Comverse Technology, Inc. (1.7%) and Saville Systems (1.7%).*
- --------------------------------------------------------------------------------
/1/ Small-capital companies typically carry additional risks, since smaller
companies generally have a higher risk of failure and, by definition, are
not as well established as "blue chip" companies. Historically, small-
company stocks have experienced a greater degree of market volatility than
stocks on average.
* The composition of the Fund's portfolio is subject to change.
-6-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
BB&T Small Company Growth Fund
<TABLE>
<CAPTION>
================================================================================
Average Annual Total Return
As of 9/30/97
- --------------------------------------------------------------------------------
Inception Since
Class Date 1 Year Inception
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares* 12/7/94 5.92% 32.92%
Class B Shares** 1/1/96 6.16% 24.76%
Trust Shares 12/7/94 11.17% 35.49%
================================================================================
</TABLE>
* Reflects 4.50% Maximum Sales Charge
** Reflects CDSC of 4.00% assuming redemption in 2nd year. Total returns of
less than 1 year are aggregate.
[GRAPH APPEARS HERE]
Value of $10,000 Investment
<TABLE>
<CAPTION>
Date Trust Shares Class A Shares* Russell 2000 Index
---- ------------ --------------- ------------------
<S> <C> <C> <C>
12/7/94 10,000 9,551 10,000
9/30/95 14,570 13,878 12,923
9/30/96 21,180 20,115 14,620
9/30/97 23,545 22,307 19,472
</TABLE>
[GRAPH APPEARS HERE]
Value of $10,000 Invesment
<TABLE>
<CAPTION>
Date Class B Shares** Russell 2000 Index
---- ---------------- ------------------
<S> <C> <C>
1/1/96 10,000 10,000
9/30/96 13,727 11,089
9/30/97 14,721 14,769
</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.
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.
-7-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
THE BB&T BALANCED FUND
During the year ended September 30, 1997, the stock market continued its
remarkable climb, and the Fund's equity holdings participated in the upsurge.
Large-capitalization stocks led the rally for most of the year, with smaller
cap issues making a big move in the last fiscal quarter.
Throughout the year, bond investors seemed ever more preoccupied with what
actions the Federal Reserve Board might take to raise interest rates--the Fed
raised short-term rates just once, in late March--and these concerns
contributed to increased volatility. While bonds could not match the equity
market's robust performance, fixed-income instruments provided satisfactory
returns, especially when measured against a historically low rate of inflation.
SEEKING SOLID RETURNS WITH LOWER VOLATILITY
The great thing about a balanced fund is that investors have a diversified
portfolio, because stocks and bonds don't always move in tandem. Asset
allocation can help dampen volatility while seeking to provide competitive
returns. Going forward, we think it may make sense to include convertible
securities as part of our asset mix. Convertibles can offer some unique and
interesting risk-and-return characteristics, particularly when they are
combined with stocks and bonds.
As of September 30, 1997, approximately 52.6% of the portfolio's holdings were
invested in stocks, 41.7% in fixed income holdings and 5.7% in cash and cash
equivalents. The Fund's top five equity holdings were Harris Corp. (1.5% of the
portfolio's assets), Phillips Petroleum Co. (1.4%), Xerox Corp. (1.3%),
Schering Plough Corp. (1.3%) and Dean Foods Co. (1.2%). The Fund's fixed-income
holdings are invested in U.S. Treasury and mortgage-backed securities. The
average maturity of the portfolio was approximately 6.5 years; the average
credit quality was AAA.*
- --------------------------------------------------------------------------------
*The composition of the Fund's portfolio is subject to change.
-8-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
BB&T Balanced Fund
<TABLE>
<CAPTION>
================================================================================
Average Annual Total Return
As of 9/30/97
- --------------------------------------------------------------------------------
Inception Since
Class Date 1 Year Inception
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares* 7/1/93 16.31% 11.30%
Class B Shares** 1/1/96 16.90% 12.97%
Trust Shares 7/1/93 22.11% 12.73%
================================================================================
</TABLE>
* Reflects 4.50% Maximum Sales Charge
** Reflects CDSC of 4.00% assuming redemption in 2nd year. Total returns of
less than 1 year are aggregate.
[GRAPH APPEARS HERE]
Value of $10,000 Investment
<TABLE>
<CAPTION>
S&P 500 Lehman Bros. Int.
Date Trust Shares Class A Shares* Stock Index Govt. Bond Index
---- ------------ --------------- ------------- ------------------
<S> <C> <C> <C> <C>
7/1/93 10,000 9,551 10,000 10,000
9/30/93 10,274 9,826 10,257 10,211
9/30/94 10,231 9,763 10,637 10,058
9/30/95 12,095 11,521 13,800 11,124
9/30/96 13,637 12,953 16,593 11,691
9/30/97 16,652 15,771 23,302 12,606
</TABLE>
[GRAPH APPEARS HERE]
Value of $10,000 Investment
<TABLE>
<CAPTION>
S&P 500 Lehman Bros. Int.
Date Class B Shares** Stock Index Govt. Bond Index
---- ---------------- ------------- ------------------
<S> <C> <C> <C>
1/1/96 10,000 10,000 10,000
9/30/96 10,567 10,979 10,085
9/30/97 12,375 15,418 10,875
</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.
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.
-9-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
THE BB&T INTERMEDIATE U.S. GOVERNMENT BOND FUND &
THE BB&T SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
The bond market experienced significant volatility during the year ended
September 30, 1997, but when all was said and done, interest rates finished
lower (with bond prices higher) than they had been a year earlier. In response
to improving conditions, and the continued absence of any signs of impending
inflation, we have lengthened the average maturities of new bonds purchased for
the Funds. Looking ahead, we are positioned for an environment of stable or
lower interest rates.
As of September 30, 1997, the estimated average maturity of the Intermediate
U.S. Government Fund was 7.4 years. For the Short-Intermediate U.S. Government
Fund, it was 3.0 years. Both fixed-income portfolios remain fully invested and
are heavily concentrated in debt obligations of the U.S. Government and its
agencies.*
- --------------------------------------------------------------------------------
*The composition of the Fund's portfolio is subject to change.
-10-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
BB&T Intermediate U.S. Government Bond Fund
<TABLE>
<CAPTION>
================================================================================
Average Annual Total Return
As of 9/30/97
- --------------------------------------------------------------------------------
Inception Since
Class Date 1 Year Inception
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares* 10/9/92 3.11% 4.84%
Class B Shares** 1/1/96 3.14% 0.35%
Trust Shares 10/9/92 8.20% 6.06%
================================================================================
</TABLE>
* Reflects 4.50% Maximum Sales Charge
** Reflects CDSC of 4.00% assuming redemption in 2nd year. Total returns of less
than 1 year are aggregate.
[GRAPH APPEARS HERE]
Value of $10,000 Investment
<TABLE>
<CAPTION>
Lehman Bros. Int.
Date Trust Shares Class A Shares* Govt. Bond Index
---- ------------ --------------- ------------------
<S> <C> <C> <C>
10/9/92 10,000 9,551 10,000
9/30/93 11,076 10,557 10,823
9/30/94 10,607 10,083 10,661
9/30/95 11,976 11,357 11,791
9/30/96 12,386 11,717 12,392
9/30/97 13,402 12,647 13,362
</TABLE>
[GRAPH APPEARS HERE]
Value of $10,000 Investment
<TABLE>
<CAPTION>
Lehman Bros. Int.
Date Class B Shares** Govt. Bond Index
---- ---------------- ------------------
<S> <C> <C>
1/1/96 10,000 10,000
9/30/96 9,752 10,085
9/30/97 10,062 10,875
</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.
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.
-11-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
BB&T Short-Intermediate U.S. Government Income Fund
<TABLE>
<CAPTION>
================================================================================
Average Annual Total Return
As of 9/30/97
- --------------------------------------------------------------------------------
Inception Since
Class Date 1 Year Inception
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares* 11/30/92 3.93% 4.64%
Trust Shares 11/30/92 6.33% 5.32%
================================================================================
</TABLE>
* Reflects 2.00% Maximum Sales Charge
[GRAPH APPEARS HERE]
Value of $10,000 Investment
<TABLE>
<CAPTION>
Lehman Bros. Merrill Lynch
1-3 Year Govt. 1-3 Year
Date Trust Shares Class A Shares* Bond Index Govt. Index
---- ------------ --------------- ---------------- --------------
<S> <C> <C> <C> <C>
11/30/92 10,000 9,804 10,000 10,000
9/30/93 10,801 10,569 10,570 10,579
9/30/94 10,622 10,373 10,692 10,702
9/30/95 11,579 11,280 11,568 11,588
9/30/96 12,083 11,741 12,229 12,238
9/30/97 12,848 12,454 12,927 12,937
</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.
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.
-12-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
THE BB&T NORTH CAROLINA TAX-EXEMPT FUND/1/
With the State of North Carolina issuing approximately $600 million worth of
general obligation bonds earlier this year, the supply of municipal issues
throughout the state was steady, though not abundant. Muni-bond investors
consider North Carolina bonds to be of very high quality, and consequently,
most new issues were bought up quickly. While sacrificing a few basis points of
yield that might be available with lower quality bonds, our portfolio is
structured to provide less volatility, relative to the market in general, in
times of declining bond prices.
THE SEARCH FOR ADDED VALUE
Nevertheless, we continue to look for opportunities to add incremental value to
our portfolio, by investing in higher yielding revenue bonds, versus general
obligation issues. Revenue bonds usually pay higher yields, because the issuers
of these bonds rely upon specific income streams to repay debt. However, the
revenue bonds we buy generally are insured, giving those bonds a AAA rating.
As of September 30, 1997, the Fund's entire bond portfolio was invested in debt
instruments issued by government entities in the state of North Carolina.
Approximately 84.34% of the portfolio's holdings were invested in general
obligation bonds; 8.03% in hospitals and health care; 4.46% in utilities; 2.53%
in cash or cash equivalents; and less than 1% in housing. The average maturity
of our holdings was 5.6 years, and the average credit quality was AA (with 55%
of the portfolio holding bonds rated AAA).*
- --------------------------------------------------------------------------------
/1/ 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.
* The composition of the Fund's portfolio is subject to change.
-13-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
BB&T North Carolina Intermediate Tax-Free Fund
<TABLE>
<CAPTION>
================================================================================
Average Annual Total Return
As of 9/30/97
- --------------------------------------------------------------------------------
Inception Since
Class Date 1 Year Inception
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares* 10/16/92 4.11% 3.92%
Trust Shares 10/16/92 6.43% 4.46%
================================================================================
</TABLE>
* Reflects 2.00% Maximum Sales Charge
[GRAPH APPEARS HERE]
Value of $10,000 Investment
<TABLE>
<CAPTION>
Lehman Bros. 5-Year
Date Trust Shares Class A Shares* General Oblig. Index
---- ------------ --------------- --------------------
<S> <C> <C> <C>
10/16/92 10,000 9,804 10,000
9/30/93 10,662 10,451 10,833
9/30/94 10,537 10,313 10,850
9/30/95 11,355 11,097 11,856
9/30/96 11,669 11,386 12,366
9/30/97 12,420 12,101 13,213
</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.
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.
-14-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
THE BB&T INTERNATIONAL EQUITY FUND/1/
The Fund was launched on January 2, 1997, and for the nearly nine months ended
September 30, 1997, produced a solid return of 12.84% (A Shares without
load)/2/.
We believe that a diversified portfolio of international equities gives
investors an expanded universe of investment options. We run a value-driven
portfolio, focusing on controlling risk while providing shareholders with the
opportunity for possible gains by investing in international equities. The
portfolio is fully diversified with regard to countries, industry sectors and
number of individual holdings.
A FORMULA FOR GREATER DIVERSIFICATION
The international markets have trailed the U.S. market in recent years.
However, from a historical perspective, international stocks often have
outperformed U.S. equities. Because individual stock markets do not always move
in the same direction at the same time, an international fund such as ours when
added to a domestic portfolio can help reduce overall volatility in an
investor's portfolio.
We continue to pursue an overweighting in the United Kingdom and Continental
Europe and an underweighting in Japan. As of September 30, 1997, approximately
22% of the portfolio's holdings were invested in the United Kingdom, 37% in
Continental Europe, 19% in Japan, 8% in other Pacific Basin countries, 11% in
the world's emerging markets and 3% in cash and cash equivalents.
The top five equity holdings in the Fund were Telecom Italia (1.8% of the
portfolio's assets), Commerzbank (1.6%), Unibanco (1.6%), Cemex (1.6%) and
Lloyds (1.6%).*
- --------------------------------------------------------------------------------
/1/ International investing involves increased risk and volatility.
/2/ With the maximum sales charge of 4.50%, the Fund's total return for the
nine-month period would have been 7.78%.
* The composition of the Fund's portfolio is subject to change.
-15-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
BB&T International Equity Fund
<TABLE>
<CAPTION>
================================================================================
Average Annual Total Return
As of 9/30/97
- --------------------------------------------------------------------------------
Inception Since
Class Date 1 Year Inception+
- --------------------------------------------------------------------------------
<S> <C> <C> <C>
Class A Shares* 1/2/97 N/A 7.78%
Class B Shares** 1/2/97 N/A 7.51%
Trust Shares 1/2/97 N/A 13.34%
================================================================================
</TABLE>
* Reflects 4.50% Maximum Sales Charge
** Reflects CDSC of 5.00%. Total returns of less than one year are aggregate.
+ Aggregate Total Return
[GRAPH APPEARS HERE]
Value of $10,000 Investment
<TABLE>
<CAPTION>
Date Trust Shares Class A Shares* Class B Shares* Morgan Stanley EAFE
---- ------------ --------------- --------------- -------------------
<S> <C> <C> <C> <C>
1/2/97 10,000 9,551 10,000 10,000
9/30/97 11,334 10,778 10,751 11,043
</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.
The performance of the BB&T International Equity Fund is measured against the
Morgan Stanley Capital International EAFE Index (EAFE), which is unmanaged and
is generally representative of the performance of stock markets in that region.
-16-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
THE BB&T U.S. TREASURY MONEY MARKET FUND/1/
The Federal Funds rate, which has a significant impact on money market rates,
remained relatively stable during the year ended September 30, 1997--with the
exception of a brief period of volatility kindled by the Federal Reserve's
decision in late March to raise short-term interest rates.
Approximately 48.0% of the portfolio's holdings are invested in U.S. Treasury
securities, with the remaining 52.0% invested in repurchase agreements
("repos") that are collateralized by Treasury securities. Our repo
counterparties are a select group of the country's largest banks and brokerage
firms whose short-term debt ratings are A1 or A1+. A recent surge of investment
into the Fund has substantially increased assets under management and given us
more leverage in negotiating higher interest rates from repo issuers. As of
September 30, 1997, the average maturity of the Fund's holdings was 47 days.
The average credit quality was AAA.*
- --------------------------------------------------------------------------------
/1/ 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.
* The composition of the Fund's portfolio is subject to change.
The BB&T Mutual Funds are distributed by BISYS Fund Services.
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, the Branch Banking and Trust Company or its
affiliates, nor are they insured by the FDIC or any other agency.
Some of the fees of the BB&T Mutual Funds are currently being waived, resulting
in higher total returns than would occur if the full fees were charged.
This literature is authorized for distribution only when preceded or
accompanied by a prospectus.
-17-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
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, Small Company Growth Fund and International Equity Fund, including the
schedules of portfolio investments, as of September 30, 1997, 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 audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included verification of securities owned as of
September 30, 1997, 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, 1997, the results of their operations, the changes in their net 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 14, 1997
-18-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
U.S. TREASURY SHORT-INTERMEDIATE INTERMEDIATE NORTH CAROLINA
MONEY MARKET U.S. GOVERNMENT U.S. GOVERNMENT INTERMEDIATE
FUND INCOME FUND BOND FUND TAX-FREE FUND
------------- ------------------ --------------- --------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Amortized cost
$144,492,010; cost
$107,795,509;
$144,471,234; and
$67,330,170,
respectively)........... $144,492,010 $107,679,269 $146,126,354 $69,791,408
Repurchase agreements,
at cost................. 156,604,330 -- -- --
------------ ------------ ------------ -----------
301,096,340 107,679,269 146,126,354 69,791,408
Interest receivable..... 1,013,094 1,573,715 2,034,428 1,050,278
Prepaid expenses and
other................... 17,972 4,421 6,640 3,709
------------ ------------ ------------ -----------
Total Assets......... 302,127,406 109,257,405 148,167,422 70,845,395
------------ ------------ ------------ -----------
LIABILITIES:
Dividends payable....... 1,079,403 508,723 678,423 241,405
Payable for capital
shares redeemed......... 22,801 -- -- --
Accrued expenses and
other payables:
Investment advisory
fees................... 92,079 44,359 60,262 29,169
Administration fees.... 6,529 2,382 3,235 1,163
Distribution fees--
Class A................ 1,310 1,087 861 1,169
Distribution fees--
Class B................ 5,201 -- 502 --
Accounting and
transfer agent fees.... 979 6,725 9,969 9,002
Other.................. 35,845 20,012 34,935 23,641
------------ ------------ ------------ -----------
Total Liabilities.... 1,244,147 583,288 788,187 305,549
------------ ------------ ------------ -----------
NET ASSETS:
Capital................. 300,883,013 110,215,916 147,784,604 68,144,467
Undistributed net
investment income....... -- 75,292 92,063 --
Net unrealized
appreciation
(depreciation) on
investments............. -- (116,240) 1,655,120 2,461,238
Accumulated
undistributed net
realized gains (losses)
on investment
transactions............ 246 (1,500,851) (2,152,552) (65,859)
------------ ------------ ------------ -----------
Net Assets........... $300,883,259 $108,674,117 $147,379,235 $70,539,846
============ ============ ============ ===========
</TABLE>
Continued
-19-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
U.S. TREASURY SHORT-INTERMEDIATE INTERMEDIATE NORTH CAROLINA
MONEY MARKET U.S. GOVERNMENT U.S. GOVERNMENT INTERMEDIATE
FUND INCOME FUND BOND FUND TAX-FREE FUND
------------- ------------------ --------------- --------------
<S> <C> <C> <C> <C>
Net Assets
Class A................ $ 32,541,359 $ 5,150,984 $ 4,211,043 $ 9,419,411
Class B................ $ 1,501,924 -- $ 622,945 --
Trust Class............ $266,839,976 $103,523,133 $142,545,247 $61,120,435
------------ ------------ ------------ -----------
Total.................. $300,883,259 $108,674,117 $147,379,235 $70,539,846
============ ============ ============ ===========
Outstanding units of
beneficial interest
(shares)
Class A................ 32,541,421 527,627 427,904 917,095
Class B................ 1,501,923 -- 63,499 --
Trust Class............ 266,839,762 10,596,827 14,466,093 5,949,237
------------ ------------ ------------ -----------
Total.................. 300,883,106 11,124,454 14,957,496 6,866,332
============ ============ ============ ===========
Net asset value
Class A--redemption
price per share........ $ 1.00 $ 9.76 $ 9.84 $ 10.27
Class B--offering price
per share*............. $ 1.00 -- $ 9.81 --
Trust Class--offering
and redemption price
per share.............. $ 1.00 $ 9.77 $ 9.85 $ 10.27
------------ ------------ ------------ -----------
Maximum Sales Charge--
Class A................. 2.00% 4.50% 2.00%
============ ============ ===========
Maximum Offering Price
(100%/(100%-Maximum
Sales Charge) of net as-
set value adjusted to
nearest cent) per
share--Class A.......... $ 1.00(a) $ 9.96 $ 10.30 $ 10.48
============ ============ ============ ===========
Maximum Redemption Price
(100%/(100%-Maximum Re-
demption Charge) of net
asset value adjusted to
nearest cent) per
share--Class B*......... $ 1.00 $ -- $ 10.33 $ --
============ ============ ============ ===========
</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-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
STATEMENTS OF ASSETS AND LIABILITIES
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
GROWTH AND SMALL COMPANY INTERNATIONAL
INCOME BALANCED GROWTH EQUITY
STOCK FUND FUND FUND FUND
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at value
(Cost $234,073,315;
$91,492,196;
$52,872,541; and
$48,563,977,
respectively)........... $361,227,041 $111,671,522 $79,687,047 $52,184,714
Cash.................... -- -- -- 3,823,282
Interest and dividends
receivable.............. 540,280 851,144 1,132 118,116
Receivable for capital
shares issued........... -- -- 2,179 --
Receivables for
investments sold........ -- -- 681,635 448,252
Reclaim receivable...... -- -- -- 26,813
Prepaid expenses and
other................... 16,161 6,448 8,404 7,593
------------ ------------ ----------- -----------
Total Assets......... 361,783,482 112,529,114 80,380,397 56,608,770
------------ ------------ ----------- -----------
LIABILITIES:
Dividends payable....... 495,302 332,866 -- 9,235
Foreign currency
overdraft (Cost
$293,399)............... -- -- -- 293,388
Payable for capital
shares redeemed......... -- 1,395 -- --
Payable for investments
purchased............... 715,600 -- 81,650 1,789,281
Accrued expenses and
other payables:
Investment advisory
fees................... 144,347 45,258 62,180 43,680
Administration fees.... 7,885 2,460 1,727 1,195
Distribution fees--
Class A................ 6,914 3,512 2,435 160
Distribution fees--
Class B................ 12,986 5,035 6,841 890
Accounting and
transfer agent fees.... 1,261 941 299 22,194
Custodian fees......... 3,567 3,025 -- 45,982
Legal and audit fees... 16,628 10,047 5,815 7,070
Other.................. 26,128 6,955 14,731 10,630
------------ ------------ ----------- -----------
Total Liabilities.... 1,430,618 411,494 175,678 2,223,705
------------ ------------ ----------- -----------
NET ASSETS:
Capital................. 212,460,253 89,001,560 53,855,301 49,478,615
Undistributed net
investment income
(loss).................. (4,109) 10,946 (10,390) 3,734
Net unrealized
appreciation
(depreciation) on
investments and foreign
currency transactions... 127,153,726 20,179,326 26,814,506 3,624,688
Accumulated
undistributed net
realized gains (losses)
on investment
transactions and foreign
currency transactions... 20,742,994 2,925,788 (454,698) 1,278,028
------------ ------------ ----------- -----------
Net Assets............. $360,352,864 $112,117,620 $80,204,719 $54,385,065
============ ============ =========== ===========
</TABLE>
Continued
-21-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
STATEMENTS OF ASSETS AND LIABILITIES, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
GROWTH AND SMALL COMPANY INTERNATIONAL
INCOME BALANCED GROWTH EQUITY
STOCK FUND FUND FUND FUND
------------ ------------ ------------- -------------
<S> <C> <C> <C> <C>
Net Assets
Class A................ $ 34,679,125 $ 17,233,539 $12,675,711 $ 832,897
Class B................ $ 16,689,987 $ 6,360,187 $ 8,869,004 $ 1,178,984
Trust Class............ $308,983,752 $ 88,523,894 $58,660,004 $52,373,184
------------ ------------ ----------- -----------
Total................ $360,352,864 $112,117,620 $80,204,719 $54,385,065
============ ============ =========== ===========
Outstanding units of
beneficial interest
(shares)
Class A................ 1,735,750 1,264,786 543,333 74,094
Class B................ 837,590 468,841 385,310 104,967
Trust Class............ 15,434,506 6,510,055 2,493,992 4,643,858
------------ ------------ ----------- -----------
Total................ 18,007,846 8,243,682 3,422,635 4,822,919
============ ============ =========== ===========
Net asset value
Class A--redemption
price per share........ $ 19.98 $ 13.63 $ 23.33 $ 11.24
Class B--offering
price per share*....... $ 19.93 $ 13.57 $ 23.02 $ 11.23
Trust Class--offering
and redemption price
per share.............. $ 20.02 $ 13.60 $ 23.52 $ 11.28
============ ============ =========== ===========
Maximum Sales Charge--
Class A................. 4.50% 4.50% 4.50% 4.50%
============ ============ =========== ===========
Maximum Offering Price
(100%/(100%-Maximum
Sales Charge) of net as-
set value adjusted to
nearest cent) per
share--Class A.......... $ 20.92 $ 14.27 $ 24.43 $ 11.77
============ ============ =========== ===========
Maximum Redemption Price
(100%/(100%-Maximum
Redemption Charge) of
net asset value adjusted
to nearest cent) per
share--Class B*......... $ 20.98 $ 14.28 $ 24.23 $ 11.82
============ ============ =========== ===========
</TABLE>
- ----
* Redemption price per share (Class B) varies by length of time shares are
held.
See notes to financial statements
-22-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
STATEMENTS OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
U.S. SHORT- INTERMEDIATE
TREASURY INTERMEDIATE U.S. NORTH CAROLINA
MONEY MARKET U.S. GOVERNMENT GOVERNMENT INTERMEDIATE
FUND INCOME FUND BOND FUND TAX-FREE FUND
------------ --------------- ------------ --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income........... $12,593,777 $6,293,188 $ 8,950,486 $3,020,418
----------- ---------- ----------- ----------
Total Income........... 12,593,777 6,293,188 8,950,486 3,020,418
----------- ---------- ----------- ----------
EXPENSES:
Investment advisory fees.. 940,705 562,927 812,351 363,548
Administration fees....... 470,355 187,425 270,652 121,183
Distribution fees--Class
A......................... 144,941 28,875 21,620 46,373
Distribution fees--Class
B......................... 15,309 -- 4,950 --
Custodian and accounting
fees...................... 99,739 50,462 73,640 39,410
Legal and audit fees...... 35,499 11,307 22,981 14,721
Trustees' fees and
expenses.................. 10,532 3,464 5,817 2,213
Transfer agent fees....... 87,434 48,675 74,070 46,449
Registration and filing
fees...................... 49,487 20,942 29,040 12,664
Printing costs............ 48,345 8,951 14,488 4,849
Other..................... 12,632 3,806 6,797 2,067
----------- ---------- ----------- ----------
Gross Expenses......... 1,914,978 926,834 1,336,406 653,477
Expenses voluntarily
reduced................ (86,964) (108,797) (146,539) (123,939)
----------- ---------- ----------- ----------
Total Expenses......... 1,828,014 818,037 1,189,867 529,538
----------- ---------- ----------- ----------
Net Investment Income..... 10,765,763 5,475,151 7,760,619 2,490,880
----------- ---------- ----------- ----------
REALIZED/UNREALIZED GAINS
(LOSSES) ON INVESTMENTS:
Net realized gains
(losses) on investment
transactions.............. 246 36,735 (124,190) 59,163
Change in unrealized
appreciation(depreciation)
on investments............ -- 312,560 3,189,400 1,337,500
----------- ---------- ----------- ----------
Net realized/unrealized
gains on investments...... 246 349,295 3,065,210 1,396,663
----------- ---------- ----------- ----------
Change in net assets
resulting from
operations................ $10,766,009 $5,824,446 $10,825,829 $3,887,543
=========== ========== =========== ==========
</TABLE>
See notes to financial statements
-23-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
GROWTH AND SMALL COMPANY INTERNATIONAL
INCOME BALANCED GROWTH EQUITY
STOCK FUND FUND FUND FUND
------------- ------------- ------------- --------------
FOR THE YEAR FOR THE YEAR FOR THE YEAR FOR THE PERIOD
ENDED ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1997 1997 1997 (A)
------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest income......... $ 163,914 $ 3,187,392 $ 319,961 $ 124,332
Dividend income......... 7,408,604 1,404,253 15,185 646,004
Foreign tax
withholding............. -- -- -- (79,469)
----------- ----------- ----------- ----------
Total Income......... 7,572,518 4,591,645 335,146 690,867
----------- ----------- ----------- ----------
EXPENSES:
Investment advisory
fees.................... 2,147,800 707,060 551,965 326,911
Administration fees..... 579,761 190,947 110,393 64,023
Distribution fees--Class
A....................... 133,421 73,186 44,868 1,280
Distribution fees--Class
B....................... 91,332 42,116 53,561 3,807
Custodian and accounting
fees.................... 120,647 64,685 73,940 114,847
Legal and audit fees.... 41,564 18,355 10,813 9,039
Organization costs...... -- -- 10,709 9,068
Trustees' fees and
expenses................ 11,825 4,398 2,633 665
Transfer agent fees..... 146,460 99,432 126,361 55,701
Registration and filing
fees.................... 39,107 13,214 11,524 11,203
Printing costs.......... 31,552 10,960 6,900 1,383
Other................... 12,363 4,647 2,408 172
----------- ----------- ----------- ----------
Gross Expenses....... 3,355,832 1,229,000 1,006,075 598,099
Expenses voluntarily
reduced.............. (765,228) (266,318) (22,470) (7,553)
----------- ----------- ----------- ----------
Total Expenses....... 2,590,604 962,682 983,605 590,546
----------- ----------- ----------- ----------
Net Investment Income
(loss).................. 4,981,914 3,628,963 (648,459) 100,321
----------- ----------- ----------- ----------
REALIZED/UNREALIZED
GAINS (LOSSES) ON
INVESTMENTS:
Net realized gains
(losses) on investment
transactions............ 21,222,568 3,823,461 (226,983) 1,278,028
Net realized gains
(losses) from foreign
currency transactions... -- -- -- 114,474
Net change in unrealized
appreciation
(depreciation) on
investments............. 68,548,798 11,630,206 10,884,559 3,620,737
Net change in unrealized
appreciation
(depreciation) from
foreign currency
transactions............ -- -- -- 3,951
----------- ----------- ----------- ----------
Net realized/unrealized
gains on investments.... 89,771,366 15,453,667 10,657,576 5,017,190
----------- ----------- ----------- ----------
Change in net assets
resulting from
operations.............. $94,753,280 $19,082,630 $10,009,117 $5,117,511
=========== =========== =========== ==========
</TABLE>
- ----
(a) For the period from January 2, 1997 (commencement of operations) through
September 30, 1997.
See notes to financial statements
-24-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
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,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income.. $ 10,765,763 $ 8,394,161 $ 5,475,151 $ 3,335,263
Net realized gains
(losses) on investment
transactions........... 246 -- 36,735 (162,759)
Net change in
unrealized appreciation
(depreciation) on
investments............ -- -- 312,560 (686,269)
------------- ------------- ------------ ------------
Change in net assets
resulting from
operations.............. 10,766,009 8,394,161 5,824,446 2,486,235
------------- ------------- ------------ ------------
DISTRIBUTIONS TO CLASS A
SHAREHOLDERS:
From net investment
income................. (1,278,099) (948,869) (323,078) (371,250)
DISTRIBUTIONS TO CLASS B
SHAREHOLDERS:
From net investment
income................. (55,272) (19,543)(a) -- --
DISTRIBUTIONS TO TRUST
CLASS SHAREHOLDERS:
From net investment
income................. (9,432,392) (7,425,749) (5,152,073) (2,964,013)
------------- ------------- ------------ ------------
Change in net assets
from shareholder
distributions........... (10,765,763) (8,394,161) (5,475,151) (3,335,263)
------------- ------------- ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................. 477,597,555 449,946,776 54,649,047 32,001,311
Dividends reinvested... 2,984,920 1,721,604 1,090,543 1,448,084
Cost of shares
redeemed............... (414,910,057) (350,488,723) (16,392,254) (15,729,346)
------------- ------------- ------------ ------------
Change in net assets
from share
transactions............ 65,672,418 101,179,657 39,347,336 17,720,049
------------- ------------- ------------ ------------
Change in net assets.... 65,672,664 101,179,657 39,696,631 16,871,021
NET ASSETS:
Beginning of period.... 235,210,595 134,030,938 68,977,486 52,106,465
------------- ------------- ------------ ------------
End of period.......... $ 300,883,259 $ 235,210,595 $108,674,117 $ 68,977,486
============= ============= ============ ============
SHARE TRANSACTIONS:
Issued................. 477,597,555 449,946,776 5,613,734 3,264,121
Reinvested............. 2,984,920 1,721,604 111,753 146,965
Redeemed............... (414,909,964) (350,488,723) (1,684,651) (1,597,468)
------------- ------------- ------------ ------------
Change in shares........ 65,672,511 101,179,657 4,040,836 1,813,618
============= ============= ============ ============
</TABLE>
- ----
(a) From January 1, 1996 (commencement of operations) through September 30,
1996.
See notes to financial statements
-25-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
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,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income.. $ 7,760,619 $ 6,313,924 $ 2,490,880 $ 1,322,554
Net realized gains
(losses) on investment
transactions........... (124,190) (725,469) 59,163 (47,072)
Net change in
unrealized appreciation
(depreciation) on
investments............ 3,189,400 (2,757,133) 1,337,500 (302,527)
------------ ------------ ------------ ------------
Change in net assets
resulting from
operations.............. 10,825,829 2,831,322 3,887,543 972,955
------------ ------------ ------------ ------------
DISTRIBUTIONS TO CLASS A
SHAREHOLDERS:
From net investment
income................. (237,636) (247,352) (364,471) (322,468)
DISTRIBUTIONS TO CLASS B
SHAREHOLDERS:
From net investment
income................. (23,493) (6,966)(a) -- --
DISTRIBUTIONS TO TRUST
CLASS SHAREHOLDERS:
From net investment
income................. (7,499,490) (6,059,606) (2,126,409) (1,000,086)
------------ ------------ ------------ ------------
Change in net assets
from shareholder
distributions........... (7,760,619) (6,313,924) (2,490,880) (1,322,554)
------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................. 45,662,151 66,845,451 44,964,506 11,820,669
Dividends reinvested... 4,043,560 4,689,472 297,458 268,478
Cost of shares
redeemed............... (29,036,797) (28,159,031) (13,823,035) (10,843,225)
------------ ------------ ------------ ------------
Change in net assets
from share
transactions............ 20,668,914 43,375,892 31,438,929 1,245,922
------------ ------------ ------------ ------------
Change in net assets.... 23,734,124 39,893,290 32,835,592 896,323
NET ASSETS:
Beginning of period.... 123,645,111 83,751,821 37,704,254 36,807,931
------------ ------------ ------------ ------------
End of period.......... $147,379,235 $123,645,111 $ 70,539,846 $ 37,704,254
============ ============ ============ ============
SHARE TRANSACTIONS:
Issued................. 4,698,844 6,757,431 4,443,543 1,171,335
Reinvested............. 415,863 478,491 29,323 26,506
Redeemed............... (2,985,297) (2,876,321) (1,359,225) (1,071,579)
------------ ------------ ------------ ------------
Change in shares........ 2,129,410 4,359,601 3,113,641 126,262
============ ============ ============ ============
</TABLE>
(a) From January 1, 1996 (commencement of operations) through September 30,
1996.
See notes to financial statements
-26-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
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,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
FROM INVESTMENT
ACTIVITIES:
OPERATIONS:
Net investment income.. $ 4,981,914 $ 4,118,150 $ 3,628,963 $ 2,956,768
Net realized gains
(losses) on investment
transactions........... 21,222,568 9,428,482 3,823,461 2,206,261
Net change in
unrealized appreciation
(depreciation) on in-
vestments.............. 68,548,798 24,542,390 11,630,206 3,503,931
------------ ------------ ------------ ------------
Change in net assets re-
sulting from opera-
tions................... 94,753,280 38,089,022 19,082,630 8,666,960
------------ ------------ ------------ ------------
DISTRIBUTIONS TO CLASS A
SHAREHOLDERS:
From net investment in-
come................... (406,746) (270,458) (532,096) (421,901)
From net realized gains
from investment trans-
actions................ (886,255) (76,748) (398,078) --
DISTRIBUTIONS TO CLASS B
SHAREHOLDERS:
From net investment in-
come................... (75,802) (19,098)(a) (125,357) (39,026)(a)
From net realized gains
from investment trans-
actions................ (206,225) -- (88,738) --
DISTRIBUTIONS TO TRUST
CLASS SHAREHOLDERS:
From net investment in-
come................... (4,503,475) (3,828,594) (2,972,191) (2,495,841)
From net realized gains
from investment trans-
actions................ (8,604,815) (1,044,981) (2,213,599) --
------------ ------------ ------------ ------------
Change in net assets
from shareholder distri-
butions................. (14,683,318) (5,239,879) (6,330,059) (2,956,768)
------------ ------------ ------------ ------------
CAPITAL TRANSACTIONS:
Proceeds from shares
issued................. 123,241,859 78,886,812 34,516,341 30,350,061
Dividends reinvested... 9,323,443 3,546,244 5,447,735 2,471,085
Cost of shares re-
deemed................. (81,770,389) (42,239,195) (24,767,622) (13,413,504)
------------ ------------ ------------ ------------
Change in net assets
from share transac-
tions................... 50,794,913 40,193,861 15,196,454 19,407,642
------------ ------------ ------------ ------------
Change in net assets.... 130,864,875 73,043,004 27,949,025 25,117,834
NET ASSETS:
Beginning of period.... 229,487,989 156,444,985 84,168,595 59,050,761
------------ ------------ ------------ ------------
End of period.......... $360,352,864 $229,487,989 $112,117,620 $ 84,168,595
============ ============ ============ ============
SHARE TRANSACTIONS:
Issued................. 7,276,447 5,587,933 2,754,247 2,636,434
Reinvested............. 580,100 252,319 444,651 214,800
Redeemed............... (4,808,625) (2,926,808) (2,005,976) (1,159,914)
------------ ------------ ------------ ------------
Change in shares........ 3,047,922 2,913,444 1,192,922 1,691,320
============ ============ ============ ============
</TABLE>
- ----
(a) From January 1, 1996 (commencement of operations) through September 30,
1996.
See notes to financial statements
-27-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
STATEMENTS OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
SMALL COMPANY INTERNATIONAL
GROWTH FUND EQUITY FUND
---------------------------- -------------
FOR THE FOR THE FOR THE
YEAR YEAR PERIOD
ENDED ENDED ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997(A)
------------- ------------- -------------
<S> <C> <C> <C>
FROM INVESTMENT ACTIVITIES:
OPERATIONS:
Net investment income (loss)........ $ (648,459) $ (328,819) $ 100,321
Net realized gains (losses) on in-
vestment transactions............... (226,983) 90,971 1,278,028
Net realized gains (losses) from
foreign currency transactions....... -- -- 114,474
Net change in unrealized apprecia-
tion (depreciation) on investments.. 10,884,559 12,148,737 3,620,737
Net change in unrealized apprecia-
tion (depreciation) from foreign
currency transactions............... -- -- 3,951
------------ ----------- -----------
Change in net assets resulting from
operations........................... 10,009,117 11,910,889 5,117,511
------------ ----------- -----------
DISTRIBUTIONS TO CLASS A
SHAREHOLDERS:
From net investment income.......... -- -- (489)
Distribution in excess of net real-
ized gains from investment transac-
tions............................... (8,888) -- --
In excess of net investment income.. -- -- (559)
DISTRIBUTIONS TO CLASS B
SHAREHOLDERS:
From net investment income.......... -- -- (251)
Distribution in excess of net real-
ized gains from investment transac-
tions............................... (4,428) -- --
In excess of net investment income.. -- -- (286)
DISTRIBUTIONS TO TRUST CLASS
SHAREHOLDERS:
From net investment income.......... -- -- (99,581)
Distribution in excess of net real-
ized gains from investment transac-
tions............................... (40,858) -- --
In excess of net investment income.. -- -- (113,629)
------------ ----------- -----------
Change in net assets from share-
holder distributions................ (54,174) -- (214,795)
------------ ----------- -----------
CAPITAL TRANSACTIONS:
Proceeds from shares issued......... 48,655,648 22,938,972 51,911,874
Dividends reinvested................ 40,212 -- 89,459
Cost of shares redeemed............. (25,431,484) (5,922,093) (2,518,984)
------------ ----------- -----------
Change in net assets from share
transactions......................... 23,264,376 17,016,879 49,482,349
------------ ----------- -----------
Change in net assets................. 33,219,319 28,927,768 54,385,065
NET ASSETS:
Beginning of period................. 46,985,400 18,057,632 --
------------ ----------- -----------
End of period....................... $ 80,204,719 $46,985,400 $54,385,065
============ =========== ===========
SHARE TRANSACTIONS:
Issued.............................. 2,498,285 1,298,090 5,042,411
Reinvested.......................... 2,036 -- 8,292
Redeemed............................ (1,300,018) (315,568) (227,784)
------------ ----------- -----------
Change in shares..................... 1,200,303 982,522 4,822,919
============ =========== ===========
</TABLE>
- ----
(a) From January 2, 1997 (commencement of operations) through September 30,
1997.
See notes to financial statements
-28-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
U.S. TREASURY MONEY MARKET FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- ---------------------------------------------------- ------------
<C> <S> <C>
U.S. TREASURY BILLS (26.5%):
$ 8,000,000 10/02/97............................................ $ 7,998,806
15,000,000 10/16/97............................................ 14,966,692
12,000,000 10/23/97............................................ 11,964,580
15,000,000 11/06/97............................................ 14,925,525
15,000,000 11/13/97............................................ 14,904,044
15,000,000 12/04/97............................................ 14,862,240
------------
Total U.S. Treasury Bills 79,621,887
------------
U.S. TREASURY NOTES (21.5%):
15,000,000 5.63%, 10/31/97..................................... 15,002,287
15,000,000 5.13%, 3/31/98...................................... 14,966,745
21,000,000 5.13%, 4/30/98...................................... 20,951,013
14,000,000 5.13%, 6/30/98...................................... 13,950,078
------------
Total U.S. Treasury Notes 64,870,123
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL SECURITY AMORTIZED
AMOUNT DESCRIPTION COST
----------- --------------------------- ------------
<C> <S> <C>
REPURCHASE AGREEMENTS (52.0%):
$50,000,000 First Boston, 6.05%,
10/1/97 (Collateralized by
$51,030,000 U.S. Treasury
Notes, 5.75%, 9/30/99,
market value--$50,982,159).... $ 50,000,000
40,000,000 Lehman Brothers, 6.00%,
10/1/97 (Collateralized by
$26,800,000 U.S. Treasury
Bonds, 11.25%, 2/15/15,
market value--$40,685,750).... 40,000,000
12,000,000 Merrill Lynch, 5.80%,
10/1/97 (Collateralized by
$12,670,000 U.S. Treasury
Bills, 5/28/98, market
value--$12,237,531)........... 12,000,000
54,604,330 NationsBank, 6.05%, 10/1/97
(Collateralized by
$36,700,000 U.S. Treasury
Bonds, 11.25%, 2/15/15,
market value--$55,715,188).... 54,604,330
------------
Total Repurchase Agreements 156,604,330
------------
Total (Cost--$301,096,340)(a) $301,096,340
============
</TABLE>
- ----
Percentages indicated are based on net assets of $300,883,259.
(a) Cost for federal income tax and financial
reporting purposes are the same.
See notes to financial statements
-29-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------- ------------
<S> <C> <C>
CORPORATE BONDS (5.6%):
Banking (2.8%):
$3,000,000 Suntrust Banks, 7.38%, 7/1/02...... $ 3,108,750
Financial Services (2.8%):
3,000,000 Ford Motor Credit, 6.55%, 9/10/02.. 3,011,250
------------
Total Corporate Bonds 6,120,000
------------
PASS-THROUGH MORTGAGE SECURITIES (20.6%):
Federal Home Loan Mortgage Corp:
2,536,325 5.50%, 8/1/00, Pool # M80285....... 2,511,748
2,692,862 6.00%, 10/1/00, Pool# G40018....... 2,696,229
2,815,274 6.00%, 11/1/02, Pool# G40168....... 2,785,347
Federal National Mortgage Assoc.:
2,569,654 6.50%, 4/1/03, Pool# 303863........ 2,564,823
1,830,361 7.00%, 6/1/08, Pool# 50751......... 1,862,960
2,600,426 7.50%, 12/1/08, Pool# 190611....... 2,675,189
2,346,102 6.00%, 4/1/09, Pool# 190759........ 2,299,907
2,137,603 6.50%, 4/1/09, Pool# 250009........ 2,133,584
2,924,667 6.00%, 12/1/09, Pool # 313658...... 2,867,080
------------
Total Pass-Through Mortgage Securities 22,396,867
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ---------------------------------------------------- ------------
<C> <S> <C>
U.S. GOVERNMENT AGENCIES (2.8%):
Federal Home Loan Bank:
$ 3,000,000 6.17%, 3/8/01....................................... $ 3,003,480
------------
Total U.S. Government Agencies 3,003,480
------------
U.S. TREASURY NOTES (69.7%):
6,000,000 8.88%, 11/15/97..................................... 6,024,120
7,000,000 7.25%, 2/15/98...................................... 7,044,590
3,500,000 8.25%, 7/15/98...................................... 3,570,105
10,500,000 5.75%, 12/31/98..................................... 10,505,145
9,000,000 6.50%, 4/30/99...................................... 9,097,200
9,500,000 8.00%, 8/15/99...................................... 9,859,575
10,000,000 6.75%, 4/30/00...................................... 10,204,700
8,000,000 6.38%, 8/15/02...................................... 8,119,280
3,500,000 5.88%, 2/15/04...................................... 3,461,815
8,000,000 5.88%, 11/15/05..................................... 7,850,160
------------
Total U.S. Treasury Notes 75,736,690
------------
INVESTMENT COMPANIES (0.4%):
422,232 Provident Federal Fund.............................. 422,232
------------
Total Investment Companies 422,232
------------
Total (Cost--$107,795,509)(a) $107,679,269
============
</TABLE>
- ----
Percentages indicated are based on net assets of $108,674,117.
(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
$45,429. Cost for financial reporting purposes differs from value by net
unrealized depreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.. $ 627,147
Unrealized depreciation.. (743,387)
---------
Net unrealized deprecia-
tion..................... $(116,240)
=========
</TABLE>
See notes to financial statements
-30-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
INTERMEDIATE U.S. GOVERNMENT BOND FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
----------- ---------------------------------------------------- ------------
<C> <S> <C>
CORPORATE BONDS (10.3%):
Banking (3.5%):
$ 5,000,000 Suntrust Banks, 7.38%, 7/1/02....................... $ 5,181,250
------------
Financial Services (3.4%):
5,000,000 Ford Motor Credit Co.,
6.55%, 9/10/02...................................... 5,018,750
------------
Industrial Goods & Services (3.4%):
5,000,000 I.B.M. Corp., 6.22%, 8/1/27......................... 4,981,250
------------
Total Corporate Bonds 15,181,250
------------
PASS-THROUGH MORTGAGE SECURITIES (18.8%):
Federal Home Loan Mortgage Corp.:
2,311,728 7.50%, 7/1/07, Pool# E00108......................... 2,376,017
3,551,870 6.50%, 4/1/11, Pool# E20235......................... 3,532,974
Federal National Mortgage Assoc.:
3,399,242 7.00%, 6/1/08, Pool# 50751.......................... 3,459,783
4,706,412 6.00%, 6/1/08, Pool# 124885......................... 4,640,193
2,924,667 6.00%, 12/1/09, Pool# 313658........................ 2,867,080
3,359,645 7.00%, 4/1/24, Pool# 250005......................... 3,358,570
Government National Mortgage Assoc.:
3,948,025 7.00%, 8/15/23, Pool# 354627........................ 3,967,766
3,370,684 7.50%, 3/15/23, Pool# 342553........................ 3,445,445
------------
Total Pass-Through Mortgage Securities 27,647,828
------------
U.S. GOVERNMENT AGENCIES (5.0%):
Federal Home Loan Bank:
2,000,000 8.38%, 10/25/99..................................... 2,091,680
3,000,000 7.36%, 7/1/04....................................... 3,171,840
2,000,000 6.79%, 2/5/07....................................... 2,054,778
------------
Total U.S. Government Agencies 7,318,298
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
----------- ---------------------------------------------------- ------------
<C> <S> <C>
U.S. TREASURY BONDS (9.2%):
$12,250,000 7.50%, 11/15/16..................................... $ 13,613,793
------------
Total U.S. Treasury Bonds 13,613,793
------------
U.S. TREASURY NOTES (55.6%):
5,000,000 6.88%, 7/31/99...................................... 5,089,000
7,500,000 5.63%, 11/30/00..................................... 7,429,875
6,500,000 7.88%, 8/15/01...................................... 6,912,555
8,000,000 6.38%, 8/15/02...................................... 8,119,280
10,000,000 6.25%, 2/15/03...................................... 10,096,900
12,500,000 7.25%, 8/15/04...................................... 13,295,125
14,000,000 5.88%, 11/15/05..................................... 13,737,780
11,000,000 6.50%, 10/15/06..................................... 11,233,750
6,000,000 6.25%, 2/15/07...................................... 6,029,340
------------
Total U.S. Treasury Notes 81,943,605
------------
INVESTMENT COMPANIES (0.3%):
421,580 Provident Federal Fund.............................. 421,580
------------
Total Investment Companies 421,580
------------
Total (Cost--$144,471,234) $146,126,354
============
</TABLE>
- ----
Percentages indicated are based on net assets of $147,379,235
(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
$167,836. Cost for financial reporting purposes differs from value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.. $2,240,882
Unrealized depreciation.. (585,762)
----------
Net unrealized apprecia-
tion..................... $1,655,120
==========
</TABLE>
See notes to financial statements
-31-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NORTH CAROLINA INTERMEDIATE TAX-FREE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------- -----------
<C> <S> <C>
MUNICIPAL BONDS (96.4%):
General Obligation Bonds (83.4%):
$1,200,000 Asheville, North Carolina, 6.00%, 3/1/01............. $ 1,270,836
500,000 Asheville, North Carolina, 4.80%, 6/1/06............. 512,085
500,000 Buncombe County, North Carolina, 5.00%, 3/1/01....... 513,725
500,000 Buncombe County, North Carolina, 5.00%, 3/1/03....... 517,720
850,000 Buncombe County, North Carolina, 5.10%, 3/1/04....... 884,859
Buncombe County, North Carolina, 5.80%, 2/1/05,
500,000 Callable 2/1/04 @ 100.5.............................. 539,920
1,000,000 Buncombe County, North Carolina, 5.10%, 3/1/07....... 1,044,840
750,000 Burke County, North Carolina, 6.25%, 3/1/99, MBIA.... 774,045
500,000 Burke County, North Carolina, 6.30%, 3/1/01, MBIA.... 533,755
Cabarrus County, North Carolina, 5.30%, 2/1/13,
1,500,000 Callable 2/1/07 @ 102, MBIA.......................... 1,526,745
500,000 Cary, North Carolina, 5.50%, 2/1/99.................. 510,570
1,000,000 Cary, North Carolina, 5.50%, 2/1/01.................. 1,042,230
Catawba County, North Carolina, 5.70%, 6/1/06,
500,000 Callable 6/1/04 @ 101................................ 539,120
825,000 Charlotte, North Carolina, 6.40%, 2/1/99............. 851,763
1,000,000 Charlotte, North Carolina, 6.20%, 6/1/01............. 1,070,100
395,000 Charlotte, North Carolina, 5.20%, 7/1/01............. 410,223
Charlotte, North Carolina, Water & Sewer, 5.70%,
600,000 2/1/06, Callable 2/1/04 @ 101........................ 646,890
Chatham County, North Carolina, 5.40%, 4/1/11,
500,000 Callable 4/1/06 @102................................. 519,765
Cleveland County, North Carolina, 7.10%, 6/1/99,
275,000 AMBAC................................................ 289,160
Cleveland County, North Carolina, 5.10%, 6/1/03,
600,000 FGIC................................................. 623,274
Craven County, North Carolina, 5.50%, 6/1/07,
1,000,000 Callable 6/1/06 @ 100.5, MBIA........................ 1,068,530
Craven County, North Carolina, 5.50%, 6/1/09,
500,000 Callable 6/1/06 @ 102, MBIA.......................... 529,885
Craven County, North Carolina, 5.50%, 6/1/16,
1,000,000 Callable 6/1/06 @ 102, MBIA.......................... 1,031,330
Durham & Wake Counties, North Carolina, 5.75%,
500,000 4/1/02............................................... 532,340
400,000 Durham County, North Carolina, 5.20%, 3/1/01......... 414,152
500,000 Durham County, North Carolina, 5.40%, 2/1/02......... 524,340
Durham County, North Carolina, 5.20%, 3/1/03,
250,000 Callable 3/1/02 @ 100.5.............................. 260,917
Durham County, North Carolina, 5.20%, 3/1/05,
340,000 Callable 3/1/02 @ 101.5.............................. 355,572
1,000,000 Durham, North Carolina, 4.90%, 2/1/04................ 1,030,680
500,000 Durham, North Carolina, 5.00%, 2/1/05................ 518,925
Fayetteville, North Carolina, 4.80%, 5/1/05, Callable
1,000,000 5/1/03 @ 101, FGIC................................... 1,020,350
1,000,000 Forsyth County, North Carolina, 5.20%, 6/1/02........ 1,042,370
Forsyth County, North Carolina, 5.60%, 8/1/03,
500,000 Callable 8/1/02 @ 100.5.............................. 531,460
Forsyth County, North Carolina, 6.20%, 3/1/04,
500,000 Callable 3/1/01 @ 101.5.............................. 539,575
Forsyth County, North Carolina, 5.40%, 6/1/04,
265,000 Callable 6/1/02 @101................................. 278,909
Gaston County, North Carolina, 5.00%, 3/1/08,
500,000 Callable 3/1/06 @ 101, AMBAC......................... 512,640
Gaston County, North Carolina, 5.50%, 5/1/09,
1,000,000 Callable 5/1/07 @ 101, FGIC.......................... 1,062,530
500,000 Goldsboro, North Carolina, 4.90%, 6/1/01............. 512,445
500,000 Greensboro, North Carolina, 5.40%, 4/1/02............ 524,590
1,000,000 Guilford County, North Carolina, 4.80%, 4/1/99....... 1,013,160
890,000 Henderson County, North Carolina, 6.50%, 6/1/01...... 960,132
555,000 Hickory, North Carolina, 6.50%, 5/1/99............... 576,700
600,000 Hickory, North Carolina, 6.50%, 5/1/01............... 646,302
680,000 High Point, North Carolina, 4.40%, 4/1/02............ 685,250
</TABLE>
Continued
-32-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NORTH CAROLINA INTERMEDIATE TAX-FREE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------- -----------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
General Obligation Bonds, continued:
$ 500,000 Lee County, North Carolina, 5.50%, 2/1/00............ $ 515,750
250,000 Lee County, North Carolina, 5.60%, 2/1/03, Callable
2/1/02 @ 100.5....................................... 263,553
1,000,000 Lincoln County, North Carolina, 4.70%, 6/1/01, FGIC.. 1,018,150
1,000,000 Lincoln County, North Carolina, 4.80%, 6/1/04, FGIC.. 1,022,270
700,000 Mecklenburg County, North Carolina, 5.75%, 3/1/03,
Callable 3/1/02 @ 100.50............................. 745,073
1,000,000 Mecklenburg County, North Carolina, 5.40%, 4/1/03.... 1,056,400
1,000,000 Mecklenburg County, North Carolina, 5.00%, 4/1/08.... 1,034,710
1,500,000 Mecklenburg County, North Carolina, 5.50%, 4/1/11,
Callable 4/1/04 @ 102................................ 1,572,360
500,000 Moore County, North Carolina, 4.75%, 6/1/03, AMBAC... 510,680
1,000,000 New Hanover County, North Carolina, 4.50%, 9/1/03.... 1,009,280
625,000 New Hanover County, North Carolina, 5.30%, 5/1/09,
Callable 5/1/06 @ 101.5.............................. 654,763
815,000 North Carolina State, 5.60%, 4/1/00.................. 845,962
1,000,000 North Carolina State, 4.70%, 2/1/01.................. 1,019,100
250,000 North Carolina State, 6.10%, 3/1/03, Callable 3/1/02
@ 100.5.............................................. 269,902
1,000,000 North Carolina State, 4.70%, 2/1/06, Callable 2/1/04
@ 101................................................ 1,019,990
1,000,000 North Carolina State, 5.10%, 6/1/09, Callable 6/1/06
@ 101.5.............................................. 1,036,460
670,000 Orange County, North Carolina, 5.10%, 6/1/00......... 687,594
500,000 Orange County, North Carolina, 5.10%, 6/1/06,
Callable 6/1/03 @ 101.5.............................. 521,430
500,000 Orange County, North Carolina, 5.10%, 6/1/07,
Callable 6/1/03 @ 102................................ 521,835
1,000,000 Pitt County, North Carolina, 4.80%, 2/1/00........... 1,016,730
965,000 Raleigh, North Carolina, 6.30%, 3/1/99............... 997,549
500,000 Raleigh, North Carolina, 5.00%, 2/1/08, Callable
2/1/00 @ 102......................................... 513,680
500,000 Rocky Mount, North Carolina, 6.10%, 5/1/03, Callable
5/1/02 @ 100.5....................................... 537,410
625,000 Rowan County, North Carolina, 5.50%, 4/1/04, MBIA.... 663,150
700,000 Rowan County, North Carolina, 5.50%, 4/1/05, MBIA.... 745,073
225,000 Rowan County, North Carolina, 5.50%, 2/1/07, Callable
2/1/06 @ 100.5, MBIA................................. 239,967
1,000,000 Surry County, North Carolina, 6.25%, 4/1/00, AMBAC... 1,051,380
500,000 Surry County, North Carolina, 6.25%, 4/1/01, AMBAC... 533,735
200,000 Union County, North Carolina, 5.80%, 3/1/05, Callable
3/1/02 @ 101.5....................................... 212,772
500,000 Wake County, North Carolina, 4.40%, 4/1/01........... 505,175
1,000,000 Wake County, North Carolina, 4.50%, 4/1/03........... 1,014,110
510,000 Wayne County, North Carolina, 4.80%, 4/1/02.......... 520,965
1,000,000 Wayne County, North Carolina, 4.80%, 4/1/03.......... 1,022,790
500,000 Wilkes County, North Carolina, 5.00%, 6/1/01, AMBAC.. 514,130
500,000 Wilkes County, North Carolina, 5.00%, 6/1/02, AMBAC.. 515,490
1,000,000 Wilmington, North Carolina, 4.60%, 3/1/02............ 1,013,530
505,000 Winston-Salem, North Carolina, 6.50%, 6/1/99......... 526,074
200,000 Winston-Salem, North Carolina, 6.40%, 6/1/02,
Callable 6/1/01 @ 102................................ 218,668
350,000 Winston-Salem, North Carolina, 6.25%, 4/1/07,
Callable 4/1/02 @ 102................................ 380,744
-----------
58,863,093
-----------
Health Care Bonds (8.0%):
650,000 Charlotte-Mecklenburg Hospital Revenue, 5.70%,
1/1/01............................................... 679,107
500,000 Charlotte-Mecklenburg Hospital Revenue, 5.90%,
1/1/02............................................... 529,555
</TABLE>
Continued
-33-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NORTH CAROLINA INTERMEDIATE TAX-FREE FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ----------------------------------------------------- -----------
<C> <S> <C>
MUNICIPAL BONDS, CONTINUED:
Health Care Bonds, continued:
$ 300,000 Charlotte-Mecklenburg Hospital Authority, North
Carolina Health Care System Revenue, 6.00%, 1/1/03,
Callable 1/1/02 @ 102................................ $ 323,874
550,000 North Carolina Medical Care Commission, Presbyterian
Health Service Project, 4.90%, 10/1/01............... 563,074
400,000 North Carolina Medical Care Commission, Presbyterian
Health Services Project, 5.70%, 10/1/04, Callable
10/1/02 @ 102........................................ 427,136
North Carolina Medical Care Commission, Rex Hospital
1,000,000 Project, 6.13%, 6/1/10, Callable 6/1/03 @ 102........ 1,063,000
1,000,000 North Carolina Medical Care Commission, Wake County
Hospital System, 5.00%, 10/1/10, Callable 10/1/07 @
102, MBIA............................................ 1,007,190
Pitt County, North Carolina Revenue, Memorial
1,000,000 Hospital, 5.50%, 12/1/15, Callable 12/1/05 @ 102..... 1,011,570
-----------
5,604,506
-----------
Housing Bonds (0.6%):
North Carolina Housing Finance Agency, 5.65%,
275,000 9/1/02............................................... 285,830
North Carolina Housing Finance Agency, 6.35%, 9/1/04,
150,000 Callable 9/1/02 @ 102, GNMA/FNMA..................... 157,590
-----------
443,420
-----------
Utility Bonds (4.4%):
Asheville, North Carolina, Water System Revenue,
500,000 5.30%, 8/1/09, Callable 8/1/06 @ 102, FGIC........... 520,470
Asheville, North Carolina, Water System Revenue,
1,000,000 5.63%, 8/1/16, Callable 8/1/06 @ 102, FGIC........... 1,030,610
Fayetteville, North Carolina, Public Works Commission
500,000 Revenue, 6.50%, 3/1/14 Callable 3/1/00 @ 102, FGIC... 537,740
Shelby, North Carolina, Combined Enterprise System
1,000,000 Revenue, 5.63%, 5/1/14, Callable 5/1/05 @ 102........ 1,023,370
-----------
3,112,190
-----------
Total Municipal Bonds 68,023,209
-----------
INVESTMENT COMPANIES (2.5%):
Compass Capital, North Carolina Municipal Money
1,768,199 Market Portfolio..................................... 1,768,199
-----------
Total Investment Companies 1,768,199
-----------
Total (Cost--$67,330,170)(a) $69,791,408
===========
</TABLE>
- ----
Percentages indicated are based on net assets of $70,539,846.
(a) Represents cost for federal income tax purposes and differs from value by
net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation.. $2,472,231
Unrealized depreciation.. (10,993)
----------
Net unrealized apprecia-
tion..................... $2,461,238
==========
</TABLE>
AMBAC - AMBAC Indemnity Corporation.
FGIC - Insured by Financial Guaranty Insurance Corp.
FNMA - Insured by Federal National Mortgage Assoc.
GNMA - Insured by Government National Mortgage Assoc.
MBIA - Municipal Bond Insurance Association.
See notes to financial statements
-34-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
GROWTH AND INCOME STOCK FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------ -------------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS (96.5%):
Aerospace/Defense (5.2%):
67,800 Lockheed Martin Corp. .................................. $ 7,229,175
118,500 Parker-Hannifin Corp. .................................. 5,332,500
105,000 Raytheon Co. ........................................... 6,208,125
------------
18,769,800
------------
Apparel (1.2%):
46,600 V.F. Corp. ............................................. 4,316,325
------------
Automobiles & Trucks (1.4%):
108,900 Ford Motor Co. ......................................... 4,927,725
------------
Banks (6.0%):
81,800 Barnett Banks, Inc. .................................... 5,787,350
49,350 J.P. Morgan & Co. ...................................... 5,607,394
67,725 Old Kent Financial Corp. ............................... 4,368,262
79,400 Wachovia Corp. ......................................... 5,716,800
------------
21,479,806
------------
Beverages (1.9%):
153,400 Anheuser-Busch Co. ..................................... 6,922,175
------------
Chemicals--Specialty (3.1%):
44,300 Air Products & Chemicals, Inc. ......................... 3,674,131
42,100 Great Lakes Chemical Corp. ............................. 2,076,056
62,100 Vulcan Materials Co. ................................... 5,402,700
------------
11,152,887
------------
Communications Equipment (2.1%):
91,800 Pitney Bowes, Inc. ..................................... 7,636,613
------------
Computers--Main & Mini (3.4%):
113,000 Hewlett-Packard Co. .................................... 7,860,563
41,400 IBM Corp. .............................................. 4,385,813
------------
12,246,376
------------
Computer Software (1.2%):
85,000 Adobe Systems, Inc. .................................... 4,281,875
------------
Containers (1.5%):
105,300 Ball Corp. ............................................. 3,665,756
50,750 Sonoco Products Co. .................................... 1,722,328
------------
5,388,084
------------
Electrical Equipment (1.7%):
106,800 Emerson Electric........................................ 6,154,350
------------
Electronic Components (1.5%):
86,500 Avnet, Inc. ............................................ 5,498,156
------------
Electronic Instruments (1.1%):
59,300 Tektronix, Inc. ........................................ 3,999,044
------------
</TABLE>
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------ -------------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Food & Related (4.1%):
138,400 Dean Foods Co. ......................................... $ 6,401,000
208,700 SUPERVALU, Inc. ........................................ 8,191,475
------------
14,592,475
------------
Forest & Paper Products (1.8%):
110,900 Weyerhauser Co. ........................................ 6,584,687
------------
Health Care (3.0%):
77,000 Abbott Labs............................................. 4,923,187
99,300 Johnson & Johnson....................................... 5,722,163
------------
10,645,350
------------
Household--General Products (1.6%):
27,250 Unilever NV, New York Shares............................ 5,794,031
------------
Household--Major Appliances (1.1%):
59,200 Whirlpool Corp. ........................................ 3,925,700
------------
Insurance (7.2%):
65,175 Aon Corp. .............................................. 3,446,128
88,300 Lincoln National Corp. ................................. 6,147,887
192,200 SAFECO Corp. ........................................... 10,186,600
73,500 Saint Paul Cos., Inc ................................... 5,994,844
------------
25,775,459
------------
Machinery & Equipment (1.8%):
137,500 Trinity Industries, Inc. ............................... 6,634,375
------------
Medical Equipment & Supplies (2.0%):
201,800 Mallinckrodt, Inc. ..................................... 7,264,800
------------
Metals--Copper (0.7%):
33,500 Phelps Dodge Corp. ..................................... 2,600,438
------------
Mining (0.4%):
20,200 Potash Corp. of Saskatchewan, Inc ...................... 1,585,700
------------
Multiple Industry (1.1%):
84,900 Corning Glass........................................... 4,011,525
------------
Petroleum (8.6%):
74,200 Ashland, Inc. .......................................... 4,034,625
78,200 Chevron Corp. .......................................... 6,505,263
61,200 Mobil Corp. ............................................ 4,528,800
175,200 Phillips Petroleum Co. ................................. 9,044,700
122,600 Royal Dutch Petroleum................................... 6,804,300
------------
30,917,688
------------
Pharmaceuticals (5.4%):
111,600 Bristol-Myers Squibb Co. ............................... 9,234,900
69,100 Rhone-Poulenc Rorer..................................... 6,681,106
70,200 Schering-Plough Corp. .................................. 3,615,300
------------
19,531,306
------------
</TABLE>
Continued
-35-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
GROWTH AND INCOME STOCK FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SECURITY MARKET
SHARES DESCRIPTION VALUE
------ -------------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Publishing (4.1%):
118,000 American Greetings...................................... $ 4,351,250
39,000 Banta Corp. ............................................ 1,087,125
110,000 Houghton Mifflin Co. ................................... 4,152,500
126,300 Media General, Inc. .................................... 5,004,637
------------
14,595,512
------------
Railroad (0.5%):
33,000 CSX Corp. .............................................. 1,930,500
------------
Restaurants (0.7%):
130,000 Bob Evans Farms......................................... 2,470,000
------------
Retail--Food Stores (1.2%):
177,000 American Stores Co. .................................... 4,314,375
------------
Retail (1.7%):
119,281 Limited, Inc. .......................................... 2,914,929
59,500 May Department Stores Co. .............................. 3,242,750
------------
6,157,679
------------
Security Brokers & Dealers (2.0%):
140,175 AG Edwards, Inc. ....................................... 7,201,491
------------
Telecommunications (2.6%):
202,400 Harris Corp. ........................................... 9,259,800
------------
Tobacco (2.0%):
75,600 Philip Morris Cos., Inc. ............................... 3,142,125
130,600 U.S.T., Inc. ........................................... 3,991,463
------------
7,133,588
------------
Toys (1.6%):
201,350 Hasbro, Inc. ........................................... 5,662,969
------------
Trucking & Shipping (0.7%):
101,500 Alexander & Baldwin................................... 2,626,313
------------
Utilities--Electric (2.8%):
84,400 New Century Energies, Inc.(b)......................... 3,507,875
196,000 Western Resources, Inc. .............................. 6,725,250
------------
10,233,125
------------
Utilities--Gas & Pipeline (2.3%):
52,400 Consolidated Natural Gas Co. ......................... 3,049,025
136,800 NICOR, Inc. .......................................... 5,130,000
------------
8,179,025
------------
Utilities--Telephone (4.2%):
82,500 AT&T Corp. ........................................... 3,655,781
117,200 SBC Communications, Inc. ............................. 7,193,150
88,200 Sprint Corp. ......................................... 4,410,000
------------
15,258,931
------------
Total Common Stocks 347,660,058
------------
U.S. GOVERNMENT AGENCIES (1.4%):
Federal Home Loan Bank:
5,000,000 0.00%, 11/28/97*...................................... 4,955,800
------------
Total U.S. Government Agencies 4,955,800
------------
INVESTMENT COMPANIES (2.4%):
8,611,183 Provident Federal Fund................................ 8,611,183
------------
Total Investment Companies 8,611,183
------------
Total (Cost--$234,073,315)(a) $361,227,041
============
</TABLE>
- ----
Percentages indicated are based on net assets of $360,352,864.
*Represents Discount Note
(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
$30,427. Cost for financial reporting purposes differs from value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized apprecia-
tion................... $127,935,602
Unrealized deprecia-
tion................... (781,876)
------------
Net unrealized appreci-
ation.................. $127,153,726
============
</TABLE>
(b)Represents non-income producing securities.
See notes to financial statements
-36-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS (52.4%):
Aerospace/Defense (1.7%):
11,000 Lockheed Martin Corp. ................................. $ 1,172,875
16,500 Parker-Hannifin, Corp. ................................ 742,500
------------
1,915,375
------------
Apparel (0.8%):
10,000 V. F., Corp. .......................................... 926,250
------------
Automobiles & Trucks (0.7%):
17,000 Ford Motor Co. ........................................ 769,250
------------
Banks (3.3%):
22,000 Banc One Corp. ........................................ 1,227,875
11,000 J.P. Morgan & Co. ..................................... 1,249,875
18,000 Wachovia Corp. ........................................ 1,296,000
------------
3,773,750
------------
Beverages (0.8%):
20,000 Anheuser-Busch Co. .................................... 902,500
------------
Business Equipment & Services (0.2%):
10,000 John H. Harland Co. ................................... 230,625
------------
Chemicals--Specialty (1.4%):
8,000 Air Products & Chemicals, Inc. ........................ 663,500
10,000 Vulcan Materials Co. .................................. 870,000
------------
1,533,500
------------
Communications Equipment (1.0%):
13,000 Pitney Bowes, Inc. .................................... 1,081,438
------------
Computers (3.2%):
15,000 Hewlett-Packard Co. ................................... 1,043,437
10,000 IBM Corp. ............................................. 1,059,375
17,500 Xerox Corp. ........................................... 1,473,281
------------
3,576,093
------------
Computer Software (0.1%):
3,000 Adobe Systems, Inc. ................................... 151,125
------------
Containers (0.6%):
20,000 Sonoco Products Co. ................................... 678,750
------------
Diversified Products (0.8%):
15,000 E.I. duPont de Nemours Co. ............................ 923,438
------------
Electrical Equipment (0.5%):
10,000 Emerson Electric ...................................... 576,250
------------
Electronic Components (0.9%):
16,000 Avnet, Inc. ........................................... 1,017,000
------------
Electronic Instruments (1.2%):
20,000 Textronix, Inc. ....................................... 1,348,750
------------
Food & Related (3.1%):
30,000 Dean Foods Co. ........................................ 1,387,500
17,500 Sara Lee Corp. ........................................ 901,250
30,000 SUPERVALU, Inc. ....................................... 1,177,500
------------
3,466,250
------------
Forest & Paper Products (0.8%):
15,000 Weyerhaeuser Co. ...................................... 890,625
------------
Health Care--General (1.8%):
20,000 Abbott Labs............................................ 1,278,750
5,000 Bausch & Lomb.......................................... 202,500
10,000 Johnson & Johnson...................................... 576,250
------------
2,057,500
------------
Household--General Products (0.5%):
2,500 Unilever NV New York Shares............................ 531,562
------------
Household--Major Appliances (0.6%):
10,000 Whirlpool Corp. ....................................... 663,125
------------
Insurance (4.6%):
22,000 American General Corp. ................................ 1,141,250
4,000 Cigna Corp. ........................................... 745,000
17,000 Lincoln National Corp. ................................ 1,183,625
24,000 SAFECO Corp. .......................................... 1,272,000
10,000 Saint Paul Co. ........................................ 815,625
------------
5,157,500
------------
Machinery & Equipment (1.4%):
16,500 Ingersoll-Rand Co. .................................... 710,531
17,500 Trinity Industries..................................... 844,375
------------
1,554,906
------------
Medical Equipment & Supplies (1.1%):
35,000 Mallinckrodt, Inc. .................................... 1,260,000
------------
Multiple Industry (0.4%):
9,000 Corning Glass ......................................... 425,250
------------
Petroleum (4.8%):
7,000 Ashland, Inc. ......................................... 380,625
13,000 Atlantic Richfield Co. ................................ 1,110,688
10,000 Chevron Corp. ......................................... 831,875
11,000 Mobil Corp. ........................................... 814,000
30,000 Phillips Petroleum Co. ................................ 1,548,750
</TABLE>
Continued
-37-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- ------------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Petroleum, continued:
12,500 Royal Dutch Petroleum.................................. $ 693,750
------------
5,379,688
------------
Pharmaceuticals (2.5%):
16,000 Bristol-Myers Squibb Co. .............................. 1,324,000
28,000 Schering-Plough Corp. ................................. 1,442,000
------------
2,766,000
------------
Publishing (1.3%):
10,000 Gannett Co, Inc. ...................................... 1,079,375
10,000 Media General, Inc. ................................... 396,250
------------
1,475,625
------------
Railroad (0.6%):
12,000 CSX Corp. ............................................. 702,000
------------
Retail (2.0%):
10,000 Dayton Hudson Corp. ................................... 599,375
10,000 May Department Stores.................................. 545,000
10,000 J. C. Penney, Inc. .................................... 582,500
10,000 Rite-Aid Corp. ........................................ 554,375
------------
2,281,250
------------
Retail--Food Stores (0.4%):
13,000 Albertson's, Inc. ..................................... 453,375
------------
Security Brokers & Dealers (0.7%):
15,000 A.G. Edwards, Inc. .................................... 770,625
------------
Telecommunications (1.5%):
36,000 Harris Corp. .......................................... 1,647,000
------------
Tobacco (1.5%):
25,000 Philip Morris, Inc. ................................... 1,039,063
20,000 UST, Inc. ............................................. 611,250
------------
1,650,313
------------
Trucking & Shipping (0.1%):
5,500 Alexander & Baldwin.................................... 142,312
------------
Utilities--Electric (1.9%):
11,000 FPL Group, Inc. ....................................... 563,750
18,000 Scana Corp. ........................................... 451,125
31,000 Western Resources, Inc. ............................... 1,063,688
------------
2,078,563
------------
Utilities--Gas & Pipeline (1.2%):
20,000 NICOR, Inc. ........................................... 750,000
Utilities--Gas & Pipeline, continued:
12,000 Williams Cos., Inc. ................................... 561,750
------------
1,311,750
------------
Utilities--Telephone (2.4%):
6,600 Ameritech Corp. ....................................... 438,900
10,000 AT&T Corp. ............................................ 443,125
17,000 SBC Communications, Inc. .............................. 1,043,375
16,000 Sprint Corp. .......................................... 800,000
------------
2,725,400
------------
Total Common Stocks 58,794,713
------------
PASS-THROUGH MORTGAGE SECURITIES (7.1%):
Federal Home Loan Mortgage Corp.:
815,553 7.50%, 7/1/07, Pool # E00108........................... 838,234
------------
Federal National Mortgage Assoc.:
1,240,816 6.50%, 1/1/09, Pool # 50974............................ 1,238,483
1,425,069 6.50%, 4/1/09, Pool # 250009........................... 1,422,389
1,309,890 7.00%, 5/1/09, Pool # 250055........................... 1,327,901
975,083 7.00%, 4/1/24, Pool # 250005........................... 974,771
2,135,748 7.50%, 8/1/24, Pool # 250126........................... 2,179,125
------------
Total Pass-through Mortgage Securities 7,980,903
------------
U. S. Treasury Bonds (4.9%):
1,500,000 11.13%, 8/15/03........................................ 1,867,890
3,000,000 9.38%, 2/15/06......................................... 3,627,870
------------
Total U. S. Treasury Bonds 5,495,760
------------
U. S. Treasury Notes (29.5%):
3,500,000 7.75%, 2/15/01......................................... 3,689,560
2,500,000 7.50%, 11/15/01........................................ 2,634,275
3,000,000 7.50%, 5/15/02......................................... 3,178,380
3,500,000 6.38%, 8/15/02......................................... 3,552,185
3,500,000 6.25%, 2/15/03......................................... 3,533,915
4,500,000 7.25%, 5/15/04......................................... 4,777,650
3,000,000 7.88%, 11/15/04........................................ 3,298,020
4,000,000 7.50%, 2/15/05......................................... 4,315,680
4,000,000 6.50%, 10/15/06........................................ 4,085,000
------------
Total U. S. Treasury Notes 33,064,665
------------
Investment Companies (5.7%):
1,049,244 Federated Short-Term U.S. Government Trust............. 1,049,244
5,286,237 Provident Federal Fund................................. 5,286,237
------------
Total Investment Companies 6,335,481
------------
Total (Cost--$91,492,196)(a) $111,671,522
============
</TABLE>
Continued
-38-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
BALANCED FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
SEPTEMBER 30, 1997
- ----
Percentages indicated are based on net assets of $112,117,620.
(a) Represents cost for federal income tax purposes and differs from market
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized appreciation........ $20,551,816
Unrealized depreciation........ (372,490)
-----------
Net unrealized appreciation.... $20,179,326
===========
</TABLE>
See notes to financial statements
-39-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
SMALL COMPANY GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (97.0%):
Air Transportation (1.1%):
21,800 Expeditor International Washington, Inc. .............. $ 912,875
-----------
Business Equipment & Services (0.7%):
6,400 Anchor Gaming(b)....................................... 568,000
-----------
Business Services (2.2%):
10,600 AccuStaff, Inc.(b)..................................... 333,900
13,300 Norrell Corp. ......................................... 457,187
20,700 Robert Half International, Inc.(b)..................... 856,462
4,500 Staff Leasing, Inc.(b)................................. 110,812
-----------
1,758,361
-----------
Collectibles (1.2%):
31,800 Action Performance Cos, Inc.(b)........................ 926,175
-----------
Commercial Goods & Services (4.6%):
12,150 Apollo Group, Inc.(b).................................. 514,856
21,000 Cambridge Technology Partners, Inc.(b)................. 752,062
17,000 Sylvan Learning Systems, Inc.(b)....................... 745,875
6,600 NCO Group, Inc.(b)..................................... 244,200
23,400 Pre-paid Legal Services, Inc.(b)....................... 661,050
26,500 Superior Services, Inc.(b)............................. 755,250
-----------
3,673,293
-----------
Communications Equipment (2.0%):
9,100 Digital Microwave Corp.(b)............................. 407,225
16,500 Nice-Systems Ltd.(b)................................... 928,125
8,000 TriQuint Semiconductor, Inc.(b)........................ 291,500
-----------
1,626,850
-----------
Computers-Memory Devices (1.0%):
46,000 Aehr Test Systems...................................... 813,625
-----------
Computer Hardware (1.5%):
13,700 Apex PC Solutions, Inc. ............................... 518,887
16,500 Level One Communications, Inc.(b)...................... 664,125
-----------
1,183,012
-----------
Computer Software (16.5%):
12,700 3DLabs Inc., Ltd.(b)................................... 409,575
6,000 Aspect Development, Inc.(b)............................ 246,375
18,000 CBT Group PLC ADR(b)................................... 1,444,500
14,200 Ciber, Inc.(b)......................................... 670,950
12,700 Electronics for Imaginc, Inc.(b)....................... 647,700
6,700 Engineering Animation, Inc.(b)......................... 255,438
3,700 Great Plains Software, Inc.(b)......................... 103,600
15,100 Harbinger Corp.(b)..................................... 549,263
14,700 Hyperion Software Corp.(b)............................. 458,456
8,600 Imnet Systems, Inc.(b)................................. 231,125
20,700 Industri-Matematik International Corp.(b).............. 507,150
19,800 Information Management Resources, Inc.(b).............. 564,300
20,100 JDA Software Group, Inc.(b)............................ 733,650
18,200 Manugistics Group, Inc.(b)............................. 650,650
13,300 Pegasystems, Inc.(b)................................... 403,988
19,200 Saville Systems Ireland PLC ADR(b)..................... 1,348,800
13,500 Smallworldwide PLC-ADR(b).............................. 276,750
11,600 SMART Modular Technologies, Inc.(b).................... 962,800
3,900 Transaction Systems Architects, Inc.(b)................ 158,437
18,900 Transition Systems, Inc.(b)............................ 387,450
21,000 VERITAS Software Corp.(b).............................. 922,687
30,400 Visio Corp.(b)......................................... 1,269,200
-----------
13,202,844
-----------
Computers Services (1.2%):
9,600 Complete Business Solutions, Inc.(b)................... 273,600
8,500 ONTRACK Data International, Inc.(b).................... 197,625
7,450 Technology Solutions Co.(b)............................ 240,262
7,100 Whittman-Hart, Inc.(b)................................. 216,550
-----------
928,037
-----------
Consumer Services (1.0%):
20,400 Caribiner International, Inc.(b)....................... 831,300
-----------
Consulting Service (0.1%):
4,500 Hagler Bailly, Inc.(b)................................. 114,187
-----------
Distribution Services (0.7%):
5,000 Anicom, Inc.(b)........................................ 83,750
2,700 Industrial Distribution Group Inc.(b).................. 56,700
21,200 Keystone Automotive Industries, Inc.(b)................ 447,850
-----------
588,300
-----------
Educational Services (0.4%):
7,200 Strayer Education, Inc. ............................... 327,600
-----------
</TABLE>
Continued
-40-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
SMALL COMPANY GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Electronics (3.0%):
11,500 DSP Group, Inc.(b)..................................... $ 451,375
4,400 Galileo Technology Ltd.(b)............................. 145,200
10,500 Sawtek, Inc.(b)........................................ 485,625
26,400 Vitesse Semiconductor Corp.(b)......................... 1,308,450
-----------
2,390,650
-----------
Electrical Equipment (1.9%):
17,000 Kent Electronics Corp.(b).............................. 671,500
19,200 Micrel, Inc.(b)........................................ 812,400
-----------
1,483,900
-----------
Electronics--Integrated (0.8%):
20,000 DII Group, Inc.(b)..................................... 655,625
-----------
Electronic Components (4.6%):
32,700 Jabil Circuit(b)....................................... 2,141,850
4,200 MRV Communications, Inc.(b)............................ 153,300
12,200 QLogic Corp.(b)........................................ 510,875
9,200 Semtech Corp.(b)....................................... 635,950
4,400 Spectrian Corp.(b)..................................... 282,150
-----------
3,724,125
-----------
Electronic Instruments (1.9%):
9,800 Asyst Technologies, Inc.(b)............................ 435,181
100 FARO Technologies, Inc.(b)............................. 1,638
14,500 Orbotech Ltd.(b)....................................... 837,375
4,000 Phototronics, Inc.(b).................................. 242,250
-----------
1,516,444
-----------
Entertainment (0.9%):
6,200 Cinar Films, Inc.(b)................................... 236,375
20,000 Speedway Motorsports, Inc.(b).......................... 491,250
-----------
727,625
-----------
Financial Services (1.7%):
22,700 E*Trade Group, Inc.(b)................................. 1,066,900
9,850 The Money Store, Inc. ................................. 280,725
-----------
1,347,625
-----------
Health Care--Information Systems (0.9%):
8,300 DAOU Systems, Inc.(b).................................. 259,375
14,500 IDX Systems Corp.(b)................................... 501,156
-----------
760,531
-----------
Homebuilders--Mobile Homes (0.5%):
14,900 Oakwood Homes Corp. ................................... 422,787
-----------
Hotels & Gaming (3.4%):
21,200 CapStar Hotel Co.(b)................................... 711,525
15,900 Doubletree Corp.(b).................................... 767,175
15,000 Signature Resorts, Inc.(b)............................. 712,500
23,900 Vistana, Inc.(b)....................................... 513,850
-----------
2,705,050
-----------
Household--General Products (0.5%):
12,400 Linens 'N Things, Inc.(b).............................. 415,400
-----------
Industrial Materials (0.7%):
9,000 Zoltek Companies, Inc.(b).............................. 572,625
-----------
Insurance--Property/Casualty (1.7%):
20,000 HCC Insurance Holdings, Inc. .......................... 531,250
14,400 Vesta Insurance Group, Inc. ........................... 820,800
-----------
1,352,050
-----------
Instruments--Scientific (0.4%):
12,800 Molecular Dynamics, Inc.(b)............................ 345,600
-----------
Medical Equipment & Supplies (4.4%):
7,400 ATL Ultrasound, Inc.(b)................................ 345,950
11,300 Hanger Orthopedic Group, Inc.(b)....................... 168,794
18,500 Medical Resources, Inc.(b)............................. 358,438
13,500 National Surgery Centers, Inc.(b)...................... 293,625
13,600 Sabratek Corp.(b)...................................... 494,700
21,700 Safeskin Corp.(b)...................................... 962,938
18,300 Theragenics Corp.(b)................................... 908,138
-----------
3,532,583
-----------
Medical--Biotechnology (2.5%):
7,700 Incyte Pharmaceuticals, Inc.(b)........................ 646,800
8,900 QIAGEN N.V.(b)......................................... 413,850
6,800 Quintiles Transnational Corp.(b)....................... 572,900
15,900 Serologicals Corp.(b).................................. 361,725
-----------
1,995,275
-----------
Medical--Hospital Management Services (3.4%):
21,600 American Oncology Resources, Inc.(b)................... 348,300
8,400 Cerner Corp.(b)........................................ 201,075
25,752 Concentra Managed Care, Inc.(b)........................ 909,368
29,400 FPA Medical Management, Inc.(b)........................ 1,010,625
7,000 Renal Care Group, Inc.(b).............................. 252,000
-----------
2,721,368
-----------
</TABLE>
Continued
-41-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
SMALL COMPANY GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
Network Software (0.1%):
8,200 Information Management Associates(b)................... $ 100,450
-----------
Oil & Gas (8.6%):
14,100 Core Laboratories N.V.(b).............................. 493,500
7,700 Atwood Oceanics, Inc.(b)............................... 867,213
21,200 Global Industries Ltd.(b).............................. 845,350
35,400 Marine Drilling Cos., Inc.(b).......................... 1,106,250
25,100 Patterson Energy, Inc.(b).............................. 1,314,613
17,700 Petroleum Geo-Services ASA(b).......................... 1,196,963
5,000 Reading & Bates Corp.(b)............................... 207,813
23,800 Trico Marine Services, Inc.(b)......................... 827,050
-----------
6,858,752
-----------
Oil-Field Services (0.2%):
7,400 Eagle Geophysical, Inc.(b)............................. 146,150
-----------
Pharmaceuticals (2.7%):
9,900 Dura Pharmaceuticals, Inc.(b).......................... 431,888
16,875 Medicis Pharmaceutical Corp.(b)........................ 774,141
24,700 Parexel International Corp.(b)......................... 975,650
-----------
2,181,679
-----------
Publishing (0.4%):
5,400 Applied Graphics Technologies, Inc.(b)................. 303,750
-----------
Railroad (0.2%):
4,800 MotivePower Industries, Inc.(b)........................ 124,800
-----------
Restaurants (3.6%):
27,600 CKE Restaurants, Inc. ................................. 1,159,200
19,800 Landry's Seafood Restaurants, Inc.(b).................. 581,625
17,050 Logan's Roadhouse, Inc.(b)............................. 443,300
17,425 Papa John's International, Inc.(b)..................... 595,717
6,700 Schlotzsky's Inc.(b)................................... 126,881
-----------
2,906,723
-----------
Retail--Apparel (0.8%):
19,000 Stein Mart, Inc.(b).................................... 622,250
-----------
Retail--Specialty Stores (2.2%):
4,400 Men's Warehouse, Inc.(b)............................... 163,900
17,400 Pacific Sunwear of California(b)....................... 713,400
7,000 Petco Animal Supplies, Inc.(b)......................... 219,625
14,100 Rexall Sundown Inc.(b)................................. 643,312
-----------
1,740,237
-----------
Retail--Apparel (0.4%):
16,600 Claire's Stores, Inc................................... 371,424
-----------
Retirement/Aged Care (0.8%):
15,500 Assisted Living Concepts, Inc.(b)...................... 248,000
10,200 Sunrise Assisted Living, Inc.(b)....................... 368,475
-----------
616,475
-----------
Technology (0.3%):
12,700 Radiant Systems, Inc.(b)............................... 266,700
-----------
Telecommunication Services (2.8%):
79,600 Tel-Save Holdings, Inc.(b)............................. 1,915,375
8,200 Pacific Gateway Exchange, Inc.(b)...................... 320,825
-----------
2,236,200
-----------
Telecommunications (5.1%):
12,600 Boston Technology, Inc.(b)............................. 426,825
25,900 Comverse Technology, Inc.(b)........................... 1,366,225
25,100 Natural Microsystems Corp.(b).......................... 953,800
13,400 Powerwave Technologies, Inc.(b)........................ 519,250
16,000 Tekelec(b)............................................. 545,000
8,300 Yurie Systems, Inc.(b)................................. 300,875
-----------
4,111,975
-----------
Tobacco (0.2%):
4,400 800-JR CIGAR, Inc.(b).................................. 154,000
-----------
Trucking & Shipping (0.2%):
4,700 Swift Transportation Co., Inc.(b)...................... 148,637
-----------
Waste Disposal (1.0%):
22,500 American Disposal Services, Inc.(b).................... 703,125
4,900 Waste Industries, Inc.(b).............................. 117,294
-----------
820,419
-----------
Total Common Stocks 77,834,343
-----------
U.S. GOVERNMENT AGENCIES (2.3%):
Federal Home Loan Mortgage Corp.:
1,853,000 0.00%*, 10/1/97........................................ 1,852,704
-----------
Total U.S. Government Agencies 1,852,704
-----------
Total (Cost--$52,872,541)(a) $79,687,047
===========
</TABLE>
Continued
-42-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
SMALL COMPANY GROWTH FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
SEPTEMBER 30, 1997
- ----
Percentages indicated are based on net assets of $80,204,719.
* Represents Discount Note
(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
$59,435. Cost for financial reporting purposes differs from value by net
unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized apprecia-
tion.................... $27,160,063
Unrealized deprecia-
tion.................... (345,557)
-----------
Net unrealized apprecia-
tion.................... $26,814,506
===========
</TABLE>
(b) Represents non-income producing securities
ADR - American Depository Receipt
PLC - Private Limited Company
See notes to financial statements
-43-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS (96.0%):
AUSTRALIA (2.4%):
Broadcasting (0.7%):
72,000 News Corp. ............................................ $ 368,979
-----------
Building & Construction (0.6%):
80,000 CSR.................................................... 327,888
-----------
Insurance--Multiline (0.5%):
145,000 National Mutual Holdings............................... 244,649
-----------
Metals--Diversified (0.6%):
215,000 M.I.M. Holdings........................................ 263,114
64,000 QNI.................................................... 88,055
-----------
351,169
-----------
Total Australia 1,292,685
-----------
BRAZIL (3.5%):
Banks (1.6%):
24,324 Unibanco(b)............................................ 890,867
-----------
Electrical (0.9%):
28,000 Copel(b)............................................... 483,000
-----------
Telecommunication Equipment (1.0%):
4,800,000 Telebras............................................... 549,846
-----------
Total Brazil 1,923,713
-----------
CHILE (0.9%):
Metals--Diversified (0.9%):
26,300 Cristalerias de Chile (ADR)(b)......................... 484,906
-----------
Total Chile 484,906
-----------
FINLAND (0.8%):
Machinery & Equipment (0.8%):
10,000 KCI Konecranes International........................... 414,268
-----------
Total Finland 414,268
-----------
FRANCE (8.3%):
Consumer Goods & Services (0.5%):
8,000 Guy Degrenne SA........................................ 269,579
-----------
Diversified Products (0.9%):
4,000 Compagnie Generale des Eaux............................ 470,650
-----------
Electronic Components (0.8%):
4,500 SGS-Thompson Microelectronics NV(b).................... 424,040
-----------
Household--General Products (1.1%):
24,000 Moulinex............................................... 576,513
-----------
Insurance--Multiline (2.4%):
8,000 Axa-AUP................................................ 536,730
20,000 AGF-Assurances Generales de France..................... 792,284
-----------
1,329,014
-----------
Multiple Industry (0.4%):
95,000 Chemunex SA(b)......................................... 192,171
-----------
Photographic Equipment (0.7%):
2,000 Grand Optical-Photoservice............................. 364,113
-----------
Retail--General Merchandise (0.5%):
625 Pinault-Printemps-Redoute SA........................... 293,208
-----------
Tire & Rubber Products (1.0%):
10,000 Michelin............................................... 568,085
-----------
Total France 4,487,373
-----------
GERMANY (8.6%):
Automobiles & Trucks (1.2%):
2,000 MAN AG................................................. 631,303
-----------
Banks (1.7%):
25,000 Commerzbank AG......................................... 901,660
-----------
Diversified Products (1.5%):
14,000 VEBA AG................................................ 816,844
-----------
Medical--Biotechnology (0.9%):
14,000 Biotest AG............................................. 475,601
-----------
Machine--Diversified (0.9%):
15,000 Boewe Systec AG........................................ 493,436
-----------
Machinery & Equipment (2.4%):
800 GEA AG................................................. 285,360
800 GEA AG--PRF............................................ 272,451
1,630 Mannesmann AG.......................................... 775,229
-----------
1,333,040
-----------
Total Germany 4,651,884
-----------
GREAT BRITAIN (22.1%):
Aerospace (0.7%):
15,000 British Aerospace PLC.................................. 403,083
-----------
Auto Parts (0.8%):
150,000 Mayflower Corp. PLC.................................... 461,601
-----------
Banks (4.8%):
30,000 Abbey National PLC..................................... 462,570
28,000 Barclays PLC........................................... 757,397
</TABLE>
Continued
-44-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
GREAT BRITAIN, CONTINUED:
Banks, continued:
65,000 Lloyds TSB Group PLC................................... $ 876,234
45,000 Royal Bank of Scotland Group PLC....................... 501,946
-----------
2,598,147
-----------
Food & Related (1.2%):
65,000 Grand Metropolitan PLC................................. 621,607
-----------
Computer Hardware (1.0%):
15,000 Micro Focus Group PLC(b)............................... 529,448
-----------
Consumer Goods & Services (0.9%):
17,000 Unilever PLC........................................... 498,020
-----------
Construction Materials (0.4%):
120,000 Bryant Group PLC....................................... 239,402
-----------
Diversified Products (1.7%):
45,000 BTR PLC................................................ 182,823
25,000 Bodycote International PLC............................. 394,764
25,000 Granada Group PLC...................................... 353,773
-----------
931,360
-----------
Electrical Equipment (0.9%):
110,000 National Grid Group PLC................................ 502,874
-----------
Hotel Management & Related Services (0.8%):
175,000 Jarvis Hotels PLC...................................... 424,043
-----------
Household--General Products (0.3%):
215,000 Limelight Group PLC(b)................................. 151,080
-----------
Insurance--Life (0.6%):
31,000 Prudential Corporation PLC............................. 345,785
-----------
Petroleum--Services (1.5%):
55,000 British Petroleum Co. PLC.............................. 831,164
-----------
Pharmaceuticals (1.8%):
15,000 Glaxo Wellcome PLC..................................... 337,902
66,000 SmithKline Beecham PLC................................. 641,298
-----------
979,200
-----------
Retail--General Merchandise (1.0%):
40,000 Boots Company PLC...................................... 567,652
-----------
Technology (0.6%):
25,000 BTG PLC................................................ 293,801
-----------
Telecommunication Equipment (1.6%):
50,000 British Telecommunications PLC......................... 330,753
215,000 IMS Group PLC.......................................... 520,967
-----------
851,720
-----------
Transportation--Misc. (0.7%):
160,000 NFC PLC................................................ 381,235
-----------
Utilities--Water (0.8%):
57,500 Yorkshire Water, PLC................................... 444,922
-----------
Total Great Britian 12,056,144
-----------
HONG KONG (2.8%):
Diversified Operations (0.8%):
54,000 Jardine Matheson Holdings.............................. 437,400
-----------
Machinery & Equipment (0.5%):
350,000 First Tractor Co.(b)................................... 287,200
-----------
Real Estate (0.8%):
17,000 Cheung Kong............................................ 191,122
44,000 New World Developement................................. 266,098
-----------
457,220
-----------
Utilities--Electric (0.7%):
94,000 Hongkong Electric Holdings............................. 349,834
-----------
Total Hong Kong 1,531,654
-----------
INDIA (0.8%):
Banks (0.8%):
20,000 State Bank of India (GDR).............................. 450,500
-----------
Total India 450,500
-----------
INDONESIA (0.5%):
Retail--General Merchandise (0.5%):
120,000 Ramayana Lestari Sentosa............................... 247,706
-----------
Total Indonesia 247,706
-----------
ITALY (3.6%):
Petroleum--Services (1.3%):
116,000 ENI SpA................................................ 730,693
-----------
Telecommunication (2.3%):
50,000 Telecom Italia Mobile SpA.............................. 198,476
155,000 Telecom Italia SpA..................................... 1,032,944
-----------
1,231,420
-----------
Total Italy 1,962,113
-----------
JAPAN (19.3%):
Automobiles & Truck (0.9%):
50,000 Suzuki Motor Corp. .................................... 480,411
-----------
Banks (2.5%):
96,000 Eighteenth Bank........................................ 593,986
50,000 Sanwa Bank, Ltd. ...................................... 612,938
</TABLE>
Continued
-45-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
JAPAN, CONTINUED:
Banks, continued:
10,000 Sumitomo Bank Ltd. .................................... $ 150,750
-----------
1,357,674
-----------
Chemicals--Petroleum & Inorganic (1.4%):
28,000 Shin-Etsu Chemical Co., Ltd. .......................... 769,982
-----------
Chemicals--Specialty (0.4%):
80,000 Mitsui Chemicals Inc................................... 234,573
-----------
Cosmetics & Toiletries (0.6%):
21,000 Shiseido Co., Ltd. .................................... 337,447
-----------
Electronics & Electrical (4.0%):
21,000 Hitachi Cable, Ltd. ................................... 141,067
60,000 Hitachi, Ltd. ......................................... 521,825
9,000 Mabuchi Motor Co., Ltd. ............................... 510,643
29,000 Matsushita Electric Industrial Co., Ltd. .............. 523,647
8,000 Tokyo Electron Ltd. ................................... 488,362
-----------
2,185,544
-----------
Financial Services (0.6%):
52,000 Daiwa Securities Co Ltd. .............................. 318,728
-----------
Insurance--Property Casualty (0.7%):
55,000 Sumitomo Marine & Fire................................. 380,394
-----------
Machinery & Equipment (1.7%):
80,000 Amada Co., Ltd. ....................................... 463,182
22,000 Komori Corp. .......................................... 459,206
-----------
922,388
-----------
Metals--Diversified (0.5%):
40,000 Tsubaki Nakashima Co., Ltd. ........................... 253,789
-----------
Motor Vehicles (0.6%):
36,000 Yamaha Motor Co., Ltd ................................. 310,113
-----------
Photographic Equipment (1.1%):
15,000 Fuji Photo Film-Ord.................................... 618,736
-----------
Precision Instruments (1.1%):
39,000 Ricoh Company Ltd. .................................... 584,693
-----------
Retail--Food Stores (1.1%):
11,000 ITO-Yokado Co., Ltd. .................................. 595,875
-----------
Steel (0.6%):
230,000 NKK Corp. ............................................. 308,623
-----------
Telecommunication Engineering (0.6%):
85,000 C-Cube Corp. .......................................... 349,209
-----------
Tires & Rubber Products (0.9%):
20,000 Bridgestone Corp. ..................................... 480,411
-----------
Total Japan 10,488,590
-----------
MEXICO (1.6%):
Building & Construction (1.6%):
170,000 Cemex(b)............................................... 881,097
-----------
Total Mexico 881,097
-----------
NETHERLANDS (3.8%):
Banks (0.6%):
7,000 ING Grouep N.V. ....................................... 321,602
-----------
Business Services (0.5%):
10,800 Vedior NV-CVA.......................................... 268,723
-----------
Electronic Components (1.4%):
9,000 Philips Electronics.................................... 761,832
-----------
Retail--General Merchandise (1.3%):
12,000 Vendex International N.V. ............................. 711,767
-----------
Total Netherlands 2,063,924
-----------
PERU (1.1%):
Telecommunication Services (1.1%):
26,200 Telefonica Del Peru-Adr(b)............................. 618,975
-----------
Total Peru 618,975
-----------
PHILIPPINES (0.2%):
Banks (0.2%):
42,375 Philippine National Bank............................... 91,288
-----------
Total Philippines 91,288
-----------
POLAND (0.4%):
Banks (0.4%):
13,334 Bank Handlowy.......................................... 191,097
-----------
Total Poland 191,097
-----------
SINGAPORE (2.4%):
Banks (1.0%):
30,000 Development Bank of Singapore.......................... 305,878
36,000 United Overseas Bank................................... 265,878
-----------
571,756
-----------
Electrical Equipment (0.6%):
100,000 GP Batteries International............................. 309,799
-----------
Publishing (0.5%):
18,000 Singapore Press Holdings............................... 264,702
-----------
</TABLE>
Continued
-46-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
SHARES
OR
PRINCIPAL SECURITY MARKET
AMOUNT DESCRIPTION VALUE
--------- ------------------------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS, CONTINUED:
SINGAPORE, CONTINUED:
Real Estate (0.3%):
65,000 DBS Land............................................... $ 158,037
-----------
Total Singapore 1,304,294
-----------
SOUTH AFRICA (2.4%):
Building & Construction (1.3%):
280,000 Murray & Roberts Holdings, Ltd. ....................... 714,638
-----------
Manufacturing (1.1%):
115,000 Aeci, Ltd. ............................................ 604,290
-----------
Total South Africa 1,318,928
-----------
SPAIN (3.6%):
Apparel (0.8%):
13,000 Adolfo Dominguez SA(b)................................. 455,788
-----------
Banks (1.0%):
16,000 Banco Santander SA..................................... 524,502
-----------
Pharmaceuticals (0.6%):
7,100 FAES................................................... 347,456
-----------
Telecommunication Equipment (1.2%):
20,200 Telefonica de Espana................................... 635,100
-----------
Total Spain 1,962,846
-----------
SWEDEN (1.6%):
Banks (0.9%):
20,000 Sparbanken Sverige AB-A Shares......................... 482,693
-----------
Medical Equipment & Supplies (0.7%):
20,000 Getinge Industrier AB-B Shares......................... $ 375,868
-----------
Total Sweden 858,561
-----------
SWITZERLAND (5.3%):
Banks (0.8%):
3,000 Credit Suisse Group-Registered......................... 405,916
-----------
Food & Related (1.5%):
600 Nestle SA-Registered................................... 837,034
-----------
Medical--Biotechnology (0.5%):
1,000 Sulzer Medica-Registered(b)............................ 267,512
-----------
Medical Equipment & Supplies (1.4%):
500 Novartis AG............................................ 767,763
-----------
Pharmaceuticals (1.1%):
70 Roche Holding AG-Genusss............................... 621,785
-----------
Total Switzerland 2,900,010
-----------
Total Common Stocks 52,182,556
-----------
WARRANTS (0.0%):
4,000 Generale des Eaux...................................... 2,158
-----------
Total (Cost $48,563,977)(a) $52,184,714
===========
</TABLE>
- ----
Percentages indicated are based on net assets of $54,385,065.
(a) Represents cost for federal income tax purposes and differs from market
value by net unrealized appreciation of securities as follows:
<TABLE>
<S> <C>
Unrealized apprecia-
tion................... $ 6,342,052
Unrealized deprecia-
tion................... (2,721,315)
-----------
Net unrealized appreci-
ation.................. $ 3,620,737
===========
</TABLE>
(b) Represents non-income producing security.
ADR - American Depository Receipt
AG - Aktiengesellschaft (West German Stock Co.)
GDR - Global Depository Receipt
PLC - Public Limited Company
PRF - Preferred
SA - Societe Anonyme (French Corporation)
SpA - Societa per Azioni (Italian Corporation)
See notes to financial statements
-47-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
INTERNATIONAL EQUITY FUND
SCHEDULE OF PORTFOLIO INVESTMENTS, CONTINUED
SEPTEMBER 30, 1997
At September 30, 1997, the International Equity Fund's open forward foreign
currency exchange contracts were as follows:
<TABLE>
<CAPTION>
DELIVERY CONTRACT CONTRACT CONTRACT MARKET UNREALIZED
CURRENCY DATE PRICE** AMOUNT VALUE VALUE APPRECIATION
- -------- -------- -------- -------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C> <C>
Long Contracts
British Sterling
Pound.................. 10/02/97 0.619195 35,497 $ 57,328 $ 57,343 $ 15
British Sterling
Pound.................. 10/02/97 0.619195 90,631 146,369 146,406 37
British Sterling
Pound.................. 10/02/97 0.619195 106,935 172,699 172,742 43
British Sterling
Pound.................. 10/02/97 0.619195 205,732 332,258 332,340 82
British Sterling
Pound.................. 10/03/97 0.618238 17,749 28,709 28,671 (38)
U.S. Dollar............ 10/01/97 1.000000 21,402 21,402 21,402 0
U.S. Dollar............ 10/02/97 1.000000 394,964 394,964 394,964 0
U.S. Dollar............ 10/02/97 1.000000 26,937 26,937 26,937 0
---------- ---------- ----
Total Long Contracts............................... $1,180,666 $1,180,805 $139
========== ========== ====
</TABLE>
** Contract price is in local currency
See notes to financial statements
-48-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1997
1.ORGANIZATION:
The BB&T Mutual Funds Group ("The Group") commenced operations on October 5,
1992 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, the Small Company Growth
Fund and the International Equity 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, the Small Company Growth Fund and the International Equity Fund
(collectively, "the variable net asset value 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 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 principal. 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. The International Equity Fund seeks long-term capital
appreciation through investments primarily in equity securities of foreign
issuers.
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 assumptions
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 amortized cost, which
approximates market value. Under the amortized cost method, discount or
premium is amortized on a constant basis to the maturity of the
Continued
-49-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
security. In addition the U.S. Treasury Money Market Fund may not (a)
purchase any instrument with a remaining maturity greater than 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 securities
of the variable net asset value 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. The variable net asset value funds may also
use an independent pricing service approved by the Board of Trustees to value
certain securities. Such prices reflect market values which may be
established through the use of electronic and matrix techniques. 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.
FOREIGN CURRENCY TRANSLATION:
The market value of investment securities, other assets and liabilities of
the International Equity Fund denominated in a foreign currency are
translated into U.S. dollars at the current exchange rate. Purchases and
sales of securities, income receipts and expense payments are translated into
U.S. dollars at the exchange rate on the dates of the transactions.
The International Equity Fund isolates that portion of the results of
operations resulting from changes in foreign exchange rates on investments
from the fluctuation arising from changes in market prices of securities
held.
Reported net realized foreign exchange gains or losses arise from sales and
maturities of foreign securities, sales of foreign currencies, currency
exchange fluctuations between the trade and settlement dates on securities
transactions, and the difference between the amount of assets and liabilities
recorded and the U.S. dollar equivalent of the amounts actually received or
paid. Net unrealized foreign exchange gains and losses arise from changes in
the value of assets and liabilities, including investments in securities,
resulting from changes in exchange rates.
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS:
The International Equity Fund may enter into forward foreign currency
exchange contracts. The purpose of these contracts is to hedge against
fluctuation in the value of the underlying currency of certain portfolio
investments. A forward foreign currency exchange contract is an agreement to
purchase or sell a specified currency at a specified price on a future date.
Risks associated with the contract include changes in the value of the
foreign currency relative to the U.S. dollar and/or the counterparty's
potential inability to perform under the contract.
The forward foreign currency exchange contracts are valued daily using the
current exchange rate of the underlying currency with any fluctuations
recorded as unrealized gains or losses. Realized gains or losses are
recognized when entering a closing or offsetting forward foreign currency
contract with the same settlement date and broker.
Continued
-50-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
RISKS ASSOCIATED WITH FOREIGN SECURITIES AND CURRENCIES:
Investments in securities of foreign issuers carry certain risks not
ordinarily associated with investments in securities of domestic issuers.
Such risks include future political and economic developments, and the
possible imposition of exchange controls or other foreign governmental laws
and restrictions. In addition, with respect to certain countries, there is
the possibility of expropriation of assets, confiscatory taxation, political
or social instability or diplomatic developments which could adversely affect
investments in those countries.
Certain countries may also impose substantial restrictions on investments in
their capital markets by foreign entities, including restrictions on
investments in issuers of industries deemed sensitive to relevant national
interests. These factors may limit the investment opportunities available in
the International Equity Fund and result in a lack of liquidity and a high
price volatility with respect to securities of issuers from developing
countries.
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
original issue 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. While the Funds purchased securities
on a "when-issued" basis during the year, the Funds held no such securities
as of September 30, 1997.
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 sellers 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 Funds custodian, another qualified
custodian or in the Federal Reserve/Treasury book-entry system.
Continued
-51-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
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 are declared and paid
quarterly for the Small Company Growth Fund and the International Equity
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 "book/tax" differences are
primarily due to differing treatments for mortgage-backed securities and
deferrals of certain losses.
These "book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such amounts
are reclassified within the composition of net assets based on their federal
tax-basis treatment; temporary differences do not require reclassifications.
Dividends and distributions to shareholders which exceed net investment
income and net realized gains for financial reporting purposes but not for
tax purposes are reported as dividends in excess of net investment income or
distributions in excess of net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are reported
as distribution of capital.
As of September 30, 1997, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to paid-
in-capital:
<TABLE>
<CAPTION>
ACCUMULATED ACCUMULATED NET
UNDISTRIBUTED NET REALIZED GAIN/(LOSS)
INVESTMENT INCOME ON INVESTMENTS
----------------- --------------------
<S> <C> <C>
Short-Intermediate U.S. Government
Bond Fund............................ 75,292 (57,103)
Intermediate U.S. Government Bond
Fund................................. 86,345 (86,270)
Growth and Income Stock Fund.......... -- 92
Balanced Fund......................... 11,627 (11,628)
Small Company Growth Fund............. 1,059,151 5
International Equity Fund............. 118,208 (114,474)
</TABLE>
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
Continued
-52-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
with the International Equity Fund's organization and registration under the
1940 Act and the Securities Act of 1933 were paid by the Fund. Such expenses
are being capitalized under other assets and 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, 1997 are as follows:
<TABLE>
<CAPTION>
PURCHASES SALES
--------- -----
<S> <C> <C>
Short-Intermediate U.S. Government Income Fund.... $107,073,359 $77,299,376
Intermediate U.S. Government Bond Fund............ $104,175,951 $82,818,519
North Carolina Intermediate Tax-Free Fund......... $ 40,212,817 $10,051,525
Growth and Income Stock Fund...................... $ 88,279,212 $63,007,092
Balanced Fund..................................... $ 35,151,222 $24,378,153
Small Company Growth Fund......................... $ 64,127,907 $40,311,623
International Equity Fund (a)..................... $ 63,485,710 $16,199,847
</TABLE>
(a) For the period from January 2, 1997 (commencement of operations) to
September 30, 1997.
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 Equity Advisors Company
(PNC) 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
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.
Pursuant to a Sub-Advisory agreement with BB&T, Castle International Asset
Management Limited ("Castle International") serves as the Sub-Advisor to the
International Equity Fund. Under the agreement, Castle International manages
the International Equity Fund subject to the general supervision of the
Group's Board of Trustees and BB&T. For it's services, Castle International
is entitled to a fee, payable by BB&T, at the following annual rates as a
percentage of the International Equity Funds average daily net assets: (1)
0.50% of net assets up to $50 million, (2) 0.45% of the next $50 million in
net assets, and (3) 0.40% of the net assets over $100 million.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services ("BISYS"),
an Ohio Limited Partnership, and BISYS Fund Services Ohio, Inc. ("BISYS
Ohio") are subsidiaries of the BISYS Group, Inc. BISYS, with whom certain
trustees and officers of the Funds are affiliated, serves the Funds as
administrator and distributor. 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% of the average daily net
assets of each Fund. BISYS Ohio, serves the Funds as transfer agent and
mutual fund accountant.
Continued
-53-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
The Funds have adopted a Distribution and Shareholder Services Plan (the
"Plan") in accordance with Rule 12b-1 under the 1940 Act. The Plan provides
for payments to the Distributor of up to 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, 1997, BISYS received $341,880 from commissions earned on sales
of shares of the Funds' variable net asset value funds, of which $290,773 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, 1997.
<TABLE>
<CAPTION>
DISTRIBUTION
INVESTMENT ADVISORY ADMINISTRATION FEES
FEES FEES CLASS A
---------------------- -------------- ------------
(AS A MUTUAL
PERCENTAGE VOLUNTARY VOLUNTARY VOLUNTARY TRANSFER FUND
OF AVERAGE FEE FEE FEE AGENT ACCOUNTING
NET ASSETS) REDUCTIONS REDUCTIONS REDUCTIONS FEES FEES
----------- ---------- -------------- ------------ -------- ----------
<S> <C> <C> <C> <C> <C> <C>
U.S. Treasury Money
Market Fund............ 0.40% -- -- $86,964 $ 87,434 $ 88,862
Short-Intermediate U.S.
Government Income
Fund................... 0.60% $ 94,368 -- $14,429 $ 48,675 $ 42,166
Intermediate U.S.
Government Bond Fund... 0.60% $135,725 -- $10,814 $ 74,070 $ 64,522
North Carolina
Intermediate Tax- Free
Fund................... 0.60% $ 61,045 $30,432 $32,462 $ 46,449 $ 31,363
Growth and Income Stock
Fund................... 0.74% $698,408 -- $66,820 $146,460 $108,545
Balanced Fund........... 0.74% $229,694 -- $36,624 $ 99,432 $ 54,013
Small Company Growth
Fund................... 1.00% $ -- -- $22,470 $126,361 $ 52,911
International Equity
Fund................... 1.00% $ 6,794 -- $ 759 $ 55,701 $ 42,729
</TABLE>
5.CONCENTRATION OF CREDIT RISK
The North Carolina Intermediate Tax-Free Fund invests in debt instruments of
municipal issuers. The issuers' abilities to meet their obligations may be
affected by economic developments in a specific state or region.
The Fund invests in securities which include revenue bonds, tax exempt
commercial paper, tax and revenue anticipation notes, and general obligation
bonds. At September 30, 1996, the percentage of portfolio investments by each
revenue source were as follows:
<TABLE>
<CAPTION>
NC TAX-FREE
FUND
-----------
<S> <C>
Revenue Bonds:
Health Care Bonds.............................................. 8.0%
Housing Bonds.................................................. 0.6%
Utility Bonds.................................................. 4.4%
General Obligation Bonds....................................... 83.4%
</TABLE>
Continued
-54-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
6.CAPITAL SHARE TRANSACTIONS:
Transactions in capital shares for the Fund were as follows:
<TABLE>
<CAPTION>
U.S. TREASURY SHORT INTERMEDIATE
MONEY MARKET FUND U.S. GOVERNMENT INCOME FUND
---------------------------- ----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
CLASS A SHARES:
Proceeds from shares
issued................. $ 70,989,333 $ 61,519,685 $ 885,456 $ 780,331
Dividends reinvested... 1,246,105 893,083 256,211 292,456
Shares redeemed........ (67,625,463) (48,429,306) (2,362,962) (1,717,615)
------------- ------------- ------------ ------------
Change in net assets
from Class A Share
transactions........... $ 4,609,975 $ 13,983,462 $ (1,221,295) $ (644,828)
============= ============= ============ ============
CLASS B SHARES:
Proceeds from shares
issued................. $ 2,616,434 $ 1,957,034 (a)
Dividends reinvested... 52,966 16,070 (a)
Shares redeemed........ (2,472,263) (668,319)(a)
------------- -------------
Change in net assets
from Class B Share
transactions........... $ 197,137 $ 1,304,785 (a)
============= =============
TRUST SHARES:
Proceeds from shares
issued................. $ 403,991,788 $ 386,470,057 $ 53,763,591 $ 31,220,980
Dividends reinvested... 1,685,849 812,451 834,332 1,155,628
Shares redeemed........ (344,812,331) (301,391,098) (14,029,292) (14,011,731)
------------- ------------- ------------ ------------
Change in net assets
from Trust Share
transactions........... $ 60,865,306 $ 85,891,410 $ 40,568,631 $ 18,364,877
============= ============= ============ ============
SHARE TRANSACTIONS:
CLASS A SHARES:
Issued................. 70,989,333 61,519,685 91,005 79,521
Reinvested............. 1,246,105 893,083 26,322 29,675
Redeemed............... (67,625,371) (48,429,306) (242,739) (174,736)
------------- ------------- ------------ ------------
Change in Class A
Shares................. 4,610,067 13,983,462 (125,412) (65,540)
============= ============= ============ ============
CLASS B SHARES:
Issued................. 2,616,434 1,957,034 (a)
Reinvested............. 52,966 16,070 (a)
Redeemed............... (2,472,262) (668,319)(a)
------------- -------------
Change in Class B
Shares................. 197,138 1,304,785 (a)
============= =============
TRUST SHARES:
Issued................. 403,991,788 386,470,057 5,522,729 3,184,600
Reinvested............. 1,685,849 812,451 85,431 117,290
Redeemed............... (344,812,331) (301,391,098) (1,441,912) (1,422,732)
------------- ------------- ------------ ------------
Change in Trust
Shares................. 60,865,306 85,891,410 4,166,248 1,879,158
============= ============= ============ ============
</TABLE>
- ----
(a) The Fund commenced offering Class B Shares on January 1, 1996.
Continued
-55-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
INTERMEDIATE NORTH CAROLINA INTERMEDIATE
U.S. GOVERNMENT BOND FUND TAX-FREE FUND
---------------------------- ----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
CLASS A SHARES:
Proceeds from shares
issued................. $ 1,310,434 $ 923,832 $ 1,088,682 $ 1,510,448
Dividends reinvested... 180,302 207,800 297,458 268,478
Shares redeemed........ (1,022,240) (2,521,905) (1,432,371) (1,143,115)
------------ ------------ ------------ -----------
Change in net assets
from Class A Share
transactions........... $ 468,496 $ (1,390,273) $ (46,231) $ 635,811
============ ============ ============ ===========
CLASS B SHARES:
Proceeds from shares
issued................. $ 335,144 $ 359,519 (a)
Dividends reinvested... 20,305 5,665 (a)
Shares redeemed........ (97,593) (8,010)(a)
------------ ------------
Change in net assets
from Class B Share
transactions........... $ 257,856 $ 357,174 (a)
============ ============
TRUST SHARES:
Proceeds from shares
issued................. $ 44,016,573 $ 65,562,100 $ 43,875,824 $10,310,221
Dividends reinvested... 3,842,953 4,476,007 -- --
Shares redeemed........ (27,916,964) (25,629,116) (12,390,664) (9,700,110)
------------ ------------ ------------ -----------
Change in net assets
from Trust Share
transactions........... $ 19,942,562 $ 44,408,991 $ 31,485,160 $ 610,111
============ ============ ============ ===========
SHARE TRANSACTIONS:
CLASS A SHARES:
Issued................. 134,656 93,847 106,962 149,219
Reinvested............. 18,586 21,069 29,323 26,506
Redeemed............... (105,409) (258,458) (141,088) (112,758)
------------ ------------ ------------ -----------
Change in Class A
Shares................. 47,833 (143,542) (4,803) 62,967
============ ============ ============ ===========
CLASS B SHARES:
Issued................. 34,677 37,041 (a)
Reinvested............. 2,100 591 (a)
Redeemed............... (10,069) (841)(a)
------------ ------------
Change in Class B
Shares................. 26,708 36,791 (a)
============ ============
TRUST SHARES:
Issued................. 4,529,511 6,626,544 4,336,581 1,022,116
Reinvested............. 395,177 456,830 -- --
Redeemed............... (2,869,819) (2,617,022) (1,218,137) (958,821)
------------ ------------ ------------ -----------
Change in Trust
Shares................. 2,054,869 4,466,352 3,118,444 63,295
============ ============ ============ ===========
</TABLE>
- ----
(a) The Fund commenced offering Class B Shares on January 1, 1996.
Continued
-56-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
GROWTH AND INCOME STOCK FUND BALANCED FUND
------------------------------- ----------------------------
FOR THE FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED YEAR ENDED YEAR ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 1996
-------------- -------------- ------------- -------------
<S> <C> <C> <C> <C>
CAPITAL TRANSACTIONS:
CLASS A SHARES:
Proceeds from shares
issued................. $ 10,205,516 $ 6,811,567 $ 3,940,696 $ 3,871,025
Dividends reinvested... 1,262,092 338,523 903,966 402,738
Shares redeemed........ (3,145,887) (1,427,065) (2,046,437) (1,928,670)
-------------- -------------- ------------ ------------
Change in net assets
from Class A Share
transactions........... $ 8,321,721 $ 5,723,025 $ 2,798,225 $ 2,345,093
============== ============== ============ ============
CLASS B SHARES:
Proceeds from shares
issued................. $ 10,402,303 $ 3,738,136 (a) 3,538,410 2,332,596
Dividends reinvested... 269,261 17,476 (a) 204,283 33,079
Shares redeemed........ (596,414) (82,260)(a) (344,991) (77,715)
-------------- -------------- ------------ ------------
Change in net assets
from Class B Share
transactions........... $ 10,075,150 $ 3,673,352 (a) 3,397,702 2,287,960
============== ============== ============ ============
TRUST SHARES:
Proceeds from shares
issued................. $ 102,634,040 $ 68,337,109 $ 27,037,235 $ 24,146,440
Dividends reinvested... 7,792,090 3,190,245 4,339,486 2,035,268
Shares redeemed........ (78,028,088) (40,729,870) (22,376,194) (11,407,119)
-------------- -------------- ------------ ------------
Change in net assets
from Trust Share
transactions........... $ 32,398,042 $ 30,797,484 $ 9,000,527 $ 14,774,589
============== ============== ============ ============
SHARE TRANSACTIONS:
CLASS A SHARES:
Issued................. 603,380 477,889 311,695 334,248
Reinvested............. 78,513 24,085 73,556 34,933
Redeemed............... (183,421) (100,847) (162,113) (166,329)
-------------- -------------- ------------ ------------
Change in Class A
Shares................. 498,472 401,127 223,138 202,852
============== ============== ============ ============
CLASS B SHARES:
Issued................. 601,095 258,055 (a) 282,902 200,160
Reinvested............. 16,806 1,200 (a) 16,642 2,850
Redeemed............... (33,998) (5,567)(a) (27,001) (6,712)
-------------- -------------- ------------ ------------
Change in Class B
Shares................. 583,903 253,688 (a) 272,543 196,298
============== ============== ============ ============
TRUST SHARES:
Issued................. 6,071,972 4,851,989 2,159,650 2,102,026
Reinvested............. 484,781 227,034 354,453 177,017
Redeemed............... (4,591,206) (2,820,394) (1,816,862) (986,873)
-------------- -------------- ------------ ------------
Change in Trust
Shares................. 1,965,547 2,258,629 697,241 1,292,170
============== ============== ============ ============
</TABLE>
- ----
(a) The Fund commenced offering Class B Shares on January 1, 1996.
Continued
-57-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
INTERNATIONAL
EQUITY
SMALL COMPANY GROWTH FUND FUND
---------------------------- -------------
FOR THE FOR THE FOR THE
YEAR ENDED YEAR ENDED PERIOD ENDED
SEPTEMBER 30, SEPTEMBER 30, SEPTEMBER 30,
1997 1996 1997 (B)
------------- ------------- -------------
<S> <C> <C> <C>
CAPITAL TRANSACTIONS:
CLASS A SHARES:
Proceeds from shares issued.. $ 14,389,954 $ 5,198,893 $ 827,829
Dividends reinvested......... 8,868 -- 1,006
Shares redeemed.............. (10,695,064) (321,183) (18,193)
------------ ----------- -----------
Change in net assets from
Class A Share transactions... $ 3,703,758 $ 4,877,710 $ 810,642
============ =========== ===========
CLASS B SHARES:
Proceeds from shares issued.. $ 4,994,141 $ 2,870,037 (a) 1,177,260
Dividends reinvested......... 4,428 -- (a) 542
Shares redeemed.............. (584,820) (41,375)(a) (35,486)
------------ ----------- -----------
Change in net assets from
Class B Share transactions... $ 4,413,749 $ 2,828,662 (a) 1,142,316
============ =========== ===========
TRUST SHARES:
Proceeds from shares issued.. $ 29,271,553 $14,870,042 $49,906,784
Dividends reinvested......... 26,916 -- 87,911
Shares redeemed.............. (14,151,600) (5,559,535) (2,465,305)
------------ ----------- -----------
Change in net assets from
Trust Share transactions..... $ 15,146,869 $ 9,310,507 $47,529,390
============ =========== ===========
SHARE TRANSACTIONS:
CLASS A SHARES:
Issued....................... 727,199 294,124 75,712
Reinvested................... 450 -- 92
Redeemed..................... (536,287) (17,579) (1,710)
------------ ----------- -----------
Change in Class A Shares..... 191,362 276,545 74,094
============ =========== ===========
CLASS B SHARES:
Issued....................... 263,521 155,105 (a) 108,207
Reinvested................... 227 -- (a) 51
Redeemed..................... (31,401) (2,142)(a) (3,291)
------------ ----------- -----------
Change in Class B Shares..... 232,347 152,963 (a) 104,967
============ =========== ===========
TRUST SHARES:
Issued....................... 1,507,565 848,861 4,858,492
Reinvested................... 1,359 -- 8,149
Redeemed..................... (732,330) (295,847) (222,783)
------------ ----------- -----------
Change in Trust Shares....... 776,594 553,014 4,643,858
============ =========== ===========
</TABLE>
- ----
(a) The Fund commenced offering Class B Shares on January 1, 1996.
(b) For the period from January 2, 1997 (commencement of operations) to
September 30, 1997.
Continued
-58-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
7.FEDERAL INCOME TAXES:
The Growth & Income Stock Fund, the Balanced Fund and the Small Company
Growth Fund declared $8,800,015, $2,417,221 and $54,174, respectively, in
capital gain dividends from long-term capital gains for the year ended
September 30, 1997.
At September 30, 1997, the following Funds have capital loss carryforwards
which are available to offset future capital gains, if any:
<TABLE>
<CAPTION>
SHORT INTERMEDIATE INTERMEDIATE NORTH CAROLINA
U.S. GOVERNMENT U.S. GOVERNMENT INTERMEDIATE
INCOME FUND BOND FUND TAX-FREE FUND
------------------ --------------- --------------
<S> <C> <C> <C>
Expires in 2003............ $312,074 $ 16,562 --
Expires in 2004............ $990,728 $1,274,796 $65,859
Expires in 2005............ $126,693 $ 673,283 --
</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, 1998. The following Funds had such losses:
<TABLE>
<CAPTION>
SHORT INTERMEDIATE INTERMEDIATE SMALL
U.S. GOVERNMENT U.S. GOVERNMENT COMPANY
INCOME FUND BOND FUND GROWTH FUND
------------------ --------------- -----------
<S> <C> <C> <C>
Post October Loss
Deferred............... $25,927 $20,075 $395,263
</TABLE>
8.ELIGIBLE DISTRIBUTIONS (UNAUDITED):
For the taxable year ended September 30, 1997, 100.00% and 30.88% 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.
9.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, 1997:
<TABLE>
<S> <C>
Exempt-Interest Dividends................... $2,363,371
Exempt-Interest Dividends Per Share--Class
A.......................................... $ 0.401
Exempt-Interest Dividends Per Share--Trust.. $ 0.410
</TABLE>
100% of the exempt interest income for the North Carolina Intermediate Tax-
Free Fund's taxable year ended September 30, 1997 was from North Carolina
securities.
Continued
-59-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NOTES TO FINANCIAL STATEMENTS, CONTINUED
SEPTEMBER 30, 1997
10.SUBSEQUENT EVENTS
Subsequent to September 30, 1997, the Group began offering six new separate
Funds (each a "Fund", collectively the "New Funds"). These new funds and
their first dates of offering are as follows:
<TABLE>
<CAPTION>
FUND FIRST DATE OF OFFERING
---- ----------------------
<S> <C>
Prime Money Market Fund............................... October 1, 1997
Large Company Growth Fund............................. October 3, 1997
South Carolina Intermediate Tax-Free Fund............. October 19, 1997
Capital Manager Conservative Growth Fund.............. October 2, 1997
Capital Manager Moderate Growth Fund.................. October 2, 1997
Capital Manager Growth Fund........................... October 2, 1997
</TABLE>
The Capital Manager Conservative Growth Fund, Capital Manager Moderate Growth
Fund and Capital Manager Growth Fund are all Fund of Funds which purchase
shares of existing Funds of the Group. These Fund of Funds currently offer
only Trust shares.
11.CONVERSION OF COMMON TRUST FUNDS:
On January 25, 1997 the Short-Intermediate U.S. Government Income Fund, the
North Carolina Intermediate Tax-Free Fund and the Growth and Income Stock
Fund, issued Trust Shares to acquire all of the assets and liabilities of
certain common trust funds of Branch Banking and Trust on a tax-free basis.
The following is a summary of shares issued, net assets converted, and net
asset values per share, and unrealized appreciation as of the conversion date
(amounts in thousands except per share amounts):
<TABLE>
<CAPTION>
NET ASSET UNREALIZED
SHARES NET ASSETS VALUE APPRECIATION
--------- ----------- --------- ------------
<S> <C> <C> <C> <C>
Short-Intermediate U.S. Gov-
ernment Bond Fund........... 2,815,577 $27,395,567 $ 9.73 $ 116,339
North Carolina Intermediate
Tax-Free Fund............... 3,469,378 $35,075,408 $10.11 $ 1,017,915
Growth and Income Stock
Fund........................ 2,431,697 $39,150,326 $16.10 $11,038,497
</TABLE>
-60-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
U.S. TREASURY MONEY MARKET FUND
Class A Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER
30,
---------------------------------- OCTOBER 5, 1992 TO
1997 1996 1995 1994 SEPTEMBER 30, 1993 (A)
------- ------- ------- ------- ----------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD..... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income.. 0.044 0.044 0.047 0.027 0.026
------- ------- ------- ------- -------
Total from Investment
Activities............ 0.044 0.044 0.047 0.027 0.026
------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income.. (0.044) (0.044) (0.047) (0.027) (0.026)
------- ------- ------- ------- -------
Total Distributions... (0.044) (0.044) (0.047) (0.027) (0.026)
------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======= ======= ======= ======= =======
Total Return............ 4.50% 4.49% 4.81% 2.76% 2.60%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets, End of Pe-
riod (000)............. $32,541 $27,931 $13,948 $ 1,486 $ 279
Ratio of expenses to
average net assets..... 0.95% 0.99% 0.98% 0.94% 0.51%(c)
Ratio of net investment
income to average net
assets................. 4.41% 4.37% 4.81% 2.89% 2.58%(c)
Ratio of expenses to
average net assets*.... 1.25% 1.25% 1.24% 1.32% 1.32%(c)
Ratio of net investment
income to average net
assets*................ 4.11% 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
-61-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
U.S. TREASURY MONEY MARKET FUND
Class B Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JANUARY 1, 1996 TO
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 (A)
------------------ ----------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................... $ 1.000 $ 1.000
------- -------
INVESTMENT ACTIVITIES
Net investment income............... 0.036 0.025
------- -------
Total from Investment Activities... 0.036 0.025
------- -------
DISTRIBUTIONS
Net investment income............... (0.036) (0.025)
------- -------
Total Distributions................ (0.036) (0.025)
------- -------
NET ASSET VALUE, END OF PERIOD....... $ 1.000 $ 1.000
======= =======
Total Return (excludes redemption
charge).............................. 3.67% 2.53%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)..... $ 1,502 $ 1,305
Ratio of expenses to average net as-
sets................................ 1.75% 1.75%(c)
Ratio of net investment income to
average net assets.................. 3.61% 3.55%(c)
</TABLE>
- ----
(a) Period from commencement of operations.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
-62-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
U.S. TREASURY MONEY MARKET FUND
Trust Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
------------------------------------- OCTOBER 5, 1992 TO
1997 1996 1995 1994 SEPTEMBER 30, 1993 (A)
-------- -------- -------- ------- ----------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD.......... $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
-------- -------- -------- ------- -------
INVESTMENT ACTIVITIES
Net investment income.. 0.046 0.046 0.050 0.030 0.027
-------- -------- -------- ------- -------
Total from Investment
Activities............ 0.046 0.046 0.050 0.030 0.027
-------- -------- -------- ------- -------
DISTRIBUTIONS
Net investment income.. (0.046) (0.046) (0.050) (0.030) (0.027)
-------- -------- -------- ------- -------
Total Distributions... (0.046) (0.046) (0.050) (0.030) (0.027)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF
PERIOD.................. $ 1.000 $ 1.000 $ 1.000 $ 1.000 $ 1.000
======== ======== ======== ======= =======
Total Return............ 4.71% 4.74% 5.07% 3.01% 2.70%(b)
RATIOS/SUPPLEMENTARY DA-
TA:
Net Assets, End of
Period (000)........... $266,840 $205,974 $120,083 $77,464 $74,962
Ratio of expenses to
average net assets..... 0.75% 0.75% 0.72% 0.67% 0.38%(c)
Ratio of net investment
income to average net
assets................. 4.61% 4.63% 4.97% 2.97% 2.71%(c)
Ratio of expenses to
average net assets*.... 0.75% 0.75% 0.75% 0.83% 0.81%(c)
Ratio of net investment
income to average net
assets*................ 4.61% 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
-63-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
Class A Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------- NOVEMBER 30, 1992 TO
1997 1996 1995 1994 SEPTEMBER 30, 1993 (A)
-------- -------- -------- -------- ----------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD.......... $ 9.73 $ 9.88 $ 9.60 $ 10.29 $ 10.00
------- ------- ------- -------- -------
INVESTMENT ACTIVITIES
Net investment income.. 0.54 0.55 0.53 0.50 0.47
Net realized and
unrealized gains
(losses) on
investments............ 0.03 (0.15) 0.29 (0.68) 0.30
------- ------- ------- -------- -------
Total from Investment
Activities............. 0.57 0.40 0.82 (0.18) 0.77
------- ------- ------- -------- -------
DISTRIBUTIONS
Net investment income.. (0.54) (0.55) (0.54) (0.50) (0.48)
Net realized gains..... -- -- -- (0.01) --
------- ------- ------- -------- -------
Total Distributions.... (0.54) (0.55) (0.54) (0.51) (0.48)
------- ------- ------- -------- -------
NET ASSET VALUE, END OF
PERIOD.................. $ 9.76 $ 9.73 $ 9.88 $ 9.60 $ 10.29
======= ======= ======= ======== =======
Total Return (excludes
sales charge)........... 6.07% 4.09% 8.74% (1.86)% 7.80%(b)
RATIOS/SUPPLEMENTARY DA-
TA:
Net Assets, End of
Period (000)........... $ 5,151 $ 6,356 $ 7,102 $ 10,345 $14,915
Ratio of expenses to
average net assets..... 1.11% 1.19% 1.17% 0.89% 0.56%(c)
Ratio of net investment
income to average net
assets................. 5.60% 5.55% 5.50% 5.01% 5.43%(c)
Ratio of expenses to
average net assets*.... 1.46% 1.54% 1.58% 1.58% 1.56%(c)
Ratio of net investment
income to average net
assets*................ 5.25% 5.20% 5.09% 4.32% 4.42%(c)
Portfolio Turnover
(d).................... 87.99% 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 classes of shares issued.
See notes to financial statements
-64-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
SHORT-INTERMEDIATE U.S. GOVERNMENT INCOME FUND
Trust Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------- NOVEMBER 30, 1992 TO
1997 1996 1995 1994 SEPTEMBER 30, 1993 (A)
-------- ------- ------- ------- ----------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD.......... $ 9.74 $ 9.89 $ 9.61 $ 10.30 $ 10.00
-------- ------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income.. 0.57 0.57 0.56 0.52 0.49
Net realized and
unrealized gains
(losses) on
investments............ 0.03 (0.15) 0.28 (0.68) 0.30
-------- ------- ------- ------- -------
Total from Investment
Activities............ 0.60 0.42 0.84 (0.16) 0.79
-------- ------- ------- ------- -------
DISTRIBUTIONS
Net investment income... (0.57) (0.57) (0.56) (0.52) (0.49)
Net realized gains...... -- -- -- (0.01) --
-------- ------- ------- ------- -------
Total Distributions... (0.57) (0.57) (0.56) (0.53) (0.49)
-------- ------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD.................. $ 9.77 $ 9.74 $ 9.89 $ 9.61 $ 10.30
======== ======= ======= ======= =======
Total Return............ 6.33% 4.36% 9.01% (1.66)% 8.01%(b)
RATIOS/SUPPLEMENTARY DA-
TA:
Net Assets, End of Pe-
riod (000).............. $103,523 $62,621 $45,005 $38,208 $34,646
Ratio of expenses to av-
erage net assets........ 0.86% 0.93% 0.93% 0.71% 0.39%(c)
Ratio of net investment
income to average net
assets.................. 5.85% 5.81% 5.78% 5.20% 5.60%(c)
Ratio of expenses to av-
erage net assets*....... 0.96% 1.03% 1.08% 1.08% 1.05%(c)
Ratio of net investment
income to average net
assets*................. 5.75% 5.71% 5.64% 4.83% 4.94%(c)
Portfolio Turnover(d)... 87.99% 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 classes of shares issued.
See notes to financial statements
-65-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
INTERMEDIATE U.S. GOVERNMENT BOND FUND
Class A Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
-------------------------------------- OCTOBER 9, 1992 TO
1997 1996 1995 1994 SEPTEMBER 30, 1993 (A)
-------- -------- -------- -------- ----------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD.......... $ 9.63 $ 9.88 $ 9.33 $ 10.39 $10.00
-------- -------- -------- -------- ------
INVESTMENT ACTIVITIES
Net investment income.. 0.53 0.56 0.59 0.59 0.63
Net realized and
unrealized gains (loss-
es) on investments..... 0.21 (0.25) 0.55 (1.04) 0.39
-------- -------- -------- -------- ------
Total from Investment
Activities............ 0.74 0.31 1.14 (0.45) 1.02
-------- -------- -------- -------- ------
DISTRIBUTIONS
Net investment income.. (0.53) (0.56) (0.59) (0.59) (0.63)
Net realized gains..... -- -- -- (0.02) --
-------- -------- -------- -------- ------
Total Distributions... (0.53) (0.56) (0.59) (0.61) (0.63)
-------- -------- -------- -------- ------
NET ASSET VALUE, END OF
PERIOD.................. $ 9.84 $ 9.63 $ 9.88 $ 9.33 $10.39
======== ======== ======== ======== ======
Total Return (excludes
sales charge)........... 7.93% 3.17% 12.63% (4.48)% 10.53%(b)
RATIOS/SUPPLEMENTARY DA-
TA:
Net Assets, End of Pe-
riod (000)............. $ 4,211 $ 3,659 $ 5,173 $ 6,772 $5,238
Ratio of expenses to
average net assets..... 1.12% 1.13% 1.09% 0.96% 0.59%(c)
Ratio of net investment
income to average net
assets................. 5.49% 5.68% 6.22% 6.03% 6.26%(c)
Ratio of expenses to
average net assets*.... 1.47% 1.48% 1.50% 1.56% 1.55%(c)
Ratio of net investment
income to average net
assets*................ 5.14% 5.33% 5.81% 5.43% 5.30%(c)
Portfolio Turnover(d).. 62.45% 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 classes of shares issued.
See notes to financial statements
-66-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
INTERMEDIATE U.S. GOVERNMENT BOND FUND
Class B Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JANUARY 1, 1996 TO
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 (A)
------------------ ----------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD............................... $ 9.60 $10.17
------ ------
INVESTMENT ACTIVITIES
Net investment income............... 0.46 0.31
Net realized and unrealized gains
(losses) on investments............. 0.21 (0.57)
------ ------
Total from Investment Activities... 0.67 (0.26)
------ ------
DISTRIBUTIONS
Net investment income............... (0.46) (0.31)
------ ------
Total Distributions................ (0.46) (0.31)
------ ------
NET ASSET VALUE, END OF PERIOD....... $ 9.81 $ 9.60
====== ======
Total Return (excludes redemption
charge).............................. 7.14% (2.48)%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)..... $ 623 $ 353
Ratio of expenses to average net as-
sets................................ 1.87% 1.85%(c)
Ratio of net investment income to
average net assets.................. 4.74% 5.01%(c)
Ratio of expenses to average net as-
sets*............................... 1.97% 1.95%(c)
Ratio of net investment income to
average net assets*................. 4.64% 4.91%(c)
Portfolio Turnover (d).............. 62.45% 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 classes of shares issued.
See notes to financial statements
-67-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
INTERMEDIATE U.S. GOVERNMENT BOND FUND
Trust Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
------------------------------------ OCTOBER 9, 1992 TO
1997 1996 1995 1994 SEPTEMBER 30, 1993 (A)
-------- -------- ------- ------- ----------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD..... $ 9.64 $ 9.89 $ 9.34 $ 10.40 $ 10.00
-------- -------- ------- ------- -------
INVESTMENT ACTIVITIES
Net investment income.. 0.56 0.58 0.61 0.62 0.64
Net realized and
unrealized gains (loss-
es) on investments..... 0.21 (0.25) 0.55 (1.04) 0.40
-------- -------- ------- ------- -------
Total from Investment
Activities............. 0.77 0.33 1.16 (0.42) 1.04
-------- -------- ------- ------- -------
DISTRIBUTIONS
Net investment income.. (0.56) (0.58) (0.61) (0.62) (0.64)
Net realized gains..... -- -- -- (0.02) --
-------- -------- ------- ------- -------
Total Distributions.... (0.56) (0.58) (0.61) (0.64) (0.64)
-------- -------- ------- ------- -------
NET ASSET VALUE, END OF
PERIOD.................. $ 9.85 $ 9.64 $ 9.89 $ 9.34 $ 10.40
======== ======== ======= ======= =======
Total Return............ 8.20% 3.43% 12.91% (4.23)% 10.76%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets, End of Pe-
riod (000)............. $142,545 $119,633 $78,578 $68,451 $59,816
Ratio of expenses to
average net assets..... 0.87% 0.87% 0.85% 0.70% 0.39%(c)
Ratio of net investment
income to average net
assets................. 5.74% 5.94% 6.43% 6.27% 6.45%(c)
Ratio of expenses to
average net assets*.... 0.97% 0.97% 1.00% 1.06% 1.03%(c)
Ratio of net investment
income to average net
assets*................ 5.64% 5.84% 6.28% 5.91% 5.82%(c)
Portfolio Turnover(d).. 62.45% 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 classes of shares issued.
See notes to financial statements
-68-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NORTH CAROLINA INTERMEDIATE TAX-FREE FUND
Class A Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
----------------------------------- OCTOBER 16, 1992 TO
1997 1996 1995 1994 SEPTEMBER 30, 1993 (A)
-------- -------- -------- -------- ----------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF PERIOD..... $ 10.05 $ 10.15 $ 9.78 $ 10.29 $ 10.00
------- ------- ------- -------- -------
INVESTMENT ACTIVITIES
Net investment income.. 0.40 0.36 0.36 0.36 0.36
Net realized and
unrealized gains (loss-
es) on investments..... 0.22 (0.10) 0.37 (0.50) 0.29
------- ------- ------- -------- -------
Total from Investment
Activities............. 0.62 0.26 0.73 (0.14) 0.65
------- ------- ------- -------- -------
DISTRIBUTIONS
Net investment income.. (0.40) (0.36) (0.36) (0.36) (0.36)
Net realized gains..... -- -- -- (0.01) --
------- ------- ------- -------- -------
Total Distributions.... (0.40) (0.36) (0.36) (0.37) (0.36)
------- ------- ------- -------- -------
NET ASSET VALUE, END OF
PERIOD.................. $ 10.27 $ 10.05 $ 10.15 $ 9.78 $ 10.29
======= ======= ======= ======== =======
Total Return (excludes
sales charge)........... 6.28% 2.61% 7.61% (1.33)% 6.60%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets, End of Pe-
riod (000)............. $ 9,419 $ 9,261 $ 8,717 $ 11,083 $13,695
Ratio of expenses to
average net assets..... 1.00% 1.11% 1.05% 0.75% 0.43%(c)
Ratio of net investment
income to average net
assets................. 3.94% 3.58% 3.63% 3.63% 3.80%(c)
Ratio of expenses to
average net assets*.... 1.50% 1.61% 1.63% 1.66% 1.77%(c)
Ratio of net investment
income to average net
assets*................ 3.44% 3.08% 3.05% 2.72% 2.45%(c)
Portfolio Turnover
(d).................... 16.98% 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 classes of shares issued.
See notes to financial statements
-69-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
NORTH CAROLINA INTERMEDIATE TAX-FREE FUND
Trust Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
-------------------------------------- OCTOBER 16, 1992 TO
1997 1996 1995 1994 SEPTEMBER 30, 1993 (A)
-------- -------- -------- -------- ----------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD.......... $ 10.05 $ 10.15 $ 9.78 $ 10.29 $ 10.00
-------- -------- -------- -------- -------
INVESTMENT ACTIVITIES
Net investment income.. 0.41 0.38 0.37 0.38 0.36
Net realized and
unrealized gains (loss-
es) on investments..... 0.22 (0.10) 0.37 (0.50) 0.29
-------- -------- -------- -------- -------
Total from Investment
Activities............. 0.63 0.28 0.74 (0.12) 0.65
-------- -------- -------- -------- -------
DISTRIBUTIONS
Net investment income.. (0.41) (0.38) (0.37) (0.38) (0.36)
Net realized gains..... -- -- -- (0.01) --
-------- -------- -------- -------- -------
Total Distributions.... (0.41) (0.38) (0.37) (0.39) (0.36)
-------- -------- -------- -------- -------
Net Asset Value, End of
Period.................. $ 10.27 $ 10.05 $ 10.15 $ 9.78 $ 10.29
======== ======== ======== ======== =======
Total Return............ 6.43% 2.77% 7.77% (1.18)% 6.62%(b)
RATIOS/SUPPLEMENTARY DA-
TA:
Net Assets, End of Pe-
riod (000)............. $ 61,120 $ 28,443 $ 28,091 $ 27,770 $20,128
Ratio of expenses to
average net assets..... 0.85% 0.96% 0.91% 0.63% 0.42%(c)
Ratio of net investment
income to average net
assets................. 4.13% 3.72% 3.78% 3.77% 3.80%(c)
Ratio of expenses to
average net assets*.... 1.00% 1.11% 1.13% 1.17% 1.30%(c)
Ratio of net investment
income to average net
assets*................ 3.98% 3.57% 3.55% 3.24% 2.92%(c)
Portfolio Turnover
(d).................... 16.98% 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 classes of shares issued.
See notes to financial statements
-70-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
GROWTH AND INCOME STOCK FUND
Class A Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER
30,
--------------------------------- OCTOBER 9, 1992 TO
1997 1996 1995 1994 SEPTEMBER 30, 1993 (A)
------- ------- ------- ------ ----------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD......... $ 15.31 $ 12.97 $ 11.26 $11.26 $10.00
------- ------- ------- ------ ------
INVESTMENT ACTIVITIES
Net investment income.. 0.26 0.26 0.25 0.25 0.28
Net realized and
unrealized gains (loss-
es) on investments..... 5.30 2.43 1.98 0.12 1.27
------- ------- ------- ------ ------
Total from Investment
Activities............ 5.56 2.69 2.23 0.37 1.55
------- ------- ------- ------ ------
DISTRIBUTIONS
Net investment income.. (0.26) (0.26) (0.25) (0.26) (0.29)
Net realized gains..... (0.63) (0.09) (0.12) (0.11) --
In excess of net real-
ized gains............. -- -- (0.15) -- --
------- ------- ------- ------ ------
Total Distributions... (0.89) (0.35) (0.52) (0.37) (0.29)
------- ------- ------- ------ ------
NET ASSET VALUE, END OF
PERIOD.................. $ 19.98 $ 15.31 $ 12.97 $11.26 $11.26
======= ======= ======= ====== ======
Total Return (excludes
sales charge)........... 37.80% 20.97% 20.62% 3.33% 15.72%(b)
RATIOS/SUPPLEMENTARY
DATA:
Net Assets, End of Pe-
riod (000)............. $34,679 $18,949 $10,842 $7,973 $6,009
Ratio of expenses to
average net assets..... 1.09% 1.11% 1.07% 0.92% 0.63%(c)
Ratio of net investment
income to average net
assets................. 1.52% 1.82% 2.15% 2.26% 2.85%(c)
Ratio of expenses to
average net assets*.... 1.58% 1.60% 1.60% 1.65% 1.68%(c)
Ratio of net investment
income to average net
assets*................ 1.03% 1.33% 1.62% 1.52% 1.81%(c)
Portfolio Turnover(d).. 22.66% 19.82% 8.73% 21.30% 27.17%
Average commission
rate(e)................ $0.0637 $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 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
-71-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
GROWTH AND INCOME STOCK FUND
Class B Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED JANUARY 1, 1996 TO
SEPTEMBER 30, 1997 SEPTEMBER 30, 1996 (A)
------------------ ----------------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERI-
OD................................... $ 15.29 $13.78
------- ------
INVESTMENT ACTIVITIES
Net investment income............... 0.13 0.13
Net realized and unrealized gains
(losses) on investments............. 5.28 1.52
------- ------
Total from Investment Activities... 5.41 1.65
------- ------
DISTRIBUTIONS
Net investment income............... (0.14) (0.14)
Net realized gains.................. (0.63) --
------- ------
Total Distributions................ (0.77) (0.14)
------- ------
NET ASSET VALUE, END OF PERIOD $ 19.93 $15.29
======= ======
Total Return (excludes redemption
charge).............................. 36.70% 12.01%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)..... $16,690 $3,880
Ratio of expenses to average net as-
sets................................ 1.84% 1.85%(c)
Ratio of net investment income to
average net assets.................. 0.77% 1.13%(c)
Ratio of expenses to average net as-
sets*............................... 2.08% 2.09%(c)
Ratio of net investment income to
average net assets*................. 0.53% 0.89%(c)
Portfolio Turnover(d)............... 22.66% 19.82%
Average commission rate(e).......... $0.0637 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 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
-72-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
GROWTH AND INCOME STOCK FUND
Trust Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
OCTOBER 9,
FOR THE YEAR ENDED SEPTEMBER 30, 1992 TO
------------------------------------- SEPTEMBER 30,
1997 1996 1995 1994 1993 (A)
-------- -------- -------- ------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD........... $ 15.34 $ 12.99 $ 11.28 $ 11.28 $ 10.00
-------- -------- -------- ------- -------
INVESTMENT ACTIVITIES
Net investment income... 0.30 0.29 0.28 0.28 0.30
Net realized and
unrealized gains (loss-
es) on investments...... 5.31 2.44 1.98 0.11 1.28
-------- -------- -------- ------- -------
Total from Investment
Activities............. 5.61 2.73 2.26 0.39 1.58
-------- -------- -------- ------- -------
DISTRIBUTIONS
Net investment income... (0.30) (0.29) (0.28) (0.28) (0.30)
Net realized gains...... (0.63) (0.09) (0.12) (0.11) --
In excess of net real-
ized gains.............. -- -- (0.15) -- --
-------- -------- -------- ------- -------
Total Distributions.... (0.93) (0.38) (0.55) (0.39) (0.30)
-------- -------- -------- ------- -------
NET ASSET VALUE, END OF
PERIOD................... $ 20.02 $ 15.34 $ 12.99 $ 11.28 $ 11.28
======== ======== ======== ======= =======
Total Return............. 38.13% 21.31% 20.88% 3.58% 16.06%(b)
RATIOS/SUPPLEMENTARY DA-
TA:
Net Assets, End of Pe-
riod (000).............. $308,984 $206,659 $145,603 $89,355 $82,358
Ratio of expenses to av-
erage net assets........ 0.84% 0.86% 0.82% 0.66% 0.40%(c)
Ratio of net investment
income to average net
assets.................. 1.77% 2.07% 2.40% 2.51% 3.08%(c)
Ratio of expenses to av-
erage net assets*....... 1.08% 1.10% 1.10% 1.15% 1.17%(c)
Ratio of net investment
income to average net
assets*................. 1.53% 1.83% 2.11% 2.02% 2.31%(c)
Portfolio Turnover(d)... 22.66% 19.82% 8.73% 21.30% 27.17%
Average commission
rate(e)................. $ 0.0637 $ 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 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
-73-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
BALANCED FUND
Class A Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JULY 1,
FOR THE YEAR ENDED SEPTEMBER 30, 1993 TO
------------------------------------- SEPTEMBER 30,
1997 1996 1995 1994 1993 (A)
-------- -------- -------- -------- -------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD........... $ 11.96 $ 11.04 $ 9.76 $ 10.20 $10.00
-------- -------- ------- ------- ------
INVESTMENT ACTIVITIES
Net investment income... 0.45 0.43 0.44 0.38 0.08
Net realized and
unrealized gains (loss-
es) on investments...... 2.04 0.92 1.27 (0.44) 0.21
-------- -------- ------- ------- ------
Total from Investment
Activities............. 2.49 1.35 1.71 (0.06) 0.29
-------- -------- ------- ------- ------
DISTRIBUTIONS
Net investment income... (0.45) (0.43) (0.43) (0.38) (0.09)
Net realized gains...... (0.37) -- -- -- --
-------- -------- ------- ------- ------
Total Distributions.... (0.82) (0.43) (0.43) (0.38) (0.09)
-------- -------- ------- ------- ------
NET ASSET VALUE, END OF
PERIOD................... $ 13.63 $ 11.96 $ 11.04 $ 9.76 $10.20
======== ======== ======= ======= ======
Total Return (excludes
sales charge)............ 21.76% 12.43% 18.00% (0.64)% 2.88%(b)
RATIOS/SUPPLEMENTARY DA-
TA:
Net Assets, End of Pe-
riod (000).............. $ 17,234 $ 12,456 $ 9,257 $ 8,560 $2,569
Ratio of expenses to av-
erage net assets........ 1.18% 1.20% 1.17% 0.98% 0.50%(c)
Ratio of net investment
income to average net
assets.................. 3.63% 3.78% 4.27% 4.02% 4.39%(c)
Ratio of expenses to av-
erage net assets*....... 1.67% 1.69% 1.71% 1.75% 2.00%(c)
Ratio of net investment
income to average net
assets*................. 3.14% 3.29% 3.73% 3.25% 2.89%(c)
Portfolio Turnover(d)... 27.07% 19.87% 23.68% 12.91% 8.32%
Average commission
rate(e)................. $ 0.0658 $ 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 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
-74-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
BALANCED FUND
Class B Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR JANUARY 1,
ENDED 1996 TO
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 (A)
------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.............. $ 11.91 $ 11.54
------- -------
INVESTMENT ACTIVITIES
Net investment income............................ 0.36 0.27
Net realized and unrealized gains (losses) on in-
vestments........................................ 2.04 0.37
------- -------
Total from Investment Activities................ 2.40 0.64
------- -------
DISTRIBUTIONS
Net investment income............................ (0.37) (0.27)
Net realized gains............................... (0.37) --
------- -------
Total Distributions............................. (0.74) (0.27)
------- -------
NET ASSET VALUE, END OF PERIOD.................... $ 13.57 $ 11.91
======= =======
Total Return (excludes redemption charge)......... 20.90% 5.67%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000).................. $ 6,360 $ 2,339
Ratio of expenses to average net assets.......... 1.93% 1.95%(c)
Ratio of net investment income to average net as-
sets............................................. 2.88% 3.13%(c)
Ratio of expenses to average net assets*......... 2.17% 2.18%(c)
Ratio of net investment income to average net as-
sets*............................................ 2.64% 2.90%(c)
Portfolio Turnover(d)............................ 27.07% 19.87%
Average commission rate(e)....................... $0.0658 $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 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
-75-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
BALANCED FUND
Trust Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED SEPTEMBER 30,
-------------------------------------- JULY 1, 1993 TO
1997 1996 1995 1994 SEPTEMBER 30, 1993 (A)
-------- -------- -------- -------- ----------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGIN-
NING OF PERIOD.......... $ 11.93 $ 11.01 $ 9.74 $ 10.18 $ 10.00
-------- -------- -------- -------- -------
INVESTMENT ACTIVITIES
Net investment income.. 0.49 0.46 0.46 0.40 0.09
Net realized and
unrealized gains (loss-
es) on investments..... 2.04 0.92 1.27 (0.44) 0.18
-------- -------- -------- -------- -------
Total from Investment
Activities............ 2.53 1.38 1.73 (0.04) 0.27
-------- -------- -------- -------- -------
DISTRIBUTIONS
Net investment income.. (0.49) (0.46) (0.46) (0.40) (0.09)
Net realized gains..... (0.37) -- -- -- --
-------- -------- -------- -------- -------
Total Distributions... (0.86) (0.46) (0.46) (0.40) (0.09)
-------- -------- -------- -------- -------
NET ASSET VALUE, END OF
PERIOD.................. $ 13.60 $ 11.93 $ 11.01 $ 9.74 $ 10.18
======== ======== ======== ======== =======
Total Return............ 22.11% 12.74% 18.23% (0.42)% 2.74%(b)
RATIOS/SUPPLEMENTARY DA-
TA:
Net Assets, End of Pe-
riod (000)............. $ 88,524 $ 69,374 $ 49,794 $ 39,715 $20,374
Ratio of expenses to
average net assets..... 0.93% 0.95% 0.92% 0.73% 0.44%(c)
Ratio of net investment
income to average net
assets................. 3.88% 4.03% 4.51% 4.22% 4.44%(c)
Ratio of expenses to
average net assets*.... 1.17% 1.19% 1.21% 1.25% 1.47%(c)
Ratio of net investment
income to average net
assets*................ 3.64% 3.79% 4.22% 3.70% 3.42%(c)
Portfolio Turnover(d).. 27.07% 19.87% 23.68% 12.91% 8.32%
Average commission
rate(e)................ $ 0.0658 $ 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 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
-76-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
SMALL COMPANY GROWTH FUND
Class A Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED DECEMBER 7,
SEPTEMBER 30, 1994 TO
--------------------- SEPTEMBER 30,
1997 1996 1995 (A)
--------- --------- -------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD... $ 21.06 $ 14.53 $10.00
--------- --------- ------
INVESTMENT ACTIVITIES
Net investment income................. (0.15) (0.20) (0.08)
Net realized and unrealized gains
(losses) on investments............... 2.44 6.73 4.61
--------- --------- ------
Total from Investment Activities..... 2.29 6.53 4.53
--------- --------- ------
DISTRIBUTIONS
In excess of net realized gains....... (0.02) -- --
--------- --------- ------
Total Distributions.................. (0.02) -- --
--------- --------- ------
NET ASSET VALUE, END OF PERIOD......... $ 23.33 $ 21.06 $14.53
========= ========= ======
Total Return (excludes sales charge)... 10.90% 44.94% 45.30%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)....... $ 12,676 $ 7,413 $1,096
Ratio of expenses to average net as-
sets.................................. 1.89% 2.01% 2.50%(c)
Ratio of net investment income to av-
erage net assets...................... (1.29)% (1.26)% (1.56)%(c)
Ratio of expenses to average net as-
sets*................................. 2.14% 2.26% 2.84%(c)
Ratio of net investment income to av-
erage net assets*..................... (1.54)% (1.51)% (1.90)%(c)
Portfolio Turnover(d)................. 80.66% 71.62% 46.97%
Average commission rate(e)............ $ 0.0570 $ 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 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
-77-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
SMALL COMPANY GROWTH FUND
Class B Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR JANUARY 1,
ENDED 1996 TO
SEPTEMBER 30, SEPTEMBER 30,
1997 1996 (A)
------------- -------------
<S> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............. $ 20.92 $ 15.24
------- -------
INVESTMENT ACTIVITIES
Net investment income........................... (0.20) (0.21)
Net realized and unrealized gains (losses) on
investments..................................... 2.32 5.89
------- -------
Total from Investment Activities............... 2.12 5.68
------- -------
DISTRIBUTIONS
In excess of net realized gains................. (0.02) --
------- -------
Total Distributions............................ (0.02) --
------- -------
NET ASSET VALUE, END OF PERIOD................... $ 23.02 $ 20.92
======= =======
Total Return (excludes redemption charge)........ 10.16% 37.27%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)................. $ 8,869 $ 3,200
Ratio of expenses to average net assets......... 2.64% 2.72%(c)
Ratio of net investment income to average net
assets.......................................... (2.04)% (2.01)%(c)
Portfolio Turnover(d)........................... 80.66% 71.62%
Average commission rate(e)...................... $0.0570 $0.0562
</TABLE>
- ----
(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 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
-78-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
SMALL COMPANY GROWTH FUND
Trust Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
FOR THE YEAR ENDED
SEPTEMBER 30,
--------------------- DECEMBER 7, 1994 TO
1997 1996 SEPTEMBER 30, 1995 (A)
--------- --------- ----------------------
<S> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD.......................... $ 21.18 $ 14.57 $ 10.00
--------- --------- -------
INVESTMENT ACTIVITIES
Net investment income.......... (0.11) (0.17) (0.07)
Net realized and unrealized
gains (losses) on investments.. 2.47 6.78 4.64
--------- --------- -------
Total from Investment Activi-
ties.......................... 2.36 6.61 4.57
--------- --------- -------
DISTRIBUTIONS
In excess of net realized
gains.......................... (0.02) -- --
--------- --------- -------
Total Distributions........... (0.02) -- --
--------- --------- -------
NET ASSET VALUE, END OF PERIOD.. $ 23.52 $ 21.18 $ 14.57
========= ========= =======
Total Return.................... 11.17% 45.37% 45.70%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period
(000).......................... $ 58,660 $ 36,373 $16,962
Ratio of expenses to average
net assets..................... 1.64% 1.79% 2.33%(c)
Ratio of net investment income
to average net assets.......... (1.04)% (1.00)% (1.34)%(c)
Ratio of expenses to average
net assets*.................... 1.64% 1.79% 2.24%(c)
Ratio of net investment income
to average net assets*......... (1.04)% (1.00)% (1.43)%(c)
Portfolio Turnover(d).......... 80.66% 71.62% 46.97%
Average commission rate(e)..... $ 0.0570 $ 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 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
-79-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
INTERNATIONAL EQUITY FUND
Class A Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JANUARY 2, 1997
TO
SEPTEMBER 30, 1997 (A)
----------------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD.................... $ 10.00
-------
INVESTMENT ACTIVITIES
Net investment income.................................. 0.03
Net realized and unrealized gains (losses) on invest-
ments and foreign currency transactions................ 1.25
-------
Total from Investment Activities...................... 1.28
-------
DISTRIBUTIONS
Net investment income.................................. (0.02)
In excess of net investment income..................... (0.02)
-------
Total Distributions................................... (0.04)
-------
NET ASSET VALUE, END OF PERIOD.......................... $ 11.24
=======
Total Return (excludes sales charge).................... 12.84%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)........................ $ 833
Ratio of expenses to average net assets................ 1.97%(c)
Ratio of net investment income to average net assets... 0.14%(c)
Ratio of expenses to average net assets*............... 2.24%(c)
Ratio of net investment income to average net assets*.. (0.13)%(c)
Portfolio Turnover(d).................................. 41.45%
Average commission rate(e)............................. $0.0457
</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 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
-80-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
INTERNATIONAL EQUITY FUND
Class B Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JANUARY 2,
1997 TO
SEPTEMBER 30,
1997 (A)
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD........................... $ 10.00
-------
INVESTMENT ACTIVITIES
Net investment income......................................... (0.01)
Net realized and unrealized gains (losses) on investments and
foreign currency transactions................................. 1.26
-------
Total from Investment Activities............................. 1.25
-------
DISTRIBUTIONS
Net investment income......................................... (0.01)
In excess of net investment income............................ (0.01)
-------
Total Distributions.......................................... (0.02)
-------
NET ASSET VALUE, END OF PERIOD................................. $ 11.23
=======
Total Return (excludes redemption charge)...................... 12.51%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)............................... $ 1,179
Ratio of expenses to average net assets....................... 2.69%(c)
Ratio of net investment income to average net assets.......... (0.62%)(c)
Ratio of expenses to average net assets*...................... 2.74%(c)
Ratio of net investment income to average net assets*......... (0.66%)(c)
Portfolio Turnover(d)......................................... 41.45%
Average commission rate(e).................................... $0.0457
</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 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
-81-
<PAGE>
[LOGO OF BB&T MUTUAL FUNDS APPEARS HERE]
INTERNATIONAL EQUITY FUND
Trust Shares
FINANCIAL HIGHLIGHTS
<TABLE>
<CAPTION>
JANUARY 2,
1997 TO
SEPTEMBER 30,
1997 (A)
-------------
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD............................ $ 10.00
-------
INVESTMENT ACTIVITIES
Net investment income.......................................... 0.03
Net realized and unrealized gains (losses) on investments and
foreign currency transactions.................................. 1.30
-------
Total from Investment Activities.............................. 1.33
-------
DISTRIBUTIONS
Net investment income.......................................... (0.02)
In excess of net investment income............................. (0.03)
-------
Total Distributions........................................... (0.05)
-------
NET ASSET VALUE, END OF PERIOD.................................. $ 11.28
=======
Total Return.................................................... 13.34%(b)
RATIOS/SUPPLEMENTARY DATA:
Net Assets, End of Period (000)................................ $52,373
Ratio of expenses to average net assets........................ 1.79%(c)
Ratio of net investment income to average net assets........... 0.32%(c)
Ratio of expenses to average net assets*....................... 1.81%(c)
Ratio of net investment income to average net assets*.......... 0.30%(c)
Portfolio Turnover(d).......................................... 41.45%
Average commission rate(e)..................................... $0.0457
</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 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
-82-
<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, 1997
11/97
[PHOTOGRAPH OF TREES APPEARS HERE]
