<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:
[ ] Preliminary Proxy Statement [ ] Confidential, For Use of the
[X] 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:
<PAGE> 2
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> 3
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
BB&T Funds
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.
<PAGE> 4
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,
/s/ Walter B. Grimm
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
<PAGE> 5
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.
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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 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. WHOM 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
3
<PAGE> 7
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 108,147,622.72 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
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<PAGE> 8
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.
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.
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<PAGE> 9
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
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<PAGE> 10
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 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.
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<PAGE> 11
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.
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.
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<PAGE> 12
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 September 30, 2001. 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
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
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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.
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
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<PAGE> 14
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 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
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
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<PAGE> 15
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>
POSITION(S) HELD WITH
NAME AND ADDRESS BB&T PRINCIPAL OCCUPATION
---------------- --------------------- --------------------
<S> <C> <C>
John A. Allison Chairman and Chief BB&T Corporation and
Winston-Salem, NC Executive Officer Branch Banking and
Trust Company
Paul Barringer Director Chairman and Chief
Weldon, NC Executive Officer,
Coastal Lumber Company
Alfred A. Cleveland Director Attorney, McCoy,
Fayetteville, NC Weaver, Wiggins,
Cleveland & Raper
W.R. Cuthberton, Jr. Director Retired (formerly
Charlotte, NC Senior Vice President),
Branch Banking and
Trust Company
Ronald E. Deal Director Investor, Chairman,
Hickory, NC Wesley Hall
A.J. Dooley, Sr. Director Retired (former
Lexington, SC Partner), Dooley,
Dooley, Spence, Parker
& Hipp, P.A.,
Attorney-at-Law
Tom D. Efird Director President, Standard
Gastonia, NC Distributors, Inc.
Paul S. Goldsmith Director Chairman and President,
Greenville, SC William Goldsmith
Company, Inc.
Dr. L. Vincent Hackley Director Chairman, Character
Fayetteville, NC Counts! Coalition
Jane P. Helm Director Vice Chancellor for
Boone, NC Business Affairs,
Appalachian State
University
</TABLE>
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<PAGE> 16
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
NAME AND ADDRESS BB&T PRINCIPAL OCCUPATION
---------------- --------------------- --------------------
<S> <C> <C>
Richard Janeway, M.D. Director Executive Vice
Winston-Salem, NC President for Health
Affairs, Emeritus;
University Professor of
Medicine & Management;
Wake Forest University,
School of Medicine
J. Ernest Lathem, M.D. Director Personal Investments,
Greenville, SC Retired Medical
Director, Prostate
Diagnostic Center
James H. Maynard Director Chairman and Chief
Raleigh, NC Executive Officer,
Investors Management
Corporation
Joseph A. McAleer, Jr. Director Manager and Member,
Winston-Salem, NC MACKK, LLC; Krispy
Kreme Doughnut
Franchisee
Albert O. McCauley Director President and Chief
Fayetteville, NC Executive 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
Winston-Salem, NC Director PHC Holdings
Nido R. Qubein Director Chief Executive
High Point, NC Officer, Creative
Services, Inc.
E. Rhone Sasser Director Former Chairman, United
Whiteville, NC Carolina, Bancshares
Corporation
Jack E. Shaw Director Chief Executive
Greenville, SC Officer, Shaw
Resources, Inc.
Harold B. Wells Director President, Wells
Whiteville, NC Chevrolet, Buick,
Pontiac, Oldsmobile,
GMC, Inc.; Wells
Chrysler Dodge Jeep,
Inc.
</TABLE>
10
<PAGE> 17
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 FEE
FISCAL FISCAL ADVISORY PAID AS OF FISCAL
FUND NAME YEAR END YEAR END FEE RATE YEAR END
--------- -------- ------------ -------- -----------------
<S> <C> <C> <C> <C>
Prime Cash Series (a 5/31/199 $4,728,448,336 0.50% 0.34%
portfolio of Cash
Trust Series, Inc.)
Federated Prime Money 12/31/1999 $ 193,869,739 0.50% 0.50%
Market Fund II (a
portfolio of
Federated Insurance
Series)
Prime Obligations 7/31/199 $9,400,957,454 0.20% 0.10%
Fund (a portfolio of
Money Market
Obligations Trust)
Prime Cash 7/31/199 $3,133,700,648 0.20% Expects to pay 0.07%
Obligations Fund (a for the fiscal year
portfolio of Money ending 7/31/2000
Market Obligations
Trust)
</TABLE>
11
<PAGE> 18
<TABLE>
<CAPTION>
MOST
RECENT ASSETS AS OF ADVISORY FEE
FISCAL FISCAL ADVISORY PAID AS OF FISCAL
FUND NAME YEAR END YEAR END FEE RATE YEAR END
--------- -------- ------------ -------- -----------------
<S> <C> <C> <C> <C>
Prime Value 7/31/199 $2,131,209,733 0.20% Expects to pay 0.05%
Obligations Fund (a for the fiscal year
portfolio of Money ending 7/31/2000
Market Obligations
Trust)
Federated Master 11/30/1999 $ 358,670,407 0.40% 0.27%
Trust (a portfolio of
Money Market
Obligations Trust)
Money Market Trust (a 7/31/199 $ 380,400,408 0.40% For fiscal year ended
portfolio of Money 7/31/1999, the Total
Market Obligations annual fund expenses
Trust) were 0.82% and the Total
actual annual fund
expenses after waivers
were 0.46%
Money Market 12/31/1999 $ 76,851,306 0.50% Expects to pay 0.45% as
Management (a of fiscal year ending
portfolio of Money 12/31/2000
Market Obligations
Trust)
Automated Cash 7/31/1999 $2,321,935,155 0.50% 0.19%
Management Trust (a
portfolio of Money
Market Obligations
Trust)
</TABLE>
12
<PAGE> 19
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>
POSITION(S) HELD WITH
NAME AND ADDRESS FEDERATED PRINCIPAL OCCUPATION
---------------- ------------------------ --------------------
<S> <C> <C>
John F. Donahue Chairman Chairman and Director,
Federated Investors Tower Federated Investors,
1001 Liberty Avenue Inc.; Chairman, Federated
Pittsburgh, PA Investment Management
15222-3779 Company, Federated Global
Investment Management
Corp. and Passport
Research, Ltd.
William D. Dawson, III Trustee, Executive Vice Executive Vice President,
Federated Investors Tower President Federated Investment
1001 Liberty Avenue Counseling, Federated
Pittsburgh, PA Global Investment
15222-3779 Management Corp.,
Federated Investment
Management Company and
Passport Research, Ltd.
J. Christopher Donahue Trustee, CEO, COO Chairman and Director,
Federated Investors Tower Federated Investors,
1001 Liberty Avenue Inc.; Chairman, Federated
Pittsburgh, PA Investment Management
15222-3779 Company, Federated Global
Investment Management
Corp. and Passport
Research, Ltd.
Thomas R. Donahue Trustee, Treasurer Director, Vice President,
Federated Investors Tower Treasurer and Chief
1001 Liberty Avenue Financial Officer,
Pittsburgh, PA Federated Investors, Inc.
15222-3779
</TABLE>
13
<PAGE> 20
<TABLE>
<CAPTION>
POSITION(S) HELD WITH
NAME AND ADDRESS FEDERATED PRINCIPAL OCCUPATION
---------------- ------------------------ --------------------
<S> <C> <C>
Henry A. Frantzen Trustee, Executive Vice Executive Vice President,
Federated Investors Tower President Federated Investment
1001 Liberty Avenue Counseling, Federated
Pittsburgh, PA Global Investment
15222-3779 Management Corp.,
Federated Investment
Management Company and
Passport Research, Ltd.;
Registered
Representative, Federated
Securities Corp.; Vice
President, Federated
Investors, Inc.
J. Thomas Madden Trustee, Executive Vice Executive Vice President,
Federated Investors Tower President Federated Investment
1001 Liberty Avenue Counseling, Federated
Pittsburgh, PA Global Investment
15222-3779 Management Corp.,
Federated Investment
Management Company and
Passport Research, Ltd.;
Vice President, Federated
Investors, Inc.
Mark D. Olson Trustee Principal, Mark D. Olson
Suite 301 & Company, L.L.C.;
Little Falls Center Two 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.
****
14
<PAGE> 21
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:
<TABLE>
<CAPTION>
TITLE OF PERCENTAGE AMOUNT OF BENEFICIAL
NAME AND ADDRESS CLASS OF CLASS OWNERSHIP
---------------- -------- ---------- --------------------
<S> <C> <C> <C>
Wilbranch
PO Box 2887
Wilson, NC 27894 Trust 94.05% 72,132,092.96
Richard Wern PA
Box 60068
N Charleston, SC 29419 Class A Shares 14.42% 1,009,328.07
</TABLE>
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.
15
<PAGE> 22
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 12, 2000
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.
16
<PAGE> 23
EXHIBIT A
FORM OF
INVESTMENT SUB-ADVISORY AGREEMENT
------------------------
This Subadvisory Agreement (this "Agreement") is entered into as of the 8th
day of July, 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 October 1, 1992,
(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;
17
<PAGE> 24
(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."
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.
18
<PAGE> 25
(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.
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.
19
<PAGE> 26
(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 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.
20
<PAGE> 27
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 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.
21
<PAGE> 28
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 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
22
<PAGE> 29
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 until September 30, 2001 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.
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
23
<PAGE> 30
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):
<TABLE>
<S> <C>
FIMCO: Federated Investment Management Company
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Attention: Carol Kayworth
Facsimile No.: 412-288-7747
Adviser: Branch Banking & Trust Company
434 Fayetteville Street Mall
Raleigh, NC 27601
Attention: E.G. Purcell, III
Facsimile No.: 919-716-9004
</TABLE>
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.
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
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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
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words used in this Agreement will be 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
<TABLE>
<CAPTION>
NAME OF SERIES
--------------
<S> <C>
BB&T Prime Money Market Fund Subadvisory Fee 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
</TABLE>
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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,
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- 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.
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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<PAGE> 37
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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