<PAGE> 1
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION
14(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [ ]
Check the appropriate box:
[X] Preliminary Proxy Statement [ ] Confidential, For Use of the
[ ] Definitive Proxy Statement Commission Only (as permitted by
[ ] Definitive Additional Materials Rule 14a-6(e)(2))
[ ] Soliciting Material Under Rule 14a-12
BB&T Funds
3435 Stelzer Road
Columbus, Ohio 43219
(Name of Registrant as Specified in its Charter)
Alan G. Priest, Esq.
Ropes & Gray
One Franklin Square
1301 K Street, N.W., Ste. 800 East
Washington, D.C. 20005
(Name of Person(s) Filing Proxy Statement)
Payment of Filing Fee (check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies: N/A
(2) Aggregate number of securities to which transaction applies: N/A
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the
filing is calculated and state how it was determined).: N/A
(4) Proposed maximum aggregate value of transaction: N/A
(5) Total fee paid:
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[ ] Fee paid previously with preliminary materials:
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was
paid previously. Identify the previous filing by registration statement
number, or the form or schedule and the date of its filing.
1) Amount previously paid: N/A
2) Form, Schedule or Registration Statement No.: N/A
3) Filing Party: N/A
4) Date Filed: N/A
Notes:
<PAGE> 3
IMPORTANT SHAREHOLDER INFORMATION
BB&T Funds
BB&T Prime Money Market Fund
The document you hold in your hands contains your proxy statement and proxy
card. A proxy card is, in essence, a ballot. When you vote your proxy, you tell
us how to vote on your behalf on important issues relating to the BB&T Prime
Money Market Fund. The proxy card may be completed by checking the appropriate
box voting for or against the specific proposal relating to your Fund. If you
simply sign the proxy without specifying a vote, your shares will be voted in
accordance with the recommendations of the Board of Trustees.
We urge you to take the time to read the proxy statement, fill out the proxy
card, and return it to us (or vote by telephone or the Internet). Voting your
proxy, and doing so promptly, enables the Fund to avoid conducting additional
mailings. When shareholders do not return their proxies in sufficient numbers,
we will incur the expense of follow-up solicitations.
Please take a few moments to exercise your right to vote. Thank you.
<PAGE> 4
BB&T PRIME MONEY MARKET FUND
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 28, 2000
Notice is hereby given that a Special Meeting of the Shareholders ("Special
Meeting") of BB&T Prime Money Market Fund (the "Fund"), a separate series of
BB&T Funds (the "Trust"), will be held at 4:00 p.m. (Eastern Time) on June 28,
2000 at the Trust's offices, 3435 Stelzer Road, Columbus, Ohio, 43219, for the
following purposes:
1. To approve a new Investment Sub-Advisory Agreement between Branch Banking
and Trust Company ("BB&T") and Federated Investment Management Company
("Federated") with respect to the Fund;
2. To approve an amendment to the Fund's industry concentration policy.
3. To transact such other business as may properly come before the Special
Meeting or any adjournment thereof.
The proposals referred to above are discussed in the Proxy Statement attached to
this Notice. Each Shareholder is invited to attend the Special Meeting in
person.
Shareholders of record at the close of business on June 2, 2000 (the
"Shareholders") are entitled to notice of, and to vote at, this Special Meeting
or any adjournment thereof.
By Order of the Trustees
PRESTON LOFTIN
Secretary
June 12, 2000
SHAREHOLDERS ARE REQUESTED TO PROMPTLY VOTE BY TELEPHONE OR THE INTERNET OR TO
EXECUTE AND RETURN PROMPTLY IN THE ENCLOSED ENVELOPE THE ACCOMPANYING PROXY CARD
WHICH IS BEING SOLICITED BY BB&T FUNDS' BOARD OF TRUSTEES. THIS IS IMPORTANT TO
ENSURE A QUORUM AT THE SPECIAL MEETING. PROXIES MAY BE REVOKED AT ANY TIME
BEFORE THEY ARE EXERCISED BY SUBMITTING TO BB&T FUNDS A WRITTEN NOTICE OF
REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE SPECIAL MEETING
AND VOTING IN PERSON.
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To BB&T Funds Shareholders:
The purpose of this proxy is to announce that a Special Meeting of Shareholders
(the "Meeting") of BB&T Prime Money Market Fund (the "Fund"), a separate series
of BB&T Funds (the "Trust"), has been scheduled for June 28, 2000. The purpose
of this Meeting is to submit to the Shareholders a vote (1) to approve a new
Investment Sub-Advisory agreement between Branch Banking and Trust Company
("BB&T" or the "Adviser") and Federated Investment Management Company (the
"Sub-Adviser"), and (2) to approve an amendment to the Fund's industry
concentration policy.
While you are, of course, welcome to join us at the Meeting, most Shareholders
cast their votes by filling out and signing the enclosed proxy card (or by
telephone or the Internet). In order to conduct the Meeting, a majority of
shares must be represented either in person or by proxy. Whether or not you plan
to attend the Meeting, we need your vote. Please vote by telephone or the
Internet, or mark, sign and date the enclosed proxy card and return it promptly
in the enclosed, postage-paid envelope so that the maximum number of shares may
be voted.
We encourage you to read the enclosed proxy statement thoroughly. In addition,
we have included on the next page a list of some commonly asked questions and
answers. If you have any additional questions, please call your account
administrator, investment representative, or BB&T Funds directly at
1-800-228-1872.
Your vote is very important to us. As always, we thank you for your confidence
and support.
Sincerely,
Walter B. Grimm
Chairman
BB&T Funds
PLEASE SIGN AND RETURN THE ENCLOSED PROXY BALLOT CARD
(OR VOTE BY TELEPHONE OR THE INTERNET)
YOUR VOTE IS VERY IMPORTANT
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BB&T FUNDS
Q. WHY IS THE BOARD OF TRUSTEES PROPOSING TO ADOPT A NEW INVESTMENT
SUB-ADVISORY AGREEMENT?
A. In unanimously approving the proposed Investment Sub-Advisory Agreement and
recommending its approval by Shareholders, the Trustees of the Fund,
including the independent Trustees, considered the best interests of
Shareholders of the Fund and took into account all factors they deemed
relevant. The factors considered by the Trustees included the nature,
quality and extent of the service to be provided by Federated and data on
investment performance, management fees and expense ratios of competitive
funds. After considering these factors, the Trustees concluded that the
proposed Investment Sub-Advisory Agreement would be beneficial to the Fund
and to Shareholders.
Q. WHY IS THE BOARD OF TRUSTEES PROPOSING TO AMEND THE INDUSTRY CONCENTRATION
POLICY?
The Fund's current policy requires concentration in the financial services
industry and prohibits concentration in any other industry. In unanimously
approving the amendment to the Fund's concentration policy to prohibit
concentration in that or any other industry and recommending such approval
by Shareholders, the Trustees of the Fund, including the independent
Trustees, considered the best interests of Shareholders of the Fund and
took into account all factors they deemed relevant. The factors considered
by the Trustees included the current industry standard and legal
restrictions, the nature and level of exposure to risk, and investment
flexibility. After considering these factors, the Trustees concluded that
the proposed amendment would be beneficial to the Fund and to Shareholders.
Q. WILL APPROVAL OF THE INVESTMENT SUB-ADVISORY AGREEMENT RESULT IN ANY
ADDITIONAL SHAREHOLDER EXPENSE?
A. No. Under the proposed agreement, the Investment Adviser will continue to
have full responsibility for providing investment advisory services to the
Fund and will compensate the Sub-Adviser at its sole expense.
Q. WHAT IF I DO NOT RETURN MY PROXY VOTING BALLOT?
A. In order to conduct the Shareholder Meeting, a quorum must be present, in
person or by proxy. A quorum is defined as representation of over 50% of
the shares outstanding for the Fund as of June 2, 2000. In the event that
not enough shareholders return the enclosed proxy ballot card to achieve
quorum, we will be forced to incur additional expenses associated with
additional solicitations. In order to avoid additional costs, please return
the completed proxy ballot as soon as possible.
Q. HOW DOES THE BOARD SUGGEST THAT I VOTE?
A. After careful consideration, the Board of Trustees of BB&T Funds, including
the independent members, recommends that you vote "FOR" adopting the
proposed
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Investment Sub-Advisory Agreement and approving the amendment to the
concentration policy. The Board also wishes to urge you to vote and return
all the proxy ballot cards you receive.
Q. WHO SHOULD I CALL WITH QUESTIONS ABOUT THIS PROXY?
A. If you have any questions regarding this proxy, please contact your account
administrator, investment representative, or BB&T Funds directly at
1-800-228-1872.
THE INFORMATION PROVIDED IN THIS "Q&A" IS SUPPORTED
BY DISCLOSURES CONTAINED IN THE ACCOMPANYING
PROXY STATEMENT
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BB&T PRIME MONEY MARKET FUND
3435 STELZER ROAD
COLUMBUS, OHIO 43219
------------------------
SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON JUNE 28, 2000
---------------------
PROXY STATEMENT
The enclosed proxy is solicited on behalf of the Board of Trustees (the
"Trustees") of BB&T Funds (the "Trust") on behalf of BB&T Prime Money Market
Fund (the "Fund"). The proxy is revocable at any time before it is voted by
sending written notice of the revocation or a subsequently executed proxy to the
Trust at the above address or by appearing personally and electing to vote on
June 28, 2000 at the Special Meeting of Shareholders of the Fund at 4:00 p.m.
(Eastern Time) at 3435 Stelzer Road, Columbus, Ohio 43219 (such meeting and any
adjournment thereof is referred to herein as the "Special Meeting"). The cost of
preparing and mailing the Notice of Special Meeting, the proxy card, this proxy
statement and any additional proxy material has been or is to be borne by the
Trust. Proxy solicitations will be made primarily by mail, but may also be made
by telephone, telegraph, or personal interview conducted by certain officers or
employees of the Trust or BISYS Fund Services, Inc. ("BISYS"), the Trust's
administrator pursuant to a management and administration agreement between
BISYS and the Trust dated October 1, 1992, as amended. In the event that the
Shareholder signs and returns the proxy ballot, but does not indicate a choice
as to any of the items on the proxy ballot, the proxy attorneys will vote those
Shares in favor of such proposal(s).
Only Shareholders of record at the close of business on June 2, 2000 will be
entitled to vote at the Special Meeting. On June 2, 2000, the Fund had
outstanding ________ shares of beneficial interest ("Shares"), each Share being
entitled to one vote, and each fractional Share being entitled to a
proportionate fractional vote on each matter to be acted upon at the Special
Meeting. This proxy statement and the enclosed proxy card will be sent to
Shareholders of record on or about June 12, 2000.
BB&T Funds' Declaration of Trust and Bylaws do not provide for annual
shareholder meetings, and no such meetings are planned for 2000. Proposals that
shareholders would like to have included in a proxy statement for any future
meeting must be received by BB&T Funds within a reasonable period of time prior
to printing and mailing proxy material for such meeting.
For purposes of determining the presence of a quorum and counting votes on the
matters presented, Shares represented by abstentions and "broker non-votes" will
be counted as present, but not as votes cast, at the Special Meeting. Under the
Investment Company Act of 1940, as amended (the "1940 Act"), the affirmative
vote necessary to approve the matter under consideration may be determined with
reference to a percentage of votes present at the Special Meeting, which would
have the effect of treating abstentions and non-votes as if they were votes
against the proposal.
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<PAGE> 9
The Trust's executive offices are located at 3435 Stelzer Road, Columbus, Ohio
43219.
A COPY OF THE FUND'S ANNUAL REPORT DATED SEPTEMBER 30, 1999 AND SEMI-ANNUAL
REPORT DATED MARCH 31, 2000 IS AVAILABLE UPON REQUEST AND MAY BE OBTAINED
WITHOUT CHARGE BY CALLING 1-800-228-1872.
7
<PAGE> 10
INTRODUCTION
This Special Meeting is being called for the following purposes: (1) to approve
a new Investment Sub-Advisory Agreement between Branch Banking and Trust Company
("BB&T" or the "Investment Adviser") and Federated Investment Management Company
("Federated" or the "Sub-Adviser") with respect to the Fund; (2) to approve an
amendment to the Fund's industry concentration policy; and (3) to transact such
other business as may properly come before the Special Meeting or any
adjournment thereof.
Approval of Proposals (1), (2), and (3) require the affirmative vote of the
lesser of: (a) 67% or more of the outstanding Shares of the Fund present at the
Special Meeting, if the holders of more than 50% of the outstanding Shares are
present or represented by proxy, or (b) more than 50% of the outstanding Shares
of the Fund.
PROPOSAL (1)--APPROVAL OF NEW INVESTMENT
SUB-ADVISORY AGREEMENT BETWEEN THE INVESTMENT
ADVISER AND FEDERATED
On May 4, 2000, the Trustees of the Trust, including a majority of the Trustees
who are not interested persons of the Trust, as defined in the 1940 Act,
unanimously approved on behalf of the Fund the proposed Investment Sub-Advisory
Agreement between the Investment Adviser and Federated. (A copy of the proposed
Investment Sub-Advisory Agreement between the Investment Adviser and Federated
is included as Exhibit A to this proxy statement). Under the proposed Investment
Sub-Advisory Agreement, Federated would act as Sub-Adviser to the Fund with
regard to selecting the Fund's investments and placing all orders for purchases
and sales of the Fund's securities, subject to the general supervision of the
BB&T Funds' Board of Trustees and BB&T and in accordance with the Fund's
respective investment objective, policies and restrictions.
CURRENT INVESTMENT ADVISORY CONTRACT
At the present time, BB&T serves as investment adviser to the Trust pursuant to
an investment advisory agreement dated October 1, 1992 (the "Investment Advisory
Agreement"). The Investment Advisory Agreement was last submitted to a vote of
shareholders of the Fund on September 30, 1992. The Investment Advisory
Agreement will continue in effect as to the Fund from year to year, if such
continuance is approved at least annually by the Trust's Board of Trustees or by
vote of a majority of the outstanding shares of the Fund and, in either case, by
a majority of the Trustees who are not interested persons as defined in the 1940
Act, by vote cast in person at a meeting called for such purpose. The Trust's
Board of Trustees renewed the Investment Advisory Agreement at their quarterly
meeting on February 11, 2000. The Investment Advisory Agreement may be
terminated as to the Fund at any time on 60 days' written notice without penalty
by the Trustees, by vote of a majority of the outstanding shares of the Fund, or
by the Investment Adviser. The Investment Advisory Agreement also terminates
automatically in the event of any assignment, as defined in the 1940 Act.
Under the Investment Advisory Agreement, BB&T may make the day-to-day investment
decisions for the Fund or employ a sub-adviser at its expense to provide
day-to-day management. Regardless of whether it employs a sub-adviser, BB&T
continuously reviews, supervises and administers the Fund's investment programs.
As consideration for its services, the Investment
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Adviser is entitled to a fee of twenty one-hundredths of one percent (0.20%) of
the Fund's average daily net assets. The Investment Adviser and the Fund's
administrator have voluntarily agreed to waive fees and/or reimburse expenses to
limit total annual fund operating expenses to 1.00 % for Class A shares, 1.75%
for Class B shares and 0.75% for Trust Class shares for the period beginning
October 1, 1999 and ending on September 30, 2000. For the fiscal year ended
September 30, 1999, the Fund paid investment advisory fees to the Investment
Adviser equal to $121,002 after taking into account fee waivers/reimbursements.
CURRENT INVESTMENT SUB-ADVISORY AGREEMENT
Under the current Investment Sub-Advisory Agreement, BlackRock Institutional
Management Corporation ("BIMC") (formerly PNC Institutional Management
Corporation) serves as the Sub-Adviser to the Fund pursuant to a Sub-Advisory
Agreement with BB&T. Under the Sub-Advisory Agreement, BIMC manages the Fund,
selects its investments and places all orders for purchases and sales of each
Fund's securities, subject to the general supervision of the BB&T Funds' Board
of Trustees and BB&T and in accordance with the Fund's investment objectives,
policies and restrictions. More specifically, BIMC performs the following
services: (i) provide investment research and credit analysis concerning the
Fund's investments; (ii) conduct a continual program of investment of the Fund's
assets; (iii) place orders for all purchases and sales of the investments made
for the Fund; (iv) maintain the books and records required in connection with
its duties hereunder; and (v) keep the Investment Adviser informed of
developments materially affecting the Fund. As consideration for its services,
BIMC is entitled to a fee of nine one-hundredths of one percent (0.09%) of the
Fund's average daily net assets. For the fiscal year ended September 30, 1999,
BB&T paid BIMC $55,516 for sub-advisory services to the Fund.
BIMC is a wholly owned subsidiary of BlackRock Advisors, Inc. ("BAI") (formerly
PNC Asset Management Group, Inc.). BAI was organized in 1994 to perform advisory
services for investment companies, and has its principal offices at 345 Park
Avenue, 29th Floor, New York, New York 10154. BAI is an indirect majority-owned
subsidiary of The PNC Financial Services Group, Inc., a diversified financial
services company. BIMC's principal business address is 400 Bellevue Parkway, 4th
Floor, Wilmington, Delaware 19809.
Under the current Investment Sub-Advisory Agreement, BIMC is not liable for any
error of judgement or mistake of law or for any loss suffered by the Investment
Adviser, the Trust or the Fund in connection with the matters to which the
current Investment Sub-Advisory Agreement relates, except that BIMC is liable to
the Investment Adviser for a loss resulting from a breach of fiduciary duty by
BIMC under the 1940 Act with respect to the receipt of compensations for
services or a loss resulting from willful misfeasance, bad faith, or gross
negligence on the part of BIMC in the performance of its duties or from reckless
disregard by it of its obligations or duties under the current Investment
Sub-Advisory Agreement. In no case is BIMC liable for actions taken or
non-actions with respect to the performance of services under the Agreement
based upon specific information, instructions or requests given or made to BIMC
by the Investment Adviser.
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PROPOSED INVESTMENT SUB-ADVISORY AGREEMENT
Under the proposed Investment Sub-Advisory Agreement, if approved, the
Investment Adviser will continue to have full responsibility for providing
investment advisory services to the Fund. The Investment Adviser will discharge
this responsibility in part through retention of Federated, at the Investment
Adviser's sole expense, to manage the day-to-day investment program of the Fund.
The Investment Adviser will oversee the activities of Federated and will be
responsible for setting any policies it deems appropriate for Federated's
activities, subject to the direction of the Fund's Trustees. Shareholders of the
Fund will continue to receive the benefits of the Investment Adviser's
supervision of the management of the Fund and, under the proposed arrangement,
will receive the additional benefit of Federated's investment advisory services.
The combined contributions of the Investment Adviser and Federated to the Fund's
management should enhance the level of service to the Shareholders.
Pursuant to the Investment Sub-Advisory Agreement, Federated will invest and
manage each Fund's portfolio of Securities in accordance with such Fund's stated
investment objective to the fullest extent permitted by: the Fund's investment
policies, limitations, procedures and guidelines; any additional objectives,
policies or guidelines established by the Adviser or by the Board that have been
furnished in writing to Federated; the provisions of the Investment Company Act
of 1940 and the rules and regulations thereunder applicable to the Fund,
including rule 2a-7 promulgated thereunder; and the provisions of Subchapter M
of the Internal Revenue Code applicable to regulated investment companies.
Subject to the supervision of the Adviser and the Board, Federated will
determine the structure and composition of the Fund's portfolio, including the
purchase, retention and disposition of, and exercise of all rights pertaining to
the Securities comprising the portfolio. Federated will bear those expenses
expressly stated to be payable by it under the Investment Sub-Advisory
Agreement.
In consideration for the services provided and expenses assumed under the
Investment Sub-Advisory Agreement, the Investment Adviser has agreed to pay
Federated a fee, computed daily and paid monthly, at an annual rate of 0.10% of
the Fund's average daily net assets up to $500 million in Fund assets and 0.08%
of the Fund's average daily net assets over $500 million. The Investment Adviser
will bear the sole responsibility for the payment of the sub-advisory fee to
Federated.
The proposed Investment Sub-Advisory Agreement will become effective on the date
approved by the Shareholders and, unless sooner terminated, will continue for an
initial term ending June 28, 2002. Thereafter, the Investment Sub-Advisory
Agreement will continue for successive one-year terms, provided that such
continuation is specifically approved at least annually by a vote of a majority
of the Trustees, or by the vote of a majority of the outstanding Shares of the
Fund, and, in either case, by a majority of the Trustees who are not interested
persons as defined in the 1940 Act, by vote cast in person at a meeting called
for such purpose. The proposed Investment Sub-Advisory Agreement will terminate
automatically in the event of its assignment, as defined in the 1940 Act or
termination of the Investment Advisory Agreement.
The Trustees recommend that the Shareholders of the Fund vote to approve the
proposed Investment Sub-Advisory Agreement, thereby appointing Federated as the
Investment Sub-Adviser to the Fund. Approval by Shareholders of the Investment
Sub-Advisory Agreement will not result in an increase in the contractual rate of
any advisory or sub-advisory fees payable by the Fund, but will result in the
payment of the sub-advisory fees by the Investment Adviser to
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Federated. Such sub-advisory fees are borne solely by the Investment Adviser and
not by the Fund.
The Investment Sub-Advisory Agreement provides that Federated will not be liable
to the Investment Adviser, the Trust or any Shareholder of the Fund for any act
or omission in the course of, or connected with its services under the
Investment Sub-Advisory Agreement or for any losses that may be sustained in the
purchase, holding or sale of any security, except a loss resulting from willful
misfeasance, bad faith, or gross negligence, or reckless disregard by Federated
of its obligations or duties under the Agreement.
There are no material differences between the current and proposed Investment
Sub-Advisory Agreements.
On May 4, 2000, the Board of Trustees decided not to renew the sub-advisory
agreement with BIMC and to replace BIMC with Federated as the sub-advisor to the
Fund. In reaching this conclusion, the Trustees considered the best interests of
both current and future shareholders of the Fund. Scott and Stringfellow, an
affiliated broker-dealer of BB&T, has decided to replace the fund used in its
sweep program, the Prime Cash Series, with the Fund. The Trustees believe it
would be beneficial to the participants in Scott and Stringfellow's sweep
program to continue their relationship with Federated by making Federated
sub-advisor to the Fund. Additionally, the Trustees believe that the switch to
Federated will be beneficial to current shareholders of the Fund because by
switching to Federated the Fund will become the sweep vehicle in Scott and
Stringfellow's sweep program which could increase the Fund's asset size and, as
a result, lower total Fund operating expenses due to economies of scale.
In unanimously approving the proposed Investment Sub-Advisory Agreement and
recommending its approval by Shareholders, the Trustees of the Fund, including
the independent Trustees, considered the best interests of Shareholders of the
Fund and took into account all factors they deemed relevant. The factors
considered by the independent Trustees included the nature, quality and extent
of the service to be provided by Federated and data on investment performance,
management fees and expense ratios of competitive funds. After considering these
factors, the Trustees concluded that the proposed Investment Sub-Advisory
Agreement would be beneficial to the Fund and to its Shareholders.
In the event that holders of a majority of the outstanding Shares of the Fund
vote in the negative with respect to the proposed Investment Sub-Advisory
Agreement, the Trustees will consider such further action as they may determine
to be in the best interests of the Fund's Shareholders.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE FUND VOTE TO APPROVE
THE PROPOSED INVESTMENT SUB-ADVISORY AGREEMENT.
PROPOSAL (2)--APPROVAL OF AMENDMENT TO CONCENTRATION POLICY
The Trustees are recommending that Shareholders approve the amendment to the
Fund's industry concentration policy so as to prohibit concentration in the
financial services industry.
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CURRENT CONCENTRATION POLICY
The current policy provides that under normal market conditions, at least 25% of
the Fund's total assets will be invested in obligations of issuers in the
financial services industry and repurchase agreements relating to such
obligations. For temporary defensive purposes, during periods when the Adviser
or Sub-Adviser believes that maintaining this concentration may be inconsistent
with the best interests of Shareholders, the Fund will not maintain this
concentration. The current policy prohibits the Fund from investing 25% or more
of the Fund's total assets in any other industry.
PROPOSED CONCENTRATION POLICY
The proposed change would prohibit the Fund from investing 25% or more of its
total assets in obligations of issuers in any industry, including the financial
services industry. Government securities, municipal securities, and bank
instruments would not be deemed to constitute an industry. To conform to the
current view of the SEC staff that only domestic bank instruments may be
excluded from industry concentration limitations, as a matter of non-fundamental
policy, the Fund would not exclude foreign bank instruments from industry
concentration tests as long as the policy of the SEC remains in effect.
The proposed change in this concentration policy should reduce risk exposure
because the Fund would no longer be more vulnerable to unfavorable developments
in the financial services industry than funds that are more
industry-diversified. The Trustees also believe that the amendment to this
concentration policy will provide the Fund with additional flexibility that best
serves the interests of the Shareholders.
In unanimously approving the proposed amendment to the Fund's industry
concentration policy and recommending its approval by Shareholders, the Trustees
of the Fund, including the independent Trustees, considered the best interests
of Shareholders of the Fund and took into account all factors they deemed
relevant. The factors considered by the independent Trustees included the
current industry standard and legal restrictions, the nature and level of
exposure to risk, and investment flexibility. After considering these factors,
the Trustees concluded that the proposed Investment Sub-Advisory Agreement would
be beneficial to the Fund and to its Shareholders.
In the event that holders of a majority of the outstanding Shares of the Fund
vote in the negative with respect to the proposed amendment to the Fund's
concentration policy, the Trustees will consider such further action as they may
determine to be in the best interests of the Fund's Shareholders.
THE TRUSTEES UNANIMOUSLY RECOMMEND THAT SHAREHOLDERS OF THE FUND VOTE TO APPROVE
THE PROPOSED AMENDMENT TO THE FUND'S CONCENTRATION POLICY.
ADDITIONAL INFORMATION
INFORMATION ABOUT THE INVESTMENT ADVISER
BB&T is the Adviser for the Fund. BB&T is the oldest bank in North Carolina and
is the principal bank affiliate of BB&T Corporation, a bank holding company that
is a North Carolina
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Corporation, headquartered in Winston-Salem, North Carolina. As of December 31,
1999, BB&T Corporation had assets of approximately $43.5 billion. Through its
subsidiaries, BB&T Corporation operates over 655 banking offices in Maryland,
North Carolina, South Carolina, Virginia, and Washington, D.C., providing a
broad range of financial services to individuals and businesses.
In addition to general commercial, mortgage and retail banking services, BB&T
also provides trust, investment, insurance and travel services. BB&T has
provided investment management services through its Trust and Investment and
Investment Services Division since 1912. While BB&T has not provided investment
advisory services to registered investment companies other than the BB&T Funds,
it has experience in managing collective investment funds with investment
portfolios and objectives comparable to those of the BB&T Funds. BB&T employs an
experienced staff of professional portfolio managers and traders who use a
disciplined investment process that focuses on maximization of risk-adjusted
investment returns. BB&T has managed common and collective investment funds for
its fiduciary accounts for more than 17 years and currently manages assets of
more than $4.4 billion.
The name, address, and principal occupation of the principal executive officer
and each director of the Investment Adviser are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION(S) HELD WITH BB&T PRINCIPAL OCCUPATION
---------------- -------------------------- --------------------
<S> <C> <C>
John A. Allison Chairman and Chief Executive Officer BB&T Corporation and Branch Banking
Winston-Salem, NC and Trust Company
Paul Barringer Director Chairman and Chief Executive
Weldon, NC Officer, Coastal Lumber Company
Alfred A. Cleveland Director Attorney, McCoy, Weaver, Wiggins,
Fayetteville, NC Cleveland & Raper
W.R. Cuthberton, Jr. Director Retired (formerly Senior Vice
Charlotte, NC President), Branch Banking and Trust
Company
Ronald E. Deal Director Investor, Chairman, Wesley Hall
Hickory, NC
A.J. Dooley, Sr. Director Retired (former Partner), Dooley,
Lexington, SC Dooley, Spence, Parker & Hipp, P.A.,
Attorney-at-Law
Tom D. Efird Director President, Standard Distributors,
Gastonia, NC Inc.
</TABLE>
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<TABLE>
<S> <C> <C>
Paul S. Goldsmith Director Chairman and President, William
Greenville, SC Goldsmith Company, Inc.
Dr. L. Vincent Hackley Director Chairman, Character Counts!
Fayetteville, NC Coalition
Jane P. Helm Director Vice Chancellor for Business
Boone, NC Affairs, Appalachian State
University
Richard Janeway, M.D. Director Executive Vice President for Health
Winston-Salem, NC Affairs, Emeritus; University
Professor of Medicine & Management;
Wake Forest University, School of
Medicine
J. Ernest Lathem, M.D. Director Personal Investments, Retired
Greenville, SC Medical Director, Prostate
Diagnostic Center
James H. Maynard Director Chairman and Chief Executive
Raleigh, NC Officer, Investors Management
Corporation
Joseph A. McAleer, Jr. Director Manager and Member, MACKK, LLC;
Winston-Salem, NC Krispy Kreme Doughnut Franchisee
Albert O. McCauley Director President and Chief Executive
Fayetteville, NC Officer, McCauley Moving & Storage
of Fayetteville, Inc.
Richard L. Player, Jr. Director Chairman, Player, Inc.
Fayetteville, NC
C. Edward Pleasants, Jr. Director Chairman Emeritus and Director PHC
Winston-Salem, NC Holdings
Nido R. Qubein Director Chief Executive Officer, Creative
High Point, NC Services, Inc.
E. Rhone Sasser Director Former Chairman, United Carolina,
Whiteville, NC Bancshares Corporation
Jack E. Shaw Director Chief Executive Officer, Shaw
Greenville, SC Resources, Inc.
</TABLE>
14
<PAGE> 17
<TABLE>
<S> <C> <C>
Harold B. Wells Director President, Wells Chevrolet, Buick,
Whiteville, NC Pontiac, Oldsmobile, GMC, Inc.;
Wells Chrysler Dodge Jeep, Inc.
</TABLE>
INFORMATION ABOUT FEDERATED INVESTMENT MANAGEMENT COMPANY
Federated is a registered investment adviser under the Investment Advisers Act
of 1940. It was organized as a Delaware business trust on April 11, 1989.
Federated is a wholly owned subsidiary of FII Holdings, Inc., a Delaware
corporation organized on March 14, 1983. FII Holdings, Inc. is, in turn, a
wholly owned subsidiary of Federated Investors, Inc., a Pennsylvania corporation
organized on October 18, 1957. Federated, FII Holdings, Inc. and Federated
Investors, Inc. ("Federated Investors") are all located at Federated Investors
Tower, 1001 Liberty Avenue, Pittsburgh, PA 15222-3779.
Federated and other subsidiaries of Federated Investors advise approximately 176
mutual funds and separate accounts, which totaled approximately $125 billion in
assets as of December 31, 1999. Federated Investors was established in 1955 and
is one of the largest mutual fund investment managers in the United States with
approximately 1,900 employees. More than 4,000 investment professionals make
Federated Funds available to their customers.
The following table shows other investment companies advised by Federated with
investment objectives similar to the Fund. However, Federated does not
sub-advise these investment companies or any other investment companies with
investment objectives similar to the Fund.
<TABLE>
<CAPTION>
MOST RECENT ASSETS AS OF ADVISORY ADVISORY FEE
FUND NAME FISCAL YEAR END FISCAL YEAR END FEE RATE PAID AS OF FISCAL
YEAR END
<S> <C> <C> <C> <C>
Prime Cash Series 5/31/1999 $4,728,448,336 0.50% 0.34%
(a portfolio of Cash Trust
Series, Inc.)
Federated Prime Money Market 12/31/1999 $193,869,739 0.50% 0.50%
Fund II
(a portfolio of Federated
Insurance Series)
Prime Obligations Fund (a 7/31/1999 $9,400,957,454 0.20% 0.10%
portfolio of Money Market
Obligations Trust)
Prime Cash Obligations Fund 7/31/1999 $3,133,700,648 0.20% Expects to pay 0.07%
(a portfolio of Money Market for the fiscal year
Obligations Trust) ending 7/31/2000
</TABLE>
15
<PAGE> 18
<TABLE>
<S> <C> <C> <C> <C>
Prime Value Obligations Fund 7/31/1999 $2,131,209,733 0.20% Expects to pay 0.05%
(a portfolio of Money Market for the fiscal year
Obligations Trust) ending 7/31/2000
Federated Master Trust (a 11/30/1999 $358,670,407 0.40% 0.27%
portfolio of Money Market
Obligations Trust)
Money Market Trust 7/31/1999 $380,400,408 0.40% For fiscal year ended
(a portfolio of Money Market 7/31/1999, the Total
Obligations Trust) annual fund expenses
were 0.82% and the
Total actual annual
fund expenses after
waivers were 0.46%
Money Market Management 12/31/1999 $76,851,306 0.50% Expects to pay 0.45% as
(a portfolio of Money Market of fiscal year ending
Obligations Trust) 12/31/2000
Automated Cash Management Trust 7/31/1999 $2,321,935,155 0.50% 0.19%
(a portfolio of Money Market
Obligations Trust)
</TABLE>
The name, address, and principal occupation of the principal executive officer
and each member of the board of managers of Federated are as follows:
<TABLE>
<CAPTION>
NAME AND ADDRESS POSITION(S) HELD WITH FEDERATED PRINCIPAL OCCUPATION
---------------- ------------------------------- --------------------
<S> <C> <C>
John F. Donahue Chairman Chairman and Director, Federated
Federated Investors Tower Investors, Inc.; Chairman, Federated
1001 Liberty Avenue Investment Management Company,
Pittsburgh, PA 15222-3779 Federated Global Investment
Management Corp. and Passport
Research, Ltd.
William D. Dawson, III Trustee, Executive Vice President Executive Vice President, Federated
Federated Investors Tower Investment Counseling, Federated
1001 Liberty Avenue Global Investment Management Corp.,
Pittsburgh, PA 15222-3779 Federated Investment Management
Company and Passport Research, Ltd.
</TABLE>
16
<PAGE> 19
<TABLE>
<S> <C> <C>
J. Christopher Donahue Trustee, CEO, COO Chairman and Director, Federated
Federated Investors Tower Investors, Inc.; Chairman, Federated
1001 Liberty Avenue Investment Management Company,
Pittsburgh, PA 15222-3779 Federated Global Investment
Management Corp. and Passport
Research, Ltd.
Thomas R. Donahue Trustee, Treasurer Director, Vice President, Treasurer
Federated Investors Tower and Chief Financial Officer,
1001 Liberty Avenue Federated Investors, Inc.
Pittsburgh, PA 15222-3779
Henry A. Frantzen Trustee, Executive Vice President Executive Vice President, Federated
Federated Investors Tower Investment Counseling, Federated
1001 Liberty Avenue Global Investment Management Corp.,
Pittsburgh, PA 15222-3779 Federated Investment Management
Company and Passport Research, Ltd.;
Registered Representative, Federated
Securities Corp.; Vice President,
Federated Investors, Inc.
J. Thomas Madden Trustee, Executive Vice President Executive Vice President, Federated
Federated Investors Tower Investment Counseling, Federated
1001 Liberty Avenue Global Investment Management Corp.,
Pittsburgh, PA 15222-3779 Federated Investment Management
Company and Passport Research, Ltd.;
Vice President, Federated Investors,
Inc.
Mark D. Olson Trustee Principal, Mark D. Olson & Company,
Suite 301 Little Falls Center Two L.L.C.; Partner, Wilson, Halbrook &
2751 Centerville Road Bayard, P.A.
Wilmington, DE 19808
</TABLE>
INFORMATION ABOUT THE ADMINISTRATOR AND DISTRIBUTOR
BISYS Fund Services, Inc. (the "Administrator"), 3435 Stelzer Road, Columbus,
Ohio 43219, serves as the Trust's Administrator. The administrative services of
the Administrator include providing office space, equipment and clerical
personnel to the Fund and supervising custodial, auditing, valuation,
bookkeeping, legal and dividend disbursing services.
BISYS Fund Services LP (the "Distributor"), an affiliate of the Administrator
serves as the distributor of the Fund's shares. The Distributor may provide
financial assistance in connection with pre-approved seminars, conferences and
advertising to the extent permitted by applicable state or self-regulatory
agencies, such as the National Association of Securities Dealers.
****
The following list indicates the beneficial ownership of the Shareholders who,
to the best knowledge of the Fund, are the beneficial owners of more than 5% of
the outstanding Shares of the Fund as of June 2, 2000:
17
<PAGE> 20
NAME AND ADDRESS TITLE OF CLASS PERCENTAGE OF OWNERSHIP TYPE OF OWNERSHIP
---------------- -------------- ----------------------- -----------------
[BISYS TO COMPLETE]
As of June 2, 2000, the Officers and Trustees of the Fund own less than 1% of
the outstanding Shares of the Fund.
PORTFOLIO TRANSACTIONS
During the Trust's fiscal year ended September 30, 1999, the Fund paid $0 in
brokerage commissions.
OTHER MATTERS AND DISCRETION OF PERSONS NAMED IN THE PROXY
While the Special Meeting is called to act upon any other business that may
properly come before it, at the date of this proxy statement the only business
which the management intends to present or knows that others will present is the
business mentioned in the Notice of Special Meeting. If any other matters
lawfully come before the Special Meeting, and in all procedural matters at said
Special Meeting, it is the intention that the enclosed proxy shall be voted in
accordance with the best judgment of the persons named as proxies, or their
substitutes, present and acting at the Special Meeting.
If at the time any session of the Special Meeting is called to order, a quorum
is not present, in person or by proxy, the persons named as proxies may vote
those proxies which have been received to adjourn the Special Meeting to a later
date. In the event that a quorum is present, but sufficient votes in favor of
one or more of the proposals have not been received, the persons named as
proxies may propose one or more adjournments of the Special Meeting to permit
further solicitation of proxies with respect to any such proposal. All such
adjournments will require the affirmative vote of a majority of the Shares
present in person or by proxy at the session of the Special Meeting to be
adjourned. The persons named as proxies will vote those proxies which they are
entitled to vote in favor of the proposal, in favor of such an adjournment, and
will vote those proxies required to be voted against the proposal, against any
such adjournment. A vote may be taken on one or more of the proposals in this
proxy statement prior to any such adjournment if sufficient votes for its
approval have been received and it is otherwise appropriate.
Shareholder proposals to be presented at any future meeting of Shareholders of
the Funds must be received by the Trust a reasonable time before the Trust's
solicitation of proxies for that meeting in order for such proposals to be
considered for inclusions in the proxy materials relating to that meeting.
If you do not expect to attend the Special Meeting, please sign your proxy card
promptly and return it in the enclosed envelope to avoid unnecessary expense and
delay. No postage is necessary.
JUNE 13, 2000
18
<PAGE> 21
YOUR VOTE IS IMPORTANT. YOU CAN HELP THE FUND AVOID THE NECESSITY AND EXPENSE OF
SENDING FOLLOW-UP LETTERS TO ENSURE A QUORUM BY PROMPTLY:
VOTING BY TELEPHONE OR THE INTERNET OR MARKING, SIGNING, DATING AND
RETURNING THE ENCLOSED PROXY. (THE ENCLOSED ENVELOPE REQUIRES NO POSTAGE IF
MAILED IN THE UNITED STATES).
IF YOU ARE UNABLE TO ATTEND THE SPECIAL MEETING, PLEASE VOTE BY ONE OF THE ABOVE
METHODS SO THAT THE NECESSARY QUORUM MAY BE REPRESENTED AT THE SPECIAL MEETING.
19
<PAGE> 22
EXHIBIT A
INVESTMENT SUB-ADVISORY AGREEMENT
-------------------------
This Subadvisory Agreement (this "Agreement") is entered into as of the
__ day of _________, 2000, by and between Branch Banking & Trust Company a state
chartered bank with its principal office in Wilson, North Carolina (the
"Adviser") and Federated Investment Management Company, a Delaware business
trust ("FIMCO").
RECITALS:
---------
A. The Adviser has entered into an advisory agreement dated ___________, (the
"Advisory Agreement") with Branch Banking & Trust Company a North Carolina
bank (the "Company"), pursuant to which the Adviser provides portfolio
management services to the series of the Company set forth on Schedule 1
to this Agreement (each a "Fund" and collectively the "Funds");
B. The Advisory Agreement provides that the Adviser may delegate any or all of
its portfolio management responsibilities under the Advisory Agreement to
one or more subadvisers; and
C. The Adviser and the Board of Directors (the "Board") of the Company desire
to retain FIMCO to render portfolio management services in the manner and
on the terms set forth in this Agreement.
AGREEMENT:
----------
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, the Adviser and FIMCO agree as follows:
SECTION 1. APPOINTMENT OF SUBADVISER.
The Adviser hereby appoints FIMCO as subadviser for each Fund and
authorizes FIMCO, in its discretion and without prior consultation with the
Adviser, to invest and manage each Fund's portfolio of Securities in accordance
with such Fund's stated investment objective to the fullest extent permitted by:
(a) the Fund's investment policies, limitations, procedures and guidelines
set forth in the documents listed on Schedules 2 and 3 to this
Agreement;
(b) any additional objectives, policies or guidelines established by the
Adviser or by the Board that have been furnished in writing to FIMCO;
(c) the provisions of the Investment Company Act of 1940 (the "1940 Act")
and the rules and regulations thereunder applicable to the Fund,
including rule 2a-7 promulgated thereunder ("Rule 2a-7"); and
(d) the provisions of Subchapter M of the Internal Revenue Code ("IRC")
applicable to "regulated investment companies."
20
<PAGE> 23
For purposes of this Agreement, "Securities" include any investment permitted
under the foregoing policies, limitations, procedures, guidelines, laws or
regulations. Subject to the supervision of the Adviser and the Board, the
Adviser authorizes FIMCO to determine the structure and composition of the
Fund's portfolio, including the purchase, retention and disposition of, and
exercise of all rights pertaining to, the Securities comprising the portfolio.
SECTION 2. REPRESENTATIONS AND WARRANTIES.
SECTION 2.1. REPRESENTATIONS AND WARRANTIES OF FIMCO
FIMCO represents and warrants to Adviser as follows:
(a) FIMCO is a business trust duly organized, validly existing, and in good
standing under the laws of the State of Delaware.
(b) This Agreement constitutes the legal, valid, and binding obligation of
FIMCO, enforceable against FIMCO in accordance with its terms. FIMCO has
the absolute and unrestricted right, power, and authority to execute and
deliver this and to perform its obligations under this Agreement.
(c) Neither the execution and delivery of this Agreement by FIMCO nor the
performance of any of its obligations hereunder will give any person the
right to prevent, delay, or otherwise interfere with the performance of
such obligations pursuant to:
(i) any provision of FIMCO's Declaration of Trust or By-Laws;
(ii) any resolution adopted by the board of trustees or the
shareholders of FIMCO;
(iii) any law, regulation or administrative or court order to which
FIMCO may be subject; or
(iv) any contract to which FIMCO is a party or by which FIMCO may be
bound.
FIMCO is not and will not be required to obtain any consent from any person
in connection with the execution and delivery of this Agreement or the
performance of any obligations hereunder.
(d) FIMCO is registered with the Securities and Exchange Commission ("SEC")
as an investment adviser under the Investment Advisers Act of 1940 (the
"Advisers Act") and is registered or licensed as an investment adviser
under the laws of all jurisdictions in which its activities require it to
be so registered or licensed, except where the failure to be so licensed
would not have a material adverse effect on its business.
(e) FIMCO has furnished to the Adviser true and complete copies of all the
documents listed on Schedule 3 to this Agreement.
21
<PAGE> 24
SECTION 2.2. REPRESENTATIONS AND WARRANTIES OF THE ADVISER
The Adviser represents and warrants to FIMCO as follows:
(a) The Adviser is a stated chartered bank duly organized, validly
existing, and in good standing under the laws of the State of North
Carolina.
(b) This Agreement constitutes the legal, valid, and binding obligation of
the Adviser, enforceable against the Adviser in accordance with its terms.
the Adviser has the absolute and unrestricted right, power, and authority
to execute and deliver this and to perform its obligations under this
Agreement.
(c) Neither the execution and delivery of this Agreement by the Adviser nor
the performance of any of its obligations hereunder will give any person
the right to prevent, delay, or otherwise interfere with the performance of
such obligations pursuant to:
(i) any provision of the Adviser's bank charter or By-Laws;
(ii) any resolution adopted by the board of directors or the
shareholders of the Adviser;
(iii) any law, regulation or administrative or court order to which
the Adviser may be subject; or
(iv) any contract to which the Adviser is a party or by which the
Adviser may be bound.
Except for the approval of the Board and of each Fund's shareholders as
required by Section 15 of the 1940 Act, the Adviser is not and will not be
required to obtain any consent from any person in connection with the
execution and delivery of this Agreement or the performance of any
obligations hereunder.
(d) The Adviser is registered with the SEC as an investment adviser under
the Advisers Act and is registered or licensed as an investment adviser
under the laws of all jurisdictions in which its activities require it to
be so registered or licensed, except where the failure to be so licensed
would not have a material adverse effect on its business.
(e) The Adviser has furnished to FIMCO true and complete copies of all the
documents listed on Schedule 2 to this Agreement.
SECTION 3. CONDITIONS TO AGREEMENT.
FIMCO's and the Adviser's obligations under this Agreement are subject to
the satisfaction of the following conditions precedent:
(a) Receipt by FIMCO of a certificate of an officer of Company stating that
(i) this Agreement and the Advisory Agreement have been approved by the
vote of a majority of the trustees, who are not interested persons of FIMCO
or the Adviser, cast in person at a meeting of the Board call for the
purpose of voting on such approval, and (ii) this
22
<PAGE> 25
Agreement and the Advisory Agreement have been approved by the vote of a
majority of the outstanding voting securities of the Company;
(b) Receipt by FIMCO of certified copies of instructions from the Fund to
its custodian designating the persons specified by FIMCO as "Authorized
Persons" under the Fund's custody agreement;
(c) The Fund's execution and delivery of a limited power of attorney in
favor of FIMCO, in a form mutually agreeable to FIMCO, the Adviser and the
Board;
(d) Receipt by FIMCO of Board resolutions, certified by an officer of the
Company, adopting all procedures and guidelines listed on Schedule 3 to
this Agreement and identified as required by Rule 2a-7 or any other
exemptive rule or order that is or will become applicable to any Fund;
(e) Receipt by FIMCO of complete copies, certified by an officer of the
Company, of all other policies procedures, guidelines, and codes listed on
Schedule 2 to this Agreement; and
(f) Any other documents, certificates or other instruments that FIMCO or
the Adviser may reasonable request from the Fund.
SECTION 4. COMPENSATION.
For the services provided under this Agreement, the Adviser will pay to
FIMCO a fee at the annual rate set forth opposite each Fund's name on Schedule 1
multiplied times such Fund's average daily net assets. Such fee will accrue
daily and will be paid monthly to FIMCO on or before the last business day of
the next succeeding calendar month. If this Agreement is effective for only a
portion of a month, the fee will be prorated for the portion of such month
during which this Agreement is in effect.
SECTION 5. INFORMATION AND REPORTS.
(a) The Adviser will promptly notify FIMCO of any material change in any of
the documents listed on Schedule 2 to this Agreement and will provide FIMCO
with copies of any such modified document. The Adviser will also provide
FIMCO with a list, to the best of the Adviser's knowledge, of all
affiliated persons of Adviser (and any affiliated person of such an
affiliated person) and will promptly update the list whenever the Adviser
becomes aware of any additional affiliated persons.
(b) FIMCO will maintain books and records relating to its management of the
Fund under its customary procedures and in compliance with applicable
regulations under the 1940 Act and the Advisers Act. FIMCO will permit the
Adviser to inspect such books and records at all reasonable times during
normal business hours, upon reasonable notice. Prior to each Board meeting,
FIMCO will provide the Adviser and the Board with reports regarding its
management of the Fund during the interim period, in such form as may be
mutually agreed upon by FIMCO and the Adviser. FIMCO will also provide the
Adviser with any information regarding its management of the Fund required
for any shareholder
23
<PAGE> 26
report, amended registration statement or prospectus supplement filed by
the Fund with the SEC.
SECTION 6. NONEXCLUSIVE AGREEMENT; ALLOCATION OF TRANSACTIONS.
(a) The investment management services provided by FIMCO hereunder are not
to be deemed to be exclusive, and FIMCO shall be free to render similar
services to other advisers, investment companies, and other types of
clients.
(b) To the extent consistent with applicable law, FIMCO may aggregate
purchase or sell orders for the Fund with contemporaneous purchase or sell
orders of other clients of FIMCO or its affiliated persons. In such event,
allocation of the Securities so purchased or sold, as well as the expenses
incurred in the transaction, will be made by FIMCO in the manner FIMCO
considers to be the most equitable and consistent with its and its
affiliates' fiduciary obligations to the Fund and to such other clients.
The Adviser hereby acknowledges that such aggregation of orders may not
result in a more favorable price or lower brokerage commissions in all
instances.
(c) FIMCO will place purchase and sell orders for the Fund with or through
such banks, brokers, dealers, futures commission merchants or other firms
dealing in Securities ("Brokers") as it determines, which may include
Brokers that are affiliated persons of FIMCO, provided such orders are
exempt from the provisions of Section 17(a), (d) and (e) of the 1940 Act.
FIMCO will use its best efforts to obtain execution of transactions for the
Fund at prices which are advantageous to the Fund and at commission rates
that are reasonable in relation to the services received. FIMCO may,
however, select Brokers on the basis that they provide brokerage, research
or other services or products to the Fund and/or other clients of FIMCO and
its affiliated persons. In selecting Brokers, FIMCO may also consider the
reliability, integrity and financial condition of the Broker, and the size
of and difficulty in executing the order.
SECTION 7. FUND EXPENSES.
Each Fund shall pay or cause to be paid all of its own expenses and its
allocable share of Trust expenses incurred in managing its portfolio of
Securities, including all commissions, mark-ups, transfer fees, registration
fees, ticket charges, transfer taxes, custodian fees and similar expenses. Each
Fund will also pay its allocable share of such extraordinary expenses as may
arise including expenses incurred in connection with litigation, proceedings,
and claims and the legal obligations of the Trust to indemnify its officers and
Trustees and agents with respect thereto. Each Fund will promptly reimburse
FIMCO for any such expense to the extent advanced by FIMCO. In no event will
FIMCO have any obligation to pay any of the Funds' expenses, including without
limitation, the expenses of organizing the Trust and continuing its existence;
fees and expenses of Trustees and officers of the Trust; fees for administrative
personnel and services; expenses incurred in the distribution of its shares
("Shares"), including expenses of administrative support services; fees and
expenses of preparing and printing its Registration Statements under the
Securities Act of 1933 and the 1940 Act; expenses of registering and qualifying
the Trust, the Funds, and Shares of the Funds under federal and state laws and
regulations; expenses of preparing, printing, and distributing prospectuses (and
any amendments
24
<PAGE> 27
thereto) to shareholders; interest expense, taxes, fees, and commissions of
every kind; expenses of issue (including cost of Share certificates), purchase,
repurchase, and redemption of Shares; charges and expenses of custodians,
transfer agents, dividend disbursing agents, shareholder servicing agents, and
registrars; printing and mailing costs, auditing, accounting, and legal
expenses; reports to shareholders and governmental officers and commissions;
expenses of meetings of Trustees and shareholders and proxy solicitations
therefor; insurance expenses; association membership dues and such nonrecurring
items as may arise, including all losses and liabilities incurred in
administering the Trust and the Funds.
SECTION 8. LIMITATION OF LIABILITY.
(a) In the absence of willful misfeasance, bad faith or gross negligence on
the part of FIMCO, or of reckless disregard by FIMCO of its obligations and
duties hereunder, FIMCO shall not be subject to any liability to the
Adviser, the Fund, the Company, any shareholder of the Fund, or to any
person, firm or organization. Without limiting the foregoing, FIMCO shall
not have any liability whatsoever for any investment losses incurred by a
Fund, or arising from transactions by a Fund, prior to the date on which
FIMCO assumes responsibility for the management of the Fund's portfolio.
(b) The Adviser, the Company, and the Fund are hereby expressly put on
notice of the limitation of liability as set forth in the Declaration of
Trust of FIMCO and agree that the obligations assumed by FIMCO pursuant to
this Agreement will be limited in any case to FIMCO and its assets and the
Adviser, the Company, and the Fund shall not seek satisfaction of any such
obligation from the shareholders of FIMCO, the trustees of FIMCO, officers,
employees or agents of FIMCO, or any of them.
SECTION 9. PRICING.
The Adviser, the Company and the Fund hereby acknowledge that FIMCO is
not responsible for pricing portfolio Securities, and that the Adviser, the
Company, the Fund, and FIMCO will rely on the pricing agent chosen by the Board
of the Company for prices of Securities, for any purposes.
SECTION 10. TERM.
This Agreement shall begin as of the date of its execution and shall
continue in effect for a period of two years from the date hereof and thereafter
for successive periods of one year, subject to the provisions for termination
and all of the other terms and conditions hereof if such continuance is
specifically approved at least annually in conformity with the requirements of
the 1940 Act; provided, however, that this Agreement may be terminated by the
Fund at any time, without the payment of any penalty, by the Board or by vote of
a majority of the outstanding voting securities (as defined in the 1940 Act) of
the Fund, or by the Adviser or FIMCO at any time, without the payment of any
penalty, on not more than 60 days' nor less than 30 days' written notice to the
other party. This Agreement will terminate automatically in the event of its
assignment (as defined in the 1940 Act) or upon the termination of the Adviser's
management agreement with the Fund.
25
<PAGE> 28
SECTION 11. LIMITED POWER OF ATTORNEY.
Subject to any other written instructions of the Adviser or the
Company, FIMCO is hereby appointed the Fund's agent and attorney-in-fact for the
limited purposes of executing account documentation, agreements, contracts and
other documents as FIMCO shall be requested by brokers, dealers, counter parties
and other persons in connection with its management of the Fund's assets. The
Adviser and the Company hereby ratify and confirm as good and effectual, at law
or in equity, all that FIMCO and its officers and employees, may do in its
capacity as attorney-in-fact. However, nothing herein shall be construed as
imposing a duty on FIMCO to act or assume responsibility for any matters in its
capacity as attorney-in-fact for the Fund. Any person, partnership, corporation
or other legal entity dealing with FIMCO in its capacity as attorney-in-fact
hereunder for the Fund is hereby expressly put on notice that FIMCO is acting
solely in the capacity as an agent of the Fund and that any such person,
partnership, corporation or other legal entity must look solely to the Fund for
enforcement of any claim against Fund, as FIMCO assumes no personal liability
whatsoever for obligations of the Fund entered into by FIMCO in its capacity as
attorney-in-fact for the Fund.
SECTION 12. GENERAL PROVISIONS
SECTION 12.1. NOTICES
All notices, consents, waivers, and other communications under this
Agreement must be in writing and will be deemed to have been duly given when (a)
delivered by hand (with written confirmation of receipt), (b) sent by telecopier
(with written confirmation of receipt), provided that a copy is mailed by
registered mail, return receipt requested, or (c) when received by the
addressee, if sent by a nationally recognized overnight delivery service
(receipt requested), in each case to the appropriate addresses and telecopier
numbers set forth below (or to such other addresses and telecopier numbers as a
party may designate by notice to the other parties):
FIMCO: Federated Investment Management Company
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Attention: Carol Kayworth
Facsimile No.: _______________
Adviser: Branch Banking & Trust Company
434 Fayetteville Street Mall
Raleigh, NC 27601
Attention: E.G. Purcell, III
Facsimile No.: 919-716-9004
SECTION 12.2. FURTHER ASSURANCES
The parties agree (a) to furnish upon request to each other such further
information, (b) to execute and deliver to each other such other documents, and
(c) to do such other acts and things, all as the other party may reasonably
request for the purpose of carrying out the intent of this Agreement and the
documents referred to in this Agreement.
26
<PAGE> 29
SECTION 12.3. WAIVER
The rights and remedies of the parties to this Agreement are cumulative and
not alternative. Neither the failure nor any delay by any party in exercising
any right, power, or privilege under this Agreement or the documents referred to
in this Agreement will operate as a waiver of such right, power, or privilege,
and no single or partial exercise of any such right, power, or privilege will
preclude any other or further exercise of such right, power, or privilege or the
exercise of any other right, power, or privilege. To the maximum extent
permitted by applicable law, (a) no claim or right arising out of this Agreement
or the documents referred to in this Agreement can be discharged by one party,
in whole or in part, by a waiver or renunciation of the claim or right unless in
writing signed by the other party; (b) no waiver that may be given by a party
will be applicable except in the specific instance for which it is given; and
(c) no notice to or demand on one party will be deemed to be a waiver of any
obligation of such party or of the right of the party giving such notice or
demand to take further action without notice or demand as provided in this
Agreement or the documents referred to in this Agreement.
SECTION 12.4. ENTIRE AGREEMENT AND MODIFICATION
This Agreement supersedes all prior agreements between the parties with
respect to its subject matter and constitutes (along with the documents referred
to in this Agreement) a complete and exclusive statement of the terms of the
agreement between the parties with respect to its subject matter. This Agreement
may not be amended except by a written agreement executed by the party to be
charged with the amendment.
SECTION 12.5. ASSIGNMENTS, SUCCESSORS, AND NO THIRD-PARTY RIGHTS
Neither party may assign any of its rights under this Agreement without the
prior consent of the other parties. Subject to the preceding sentence, this
Agreement will apply to, be binding in all respects upon, and inure to the
benefit of the successors and permitted assigns of the parties. Nothing
expressed or referred to in this Agreement will be construed to give any person
other than the parties to this Agreement any legal or equitable right, remedy,
or claim under or with respect to this Agreement or any provision of this
Agreement. This Agreement and all of its provisions and conditions are for the
sole and exclusive benefit of the parties to this Agreement and their successors
and assigns.
SECTION 12.6. SEVERABILITY
If any provision of this Agreement is held invalid or unenforceable by any
court of competent jurisdiction, the other provisions of this Agreement will
remain in full force and effect. Any provision of this Agreement held invalid or
unenforceable only in part or degree will remain in full force and effect to the
extent not held invalid or unenforceable.
SECTION 12.7. SECTION HEADINGS, CONSTRUCTION
The headings of Sections in this Agreement are provided for convenience
only and will not affect its construction or interpretation. All references to
"Section" or "Sections" refer to the corresponding Section or Sections of this
Agreement. All words used in this Agreement will be
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construed to be of such gender or number as the circumstances require. Unless
otherwise expressly provided, the word "including" does not limit the preceding
words or terms.
SECTION 12.8. GOVERNING LAW
This Agreement will be governed by the laws of the State of
Pennsylvania without regard to conflicts of laws principles.
SECTION 12.9. COUNTERPARTS
This Agreement may be executed in one or more counterparts, each of
which will be deemed to be an original copy of this Agreement and all of which,
when taken together, will be deemed to constitute one and the same agreement.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be signed
on their behalf by their duly authorized officers as of the date first above
written.
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SCHEDULE 1 - FUNDS AND SUBADVISORY FEES
NAME OF SERIES SUBADVISORY FEE
BB&T PRIME MONEY MARKET FUND AN ANNUAL FEE,
ACCRUED DAILY
AND PAID
MONTHLY, OF:
0.10% OF THE FUND'S
AVERAGE DAILY NET
ASSETS UP TO $500
MILLION
0.08% OF THE FUND'S
AVERAGE DAILY NET
ASSETS OVER $500
MILLION
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SCHEDULE 2 - FUND DOCUMENTATION
1. Company's bank charter and Bylaws.
2. Currently effective registration statement for each class of each Fund's
shares and any pending amendments to such registration statement.
3. Any supplements to any prospectus or statement of additional information
for any class of any Fund's shares.
4. Custody Agreement between the Trust and FirStar, as Custodian for the
Portfolio's securities, including information as to:
- the Portfolio's nominee,
- the Federal tax identification numbers of the Portfolio and its
nominee,
- all routing, bank, participant and account numbers and other
information necessary to provide proper instructions for transfer and
delivery of Securities to the Portfolio's accounts at the Custodian,
- the name, address, phone and fax number of the Custodian's employees
responsible for the Portfolio's accounts, and
- the Portfolio's pricing service and contact persons.
5. All policies, procedures, guidelines and codes adopted by the Board under
the 1940 Act or any regulation thereunder, including:
- Rule 2a-7 (if the Portfolio holds itself out as a "money market
fund"),
- Rule 10f-3 (relating to affiliated underwriting syndicates),
- Rule 17a-7 (relating to interfund transactions),
- Rule 17e-1 (relating to transactions with affiliated Brokers),
- Rule 17f-4 (relating to securities held in securities depositories),
- Rule 17j-1 (relating to a code of ethics), and
- Rule 17f-5 (relating to foreign custody).
6. All SEC exemptive orders applicable to the Portfolio, and all procedures
and guidelines adopted by the Board under the terms of such orders.
7. All procedures and guidelines adopted by the Board or the Manager
regarding:
- Repurchase agreements,
- Evaluating the liquidity of securities, include restricted securities,
municipal leases and stripped U.S. government securities,
- Segregation of liquid assets in connection with reverse repurchase
agreements, firm commitments, standby commitments, short sales,
options and futures agreements,
- Derivative contracts and securities, and
- Affiliated bank procedures.
8. Any master agreements that the Trust has entered into on behalf of the
Portfolio, including:
- Master Repurchase Agreement,
- Master Futures and Options Agreements,
- Master Foreign Exchange Netting Agreements, and
- Master Swap Agreements.
9. Blue Sky undertakings.
10. CFTC Rule 4.5 letter.
11. Schedule of the current year's Board meetings, and the reports needed by
the Board.
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12. Pricing and performance calculation entities and contact persons.
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SCHEDULE 3 - SUBADVISER DOCUMENTATION
-------------------------------------
1. Part II of FIMCO's Form ADV most recently filed with the SEC.
2. Guidelines and procedures required by Rule 2a-7, consisting of:
- Forms of resolutions authorizing use of the amortized cost method,
- Amortized Cost Procedures, and
- Federated Investment Adviser Guidelines
3. Procedures and checklists required by the following exemptive rules and
orders under under the 1940 Act:
- Rule 10f-3 (relating to affiliated underwriting syndicates),
- Rule 17a-7 (relating to interfund transactions),
- Rule 17e-1 (relating to transactions with affiliated Brokers),
- Rule 17f-4 (relating to securities held in securities depositories),
- Rule 17j-1 (relating to a code of ethics),
- Release No. IC-22903 (granting an exemption for the use of "core
funds"),
- Release No. IC-22313 (granting an exemption for the purchase of
affiliated money market funds)
- Release Nos. IC-16602 and IC-19816 (granting an exemption for certain
transactions with affiliated banks), and
- Release No. IC-15243 (granting an exemption permitting the purchase of
insurance from an affiliate and the settlement of claims therefrom).
4. Procedures and checklist required
5. All exemptive orders granted by the SEC that will become applicable to the
Portfolio, and the procedures and guidelines followed by FIMCO in
accordance therewith.
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BB&T PRIME MONEY MARKET FUND
PROXY FOR A SPECIAL MEETING OF
SHAREHOLDERS ON JUNE 28, 2000
This proxy is solicited by the Board of Trustees of BB&T Funds for use at a
Special Meeting of Shareholders ("Special Meeting") to be held on June 28, 2000
at 4:00 p.m. Eastern Time at 3435 Stelzer Road, Columbus, Ohio 43219.
The undersigned hereby appoints Mike Lockhart and Charles L. Booth, each of them
with full power of substitution as proxies of the undersigned, to vote, as
designated below, at the above-stated Special Meeting and at any and all
adjournments thereof, all units of beneficial interest in the Fund held of
record by the undersigned on the record date for the Special Meeting, upon the
following matters and upon any other matter which may come before the Special
Meeting in their discretion:
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) call 1-800-690-6903.
3) Enter the 12 digit control number set on the Proxy Card and follow the
simple instructions.
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the Proxy Card below at hand.
2) Go to website www.proxyvote.com.
3) Enter the 12 digit control number set forth or the Proxy Card and follow
the simple instructions.
PROPOSAL (1) Approval of the new Investment Sub-Advisory Agreement between BB&T
and Federated Investment Management Company.
FOR AGAINST ABSTAIN
--------- --------- ---------
PROPOSAL (2) Approval of the amendment to the Fund's industry concentration
policy.
FOR AGAINST ABSTAIN
--------- --------- ---------
PROPOSAL (3) Transaction of such other business as may properly come before the
Special Meeting.
FOR AGAINST ABSTAIN
--------- --------- ---------
Every properly executed proxy will be voted in the manner specified hereon and,
in the absence of specification, will be treated as granting authority to vote
FOR the above-enumerated proposals.
The undersigned hereby acknowledges receipt of the Notice of
Special Meeting dated June 12, 2000 and the Proxy Statement attached hereto:
-----------------------------------------------------
Signature(s) of Shareholder(s)
-----------------------------------------------------
Signature(s) of Shareholder(s)
Date: , 2000
-----------------------------------------------
IMPORTANT: Please sign legibly and exactly as the name appears
on this card. Joint owners must EACH sign the proxy. When
signing as executor, administrator, attorney, trustee or
guardian, or as custodian for a minor, please give the FULL
title of such. If a corporation, please give the FULL
corporate name and indicate the signer's office. If a partner,
please sign in the partnership name.
*** IF VOTING BY MAIL, PLEASE MARK, SIGN, DATE AND RETURN THE
PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE***
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