<PAGE> 1
BB&T MUTUAL FUNDS GROUP
CLASS A AND B SHARES
Supplement dated September 1, 1998
to Prospectus dated February 1, 1998
Capitalized terms not defined in this Supplement have the same meaning
assigned to them in the Prospectus.
1. The "FEE TABLE" on pages 6 and 7 is deleted in its entirety and replaced
as follows:
FEE TABLE
The following Fee Table and example summarize the various costs and
expenses that a Shareholder of Class A and Class B Shares of the Funds will
bear, either directly or indirectly.
<TABLE>
<CAPTION>
PRIME MONEY U.S. TREASURY SHORT-INTERMEDIATE INTERMEDIATE BOND
MARKET FUND FUND FUND FUND
------------------ ------------------ ------------------ ------------------
CLASS A CLASS B CLASS A CLASS B CLASS A CLASS A CLASS B
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES(1)
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price)............................... 0% 0% 0% 0% 2.00% 4.50% 0%
Maximum Sales Load Imposed on
Reinvested Dividends (as a percentage
of offering price)................... 0% 0% 0% 0% 0% 0% 0%
Deferred Sales Load (as a percentage of
original purchase price or redemption
proceeds, as applicable)............. 0% 5.00% 0% 5.00% 0% 0% 5.00%
Redemption Fees (as a percentage of
amount redeemed, if applicable)(2)... 0% 0% 0% 0% 0% 0% 0%
Exchange Fee........................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Annual Fund Operating Expenses (as a
percentage of net assets)
Management Fees (after voluntary fee
reductions).......................... .30%(3) .30%(3) .40% .40% .50%(3) .50%(3) .50%(3)
12b-1 Fees (after voluntary fee
reductions).......................... .25%(4) 1.00% .25%(4) 1.00% .25%(4) .25%(4) 1.00%
Other Expenses (after voluntary fee
reductions).......................... .35%(5) .35%(5) .35% .35% .36% .37% .37%
--- ---- ---- ---- ---- ---- ----
Total Fund Operating Expenses (after
voluntary fee reductions)............ .90%(6) 1.65%(6) 1.00%(6) 1.75% 1.11%(6) 1.12%(6) 1.87%(6)
=== ==== ==== ==== ==== ==== ====
</TABLE>
<PAGE> 2
<TABLE>
<CAPTION>
NORTH SOUTH
CAROLINA CAROLINA GROWTH AND SMALL COMPANY
FUND FUND INCOME FUND BALANCED FUND GROWTH FUND
-------- -------- ----------------- ----------------- -----------------
CLASS A CLASS A CLASS A CLASS B CLASS A CLASS B CLASS A CLASS B
------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES(1)
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price).............. 2.00% 2.00% 4.50% 0% 4.50% 0% 4.50% 0%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price)....................... 0% 0% 0% 0% 0% 0% 0% 0%
Deferred Sales Load (as a
percentage of original
purchase price or redemption
proceeds, as applicable)..... 0% 0% 0% 5.00% 0% 5.00% 0% 5.00%
Redemption Fees (as a
percentage of amount
redeemed, if
applicable)(2)............... 0% 0% 0% 0% 0% 0% 0% 0%
Exchange Fee................... $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0 $ 0
Annual Fund Operating Expenses
(as a percentage of net
assets)
Management Fees (after
voluntary fee reductions).... .50%(3) .50%(3) .50%(3) .50%(3) .50%(3) .50%(3) 1.00% 1.00%
12b-1 Fees (after voluntary fee
reductions).................. .15%(4) .15%(4) .25%(4) 1.00% .25%(4) 1.00% .25%(4) 1.00%
Other Expenses (after voluntary
fee reductions).............. .35%(5) .49%(5) .34% .34% .43% .43% .64% .64%
---- ---- ---- ---- ---- ---- ---- ----
Total Fund Operating Expenses
(after voluntary fee
reductions).................. 1.00%(6) 1.14%(6) 1.09%(6) 1.84%(6) 1.18%(6) 1.93%(6) 1.89%(6) 2.64%
==== ==== ==== ==== ==== ==== ==== ====
<CAPTION>
LARGE COMPANY INTERNATIONAL
GROWTH FUND EQUITY FUND
----------------- -----------------
CLASS A CLASS B CLASS A CLASS B
------- ------- ------- -------
<S> <C> <C> <C> <C>
SHAREHOLDER TRANSACTION
EXPENSES(1)
Maximum Sales Load Imposed on
Purchases (as a percentage of
offering price).............. 4.50% 0% 4.50% 0%
Maximum Sales Load Imposed on
Reinvested Dividends (as a
percentage of offering
price)....................... 0% 0% 0% 0%
Deferred Sales Load (as a
percentage of original
purchase price or redemption
proceeds, as applicable)..... 0% 5.00% 0% 5.00%
Redemption Fees (as a
percentage of amount
redeemed, if
applicable)(2)............... 0% 0% 0% 0%
Exchange Fee................... $ 0 $ 0 $ 0 $ 0
Annual Fund Operating Expenses
(as a percentage of net
assets)
Management Fees (after
voluntary fee reductions).... .50%(3) .50%(3) 1.00% 1.00%
12b-1 Fees (after voluntary fee
reductions).................. .25%(4) 1.00% .24%(4) 1.00%
Other Expenses (after voluntary
fee reductions).............. .49%(5) .49%(5) .79%(5) .79%(5)
---- ---- ---- ----
Total Fund Operating Expenses
(after voluntary fee
reductions).................. 1.24%(6) 1.99%(6) 2.03%(6) 2.79%(6)
==== ==== ==== ====
</TABLE>
(1) A Participating Organization or Bank (both terms used as defined in this
Prospectus) may charge a Customer's (as defined in the Prospectus) account
fees for automatic investment, exchanges, and other investment management
services provided in connection with investment in Class A Shares or Class B
Shares, respectively, of a Fund. (See "HOW TO PURCHASE AND REDEEM SHARES--
Purchases of Class A and Class B Shares" and "HOW TO PURCHASE AND REDEEM
SHARES--Exchange Privilege.")
(2) A wire redemption charge (currently $7.00) may be deducted from the amount
of a wire redemption payment made at the request of a shareholder. Such fee
is currently being waived. (See "HOW TO PURCHASE AND REDEEM
SHARES--Redemption by Telephone.")
(3) Branch Banking and Trust Company ("BB&T") has agreed with the Group to
voluntarily reduce the amount of its investment advisory fee through
September 30, 1998. Absent the voluntary reduction of investment advisory
fees, Management Fees as a percentage of average daily net assets for Class
A and Class B Shares would be .40% for the Prime Money Market Fund, .60% for
the Intermediate Bond, Short-Intermediate, and North Carolina and South
Carolina Funds and .74% for the Growth and Income, Balanced and Large
Company Growth Funds.
(4) BISYS Fund Services has agreed with the Group to voluntarily reduce the
amount of its distribution fee for Class A Shares. Absent the voluntary fee
reduction of distribution fees, 12b-1 Fees as a percentage of average daily
net assets would be .50% for Class A Shares for each Fund. (See "MANAGEMENT
OF BB&T MUTUAL FUNDS GROUP--Distributor.")
(5) With respect to the Prime Money Market Fund, the International Equity Fund,
the South Carolina Fund, and the Large Company Growth Fund, "Other Expenses"
are based on estimated amounts for the current fiscal year. Absent voluntary
fee reductions, "Other Expenses" as a percentage of average daily net assets
would be .45% for the Class A Shares and Class B Shares of the Prime Money
Market Fund, and .40% for the Class A Shares of the North Carolina Fund, and
.81% for the Class A Shares of the International Equity Fund.
(6) As indicated in preceding notes, voluntary fee reductions have lowered this
amount. Lower total fund operating expenses will result in higher yields.
Absent the voluntary reduction of investment advisory, distribution fees
and/or other expenses, Total Fund Operating Expenses for Class A Shares, as
a percentage of average daily net assets would be 1.35% for the Prime Money
Market Fund, 1.25% for the U.S. Treasury Fund, 1.46% for the
Short-Intermediate Fund, 1.47% for the Intermediate Bond Fund, 1.50% for the
North Carolina Fund, 1.59% for the South Carolina Fund, 1.58% for the Growth
and Income Fund, 1.67% for the Balanced Fund, 2.14% for the Small Company
Growth Fund, 2.31% for the International Equity Fund, and 1.73% for the
Large Company Growth Fund. Absent the voluntary reduction of investment
advisory fees and/or other expenses, Total Fund Operating Expenses for Class
B Shares, as a percentage of average daily net assets, would be 1.85% for
the Prime Money Market Fund, 1.97% for the Intermediate Bond Fund, 2.08% for
the Growth and Income Fund, 2.17% for the Balanced Fund, 2.81% for the
International Equity Fund, and 2.23% for the Large Company Growth Fund.
<PAGE> 3
2. The "FEE TABLE -- EXAMPLE" on page 8 for Class B Shares of the Prime
Money Market Fund is hereby supplemented as follows:
Example:
You would pay the following expenses on a $1,000 investment in Class B
Shares of the Funds, assuming (1) deduction of the applicable Contingent
Deferred Sales Charge; and (2) 5% annual return.
<TABLE>
<CAPTION>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
<S> <C> <C> <C> <C>
Prime Money Market Fund
Assuming a complete redemption at end of period........ $67 $82 N/A N/A
Assuming no redemption................................. $17 $52 N/A N/A
</TABLE>
3. Under "HOW TO PURCHASE AND REDEEM SHARES -- CONTINGENT DEFERRED SALES
CHARGE" on page 43, the following sales waivers are added to the last paragraph
as follows:
(iii) provided that the Shareholder withdraws no more than 12% of the
account value annually using the Auto Withdrawal Plan Feature;
(iv) for Investors who purchased Class B Shares of the Prime Money
Market Fund or Class B Shares of the U.S. Treasury Fund through the Cash
Sweep Program at BB&T Treasury Services Division; and
(v) for Investors who purchased through a participant directed defined
contribution plan.
4. Under "HOW TO PURCHASE AND REDEEM SHARES" -- AUTO INVEST PLAN on page
44, the third and fourth sentences are deleted in their entirety and replaced as
follows:
The required minimum initial investment when opening an account using
the Auto Invest Plan is $25 per Fund; the minimum amount for subsequent
automatic investments in a Fund is $25. To participate in the Auto Invest
Plan, Shareholders should complete the appropriate section of the Account
Registration Form or supplemental sign-up form that can be acquired by
calling the Distributor and attach a voided check and (for new Shareholders
only) send a check for the initial $25 Fund Share purchase.
5. Under "HOW TO PURCHASE AND REDEEM SHARES" -- AUTO WITHDRAWAL PLAN on
page 48, the first paragraph is deleted in its entirety and replaced as follows:
BB&T Mutual Funds Group Auto Withdrawal Plan enables Shareholders to
make regular redemptions of Class A Shares and Class B Shares of a Fund.
With Shareholder authorization, the Group's transfer agent will
automatically redeem Class A Shares and Class B Shares at the net asset
value of the applicable Fund on the dates of withdrawal and have the amount
specified transferred according to the instructions of the Shareholder. In
certain cases, Class B Shareholders may redeem using the Auto Withdrawal
Plan without paying a contingent deferred sales charge as described in "How
To Purchase and Redeem Shares -- Contingent Deferred Sales Charge."
Shareholders participating in the Auto Withdrawal Plan must maintain a
minimum account balance of $1,000 in the Fund from which Class A Shares or
Class B Shares are being redeemed. Purchase of additional Shares concurrent
with withdrawals may be disadvantageous to certain Shareholders because of
tax liabilities.
6. Under "OTHER INVESTMENT PRACTICES" on page 29, the third paragraph
regarding the Group's securities lending policy is deleted and replaced in its
entirety as follows:
In order to generate additional income, each Fund except the North
Carolina Fund and the South Carolina Fund may, from time to time, lend its
portfolio securities to broker-dealers, banks or institutional borrowers of
securities which BB&T and/or a Fund's respective subadviser has determined
are creditworthy under guidelines established by the Group's Board of
Trustees. The Group will employ one or more securities lending agents to
initiate and effect securities lending transactions for the Group. While
the lending of securities may subject a Fund to certain risks, such as
delays or the inability to regain the securities in the event the borrower
was to default on its lending agreement or enter into bankruptcy, the Fund
will lend only on a fully collateralized basis in order to reduce such
risk. During the time portfolio securities are on loan, the Fund is
entitled to receive any dividends or interest paid on such securities.
<PAGE> 4
Additionally, cash collateral received will be invested on behalf of the
Fund exclusively in money market instruments. While a Fund will not have
the right to vote securities on loan, the Funds intend to terminate the
loan and regain the right to vote if that is considered important with
respect to the investment. Each Fund will restrict its securities lending
to 33 1/3% of its total assets.
7. Under "MANAGEMENT OF BB&T MUTUAL FUNDS GROUP" on page 58, a new
provision is added as follows:
PORTFOLIO BROKERAGE. When placing orders for the Group's securities
transactions, BB&T or a Fund's respective sub-adviser will use its judgment
to obtain best price and execution. The full range and quality of brokerage
services available are considered in making these determinations. BB&T or a
Fund's respective sub-adviser may use a qualified affiliated broker or
dealer of BB&T to execute the Group's transactions when it reasonably
believes that commissions (or prices) charged and transaction quality will
be at least comparable to those available from other qualified brokers or
dealers.
INVESTORS SHOULD RETAIN THIS SUPPLEMENT WITH THE PROSPECTUS FOR FUTURE
REFERENCE.
