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BB&T FUNDS
SUPPLEMENT DATED JULY 7, 2000
TO THE STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 1, 2000
THIS SUPPLEMENT PROVIDES UPDATED INFORMATION REGARDING CHANGES TO THE
PRIME MONEY MARKET FUND'S (1) INVESTMENT POLICIES, (2) CUSTODIAN, AND (3)
SUB-ADVISER. PLEASE KEEP THIS SUPPLEMENT AND READ IT TOGETHER WITH THE STATEMENT
OF ADDITIONAL INFORMATION.
I. Changes to Investment Policies for the Prime Money Market Fund
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A. Addition of Credit Enhancement
The Prime Money Market Fund may purchase securities subject to credit
enhancements. The following language is added to page 2 of the
Statement of Additional Information:
The Prime Money Market Fund may purchase securities subject to
credit enhancement. Credit enhancement consists of an arrangement
in which a company agrees to pay amounts due on a fixed income
security if the issuer defaults. In some cases the company
providing credit enhancement makes all payments directly to the
security holders and receives reimbursement from the issuer.
Normally, the credit enhancer has greater financial resources and
liquidity than the issuer. For this reason, the Sub-Adviser
usually evaluates the credit risk of a fixed income security based
solely upon its credit enhancement.
B. Addition of Zero Coupon Securities
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The Prime Money Market Fund may purchase zero coupon securities. The
following language is added to page 2 of the Statement of Additional
Information:
The Prime Money Market Fund may purchase zero coupon
securities. Zero coupon securities do not pay interest or
principal until final maturity unlike debt securities that
provide periodic payments of interest (referred to as a coupon
payment). Investors buy zero coupon securities at a price
below the amount payable at maturity. The difference between
the purchase price and the amount paid at maturity represents
interest on the zero coupon security. Investors must wait
until maturity to receive interest and principal, which
increases the interest rate and credit risks of a zero coupon
security.
C. Addition of Insurance Contracts
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The Prime Money Market Fund may purchase insurance contracts. The
following language is added to page 2 of the Statement of Additional
Information:
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The Prime Money Market Fund may purchase insurance contracts.
Insurance contracts include guaranteed investment contracts,
funding agreements and annuities. The Prime Money Market Fund
treats these contracts as fixed income securities.
D. Removal of Restriction Regarding Guaranteed Investment Contracts
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Information regarding Guaranteed Investment Contracts for the Prime
Money Market Fund appears on page 3 of the Statement of Additional
Information. The paragraph has been deleted and replaced in its
entirety by the following:
The Prime Money Market Fund may make investments in guaranteed
investment contracts ("GICs") issued by highly rated U.S.
insurance companies. Under these contracts, the Prime Money
Market fund makes cash contributions to a deposit fund of the
insurance company's general account. The insurance company
then credits interest to the Prime Money Market fund on a
monthly basis, which is based on an index (such as the Salomon
Brothers CD Index), but is guaranteed not to be less than a
certain minimum rate.
E. Removal of Restriction Regarding Foreign Securities
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Information regarding foreign securities for the Prime Money Market
Fund appears on pages 4 and 5 of the Statement of Additional
Information. The second paragraph has been deleted in its entirety.
F. Removal of Percentage Limitation on Investing in Investment
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Companies
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Information regarding investing in investment companies for each BB&T
Fund, including the Prime Money Market Fund, appears on pages 27 and 28
of the Statement of Additional Information. The first sentence of the
first paragraph has been deleted and replaced in its entirety by the
following:
Each Fund, except the U.S. Treasury Fund and the Fund of
Funds, may, to the extent permitted by the 1940 Act, invest in
the securities of money market mutual funds.
G. Amendment to Concentration Policy
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Information regarding the concentration policy for the Prime Money
Market Fund appears on pages 35 and 36 of the Statement of Additional
Information. The first paragraph has been deleted in its entirety and
replaced by the following:
1. Make investments that will result in the concentration of
its investments in the securities of issuers primarily engaged
in the same industry. Government securities, municipal
securities and bank instruments will not be deemed to
constitute an industry.
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Bank instruments include bank accounts, time deposits,
certificates of deposit, and banker's acceptances. As a matter
of non-fundamental policy, instruments of foreign banks will
not be considered bank instruments for purposes of the
above-described exclusion from the above industry
concentration limit; (ii) wholly-owned finance companies will
be considered to be in the industries of their parents if
their activities are primarily related to financing the
activities of the parents; and (iii) utilities will be divided
according to their services, for example, gas, gas
transmission, electric and gas, electric and telephone will be
each considered a separate industry. For purposes of this
limitation, a security is considered to be issued by the
entity (or entities) whose assets and revenues back the
security. A guarantee of a security is not deemed to be a
security issued by the guarantor, for purposes of
diversificartion, when the value of all securities issued and
guaranteed by the guarantor, and owned by the Fund, does not
exceed 10% of the value of the Fund's total assets.
II. Change Regarding the Custodian to the Prime Money Market Fund
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State Street Bank and Trust Company currently serves as the Custodian
to the Prime Money Market Fund. Firstar Bank, N.A. formerly served as the
Custodian to the Prime Money Market Fund.
III. Change Regarding the Sub-Adviser to the Prime Money Market Fund
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Information regarding the Sub-Adviser to the Prime Money Market Fund
appears on pages 2, 19, 80, 81, 84, and 85 of the Statement of Additional
Information. Federated Investment Management Company currently serves as the
Sub-Adviser to the Prime Money Market Fund. BlackRock Institutional Management
Corporation formerly served as the Sub-Adviser to the Prime Money Market Fund.
All such references in the Statement of Additional Information regarding the
Sub-Adviser to the Prime Money Market Fund should be noted accordingly.
SHAREHOLDERS SHOULD RETAIN THIS SUPPLEMENT WITH THE APPLICABLE PROSPECTUS FOR
FUTURE REFERENCE.
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