AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON DECEMBER 13, 2006
REGISTRATION NO. 333-138725
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-14
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933 [X]
[X] PRE-EFFECTIVE AMENDMENT NO. 2
[ ] POST-EFFECTIVE AMENDMENT NO. --
(Check appropriate box or boxes)
BB&T FUNDS
BB&T VARIABLE INSURANCE FUNDS
(Exact Name of Registrant as Specified in Charter)
1-800-228-1872
(Area Code and Telephone Number)
3435 STELZER ROAD
COLUMBUS, OH 43219
(Address of Principal Executive Offices)
------------
ALAN G. PRIEST, ESQUIRE
ROPES & GRAY LLP
ONE METRO CENTER
700 12(TH) STREET, N.W., SUITE 900
WASHINGTON, D.C. 20005
(Name and address of Agent for Service)
------------
APPROXIMATE DATE OF PROPOSED PUBLIC OFFERING: As soon as practicable after
this Registration Statement becomes effective.
Title of securities being offered: Shares of BB&T Large Cap Fund and BB&T
Large Cap VIF.
An indefinite amount of the Registrant's securities has been registered
under the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment
Company Act of 1940. In reliance upon such Rule, no filing fee is being paid at
this time.
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment that specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
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IMPORTANT INFORMATION
FOR SHAREHOLDERS INVESTED IN
BB&T LARGE CAP GROWTH FUND
AND
OWNERS OF VARIABLE ANNUITY OR
LIFE INSURANCE CONTRACTS INVESTED IN
BB&T LARGE CAP GROWTH VIF
The Combined Prospectus/Proxy Statement provides information for both the
shareholders of the BB&T Large Cap Growth Fund, a retail fund, and for owners of
variable annuity or life insurance contracts invested in the BB&T Large Cap
Growth VIF, a variable insurance product. Any discussion below and in the
Combined Prospectus/Proxy Statement relating to insurance companies and
proportional voting applies only with respect to the BB&T Large Cap Growth VIF,
not the BB&T Large Cap Growth Fund.
The document you hold in your hands contains your Combined Prospectus/Proxy
Statement and proxy card or voting instruction form. A proxy card is, in
essence, a ballot. A voting instruction form tells your insurance company how to
vote on your behalf with respect to the BB&T Large Cap Growth VIF. When you vote
your proxy or complete your voting instruction form, you tell us how to vote on
your behalf on important issues relating to your Fund. If you simply sign the
proxy card or voting instruction form without specifying a vote, your shares
will be voted in accordance with the recommendations of the Boards of Trustees
of BB&T Funds and BB&T Variable Insurance Funds, as applicable (collectively,
the "Board" or "Trustees"). If you do not return your voting instruction form or
record your voting instructions by telephone or through the Internet with
respect to the BB&T Large Cap Growth VIF, your insurance company will vote your
shares in the same proportion as shares for which instructions have been
received.
We urge you to spend a few minutes with the Combined Prospectus/Proxy
Statement, fill out your proxy card or voting instruction form, and return it
(or vote by telephone or the Internet). By voting your proxy or completing your
voting instruction form, and doing so promptly, you enable BB&T Funds and BB&T
Variable Insurance Funds to avoid conducting additional mailings.
Please take a few moments to exercise your right to vote. Thank you.
BB&T FUNDS
----------
BB&T LARGE CAP GROWTH FUND
BB&T LARGE CAP FUND
BB&T VARIABLE INSURANCE FUNDS
-----------------------------
BB&T LARGE CAP GROWTH VIF
BB&T LARGE CAP VIF
3435 STELZER ROAD
COLUMBUS, OHIO 43219
DECEMBER 15, 2006
Dear Investors:
Enclosed you will find several documents being provided to you in
connection with a joint special meeting of the shareholders of the BB&T Large
Cap Growth Fund and BB&T Large Cap Growth VIF to be held January 24, 2007 at
9:00 a.m. at the offices of BISYS Fund Services Ohio, Inc., 100 Summer Street,
Suite 1500, Boston, MA 02110. We hope this material will receive your immediate
attention and that, if you cannot attend the meeting in person, you will vote
your proxy or complete your voting instruction form promptly.
The Combined Prospectus/Proxy Statement constitutes the Proxy Statement of
BB&T Funds for the meeting of shareholders of the BB&T Large Cap Growth Fund
(the "Large Cap Growth Fund") and of BB&T Variable Insurance Funds for the
meeting of the shareholders of the BB&T Large Cap Growth VIF (the "Large Cap
Growth VIF"). It also constitutes the Prospectus of (i) the BB&T Large Cap Fund
(the "Large Cap Fund") which is to issue units of beneficial interest ("Shares")
to be distributed to each of the Large Cap Growth Fund shareholders in
connection with the proposed reorganization of the Large Cap Growth Fund with
and into the Large Cap Fund, and (ii) the BB&T Large Cap VIF (the "Large Cap
VIF") Shares to be distributed to each of the Large Cap Growth VIF shareholders
in connection with the proposed reorganization of the Large Cap Growth VIF with
and into the Large Cap VIF. The Board of Trustees of BB&T Funds (the "BB&T
Trustees") is recommending that shareholders of the Large Cap Growth Fund
approve a reorganization in which the Large Cap Growth Fund will transfer all of
its assets to the Large Cap Fund in return for Institutional, Class A, Class B
or Class C Shares of the Large Cap Fund. At the same time, the Large Cap Fund
will assume all of the liabilities of the Large Cap Growth Fund. After the
transfer, it is intended that Shares of the Large Cap Fund will be distributed
to the shareholders of the Large Cap Growth Fund tax-free in liquidation of the
Large Cap Growth Fund. As a result of these transactions, it is expected that
Shares of the Large Cap Growth Fund will, in effect, be exchanged at net asset
value and on a tax-free basis for Shares of the Large Cap Fund. Shareholders of
the Large Cap Growth Fund holding Institutional, Class A, Class B or Class C
Shares, will receive Institutional, Class A, Class B or Class C Shares,
respectively, of the Large Cap Fund. The Board of Trustees of BB&T Variable
Insurance Funds (the "VIF Trustees," and together with the BB&T Trustees, the
"Trustees") is recommending that shareholders of the Large Cap Growth VIF
approve a reorganization in which the Large Cap Growth VIF will transfer all of
its assets to the Large Cap VIF in return for Shares of the Large Cap VIF. At
the same time, the Large Cap VIF will assume all of the liabilities of the Large
Cap Growth VIF. After the transfer, it is intended that Shares of the Large Cap
VIF will be distributed to the shareholders of the Large Cap Growth VIF tax-free
in liquidation of the Large Cap Growth VIF. As a result of these transactions,
it is expected that Shares of the Large Cap Growth VIF will, in effect, be
exchanged at net asset value and on a tax-free basis for Shares of the Large Cap
VIF. These transactions will not result in recognition of any gain or loss for
federal income tax purposes.
BB&T Asset Management, Inc., the investment advisor to the Acquired and
Acquiring Funds (the "Funds"), has advised the Trustees that it believes that
the above-described transactions offer the shareholders of the Large Cap Growth
Fund and Large Cap Growth VIF, respectively, enhanced investment management
efficiencies, greater market leverage and market presence, economies of scale,
and greater opportunities for asset growth.
The Trustees believe that the proposed combinations of the Large Cap Growth
Fund with the Large Cap Fund and Large Cap Growth VIF and Large Cap VIF are in
the best interests of each of the Large Cap Fund and the Large Cap Growth Fund
and its shareholders and Large Cap VIF and Large Cap Growth VIF and its
shareholders, respectively, and recommend that you vote in favor of each
proposal.
While you are, of course, welcome to join us at the Joint Special Meeting,
most Shareholders cast their votes by filling out and signing the enclosed proxy
card (or vote by telephone or the Internet). In order to conduct the Joint
Special Meeting, a majority of shares must be represented either in person or by
proxy. Whether or not you plan to attend the Joint Special Meeting, we need your
vote. Please mark, sign, and date the enclosed proxy card or voting instruction
form and return it promptly in the enclosed, postage-paid envelope so that the
maximum number of shares may be voted (or vote by telephone or the Internet).
The Notice of Joint Special Meeting of shareholders, the accompanying
Combined Prospectus/Proxy Statement, the form of proxy, and the form of voting
instruction form are enclosed. Please read them carefully. If you are unable to
attend the meeting in person, we urge you to sign, date, and return the proxy
card (or vote by telephone or the Internet) so that your Shares may be voted in
accordance with your instructions.
SINCE THE MEETING IS LESS THAN SIX WEEKS AWAY, WE URGE YOU TO GIVE THE
ENCLOSED MATERIAL YOUR PROMPT ATTENTION SO AS TO AVOID THE EXPENSE OF ADDITIONAL
MAILINGS.
Your vote is important to us. Thank you for taking the time to consider
this important proposal.
Sincerely yours,
/s/ Keith F. Karlawish
----------------------------------------
Keith F. Karlawish
President
BB&T Funds
BB&T Variable Insurance Funds
BB&T LARGE CAP GROWTH FUND
BB&T LARGE CAP GROWTH VIF
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
To the Shareholders of BB&T Large Cap Growth Fund and BB&T Large Cap Growth VIF:
NOTICE IS HEREBY GIVEN that a Joint Special Meeting of shareholders of the
BB&T Large Cap Growth Fund and BB&T Large Cap Growth VIF, will be held at the
offices of BISYS Fund Services Ohio, Inc., 100 Summer Street, Suite 1500,
Boston, MA 02110 on January 24, 2007 at 9:00 a.m. Eastern time, for the
following purposes:
1. To consider and act upon an Agreement and Plan of Reorganization
providing for the transfer of all of the assets of the Acquired Fund to the
corresponding Acquiring Fund, as listed below:
<Table>
<Caption>
ACQUIRED FUND ACQUIRING FUND
------------- --------------
BB&T Large Cap Growth Fund BB&T Large Cap Fund
BB&T Large Cap Growth VIF BB&T Large Cap VIF
</Table>
in exchange for Shares of the Acquiring Fund and the assumption by the
Acquiring Fund of all of the liabilities of the Acquired Fund,
followed by the dissolution and liquidation of the Acquired Fund and
the distribution of Shares of the Acquiring Fund to the shareholders
of the Acquired Fund.
2. To transact such other business as may properly come before the
Joint Special Meeting or any adjournment thereof.
The proposed Agreements and Plans Reorganization (the "Reorganization
Plans") are described in the attached Combined Prospectus/Proxy Statement.
Copies of the Reorganization Plans are appended as Appendices A and B thereto.
Pursuant to instructions of the Boards of Trustees of BB&T Funds and BB&T
Variable Insurance Funds (the "Trustees"), the close of business on November 29,
2006, has been designated as the record date for determination of shareholders
entitled to notice of, and to vote at, the Joint Special Meeting or any
adjournment thereof.
Shareholders and contract owners are requested to promptly vote by
telephone or the Internet or to execute and return promptly in the enclosed
envelope the accompanying proxy card or voting instruction form, as applicable,
which is being solicited by BB&T Funds' and/or BB&T Variable Insurance Funds'
Boards 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 and/or BB&T Variable Insurance Funds a written notice of revocation
or a subsequently executed proxy or by attending the Joint Special Meeting and
voting in person. Contract owners should consult their insurance company
regarding their ability to revoke voting instructions after such instructions
have been provided to the insurance company.
By Order of the Trustees
/s/ James T. Gillespie
----------------------------------------
James T. Gillespie
Secretary
BB&T Funds
BB&T Variable Insurance Funds
Raleigh, North Carolina
December 15, 2006
BB&T FUNDS
BB&T VARIABLE INSURANCE FUNDS
3435 STELZER ROAD
COLUMBUS, OHIO 43219
1-800-228-1872
December 15, 2006
COMBINED PROSPECTUS/PROXY STATEMENT
This Combined Prospectus/Proxy Statement is furnished in connection with
the solicitation of proxies from the holders of units of beneficial interest
("Shares") of BB&T Large Cap Growth Fund (the "Large Cap Growth Fund") and BB&T
Large Cap Growth VIF (the "Large Cap Growth VIF," and together with the Large
Cap Growth Fund, the "Acquired Funds") for use at a Joint Special Meeting of
shareholders to approve the reorganization of the Large Cap Growth Fund with and
into the BB&T Large Cap Fund (the "Large Cap Fund") and the reorganization of
Large Cap Growth VIF with and into the BB&T Large Cap VIF (the "Large Cap VIF,"
and together with the Large Cap Fund, the "Acquiring Funds"). Acquired Fund
shareholders of record on November 29, 2006 are entitled to receive notice of
and to vote at the Joint Special Meeting. The reorganizations contemplate the
transfer of all the assets and liabilities of each of the Acquired Funds to the
corresponding Acquiring Fund in exchange for Acquiring Fund Shares, followed by
the dissolution and liquidation of the Acquired Funds, and the distribution of
Acquiring Fund Shares to shareholders of the Acquired Funds (the
"Transactions"). As a result of the Transactions, each shareholder of the
Acquired Funds will receive a number of full and fractional Shares of the
corresponding Acquiring Fund equal in value at the date of the exchange to the
net asset value of the Acquired Fund shares transferred by such shareholder to
the corresponding Acquiring Fund. It is expected that the Transactions will not
result in recognition of any gain or loss for federal income tax purposes.
However, the Transactions will end the tax year of the Acquired Funds, likely
accelerating taxable distributions from the Acquired Funds to shareholders.
Large Cap Growth Fund shareholders holding Institutional, Class A, Class B or
Class C Shares, will receive Institutional, Class A, Class B or Class C Shares,
respectively, of the Large Cap Fund.
Shares of the Large Cap Growth VIF are available exclusively as a pooled
funding vehicle for variable life insurance policies and variable annuity
contracts (each a "Contract") offered by the separate accounts, or sub-accounts
thereof, of certain life insurance companies ("Participating Insurance
Companies"). The Participating Insurance Companies own shares of the Large Cap
Growth VIF as depositors for the owners of their respective Contracts (each a
"Contract Owner"). Thus, individual Contract Owners are not the "shareholders"
of the Large Cap Growth VIF. Rather, the Participating Insurance Companies and
their separate accounts are the shareholders. To the extent required to be
consistent with the interpretations of voting requirements by the staff of the
Securities and Exchange Commission ("SEC"), each Participating Insurance Company
will offer to Contract Owners the opportunity to instruct it as to how it should
vote shares held by it and the separate accounts on the proposed merger. This
Combined Prospectus/Proxy Statement is, therefore, furnished to Contract Owners
entitled to give voting instructions with regard to the Large Cap Growth VIF.
All persons entitled to direct the voting of shares of the Large Cap Growth VIF,
whether or not they are shareholders, are described as voting for purposes of
this Combined Prospectus/Proxy Statement. This Combined Prospectus/Proxy
Statement, along with the Notice of a Joint Special Meeting of Shareholders and
the proxy card or voting instruction form, is being mailed to shareholders and
Contract Owners on or about December 19, 2006. It explains concisely what you
should know before voting on the proposals described in this Combined
Prospectus/Proxy Statement or investing in the Large Cap Growth VIF. Please read
it carefully and keep it for future reference.
The Large Cap Growth Fund and Large Cap Fund are portfolios ("series") of
BB&T Funds, which is an open end management investment company consisting of 26
separate funds. The Large Cap Growth VIF and Large Cap VIF are portfolios
("series") of BB&T Variable Insurance Funds, which is an open end management
investment company consisting of 6 separate funds.
This Combined Prospectus/Proxy Statement explains concisely what you should
know before investing in the Acquiring Funds. Please read it carefully and keep
it for future reference. The current Prospectus of BB&T Funds for the Large Cap
Growth Fund and the Large Cap Fund dated February 1, 2006, as supplemented (the
"BB&T
Prospectus"), the current Statement of Additional Information of BB&T Funds for
the Large Cap Growth Fund and the Large Cap Fund dated February 1, 2006, as
supplemented (the "BB&T SAI"), the current Prospectuses of BB&T Variable
Insurance Funds for the Large Cap Growth VIF and Large Cap VIF dated May 1,
2006, as supplemented (collectively, the "VIF Prospectus"), and the current
Statement of Additional Information of BB&T Variable Insurance Funds for the
Large Cap Growth VIF and Large Cap VIF dated May 1, 2006, as supplemented (the
"VIF SAI"), have been filed with the Securities and Exchange Commission and are
incorporated by reference into this Combined Prospectus/Proxy Statement. The
BB&T Prospectus and the BB&T Large Cap Growth VIF Prospectus will accompany this
Combined Prospectus/Proxy Statement when furnished to shareholders. The BB&T
Prospectus, VIF Prospectus, BB&T SAI and VIF SAI may be obtained, without
charge, by contacting a broker or bank that sells the Acquired Funds and
Acquiring Funds, by writing to BB&T Funds or BB&T Variable Insurance Funds at
3435 Stelzer Road, Columbus, Ohio 43219, by calling 1-800-228-1872, or, for the
BB&T SAI only, by contacting BB&T Funds online at http://www.bbtfunds.com. In
addition, a Statement of Additional Information dated December 15, 2006,
relating to the Transactions described in this Combined Prospectus/Proxy
Statement has been filed with the Securities and Exchange Commission and is also
incorporated by reference into this Combined Prospectus/Proxy Statement. Such
Statement of Additional Information may be obtained, without charge, by writing
BB&T Funds or BB&T Variable Insurance Funds at the above-listed address or by
calling 1-800-228-1872. BB&T Funds will furnish, without charge, a copy of the
Annual Report dated September 30, 2006 to a shareholder upon written request to
BB&T Funds at the above-listed address or by calling 1-800-228-1872. BB&T
Variable Insurance Funds will furnish, without charge, a copy of the Annual
Report dated December 31, 2005 and the Semi-Annual Report dated June 30, 2006 to
a shareholder upon written request to BB&T Variable Insurance Funds at the
above-listed address or by calling 1-800-228-1872.
Investment Advisor -- BB&T Asset Management, Inc., 434 Fayetteville Street
Mall, Raleigh, NC 27601.
BB&T Funds Distributor -- BB&T Funds Distributor, Inc., 3435 Stelzer Road,
Columbus, Ohio 43219.
Administrator -- BB&T Asset Management, Inc., 434 Fayetteville Street Mall,
Raleigh, NC 27601.
Sub-Administrator -- BISYS Fund Services Ohio, Inc., 3435 Stelzer Road,
Columbus, Ohio 43219.
AS WITH ALL MUTUAL FUNDS, THE SECURITIES AND EXCHANGE COMMISSION HAS NOT
APPROVED OR DISAPPROVED THESE FUND SHARES OR DETERMINED WHETHER THIS PROSPECTUS
IS TRUTHFUL OR COMPLETE. ANYONE WHO TELLS YOU OTHERWISE IS COMMITTING A CRIME.
LIKE OTHER INVESTMENTS, YOU COULD LOSE MONEY ON YOUR INVESTMENT IN A FUND.
YOUR INVESTMENT IN A FUND IS NOT A DEPOSIT OR AN OBLIGATION OF BB&T, ITS
AFFILIATES, OR ANY BANK. IT IS NOT INSURED BY THE FDIC OR ANY GOVERNMENT AGENCY.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS COMBINED PROSPECTUS/PROXY STATEMENT IN
CONNECTION WITH THE OFFERING MADE BY THIS COMBINED PROSPECTUS/PROXY STATEMENT
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY BB&T FUNDS OR BB&T VARIABLE INSURANCE FUNDS.
THIS COMBINED PROSPECTUS/PROXY STATEMENT DOES NOT CONSTITUTE AN OFFERING BY BB&T
FUNDS OR BB&T VARIABLE INSURANCE FUNDS IN ANY JURISDICTION IN WHICH SUCH
OFFERING MAY NOT LAWFULLY BE MADE.
December 15, 2006
2
TABLE OF CONTENTS
<Table>
PROPOSAL (1) APPROVAL OF AGREEMENT AND PLAN OF REORGANIZATION................... 4
FEE TABLES...................................................................... 5
SYNOPSIS OF PROSPECTUS.......................................................... 8
PRINCIPAL RISK FACTORS.......................................................... 11
INFORMATION ABOUT THE TRANSACTIONS.............................................. 12
INFORMATION ABOUT THE ACQUIRING FUNDS AND THE ACQUIRED FUNDS.................... 18
FINANCIAL HIGHLIGHTS............................................................ 19
VOTING INFORMATION.............................................................. 25
INTEREST OF CERTAIN PERSON IN THE TRANSACTIONS.................................. 27
</Table>
3
PROPOSAL (1)
APPROVAL OF
AGREEMENT AND PLAN OF REORGANIZATION
At a meeting held on August 29, 2006, the Boards of Trustees of BB&T Funds
and BB&T Variable Insurance Funds (the "Trustees") unanimously approved
Agreements and Plans of Reorganization (each a "Reorganization Plan,"
collectively the "Reorganization Plans") pursuant to which each Acquired Fund
would be merged with and into the corresponding acquiring Fund on or about
January 29, 2007 (the "Exchange Date"). On the Exchange Date, each Acquired Fund
will transfer all of its assets and liabilities to the corresponding Acquiring
Fund in exchange for Acquiring Fund Shares having an aggregate net asset value
equal to the aggregate value of the net assets acquired from the Acquired Fund.
The assets and liabilities of the Acquired Funds and the Acquiring Funds (the
"Funds") will be valued as of the close of trading on the New York Stock
Exchange on the business day preceding the Exchange Date. Following the
transfer, each Acquired Fund will be dissolved and Shares of the corresponding
Acquiring Fund received by each Acquired Fund will be distributed to that
Acquired Fund's shareholders in liquidation of such Acquired Fund. As a result
of the proposed Transactions, shareholders of each Acquired Fund will receive a
number of full and fractional Shares equal in value at the date of the exchange
to the value of the net assets of such Acquired Fund transferred to the
corresponding Acquiring Fund attributable to the shareholder (based on the
proportion of the outstanding Shares of the Acquired Fund owned at the time by
the shareholder). It is expected that the Transactions will not result in any
gain or loss for federal income tax purposes. However, the Transactions will end
the tax year of the Acquired Funds, likely accelerating taxable distributions
from the Acquired Funds to shareholders. All Large Cap Growth Fund shareholders
will receive Shares of the BB&T class (Institutional, Class A, Class B or Class
C) that corresponds to the class of Large Cap Growth Fund Shares that they hold
(Institutional, Class A, Class B or Class C, respectively).
For the reasons set forth below under "Reasons for the Proposed
Transactions," the Trustees, including Trustees who are not "interested persons"
of BB&T Funds and BB&T Variable Insurance Funds as defined in the Investment
Company Act of 1940 (the "1940 Act") (the "Independent Trustees"), unanimously
concluded that participation in the proposed Transactions is in the best
interests of each of the Acquiring Funds, the Acquired Funds and their
respective existing shareholders. In reaching this conclusion, the Trustees
considered, among other things:
(1) the compatibility of the objectives, strategies, restrictions and
investment portfolios of each Acquiring Fund with those of the
corresponding Acquired Fund;
(2) the qualifications and experience of BB&T Asset Management, Inc.
and Ronald T. Rimkus, CFA, the portfolio manager for both the Acquiring
Funds, and the performance history of the Acquired and Acquiring Funds;
(3) the investment management efficiencies that may be gained and the
potential economies of scale which could be realized;
(4) the continuation of all shareholder services currently provided to
shareholders of the Acquired Funds;
(5) the projected expense ratios of each Acquiring Fund as compared to
the corresponding Acquired Fund;
(6) the lack of adequate shareholder demand and the failure to
accumulate assets experienced by the Acquired Funds over the past 2 years;
(7) the limited demand for Acquired Fund shares, indicating limited
prospects for growth;
(8) the fact that the Transactions will result in a better use of
resources;
(9) the fact that any merger expense will be borne by BB&T Asset
Management, Inc.;
(10) the fact that the Transactions are expected to not result in a
recognition of any gain or loss for federal income tax purposes;
4
(11) the fact that the potential benefits of the Transactions,
including reduced volatility, reduced transaction costs and with respect to
the Large Cap Growth VIF/Large Cap VIF Transaction, reduced expenses, are
expected to outweigh any negative potential direct or indirect consequences
of the Transactions, including direct or indirect federal income tax
consequences and additional brokerage costs, to the shareholders of both
Acquired Funds;
(12) the fact that the economic interests of shareholders of the Funds
will not be diluted as a result of the proposed Transactions; and
(13) the recommendation of BB&T Asset Management, Inc. in favor of the
Transactions.
Acquired Fund shareholders who do not wish to be reorganized into the
respective Acquiring Fund and have their Acquired Fund shares exchanged for
shares of the Acquiring Fund should redeem their shares prior to the
consummation of the Transactions. If you redeem your shares you may recognize a
taxable gain or loss based on the difference between your tax basis in the
shares and the amount you receive for them.
FEE TABLES
Fee tables showing the current fees as of September 30, 2006 for the Large
Cap Growth Fund and the Large Cap Fund, as well as the pro forma fees annualized
after the reorganization and after fee waivers and/or expense reimbursement, are
below:
<Table>
<Caption>
BB&T LARGE CAP GROWTH FUND BB&T LARGE CAP FUND
----------------------------------------------- -----------------------------------------------
INSTITUTIONAL CLASS A CLASS B CLASS C INSTITUTIONAL CLASS A CLASS B CLASS C
------------- ------- ------- ------- ------------- ------- ------- -------
Shareholder Fees (fees
paid directly from
your investment)(1)
Maximum Sales Charge
(Load) Imposed on
Purchases (as a
percentage of
offering price)...... None 5.75%(2) None None None 5.75%(2) None None
Maximum Sales Charge on
Reinvested
Dividends............ None None None None None None None None
Maximum Deferred Sales
Load................. None None 5.00%(3) 1.00%(4) None None 5.00%(3) 1.00%(4)
Redemption Fee (on
Shares sold within 7
calendar days of
purchase)(5)......... None None None None None None None None
ANNUAL FUND OPERATING
EXPENSES (as a
percentage of average
net assets)
Management Fees........ 0.74% 0.74% 0.74% 0.74% 0.74% 0.74% 0.74% 0.74%
Distribution/Service
(12b-1) Fees......... None 0.50% 1.00% 1.00% None 0.50% 1.00% 1.00%
Other Expenses......... 0.18% 0.18% 0.18% 0.18% 0.19% 0.19% 0.19% 0.19%
Total Annual Fund
Operating Expenses .. 0.92% 1.42% 1.92% 1.92% 0.93% 1.43% 1.93% 1.93%
Fee Waiver and/or
Expense
Reimbursement(6)..... 0.04% 0.29% 0.04% 0.04% 0.04% 0.29% 0.04% 0.04%
Net Expenses........... 0.88% 1.13% 1.88% 1.88% 0.89% 1.14% 1.89% 1.89%
</Table>
--------
(1) Participating banks or other financial institutions may charge their
customers account fees for automatic investment, exchanges and other cash
management services provided in connection with investment in the Fund.
5
(2) Lower sales charges are available depending upon the amount invested. For
investments of $1 million or more, a contingent deferred sales charge
("CDSC") is applicable to redemptions within one year of purchase.
(3) A CDSC on Class B shares declines over six years, starting with year one
and ending on the sixth anniversary from: 5.00%, 4.00%, 3.00%, 3.00%,
2.00%, 1.00%.
(4) The CDSC on Class C Shares is applicable only to redemption within one
year of purchase.
(5) A wire transfer fee of $7.00 may be deducted from the amount of your
redemption, regardless of the date of purchase, if you request a wire
transfer. This fee is currently being waived.
(6) BB&T Asset Management, Inc. (the "Advisor") has contractually agreed to
limit the management fees paid by the Fund to 0.70% for the period from
February 1, 2006 through January 31, 2008. Additionally, BB&T Funds
Distributor, Inc. (the "Fund's Distributor") has contractually agreed to
limit the distribution and service fees for Class A shares of the Fund to
0.25% for the same period.
<Table>
<Caption>
PRO FORMA BB&T LARGE CAP FUND
-------------------------------------------------------
INSTITUTIONAL CLASS A CLASS B CLASS C
------------- ------- ------- -------
Shareholder Fees (fees paid directly from
your investment)
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering
price).................................. None 5.00% None None
Maximum Sales Charge on Reinvested
Dividends............................... None None None None
Maximum Deferred Sales Load............... None None 5.00%(2) 1.00%(3)
Redemption Fee (on Shares sold within 7
calendar days of purchase).............. None None None None
ANNUAL FUND OPERATING EXPENSES (as a
percentage of average net assets)
Management Fees........................... 0.74% 0.74% 0.74% 0.74%
Distribution/Service (12b-1) Fees......... None 0.50% 1.00% 1.00%
Other Expenses............................ 0.18% 0.18% 0.18% 0.18%
Total Annual Fund Operating Expenses...... 0.92% 1.42% 1.92% 1.92%
Fee Waiver and/or Expense Reimbursement... 0.04% 0.29% 0.04% 0.04%
Net Expenses.............................. 0.88%(1) 1.13%(1) 1.88%(1) 1.88%(1)
</Table>
--------
(1) The Fund's Advisor has contractually agreed to limit the management fees
paid by the Fund to 0.70% for the period from December 8, 2006 through
January 31, 2008. Additionally, the Fund's Distributor has contractually
agreed to limit the distribution and service fees for Class A shares of
the Fund to 0.25% for the same period.
(2) A CDSC on Class B Shares declines over six years starting with year one
and ending on the sixth anniversary from: 5.00%, 4.00%, 3.00%, 3.00%,
2.00%, 1.00%.
(3) The CDSC for Class C Shares is applicable only to redemption within one
year of purchase.
Fee tables showing the current fees as of December 31, 2005 for the Large
Cap Growth VIF and the Large Cap VIF, as well as the pro forma fees annualized
after the reorganization and after fee waivers and/or expense reimbursement, are
below. The table does not reflect separate account or insurance contract fees
and charges. If they had been included, the expenses would have been higher.
<Table>
<Caption>
BB&T LARGE CAP BB&T LARGE PRO FORMA BB&T
GROWTH VIF CAP VIF LARGE CAP VIF
-------------- ---------- --------------
ANNUAL FUND OPERATING EXPENSES (as a
percentage of average net assets)
Management Fees............................. 0.74%(1) 0.74%(1) 0.74%(3)
Other Expenses.............................. 0.29%(2) 0.24%(2) 0.24%
Total Annual Fund Operating Expenses........ 1.03%(1) 0.98%(1) 0.98%(3)
</Table>
6
--------
(1) BB&T Asset Management currently limits its management fees to 0.50%. Total
annual operating expenses, after fee waivers and expense reimbursements
are limited to 0.79% for the Large Cap Growth VIF and 0.74% for the Large
Cap VIF. Any fee waiver or expense reimbursement is voluntary and may be
terminated at any time.
(2) Expense information in the table has been restated to reflect changes in
the contractual amounts of current fees.
(3) It is expected that BB&T Asset Management will continue to voluntarily
limit its management fees to 0.50%. Total annual operating expenses, after
fee waivers and expense reimbursements are expected to be limited to 0.74%
for the Fund. Any fee waiver or expense reimbursement is voluntary and may
be terminated at any time.
EXAMPLE: Use the tables below to compare fees and expenses with the fees
and expenses of other mutual funds. The tables illustrate the amount of fees and
expenses you and the Fund would pay, assuming a $10,000 initial investment, 5%
annual return, payment of maximum sales charges, and no changes in the Fund's
operating expenses. Because these examples are hypothetical and for comparison
only, your actual costs may be different.
<Table>
<Caption>
1 YEAR 3 YEARS 5 YEARS 10 YEARS
------ ------- ------- --------
BB&T Large Cap Fund(2)
Institutional Shares.................... $ 91 $293 $ 514 $1,151
Class A Shares.......................... $685 $968 $1,279 $2,160
Class B Shares
Assuming Redemption.................. $592 $901 $1,137 $2,120(1)
Assuming No Redemption............... $192 $601 $1,037 $2,120(1)
Class C Shares
Assuming Redemption.................. $192 $601 $1,037 $2,250
Assuming No Redemption............... $192 $601 $1,037 $2,250
BB&T Large Cap Growth Fund(2)
Institutional Shares.................... $ 90 $288 $ 504 $1,127
Class A Shares.......................... $684 $965 $1,274 $2,150
Class B Shares
Assuming Redemption.................. $591 $898 $1,132 $2,110(1)
Assuming No Redemption............... $191 $598 $1,032 $2,110(1)
Class C Shares
Assuming Redemption.................. $191 $598 $1,032 $2,239
Assuming No Redemption............... $191 $598 $1,032 $2,239
BB&T Large Cap Pro Forma(2)
Institutional Shares.................... $ 90 $288 $ 504 $1,127
Class A Shares.......................... $684 $965 $1,274 $2,150
Class B Shares
Assuming Redemption.................. $591 $898 $1,132 $2,110(1)
Assuming No Redemption............... $191 $598 $1,032 $2,110(1)
Class C Shares
Assuming Redemption.................. $191 $598 $1,032 $2,239
Assuming No Redemption............... $191 $598 $1,032 $2,239
BB&T Large Cap Growth VIF(3).............. $105 $328 $ 569 $1,259
BB&T Large Cap VIF(3)..................... $100 $312 $ 542 $1,201
BB&T Large Cap VIF Pro Forma(3)........... $100 $312 $ 542 $1,201
</Table>
--------
(1) Reflects automatic conversion of Class B Shares to Class A Shares after
eight years.
(2) The example assumes net expenses through January 31, 2008, and total
annual operating expenses thereafter.
(3) The example does not reflect separate account or insurance contract fees
and charges. If they had been included, the fees and expenses would have
been higher.
7
SYNOPSIS
Summary. The following is a synopsis of certain information relating to
the Transactions and is qualified by reference to the more complete information
contained in this Combined Prospectus/Proxy Statement, the BB&T SAI, the VIF
SAI, and the Appendices attached hereto.
Key Features of Transaction. The shareholders of the Acquired Funds are
being asked to approve or disapprove the Agreements and Plans of Reorganization
adopted by the Trustees dated as of December 5, 2006 (the "Reorganization
Plans"), copies of which are attached to this Combined Prospectus/Proxy
Statement as Appendices A and B. The Reorganization Plans provide, among other
things, for the transfer of all of the assets of each Acquired Fund into the
corresponding Acquiring Fund in exchange for the assumption by that Acquiring
Fund of all of the liabilities of the Acquired Fund and for a number of Shares
of the designated class, if applicable, calculated based on the value of the net
assets of the corresponding Acquired Fund acquired by that Acquiring Fund and
the net asset value per Share of the Acquiring Fund, all as more fully described
below under "Information about the Transactions." After receipt of Shares, each
Acquired Fund will dissolve, distributing the Shares to its shareholders in
complete liquidation, and each Acquired Fund will be terminated. Prior to the
date of such transfer (the "Exchange Date"), each Acquired Fund will declare a
distribution to its shareholders which, together with all previous
distributions, will have the effect of distributing to its shareholders all of
its investment company taxable income (computed without regard to the deduction
for dividends paid), if any, and net realized capital gains, if any, through the
Exchange Date.
At a meeting held on August 29, 2006, the Trustees, including the
Independent Trustees, voted unanimously to approve the Transactions and to
recommend that shareholders of each Acquired Fund also approve the Transactions.
Approval of each Reorganization Plan requires the affirmative vote of a majority
of votes cast by the corresponding Acquired Fund.
A shareholder of each Acquired Fund objecting to the proposed Transactions
is not entitled under either Massachusetts law, BB&T Funds' Declaration of Trust
or BB&T Variable Insurance Funds' Declaration of Trust to demand payment for or
an appraisal of his or her particular Shares if the Transactions is consummated
over his or her objection. However, Shares of each Acquired Fund are redeemable
for cash at their net asset value on days on which the New York Stock Exchange
is open for regular trading. If you redeem your Shares, you may recognize a
taxable gain or loss based on the difference between your tax basis in the
Shares and the amount you receive for them.
In the event that this proposal is not approved by the shareholders of a
Acquired Fund, such Acquired Fund will continue to be managed as a separate fund
in accordance with its current investment objectives and policies, and the
Trustees of the BB&T Funds and/or BB&T Variable Insurance Funds may consider
alternatives in the best interests of the shareholders. Each Transaction is not
contingent on the approval of the other Transaction. However, if approval of a
Reorganization Plan is obtained, the reorganization of the corresponding
Acquired Fund will be consummated.
Comparison. Below is a brief comparison of the principal investment
objectives and strategies of the Large Cap Growth Fund to the Large Cap Fund and
the Large Cap Growth VIF and the Large Cap VIF. The following discussion is
qualified in its entirety by the disclosure on such subjects contained in this
Combined Prospectus/Proxy Statement, the BB&T SAI and the VIF SAI. For a full
and detailed description of permitted investments, see such applicable
documents.
The proposed Transactions may result in higher than normal portfolio
turnover.
FUNDAMENTAL OBJECTIVE.
<Table>
<Caption>
ACQUIRED FUND ACQUIRING FUND
------------- --------------
Large Cap Growth Fund. The Large Cap Large Cap Fund. The Large Cap Fund
Growth Fund seeks long-term capital seeks capital growth, current income or
appreciation by investing primarily in both, primarily through investment in
a diversified portfolio of equity and stocks.
equity-related securities of large
capitalization growth companies.
--------------------------------------------------------------------------------
Large Cap Growth VIF. The Large Cap Large Cap VIF. The Large Cap VIF seeks
Growth VIF seeks capital growth. capital growth, current income, or
both.
</Table>
8
PRINCIPAL INVESTMENT STRATEGIES.
<Table>
<Caption>
ACQUIRED FUND ACQUIRING FUND
------------- --------------
Large Cap Growth Fund. To pursue this Large Cap Fund. To pursue this goal,
goal, the Fund invests primarily in the Fund invests primarily in
common stocks, as well as American domestically traded U.S. common stocks
Depositary Receipts ("ADRs"), of large of large U.S. companies and U.S. traded
capitalization companies that the equity stocks of foreign companies
portfolio manager believes have whose capitalization is within the
attractive potential for growth. Large range of those companies in the S&P
capitalization companies are those 500(R) Index. In managing the Fund, the
companies whose market capitalization portfolio manager selects those stocks
is within the range of those companies that he believes are undervalued and
in the Russell 1000(R) Growth Index. In have a favorable outlook. In choosing
managing the Fund's portfolio, the individual stocks, the portfolio
manager uses a variety of economic manager uses quantitative and
projections, quantitative techniques, qualitative processes to examine
and earnings projections in formulating intrinsic value and the fundamental
individual stock purchase and sale outlook of a particular issuer. The
decisions. In choosing individual Fund may also invest in certain other
stocks, the portfolio manager primarily equity securities in addition to those
uses a fundamental investment process described above. Under normal
to identify companies with a history of circumstances, the Fund will invest at
above average growth or companies that least 80% of its net assets plus
are expected to enter periods of above borrowings in the securities of large
average growth. Some of the criteria companies. This policy will not be
that the manager uses to select these changed without 60 days' advance notice
companies are return on equity, price to shareholders. Large companies are
and earnings momentum, earnings those companies with market
surprise, the company's management and capitalizations within the range of
the company's position within its those companies in the S&P 500(R)
industry. The Fund may also invest in Index. These stocks may include common
certain other equity securities in stock, preferred stock, warrants, or
addition to those described above. debt instruments that are convertible
Under normal circumstances, the Fund to common stock.
will invest at least 80% of its net
assets plus borrowings in the
securities of large companies. This
policy will not be changed without 60
days' advance notice to shareholders.
Large companies are those companies
with market capitalizations within the
range of those companies in the Russell
1000(R) Growth Index.
--------------------------------------------------------------------------------
Large Cap Growth VIF. Under normal Large Cap VIF. Under normal market
market conditions, the Fund will invest conditions, the Fund will invest at
at least 80% of its assets in a least 80% of its assets in equity
diversified portfolio of equity securities issued by large
securities issued by large capitalization companies, which may
capitalization companies, and will include common stocks, preferred
primarily invest in companies that BB&T stocks, warrants, or debt instruments
Asset Management believes have the that are convertible into common
potential to provide significant stocks. For purposes of this policy,
capital growth. Large capitalization large capitalization companies are
companies are those companies whose those companies with a capitalization
market capitalization is within the within the range of those companies in
range of those companies in the Russell the S&P 500(R) Index (as of May 31,
1000(R) Growth Index (as of March 31, 2006, $455 million to $371 billion), as
2006, $952 million to $368.9 billion). well as American Depositary Receipts
A portion of the Fund's assets may be ("ADRs").
invested in preferred stock or bonds
convertible into common stock.
</Table>
Distribution, Purchase and Redemption Procedures and Exchange Rights.
Distribution, purchase and redemption procedures and exchange rights are
identical for each Acquired Fund and corresponding Acquiring Fund.
Federal Tax Considerations. For federal income tax purposes, it is
intended that each Transaction will qualify as a tax-free reorganization.
Accordingly, the Transactions are expected not to result in the recognition of
gain or loss for federal income tax purposes for any of the Funds or the
shareholders of any Fund, and the aggregate tax basis of the Acquiring Fund
shares received by a shareholder of an Acquired Fund are expected
9
to equal the aggregate tax basis of that shareholder's Acquired Fund shares. At
any time prior to the consummation of the Transactions, a shareholder may redeem
shares, likely resulting in recognition of gain or loss to such shareholder for
federal income tax purposes.
However, since the Transactions will end the tax year of each Acquired
Fund, it may accelerate distributions from the Acquired Funds to shareholders.
Specifically, each Acquired Fund will recognize any net investment company
taxable income, any net tax-exempt investment income and any net capital gains,
including those realized on disposition of portfolio securities in connection
with the Transactions (after reduction by any available capital loss
carryforwards) or net capital losses in the short tax year ending on the date of
the reorganization, and will declare and pay a distribution of such income and
any such net capital gains remaining after reduction by any available capital
loss carryforwards to its shareholders on or before that date.
A substantial portion of the portfolio assets of each Acquired Fund may be
sold in connection with the Transactions. The actual tax impact of such sales
will depend on the difference between the price at which such portfolio assets
are sold and such Acquired Fund's basis in such assets. Any capital gains
recognized in these sales, if any, will be distributed to such Acquired Fund's
shareholders as capital gain dividends (to the extent of net realized long-term
capital gains distributed) and/or ordinary dividends (to the extent of net
realized short-term capital gains distributed) during or with respect to the
year of sale, and such distributions in general will be taxable to shareholders.
With regard to the Large Cap Growth VIF, as long as contracts funded
through the separate accounts of the insurance company shareholder qualify as
annuity contracts or life insurance contracts under Section 72 or Section
7702(a) of the Internal Revenue Code of 1986, as amended (the "Code"), the
Transactions will not create any tax liability for contract owners.
The cost basis and holding period of shares in each Acquired Fund are
expected to carry over to new shares in the respective Acquiring Fund.
For more information about the federal income tax consequences of the
Transactions, see "Information About the Transactions -- Federal Income Tax
Consequences" below.
10
PRINCIPAL RISK FACTORS
<Table>
<Caption>
ACQUIRED FUND ACQUIRING FUND
------------- --------------
Large Cap Growth Fund. Your investment Large Cap Fund. Your investment in the
in the Fund may be subject to market Fund may be subject to market risk and
risk and investment style risk. Market investment style risk. Market risk is
risk is the possibility that the Fund's the possibility that the Fund's stock
stock holdings will decline in price holdings will decline in price because
because of a broad stock market decline. of a broad stock market decline. Markets
Markets generally move in cycles, with generally move in cycles, with periods
periods of rising prices followed by of rising prices followed by periods of
periods of falling prices. The value of falling prices. The value of your
your investment will tend to increase or investment will tend to increase or
decrease in response to these movements. decrease in response to these movements.
Investment style risk is the possibility Investment style risk is the possibility
that the market segment on which this that the market segment on which this
Fund focuses -- large cap growth Fund focuses -- large cap stocks -- will
stocks -- will underperform other kinds underperform other kinds of investments
of investments or market averages. The or market averages. The Fund may trade
Fund may trade securities actively, securities actively, which could
which could increase its transaction increase its transaction costs (thereby
costs (thereby lowering its performance) lowering its performance) and may
and may increase the amount of taxes increase the amount of taxes that you
that you pay. If the Fund invests in pay. If the Fund invests in securities
securities with additional risks, its with additional risks, its share price
share price volatility accordingly could volatility accordingly could be greater
be greater and its performance lower. and its performance lower.
---------------------------------------------------------------------------------
Large Cap Growth VIF. An investment in Large Cap VIF. An investment in the
the Fund entails investment risk, Fund entails investment risk, including
including possible loss of the principal possible loss of the principal amount
amount invested. The Fund is subject to invested. The Fund is subject to market
market risk, which is the risk that the risk, which is the risk that the market
market value of a portfolio security may value of a portfolio security may move
move up and down, sometimes rapidly and up and down, sometimes rapidly and
unpredictably. This risk may be greatest unpredictably. This risk may be greatest
for the Fund's investments in common for the Fund's investments in stocks.
stocks. Large-capitalization growth The Fund also is subject to interest
stocks may fall out of favor with rate risk, which is the risk that
investors, and may be particularly changes in interest rates will affect
volatile in the event of earnings the value of the Fund's investments. In
disappointments or other financial particular, the Fund's investments in
difficulties. The market could favor fixed income securities, such as
value stocks to the exclusion of growth convertible bonds and preferred stocks,
stocks, or may not favor equities at generally will change in value inversely
all. The Fund also is subject to with changes in interest rates. Also,
interest rate risk, which is the risk the Fund's investments may expose it to
that changes in interest rates will credit risk, which is the risk that the
affect the value of the Fund's issuer of a security will default or not
investments. In particular, the Fund's be able to meet its financial
investments in fixed income securities, obligations.
such as convertible bonds and preferred
stocks, generally will change in value
inversely with changes in interest
rates. Also, the Fund's investments may
expose it to credit risk, which is the
risk that the issuer of a security will
default or not be able to meet its
financial obligations.
</Table>
As shown in the table above, the principal risks of each Acquired Fund and
the corresponding Acquiring Fund are similar, except that the Acquired Funds
invest in large cap growth stocks and are subject to the additional risk that
the market may not favor large cap growth stocks. The Acquiring Funds have the
ability to invest in large cap stocks, including both large cap growth and large
cap value stocks, allowing them to respond to market changes.
11
INFORMATION ABOUT THE TRANSACTIONS
Reorganization Plan; Securities. The proposed Reorganization Plans
provide that the Acquiring Funds will acquire all of the assets of the Acquired
Funds in exchange for the assumption by the Acquiring Funds of all of the
liabilities of the Acquired Funds, and for Shares, all as of the Exchange Date
(defined in the Reorganization Plans to be on or about January 29, 2007, or such
other date as determined by the Trustees.) The following discussion of the
Reorganization Plans is qualified in its entirety by the full text of the
Reorganization Plans, which is attached as Appendices A and B to this Combined
Prospectus/Proxy Statement.
As a result of the Transactions, each shareholder of an Acquired Fund will
receive that number of full and fractional Shares equal in value at the Exchange
Date to the value of the portion of the net assets of the Acquired Fund
transferred to the corresponding Acquiring Fund attributable to the shareholder
(based on the proportion of the outstanding Shares of that Acquired Fund owned
by the shareholder as of the valuation time). The portfolio securities of each
Acquired Fund will be valued in accordance with the generally employed valuation
procedures of BB&T Funds and BB&T Variable Insurance Funds, as applicable. The
reorganizations are being accounted for as tax-free business combinations. At a
meeting held on August 29, 2006, all of the Trustees, including the Independent
Trustees, unanimously determined that the reorganizations would be in the best
interests of the Funds and existing shareholders, and that the economic
interests of their existing shareholders would not be diluted as a result of
effecting the reorganizations.
Immediately following the Exchange Date, each Acquired Fund will distribute
pro rata to its shareholders of record as of the close of business on the
Exchange Date the full and fractional Shares received by it, and the Acquired
Fund will be liquidated and dissolved. Such liquidation and distribution will be
accomplished by the establishment of accounts on the Share records of the
corresponding Acquiring Fund in the name of the Acquired Fund's shareholders,
each account representing the corresponding number of full and fractional Shares
due such shareholder. All Large Cap Growth Fund shareholders will receive Shares
of the BB&T class (Institutional, Class A, Class B or Class C) that corresponds
to the class of the Large Cap Growth Fund that they hold (Institutional, Class
A, Class B or Class C, respectively).
The consummation of the Transactions is subject to the conditions set forth
in the Reorganization Plans. The Reorganization Plans may be terminated and the
Transactions abandoned at any time, before or after approval by the
shareholders, prior to the Exchange Date by consent of BB&T Funds or BB&T
Variable Insurance Funds or, if any condition set forth in the Reorganization
Plans has not been fulfilled and has not been waived by the party entitled to
its benefits, by such party. If the Transactions are approved, Acquired Fund
shareholders who do not wish to have their Acquired Fund Shares exchanged for
Shares of the Acquiring Fund should redeem their shares prior to consummation of
the Transactions. If you redeem your Shares you may recognize a taxable gain or
loss based on the difference between your tax basis in the shares and the amount
you received for them.
All fees and expenses incurred by the Funds as a direct result of the
Transactions contemplated by the Reorganization Plans, will be borne by BB&T
Asset Management, Inc., including the costs of proxy materials, proxy
solicitations and legal expenses. Aggregate costs of the Transactions are
estimated to range between $150,000 and $225,000. Fees and expenses not incurred
directly in connection with the consummation of the Transactions will be paid by
the party directly incurring such expenses, and such fees and expenses will be
paid by the party directly incurring such expenses if and to the extent that
payment by the other party would result in the disqualification of any Fund, as
the case may be, as a "regulated investment company" within the meaning of
Section 851 of the Code.
The Board has determined that the interests of the existing shareholders of
the Funds will not be diluted as a result of the Transactions. Full and
fractional Shares will be issued to each Acquired Fund's shareholders in
accordance with the procedure under the Reorganization Plans as described above.
Each Acquiring Fund Share will be fully paid and nonassessable when issued, will
be transferable without restriction, and will have no preemptive or conversion
rights.
12
BB&T Funds' Declaration of Trust permits BB&T Funds to divide its Shares of
any series, without shareholder approval, into one or more classes of Shares
having such variations as to dividend, redemption, and voting rights, net asset
values, expenses borne by the classes, and other matters as the Trustees have
authorized, provided that each Share of a class shall represent an equal
proportionate interest in the assets and liabilities of the class with each
other Share of the same class, none having priority or preference over another.
Shares of certain of the BB&T Funds are currently divided into four classes:
Class A, Class B, Class C, and Institutional Shares. Institutional, Class A,
Class B or Class C Shares will be distributed as applicable by BB&T Funds in
connection with the Large Cap Fund/Large Cap Growth Fund Transaction. Upon
consummation of the Large Cap Fund/Large Cap Growth Fund Transaction, Large Cap
Growth Fund shareholders holding Institutional, Class A, Class B or Class C
Shares, will receive Institutional, Class A, Class B or Class C Shares,
respectively, of the Large Cap Fund.
Under Massachusetts law, BB&T Funds' and BB&T Variable Insurance Funds'
shareholders, could, under certain circumstances, be held personally liable for
the obligations of BB&T Funds and BB&T Variable Insurance Funds, respectively.
However, the Declarations of Trust disclaim shareholder liability for acts or
obligations of BB&T Funds and BB&T Variable Insurance Funds. The Declarations of
Trust provide for indemnification out of BB&T Funds or BB&T Variable Insurance
Funds property for all loss and expense of any shareholder held personally
liable for the obligations of BB&T Funds or BB&T Variable Insurance Funds. Thus,
the risk of a shareholder incurring financial loss on account of shareholder
liability is limited to circumstances in which BB&T Funds or BB&T Variable
Insurance Funds would be unable to meet its obligations. The likelihood of such
circumstances is remote.
Reasons For The Proposed Transactions. A meeting was held on August 29,
2006, for the BB&T Funds' and BB&T Variable Insurance Funds' Trustees, at which
meeting all of the Trustees, including the Independent Trustees, unanimously
determined that the Transactions would be in the best interests of existing
shareholders of the Funds. The Trustees also unanimously determined that the
economic interests of such shareholders would not be diluted as a result of
effecting the Transactions. At this same meeting, all of the Trustees, including
the Independent Trustees, unanimously adopted the Reorganization Plans and
recommended approval of the Transactions.
In electing to approve each reorganization and recommend it to shareholders
of the applicable Acquired Fund, the Trustees acted upon information provided to
them, indicating that the proposed Transactions would operate in the best
interests of the Funds' shareholders. In particular, the Trustees considered the
following details:
(1) The compatibility of the objectives, strategies, restrictions and
investment portfolios of each Acquiring Fund with those of the
corresponding Acquired Fund.
As discussed under the "Synopsis," each Acquired Fund and its
corresponding Acquiring Fund have substantially similar fundamental
investment objectives. The Trustees considered that, over time, the
Acquiring Funds' flexibility to invest in either value or growth stocks,
depending upon prevailing market conditions, may provide greater value to
shareholders of each Acquired Fund. The Acquired Funds and Acquiring Funds
also share similar investment strategies. While both of the Acquiring Funds
invest generally in large capitalization stocks, each of the Acquired Funds
focuses on large capitalization "growth" stocks.
The Trustees considered the overlap in the portfolio compositions of
the Acquired Funds and Acquiring Funds. BB&T Asset Management, Inc. advised
the Trustees and the Trustees came to the conclusion that the objectives,
strategies, restrictions and investment portfolios of each Acquiring Fund
are compatible with those of the corresponding Acquired Fund.
(2) The qualifications and experience of BB&T Asset Management, Inc.
and Ronald T. Rimkus, CFA, the portfolio manager for both the Acquiring
Funds, and the performance history of the Acquired and Acquiring Funds.
The proposed Transactions will allow investment management to remain
in the current investment adviser, BB&T Asset Management, Inc., under the
direction of Ronald T. Rimkus, CFA, who currently
13
manages the Acquiring Funds. The Trustees considered the benefits that this
arrangement will provide to shareholders of the Acquired Funds, including
Mr. Rimkus's expertise.
Ronald T. Rimkus, CFA, has been primarily responsible for the
management of the Acquiring Funds since March 2006. Mr. Rimkus joined BB&T
Asset Management, Inc. in January 2006 as the Director of Core Equity. From
2000 to 2006, Mr. Rimkus managed a large cap core equity product for
Mesirow Financial, Inc.
The Trustees reviewed and compared the performance history of the
Acquiring Funds and the Acquired Funds. The performance history of each
Acquiring Fund generally compares favorably to the performance history of
the corresponding Acquired Fund.
(3) The investment management efficiencies that may be gained and the
potential economies of scale which could be realized.
(4) The continuation of all shareholder services currently provided to
shareholders of the Acquired Funds.
(5) The projected expense ratios of each Acquired Fund as compared to
the corresponding Acquired Fund.
The Trustees determined that the Large Cap Growth Fund shareholders
will be subject to the same expenses after the Transaction, and the Large
Cap Growth VIF shareholders will benefit from the lower expense ratio of
the Large Cap VIF.
(6) The Trustees considered the lack of adequate shareholder demand
and the failure to accumulate assets of each Acquired Fund, while
considering the investment similarities among the Acquired Funds and the
Acquiring Funds. Over the past two (2) years, net assets of the Large Cap
Growth Fund have declined from $359 million on July 31 2004 to $343 million
on July 31, 2006, while net assets of the Large Cap Growth VIF have
remained fairly constant from $22 million on July 31, 2004 to $23 million
on July 31, 2006. The merger is expected to result in greater investment
leverage and market presence for the Acquiring Funds. In addition, former
Acquired Fund shareholders would benefit from the resulting economies of
scale attributable to the larger asset size of the Acquiring Funds.
(7) The limited demand for Acquired Fund shares, indicating limited
prospects for growth.
(8) The fact that the Transactions will result in a better use of
resources.
(9) The fact that any merger expense will be borne by BB&T Asset
Management, Inc.
The fees and expenses incurred directly in connection with the
consummation of the Transactions that relate to the merger will be borne by
BB&T Asset Management, Inc.
(10) The fact that the Transactions are expected to not result in the
recognition of any gain or loss for federal income tax purposes.
The BB&T Funds' and BB&T Variable Insurance Funds' Trustees were
informed that the proposed Transactions involving the Acquiring Funds would
occur only if it could be accomplished without resulting in the imposition
of federal income taxes on any of the Funds or any of their shareholders as
a direct result of the Transactions.
(11) The fact that the potential benefits of the Transactions will
outweigh any negative potential direct or indirect consequences of the
Transactions to the shareholders of the Acquired Funds.
The BB&T Funds' and BB&T Variable Insurance Funds' Trustees considered
the potentially negative consequences of the Transactions on the former
shareholders of the Acquired Funds, as described below.
14
The Board determined that the potential benefits to be gained from the
proposed Transactions, outweigh the potentially negative direct or indirect
consequences of the Transactions on the former shareholders of the Acquired
Funds. Benefits include reduced volatility, reduced or consistent expenses
and reduced transaction costs, anticipated economies of scale from
increased assets, potential for greater diversification based on broader
investment strategy, a solid performance record, and the potential for
greater growth through the sale of fund shares.
Among potential negative direct or indirect consequences is the
potential loss of net capital loss carryforwards by each Acquired Fund and
additional brokerage costs associated with portfolio assets of the Acquired
Funds being sold in connection with the Transactions. See "Federal Income
Tax Consequences" for additional information.
(12) The fact that the economic interests of shareholders of each of
the Funds will not be diluted as a result of the proposed Transactions.
The BB&T Funds' and BB&T Variable Insurance Funds' Trustees were
informed that the interests of each Fund's shareholders would not be
diluted as a result of the proposed Transactions, and that each Acquired
Fund's shareholders would receive, in the aggregate, Shares of the
corresponding Acquiring Fund equal in value to the market value of the
assets of the Acquired Fund.
(13) The recommendation of BB&T Asset Management, Inc. in favor of the
Transactions.
Federal Income Tax Consequences. The Transactions are intended to be tax-
free reorganizations. As a condition to the relevant Funds' obligations to
consummate the applicable Transaction, BB&T Funds or BB&T Variable Insurance
Funds (as applicable), on behalf of such Funds, will receive an opinion, in a
form reasonably acceptable to such Funds, in respect of such Transaction from
Ropes & Gray LLP, counsel to BB&T Funds and BB&T Variable Insurance Funds, to
the effect that, although not free from doubt, on the basis of the existing
provisions of the Code, the Treasury Regulations promulgated thereunder, current
administrative rules, and court decisions, generally for federal income tax
purposes, except as noted below: (i) such Transaction will constitute a
reorganization within the meaning of Section 368(a) of the Code, and the
Acquired Fund and the Acquiring Fund will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code; (ii) under Section 1032 of the
Code no gain or loss will be recognized by the Acquiring Fund upon the receipt
of the assets of the Acquired Fund in exchange for Acquiring Fund Shares and the
assumption by the Acquiring Fund of the liabilities of the Acquired Fund; (iii)
under Section 362(b) of the Code the basis in the hands of the Acquiring Fund of
the assets of the Acquired Fund transferred to the Acquiring Fund in the
Transaction will be the same as the basis of such assets in the hands of the
Acquired Fund immediately prior to the transfer; (iv) under Section 1223(2) of
the Code the holding periods of the assets of the Acquired Fund in the hands of
the Acquiring Fund will include the periods during which such assets were held
by the Acquired Fund; (v) under Section 361 of the Code no gain or loss will be
recognized by the Acquired Fund upon the transfer of the Acquired Fund's assets
to the Acquiring Fund in exchange for Acquiring Fund Shares and the assumption
by the Acquiring Fund of the liabilities of the Acquired Fund, or upon the
distribution of Acquiring Fund Shares by the Acquired Fund to its shareholders
in liquidation; (vi) under Section 354 of the Code no gain or loss will be
recognized by the Acquired Fund's shareholders upon the exchange of their Shares
for Acquiring Fund Shares; (vii) under Section 358 of the Code, the aggregate
basis of Acquiring Fund Shares an Acquired Fund shareholder receives in
connection with the Transaction will be the same as the aggregate basis of his
or her Acquired Fund Shares exchanged therefor; (viii) under Section 1223(1) of
the Code, an Acquired Fund shareholder's holding period for his or her Acquiring
Fund Shares will be determined by including the period for which he or she held
the Acquired Fund Shares exchanged therefor, provided that he or she held such
Acquired Fund Shares as capital assets; and (ix) the Acquiring Fund will succeed
to, and take into account the items of the Acquired Funds described in Section
381(c) of the Code, subject to the conditions and limitations specified in
Sections 381, 382, 383 and 384 of the Code and the Treasury Regulations
thereunder.
Ropes & Gray LLP will express no view with respect to the effect of the
Transactions on any transferred asset as to which any unrealized gain or loss is
required to be recognized at the end of a taxable year (or on the termination or
transfer thereof) under federal income tax principles.
15
The opinion will be based on certain factual certifications and
representations made by the officers of the Funds and will also be based on
customary assumptions. The opinion is not a guarantee that the tax consequences
of the Transactions will be as described above.
It is possible that each Acquiring Fund's ability to utilize either its own
or the corresponding Acquired Fund's pre-Transaction losses to offset the post-
Transaction gains of the combined fund will be limited as a result of the
Transaction due to the application of loss limitation rules under federal tax
law. In addition, for five years beginning after the closing date, the combined
fund will not be allowed to offset gains "built in" to either the Acquired or
Acquiring Fund at the time of the Transaction against capital losses (including
capital loss carryforwards) built in to the other Fund. As a result of these
limitations, under certain circumstances the shareholders of either the Acquired
or Acquiring Fund could receive distributions that are taxable in the hands of
taxable shareholders earlier than they would if the Transaction were not to have
occurred. The effect of these limitations, however, will depend on the amount of
losses in each Fund at the time of the Transaction, and, in any event, these
limitations will only affect taxable shareholders.
Because the shareholders of the Large Cap Growth VIF and the Large Cap VIF
are Participating Insurance Companies and their separate accounts (which are not
taxable shareholders), the impact (if any) of these loss limitation rules in
connection with the reorganization of the Large Cap Growth VIF with and into the
Large Cap VIF will be generally inconsequential to shareholders. If the
reorganization of the Large Cap Growth Fund with and into the Large Cap Fund
were to have taken place on September 30, 2006, the combined fund's use of the
pre-Transaction losses (including capital loss carryforwards) of the Large Cap
Growth Fund and the Large Cap Fund would not have been limited by the above-
described rules. However, because, as a result of the Transaction, the
shareholders of the Large Cap Growth Fund will receive Shares of the combined
fund, such shareholders will be allocated a proportionate share of any built-in
gains in the Large Cap Fund's assets, as well as any taxable gains realized by
the Large Cap Fund but not distributed to its shareholders prior to the
Transaction. Accordingly, distributions to shareholders' of the Large Cap Growth
Fund may be increased or accelerated as a result of the Transaction. If the
Transaction were to have taken place on September 30, 2006, the combined fund
would have had higher built-in gains as a percentage of net assets than the
Large Cap Growth Fund prior to the Transaction because as of that date the Large
Cap Fund had higher built-in gains as a percentage of net assets than the Large
Cap Growth Fund.
A substantial portion of the portfolio assets of the Acquired Funds may be
sold in connection with the Transactions. The actual tax impact of such sales
will depend on the difference between the price at which such portfolio assets
are sold and that Acquired Fund's basis in such assets. Any net capital gains
recognized in these sales will be distributed to such Acquired Fund's
shareholders as capital gain dividends (to the extent of net realized long-term
capital gains) and/or ordinary dividends (to the extent of net realized short-
term capital gains) during or with respect to the year of sale, and such
distributions will be taxable to shareholders.
At or before the closing of the Transactions, each Acquired Fund will, and
each Acquiring Fund may, declare a distribution to shareholders, which together
with all previous distributions, will have the effect of distributing to
shareholders all of its investment company taxable income (computed without
regard to the deduction for dividends paid) and net capital gains, including
those realized on disposition of portfolio securities in connection with the
Transactions (after reduction by any available capital loss carryforwards), if
any, through the closing of the Transactions. Such distributions will be taxable
to shareholders.
With regard to the Large Cap Growth VIF, as long as contracts funded
through the separate accounts of the insurance company qualify as annuity
contracts shareholder or life insurance contracts under Section 72 or Section
7702(a) of the Internal Revenue Code of 1986, as amended (the "Code"), the
Transactions will not create any tax liability for contract owners.
This description of the federal income tax consequences of the Transactions
is made without regard to the particular facts and circumstances of any
shareholder. Shareholders are urged to consult their own tax advisors as to the
specific consequences to them of the Transactions, including the applicability
and effect of state, local, non-U.S. and other tax laws.
16
Voting Rights. Each shareholder of the Acquired Funds is entitled to one
vote per Share and a proportionate fractional vote for any fractional Share. The
former shareholders of the Large Cap Growth Fund, as holders of Institutional,
Class A, Class B or Class C Shares of the Large Cap Fund, will vote separately
as a fund or a class on matters relating solely to that fund or class. On all
other matters, they will vote in the aggregate with shareholders of the Large
Cap Fund. The former shareholders of the Large Cap Growth VIF, as holders of
Shares of the Large Cap VIF, will vote separately as a fund on matters relating
solely to that fund. On all other matters, they will vote in the aggregate with
shareholders of the Large Cap VIF. As shareholders of the considerably larger
Acquiring Funds following the Transactions, the former shareholders of the
Acquired Funds will possess less proportional voting power when they vote
separately as Acquiring Fund shareholders, or shareholders of the classes
thereof, than they had when they voted separately as shareholders of the smaller
Acquired Fund.
Capitalization. The following tables set forth as of November 30, 2006 (i)
the capitalization of the Large Cap Growth Fund, (ii) the capitalization of the
Large Cap Fund, and (iii) the pro forma capitalization of the Large Cap Fund as
adjusted giving effect to the proposed acquisition of assets at net asset value:
<Table>
<Caption>
BB&T LARGE CAP GROWTH FUND
-----------------------------------------------
INSTITUTIONAL CLASS A CLASS B CLASS C
------------- --------- --------- -------
Net Assets ($)........................ 149,133,584 9,203,337 8,635,918 39,146
Shares................................ 15,655,995 982,727 984,198 4,460
Net Asset Value per Share ($)......... 9.53 9.37 8.77 8.78
</Table>
<Table>
<Caption>
BB&T LARGE CAP FUND
BB&T LARGE CAP FUND PRO FORMA COMBINED
------------------------------------------------- -------------------------------------------------
INSTITUTIONAL CLASS A CLASS B CLASS C INSTITUTIONAL CLASS A CLASS B CLASS C
------------- ---------- ---------- ------- ------------- ---------- ---------- -------
Net Assets ($)..... 596,045,284 50,266,190 15,025,992 177,619 745,178,868 59,469,527 23,661,910 216,765
Shares (a)......... 27,670,086 2,339,522 705,671 8,358 34,593,283 2,767,870 1,111,243 10,200
Net Asset Value per
Share ($)........ 21.54 21.49 21.29 21.25 21.54 21.49 21.29 21.25
</Table>
------------
(a) The share adjustment for merger for the Institutional Shares is 8,732,798,
for Class A Shares is 554,379, for Class B Shares is 578,626 and for Class C
Shares is 2,618.
The following table sets forth as of November 30, 2006 (i) the
capitalization of the Large Cap Growth VIF, (ii) the capitalization of the
Large Cap VIF, and (iii) the pro forma capitalization of the Large Cap VIF
as adjusted giving effect to the proposed acquisition of assets at net asset
value:
<Table>
<Caption>
BB&T LARGE CAP BB&T LARGE ADJUSTMENT BB&T LARGE CAP VIF
GROWTH VIF CAP VIF FOR MERGER PRO FORMA COMBINED
-------------- ---------- ---------- ------------------
Net Assets ($).............. 13,693,565 92,483,256 -- 106,176,821
Shares...................... 1,284,887 5,608,430 (454,473) 6,438,844
Net Asset Value per Share
($)....................... 10.66 16.49 -- 16.49
</Table>
17
INFORMATION ABOUT THE ACQUIRING FUNDS AND THE ACQUIRED FUNDS
LARGE CAP GROWTH FUND
LARGE CAP FUND
Information about the Large Cap Growth Fund and Large Cap Fund is
incorporated by reference into this Combined Prospectus/Proxy Statement from the
BB&T Prospectus forming a part of its Registration Statement on Form N-1A (File
No. 33-49098).
LARGE CAP GROWTH VIF
LARGE CAP VIF
Information about the Large Cap Growth VIF and Large Cap VIF is
incorporated by reference into this Combined Prospectus/Proxy Statement from the
VIF Prospectus forming a part of its Registration Statement on Form N-1A (File
No. 333-121205).
18
FINANCIAL HIGHLIGHTS
The financial highlights table is intended to help you understand the
Funds' financial performance for the past 5 years or the period of each Fund's
operations, if shorter. Certain information reflects financial results for a
single Fund Share. The total returns in the tables represent the rate that an
investor would have earned or lost on an investment in the Fund (assuming
reinvestment of all dividends and distributions).
All unaudited interim financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
for the interim periods presented. In addition, all such adjustments are of a
normal recurring nature.
FINANCIAL HIGHLIGHTS, LARGE CAP FUND AND LARGE CAP GROWTH FUND
The financial highlights table is intended to help you understand the
Funds' financial performance for the past 5 years or, if shorter, the period of
the Funds' operations. Certain information reflects financial results for a
single fund share. The total returns in the table represent the rate that an
investor would have earned [or lost] on an investment in the Fund (assuming
reinvestment of all dividends and distributions). This information has been
audited by KPMG LLP, an independent registered public accounting firm. This
report, along with the Fund's financial statements, is incorporated by reference
in the SAI, which is available upon request.
19
FINANCIAL HIGHLIGHTS, CLASS A SHARES
Selected data for a share of beneficial interest outstanding throughout the
periods indicated.
<Table>
<Caption>
INVESTMENT ACTIVITIES
-------------------------------------- DIVIDENDS
NET ASSET NET NET REALIZED/ ----------------------------------- NET ASSET
VALUE, INVESTMENT UNREALIZED TOTAL FROM NET NET REALIZED VALUE,
BEGINNING INCOME GAINS (LOSSES) INVESTMENT INVESTMENT GAINS ON TOTAL END OF
OF PERIOD (LOSS) ON INVESTMENTS ACTIVITIES INCOME INVESTMENTS DIVIDENDS PERIOD
--------- ---------- -------------- ---------- ---------- ------------ --------- ---------
LARGE CAP FUND
Year Ended September 30,
2006..................... $19.47 0.30(a) 2.30 2.60 (0.30) (1.44) (1.74) $20.33
Year Ended September 30,
2005..................... $17.26 0.28 2.22 2.50 (0.29) -- (0.29) $19.47
Year Ended September 30,
2004..................... $14.87 0.23 2.38 2.61 (0.22) -- (0.22) $17.26
Year Ended September 30,
2003..................... $12.84 0.23 2.03 2.26 (0.23) -- (0.23) $14.87
Year Ended September 30,
2002..................... $16.79 0.18 (3.47) (3.29) (0.18) (0.48) (0.66) $12.84
LARGE CAP GROWTH FUND
Year Ended September 30,
2006..................... $ 8.97 0.02(a) (0.05) (0.03) (0.01) -- (0.01) $ 8.93
Year Ended September 30,
2005..................... $ 8.22 0.02(a) 0.77 0.79 (0.04) -- (0.04) $ 8.97
Year Ended September 30,
2004..................... $ 7.69 (0.01) 0.54 0.53 -- -- -- $ 8.22
Year Ended September 30,
2003..................... $ 6.60 (0.02) 1.11 1.09 -- -- -- $ 7.69
Year Ended September 30,
2002..................... $ 8.16 (0.06) (1.50) (1.56) -- -- -- $ 6.60
</Table>
<Table>
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------------------------
RATIO OF NET
INVESTMENT
TOTAL NET ASSETS, RATIO OF INCOME RATIO OF
RETURN END OF NET EXPENSES (LOSS) TO EXPENSES TO
(EXCLUDES PERIOD TO AVERAGE AVERAGE NET AVERAGE PORTFOLIO
SALES CHARGE)(B) (000) NET ASSETS(C) ASSETS(C) NET ASSETS*(C) TURNOVER RATE**
---------------- ----------- ------------- ------------ -------------- ---------------
LARGE CAP FUND
Year Ended September 30,
2006..................... 14.29% $48,656 1.14% 1.53% 1.43% 34.83%
Year Ended September 30,
2005..................... 14.60% $39,756 1.14% 1.56% 1.48% 19.50%
Year Ended September 30,
2004..................... 17.61% $31,783 1.20% 1.32% 1.56% 16.40%
Year Ended September 30,
2003..................... 17.73% $25,397 1.17% 1.67% 1.55% 18.89%
Year Ended September 30,
2002..................... (20.57)% $22,222 1.23% 1.11% 1.62% 23.02%
LARGE CAP GROWTH FUND
Year Ended September 30,
2006..................... (0.31)% $ 9,446 1.13% 0.19% 1.43% 186.19%
Year Ended September 30,
2005..................... 9.62% $ 9,116 1.14% 0.38% 1.49% 62.78%
Year Ended September 30,
2004..................... 6.89% $ 8,784 1.22% (0.33)% 1.58% 127.47%
Year Ended September 30,
2003..................... 16.52% $ 7,042 1.18% (0.35)% 1.57% 91.73%
Year Ended September 30,
2002..................... (19.12)% $ 6,240 1.28% (0.57)% 1.67% 100.46%
</Table>
--------
* During the period certain fees were reduced. If such reductions had not
occurred, the ratios would have been as indicated.
** Portfolio turnover rate is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(a) Per share net investment income (loss) has been calculated using the
average daily shares method.
(b) Not annualized for periods less than one year.
(c) Annualized for periods less than one year.
20
FINANCIAL HIGHLIGHTS, CLASS B SHARES
Selected data for a share of beneficial interest outstanding throughout the
periods indicated.
<Table>
<Caption>
INVESTMENT ACTIVITIES
-------------------------------------- DIVIDENDS
NET ASSET NET NET REALIZED/ ----------------------------------- NET ASSET
VALUE, INVESTMENT UNREALIZED TOTAL FROM NET NET REALIZED VALUE,
BEGINNING INCOME GAINS (LOSSES) INVESTMENT INVESTMENT GAINS ON TOTAL END OF
OF PERIOD (LOSS) ON INVESTMENTS ACTIVITIES INCOME INVESTMENTS DIVIDENDS PERIOD
--------- ---------- -------------- ---------- ---------- ------------ --------- ---------
LARGE CAP FUND
Year Ended September 30,
2006................. $19.31 0.16(a) 2.27 2.43 (0.15) (1.44) (1.59) $20.15
Year Ended September 30,
2005................. $17.12 0.13 2.22 2.35 (0.16) -- (0.16) $19.31
Year Ended September 30,
2004................. $14.75 0.09 2.38 2.47 (0.10) -- (0.10) $17.12
Year Ended September 30,
2003................. $12.75 0.12 2.01 2.13 (0.13) -- (0.13) $14.75
Year Ended September 30,
2002................. $16.68 0.06 (3.44) (3.38) (0.07) (0.48) (0.55) $12.75
LARGE CAP GROWTH FUND
Year Ended September 30,
2006................. $ 8.47 (0.05)(a) (0.05) (0.10) -- -- -- $ 8.37
Year Ended September 30,
2005................. $ 7.80 (0.03)(a) 0.72 0.69 (0.02) -- (0.02) $ 8.47
Year Ended September 30,
2004................. $ 7.36 (0.13) 0.57 0.44 -- -- -- $ 7.80
Year Ended September 30,
2003................. $ 6.36 (0.08)(a) 1.08 1.00 -- -- -- $ 7.36
Year Ended September 30,
2002................. $ 7.93 (0.12) (1.45) (1.57) -- -- -- $ 6.36
</Table>
<Table>
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------------------------
RATIO OF NET
INVESTMENT
TOTAL NET ASSETS, RATIO OF NET INCOME RATIO OF
RETURN END OF EXPENSES TO (LOSS) TO EXPENSES TO
(EXCLUDES PERIOD AVERAGE AVERAGE NET AVERAGE PORTFOLIO
SALES CHARGE)(B) (000) NET ASSETS(C) ASSETS(C) NET ASSETS*(C) TURNOVER RATE**
---------------- ----------- ------------- ------------ -------------- ---------------
LARGE CAP FUND
Year Ended September 30,
2006................. 13.45% $14,808 1.88% 0.85% 1.93% 34.83%
Year Ended September 30,
2005................. 13.75% $22,148 1.89% 0.82% 1.99% 19.50%
Year Ended September 30,
2004................. 16.75% $26,309 1.95% 0.58% 2.06% 16.40%
Year Ended September 30,
2003................. 16.74% $26,215 1.91% 0.92% 2.05% 18.89%
Year Ended September 30,
2002................. (21.14)% $24,849 1.98% 0.36% 2.12% 23.02%
LARGE CAP GROWTH FUND
Year Ended September 30,
2006................. (1.18)% $ 8,970 1.88% (0.58)% 1.93% 186.19%
Year Ended September 30,
2005................. 8.89% $12,621 1.89% (0.36)% 1.99% 62.78%
Year Ended September 30,
2004................. 5.98% $13,845 1.96% (1.08)% 2.08% 127.47%
Year Ended September 30,
2003................. 15.72% $14,217 1.93% (1.10)% 2.07% 91.73%
Year Ended September 30,
2002................. (19.80)% $13,040 2.03% (1.32)% 2.17% 100.46%
</Table>
--------
* During the period certain fees were reduced. If such reductions had not
occurred, the ratios would have been as indicated.
** Portfolio turnover rate is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(a) Per share net investment income (loss) has been calculated using the
average daily shares method.
(b) Not annualized for periods less than one year.
(c) Annualized for periods less than one year.
21
FINANCIAL HIGHLIGHTS, CLASS C SHARES
Selected data for a share of beneficial interest outstanding throughout the
periods indicated.
<Table>
<Caption>
INVESTMENT ACTIVITIES
-------------------------------------- DIVIDENDS
NET ASSET NET NET REALIZED/ ----------------------------------- NET ASSET
VALUE, INVESTMENT UNREALIZED TOTAL FROM NET NET REALIZED VALUE,
BEGINNING INCOME GAINS (LOSSES) INVESTMENT INVESTMENT GAINS ON TOTAL END OF
OF PERIOD (LOSS) ON INVESTMENTS ACTIVITIES INCOME INVESTMENTS DIVIDENDS PERIOD
--------- ---------- -------------- ---------- ---------- ------------ --------- ---------
LARGE CAP FUND
Year Ended September 30,
2006................. $19.28 0.16(a) 2.26 2.42 (0.15) (1.44) (1.59) $20.11
Year Ended September 30,
2005................. $17.09 0.14 2.19 2.33 (0.14) -- (0.14) $19.28
Year Ended September 30,
2004................. $14.73 0.09 2.37 2.46 (0.10) -- (0.10) $17.09
Year Ended September 30,
2003................. $12.74 0.13 1.99 2.12 (0.13) -- (0.13) $14.73
Year Ended September 30,
2002................. $16.67 0.08 (3.45) (3.37) (0.08) (0.48) (0.56) $12.74
LARGE CAP GROWTH FUND
Year Ended September 30,
2006................. $ 8.47 (0.05)(a) (0.04) (0.09) -- -- -- $ 8.38
Year Ended September 30,
2005................. $ 7.81 (0.04)(a) 0.73 0.69 (0.03) -- (0.03) $ 8.47
Year Ended September 30,
2004................. $ 7.37 (0.12) 0.56 0.44 -- -- -- $ 7.81
Year Ended September 30,
2003................. $ 6.37 (0.08)(a) 1.08 1.00 -- -- -- $ 7.37
Year Ended September 30,
2002................. $ 7.94 (0.10)(a) (1.47) (1.57) -- -- -- $ 6.37
</Table>
<Table>
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------------------------
RATIO OF NET
INVESTMENT
TOTAL NET ASSETS, RATIO OF NET INCOME RATIO OF
RETURN END OF EXPENSES TO (LOSS) TO EXPENSES TO
(EXCLUDES PERIOD AVERAGE AVERAGE NET AVERAGE PORTFOLIO
SALES CHARGE)(B) (000) NET ASSETS(C) ASSETS(C) NET ASSETS*(C) TURNOVER RATE**
---------------- ----------- ------------- ------------ -------------- ---------------
LARGE CAP FUND
Year Ended September 30,
2006................. 13.42% $161 1.88% 0.82% 1.94% 34.83%
Year Ended September 30,
2005................. 13.77% $176 1.88% 0.80% 1.98% 19.50%
Year Ended September 30,
2004................. 16.72% $157 1.95% 0.57% 2.07% 16.40%
Year Ended September 30,
2003................. 16.72% $122 1.92% 0.90% 2.06% 18.89%
Year Ended September 30,
2002................. (21.10)% $ 52 1.94% 0.41% 2.08% 23.02%
LARGE CAP GROWTH FUND
Year Ended September 30,
2006................. (1.18)% $ 37 1.89% (0.56)% 1.93% 186.19%
Year Ended September 30,
2005................. 8.90% $ 18 1.89% (0.43)% 1.98% 62.78%
Year Ended September 30,
2004................. 5.97% $ 25 1.96% (1.08)% 2.08% 127.47%
Year Ended September 30,
2003................. 15.70% $ 31 1.93% (1.10)% 2.06% 91.73%
Year Ended September 30,
2002................. (19.77)% $ 37 1.98% (1.23)% 2.12% 100.46%
</Table>
--------
* During the period certain fees were reduced. If such reductions had not
occurred, the ratios would have been as indicated.
** Portfolio turnover rate is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(a) Per share net investment income (loss) has been calculated using the
average daily shares method.
(b) Not annualized for periods less than one year.
(c) Annualized for periods less than one year.
22
FINANCIAL HIGHLIGHTS, INSTITUTIONAL SHARES
Selected data for a share of beneficial interest outstanding throughout the
periods indicated.
<Table>
<Caption>
INVESTMENT ACTIVITIES
-------------------------------------- DIVIDENDS
NET ASSET NET NET REALIZED/ ----------------------------------- NET ASSET
VALUE, INVESTMENT UNREALIZED TOTAL FROM NET NET REALIZED VALUE,
BEGINNING INCOME GAINS (LOSSES) INVESTMENT INVESTMENT GAINS ON TOTAL END OF
OF PERIOD (LOSS) ON INVESTMENTS ACTIVITIES INCOME INVESTMENTS DIVIDENDS PERIOD
--------- ---------- -------------- ---------- ---------- ------------ --------- ---------
LARGE CAP FUND
Year Ended September 30,
2006................... $19.51 0.35(a) 2.31 2.66 (0.35) (1.44) (1.79) $20.38
Year Ended September 30,
2005................... $17.29 0.34 2.22 2.56 (0.34) -- (0.34) $19.51
Year Ended September 30,
2004................... $14.90 0.26 2.39 2.65 (0.26) -- (0.26) $17.29
Year Ended September 30,
2003................... $12.87 0.27 2.03 2.30 (0.27) -- (0.27) $14.90
Year Ended September 30,
2002................... $16.82 0.22 (3.47) (3.25) (0.22) (0.48) (0.70) $12.87
LARGE CAP GROWTH FUND
Year Ended September 30,
2006................... $ 9.12 0.04(a) (0.05) (0.01) (0.03) -- (0.03) $ 9.08
Year Ended September 30,
2005................... $ 8.35 0.06(a) 0.77 0.83 (0.06) -- (0.06) $ 9.12
Year Ended September 30,
2004................... $ 7.79 (0.01) 0.57 0.56 -- -- -- $ 8.35
Year Ended September 30,
2003................... $ 6.67 (0.01)(a) 1.13 1.12 -- -- -- $ 7.79
Year Ended September 30,
2002................... $ 8.23 (0.03) (1.53) (1.56) -- -- -- $ 6.67
</Table>
<Table>
<Caption>
RATIOS/SUPPLEMENTARY DATA
-------------------------------------------------------------------------
RATIO OF NET
INVESTMENT
NET ASSETS, RATIO OF NET INCOME RATIO OF
END OF EXPENSES TO (LOSS) TO EXPENSES TO
TOTAL PERIOD AVERAGE AVERAGE NET AVERAGE PORTFOLIO
RETURN(B) (000) NET ASSETS(C) ASSETS(C) NET ASSETS*(C) TURNOVER RATE**
--------- ----------- ------------- ------------ -------------- ---------------
LARGE CAP FUND
Year Ended September 30,
2006................... 14.59% $660,667 0.89% 1.80% 0.93% 34.83%
Year Ended September 30,
2005................... 14.92% $605,493 0.89% 1.82% 0.99% 19.50%
Year Ended September 30,
2004................... 17.86% $620,186 0.95% 1.58% 1.06% 16.40%
Year Ended September 30,
2003................... 17.98% $475,289 0.92% 1.90% 1.06% 18.89%
Year Ended September 30,
2002................... (20.33)% $319,971 0.98% 1.37% 1.12% 23.02%
LARGE CAP GROWTH FUND
Year Ended September 30,
2006................... (0.10)% $207,384 0.88% 0.40% 0.93% 186.19%
Year Ended September 30,
2005................... 9.92% $336,103 0.89% 0.63% 0.99% 62.78%
Year Ended September 30,
2004................... 7.19% $346,061 0.97% (0.08)% 1.08% 127.47%
Year Ended September 30,
2003................... 16.79% $272,961 0.93% (0.11)% 1.07% 91.73%
Year Ended September 30,
2002................... (18.96)% $160,933 1.02% (0.30)% 1.16% 100.46%
</Table>
--------
* During the period certain fees were reduced. If such reductions had not
occurred, the ratios would have been as indicated.
** Portfolio turnover rate is calculated on the basis of the Fund as a whole
without distinguishing between classes of shares issued.
(a) Per share net investment income (loss) has been calculated using the
average daily shares method.
(b) Not annualized for periods less than one year.
(c) Annualized for periods less than one year.
23
FINANCIAL HIGHLIGHTS, LARGE CAP VIF AND LARGE CAP GROWTH VIF
The following table is included to assist investors in evaluating the
financial performance of the Funds for the five-year period ended December 31,
2005 or, if shorter, the period of the Funds' operation. Certain information
reflects financial results of a single share. "Total Return" represents how much
an investment in the Fund would have earned (or lost) during each period. This
information has been audited by KPMG LLP, an independent registered public
accounting firm, for the fiscal years ended December 31, 2005, December 31,
2004, December 31, 2003 and December 31, 2002, and by other auditors for the
fiscal period ended December 31, 2001. The information does not reflect charges
and fees associated with separate accounts that invest in the Funds or any
insurance contract for which the Funds are an investment option. This
information, along with the Funds' financial statements, is included in the
annual report, which may be obtained free of charge upon request.
Selected data for a share of beneficial interest outstanding throughout the
periods indicated.
<Table>
<Caption>
INVESTMENT ACTIVITIES DIVIDENDS
----------------------------------- ----------------------------
NET REALIZED/
NET ASSET NET UNREALIZED NET ASSET
VALUE, INVESTMENT GAINS TOTAL FROM NET VALUE,
BEGINNING INCOME (LOSSES) ON INVESTMENT INVESTMENT TOTAL END OF
OF PERIOD (LOSS) INVESTMENTS ACTIVITIES INCOME DISTRIBUTIONS PERIOD
--------- ---------- ------------- ---------- ---------- ------------- ---------
BB&T LARGE CAP VIF
For the Six Months Ended June 30,
2006 (Unaudited).................. $14.00 0.14 0.70 0.84 (0.14) (0.14) $14.70
Year Ended December 31, 2005...... $13.35 0.26 0.65 0.91 (0.26) (0.26) $14.00
Year Ended December 31, 2004...... $12.00 0.22 1.35 1.57 (0.22) (0.22) $13.35
Year Ended December 31, 2003...... $ 9.88 0.19 2.12 2.31 (0.19) (0.19) $12.00
Year Ended December 31, 2002...... $12.50 0.17 (2.62) (2.45) (0.17) (0.17) $ 9.88
Year Ended December 31, 2001...... $12.66 0.17 (0.16) 0.01 (0.17) (0.17) $12.50
BB&T LARGE CAP GROWTH VIF
For the Six Months Ended June 30,
2006 (Unaudited).................. $10.29 0.02 (0.19) (0.17) (0.02) (0.02) $10.10
Year Ended December 31, 2005...... $10.14 0.04 0.15 0.19 (0.04) (0.04) $10.29
Year Ended December 31, 2004...... $ 9.64 0.04 0.50 0.54 (0.04) (0.04) $10.14
Year Ended December 31, 2003...... $ 7.53 (0.02) 2.13 2.11 -- -- $ 9.64
Year Ended December 31, 2002...... $10.83 (0.06) (3.24) (3.30) -- -- $ 7.53
October 15, 2001 to December 31,
2001 (a).......................... $10.00 (0.01) 0.84 0.83 -- -- $10.83
</Table>
<Table>
<Caption>
RATIOS/SUPPLEMENTARY DATA
------------------------------------------------------------------------------
RATIO OF
RATIO OF NET NET INVESTMENT RATIO OF
NET ASSETS, EXPENSES TO INCOME (LOSS) EXPENSES TO PORTFOLIO
TOTAL END OF AVERAGE NET TO AVERAGE AVERAGE NET TURNOVER
RETURN**(B) PERIOD (000) ASSETS(C) NET ASSETS(C) ASSETS*(C) RATE
----------- ------------ ------------ -------------- ----------- ---------
BB&T LARGE CAP VIF
For the Six Months Ended June 30,
2006 (Unaudited).................. 6.02% $115,294 0.75% 1.89% 0.99% 27.87%
Year Ended December 31, 2005...... 6.90% $113,648 0.79% 1.95% 1.05% 21.76%
Year Ended December 31, 2004...... 13.18% $111,612 0.81% 1.77% 1.10% 12.91%
Year Ended December 31, 2003...... 23.62% $ 94,683 0.88% 1.82% 1.17% 13.96%
Year Ended December 31, 2002...... (19.64)% $ 63,667 0.84% 1.57% 1.13% 15.24%
Year Ended December 31, 2001...... 0.16% $ 77,796 0.86% 1.17% 1.15% 14.47%
BB&T LARGE CAP GROWTH VIF
For the Six Months Ended June 30,
2006 (Unaudited).................. (1.64)% $ 23,181 0.78% 0.42% 1.02% 73.55%
Year Ended December 31, 2005...... 1.88% $ 23,523 0.79% 0.40% 1.14% 91.61%
Year Ended December 31, 2004...... 5.63% $ 22,300 0.86% 0.46% 1.26% 119.90%
Year Ended December 31, 2003...... 28.02% $ 18,464 1.04% (0.32)% 1.44% 90.57%
Year Ended December 31, 2002...... (30.47)% $ 9,328 1.31% (0.73)% 1.71% 93.65%
October 15, 2001 to December 31,
2001 (a).......................... 8.30% $ 10,876 1.19% (0.32)% 1.59% 16.20%
</Table>
--------
* During the period certain fees were reduced. If such reductions had not
occurred, the ratios would have been as indicated.
** Total return ratios are based on a share outstanding throughout the
period and assume reinvestment of distributions at a net asset value.
Total return ratios do not reflect changes pursuant to the terms of the
insurance contracts funded by separate accounts that invest in the Fund's
shares.
(a) Period from commencement of operations.
(b) Not annualized for periods less than one year.
(c) Annualized for periods less than one year.
24
Information Filed With The Securities And Exchange Commission. BB&T Funds
and BB&T Variable Insurance Funds are subject to the informational requirements
of the Securities Exchange Act of 1934 and in accordance therewith file reports
and other information with the SEC. Reports, proxy and information statements,
registration statements and other information filed by BB&T Funds and BB&T
Variable Insurance Funds can be inspected and copied at the public reference
facilities of the SEC at 100 F Street, NE Washington, D.C. 20549. Copies of such
materials can also be obtained from the Public Reference Branch, Office of
Consumer Affairs and Information Services, Securities and Exchange Commission,
Washington, D.C. 20549, at prescribed rates.
VOTING INFORMATION
Proxies are being solicited from shareholders of the Large Cap Growth Fund
by the Trustees of BB&T Funds and the Large Cap Growth VIF by the Trustees of
BB&T Variable Insurance Funds for the Joint Special Meeting of shareholders to
be held on January 24, 2007, at the offices of BISYS Fund Services Ohio, Inc.,
100 Summer Street, Suite 1500, Boston, MA 02110 at 9:00 a.m., Eastern time, or
at such later time made necessary by adjournment. This Combined Prospectus/Proxy
Statement and the enclosed form of proxy or voting instruction form are being
mailed to shareholders and contract owners on or about December 19, 2006. The
costs of the proxy materials and proxy solicitations will be borne by BB&T Asset
Management, Inc. A proxy may be revoked at any time at or before the meeting by
submitting to BB&T Funds or BB&T Variable Insurance Funds a subsequently dated
proxy, delivering a written notice of revocation to BB&T Funds or BB&T Variable
Insurance Funds at 3435 Stelzer Road, Columbus, Ohio 43219 or as otherwise
described in the "Introduction" above. All properly executed proxies received in
time for the Meeting will be voted as specified in the proxy, or, if no
specification is made, FOR the proposals set forth in Proposals 1 and 2 of the
Notice of Joint Special Meeting to implement the reorganizations of the Acquired
Funds by the transfer of all of its assets to the Acquiring Funds, in exchange
for Shares of the Acquiring Funds and the assumption by the Acquiring Funds of
all of the liabilities of the Acquired Funds followed by the dissolution and
liquidation of the Acquired Funds and the distribution of Shares to the
shareholders of the Acquired Funds. All Large Cap Growth Fund shareholders will
receive Shares of the BB&T Class (Institutional, Class A, Class B, or Class C)
that corresponds to the Class of each of Large Cap Growth Fund Shares that they
hold (Institutional, Class A, Class B, or Class C, respectively). Each
Transaction contemplated by the Reorganization Plans will be consummated only
if: (1) a quorum is present (except as otherwise provided by law, to constitute
a quorum for the transaction of business at a shareholders' meeting, there must
be present, in person or by proxy, holders of a majority of the total number of
shares of an Acquired Fund then outstanding and entitled to vote at the
meeting); (2) approved by the affirmative vote of a majority of votes cast by
each Acquired Fund voting as a fund, as described below; and (3) the other
closing conditions set forth in each Reorganization Plan are satisfied. In the
event the shareholders do not approve one or both of the Transactions, the
Trustees of BB&T Funds and/or BB&T Variable Insurance Funds will consider
possible alternative arrangements in the best interests of BB&T Funds and/or
BB&T Variable Insurance Funds and their shareholders. Each Transaction is not
contingent on the approval of the other Transaction.
Proxies are being solicited by mail. Shareholders of record of each
Acquired Fund at the close of business on November 29, 2006, (the "Record
Date"), will be entitled to vote at the Joint Special Meeting of shareholders or
any adjournment thereof. Each Share is entitled to one vote as of the close of
business on November 29, 2006. Approval of Proposal 1 requires the affirmative
vote of the lesser of: (a) 67% or more of the outstanding shares of the Acquired
Fund present at the Joint 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 Acquired Fund.
As discussed above, Shares of the Large Cap Growth VIF are offered only to
Participating Insurance Companies to fund benefits under their Contracts.
Accordingly, as of the close of business on November 29, 2006, Shares of the
Large Cap Growth VIF were held by separate accounts, or sub-accounts thereof, of
various Participating Insurance Companies. These Shares are owned by the
Participating Insurance Companies as depositors for their respective Contracts
issued to individual Contract Owners or to a group (e.g., a defined benefit
plan) in which Contract Owners participate. Contract Owners have the right to
instruct the Participating Insurance Companies on how to vote the Shares related
to their interests through their Contracts (i.e., pass-through voting). A
Participating Insurance Company must vote the Shares of the Large Cap Growth VIF
held in its name as directed. In the absence of voting directions on any voting
instruction form that is signed and returned, the
25
Participating Insurance Company will vote the interest represented thereby in
favor of a Proposal. If a Participating Insurance Company does not receive
voting instructions for all of the Shares of the Large Cap Growth VIF held under
the Contracts, it will vote all of the Shares in the relevant separate accounts
with respect to a Proposal, for, against, or abstaining, in the same proportion
as the Shares of the Large Cap Growth VIF for which it has received instructions
from Contract Owners (i.e., echo voting). Echo voting may lead to a small number
of Contract Owners determining the outcome of the vote. This Combined
Prospectus/Proxy Statement is used to solicit voting instructions from Contract
Owners, as well as to solicit proxies from the Participating Insurance
Companies, the actual shareholders of the Large Cap Growth VIF. All persons
entitled to direct the voting of Shares, whether or not they are shareholders,
are described as voting for purposes of this Combined Prospectus/Proxy
Statement. Contract Owners should consult their Participating Insurance Company
regarding their ability to revoke voting instructions after such instructions
have been provided to the Participating Insurance Company.
As of November 29, 2006, there were outstanding the following amount of
Shares of Institutional, Class A, Class B or Class C Class of the Large Cap
Growth Fund and Shares of the Large Cap Growth VIF:
<Table>
LARGE CAP GROWTH FUND: 15,665,940.899 Institutional Shares
983,770.741 Class A Shares
984,192.159 Class B Shares
4,459.924 Class C Shares
LARGE CAP GROWTH VIF: 1,284,835.693 Shares
</Table>
Votes cast by proxy, telephone, the Internet or in person at the meeting
will be counted by the inspector of election appointed by BB&T Funds. The
inspector of election will count the total number of votes cast "for" approval
of the Proposal for purposes of determining whether sufficient affirmative votes
have been cast. The inspector of election will count Shares represented by
proxies that reflect abstentions as Shares that are present and entitled to vote
on the matter for purposes of determining the presence of a quorum; however, the
inspector of election will not count "broker non-votes" (i.e., Shares held by
brokers or nominees as to which (i) instructions have not been received from the
beneficial owners or the persons entitled to vote and (ii) the broker or nominee
does not have the discretionary voting power on a particular matter) as Shares
that are present and entitled to vote on the matter for purposes of determining
the presence of a quorum. For purposes of determining whether an issue has been
approved, abstentions have the effect of a negative vote on the proposal, and
broker non-votes are treated as "against" votes in those instances where
approval of an issue requires a certain percentage of all votes outstanding, but
are given no effect in those instances where approval of an issue requires a
certain percentage of the votes constituting the quorum for such issue.
BB&T Funds' and BB&T Variable Insurance Funds' Trustees know of no matters
other than those set forth herein to be brought before the meeting. If, however,
any other matters properly come before the meeting, it is the Trustees'
intention that proxies will be voted on such matters in accordance with the
judgment of the persons named in the enclosed form of proxy.
As of November 29, 2006, the officers and Trustees of BB&T Funds as a group
beneficially owned less than 1% of the outstanding Shares of Institutional,
Class A, Class B or Class C Shares of any of the BB&T Funds. As of November 29,
2006, the officers and Trustees of BB&T Variable Insurance Funds as a group
beneficially owned less than 1% of the outstanding Shares of any of the BB&T
Variable Insurance Funds. The information in the following table shows, to the
best of the knowledge of BB&T Funds and BB&T Variable Insurance Funds, the
shareholders who owned of record or beneficially 5% or more of the indicated
Fund and Class, if applicable. The table also shows, as far as practicable, the
percentage of record and beneficial ownership of these same shareholders upon
consummation of the Transactions calculated on the basis of holdings as of the
November 29, 2006 record date. Those shareholders who beneficially own 25% or
more of the outstanding shares of a fund may be deemed to be controlling persons
of that fund under the 1940 Act. In this context, "control" shall mean (1) the
beneficial ownership, either directly or through one or more controlled
companies of more than 25% of the voting securities of
26
a company; (2) the acknowledgement or assertion by either the controlled or
controlling party of the existence of control; or (3) an adjudication under
sec.2(a)(9)of the 1940 Act which has become final, that control exists.
<Table>
<Caption>
APPROXIMATE APPROXIMATE
PERCENT OF APPROXIMATE PERCENT OF PERCENT OF
RECORD PERCENT OF RECORD BENEFICIAL
OWNERSHIP BENEFICIAL OWNERSHIP OWNERSHIP
AS OF OWNERSHIP AS UPON UPON
NAME AND ADDRESS 11/29/2006 OF 11/29/2006 CONSUMMATION CONSUMMATION
---------------- ---------- ------------- ------------ ------------
BB&T Large Cap Growth Fund
CLASS A SHARES
PERSHING LLC
PO BOX 2052
JERSEY CITY, NJ 07303-9998...... 10.28% 0% 16.11% 0%
CLASS B SHARES
PERSHING LLC
PO BOX 2052
JERSEY CITY, NJ 07303-9998...... 5.04% 0% 5.95% 0%
CLASS C SHARES
A WAYNE ANNAS
CAROLYN B ANNAS
PO BOX 563
VALDESE, NC 28690............... 51.07% 51.07% 17.77% 17.77%
TERESA L LUHN
PO BOX 48525
CUMBERLAND, NC 28331............ 22.72% 22.72% 7.9% 7.9%
RICHARD G BLAKE
3525 LEWIS LOOP SE
BOLIVIA, NC 28422............... 11.90% 11.90% 4.14% 4.14%
HEIDI P SCEARCE
60 BRICKHORN DR
RIDGEWAY, VA 24148.............. 6.12% 6.12% 2.13% 2.13%
DONALDSON LUFKIN JENRETTE
SECURITIES CORPORATION INC
PO BOX 2052
JERSEY CITY, NJ 07303-9998...... 5.94% 5.94% 2.06% 2.06%
INSTITUTIONAL CLASS SHARES
WILBRANCH & CO
223 NASH ST W
WILSON, NC 27893-3801........... 51.29% 0% 42.84% 0%
BRANCH BANKING & TRUST CO
DAILY RECORDKEEPING PLANS
300 EAST WENDOVER AVENUE
GREENSBORO, NC 27401............ 48.20% 0% 42.70% 0%
BB&T Large Cap Fund
CLASS A SHARES
PERSHING LLC
PO BOX 2052
JERSEY CITY, NJ 07303-9998...... 11.79% 0% 16.11% 0%
CLASS B SHARES
PERSHING LLC
PO BOX 2052
JERSEY CITY, NJ 07303-9998...... 7.21% 0% 5.95% 0%
</Table>
27
<Table>
<Caption>
APPROXIMATE APPROXIMATE
PERCENT OF APPROXIMATE PERCENT OF PERCENT OF
RECORD PERCENT OF RECORD BENEFICIAL
OWNERSHIP BENEFICIAL OWNERSHIP OWNERSHIP
AS OF OWNERSHIP AS UPON UPON
NAME AND ADDRESS 11/29/2006 OF 11/29/2006 CONSUMMATION CONSUMMATION
---------------- ---------- ------------- ------------ ------------
CLASS C SHARES
MG TRUST CUSTODIAN OR TRUSTEE
PRIME HEALTH INCORPORATED 401K
700 17TH ST STE 150
DENVER, CO 80202................ 55.73% 0% 36.34% 0%
INSTITUTIONAL CLASS SHARES
BRANCH BANKING & TRUST CO
300 EAST WENDOVER AVENUE
GREENSBORO, NC 27401............ 39.59% 0% 42.75% 0%
WILBRANCH CO
PO BOX 2887
WILSON, NC 27894................ 38.07% 0% 42.84% 0%
BB&T CAPITAL MGR MODERATE GROWTH
FD
434 FAYETTEVILLE ST
MALL 5TH FL
RALEIGH, NC 27601............... 6.00% 6.00% 3.82% 3.82%
BB&T CAPITAL MANAGER GROWTH FUND
434 FAYETTEVILLE ST
MALL 5TH FL
RALEIGH, NC 27601............... 5.69% 5.69% 3.63% 3.63%
BB&T Large Cap Growth VIF
HARTFORD LIFE
200 HOPMEADOW ST
ATTN DAVID TEN-BROECK SIMSBURY,
CT 06070........................ 86.20% 0% 91.77% 0%
NATIONWIDE INSURANCE COMPANY
PO BOX 182029
COLUMBUS, OH 43218-2029......... 12.14% 0% 2.26% 0%
BB&T Large Cap VIF
HARTFORD LIFE
200 HOPMEADOW ST
SIMBURY, CT 06070............... 93.05% 0% 91.77% 0%
</Table>
THE BOARDS OF TRUSTEES OF BB&T FUNDS AND BB&T VARIABLE INSURANCE FUNDS,
INCLUDING THE INDEPENDENT TRUSTEES, UNANIMOUSLY RECOMMEND APPROVAL OF THE
REORGANIZATION PLANS.
As demonstrated above, A. Wayne Annas and Carolyn B. Annas. may be deemed a
controlling person of the Class C Shares of the BB&T Large Cap Growth Fund.
With respect to the effect of this control on the voting rights of other
security holders, such a controlling person's vote may determine the outcome of
each proposal.
28
APPENDIX A
BB&T FUNDS
BB&T LARGE CAP GROWTH FUND AND
BB&T LARGE CAP FUND
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization, having been approved by the
Board of Trustees of BB&T Funds, is made as of December 5, 2006 between BB&T
Funds, on behalf of BB&T Large Cap Growth Fund and BB&T Large Cap Fund, and BB&T
Asset Management, Inc (the "Plan"). The capitalized terms used herein shall have
the meaning ascribed to them in this Plan.
1. Overview of Plan of Reorganization
(a) The BB&T Large Cap Growth Fund ("Large Cap Growth Fund") will sell,
assign, convey, transfer and deliver to BB&T Large Cap Fund ("Large Cap Fund"),
and Large Cap Fund will acquire, on the Exchange Date, all of the properties and
assets existing at the Valuation Time in Large Cap Growth Fund, subject to
liabilities.
In consideration therefor, Large Cap Fund shall, on the Exchange Date,
assume all of the liabilities of Large Cap Growth Fund existing at the Valuation
Time and transfer to Large Cap Growth Fund a number of full and fractional units
of beneficial interest ("Shares") (such Shares being Institutional, Class A,
Class B or Class C Shares) of Large Cap Fund having an aggregate net asset value
equal to the value of the assets of Large Cap Growth Fund transferred to Large
Cap Fund on such date less the value of all of the liabilities of Large Cap
Growth Fund assumed by Large Cap Fund on that date. It is intended that the
reorganization described in this Plan shall be a tax-free reorganization under
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
(b) Upon consummation of the transaction described in paragraph 1(a) of
this Plan, Large Cap Growth Fund in complete liquidation shall distribute to its
respective shareholders of record as of the Exchange Date the Large Cap Fund
Shares received by it, each shareholder being entitled to receive that number of
such Large Cap Fund Shares equal to the total of (i) the proportion which the
number of Shares of Large Cap Growth Fund held by such shareholder bears to the
number of such Shares of Large Cap Growth Fund outstanding on such date
multiplied by (ii) the total number of Large Cap Fund Shares received by the
Large Cap Growth Fund, as of the Exchange Date. Large Cap Growth Fund
shareholders of record holding Institutional, Class A, Class B or Class C Shares
will receive Institutional, Class A, Class B or Class C Shares, respectively, of
Large Cap Fund.
2. Representations and Warranties of BB&T Funds. Each of the BB&T Funds,
Large Cap Fund and Large Cap Growth Fund warrant to and agree that:
(a) BB&T Funds is a business trust duly established and validly
existing under the laws of The Commonwealth of Massachusetts and has power
to carry on its business as it is now being conducted and to carry out this
Plan. Each of BB&T Funds, Large Cap Growth Fund and Large Cap Fund is not
required to qualify as a foreign association in any jurisdiction. Each of
BB&T Funds, Large Cap Growth Fund and Large Cap Fund has all necessary
federal, state and local authorizations to own all of its properties and
assets and to carry on business as now being conducted and to fulfill the
terms of this Plan, except as set forth in Section 2(i).
(b) BB&T Funds is registered under the Investment Company Act of 1940,
as amended (the "1940 Act"), as an open-end management investment company,
and such registration has not been revoked or rescinded and is in full
force and effect.
(c) The statements of assets and liabilities, statements of
operations, statements of changes in net assets and schedules of
investments (indicating their market values) for each of Large Cap Growth
Fund and Large Cap Fund for the year ended September 30, 2006, fairly
present the financial position of each of Large Cap Growth Fund and Large
Cap Fund as of such date, and said statements of operations and changes in
net assets and financial highlights fairly reflect the results of
operations, changes in net assets and financial highlights for the periods
covered thereby in conformity with generally accepted accounting
principles.
A-1
(d) The prospectuses of each of Large Cap Growth Fund and Large Cap
Fund dated February 1, 2006, as amended, as filed with the Securities and
Exchange Commission (the "Commission") (the "Prospectuses") and the
Statement of Additional Information for BB&T Funds, dated February 1, 2006,
as amended (the "Statement of Additional Information"), as filed with the
Commission, did not as of such date, and will not as of the Exchange Date,
contain any untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of BB&T Funds, Large Cap Growth Fund or Large
Cap Fund, overtly threatened against BB&T Funds, Large Cap Growth Fund or
Large Cap Fund, which assert liability on the part of BB&T Funds, Large Cap
Growth Fund or Large Cap Fund.
(f) There are no material contracts outstanding to which BB&T Funds,
Large Cap Growth Fund or Large Cap Fund is a party, other than as disclosed
in BB&T's Prospectuses and Statement of Additional Information or in the
Registration Statement.
(g) Large Cap Growth Fund has no known liabilities of a material
nature, contingent or otherwise, other than those shown on its statement of
assets and liabilities as of September 30, 2006, referred to above and
those incurred in the ordinary course of the business of BB&T Funds as an
investment company or Large Cap Growth Fund since such date. Prior to the
Exchange Date, Large Cap Growth Fund will advise Large Cap Fund of all
known material liabilities, contingent or otherwise, incurred by it
subsequent to September 30, 2006, whether or not incurred in the ordinary
course of business.
(h) As of the Exchange Date, BB&T Funds and each of Large Cap Growth
Fund and Large Cap Fund will have filed all federal and other tax returns
which, to the knowledge of BB&T Funds' officers, have been required to be
filed by Large Cap Growth Fund or Large Cap Fund, respectively, and will
have paid or will pay all federal and other taxes shown to be due on such
returns or on any assessments received by Large Cap Growth Fund or Large
Cap Fund, respectively. As of the Exchange Date, to such officers'
knowledge, each of Large Cap Growth Fund and Large Cap Fund (i) will have
adequately provided for all tax liabilities on its books, (ii) will not
have had any tax deficiency or liability asserted against it, or question
with respect thereto raised, and (iii) will not be under audit by the
Internal Revenue Service or by any state or local tax authority for taxes
in excess of those already paid.
(i) As used in this Plan, the term "Investments" shall mean the Large
Cap Growth Fund's investments shown on the schedule of its portfolio
investments as of September 30, 2006, referred to in Section 2(c) hereof,
as supplemented with such changes as BB&T Funds or the Large Cap Growth
Fund shall make after September 30, 2006, which changes shall be disclosed
to BB&T Funds and the Large Cap Fund, and changes resulting from stock
dividends, stock split-ups, mergers and similar corporate actions.
(j) Each of Large Cap Growth Fund and Large Cap Fund has elected to
qualify and has qualified as, and has met the requirements of subchapter M
of the Code for treatment as a "regulated investment company" within the
meaning of Section 851 of the Code in respect of each taxable year since
the commencement of operations, and will continue to so qualify and meet
such requirements at all times through the Exchange Date. Neither Large Cap
Growth Fund nor Large Cap Fund has at any time since its inception been
liable (nor is now liable) for any material income or excise tax pursuant
to Section 852 or 4982 of the Code. Each of Large Cap Growth Fund and Large
Cap Fund is in compliance in all material respects with applicable
regulations of the Internal Revenue Service pertaining to the reporting of
dividends and other distributions on and redemptions of its capital stock
and to withholding in respect of dividends and other distributions to
shareholders, and is not liable for any material penalties which could be
imposed thereunder.
(k) No consent, approval, authorization or order of any governmental
authority is required for the consummation by BB&T Funds, Large Cap Growth
Fund or Large Cap Fund of the transaction contemplated by this Plan, except
such as may be required under the 1933 Act, the 1934 Act, the 1940 Act,
state securities or Blue Sky laws or the Hart-Scott-Rodino Antitrust
Improvements Act of 1976.
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(l) As of both the Valuation Time and the Exchange Date and otherwise
as described in Section 2(i), BB&T Funds on behalf of Large Cap Fund will
have full right, power and authority to purchase the Investments and any
other assets and assume the liabilities of Large Cap Growth Fund to be
transferred to Large Cap Fund pursuant to this Plan.
(m) The Registration Statement, the Prospectuses and the Proxy
Statement, on the effective date of the Registration Statement and insofar
as they relate to BB&T Funds, Large Cap Growth Fund and Large Cap Fund: (i)
will comply in all material respects with the provisions of the 1933 Act,
the 1934 Act and the 1940 Act and the rules and regulations thereunder and
(ii) will not contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein, in light of the circumstances in which they were
made, not misleading; and at the time of the shareholders' meeting referred
to in Section 8(a) and at the Exchange Date, the Prospectuses, as amended
or supplemented by any amendments or supplements filed with the Commission
by BB&T Funds, Large Cap Growth Fund or Large Cap Fund, will not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein,
in light of the circumstances in which they were made, not misleading;
provided, however, that none of the representations and warranties in this
subsection shall apply to statements in or omissions from the Registration
Statement, the Prospectuses or the Proxy Statement made in reliance upon
and in conformity with information furnished by Large Cap Growth Fund or
Large Cap Fund for use in the Registration Statement, the Prospectuses or
the Proxy Statement.
(n) Large Cap Fund Shares to be issued to each of Large Cap Growth
Fund have been duly authorized and, when issued and delivered pursuant to
this Plan and the Prospectuses, will be legally and validly issued and will
be fully paid and nonassessable by BB&T Funds and no shareholder of BB&T
Funds will have any preemptive right of subscription or purchase in respect
thereof.
(o) The issuance of Large Cap Fund Shares pursuant to this Plan will
be in compliance with all applicable federal and state securities laws.
3. Reorganization. (a) Subject to the requisite approval of the
shareholders of Large Cap Growth Fund (in respect of the Large Cap Growth Fund
Reorganization, as hereafter defined) and to the other terms and conditions
contained herein (including Large Cap Growth Fund's obligation described in
Section 9(j) hereof to distribute to its respective shareholders all of its
undistributed investment company taxable income (as defined in Section 852 of
the Code), if any, and net capital gain (as defined in Section 1222 of the
Code)), Large Cap Growth Fund will agree to sell, assign, convey, transfer and
deliver to Large Cap Fund, and Large Cap Fund will agree to acquire from Large
Cap Growth Fund, on the Exchange Date all of the Investments and all of the cash
and other assets of Large Cap Growth Fund, subject to liabilities, in exchange
for that number of Shares of Large Cap Fund provided for in Section 4 and the
assumption by Large Cap Fund of all of the liabilities of Large Cap Growth Fund.
Pursuant to this Plan, Large Cap Growth Fund will, as soon as practicable after
the Exchange Date, distribute in liquidation all of the Large Cap Fund Shares
received by it to its shareholders in exchange for their respective Shares of
Large Cap Growth Fund.
(b) BB&T Funds, on behalf of Large Cap Growth Fund, will pay or cause to be
paid to Large Cap Fund any interest and cash dividends received by it on or
after the Exchange Date with respect to the Investments transferred to Large Cap
Fund hereunder. BB&T Funds, on behalf of Large Cap Growth Fund, will transfer to
Large Cap Fund any rights, stock dividends, or other securities received by
Large Cap Growth Fund after the Exchange Date as stock dividends or other
distributions on or with respect to the Investments transferred, which rights,
stock dividends, and other securities shall be deemed included in the assets
transferred to Large Cap Fund at the Exchange Date and shall not be separately
valued, in which case any such distribution that remains unpaid as of the
Exchange Date shall be included in the determination of the value of the assets
of Large Cap Growth Fund acquired by Large Cap Fund.
4. Exchange Date; Valuation Time. On the Exchange Date, Large Cap Fund
will deliver to Large Cap Growth Fund a number of Large Cap Fund Shares having
an aggregate net asset value equal to the value of the assets attributable to
each corresponding class of Shares of Large Cap Growth Fund acquired by Large
Cap Fund, less the value of the liabilities of Large Cap Growth Fund assumed,
determined as hereafter provided in this Section 4.
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(a) Subject to Section 4(d) hereof, the value of Large Cap Growth Fund's
net assets will be computed as of the Valuation Time using the valuation
procedures for Large Cap Fund set forth in the BB&T Prospectuses and BB&T
Statement of Additional Information. In no event shall the same security held by
the Large Cap Growth Fund and BB&T Funds be valued at different prices.
(b) Subject to Section 4(d) hereof, the net asset value of a Share of Large
Cap Fund will be determined to the nearest full cent as of the Valuation Time,
using the valuation procedures set forth in the BB&T Prospectuses for Large Cap
Fund.
(c) Subject to Section 4(d), the Valuation Time shall be 4:00 p.m. Eastern
Standard time on January 26, 2007, or such earlier or later days as may be
established by the proper officers of BB&T Funds (the "Valuation Time").
(d) No formula will be used to adjust the net asset value of Large Cap
Growth Fund or Large Cap Fund to take into account differences in realized and
unrealized gains and losses.
(e) Large Cap Fund shall issue its Shares to Large Cap Growth Fund on one
share deposit receipt registered in the name of Large Cap Growth Fund. Large Cap
Growth Fund shall distribute in liquidation the Large Cap Fund Shares received
by it hereunder pro rata to its shareholders by redelivering such share deposit
receipt to BB&T Funds' transfer agent which will as soon as practicable set up
open accounts for each Large Cap Growth Fund shareholder, in accordance with
written instructions furnished by Large Cap Growth Fund.
(f) Large Cap Fund shall assume all liabilities of Large Cap Growth Fund,
whether accrued or contingent, in connection with the acquisition of assets and
subsequent dissolution of Large Cap Growth Fund or otherwise, except that
recourse for assumed liabilities relating to Large Cap Growth Fund will be
limited to Large Cap Fund.
5. Expenses, Fees, etc. (a) All fees and expenses incurred by Large Cap
Growth Fund, Large Cap Fund and/or BB&T Asset Management, Inc. (the investment
adviser of both Large Cap Growth Fund and Large Cap Fund) directly in connection
with the consummation the transaction contemplated by this Plan will be borne by
BB&T Asset Management, Inc., including the costs of proxy materials, proxy
solicitations and legal expenses. All such fees and expenses incurred and so
borne by BB&T Asset Management, Inc. will be solely and directly related to the
transaction contemplated by this Plan and will be paid directly by BB&T Asset
Management, Inc. to the relevant providers of services or other payees, in
accordance with the principles set forth in Revenue Ruling 73-54, 1973-1 C.B.
187. Fees and expenses not incurred directly in connection with the consummation
of the transaction contemplated by this Plan will be paid by the party directly
incurring such expenses. Notwithstanding any of the foregoing, fees and expenses
shall in any event be paid by the party directly incurring such fees and
expenses if and to the extent that the payment by BB&T Asset Management, Inc. of
such fees and expenses would result in the disqualification of such party as a
regulated investment company within the meaning of Section 851 of the Code.
Large Cap Growth Fund shareholders will pay their respective expenses, if any,
incurred in connection with the transaction contemplated by this Plan. Neither
BB&T Asset Management, Inc. nor Large Cap Growth Fund nor Large Cap Fund will
pay Large Cap Growth Fund shareholders' expenses.
(b) Notwithstanding any other provisions of this Plan, if for any reason
the transaction contemplated by this Plan is not consummated, no party shall be
liable to the other party for any damages resulting therefrom, including without
limitation consequential damages.
6. Permitted Assets. BB&T Funds and Large Cap Growth Fund will agree to
review the assets of Large Cap Growth Fund to ensure that at any time prior to
the Exchange Date the assets of Large Cap Growth Fund do not include any assets
that Large Cap Fund is not permitted, or reasonably believes to be unsuitable
for it, to acquire, including without limitation any security that, prior to its
acquisition by Large Cap Growth Fund, is unsuitable for Large Cap Fund to
acquire.
7. Exchange Date. Delivery of the assets of Large Cap Growth Fund to be
transferred, assumption of the liabilities of Large Cap Growth Fund to be
assumed, and the delivery of Large Cap Fund Shares to be issued shall be made at
the offices of BB&T Funds, 3435 Stelzer Road, Columbus, OH 43219, at 9:00 a.m.
Eastern standard time on January 29, 2007, or at such other times and dates
established by the proper officers of BB&T Funds, the date and time upon which
such delivery is to take place being referred to herein as the "Exchange Date."
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8. Special Meeting of Shareholders; Dissolution. (a) Large Cap Growth Fund
will agree to call a special meeting of the shareholders as soon as is
practicable after the effective date of the Registration Statement for the
purpose of considering the sale of all of the assets of Large Cap Growth Fund to
and the assumption of all of the liabilities of Large Cap Growth Fund by Large
Cap Fund as herein provided, and approving this Plan, and it shall be a
condition to the obligations of each of the parties hereto that the holders of
the Shares of Large Cap Growth Fund shall have approved this Plan and the
transaction contemplated herein in the manner required by law and BB&T Funds'
Declaration of Trust and Bylaws at such a meeting on or before the Valuation
Time.
9. Conditions to Be Met Regarding the Transaction. The consummation by
the Large Cap Growth Fund and Large Cap Fund of the reorganization of the Large
Cap Growth Fund with and into the Large Cap Fund ("Large Cap Growth Fund
Reorganization") shall be subject to the following conditions:
(a) This Plan shall have been adopted and the transaction contemplated
hereby, shall have been approved by the shareholders of Large Cap Growth
Fund in the manner required by law.
(b) Large Cap Growth Fund shall have furnished to Large Cap Fund a
statement of each of Large Cap Growth Fund's assets and liabilities, with
values determined as provided in Section 3 of this Plan, together with a
list of Investments with their respective tax costs, all as of the
Valuation Time, certified on Large Cap Growth Fund's behalf by its
President (or any Vice President) and Treasurer, and a certificate of both
such officers, dated the Exchange Date, to the effect that as of the
Valuation Time and as of the Exchange Date there has been no material
adverse change in the financial position of Large Cap Growth Fund since
September 30, 2006, other than changes in the Investments since that date
or changes in the market value of the Investments, or changes due to net
redemptions of Shares of Large Cap Growth Fund, dividends paid or losses
from operations.
(c) As of the Valuation Time and as of the Exchange Date, all
representations and warranties of BB&T Funds, Large Cap Fund and Large Cap
Growth Fund made in Section 2 of this Plan are true and correct in all
material respects as if made at and as of such dates, Large Cap Growth Fund
has complied with all requirements of this Plan to be performed or
satisfied at or prior to each of such dates, and Large Cap Growth Fund
shall have furnished to Large Cap Fund a statement, dated the Exchange
Date, signed by BB&T Funds' President (or any Vice President) and Treasurer
certifying those facts as of such dates.
(d) There shall not be any material litigation pending with respect to
the matters contemplated by this Plan.
(e) BB&T Funds shall have received an opinion of Ropes & Gray LLP
dated the Exchange Date to the effect that: (i) BB&T Funds is a business
trust duly established and validly existing under the laws of the
Commonwealth of Massachusetts, and neither BB&T Funds, Large Cap Growth
Fund nor Large Cap Fund is, to the knowledge of such counsel, required to
qualify to do business as a foreign association in any jurisdiction; (ii)
BB&T Funds and Large Cap Growth Fund have power to sell, assign, convey,
transfer and deliver the Investments and other assets contemplated hereby
and, upon consummation of the transaction contemplated hereby in accordance
with the terms of this Plan, BB&T Funds and Large Cap Growth Fund will have
duly sold, assigned, conveyed, transferred and delivered such Investments
and other assets to Large Cap Fund; (iii) the adoption of this Plan did
not, and the consummation of the transaction contemplated hereby will not,
violate BB&T Funds' Declaration of Trust or Bylaws, as amended, or any
provision of any agreement known to such counsel to which BB&T Funds is a
party or by which it is bound; (iv) no consent, approval, authorization or
order of any court or governmental authority is required for the
consummation by BB&T Funds of the transaction contemplated hereby, except
such as have been obtained under the Securities Act of 1933 (the "1933
Act"), the Securities Exchange Act of 1934 ("the 1934 Act") and the 1940
Act; (v) this Plan has been duly authorized by BB&T Funds and is a valid
and binding obligation of BB&T Funds; and (vi) the Shares of Large Cap Fund
to be delivered to Large Cap Growth Fund as provided for by this Plan are
duly authorized and upon such delivery will be validly issued and will be
fully paid and nonassessable by BB&T Funds and no shareholder of BB&T Funds
has any preemptive right to subscription or purchase in respect thereof.
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(f) With respect to the Large Cap Growth Fund Reorganization, BB&T
Funds, on behalf of Large Cap Growth Fund and Large Cap Fund shall have
received an opinion of Ropes & Gray LLP addressed to Large Cap Growth Fund
and Large Cap Fund and dated the Exchange Date (which opinion will be based
upon certain factual representations and subject to certain qualifications)
to the effect that, on the basis of the existing provisions of the Code,
Treasury Regulations, current administrative rules and court decisions,
generally for federal income tax purposes, except as noted below: (i) the
transaction contemplated by this Plan will constitute a reorganization
within the meaning of Section 368(a) of the Code, and Large Cap Fund and
Large Cap Growth Fund will each be a "party to a reorganization" within the
meaning of Section 368(b) of the Code; (ii) no gain or loss will be
recognized by Large Cap Fund upon the receipt of the assets of Large Cap
Growth Fund in exchange for Large Cap Fund Shares and the assumption by
Large Cap Fund of the liabilities of Large Cap Growth Fund; (iii) the basis
in the hands of Large Cap Fund of the assets of Large Cap Growth Fund
transferred to Large Cap Fund in the transaction contemplated by this Plan
will be the same as the basis of such assets in the hands of Large Cap
Growth Fund immediately prior to the transfer; (iv) the holding periods of
the assets of Large Cap Growth Fund in the hands of Large Cap Fund will
include the periods during which such assets were held by Large Cap Growth
Fund; (v) no gain or loss will be recognized by Large Cap Growth Fund upon
the transfer of Large Cap Growth Fund's assets to Large Cap Fund in
exchange for Large Cap Fund Shares and the assumption by Large Cap Fund of
the liabilities of Large Cap Growth Fund, or upon the distribution of Large
Cap Fund Shares by Large Cap Growth Fund to its shareholders in
liquidation; (vi) no gain or loss will be recognized by Large Cap Growth
Fund shareholders upon the exchange of their Large Cap Growth Fund Shares
for Large Cap Fund Shares; (vii) the aggregate basis of Large Cap Fund
Shares a Large Cap Growth Fund shareholder receives in connection with the
transaction contemplated by this Plan will be the same as the aggregate
basis of his or her Large Cap Growth Fund exchanged therefor; (viii) a
Large Cap Growth Fund shareholder's holding period for his or her Large Cap
Fund Shares will be determined by including the period for which he or she
held the Large Cap Growth Fund Shares exchanged therefor, provided that he
or she held such Large Cap Growth Fund Shares as capital assets; and (ix)
Large Cap Fund will succeed to, and take into account the items of Large
Cap Growth Fund described in Section 381(c) of the Code, subject to the
conditions and limitations specified in Sections 381, 382, 383 and 384 of
the Code and the Treasury regulations thereunder. The opinion will express
no view with respect to the effect of the reorganization on any transferred
asset as to which any unrealized gain or loss is required to be recognized
at the end of a taxable year (or on the termination or transfer thereof)
under federal income tax principles.
(g) The assets of Large Cap Growth Fund to be acquired by Large Cap
Fund will include no assets which Large Cap Fund, by reason of limitations
contained in its Declaration of Trust or of investment restrictions
disclosed in BB&T Prospectuses and SAI in effect on the Exchange Date, may
not properly acquire. BB&T Funds shall not change BB&T Funds' Declaration
of Trust and BB&T Prospectuses so as to restrict permitted investments for
Large Cap Fund except as required by the Commission or any state regulatory
authority.
(h) The Registration Statement shall have become effective under the
1933 Act and applicable Blue Sky provisions, and no stop order suspending
such effectiveness shall have been instituted or, to the knowledge of BB&T
Funds, contemplated by the Commission and or any state regulatory
authority.
(i) BB&T Funds shall have received from the Commission such order or
orders as Ropes & Gray LLP deems reasonably necessary or desirable under
the 1933 Act, the 1934 Act, the 1940 Act in connection with the transaction
contemplated hereby, and that all such orders shall be in full force and
effect.
(j) Prior to the Exchange Date, the Large Cap Growth Fund shall have
declared a dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to its shareholders (a)
all of the excess of (x) its investment income excludable from gross income
under Section 103 of the Code over (y) its deductions disallowed under
Section 265 and 171 of the Code, (b) all of its investment company taxable
income (in each case computed without regard to any deduction for dividends
paid), and (c) all of its net capital gain realized (after reduction for
any capital loss carryover), in each case for both the current taxable year
(which will end on the Exchange Date) and the immediately preceding taxable
year.
(k) With respect to the Large Cap Growth Fund Reorganization, Large
Cap Growth Fund shall have furnished to Large Cap Fund a certificate,
signed by the President (or any Vice President) and the Treasurer of
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BB&T Funds, as to the tax cost to Large Cap Growth Fund of the securities
delivered to Large Cap Fund pursuant to this Plan, together with any such
other evidence as to such tax cost as Large Cap Fund may reasonably
request.
(l) BB&T Funds shall have received from the custodian of BB&T Funds a
certificate identifying all of the assets of Large Cap Growth Fund held by
such custodian as of the Valuation Time.
(m) The transfer agent of BB&T Funds shall have provided to BB&T Funds
(i) a record specifying the number of Shares of Large Cap Growth Fund
outstanding as of the Valuation Time and (iii) a record specifying the name
and address of each holder of record of any such Shares of Large Cap Growth
Fund and the number of Large Cap Growth Fund Shares held of record by each
such shareholder as of the Valuation Time. Large Cap Growth Fund's transfer
agent shall also have provided BB&T Funds with a certificate confirming
that the acts specified in the preceding sentence have been taken and that
the information so supplied is complete and accurate to the best knowledge
of the transfer agent.
(n) BB&T Funds, on behalf of Large Cap Fund, shall have executed and
delivered an Assumption of Liabilities dated as of the Exchange Date
pursuant to which Large Cap Fund will assume all of the liabilities of
Large Cap Growth Fund existing at the Valuation Time in connection with the
transaction contemplated by this Plan, other than liabilities pursuant to
this Plan.
(o) BB&T Funds, on behalf of Large Cap Growth Fund, shall have
executed and delivered an instrument of transfer ("Transfer Document") and
any other certificates or documents BB&T Funds may deem necessary or
desirable to transfer Large Cap Growth Fund's entire right, title and
interest in and to the Investments and all other assets of Large Cap Growth
Fund.
10. No Broker, etc. There is no person who has dealt with BB&T Funds,
Large Cap Growth Fund or Large Cap Fund who by reason of such dealings is
entitled to any broker's or finder's or other similar fee or commission arising
out of the transaction contemplated by this Plan.
11. Termination. BB&T Funds may, by consent of its Trustees, terminate
this Plan, and BB&T Funds, after consultation with counsel, may modify this Plan
in any manner deemed necessary or desirable.
12. Covenants, etc. Deemed Material. All covenants, agreements,
representations and warranties made under this Plan and any certificates
delivered pursuant to this Plan shall be deemed to have been material and relied
upon by each of the parties, notwithstanding any investigation made by them or
on their behalf.
13. Sole Plan; Amendments. This Plan supersedes all previous
correspondence and oral communications between the parties regarding the subject
matter hereof, constitutes the only understanding with respect to such subject
matter, may be changed only by duly adopted resolution of the Board of Trustees
of BB&T Funds, and shall be construed in accordance with and governed by the
laws of The Commonwealth of Massachusetts.
14. Rule 145. Pursuant to Rule 145 under the 1933 Act, BB&T Funds will, in
connection with the issuance of any Shares of the Large Cap Fund to any person
who at the time of the transaction contemplated hereby is deemed to be an
affiliate of a party to the transaction pursuant to Rule 145(c), cause to be
affixed upon the certificates issued to such person (if any) a legend as
follows:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT TO
BB&T FUNDS OR ITS PRINCIPAL UNDERWRITER UNLESS (i) A REGISTRATION STATEMENT
WITH RESPECT THERETO IS EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, OR (ii) IN THE OPINION OF COUNSEL REASONABLY SATISFACTORY TO BB&T
FUNDS SUCH REGISTRATION IS NOT REQUIRED.
15. BB&T Funds' Declaration of Trust. BB&T Funds is a business trust
organized under Massachusetts law and under a Declaration of Trust, to which
reference is hereby made and a copy of which is on file at the office of the
Secretary of The Commonwealth of Massachusetts and elsewhere as required by law,
and to any and all amendments thereto so filed or hereafter filed. The
obligations of "BB&T Funds" entered into in the name or on behalf thereof by any
of the Trustees, officers, employees or agents are made not individually, but in
such
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capacities, and are not binding upon any of the Trustees, officers, employees,
agents or shareholders of BB&T Funds personally, but bind only the assets of
BB&T Funds and all persons dealing with any series or funds of BB&T Funds, such
as Large Cap Fund, must look solely to the assets of BB&T Funds belonging to
such series or funds for the enforcement of any claims against BB&T Funds.
[Signature Page Follow]
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This Agreement may be executed in any number of counter-parts, each of
which, when executed and delivered, shall be deemed to be an original.
BB&T FUNDS,
on behalf of BB&T Large Cap Fund and
BB&T Large Cap Growth Fund
By: /s/ Todd Miller
------------------------------------
Name: Todd Miller
Title: Vice President
BB&T ASSET MANAGEMENT, INC.,
with respect to Section 5 only
By: /s/ E.G. Purcell, III
------------------------------------
Name: E.G. Purcell, III
Title: Senior Vice President
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APPENDIX B
BB&T VARIABLE INSURANCE FUNDS
BB&T LARGE CAP GROWTH VIF AND
BB&T LARGE CAP VIF
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization, having been approved by the
Board of Trustees of BB&T Variable Insurance Funds, is made as of December 5,
2006 between BB&T Variable Insurance Funds, on behalf of BB&T Large Cap Growth
VIF and BB&T Large Cap VIF, and BB&T Asset Management, Inc. (the "Plan"). The
capitalized terms used herein shall have the meaning ascribed to them in this
Plan.
1. Overview of Plan of Reorganization
(a) The BB&T Large Cap Growth VIF ("Large Cap Growth VIF") will sell,
assign, convey, transfer and deliver to BB&T Large Cap VIF ("Large Cap VIF"),
and Large Cap VIF will acquire, on the Exchange Date, all of the properties and
assets existing at the Valuation Time in Large Cap Growth VIF, subject to
liabilities.
In consideration therefor, Large Cap VIF shall, on the Exchange Date,
assume all of the liabilities of Large Cap Growth VIF existing at the Valuation
Time and transfer to Large Cap Growth VIF a number of full and fractional units
of beneficial interest ("Shares") of Large Cap VIF having an aggregate net asset
value equal to the value of the assets of Large Cap Growth VIF transferred to
Large Cap VIF on such date less the value of all of the liabilities of Large Cap
Growth VIF assumed by Large Cap VIF on that date. It is intended that the
reorganization described in this Plan shall be a tax-free reorganization under
Section 368 of the Internal Revenue Code of 1986, as amended (the "Code").
(b) Upon consummation of the transaction described in paragraph 1(a) of
this Plan, Large Cap Growth VIF in complete liquidation shall distribute to its
respective shareholders of record as of the Exchange Date the Large Cap VIF
Shares received by it, each shareholder being entitled to receive that number of
such Large Cap VIF Shares equal to the total of (i) the proportion which the
number of Shares of Large Cap Growth VIF held by such shareholder bears to the
number of such Shares of Large Cap Growth VIF outstanding on such date
multiplied by (ii) the total number of Large Cap VIF Shares received by the
Large Cap Growth VIF, as of the Exchange Date. Large Cap Growth VIF shareholders
of record will receive Shares of Large Cap VIF.
2. Representations and Warranties of BB&T Variable Insurance Funds. Each
of BB&T Variable Insurance Funds, Large Cap VIF and Large Cap Growth VIF warrant
to and agree that:
(a) BB&T Variable Insurance Funds is a business trust duly established
and validly existing under the laws of The Commonwealth of Massachusetts
and has power to carry on its business as it is now being conducted and to
carry out this Plan. Each of BB&T Variable Insurance Funds, Large Cap
Growth VIF and Large Cap VIF is not required to qualify as a foreign
association in any jurisdiction. Each of BB&T Variable Insurance Funds,
Large Cap Growth VIF and Large Cap VIF has all necessary federal, state and
local authorizations to own all of its properties and assets and to carry
on business as now being conducted and to fulfill the terms of this Plan,
except as set forth in Section 2(i).
(b) BB&T Variable Insurance Funds is registered under the Investment
Company Act of 1940, as amended (the "1940 Act"), as an open-end management
investment company, and such registration has not been revoked or rescinded
and is in full force and effect.
(c) The statements of assets and liabilities, statements of
operations, statements of changes in net assets and schedules of
investments (indicating their market values) for each of Large Cap Growth
VIF and Large Cap VIF for the year ended December 31, 2005 and six-month
period ended June 30, 2006, fairly present the financial position of each
of Large Cap Growth VIF and Large Cap VIF as of such date, and said
statements of operations and changes in net assets and financial highlights
fairly reflect the results of operations, changes in net assets and
financial highlights for the periods covered thereby in conformity with
generally accepted accounting principles.
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(d) The prospectuses of each of Large Cap Growth VIF and Large Cap VIF
dated May 1, 2006, as amended, as filed with the Securities and Exchange
Commission (the "Commission") (the "Prospectuses") and the Statement of
Additional Information for BB&T Variable Insurance Funds, dated May 1,
2006, as amended (the "Statement of Additional Information"), as filed with
the Commission, did not as of such date, and will not as of the Exchange
Date, contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were
made, not misleading.
(e) There are no material legal, administrative or other proceedings
pending or, to the knowledge of BB&T Variable Insurance Funds, Large Cap
Growth VIF or Large Cap VIF, overtly threatened against BB&T Variable
Insurance Funds, Large Cap Growth VIF or Large Cap VIF, which assert
liability on the part of BB&T Variable Insurance Funds, Large Cap Growth
VIF or Large Cap VIF.
(f) There are no material contracts outstanding to which BB&T Variable
Insurance Funds, Large Cap Growth VIF or Large Cap VIF is a party, other
than as disclosed in BB&T's Prospectuses and Statement of Additional
Information or in the Registration Statement.
(g) Large Cap Growth VIF has no known liabilities of a material
nature, contingent or otherwise, other than those shown on its statement of
assets and liabilities as of June 30, 2006, referred to above and those
incurred in the ordinary course of the business of BB&T Variable Insurance
Funds as an investment company or Large Cap Growth VIF since such date.
Prior to the Exchange Date, Large Cap Growth VIF will advise Large Cap VIF
of all known material liabilities, contingent or otherwise, incurred by it
subsequent to June 30, 2006, whether or not incurred in the ordinary course
of business.
(h) As of the Exchange Date, BB&T Variable Insurance Funds and each of
Large Cap Growth VIF and Large Cap VIF will have filed all federal and
other tax returns which, to the knowledge of BB&T Variable Insurance Funds'
officers, have been required to be filed by Large Cap Growth VIF or Large
Cap VIF, respectively, and will have paid or will pay all federal and other
taxes shown to be due on such returns or on any assessments received by
Large Cap Growth VIF or Large Cap VIF, respectively. As of the Exchange
Date, to such officers' knowledge, each of Large Cap Growth VIF and Large
Cap VIF (i) will have adequately provided for all tax liabilities on its
books, (ii) will not have had any tax deficiency or liability asserted
against it, or question with respect thereto raised, and (iii) will not be
under audit by the Internal Revenue Service or by any state or local tax
authority for taxes in excess of those already paid.
(i) As used in this Plan, the term "Investments" shall mean the Large
Cap Growth VIF's investments shown on the schedule of its portfolio
investments as of June 30, 2006, referred to in Section 2(c) hereof, as
supplemented with such changes as BB&T Variable Insurance Funds or the
Large Cap Growth VIF shall make after June 30, 2006, which changes shall be
disclosed to BB&T Variable Insurance Funds and the Large Cap VIF, and
changes resulting from stock dividends, stock split-ups, mergers and
similar corporate actions.
(j) Each of Large Cap Growth VIF and Large Cap VIF has elected to
qualify and has qualified as, and has met the requirements of subchapter M
of the Code for treatment as, a "regulated investment company" within the
meaning of Section 851 of the Code in respect of each taxable year since
the commencement of operations, and will continue to meet such requirements
at all times through the Exchange Date. Neither Large Cap Growth VIF nor
Large Cap VIF has at any time since its inception been liable (nor is now
liable) for any material income or excise tax pursuant to Section 852 or
4982 of the Code. Each of Large Cap Growth VIF and Large Cap VIF is in
compliance in all material respects with applicable regulations of the
Internal Revenue Service pertaining to the reporting of dividends and other
distributions on and redemptions of its capital stock and to withholding in
respect of dividends and other distributions to shareholders, and is not
liable for any material penalties which could be imposed thereunder.
(k) For all taxable years and all applicable quarters of Large Cap
Growth VIF from the date of its inception, the assets of Large Cap Growth
VIF have been sufficiently diversified that each segregated asset account
investing all its assets in Large Cap Growth VIF was adequately diversified
within the meaning of Section 817(h) of the Code and applicable regulations
thereunder. For all taxable years and all applicable quarters of Large Cap
VIF from the date of its inception, the assets of Large Cap VIF have been
sufficiently
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diversified that each segregated asset account investing all its assets in
Large Cap VIF was adequately diversified within the meaning of Section
817(h) of the Code and applicable regulations thereunder.
(l) No consent, approval, authorization or order of any governmental
authority is required for the consummation by BB&T Variable Insurance
Funds, Large Cap Growth VIF or Large Cap VIF of the transaction
contemplated by this Plan, except such as may be required under the 1933
Act, the 1934 Act, the 1940 Act, state securities or Blue Sky laws or the
Hart-Scott-Rodino Antitrust Improvements Act of 1976.
(m) As of both the Valuation Time and the Exchange Date and otherwise
as described in Section 2(i), BB&T Variable Insurance Funds on behalf of
Large Cap VIF will have full right, power and authority to purchase the
Investments and any other assets and assume the liabilities of Large Cap
Growth VIF to be transferred to Large Cap VIF pursuant to this Plan.
(n) The Registration Statement, the Prospectuses and the Proxy
Statement, on the effective date of the Registration Statement and insofar
as they relate to BB&T Variable Insurance Funds, Large Cap Growth VIF and
Large Cap VIF: (i) will comply in all material respects with the provisions
of the 1933 Act, the 1934 Act and the 1940 Act and the rules and
regulations thereunder and (ii) will not contain any untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances in which they were made, not misleading; and at the time of
the shareholders' meeting referred to in Section 8(a) and at the Exchange
Date, the Prospectuses, as amended or supplemented by any amendments or
supplements filed with the Commission by BB&T Variable Insurance Funds,
Large Cap Growth VIF or Large Cap VIF, will not contain any untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein, in light of
the circumstances in which they were made, not misleading; provided,
however, that none of the representations and warranties in this subsection
shall apply to statements in or omissions from the Registration Statement,
the Prospectuses or the Proxy Statement made in reliance upon and in
conformity with information furnished by Large Cap Growth VIF or Large Cap
VIF for use in the Registration Statement, the Prospectuses or the Proxy
Statement.
(o) Large Cap VIF Shares to be issued to each of Large Cap Growth VIF
have been duly authorized and, when issued and delivered pursuant to this
Plan and the Prospectuses, will be legally and validly issued and will be
fully paid and nonassessable by BB&T Variable Insurance Funds and no
shareholder of BB&T Variable Insurance Funds will have any preemptive right
of subscription or purchase in respect thereof.
(p) The issuance of Large Cap VIF Shares pursuant to this Plan will be
in compliance with all applicable federal and state securities laws.
3. Reorganization. (a) Subject to the requisite approval of the
shareholders of Large Cap Growth VIF (in respect of the Large Cap Growth VIF
Reorganization, as hereafter defined) and to the other terms and conditions
contained herein (including Large Cap Growth VIF's obligation described in
Section 9(j) hereof to distribute to its respective shareholders all of its
undistributed investment company taxable income (as defined in Section 852 of
the Code), if any, and net capital gain (as defined Section 1222 of the Code)),
Large Cap Growth VIF will agree to sell, assign, convey, transfer and deliver to
Large Cap VIF, and Large Cap VIF will agree to acquire from Large Cap Growth
VIF, on the Exchange Date all of the Investments and all of the cash and other
assets of Large Cap Growth VIF, subject to liabilities, in exchange for that
number of Shares of Large Cap VIF provided for in Section 4 and the assumption
by Large Cap VIF of all of the liabilities of Large Cap Growth VIF. Pursuant to
this Plan, Large Cap Growth VIF will, as soon as practicable after the Exchange
Date, distribute in liquidation all of the Large Cap VIF Shares received by it
to its shareholders in exchange for their respective Shares of Large Cap Growth
VIF.
(b) BB&T Variable Insurance Funds, on behalf of Large Cap Growth VIF, will
pay or cause to be paid to Large Cap VIF any interest and cash dividends
received by it on or after the Exchange Date with respect to the Investments
transferred to Large Cap VIF hereunder. BB&T Variable Insurance Funds, on behalf
of Large Cap Growth VIF, will transfer to Large Cap VIF any rights, stock
dividends, or other securities received by Large Cap Growth VIF after the
Exchange Date as stock dividends or other distributions on or with respect to
the Investments transferred, which rights, stock dividends, and other securities
shall be deemed included in the assets transferred to Large Cap VIF at the
Exchange Date and shall not be separately valued, in which case any such
distribution that
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remains unpaid as of the Exchange Date shall be included in the determination of
the value of the assets of Large Cap Growth VIF acquired by Large Cap VIF.
4. Exchange Date; Valuation Time. On the Exchange Date, Large Cap VIF will
deliver to Large Cap Growth VIF a number of Large Cap VIF Shares having an
aggregate net asset value equal to the value of the assets attributable to each
corresponding class of Shares of Large Cap Growth VIF acquired by Large Cap VIF,
less the value of the liabilities of Large Cap Growth VIF assumed, determined as
hereafter provided in this Section 4.
(a) Subject to Section 4(d) hereof, the value of Large Cap Growth VIF's net
assets will be computed as of the Valuation Time using the valuation procedures
for Large Cap VIF set forth in the BB&T Prospectuses and BB&T Statement of
Additional Information. In no event shall the same security held by the Large
Cap Growth VIF and BB&T Variable Insurance Funds be valued at different prices.
(b) Subject to Section 4(d) hereof, the net asset value of a Share of Large
Cap VIF will be determined to the nearest full cent as of the Valuation Time,
using the valuation procedures set forth in the BB&T Prospectuses for Large Cap
VIF.
(c) Subject to Section 4(d), the Valuation Time shall be 4:00 p.m. Eastern
Standard time on January 26, 2007, or such earlier or later days as may be
established by the proper officers of BB&T Variable Insurance Funds (the
"Valuation Time").
(d) No formula will be used to adjust the net asset value of Large Cap
Growth VIF or Large Cap VIF to take into account differences in realized and
unrealized gains and losses.
(e) Large Cap VIF shall issue its Shares to Large Cap Growth VIF on one
share deposit receipt registered in the name of Large Cap Growth VIF. Large Cap
Growth VIF shall distribute in liquidation the Large Cap VIF Shares received by
it hereunder pro rata to its shareholders by redelivering such share deposit
receipt to BB&T Variable Insurance Funds' transfer agent which will as soon as
practicable set up open accounts for each Large Cap Growth VIF shareholder, in
accordance with written instructions furnished by Large Cap Growth VIF.
(f) Large Cap VIF shall assume all liabilities of Large Cap Growth VIF,
whether accrued or contingent, in connection with the acquisition of assets and
subsequent dissolution of Large Cap Growth VIF or otherwise, except that
recourse for assumed liabilities relating to Large Cap Growth VIF will be
limited to Large Cap VIF.
5. Expenses, Fees, etc. (a) All fees and expenses incurred by Large Cap
Growth VIF, Large Cap VIF and/or BB&T Asset Management, Inc. (the investment
adviser of both Large Cap Growth VIF and Large Cap VIF) directly in connection
with the consummation of the transaction contemplated by this Plan will be borne
by BB&T Asset Management, Inc., including the costs of proxy materials, proxy
solicitations and legal expenses. All such fees and expenses incurred and so
borne by BB&T Asset Management, Inc. will be solely and directly related to the
transaction contemplated by this Plan and will be paid directly by BB&T Asset
Management, Inc. to the relevant providers of services or other payees, in
accordance with the principles set forth in Revenue Ruling 73-54, 1973-1 C.B.
187. Fees and expenses not incurred directly in connection with the consummation
of the transaction contemplated by this Plan will be paid by the party directly
incurring such expenses. Notwithstanding any of the foregoing, fees and expenses
shall in any event be paid by the party directly incurring such fees and
expenses if and to the extent that the payment by BB&T Asset Management, Inc. of
such fees and expenses would result in the disqualification of such party as a
regulated investment company within the meaning of Section 851 of the Code.
Large Cap Growth VIF shareholders will pay their respective expenses, if any,
incurred in connection with the transaction contemplated by this Plan. BB&T
Asset Management, Inc. nor Large Cap Growth VIF nor Large Cap VIF will pay Large
Cap Growth VIF shareholders' expenses.
(b) Notwithstanding any other provisions of this Plan, if for any reason
the transaction contemplated by this Plan is not consummated, no party shall be
liable to the other party for any damages resulting therefrom, including without
limitation consequential damages.
6. Permitted Assets. BB&T Variable Insurance Funds and Large Cap Growth
VIF will agree to review the assets of Large Cap Growth VIF to ensure that at
any time prior to the Exchange Date the assets of Large Cap Growth VIF do not
include any assets that Large Cap VIF is not permitted, or reasonably believes
to be unsuitable
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for it, to acquire, including without limitation any security that, prior to its
acquisition by Large Cap Growth VIF, is unsuitable for Large Cap VIF to acquire.
7. Exchange Date. Delivery of the assets of Large Cap Growth VIF to be
transferred, assumption of the liabilities of Large Cap Growth VIF to be
assumed, and the delivery of Large Cap VIF Shares to be issued shall be made at
the offices of BB&T Variable Insurance Funds, 3435 Stelzer Road, Columbus, OH
43219, at 9:00 a.m. Eastern standard time on January 29, 2007, or at such other
times and dates established by the proper officers of BB&T Variable Insurance
Funds, the date and time upon which such delivery is to take place being
referred to herein as the "Exchange Date."
8. Special Meeting of Shareholders; Dissolution. (a) Large Cap Growth VIF
will agree to call a special meeting of the shareholders as soon as is
practicable after the effective date of the Registration Statement for the
purpose of considering the sale of all of the assets of Large Cap Growth VIF to
and the assumption of all of the liabilities of Large Cap Growth VIF by Large
Cap VIF as herein provided, and approving this Plan, and it shall be a condition
to the obligations of each of the parties hereto that the holders of the Shares
of Large Cap Growth VIF shall have approved this Plan and the transaction
contemplated herein in the manner required by law and BB&T Variable Insurance
Funds' Declaration of Trust and Bylaws at such a meeting on or before the
Valuation Time.
9. Conditions to Be Met Regarding the Transaction. The consummation by the
Large Cap Growth VIF and Large Cap VIF of the reorganization of the Large Cap
Growth VIF with and into the Large Cap VIF ("Large Cap Growth VIF
Reorganization") shall be subject to the following conditions:
(a) This Plan shall have been adopted and the transaction contemplated
hereby, shall have been approved by the shareholders of Large Cap Growth
VIF in the manner required by law.
(b) Large Cap Growth VIF shall have furnished to Large Cap VIF a
statement of each of Large Cap Growth VIF's assets and liabilities, with
values determined as provided in Section 3 of this Plan, together with a
list of Investments with their respective tax costs, all as of the
Valuation Time, certified on Large Cap Growth VIF's behalf by its President
(or any Vice President) and Treasurer, and a certificate of both such
officers, dated the Exchange Date, to the effect that as of the Valuation
Time and as of the Exchange Date there has been no material adverse change
in the financial position of Large Cap Growth VIF since June 30, 2006,
other than changes in the Investments since that date or changes in the
market value of the Investments, or changes due to net redemptions of
Shares of Large Cap Growth VIF, dividends paid or losses from operations.
(c) As of the Valuation Time and as of the Exchange Date, all
representations and warranties of BB&T Variable Insurance Funds, Large Cap
VIF and Large Cap Growth VIF made in Section 2 of this Plan are true and
correct in all material respects as if made at and as of such dates, Large
Cap Growth VIF has complied with all requirements of this Plan to be
performed or satisfied at or prior to each of such dates, and Large Cap
Growth VIF shall have furnished to Large Cap VIF a statement, dated the
Exchange Date, signed by BB&T Variable Insurance Funds' President (or any
Vice President) and Treasurer certifying those facts as of such dates.
(d) There shall not be any material litigation pending with respect to
the matters contemplated by this Plan.
(e) BB&T Variable Insurance Funds shall have received an opinion of
Ropes & Gray LLP dated the Exchange Date to the effect that: (i) BB&T
Variable Insurance Funds is a business trust duly established and validly
existing under the laws of the Commonwealth of Massachusetts, and neither
BB&T Variable Insurance Funds, Large Cap Growth VIF nor Large Cap VIF is,
to the knowledge of such counsel, required to qualify to do business as a
foreign association in any jurisdiction; (ii) BB&T Variable Insurance Funds
and Large Cap Growth VIF have power to sell, assign, convey, transfer and
deliver the Investments and other assets contemplated hereby and, upon
consummation of the transaction contemplated hereby in accordance with the
terms of this Plan, BB&T Variable Insurance Funds and Large Cap Growth VIF
will have duly sold, assigned, conveyed, transferred and delivered such
Investments and other assets to Large Cap VIF; (iii) the adoption of this
Plan did not, and the consummation of the transaction contemplated hereby
will not, violate BB&T Variable Insurance Funds' Declaration of Trust or
Bylaws, as amended, or any provision of any agreement known to such counsel
to which BB&T Variable Insurance Funds is a party or by which it is bound;
B-5
(iv) no consent, approval, authorization or order of any court or
governmental authority is required for the consummation by BB&T Variable
Insurance Funds of the transaction contemplated hereby, except such as have
been obtained under the Securities Act of 1933 (the "1933 Act"), the
Securities Exchange Act of 1934 ("the 1934 Act") and the 1940 Act; (v) this
Plan has been duly authorized by BB&T Variable Insurance Funds and is a
valid and binding obligation of BB&T Variable Insurance Funds; and (vi) the
Shares of Large Cap VIF to be delivered to Large Cap Growth VIF as provided
for by this Plan are duly authorized and upon such delivery will be validly
issued and will be fully paid and nonassessable by BB&T Variable Insurance
Funds and no shareholder of BB&T Variable Insurance Funds has any
preemptive right to subscription or purchase in respect thereof.
(f) With respect to the Large Cap Growth VIF Reorganization, BB&T
Variable Insurance Funds, on behalf of Large Cap Growth VIF and Large Cap
VIF shall have received an opinion of Ropes & Gray LLP addressed to Large
Cap Growth VIF and Large Cap VIF and dated the Exchange Date (which opinion
will be based upon certain factual representations and subject to certain
qualifications) to the effect that, on the basis of the existing provisions
of the Code, Treasury Regulations, current administrative rules and court
decisions, generally for federal income tax purposes, except as noted
below: (i) the transaction contemplated by this Plan will constitute a
reorganization within the meaning of Section 368(a) of the Code, and Large
Cap VIF and Large Cap Growth VIF will each be a "party to a reorganization"
within the meaning of Section 368(b) of the Code; (ii) no gain or loss will
be recognized by Large Cap VIF upon the receipt of the assets of Large Cap
Growth VIF in exchange for Large Cap VIF Shares and the assumption by Large
Cap VIF of the liabilities of Large Cap Growth VIF; (iii) the basis in the
hands of Large Cap VIF of the assets of Large Cap Growth VIF transferred to
Large Cap VIF in the transaction contemplated by this Plan will be the same
as the basis of such assets in the hands of Large Cap Growth VIF
immediately prior to the transfer; (iv) the holding periods of the assets
of Large Cap Growth VIF in the hands of Large Cap VIF will include the
periods during which such assets were held by Large Cap Growth VIF; (v) no
gain or loss will be recognized by Large Cap Growth VIF upon the transfer
of Large Cap Growth VIF's assets to Large Cap VIF in exchange for Large Cap
VIF Shares and the assumption by Large Cap VIF of the liabilities of Large
Cap Growth VIF, or upon the distribution of Large Cap VIF Shares by Large
Cap Growth VIF to its shareholders in liquidation; (vi) no gain or loss
will be recognized by Large Cap Growth VIF shareholders upon the exchange
of their Large Cap Growth VIF Shares for Large Cap VIF Shares; (vii) the
aggregate basis of Large Cap VIF Shares a Large Cap Growth VIF shareholder
receives in connection with the transaction contemplated by this Plan will
be the same as the aggregate basis of his or her Large Cap Growth VIF
exchanged therefor; (viii) a Large Cap Growth VIF shareholder's holding
period for his or her Large Cap VIF Shares will be determined by including
the period for which he or she held the Large Cap Growth VIF Shares
exchanged therefor, provided that he or she held such Large Cap Growth VIF
Shares as capital assets; and (ix) Large Cap VIF will succeed to, and take
into account the items of Large Cap Growth VIF described in Section 318(c)
of the Code, subject to the conditions and limitations specified in
Sections 381, 382, 383 and 384 of the Code and the Treasury regulations
thereunder. The opinion will express no view with respect to the effect of
the reorganization on any transferred asset as to which any unrealized gain
or loss is required to be recognized at the end of a taxable year (or on
the termination or transfer thereof) under federal income tax principles.
(g) The assets of Large Cap Growth VIF to be acquired by Large Cap VIF
will include no assets which Large Cap VIF, by reason of limitations
contained in its Declaration of Trust or of investment restrictions
disclosed in BB&T Prospectuses and SAI in effect on the Exchange Date, may
not properly acquire. BB&T Variable Insurance Funds shall not change BB&T
Variable Insurance Funds' Declaration of Trust and BB&T Prospectuses so as
to restrict permitted investments for Large Cap VIF except as required by
the Commission or any state regulatory authority.
(h) The Registration Statement shall have become effective under the
1933 Act and applicable Blue Sky provisions, and no stop order suspending
such effectiveness shall have been instituted or, to the knowledge of BB&T
Variable Insurance Funds, contemplated by the Commission and or any state
regulatory authority.
(i) BB&T Variable Insurance Funds shall have received from the
Commission such order or orders as Ropes & Gray LLP deems reasonably
necessary or desirable under the 1933 Act, the 1934 Act, the 1940 Act in
connection with the transaction contemplated hereby, and that all such
orders shall be in full force and effect.
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(j) Prior to the Exchange Date, the Large Cap Growth VIF shall have
declared a dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to its shareholders (a)
all of the excess of (x) its investment income excludable from gross income
under Section 103 of the Code over (y) its deductions disallowed under
Section 265 and 171 of the Code, (b) all of its investment company taxable
income (in each case computed without regard to any deduction for dividends
paid), and (c) all of its net capital gain realized (after reduction for
any capital loss carryover), in each case for both the current taxable year
(which will end on the Exchange Date) and the immediately preceding taxable
year.
(k) With respect to the Large Cap Growth VIF Reorganization, Large Cap
Growth VIF shall have furnished to Large Cap VIF a certificate, signed by
the President (or any Vice President) and the Treasurer of BB&T Variable
Insurance Funds, as to the tax cost to Large Cap Growth VIF of the
securities delivered to Large Cap VIF pursuant to this Plan, together with
any such other evidence as to such tax cost as Large Cap VIF may reasonably
request.
(l) BB&T Variable Insurance Funds shall have received from the
custodian of BB&T Variable Insurance Funds a certificate identifying all of
the assets of Large Cap Growth VIF held by such custodian as of the
Valuation Time.
(m) The transfer agent of BB&T Variable Insurance Funds shall have
provided to BB&T Variable Insurance Funds (i) a record specifying the
number of Shares of Large Cap Growth VIF outstanding as of the Valuation
Time and (iii) a record specifying the name and address of each holder of
record of any such Shares of Large Cap Growth VIF and the number of Large
Cap Growth VIF Shares held of record by each such shareholder as of the
Valuation Time. Large Cap Growth VIF's transfer agent shall also have
provided BB&T Variable Insurance Funds with a certificate confirming that
the acts specified in the preceding sentence have been taken and that the
information so supplied is complete and accurate to the best knowledge of
the transfer agent.
(n) BB&T Variable Insurance Funds, on behalf of Large Cap VIF, shall
have executed and delivered an Assumption of Liabilities dated as of the
Exchange Date pursuant to which Large Cap VIF will assume all of the
liabilities of Large Cap Growth VIF existing at the Valuation Time in
connection with the transaction contemplated by this Plan, other than
liabilities pursuant to this Plan.
(o) BB&T Variable Insurance Funds, on behalf of Large Cap Growth VIF,
shall have executed and delivered an instrument of transfer ("Transfer
Document") and any other certificates or documents BB&T Variable Insurance
Funds may deem necessary or desirable to transfer Large Cap Growth VIF's
entire right, title and interest in and to the Investments and all other
assets of Large Cap Growth VIF.
10. No Broker, etc. There is no person who has dealt with BB&T Variable
Insurance Funds, Large Cap Growth VIF or Large Cap VIF who by reason of such
dealings is entitled to any broker's or finder's or other similar fee or
commission arising out of the transaction contemplated by this Plan.
11. Termination. BB&T Variable Insurance Funds may, by consent of its
Trustees, terminate this Plan, and BB&T Variable Insurance Funds, after
consultation with counsel, may modify this Plan in any manner deemed necessary
or desirable.
12. Covenants, etc. Deemed Material. All covenants, agreements,
representations and warranties made under this Plan and any certificates
delivered pursuant to this Plan shall be deemed to have been material and relied
upon by each of the parties, notwithstanding any investigation made by them or
on their behalf.
13. Sole Plan; Amendments. This Plan supersedes all previous
correspondence and oral communications between the parties regarding the subject
matter hereof, constitutes the only understanding with respect to such subject
matter, may be changed only by duly adopted resolution of the Board of Trustees
of BB&T Variable Insurance Funds, and shall be construed in accordance with and
governed by the laws of The Commonwealth of Massachusetts.
14. Rule 145. Pursuant to Rule 145 under the 1933 Act, BB&T Variable
Insurance Funds will, in connection with the issuance of any Shares of the Large
Cap VIF to any person who at the time of the transaction contemplated
B-7
hereby is deemed to be an affiliate of a party to the transaction pursuant to
Rule 145(c), cause to be affixed upon the certificates issued to such person (if
any) a legend as follows:
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED EXCEPT TO
BB&T VARIABLE INSURANCE FUNDS OR ITS PRINCIPAL UNDERWRITER UNLESS (i) A
REGISTRATION STATEMENT WITH RESPECT THERETO IS EFFECTIVE UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR (ii) IN THE OPINION OF COUNSEL
REASONABLY SATISFACTORY TO BB&T FUNDS SUCH REGISTRATION IS NOT REQUIRED.
15. BB&T Variable Insurance Funds' Declaration of Trust. BB&T Variable
Insurance Funds is a business trust organized under Massachusetts law and under
a Declaration of Trust, to which reference is hereby made and a copy of which is
on file at the office of the Secretary of The Commonwealth of Massachusetts and
elsewhere as required by law, and to any and all amendments thereto so filed or
hereafter filed. The obligations of "BB&T Variable Insurance Funds" entered into
in the name or on behalf thereof by any of the Trustees, officers, employees or
agents are made not individually, but in such capacities, and are not binding
upon any of the Trustees, officers, employees, agents or shareholders of BB&T
Variable Insurance Funds personally, but bind only the assets of BB&T Variable
Insurance Funds and all persons dealing with any series or funds of BB&T
Variable Insurance Funds, such as Large Cap VIF, must look solely to the assets
of BB&T Variable Insurance Funds belonging to such series or funds for the
enforcement of any claims against BB&T Variable Insurance Funds.
[Signature Page Follows]
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This Agreement may be executed in any number of counter-parts, each of
which, when executed and delivered, shall be deemed to be an original.
BB&T VARIABLE INSURANCE FUNDS,
on behalf of BB&T Large Cap VIF and
BB&T Large Cap Growth VIF
By: /s/ Todd Miller
------------------------------------
Name: Todd Miller
Title: Vice President
BB&T ASSET MANAGEMENT, INC.,
with respect to Section 5 only
By: /s/ E.G. Purcell, III
------------------------------------
Name: E.G. Purcell, III
Title: Senior Vice President
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APPENDIX C
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information contains information which may be
of interest to investors but which is not included in the Combined
Prospectus/Proxy Statement of BB&T Funds and BB&T Variable Insurance Funds dated
December 15, 2006 relating to the transfer of all assets of the BB&T Large Cap
Growth Fund to BB&T Large Cap Fund and all of the assets of BB&T Large Cap
Growth VIF to BB&T Large Cap VIF.
The Statement of Additional Information for the BB&T Large Cap Growth Fund
and BB&T Large Cap Fund, series of BB&T Funds (the "BB&T Large Cap Funds"),
dated February 1, 2006, and the Annual Report for the BB&T Large Cap Funds for
the period ended September 30, 2006 have been filed with the Securities and
Exchange Commission and are incorporated herein by reference. The Statement of
Additional Information for the BB&T Large Cap Growth VIF and BB&T Large Cap VIF,
series of BB&T Variable Insurance Funds (the "VIF Funds"), dated May 1, 2006,
the Annual Report for VIF Funds for the period ended December 31, 2005, and the
Semi-Annual Report for the VIF Funds for the period ended June 30, 2006, have
been filed with the Securities and Exchange Commission and are incorporated
herein by reference. This Statement of Additional Information is not a
prospectus and is authorized for distribution only when it accompanies or
follows delivery of the Combined Prospectus/Proxy Statement. This Statement of
Additional Information should be read in conjunction with the Combined
Prospectus/Proxy Statement. A copy of the Combined Prospectus/Proxy Statement
may be obtained, without charge, by writing BB&T Funds or BB&T Variable
Insurance Funds, 3435 Stelzer Road, Columbus, OH 43219 or by calling 1-800-228-
1872.
Unless otherwise indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the Combined
Prospectus/Proxy Statement. The audited financial statements and related
independent accountants' report for the BB&T Funds contained in the Annual
Report dated September 30, 2006 are hereby incorporated herein by reference and
no other parts of such Annual Report are incorporated by reference herein. The
audited financial statements and related independent accountants' report for the
VIF Funds contained in the Annual Report dated December 31, 2005 are hereby
incorporated herein by reference and no other parts of the Annual Report are
incorporated by reference herein. The unaudited financial statements for the VIF
Funds contained in the Semi-Annual Report dated June 30, 2006 are hereby
incorporated herein by reference and no other parts of the Semi-Annual Report
are incorporated by reference herein.
All unaudited interim financial statements reflect all adjustments which
are, in the opinion of management, necessary to a fair statement of the results
for the interim periods presented. In addition, all such adjustments are of a
normal recurring nature.
This Statement of Additional Information is dated December 15, 2006.
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TABLE OF CONTENTS
<Table>
Financial Statements of the Large Cap Fund on a pro forma basis as of and for
the period ended September 30, 2006........................................... C-3
Financial Statements of the Large Cap VIF on a pro forma basis as of and for the
periods ended December 31, 2005 and June 30, 2006............................. C-16
</Table>
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BB&T LARGE CAP FUND
PRO FORMA COMBINED SCHEDULE OF PORTFOLIO INVESTMENTS
SEPTEMBER 30, 2006
(UNAUDITED)
<Table>
<Caption>
PRO FORMA
LARGE CAP LARGE CAP PRO FORMA LARGE CAP LARGE CAP COMBINED
FUND GROWTH FUND COMBINED FUND GROWTH FUND FAIR
SHARES SHARES SHARES SECURITY DESCRIPTION FAIR VALUE FAIR VALUE (C) VALUE
------------ ------------ ------------ -------------------- ------------ -------------- --------------
COMMON STOCKS (93.9%)
Consumer Discretionary (11.9%)
65,600 65,600 American Eagle Outfitters, $ $ 2,875,248 $ 2,875,248
Inc. (b)
59,800 59,800 Best Buy, Inc. (b) 3,202,888 3,202,888
113,100 113,100 Coach, Inc. (a) (b) 3,890,640 3,890,640
98,800 98,800 Comcast Corp., Class A (a) 3,640,780 3,640,780
(b)
68,200 68,200 Federated Department Stores, 2,946,922 2,946,922
Inc. (b)
282,000 282,000 Gannett Co., Inc. (b) 16,026,060 16,026,060
120,900 120,900 Hilton Hotels Corp. (b) 3,367,065 3,367,065
42,200 42,200 J. C. Penney, Inc. (b) 2,886,058 2,886,058
434,800 434,800 Mattel, Inc. 8,565,560 8,565,560
38,300 38,300 Polo Ralph Lauren Corp. 2,477,627 2,477,627
93,600 93,600 Starbucks Corp. (a) (b) 3,187,080 3,187,080
168,111 168,111 Target Corp. (b) 9,288,133 9,288,133
706,381 706,381 Tiffany & Co. (b) 23,451,848 23,451,848
103,250 103,250 V.F. Corp. 7,532,088 7,532,088
650,000 650,000 Walt Disney Co. (The) 20,091,500 20,091,500
------------ ------------ --------------
84,955,189 28,474,308 113,429,497
------------ ------------ --------------
Consumer Staples (5.5%)
138,590 138,590 Altria Group, Inc. 10,609,065 10,609,065
85,800 85,800 Archer-Daniels-Midland Co. 3,250,104 3,250,104
29,900 29,900 Fomento Economico Mexicano 2,898,506 2,898,506
SA, ADR
85,100 85,100 Hansen Natural Corp. (a) (b) 2,764,048 2,764,048
276,500 276,500 Kimberly-Clark Corp. (b) 18,072,039 18,072,039
43,500 43,500 PepsiCo, Inc. 2,838,810 2,838,810
39,600 39,600 Procter & Gamble Co. 2,454,408 2,454,408
568,010 568,010 Sara Lee Corp. 9,127,921 9,127,921
------------ ------------ --------------
37,809,025 14,205,876 52,014,901
------------ ------------ --------------
Energy (9.2%)
219,000 219,000 Anadarko Petroleum Corp. (b) 9,598,770 9,598,770
81,900 81,900 Cameco Corp. (b) 2,995,083 2,995,083
329,460 329,460 ChevronTexaco Corp. 21,368,776 21,368,776
265,347 265,347 ConocoPhillips 15,796,107 15,796,107
242,000 242,000 Duke Energy Corp. (b) 7,308,400 7,308,400
290,000 290,000 Exxon Mobil Corp. (b) 19,459,000 19,459,000
66,300 66,300 McDermott International, Inc. 2,771,340 2,771,340
(b)
96,000 39,600 135,600 Schlumberger, Ltd. (b) 5,954,880 2,456,388 8,411,268
------------ ------------ --------------
79,485,933 8,222,811 87,708,744
------------ ------------ --------------
</Table>
C-3
<Table>
<Caption>
PRO FORMA
LARGE CAP LARGE CAP PRO FORMA LARGE CAP LARGE CAP COMBINED
FUND GROWTH FUND COMBINED FUND GROWTH FUND FAIR
SHARES SHARES SHARES SECURITY DESCRIPTION FAIR VALUE FAIR VALUE (C) VALUE
------------ ------------ ------------ -------------------- ------------ -------------- --------------
Financials (18.8%)
33,800 33,800 Affiliated Managers Group, 3,383,718 3,383,718
Inc. (a) (b)
93,100 93,100 AMBAC Financial Group, Inc. 7,704,025 7,704,025
182,000 39,300 221,300 American International Group, 12,059,320 2,604,018 14,663,338
Inc.
250,000 250,000 Bank of New York Co., Inc. 8,815,000 8,815,000
(The)
18,200 18,200 Bear Stearns Cos., Inc. (The) 2,549,820 2,549,820
(b)
139,700 139,700 Charles Schwab Corp. (The) 2,500,630 2,500,630
(b)
7,400 7,400 Chicago Mercantile Exchange 3,539,050 3,539,050
Holdings, Inc. (b)
405,666 405,666 CitiGroup, Inc. 20,149,430 20,149,430
206,000 206,000 Fannie Mae (b) 11,517,460 11,517,460
20,000 20,000 Goldman Sachs Group, Inc. 3,383,400 3,383,400
(The) (b)
507,772 507,772 JPMorgan Chase & Co. 23,844,973 23,844,973
118,600 118,600 Lincoln National Corp. 7,362,688 7,362,688
190,000 43,000 233,000 Merrill Lynch & Co., Inc. (b) 14,861,800 3,363,460 18,225,260
257,718 257,718 Northern Trust Corp. (b) 15,058,463 15,058,463
298,500 298,500 St. Paul Travelers Cos., Inc. 13,996,665 13,996,665
(The)
318,000 318,000 Washington Mutual, Inc. (b) 13,823,460 13,823,460
217,600 217,600 Wells Fargo & Co. 7,872,768 7,872,768
------------ ------------ --------------
157,066,052 21,324,096 178,390,148
------------ ------------ --------------
Health Care (15.4%)
186,000 186,000 Abbott Laboratories 9,032,160 9,032,160
52,600 52,600 AmerisourceBergen Corp. (b) 2,377,520 2,377,520
312,984 31,762 344,746 Amgen, Inc. (a) (b) 22,387,745 2,271,936 24,659,681
72,800 72,800 Amylin Pharmaceuticals, Inc. 3,208,296 3,208,296
(a) (b)
233,080 233,080 Bristol-Myers Squibb Co. 5,808,354 5,808,354
80,600 80,600 Celgene Corp. (a) (b) 3,489,980 3,489,980
33,100 33,100 Fisher Scientific 2,589,744 2,589,744
International, Inc. (a)
29,900 29,900 Genentech, Inc. (a) (b) 2,472,730 2,472,730
53,000 53,000 Gilead Sciences, Inc. (a) 3,641,100 3,641,100
65,600 65,600 Humana, Inc. (a) 4,335,504 4,335,504
285,806 285,806 Johnson & Johnson 18,560,242 18,560,242
37,500 37,500 Medco Health Solutions, Inc. 2,254,125 2,254,125
(a)
507,821 507,821 Merck & Co., Inc. (b) 21,277,699 21,277,699
74,100 74,100 Novartis AG, ADR 4,330,404 4,330,404
724,402 724,402 Pfizer, Inc. 20,544,041 20,544,041
104,000 104,000 Schering-Plough Corp. 2,297,360 2,297,360
41,900 41,900 Stericycle, Inc. (a) (b) 2,924,201 2,924,201
29,200 29,200 Wellpoint, Inc. (a) 2,249,860 2,249,860
145,000 64,700 209,700 Wyeth 7,371,800 3,289,348 10,661,148
------------ ------------ --------------
104,982,041 41,732,108 146,714,149
------------ ------------ --------------
</Table>
C-4
<Table>
<Caption>
PRO FORMA
LARGE CAP LARGE CAP PRO FORMA LARGE CAP LARGE CAP COMBINED
FUND GROWTH FUND COMBINED FUND GROWTH FUND FAIR
SHARES SHARES SHARES SECURITY DESCRIPTION FAIR VALUE FAIR VALUE (C) VALUE
------------ ------------ ------------ -------------------- ------------ -------------- --------------
Industrials (4.4%)
53,481 53,481 Danaher Corp. (b) 3,672,540 3,672,540
41,370 41,370 Emerson Electric Co. (The) 3,469,288 3,469,288
23,812 23,812 FedEx Corp. 2,587,888 2,587,888
105,000 68,200 173,200 General Electric Co. 3,706,500 2,407,460 6,113,960
76,000 76,000 Monster Worldwide, Inc. (a) 2,750,440 2,750,440
117,000 117,000 Parker-Hannifin Corp. 9,094,410 9,094,410
176,800 176,800 Pitney Bowes, Inc. (b) 7,844,616 7,844,616
39,000 39,000 Precision Castparts Corp. (b) 2,463,240 2,463,240
56,500 56,500 United Technologies Corp. 3,579,275 3,579,275
------------ ------------ --------------
24,114,814 17,460,843 41,575,657
------------ ------------ --------------
Information Technology (16.3%)
91,000 91,000 Advanced Micro Devices, Inc. 2,261,350 2,261,350
(a) (b)
68,900 68,900 Agilent Technologies, Inc. 2,252,341 2,252,341
(a)
75,000 75,000 Akamai Technologies, Inc. (a) 3,749,250 3,749,250
(b)
74,700 74,700 Amphenol Corp., Class A (b) 4,626,171 4,626,171
49,400 49,400 Apple Computer, Inc. (a) (b) 3,805,282 3,805,282
142,400 142,400 Automatic Data Processing, 6,741,216 6,741,216
Inc.
1,046,516 112,400 1,158,916 Cisco Systems, Inc. (a) (b) 24,069,868 2,585,200 26,655,068
47,800 47,800 Cognizant Technology 3,540,068 3,540,068
Solutions Corp., Class A (a)
844,202 844,202 Dell, Inc. (a) (b) 19,281,574 19,281,574
152,000 152,000 First Data Corp. 6,384,000 6,384,000
6,800 6,800 Google, Inc. (a) (b) 2,732,920 2,732,920
123,000 123,000 Hewlett-Packard Co. 4,512,870 4,512,870
1,407,693 1,407,693 Intel Corp. 28,956,245 28,956,245
100,100 100,100 MEMC Electronic Materials, 3,666,663 3,666,663
Inc. (a) (b)
245,000 245,000 Micron Technology, Inc. (a) 4,263,000 4,263,000
(b)
243,000 128,000 371,000 Microsoft Corp. 6,641,190 3,498,240 10,139,430
143,000 143,000 Motorola, Inc. 3,575,000 3,575,000
291,200 291,200 Oracle Corp. (a) (b) 5,165,889 5,165,889
57,800 57,800 QUALCOMM, Inc. 2,101,030 2,101,030
564,000 564,000 Time Warner, Inc. 10,281,720 10,281,720
------------ ------------ --------------
102,355,813 52,335,274 154,691,087
------------ ------------ --------------
Materials (2.9%)
129,700 129,700 Air Products & Chemicals, 8,608,189 8,608,189
Inc.
252,000 252,000 Alcoa, Inc. 7,066,080 7,066,080
186,500 186,500 Weyerhaeuser Co. (b) 11,475,345 11,475,345
------------ --------------
27,149,614 27,149,614
------------ --------------
</Table>
C-5
<Table>
<Caption>
PRO FORMA
LARGE CAP LARGE CAP PRO FORMA LARGE CAP LARGE CAP COMBINED
FUND GROWTH FUND COMBINED FUND GROWTH FUND FAIR
SHARES SHARES SHARES SECURITY DESCRIPTION FAIR VALUE FAIR VALUE (C) VALUE
------------ ------------ ------------ -------------------- ------------ -------------- --------------
Telecommunication Services (7.1%)
111,100 111,100 America Movil SA de CV, 4,374,007 4,374,007
Series L, ADR (b)
108,500 108,500 American Tower Corp., Class A 3,960,250 3,960,250
(a) (b)
421,837 94,600 516,437 AT&T, Inc. (b) 13,735,013 3,080,176 16,815,189
180,000 180,000 BellSouth Corp. 7,695,000 7,695,000
72,800 72,800 NII Holdings, Inc. (a) (b) 4,525,248 4,525,248
550,000 160,500 710,500 Nokia Corp., ADR (b) 10,829,500 3,160,245 13,989,745
427,000 427,000 Verizon Communications, Inc. 15,854,510 15,854,510
------------ ------------ --------------
48,114,023 19,099,926 67,213,949
------------ ------------ --------------
Utilities (2.4%)
29,900 29,900 FirstEnergy Corp. (b) 1,670,214 1,670,214
37,700 37,700 FPL Group, Inc. (b) 1,696,500 1,696,500
538,100 538,100 NiSource, Inc. (b) 11,698,294 11,698,294
87,467 87,467 SCANA Corp. (b) 3,522,296 3,522,296
231,275 231,275 Xcel Energy, Inc. 4,775,829 4,775,829
------------ ------------ ------------ ------------ ------------ --------------
Cost
$525,464,176 $173,798,922 $699,263,098 19,996,419 3,366,714 23,363,133
------------ ------------ --------------
Total Common Stocks 686,028,923 206,221,956 892,250,879
------------ ------------ --------------
EXCHANGE TRADED FUNDS (1.1%)
195,000 195,000 iShares Russell 1000 10,171,200 10,171,200
Growth Index Fund (b)
------------ ------------ ------------ --------------
Cost
$ 9,911,034 $ 9,911,034
Total Exchange Traded Funds 10,171,200 10,171,200
------------ --------------
WARRANT (0.0%)
7,110 7,110 Raytheon Co. (a) 101,460 101,460
------------ ------------ ------------ --------------
Cost
$ 0 $ 0
Total Warrant 101,460 101,460
------------ --------------
REPURCHASE AGREEMENT (4.8%)
$ 38,405,481 $ 6,880,178 $ 45,285,659 U.S. Bank N.A., 5.05%, dated 38,405,481 6,880,178 45,285,659
9/29/06, maturing 10/2/06,
with a maturity value of
$45,304,716 (Collateralized
fully by U.S. Government
Agencies)
------------ ------------ ------------ ------------ ------------ --------------
Cost
$ 38,405,481 $ 6,880,178 $ 45,285,659
Total Repurchase Agreement 38,405,481 6,880,178 45,285,659
------------ ------------ --------------
</Table>
C-6
<Table>
<Caption>
PRO FORMA
LARGE CAP LARGE CAP PRO FORMA LARGE CAP LARGE CAP COMBINED
FUND GROWTH FUND COMBINED FUND GROWTH FUND FAIR
SHARES SHARES SHARES SECURITY DESCRIPTION FAIR VALUE FAIR VALUE (C) VALUE
------------ ------------ ------------ -------------------- ------------ -------------- --------------
SECURITIES HELD AS COLLATERAL FOR SECURITIES ON LOAN (23.9%)
$126,591,112 $101,006,062 $227,597,174 Pool of Various Securities 126,591,112 101,006,062 227,597,174
for BB&T Funds -- Note 3 -
Security Loans
------------ ------------ ------------ ------------ ------------ --------------
Cost
$126,591,112 $101,006,062 $227,597,174
Total Securities Held as Collateral for Securities on Loan 126,591,112 101,006,062 227,597,174
------------ ------------ --------------
TOTAL INVESTMENTS -- 123.7% $851,126,976 $324,279,396 $1,175,406,372
COST
$690,460,769 $291,596,196 $982,056,965
============ ============ ============ ============ ============ ==============
</Table>
--------
Percentages indicated are based on combined net assets of $950,127,972.
(a) Represents non-income producing security.
(b) Represents that all or a portion of the security was on loan as of
September 30, 2006.
(c) None of the securities held by the Large Cap Growth Fund on September 30,
2006 would be violative of the current investment guidelines or
restrictions of the Large Cap Fund.
ADR -- American Depositary Receipt.
See accompanying notes to the Pro Forma financial statements.
C-7
BB&T LARGE CAP FUND
PRO FORMA
STATEMENT OF ASSETS AND LIABILITIES
AS OF SEPTEMBER 30, 2006
(UNAUDITED)
<Table>
<Caption>
LARGE CAP PRO FORMA PRO FORMA
GROWTH FUND LARGE CAP FUND ADJUSTMENTS COMBINED
------------ -------------- ------------ --------------
ASSETS:
Investments, at cost................. $284,716,018 $652,055,288 $ -- $ 936,771,306
Unrealized appreciation
(depreciation).................. 32,683,200 160,666,207 -- 193,349,407
------------ ------------ ------------ --------------
Investments, at fair value*........ 317,399,218 812,721,495 -- 1,130,120,713
Repurchase agreements, at cost....... 6,880,178 38,405,481 -- 45,285,659
Interest and dividends receivable.... 281,220 964,315 -- 1,245,335
Receivable for capital shares
issued............................. 1,117 190,567 -- 191,684
Receivable for investments sold...... 7,864,285 -- -- 7,864,285
Prepaid and other expenses........... 5,619 11,107 -- 16,726
------------ ------------ ------------ --------------
Total Assets:........................ 332,431,637 852,292,965 -- 1,184,724,602
------------ ------------ ------------ --------------
LIABILITIES:
Cash Overdraft....................... 3,710 -- -- 3,710
Dividends payable.................... 131,054 270,220 -- 401,274
Payable for investments purchased.... 4,929,053 -- -- 4,929,053
Payable for capital shares redeemed.. 242,032 550,374 -- 792,406
Payable for collateral received on
loaned securities.................. 101,006,062 126,591,112 -- 227,597,174
Accrued expenses and other payables.. --
Investment advisory fees........... 194,151 409,740 -- 603,891
Administration fees................ 31,296 66,111 -- 97,407
Fund accounting fees............... 2,950 6,014 -- 8,964
Transfer agency fees............... 9,636 19,828 -- 29,464
Distribution fees.................. 9,325 22,181 -- 31,506
Compliance service fees............ 481 979 -- 1,460
Trustee fees....................... 156 317 -- 473
Other.............................. 35,419 64,429 -- 99,848
------------ ------------ ------------ --------------
Total Liabilities:................... 106,595,325 128,001,305 -- 234,596,630
------------ ------------ ------------ --------------
NET ASSETS:
Capital.............................. 200,780,840 488,293,326 -- 689,074,166
Accumulated (distributions in excess
of) net investment income.......... 230,874 (104,143) -- 126,731
Accumulated realized gains/(losses)
from investment transactions....... (7,858,602) 75,436,270 -- 67,577,668
Net unrealized
appreciation/depreciation on
investments........................ 32,683,200 160,666,207 -- 193,349,407
------------ ------------ ------------ --------------
Net Assets........................... $225,836,312 $724,291,660 $ -- $ 950,127,972
============ ============ ------------ ==============
</Table>
C-8
<Table>
<Caption>
LARGE CAP PRO FORMA PRO FORMA
GROWTH FUND LARGE CAP FUND ADJUSTMENTS COMBINED
------------ -------------- ------------ --------------
NET ASSETS
Class A Shares.................. $ 9,445,810 $ 48,656,168 -- $ 58,101,978
Class B Shares.................. 8,970,050 14,807,596 -- 23,777,646
Class C Shares.................. 36,886 161,325 -- 198,211
Institutional Shares............ 207,383,566 660,666,571 -- 868,050,137
------------ ------------ ------------ --------------
Total................................ $225,836,312 $724,291,660 $ -- $ 950,127,972
============ ============ ------------ ==============
SHARES OF BENEFICIAL INTEREST
OUTSTANDING (UNLIMITED NUMBER OF
SHARES AUTHORIZED, NO PAR VALUE)
(A)
Class A Shares.................. 1,058,076 2,393,513 (593,414) 2,858,175
Class B Shares.................. 1,071,062 734,971 (625,836) 1,180,197
Class C Shares.................. 4,403 8,023 (2,569) 9,857
Institutional Shares............ 22,850,209 32,417,350 (12,674,383) 42,593,176
------------ ------------ ------------ --------------
Total................................ 24,983,750 35,553,857 (13,896,202) 46,641,105
============ ============ ------------ ==============
NET ASSET VALUE (A)
Class A Shares -- redemption
price per share............... $ 8.93 $ 20.33 $ 20.33
============ ============ ==============
Class B Shares -- offering price
per share**................... $ 8.37 $ 20.15 $ 20.15
============ ============ ==============
Class C Shares -- offering price
per share**................... $ 8.38 $ 20.11 $ 20.11
============ ============ ==============
Institutional Shares -- offering
and redemption price per
share......................... $ 9.08 $ 20.38 $ 20.38
============ ============ ==============
Maximum Sales Charge -- Class A
Shares............................. $ 5.75% 5.75% 5.75%
============ ============ ==============
Maximum Offering Price
(100%/100% -- Maximum Sales Charge)
of net asset value adjusted to the
nearest cent per share -- Class A
Shares............................. $ 9.47 $ 21.57 $ 21.57
============ ============ ==============
</Table>
--------
(A) Class A, Class B, Class C, and Institutional Class Shares of the Large
Cap Growth Fund are exchanged for new Class A, Class B, Class C, and
Institutional Class Shares of the Large Cap Fund, to commence operations
upon consummation of the merger.
* The Large Cap Growth Fund and Large Cap Fund include securities on loan
of $97,859,740 and $122,511,470, respectively.
** Redemption price per share varies by length of time shares are held.
See accompanying notes to the Pro Forma financial statements.
C-9
BB&T LARGE CAP FUND
PRO FORMA
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED SEPTEMBER 30, 2006
(UNAUDITED)
<Table>
<Caption>
LARGE CAP PRO FORMA PRO FORMA
GROWTH FUND LARGE CAP FUND ADJUSTMENTS COMBINED
------------ -------------- ----------- ------------
INVESTMENT INCOME:
Interest Income..................... $ 459,645 $ 1,230,665 $ -- $ 1,690,310
Dividend Income..................... 4,089,284 17,070,769 -- 21,160,053
Income from securities lending...... 71,297 125,434 -- 196,731
------------ ----------- -------- ------------
Total Investment Income............. 4,620,226 18,426,868 -- 23,047,094
------------ ----------- -------- ------------
EXPENSES:
Investment advisory fees............ 2,669,370 5,075,497 -- 7,744,867
Administration fees................. 407,694 775,253 -- 1,182,947
Fund accounting fees................ 46,905 86,724 (4,800) 128,829
Transfer agency fees................ 76,221 145,019 (4,000) 217,240
Distribution fees -- Class A
Shares............................ 45,932 218,866 -- 264,798
Distribution fees -- Class B
Shares............................ 111,680 189,381 -- 301,061
Distribution fees -- Class C
Shares............................ 277 1,607 -- 1,884
Compliance service fees............. 6,757 11,970 -- 18,727
Custodian fees...................... 35,486 69,727 -- 105,213
Legal fees.......................... 28,434 57,871 -- 86,305
Printing fees....................... 32,068 65,274 (3,000) 94,342
Trustee fees........................ 13,917 25,552 -- 39,469
Other............................... 43,306 97,955 (16,000) 125,261
------------ ----------- -------- ------------
Total expenses before waivers....... 3,518,047 6,820,696 (27,800) 10,310,943
Less expenses waived by the
Investment Advisor................ (180,419) (340,766) -- (521,185)
Less expenses waived by the
Distributor....................... (22,966) (109,433) -- (132,399)
------------ ----------- -------- ------------
Net Expenses........................ 3,314,662 6,370,497 (27,800) 9,657,359
------------ ----------- -------- ------------
Net Investment Income (Loss)........ 1,305,564 12,056,371 27,800 13,389,735
------------ ----------- -------- ------------
REALIZED/UNREALIZED GAINS (LOSSES)
ON INVESTMENTS:
Net realized gains (losses) from
investment transactions........... 16,243,812 88,409,170 -- 104,652,982
Change in unrealized
appreciation/depreciation of
investment securities............. (18,517,591) (7,600,664) -- (26,118,255)
------------ ----------- -------- ------------
Net realized/unrealized gains
(losses) on investments........... (2,273,779) 80,808,506 -- 78,534,727
------------ ----------- -------- ------------
Change in net assets from
operations........................ $ (968,215) $92,864,877 $ 27,800 $ 91,924,462
============ =========== ======== ============
</Table>
See accompanying notes to the Pro Forma financial statements.
C-10
BB&T LARGE CAP FUND
PRO FORMA NOTES TO COMBINING FINANCIAL STATEMENTS
SEPTEMBER 30, 2006 (UNAUDITED)
1. DESCRIPTION OF THE FUND:
The BB&T Large Cap Fund, ('Large Cap Fund") a series of the BB&T Funds (the
"Trust"), is registered under the Investment Company Act of 1940, as amended
("the 1940 Act"), as a diversified, open-end investment company established as a
Massachusetts business trust.
The BB&T Funds are authorized to issue an unlimited amount of shares
without par value. The Large Cap Fund offers four classes of shares: Class A
Shares, Class B Shares, Class C Shares and Institutional Shares. The Class A
Shares of the Large Cap Fund, have a maximum sales charge of 5.75% as a
percentage of original purchase price. Certain purchases of Class A Shares will
not be subject to a front-end sales charge, but will be subject to a contingent
deferred sales charge ("CDSC") of 1.00% of the purchase price if redeemed less
than one year after purchase. The Class B Shares of the Funds are offered
without any front-end sales charge but will be subject to a maximum CDSC of
5.00% if redeemed less than one year after purchase and 1.00% if redeemed less
than six years after purchase. The Class C Shares of the Funds are offered
without any front-end sales charge but will be subject to a maximum CDSC of
1.00% if redeemed less than one year after purchase.
Each class of shares has identical rights and privileges except with
respect to the fees paid under the distribution plan, voting rights on matters
affecting a single class of shares and the exchange privilege of each class of
shares.
The pro forma adjustments and pro forma combined columns of the Statement
of Operations reflect the adjustments necessary to show expenses at the rates
which would have been in effect if the Funds were combined for the periods ended
September 30, 2006. Investment advisory, administration and 12b-1 fees in the
pro forma combined column are calculated at the projected rates in effect for
the Large Cap Fund based upon the combined net assets of the corresponding Large
Cap Fund and the Large Cap Growth Fund. Certain pro forma adjustments were made
to estimate the benefit of combining operations of separate funds into one
survivor fund.
2. BASIS OF COMBINATION:
The accompanying pro forma financial statements are presented to show the
effect of the proposed acquisition of the BB&T Large Cap Growth Fund, ("Large
Growth Fund") a series of the Trust, by Large Cap Fund as if such acquisition
had taken place as of October 1, 2005.
Under the terms of the Plan of Reorganization, the combination of Large
Growth Fund and Large Cap Fund will be accounted for by the method of accounting
for tax-free mergers of investment companies. The acquisition would be
accomplished by an acquisition of the net assets of Large Growth Fund in
exchange for shares of Large Cap Fund at the September 30, 2006 net asset value.
The statement of assets and liabilities and the related statement of operation
of Large Growth Fund and Large Cap Fund have been combined as of and for the
year ended September 30, 2006. Following the acquisition, the Large Cap Fund
will be the accounting survivor. In accordance with accounting principles
generally accepted in the United States of America, the historical cost of
investment securities will be carried forward to the Large Cap Fund and the
results of operations for pre-combination periods of the Large Cap Fund will not
be restated.
The accompanying pro forma financial statements should be read in
conjunction with the financial statements of Large Cap Fund and Large Growth
Fund included in their respective annual report dated September 30, 2006.
The following notes refer to the accompanying pro forma financial
statements as if the above-mentioned acquisition of Large Growth Fund by Large
Cap Fund had taken place as of October 1, 2005.
3. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. The policies are in
conformity with accounting principles generally accepted in the United
C-11
BB&T LARGE CAP FUND
PRO FORMA NOTES TO COMBINING FINANCIAL STATEMENTS -- (CONTINUED)
States of America. The preparation of financial statements requires management
to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of
the financial statements and the reported amounts of income and expenses for the
period. Actual results could differ from those estimates.
SECURITIES VALUATION:
Investments in common stocks, the principal market for which is a
securities exchange or an over-the-counter market, are valued at their latest
available sale price (except for those securities that are traded on NASDAQ,
which will be valued at the NASDAQ official closing price) or in the absence of
such a price, by reference to the latest available bid price in the principal
market in which such securities are normally traded. The Large Cap Fund may also
use an independent pricing service approved by the Board of Trustees to value
certain securities. Such prices reflect fair values which may be established
through the use of electronic and matrix techniques. Short-term obligations that
mature in 60 days or less are valued at either amortized cost or original cost
plus interest, which approximates current value. Investments in open-end
investment companies, including the Funds of Funds, are valued at their
respective net asset values as reported by such companies. Investments in
closed-end investment companies are valued at their fair values based upon the
latest available bid prices in the principal market in which such securities are
normally traded. The differences between cost and fair values of investments are
reflected as either unrealized appreciation or depreciation. Securities for
which market quotations are not readily available will be valued at fair value
using methods determined in good faith by the Pricing Committee under the
supervision of the Board of Trustees.
SECURITIES TRANSACTIONS AND RELATED INCOME:
During the period, security transactions are accounted for no later than
one business day after trade date. For financial reporting purposes, however,
security transactions are accounted for on trade date of the last business day
of the reporting period. Interest income is recognized on the accrual basis and
includes, where applicable, the pro-rata amortization/accretion of premium or
discount. Dividend income is recorded on the ex-dividend date. Gains or losses
realized from sales of securities are determined by comparing the identified
cost of the security lot sold with the net sales proceeds.
REPURCHASE AGREEMENTS AND COLLATERALIZED LOAN AGREEMENTS:
The Funds may enter into agreements with member banks of the Federal
Deposit Insurance Corporation and with registered broker/dealers that BB&T Asset
Management, Inc. ("BB&T") deems creditworthy under guidelines approved by the
Board of Trustees, subject to the seller's agreement to repurchase such
securities at a mutually agreed-upon date and price. The repurchase price
generally equals the price paid by the Fund plus interest negotiated on the
basis of current short-term rates, which may be more or less than the rate on
the underlying Fund securities. The seller, under these types of agreements, is
required to maintain the value of collateral held pursuant to the agreement at
not less than the repurchase price (including accrued interest). Securities
subject to repurchase are held by the Funds' custodian, another qualified
custodian, or in the Federal Reserve/Treasury book-entry system. In the event of
counterparty default, the Fund has the right to use the collateral to offset
losses incurred. There is potential for loss to the Fund in the event the Fund
is delayed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the fair value of the
underlying securities during the period while the Fund seeks to assert its
rights.
SECURITY LOANS:
To generate additional income, the Funds may lend up to 33 1/3% of their
respective total assets pursuant to agreements requiring that the loan be
continuously secured by any combination of cash, U.S. Government or U.S.
Government agency securities, equal at all times to at least 100% of the fair
value.
C-12
BB&T LARGE CAP FUND
PRO FORMA NOTES TO COMBINING FINANCIAL STATEMENTS -- (CONTINUED)
Pursuant to an exemptive order from the Securities and Exchange Commission,
the cash collateral received by the Funds was pooled and at September 30, 2006
was invested in Commercial Paper, Corporate Bonds, Mutual Funds, and Repurchase
Agreements (with interest rates ranging from 5.30% to 5.48% and maturity dates
ranging from October 2006 through December 2015) these investments are managed
by U.S. Bank National Association. The Funds receive payments from borrowers
equivalent to the dividends and interest that would have been earned on
securities lent while simultaneously seeking to earn income on the investment of
collateral. Collateral is marked to market daily to provide a level of
collateral at least equal to the fair value of securities lent. There may be
risks of delay in recovery of the securities or even loss of rights in the
collateral should the borrower of the securities fail financially. However,
loans will be made only to borrowers, such as broker-dealers, banks or
institutional borrowers of securities, deemed by BB&T Funds to be of good
standing and creditworthy under guidelines established by the Board of Trustees
and when, in the judgment of BB&T Funds, the consideration which can be earned
currently from such securities loans justifies the attendant risks. Loans are
subject to termination by the Funds or the borrower at any time and are,
therefore, not considered to be illiquid investments. As of September 30, 2006,
the following Funds had loans outstanding:
<Table>
<Caption>
AVERAGE VALUE
ON LOAN FOR THE
VALUE OF PERIOD ENDED
LOANED SEPTEMBER 30,
SECURITIES VALUE OF COLLATERAL 2006
------------ ------------------- ---------------
Large Cap Fund........................ $122,511,470 $126,591,112 $179,921,206
Large Cap Growth Fund................. 97,859,740 101,006,062 113,851,334
</Table>
ALLOCATION METHODOLOGY:
Expenses directly attributable to a Fund are charged to that Fund. Expenses
not directly attributable to a Fund are allocated proportionately among all
Funds daily in relation to the net assets of each Fund or on another reasonable
basis. Each class of shares bears its pro-rata portion of expenses attributable
to its series, except that each class separately bears expenses related
specifically to that class, such as distribution fees. Expenses, which are
attributable to more than one Trust are allocated across the BB&T Funds and BB&T
Variable Insurance Funds, based upon relative net assets or on another
reasonable basis. BB&T serves as the Investment Advisor for each of the BB&T
Funds. Income and realized and unrealized gains or losses on investments are
allocated to each class of shares based on its relative net assets or another
appropriate basis.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared and paid monthly for the
Large Cap Fund. Dividends from net investment income are declared and paid
quarterly for the Large Cap Growth Fund. Distributable net realized gains, if
any, are declared and distributed at least annually.
The character of income and gains distributed are determined in accordance
with federal income tax regulations, which may differ from accounting principles
generally accepted in the United States of America. These "book/tax" differences
are either considered temporary or permanent in nature. To the extent these
differences are permanent in nature (e.g. reclass of market discounts,
gain/loss, paydowns, and distributions), such amounts are reclassified within
the composition of net assets based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends to shareholders
which exceed net investment income and net realized gains for tax purposes are
reported as distributions of capital.
4. CAPITAL SHARES:
The pro forma net asset value per share assumes the issuance of shares of
the Large Cap Fund that would have been issued at September 30, 2006, in
connection with the proposed reorganization. The number of shares assumed to be
issued is equal to the net asset value of shares of Large Growth Fund, as of
September 30, 2006, divided by the
C-13
BB&T LARGE CAP FUND
PRO FORMA NOTES TO COMBINING FINANCIAL STATEMENTS -- (CONTINUED)
net asset value per share of the shares of Large Cap Fund as of September 30,
2006. The pro forma number of shares outstanding, by class, for the combined
fund consists of the following at September 30, 2006:
<Table>
<Caption>
SHARES OF
LARGE CAP GROWTH SHARES ASSUMED TOTAL OUTSTANDING
FUND ISSUED IN SHARES
CLASS OF SHARES PRE-COMBINATION REORGANIZATION POST-COMBINATION
--------------- ---------------- -------------- -----------------
CAPITAL SHARES
Class A Shares...................... 1,058,076 1,800,099 2,858,175
Class B Shares...................... 1,071,062 109,135 1,180,197
Class C Shares...................... 4,403 5,454 9,857
Institutional Shares................ 22,850,209 19,742,967 42,593,176
</Table>
<Table>
<Caption>
LARGE CAP PRO FORMA
GROWTH FUND LARGE CAP FUND COMBINED
------------ -------------- ------------
CAPITALIZATION
NET ASSETS
Class A Shares......................... $ 9,445,810 $ 48,656,168 $ 58,101,978
Class B Shares......................... 8,970,050 14,807,596 23,777,646
Class C Shares......................... 36,886 161,325 198,211
Institutional Shares................... 207,383,566 660,666,571 868,050,137
------------ ------------ ------------
Total.................................. $225,836,312 $724,291,660 $950,127,972
============ ============ ============
NET ASSET VALUE PER SHARE
Class A Shares......................... $ 8.93 $ 20.33 $ 20.33
Class B Shares......................... $ 8.37 $ 20.15 $ 20.15
Class C Shares......................... $ 8.38 $ 20.11 $ 20.11
Institutional Shares................... $ 9.08 $ 20.38 $ 20.38
SHARES OUTSTANDING
Class A Shares......................... 1,058,076 2,393,513 2,858,175
Class B Shares......................... 1,071,062 734,971 1,180,197
Class C Shares......................... 4,403 8,023 9,857
Institutional Shares................... 22,850,209 32,417,350 42,593,176
RATIO OF EXPENSES TO AVERAGE NET ASSETS
A
Before Fee Waivers
Class A Shares......................... 1.43% 1.43% 1.43%
Class B Shares......................... 1.93% 1.93% 1.93%
Class C Shares......................... 1.93% 1.94% 1.94%
Institutional Shares................... 0.93% 0.93% 0.93%
After Fee Waivers
Class A Shares......................... 1.13% 1.14% 1.14%
Class B Shares......................... 1.88% 1.88% 1.88%
Class C Shares......................... 1.89% 1.88% 1.88%
Institutional Shares................... 0.88% 0.89% 0.89%
</Table>
C-14
BB&T LARGE CAP FUND
PRO FORMA NOTES TO COMBINING FINANCIAL STATEMENTS -- (CONTINUED)
5. FEDERAL INCOME TAXES:
It is the policy of the Large Cap Fund to continue to qualify as a
regulated investment company, after the acquisition, by complying with the
provisions available to certain investment companies, as defined in applicable
sections of the Internal Revenue Code, and to make distributions of net
investment income and net realized capital gains sufficient to relieve it from
all, or substantially all, federal income taxes. Accordingly, no provision for
federal income tax is required.
At September 30, 2006, the Large Growth Fund had net capital loss
carryforwards to offset future net capital gains, if any, to the extent provided
by the Treasury regulations. To the extent that these carryforwards are used to
offset future capital gains, it is probable that the gains that are offset will
not be distributed to shareholders.
<Table>
<Caption>
AMOUNT EXPIRES
---------- -------
Large Cap Growth Fund.................................. $7,019,454 2011
</Table>
At September 30, 2006 the cost, gross unrealized appreciation and gross
unrealized depreciation on securities for federal income tax purposes were as
follows:
<Table>
<Caption>
TAX UNREALIZED TAX UNREALIZED NET UNREALIZED
TAX COST APPRECIATION DEPRECIATION APPRECIATION (DEPRECIATION)
------------ -------------- -------------- ---------------------------
Large Cap Fund......... $983,236,083 $198,883,898 $(6,713,609) $192,170,289
</Table>
C-15
BB&T LARGE CAP VIF
PROFORMA COMBINED SCHEDULE OF PORTFOLIO INVESTMENTS
DECEMBER 31, 2005
(UNAUDITED)
<Table>
<Caption>
PROFORMA
LARGE CAP LARGE CAP PROFORMA LARGE CAP LARGE CAP COMBINED
VIF GROWTH VIF COMBINED VIF GROWTH VIF FAIR
SHARES SHARES SHARES SECURITY DESCRIPTION FAIR VALUE FAIR VALUE(B) VALUE
---------------- ----------- ------------ -------------------- ------------ ------------- ------------
COMMON STOCKS (97.1)%
Consumer Discretionary (8.0)%
3,397 3,397 Chico's FAS, Inc.(a) $ $ 149,230 $ 149,230
3,671 3,671 Coach, Inc.(a) 122,391 122,391
2,300 2,300 eBay, Inc.(a) 99,475 99,475
8,223 8,223 Federated Department Stores, 545,432 545,432
Inc.
45,000 45,000 Gannett Co., Inc. 2,725,649 2,725,649
3,933 3,933 Hershey Co. (The) 217,298 217,298
5,814 5,814 Home Depot, Inc. 235,351 235,351
6,410 6,410 Kohl's Corp. 311,526 311,526
1,855 1,855 Lowe's Companies, Inc. 123,654 123,654
70,000 70,000 Mattel, Inc. 1,107,400 1,107,400
1,594 1,594 Nike, Inc., Class B 138,343 138,343
17,297 17,297 Starbucks Corp. (a) 519,084 519,084
2,174 2,174 Target Corp. 119,505 119,505
17,475 17,475 V.F. Corp. 967,067 967,067
99,000 99,000 Walt Disney Co. (The) 2,373,030 2,373,030
13,100 13,100 Whirlpool Corp. 1,097,256 1,097,256
3,049 3,049 Williams Sonoma, Inc.(a) 131,564 131,564
------------ ----------- ------------
8,815,834 2,167,421 10,983,255
------------ ----------- ------------
Consumer Staples (6.6)%
55,400 55,400 Albertson's, Inc. 1,182,790 1,182,790
24,000 3,182 27,182 Altria Group, Inc. 1,793,280 237,759 2,031,039
5,749 5,749 Coca-Cola Co. 231,742 231,742
38,000 38,000 Kimberly-Clark Corp. 2,266,700 2,266,700
8,753 8,753 PepsiCo, Inc. 517,127 517,127
9,033 9,033 Procter & Gamble Co. 522,830 522,830
90,452 90,452 Sara Lee Corp. 1,709,543 1,709,543
11,936 11,936 Wal-Mart Stores, Inc. 558,605 558,605
------------ ----------- ------------
6,952,313 2,068,063 9,020,376
------------ ----------- ------------
Energy (11.7)%
19,000 3,737 22,737 Anadarko Petroleum Corp. 1,800,250 354,081 2,154,331
5,136 5,136 Apache Corp. 351,919 351,919
6,270 6,270 Baker Hughes, Inc. 381,090 381,090
9,000 9,000 Burlington Resources, Inc. 775,800 775,800
50,800 50,800 ChevronTexaco Corp. 2,883,916 2,883,916
53,400 3,842 57,242 ConocoPhillips 3,106,812 223,528 3,330,340
47,632 47,632 Exxon Mobil Corp. 2,675,489 2,675,489
38,500 38,500 Royal Dutch Shell PLC, A 2,367,365 2,367,365
Shares, ADR
12,000 12,000 Schlumberger, Ltd. 1,165,800 1,165,800
------------ ----------- ------------
14,775,432 1,310,618 16,086,050
------------ ----------- ------------
</Table>
C-16
<Table>
<Caption>
PROFORMA
LARGE CAP LARGE CAP PROFORMA LARGE CAP LARGE CAP COMBINED
VIF GROWTH VIF COMBINED VIF GROWTH VIF FAIR
SHARES SHARES SHARES SECURITY DESCRIPTION FAIR VALUE FAIR VALUE(B) VALUE
---------------- ----------- ------------ -------------------- ------------ ------------- ------------
Financials (26.1)%
6,000 6,000 Ambac Financial Group, Inc. 462,360 462,360
17,000 4,399 21,399 American International Group, 1,159,910 300,143 1,460,053
Inc.
76,000 76,000 Bank of America Corp. 3,507,400 3,507,400
37,000 37,000 Bank of New York Company, 1,178,450 1,178,450
Inc. (The)
2,355 2,355 CIT Group, Inc. 121,942 121,942
62,333 62,333 Citigroup, Inc. 3,025,020 3,025,020
15,000 15,000 Equity Residential, REIT 586,800 586,800
34,000 34,000 Fannie Mae 1,659,540 1,659,540
11,500 2,553 14,053 Franklin Resources, Inc. 1,081,115 240,008 1,321,123
1,890 1,890 Goldman Sachs Group, Inc. 241,372 241,372
(The)
44,677 44,677 ING Groep NV, ADR 1,555,653 1,555,653
74,490 74,490 J.P. Morgan Chase & Co. 2,956,508 2,956,508
23,200 23,200 Lincoln National Corp. 1,230,296 1,230,296
30,000 30,000 Merrill Lynch & Company, Inc. 2,031,900 2,031,900
37,000 37,000 Northern Trust Corp. 1,917,340 1,917,340
45,000 45,000 Old Republic International 1,181,700 1,181,700
Corp.
38,000 3,699 41,699 PNC Financial Services Group, 2,349,540 228,709 2,578,249
Inc.
56,600 56,600 St. Paul Travelers Cos, Inc. 2,528,322 2,528,322
(The)
26,000 26,000 SunTrust Banks, Inc. 1,891,760 1,891,760
52,000 52,000 Washington Mutual, Inc. 2,262,000 2,262,000
22,900 22,900 Wells Fargo & Co. 1,438,807 1,438,807
16,400 16,400 Willis Group Holdings, Ltd. 605,816 605,816
------------ ----------- ------------
34,610,237 1,132,174 35,742,411
------------ ----------- ------------
Health Care (10.9)%
29,200 6,940 36,140 Abbott Laboratories 1,151,356 273,644 1,425,000
6,253 6,253 Amgen, Inc.(a) 493,112 493,112
43,600 43,600 Bristol-Myers Squibb Co. 1,001,928 1,001,928
5,865 5,865 Caremark Rx, Inc. 303,748 303,748
17,000 17,000 Cigna Corp. 1,898,900 1,898,900
2,385 2,385 Genentech, Inc.(a) 220,613 220,613
2,870 2,870 Genzyme Corp.(a) 203,139 203,139
5,502 5,502 Gilead Sciences, Inc.(a) 289,570 289,570
25,000 25,000 HCA, Inc. 1,262,500 1,262,500
17,400 11,846 29,246 Johnson & Johnson 1,045,740 711,944 1,757,684
4,449 4,449 Medco Health Solutions, 248,254 248,254
Inc.(a)
8,608 8,608 Medtronic, Inc. 495,562 495,562
61,000 61,000 Merck & Co., Inc. 1,940,410 1,940,410
5,400 5,400 Novartis AG, ADR 283,392 283,392
51,000 9,865 60,865 Pfizer, Inc. 1,189,320 230,052 1,419,372
6,811 6,811 UnitedHealth Group, Inc. 423,236 423,236
3,056 3,056 Wellpoint, Inc.(a) 243,838 243,838
15,000 7,140 22,140 Wyeth 691,050 328,940 1,019,990
------------ ----------- ------------
10,181,204 4,749,044 14,930,248
------------ ----------- ------------
</Table>
C-17
<Table>
<Caption>
PROFORMA
LARGE CAP LARGE CAP PROFORMA LARGE CAP LARGE CAP COMBINED
VIF GROWTH VIF COMBINED VIF GROWTH VIF FAIR
SHARES SHARES SHARES SECURITY DESCRIPTION FAIR VALUE FAIR VALUE(B) VALUE
---------------- ----------- ------------ -------------------- ------------ ------------- ------------
Industrials (9.1)%
4,514 4,514 Boeing Co. 317,063 317,063
6,201 6,201 Caterpillar, Inc. 358,232 358,232
15,000 15,000 CSX Corp. 761,550 761,550
2,245 2,245 Danaher Corp. 125,226 125,226
6,296 6,296 Dow Chemical Co. (The) 275,891 275,891
9,500 9,500 Emerson Electric Co. 709,650 709,650
1,406 1,406 Fedex Corp. 145,366 145,366
31,000 28,213 59,213 General Electric Co. 1,086,550 988,866 2,075,416
3,300 3,300 Honeywell International, Inc. 122,925 122,925
2,892 2,892 Illinois Tool Works, Inc. 254,467 254,467
11,774 11,774 National Semiconductor Corp. 305,889 305,889
18,900 18,900 Parker-Hannifin Corp. 1,246,644 1,246,644
3,500 2,415 5,915 Phelps Dodge Corp. 503,545 347,446 850,991
27,600 27,600 Pitney Bowes, Inc. 1,166,100 1,166,100
4,661 4,661 Precision Castparts Corp. 241,486 241,486
47,000 47,000 Raytheon Co. 1,887,050 1,887,050
14,000 14,000 Textron, Inc. 1,077,720 1,077,720
3,158 3,158 United Parcel Service, Inc., 237,324 237,324
Class B
6,096 6,096 United Technologies Corp. 340,827 340,827
------------ ----------- ------------
8,438,809 4,061,008 12,499,817
------------ ----------- ------------
Information Technology (11.9)%
4,941 4,941 3M Co. 382,928 382,928
1,887 1,887 Apple Computer, Inc.(a) 135,656 135,656
25,400 25,400 Automatic Data Processing, 1,165,606 1,165,606
Inc.
30,747 30,747 Cisco Systems, Inc.(a) 526,389 526,389
12,768 12,768 Corning, Inc.(a) 251,019 251,019
7,767 7,767 Dell, Inc.(a) 232,932 232,932
8,530 8,530 EMC Corp.(a) 116,179 116,179
29,000 29,000 First Data Corp. 1,247,290 1,247,290
605 605 Google, Inc.(a) 250,990 250,990
82,200 82,200 Hewlett-Packard Co. 2,353,386 2,353,386
4,800 6,442 11,242 IBM Corp. 394,560 529,532 924,092
31,504 31,504 Intel Corp. 786,340 786,340
40,000 37,536 77,536 Microsoft Corp. 1,046,000 981,567 2,027,567
9,956 9,956 Monster Worldwide, Inc.(a) 406,404 406,404
19,939 19,939 Motorola, Inc. 450,422 450,422
87,000 10,094 97,094 Nokia Corp., ADR 1,592,100 184,720 1,776,820
30,800 30,800 Oracle Corp.(a) 376,068 376,068
6,100 6,100 QUALCOMM, Inc. 262,788 262,788
11,579 11,579 Texas Instruments, Inc. 371,339 371,339
96,000 23,776 119,776 Time Warner, Inc. 1,674,240 414,653 2,088,893
3,116 3,116 Yahoo!, Inc. 122,085 122,085
------------ ----------- ------------
9,473,182 6,782,011 16,255,193
------------ ----------- ------------
</Table>
C-18
<Table>
<Caption>
PROFORMA
LARGE CAP LARGE CAP PROFORMA LARGE CAP LARGE CAP COMBINED
VIF GROWTH VIF COMBINED VIF GROWTH VIF FAIR
SHARES SHARES SHARES SECURITY DESCRIPTION FAIR VALUE FAIR VALUE(B) VALUE
---------------- ----------- ------------ -------------------- ------------ ------------- ------------
Materials (4.1)%
17,000 17,000 Air Products & Chemical, Inc. 1,006,230 1,006,230
41,000 41,000 Alcoa, Inc. 1,212,370 1,212,370
5,000 5,000 E.I. DuPont de Nemours & Co. 212,500 212,500
39,800 39,800 Sonoco Products Co. 1,170,120 1,170,120
30,000 30,000 Weyerhaeuser Co. 1,990,200 1,990,200
------------ ------------
5,591,420 5,591,420
------------ ------------
Telecommunication Services (4.3)%
72,399 72,399 AT&T, Inc. 1,773,052 1,773,052
36,800 36,800 BellSouth Corp. 997,280 997,280
60,000 9,423 69,423 Sprint Nextel Corp. 1,401,600 220,121 1,621,721
52,000 52,000 Verizon Communications, 1,566,240 1,566,240
------------ ----------- ------------
5,738,172 220,121 5,958,293
------------ ----------- ------------
Utilities (4.4)%
16,000 16,000 Dominion Resources, Inc. 1,235,200 1,235,200
30,000 30,000 Duke Energy Corp. 823,500 823,500
38,200 38,200 National Fuel Gas Co. 1,191,458 1,191,458
70,000 70,000 NiSource, Inc. 1,460,200 1,460,200
6,450 6,450 SCANA Corp. 254,001 254,001
59,910 59,910 Xcel Energy, Inc. 1,105,939 1,105,939
----------- ----------- ------------ ------------ ------------
Cost
$90,964,299 $20,175,360 $111,139,659 6,070,298 6,070,298
------------ ----------- ------------
Total Common Stocks 110,646,901 22,490,460 133,137,361
------------ ----------- ------------
REPURCHASE AGREEMENT (3.0)%
Repurchase Agreement (3.0)%
$ 3,042,954 $ 1,026,296 $ 4,069,250 U.S. Bank N.A., 4.05%, dated 3,042,954 1,026,296 4,069,250
12/31/05, maturing 1/3/06,
with a maturity value of
$4,071,081 (Collateralized
fully by U.S. Government
Agencies)
----------- ----------- ------------ ------------ ----------- ------------
Cost
$ 3,042,954 $ 1,026,296 $ 4,069,250
Total Repurchase Agreement 3,042,954 1,026,296 4,069,250
------------ ----------- ------------
TOTAL INVESTMENTS -- 100.1% $113,689,855 $23,516,756 $137,206,611
============ =========== ============
COST
$94,007,253 $21,201,656 $115,208,909
</Table>
--------
Percentages indicated are based on combined net assets of $137,171,167.
(a) Represents non-income producing security.
(b) None of the securities held by the Large Cap Growth VIF on December 31, 2005
would be violative of the current investment guidelines or restrictions of
the Large Cap VIF.
ADR -- American Depositary Receipt.
REIT -- Real Estate Investment Trust.
See accompanying notes to the Pro Forma financial statements.
C-19
BB&T LARGE CAP VIF
STATEMENT OF ASSETS AND LIABILITIES PRO FORMA
DECEMBER 31, 2005
(UNAUDITED)
<Table>
<Caption>
LARGE CAP PRO FORMA PRO FORMA
GROWTH VIF LARGE CAP VIF ADJUSTMENTS COMBINED
----------- ------------- ----------- ------------
ASSETS:
Investments, at cost................. $20,175,360 $ 90,964,299 $ -- $111,139,659
Unrealized appreciation
(depreciation)................ 2,315,100 19,682,602 -- 21,997,702
----------- ------------ --------- ------------
Investments, at fair value...... 22,490,460 110,646,901 -- 133,137,361
Repurchase agreements, at cost....... 1,026,296 3,042,954 -- 4,069,250
Cash................................. -- 4,402 -- 4,402
Interest and dividends receivable.... 22,682 209,507 -- 232,189
Receivable for capital shares
issued............................. 67 14,717 -- 14,784
Prepaid expenses..................... 1,054 5,069 -- 6,123
----------- ------------ --------- ------------
Total Assets:........................ 23,540,559 113,923,550 -- 137,464,109
----------- ------------ --------- ------------
LIABILITIES:
Payable for investments purchased.... -- 182,906 -- 182,906
Payable for capital shares redeemed.. 1,258 9,085 -- 10,343
Accrued expenses and other payables..
Investment advisory fees........... 8,109 47,412 -- 55,521
Administration fees................ 2,280 11,004 -- 13,284
Fund accounting fees............... 358 1,133 -- 1,491
Transfer agency fees............... 1,319 2,094 -- 3,413
Compliance service fees............ 274 1,317 -- 1,591
Other.............................. 3,790 20,603 -- 24,393
----------- ------------ --------- ------------
Total Liabilities:................... 17,388 275,554 -- 292,942
----------- ------------ --------- ------------
NET ASSETS:
Capital.............................. 21,265,528 94,851,983 -- 116,117,511
Undistributed net investment income
(loss)............................. -- 24,377 -- 24,377
Accumulated realized gains/(losses)
from investment transactions....... (57,457) (910,966) -- (968,423)
Net unrealized
appreciation/depreciation on
investments........................ 2,315,100 19,682,602 -- 21,997,702
----------- ------------ --------- ------------
Net Assets........................... $23,523,171 $113,647,996 $ -- $137,171,167
=========== ============ --------- ============
OUTSTANDING UNITS OF BENEFICIAL
INTEREST (SHARES)(A)............... 2,285,271 8,120,486 (607,816) 9,797,941
=========== ============ --------- ============
NET ASSET VALUE(A)................... $ 10.29 $ 14.00 $ 14.00
=========== ============ ============
</Table>
--------
(A) Shares of the Large Cap Growth VIF are exchanged for new Shares of the
Large Cap VIF, to commence operations upon consummation of the merger.
See accompanying notes to the Pro Forma financial statements.
C-20
<Table>
<Caption>
BB&T LARGE CAP VIF
PRO FORMA
STATEMENT OF OPERATIONS (UNAUDITED) LARGE CAP PRO FORMA PRO FORMA
FOR THE PERIOD ENDED DECEMBER 31, 2005 GROWTH VIF LARGE CAP VIF ADJUSTMENTS COMBINED
-------------------------------------- ---------- ------------- ----------- ----------
INVESTMENT INCOME:
Interest Income......................... $ 30,269 $ 117,232 $ -- $ 147,501
Dividend Income......................... 241,567 2,957,911 -- 3,199,478
--------- ---------- -------- ----------
Total Investment Income................. 271,836 3,075,143 -- 3,346,979
--------- ---------- -------- ----------
EXPENSES:
Investment advisory fees................ 169,101 831,024 -- 1,000,125
Administration, transfer agency and fund
accounting fees....................... 31,486 93,267 (1,850) 122,903
Administration fees..................... 17,717 85,967 -- 103,684
Fund accounting fees.................... 5,751 11,917 (4,500) 13,168
Transfer agency fees.................... 6,879 13,051 (450) 19,480
Compliance service fees................. 2,001 9,936 -- 11,937
Custodian fees.......................... 2,862 14,306 -- 17,168
Professional fees....................... 13,420 68,366 (6,500) 75,286
Trustee fees............................ 3,005 15,148 -- 18,153
Other................................... 7,782 34,906 -- 42,688
--------- ---------- -------- ----------
Total expenses before waivers........... 260,004 1,177,888 (13,300) 1,424,592
Less expenses waived or reimbursed by
the Investment Advisor................ (78,732) (235,503) 15,500 (298,735)
Less expenses waived by the
Administrator and its affiliates...... -- (54,844) (10,850) (65,694)
--------- ---------- -------- ----------
Net Expenses............................ 181,272 887,541 (8,650) 1,060,163
--------- ---------- -------- ----------
Net Investment Income (Loss)............ 90,564 2,187,602 8,650 2,286,816
--------- ---------- -------- ----------
REALIZED/UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Net realized gains (losses) from
investment security transactions...... 761,512 5,648,845 -- 6,410,357
Change in unrealized
appreciation/depreciation of
investments........................... (393,355) (351,242) -- (744,597)
--------- ---------- -------- ----------
Net realized/unrealized gains (losses)
on investments........................ 368,157 5,297,603 -- 5,665,760
--------- ---------- -------- ----------
Change in net assets from operations.... $ 458,721 $7,485,205 $ 8,650 $7,952,576
========= ========== ======== ==========
</Table>
See accompanying notes to the Pro Forma financial statements.
C-21
BB&T LARGE CAP VIF
PROFORMA COMBINED SCHEDULE OF PORTFOLIO INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
LARGE CAP LARGE CAP PROFORMA LARGE CAP LARGE CAP PROFORMA
VIF GROWTH VIF COMBINED VIF GROWTH VIF COMBINED
SHARES SHARES SHARES SECURITY DESCRIPTION FAIR VALUE FAIR VALUE(B) FAIR VALUE
------------ ----------- ------------ -------------------- ------------ ------------- ------------
COMMON STOCKS (94.7)%
Consumer Discretionary (10.1)%
10,500 10,500 American Eagle Outfitters, $ $ 357,420 $ 357,420
Inc.
4,300 4,300 Best Buy Co., Inc. 235,812 235,812
7,225 7,225 Coach, Inc.(a) 216,028 216,028
7,000 7,000 Comcast Corp., Class A(a) 229,180 229,180
46,906 46,906 Gannett Co., Inc. 2,623,453 2,623,453
3,625 3,625 J.C. Penney Company, Inc. 244,724 244,724
3,750 3,750 Lowe's Companies., Inc. 227,513 227,513
72,315 72,315 Mattel, Inc. 1,193,921 1,193,921
11,800 11,800 Staples, Inc. 286,976 286,976
12,250 12,250 Starbucks Corp.(a) 462,559 462,559
103,883 103,883 Tiffany & Co. 3,430,216 3,430,216
17,174 17,174 V.F. Corp. 1,166,458 1,166,458
108,110 108,110 Walt Disney Co. (The) 3,243,300 3,243,300
------------ ----------- ------------
11,657,348 2,260,212 13,917,560
------------ ----------- ------------
Consumer Staples (5.6)%
23,052 23,052 Altria Group, Inc. 1,692,708 1,692,708
9,550 9,550 Archer-Daniels-Midland Co. 394,224 394,224
7,500 7,500 CVS Corp. 230,250 230,250
4,000 4,000 Hershey Co. (The) 220,280 220,280
45,980 45,980 Kimberly-Clark Corp. 2,836,966 2,836,966
4,200 4,200 PepsiCo, Inc. 252,168 252,168
6,000 6,000 Procter & Gamble Co. 333,600 333,600
94,452 94,452 Sara Lee Corp. 1,513,121 1,513,121
6,590 6,590 SUPERVALU, Inc. 202,313 202,313
2,475 2,475 Wal-Mart Stores, Inc. 119,221 119,221
------------ ----------- ------------
6,245,108 1,549,743 7,794,851
------------ ----------- ------------
Energy (10.8)%
36,428 36,428 Anadarko Petroleum Corp. 1,737,251 1,737,251
4,400 4,400 Baker Hughes, Inc. 360,139 360,139
6,375 6,375 Cameco Corp. 254,809 254,809
54,300 54,300 ChevronTexaco Corp. 3,369,858 3,369,858
44,028 44,028 ConocoPhillips 2,885,155 2,885,155
40,253 40,253 Duke Energy Corp. 1,182,231 1,182,231
48,182 48,182 Exxon Mobil Corp. 2,955,966 2,955,966
4,550 4,550 Halliburton Co. 337,656 337,656
15,968 3,800 19,768 Schlumberger, Ltd. 1,039,676 247,418 1,287,094
5,000 5,000 Valero Energy Corp. 332,600 332,600
6,450 6,450 Weatherford International, 320,049 320,049
Ltd.(a)
------------ ----------- ------------
13,170,137 1,852,671 15,022,808
------------ ----------- ------------
Financials (19.0)%
3,550 3,550 AllianceBernstein Holding LP 217,047 217,047
</Table>
C-22
<Table>
<Caption>
LARGE CAP LARGE CAP PROFORMA LARGE CAP LARGE CAP PROFORMA
VIF GROWTH VIF COMBINED VIF GROWTH VIF COMBINED
SHARES SHARES SHARES SECURITY DESCRIPTION FAIR VALUE FAIR VALUE(B) FAIR VALUE
------------ ----------- ------------ -------------------- ------------ ------------- ------------
15,450 15,450 Ambac Financial Group, Inc. 1,252,995 1,252,995
30,200 3,775 33,975 American International Group, 1,783,310 222,914 2,006,224
Inc.
41,500 41,500 Bank of New York Company, Inc. 1,336,300 1,336,300
(The)
1,750 1,750 Bear Stearns Companies, Inc. 245,139 245,139
(The)
13,350 13,350 Charles Schwab Corp. (The) 213,333 213,333
578 578 Chicago Mercantile Exchange 283,884 283,884
Holdings, Inc.
67,433 67,433 Citigroup, Inc. 3,252,967 3,252,967
34,265 34,265 Fannie Mae 1,648,147 1,648,147
1,550 1,550 Goldman Sachs Group, Inc. (The) 233,167 233,167
84,390 84,390 J.P. Morgan Chase & Co. 3,544,379 3,544,379
19,727 19,727 Lincoln National Corp. 1,113,392 1,113,392
31,500 3,250 34,750 Merrill Lynch & Co., Inc. 2,191,140 226,070 2,417,210
42,700 42,700 Northern Trust Corp. 2,361,310 2,361,310
3,125 3,125 Prudential Financial, Inc. 242,813 242,813
49,651 49,651 St. Paul Travelers Cos, Inc. 2,213,442 2,213,442
(The)
52,894 52,894 Washington Mutual, Inc. 2,410,909 2,410,909
18,097 18,097 Wells Fargo & Co. 1,213,947 1,213,947
------------ ----------- ------------
24,322,238 1,884,367 26,206,605
------------ ----------- ------------
Health Care (15.9)%
30,200 30,200 Abbott Laboratories 1,317,022 1,317,022
3,375 3,375 Aetna, Inc. 134,764 134,764
5,050 5,050 AmerisourceBergen Corp. 211,696 211,696
52,388 3,173 55,561 Amgen, Inc.(a) 3,417,269 206,975 3,624,244
7,200 7,200 Amylin Pharmaceuticals, Inc.(a) 355,464 355,464
38,769 38,769 Bristol-Myers Squibb Co. 1,002,566 1,002,566
5,865 5,865 Caremark Rx, Inc. 292,488 292,488
7,750 7,750 Celgene Corp.(a) 367,583 367,583
14,088 14,088 Cigna Corp. 1,387,809 1,387,809
3,200 3,200 Fisher Scientific 233,760 233,760
International, Inc. (a)
2,875 2,875 Genentech, Inc.(a) 235,175 235,175
4,253 4,253 Gilead Sciences, Inc.(a) 251,607 251,607
25,700 25,700 HCA, Inc. 1,108,955 1,108,955
6,500 6,500 Humana, Inc.(a) 349,050 349,050
48,203 48,203 Johnson & Johnson 2,888,324 2,888,324
4,449 4,449 Medco Health Solutions, Inc.(a) 254,839 254,839
4,550 4,550 Medtronic, Inc. 213,486 213,486
84,262 84,262 Merck & Co., Inc. 3,069,665 3,069,665
7,125 7,125 Novartis AG, ADR 384,179 384,179
122,174 122,174 Pfizer, Inc. 2,867,424 2,867,424
1,800 1,800 Wellpoint, Inc .(a) 130,986 130,986
23,900 6,200 30,100 Wyeth 1,061,399 275,342 1,336,741
------------ ----------- ------------
18,120,433 3,897,394 22,017,827
------------ ----------- ------------
Industrials (7.4)%
7,407 7,407 Boeing Co. 606,708 606,708
6,200 6,200 Caterpillar, Inc. 461,776 461,776
5,304 5,304 Danaher Corp. 341,153 341,153
6,881 4,250 11,131 Emerson Electric Co. 576,697 356,193 932,890
</Table>
C-23
<Table>
<Caption>
LARGE CAP LARGE CAP PROFORMA LARGE CAP LARGE CAP PROFORMA
VIF GROWTH VIF COMBINED VIF GROWTH VIF COMBINED
SHARES SHARES SHARES SECURITY DESCRIPTION FAIR VALUE FAIR VALUE(B) FAIR VALUE
------------ ----------- ------------ -------------------- ------------ ------------- ------------
2,368 2,368 Fedex Corp. 276,724 276,724
3,800 3,800 Fluor Corp. 353,134 353,134
17,465 10,300 27,765 General Electric Co. 575,646 339,488 915,134
4,700 4,700 Illinois Tool Works, Inc. 223,250 223,250
4,500 4,500 Joy Global, Inc. 234,405 234,405
10,200 10,200 Monster Worldwide, Inc.(a) 435,132 435,132
19,200 19,200 Parker-Hannifin Corp. 1,489,920 1,489,920
29,100 29,100 Pitney Bowes, Inc. 1,201,830 1,201,830
5,450 5,450 Precision Castparts Corp. 325,692 325,692
14,500 14,500 Textron, Inc. 1,336,610 1,336,610
4,000 4,000 Union Pacific Corp. 371,840 371,840
3,995 3,995 United Parcel Service, Inc., 328,908 328,908
Class B
7,250 7,250 United Technologies Corp. 459,795 459,795
------------ ----------- ------------
5,180,703 5,114,198 10,294,901
------------ ----------- ------------
Information Technology (14.6)%
6,625 6,625 Agilent Technologies, Inc.(a) 209,085 209,085
3,650 3,650 Apple Computer, Inc.(a) 208,488 208,488
23,686 23,686 Automatic Data Processing, Inc. 1,074,160 1,074,160
5,875 5,875 Broadcom Corp., Class A(a) 176,544 176,544
174,978 23,050 198,028 Cisco Systems, Inc.(a) 3,417,320 450,166 3,867,486
13,700 13,700 Corning, Inc.(a) 331,403 331,403
141,151 141,151 Dell, Inc.(a) 3,445,496 3,445,496
18,200 18,200 EMC Corp.(a) 199,654 199,654
25,283 25,283 First Data Corp. 1,138,746 1,138,746
655 655 Google, Inc.(a) 274,661 274,661
10,600 10,600 Hewlett-Packard Co. 335,808 335,808
155,138 155,138 Intel Corp. 2,939,865 2,939,865
4,050 4,050 Marvel Technology Group, 179,537 179,537
Ltd.(a)
40,300 15,300 55,600 Microsoft Corp. 938,990 356,490 1,295,480
5,700 5,700 Motorola, Inc. 114,855 114,855
91,484 1,484 Nokia Corp., ADR 1,853,466 1,853,466
30,800 30,800 Oracle Corp.(a) 446,291 446,291
5,800 5,800 Paychex, Inc. 226,084 226,084
5,750 5,750 QUALCOMM, Inc. 230,403 230,403
93,812 93,812 Time Warner, Inc. 1,622,948 1,622,948
------------ ----------- ------------
16,430,991 3,739,469 20,170,460
------------ ----------- ------------
Materials (3.3)%
20,800 20,800 Air Products & Chemical, Inc. 1,329,536 1,329,536
41,916 41,916 Alcoa, Inc. 1,356,402 1,356,402
31,021 31,021 Weyerhaeuser Co. 1,931,057 1,931,057
------------ ------------
4,616,995 4,616,995
------------ ------------
Telecommunication Services (4.8)%
10,700 10,700 America Movil SA de CV, 355,882 355,882
Series L, ADR
7,675 7,675 American Tower Corp., Class 238,846 238,846
A(a)
69,799 9,100 78,899 AT&T, Inc. 1,946,694 253,799 2,200,493
29,940 29,940 BellSouth Corp. 1,083,828 1,083,828
</Table>
C-24
<Table>
<Caption>
LARGE CAP LARGE CAP PROFORMA LARGE CAP LARGE CAP PROFORMA
VIF GROWTH VIF COMBINED VIF GROWTH VIF COMBINED
SHARES SHARES SHARES SECURITY DESCRIPTION FAIR VALUE FAIR VALUE(B) FAIR VALUE
------------ ----------- ------------ -------------------- ------------ ------------- ------------
6,950 6,950 NII Holdings, Inc.(a) 391,841 391,841
71,025 71,025 Verizon Communications, Inc. 2,378,627 2,378,627
------------ ----------- ------------
5,409,149 1,240,368 6,649,517
------------ ----------- ------------
Utilities (3.2)%
16,467 16,467 Dominion Resources, Inc. 1,231,567 1,231,567
89,504 89,504 NiSource, Inc. 1,954,768 1,954,768
14,549 14,549 SCANA Corp. 561,300 561,300
38,469 38,469 Xcel Energy, Inc. 737,835 737,835
------------ ----------- ------------ ------------ ------------
Cost
$ 93,731,105 $20,104,497 $113,835,602 4,485,470 4,485,470
------------ ------------
Total Common Stocks 109,638,572 21,538,422 131,176,994
------------ ----------- ------------
REPURCHASE AGREEMENT (6.4)%
Repurchase Agreement (6.4)%
$7,262,814 $ 1,626,433 $ 8,889,247 U.S. Bank N.A., 4.80%, dated 7,262,814 1,626,433 8,889,247
6/30/06, maturing 7/3/06, with
a maturity value of $8,892,987
(Collateralized fully by U.S.
Government Agencies)
------------ ----------- ------------ ------------ ----------- ------------
Cost
$ 7,262,814 $ 1,626,433 $ 8,889,247
Total Repurchase Agreement 7,262,814 1,626,433 8,889,247
------------ ----------- ------------
TOTAL INVESTMENTS -- 101.1% $116,901,386 $23,164,855 $140,066,241
============ =========== ============
COST
$100,993,919 $21,730,930 $122,724,849
</Table>
--------
Percentages indicated are based on combined net assets of $138,474,534.
(a) Represents non-income producing security.
(b) None of the securities held by the Large Cap Growth VIF on June 30, 2006
would be violative of the current investment guidelines or restrictions of
the Large Cap VIF.
ADR -- American Depositary Receipt.
See accompanying notes to the Pro Forma financial statements.
C-25
BB&T LARGE CAP VIF
STATEMENT OF ASSETS AND LIABILITIES PRO FORMA
JUNE 30, 2006
(UNAUDITED)
<Table>
<Caption>
LARGE CAP PRO FORMA PRO FORMA
GROWTH VIF LARGE CAP VIF ADJUSTMENTS COMBINED
----------- ------------- ----------- ------------
ASSETS:
Investments, at cost................. $20,104,497 $ 93,731,105 $ -- $113,835,602
Unrealized appreciation
(depreciation)................ 1,433,925 15,907,467 -- 17,341,392
----------- ------------ --------- ------------
Investments, at fair value...... 21,538,422 109,638,572 -- 131,176,994
Repurchase agreements, at cost....... 1,626,433 7,262,814 -- 8,889,247
Interest and dividends receivable.... 10,653 156,062 -- 166,715
Receivable for capital shares
issued............................. 18,991 44,637 -- 63,628
Receivable for investments sold...... -- 1,864,916 -- 1,864,916
Prepaid expenses..................... 607 15,200 -- 15,807
----------- ------------ --------- ------------
Total Assets:........................ 23,195,106 118,982,201 -- 142,177,307
----------- ------------ --------- ------------
LIABILITIES:
Payable for investments purchased.... -- 3,626,802 -- 3,626,802
Payable for capital shares redeemed.. 85 674 -- 759
Accrued expenses and other payables..
Investment advisory fees........... 9,345 47,011 -- 56,356
Administration fees................ 2,101 10,586 -- 12,687
Fund accounting fees............... 187 940 -- 1,127
Transfer agency fees............... 312 1,065 -- 1,377
Compliance service fees............ 252 1,248 -- 1,500
Trustee fees....................... 9 43 -- 52
Other.............................. 2,113 -- -- 2,113
----------- ------------ --------- ------------
Total Liabilities:................... 14,404 3,688,369 -- 3,702,773
----------- ------------ --------- ------------
NET ASSETS:
Capital.............................. 21,358,923 90,756,630 -- 112,115,553
Undistributed net investment income
(loss)............................. (85) (313) -- (398)
Accumulated realized gains/(losses)
from investment transactions....... 387,939 8,630,048 -- 9,017,987
Net unrealized
appreciation/depreciation on
investments........................ 1,433,925 15,907,467 -- 17,341,392
----------- ------------ --------- ------------
Net Assets........................... $23,180,702 $115,293,832 $ -- $138,474,534
=========== ============ --------- ============
OUTSTANDING UNITS OF BENEFICIAL
INTEREST (SHARES)(A)............... 2,295,098 7,841,644 (716,706) 9,420,036
=========== ============ --------- ============
NET ASSET VALUE(A)................... $ 10.10 $ 14.70 $ 14.70
=========== ============ ============
</Table>
--------
(A) Shares of the Large Cap Growth VIF are exchanged for new Shares of the
Large Cap VIF, to commence operations upon consummation of the merger.
See accompanying notes to the Pro Forma financial statements.
C-26
<Table>
<Caption>
BB&T LARGE CAP VIF
PRO FORMA
STATEMENT OF OPERATIONS (UNAUDITED) LARGE CAP PRO FORMA PRO FORMA
FOR THE PERIOD ENDED JUNE 30, 2006 GROWTH VIF LARGE CAP VIF ADJUSTMENTS COMBINED
----------------------------------- ---------- ------------- ----------- -----------
INVESTMENT INCOME:
Interest Income......................... $ 14,211 $ 108,164 $ -- $ 122,375
Dividend Income......................... 127,571 1,429,360 -- 1,556,931
--------- ----------- -------- -----------
Total Investment Income................. 141,782 1,537,524 -- 1,679,306
--------- ----------- -------- -----------
EXPENSES:
Investment advisory fees................ 87,204 431,210 -- 518,414
Administration fees..................... 13,302 65,777 -- 79,079
Fund accounting fees.................... 3,567 13,147 (3,900) 12,814
Transfer agency fees.................... 1,179 5,828 (250) 6,757
Compliance service fees................. 1,493 6,111 -- 7,604
Custodian fees.......................... 1,129 4,547 -- 5,676
Professional fees....................... 10,305 43,346 (6,000) 47,651
Trustee fees............................ 1,678 7,140 -- 8,818
Other................................... 427 2,364 (650) 2,141
--------- ----------- -------- -----------
Total expenses before waivers........... 120,284 579,470 (10,800) 688,954
Less expenses waived by the Investment
Advisor............................... (28,462) (142,272) -- (170,734)
--------- ----------- -------- -----------
Net Expenses............................ 91,822 437,198 (10,800) 518,220
--------- ----------- -------- -----------
Net Investment Income (Loss)............ 49,960 1,100,326 10,800 1,161,086
--------- ----------- -------- -----------
REALIZED/UNREALIZED GAINS (LOSSES) ON
INVESTMENTS:
Net realized gains (losses) from
investment securities................. 445,396 9,541,014 -- 9,986,410
Change in unrealized
appreciation/depreciation of
investments........................... (881,175) (3,775,135) -- (4,656,310)
--------- ----------- -------- -----------
Net realized/unrealized gains (losses)
on investments........................ (435,779) 5,765,879 -- 5,330,100
--------- ----------- -------- -----------
Change in net assets from operations.... $(385,819) $ 6,866,205 $ 10,800 $ 6,491,186
========= =========== ======== ===========
</Table>
See accompanying notes to the Pro Forma financial statements.
C-27
BB&T LARGE CAP VIF
PRO FORMA NOTES TO COMBINING FINANCIAL STATEMENTS
JUNE 30, 2006 (UNAUDITED)
1. DESCRIPTION OF THE FUND:
The BB&T Large Cap VIF, ("Large Cap VIF") a series of the BB&T Variable
Insurance Funds (the "Trust"), is registered under the Investment Company Act of
1940, as amended ("the 1940 Act"), as a diversified, open-end investment company
established as a Massachusetts business trust.
The Trust is authorized to issue an unlimited number of shares of
beneficial interest without par value. Shares of the Funds are offered through
variable annuity contracts offered through the separate accounts of
participating insurance companies.
The pro forma adjustments and pro forma combined columns of the statements
of operations reflect the adjustments necessary to show expenses at the rates
which would have been in effect if the Funds were combined for the periods ended
December 31, 2005 and June 30, 2006. Investment advisory and administration fees
in the pro forma combined column are calculated at the projected rates in effect
for the Large Cap VIF based upon the combined net assets of the corresponding
Large Cap VIF and the BB&T Large Cap Growth VIF. Certain pro forma adjustments
were made to estimate the benefit of combining operations of separate funds into
one survivor fund.
Under the Funds' organizational documents, its Officers and Trustees are
indemnified against certain liabilities arising out of the performance of their
duties to the Funds. In addition, in the normal course of business, the Funds
may enter into contracts with their vendors and others that provide for general
indemnifications. The Funds' maximum exposure under these arrangements is
unknown as this would involve future claims that may be made against the Funds.
However, based on experience, the Funds expect that risk of loss to be remote.
2. BASIS OF COMBINATION:
The accompanying pro forma financial statements are presented to show the
effect of the proposed acquisition of the BB&T Large Cap Growth VIF ("Large Cap
Growth VIF") a series of the Trust, by Large Cap Fund as if such acquisition had
taken place as of January 1, 2006 or July 1, 2006.
Under the terms of the Plan of Reorganization, the combination of Large Cap
Growth VIF and Large Cap VIF will be accounted for by the method of accounting
for tax-free mergers of investment companies. The acquisition would be
accomplished by an acquisition of the net assets of Large Cap Growth VIF in
exchange for shares of Large Cap VIF at the December 31, 2005 or June 30, 2006
net asset values. The statements of assets and liabilities and the related
statements of operations of Large Cap Growth VIF and Large Cap VIF have been
combined as of and for the periods ended December 31, 2005 and June 30, 2006.
Following the acquisition, the Large Cap VIF will be the accounting survivor. In
accordance with U.S. generally accepted accounting principles (GAAP), the
historical cost of investment securities will be carried forward to the Large
Cap VIF and the results of operations for pre-combination periods of the Large
Cap VIF will not be restated.
The accompanying pro forma financial statements should be read in
conjunction with the financial statements of Large Cap Growth VIF and Large Cap
VIF included in their respective annual and semi-annual reports dated December
31, 2005 and June 30, 2006.
The following notes refer to the accompanying pro forma financial
statements as if the above-mentioned acquisition of Large Cap Growth VIF by
Large Cap VIF had taken place as of January 1, 2006 or July 1, 2006.
C-28
BB&T LARGE CAP VIF
PRO FORMA NOTES TO COMBINING FINANCIAL STATEMENTS -- (CONTINUED)
3. SIGNIFICANT ACCOUNTING POLICIES:
The following is a summary of significant accounting policies followed by
the Funds in the preparation of their financial statements. The policies are in
conformity with GAAP. The preparation of financial statements requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at
the date of the financial statements and the reported amounts of income and
expenses for the period. Actual results could differ from those estimates.
SECURITIES VALUATION:
Investments in common stocks, the principal market for which is a
securities exchange or an over-the-counter market, are valued at their latest
available sale price (except for those securities that are traded on NASDAQ,
which will be valued at the NASDAQ official closing price) or in the absence of
such a price, by reference to the latest available bid price in the principal
market in which such securities are normally traded. The Large Cap VIF may also
use an independent pricing service approved by the Board of Trustees to value
certain securities. Such prices reflect fair values which may be established
through the use of electronic and matrix techniques. Short-term obligations that
mature in 60 days or less are valued at either amortized cost or original cost
plus interest, which approximates current value. Investments in closed-end
investment companies are valued at their fair values based upon the latest
available bid prices in the principal market in which such securities are
normally traded. The differences between cost and fair values of investments are
reflected as either unrealized appreciation or depreciation. Securities for
which market quotations are not readily available will be valued at fair value
using methods determined in good faith by the Pricing Committee under the
supervision of the Board of Trustees.
SECURITIES TRANSACTIONS AND RELATED INCOME:
During the period, security transactions are accounted for no later than
one business day after trade date. For financial reporting purposes, however,
security transactions are accounted for on trade date of the last business day
of the reporting period. Interest income is recognized on the accrual basis and
includes, where applicable, the pro-rata amortization/accretion of premium or
discount. Dividend income is recorded on the ex-dividend date. Gains or losses
realized from sales of securities are determined by comparing the identified
cost of the security lot sold with the net sales proceeds.
REPURCHASE AGREEMENTS AND COLLATERALIZED LOAN AGREEMENTS:
The Fund may enter into agreements with member banks of the Federal Deposit
Insurance Corporation and with registered broker/dealers that BB&T Asset
Management, Inc. ("BB&T") deems creditworthy under guidelines approved by the
Board of Trustees, subject to the seller's agreement to repurchase such
securities at a mutually agreed-upon date and price. The repurchase price
generally equals the price paid by the Fund plus interest negotiated on the
basis of current short-term rates, which may be more or less than the rate on
the underlying Fund securities. The seller, under these types of agreements, is
required to maintain the value of collateral held pursuant to the agreement at
not less than the repurchase price (including accrued interest). Securities
subject to repurchase are held by the Fund's custodian, another qualified
custodian, or in the Federal Reserve/Treasury book-entry system. In the event of
counterparty default, the Fund has the right to use the collateral to offset
losses incurred. There is potential for loss to the Fund in the event the Fund
is delayed or prevented from exercising its rights to dispose of the collateral
securities, including the risk of a possible decline in the fair value of the
underlying securities during the period while the Fund seeks to assert its
rights.
C-29
BB&T LARGE CAP VIF
PRO FORMA NOTES TO COMBINING FINANCIAL STATEMENTS -- (CONTINUED)
ALLOCATION METHODOLOGY:
Expenses directly attributable to a Fund are charged to that Fund. Expenses
not directly attributable to a Fund are allocated proportionately among all
Funds daily in relation to the net assets of each Fund or on another reasonable
basis. Expenses which are attributable to more than one Trust are allocated
across the BB&T Variable Insurance Funds and BB&T Funds Trusts, based upon
relative net assets or on another reasonable basis. BB&T serves as the
Investment Advisor for the BB&T Variable Insurance Funds and BB&T Fund Trusts.
DIVIDENDS TO SHAREHOLDERS:
Dividends from net investment income are declared and paid quarterly for
the Large Cap Growth VIF and Large Cap VIF. Distributable net realized gains, if
any, are declared and distributed at least annually.
The character of income and gains distributed are determined in accordance
with federal income tax regulations, which may differ from GAAP. These
"book/tax" differences are either considered temporary or permanent in nature.
To the extent these differences are permanent in nature (e.g. reclass of market
discounts, gain/loss, paydowns, and distributions), such amounts are
reclassified within the composition of net assets based on their federal tax-
basis treatment; temporary differences do not require reclassification.
Dividends to shareholders which exceed net investment income and net realized
gains for tax purposes are reported as distributions of capital.
4. CAPITAL SHARES:
The pro forma net asset value per share assumes the issuance of shares of
the Large Cap VIF that would have been issued at June 30, 2006, in connection
with the proposed reorganization. The number of shares assumed to be issued is
equal to the net asset value of shares of Large Cap Growth VIF, as of June 30,
2006, divided by the net asset value per share of the shares of Large Cap VIF as
of June 30, 2006. The pro forma number of shares outstanding, by class, for the
combined Fund consists of the following at June 30, 2006:
<Table>
<Caption>
SHARES ASSUMED TOTAL OUTSTANDING
SHARES OF LARGE ISSUED IN SHARES
CAP GROWTH VIF REORGANIZATION POST-COMBINATION
--------------- -------------- -----------------
CAPITAL SHARES
Outstanding Units of Beneficial
Interest (Shares).................. 2,295,098 7,124,938 9,420,036
</Table>
<Table>
<Caption>
LARGE CAP PRO FORMA
GROWTH VIF LARGE CAP VIF COMBINED
----------- ------------- ------------
CAPITALIZATION
NET ASSETS.............................. $23,180,702 $115,293,832 $138,474,534
NET ASSET -- OFFERING AND REDEMPTION
PRICE PER SHARE....................... $ 10.10 $ 14.70 $ 14.70
OUTSTANDING UNITS OF BENEFICIAL INTEREST
(SHARES).............................. 2,295,098 7,841,644 9,418,266
RATIO OF EXPENSES TO AVERAGE NET
ASSETS(A)
Before Fee Waivers...................... 1.02% 0.99% 0.98%
After Fee Waivers....................... 0.78% 0.75% 0.74%
</Table>
--------
(A) Annualized.
C-30
BB&T LARGE CAP VIF
PRO FORMA NOTES TO COMBINING FINANCIAL STATEMENTS -- (CONTINUED)
5. FEDERAL INCOME TAXES:
It is the policy of the Large Cap VIF to continue to qualify as a regulated
investment company, after the acquisition, by complying with the provisions
available to certain investment companies, as defined in applicable sections of
the Internal Revenue Code, and to make distributions of net investment income
and net realized capital gains sufficient to relieve it from all, or
substantially all, federal income taxes. Accordingly, no provision for federal
income tax is required.
At December 31, 2005, the Large Cap VIF had net capital loss carryforwards
to offset future net capital gains, if any, to the extent provided by the
Treasury regulations. To the extent that these carryforwards are used to offset
future capital gains, it is probable that the gains that are offset will not be
distributed to shareholders.
<Table>
<Caption>
AMOUNT EXPIRES
-------- -------
Large Cap VIF........................................... $891,424 2011
</Table>
At June 30, 2006 the cost, gross unrealized appreciation and gross
unrealized depreciation on securities for federal income tax purposes were as
follows:
<Table>
<Caption>
NET
TAX TAX UNREALIZED
UNREALIZED UNREALIZED APPRECIATION
TAX COST APPRECIATION DEPRECIATION (DEPRECIATION)
----------- ------------ ------------ --------------
BB&T Large Cap VIF................ 122,918,683 20,221,443 (3,073,885) 17,147,558
</Table>
C-31
PROXY TABULATOR
PO BOX 9112
FARMINGDALE, NY 11735
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) Follow the instructions provided on the website.
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the proxy card below at hand.
2) Call 1-800-690-6903
3) Follow the instructions.
TO VOTE BY MAIL
1) Read the Proxy Statement.
2) Check the appropriate boxes on the proxy card below.
3) Sign and date the proxy card.
4) Return the proxy card in the envelope provided.
*** IF VOTING BY MAIL, PLEASE MARK, SIGN, DATE AND RETURN
THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE ***
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: BBTSC1 KEEP THIS PORTION FOR YOUR RECORDS
------------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
BB&T LARGE CAP GROWTH VIF
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 below-enumerated proposals.
VOTE ON PROPOSALS FOR AGAINST ABSTAIN
PROPOSAL (1) To consider and act upon an Agreement of Plan of Reorganization [ ] [ ] [ ]
providing for the transfer of all of the assets of the Acquired Fund to the
corresponding Acquiring Fund, as listed below:
Acquired Fund Acquiring Fund
BB&T Large Cap Growth Fund BB&T Large Cap Fund
BB&T Large Cap Growth VIF BB&T Large Cap VIF
FOR AGAINST ABSTAIN
PROPOSAL (2) To transact such other business as may properly come before the [ ] [ ] [ ]
Joint Special Meeting or any adjournment thereof.
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.
------------------------------------------ --------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
PROXY CARD
BB&T LARGE CAP GROWTH VIF PROXY FOR A JOINT SPECIAL MEETING OF SHAREHOLDERS
ON JANUARY 24, 2006
This proxy is solicited by the Board of Trustees of BB&T Variable Insurance
Funds for use at a Joint Special Meeting of Shareholders ("Special Meeting") to
be held on January 24, 2006 at 9:00 a.m. Eastern Time at the offices of BISYS
Fund Services OHIO, Inc., 100 Summer Street, Suite 1500, Boston, MA 02110.
The undersigned hereby appoints Tim Bresnahan with full power of substitution as
proxies of the undersigned, to vote, as designated on reverse, at the
above-stated Joint 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 Joint Special Meeting, upon the matters listed on the
reverse side and upon any other matter which may come before the Joint Special
Meeting in their discretion.
THIS VOTING INSTRUCTION FORM IS VALID ONLY WHEN SIGNED AND DATED.
PROXY TABULATOR
PO BOX 9112
FARMINGDALE, NY 11735
TO VOTE BY INTERNET
1) Read the Proxy Statement and have the voting instruction form below at hand.
2) Go to Website www.proxyvote.com
3) Follow the instructions provided on the website.
TO VOTE BY TELEPHONE
1) Read the Proxy Statement and have the voting instruction form below at hand.
2) Call 1-800-690-6903
3) Follow the instructions.
TO VOTE BY MAIL
1) Read the Proxy Statement.
2) Check the appropriate boxes on the voting instruction form below.
3) Sign and date the voting instruction form.
4) Return the voting instruction form in the envelope provided.
*** IF VOTING BY MAIL, PLEASE MARK, SIGN, DATE AND RETURN
THE VOTING INSTRUCTION FORM PROMPTLY USING THE ENCLOSED ENVELOPE ***
TO VOTE, MARK BLOCKS BELOW IN BLUE OR BLACK INK AS FOLLOWS: BBTSC1 KEEP THIS PORTION FOR YOUR RECORDS
------------------------------------------------------------------------------------------------------------------------------------
DETACH AND RETURN THIS PORTION ONLY
THIS VOTING INSTRUCTION FORM IS VALID ONLY WHEN SIGNED AND DATED.
BB&T LARGE CAP GROWTH VIF
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 BELOW-ENUMERATED PROPOSALS.
VOTE ON PROPOSALS FOR AGAINST ABSTAIN
PROPOSAL (1) To consider and act upon an Agreement and Plan of Reorganization [ ] [ ] [ ]
providing for the transfer of all of the assets of the BB&T Large Cap Growth VIF
to the BB&T Large Cap VIF in exchange for shares of the BB&T Large Cap
VIF and the assumption by the BB&T Large Cap VIF of all of the liabilities of
the BB&T Large Cap Growth VIF, followed by the dissolution of the BB&T Large
Cap Growth VIF and the distribution of Shares of the BB&T Large Cap VIF to
the shareholders of the BB&T Large Cap Growth VIF.
FOR AGAINST ABSTAIN
PROPOSAL (2) To transact such other business as may properly come before the [ ] [ ] [ ]
Joint Special Meeting or any adjournment thereof.
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.
------------------------------------------ --------------------------------
Signature [PLEASE SIGN WITHIN BOX] Date Signature (Joint Owners) Date
VOTING INSTRUCTION FORM
BB&T LARGE CAP GROWTH VIF PROXY FOR A JOINT SPECIAL MEETING OF SHAREHOLDERS
ON JANUARY 24, 2007
This proxy is solicited by the Board of Trustees of BB&T Variable Insurance
Funds for use at a Joint Special Meeting of Shareholders ("Joint Special
Meeting") to be held on January 24, 2007 at 9:00 a.m. Eastern Time at the
offices of BISYS Fund Services OHIO, Inc., 100 Summer Street, Suite 1500,
Boston, MA 02110.
The undersigned hereby appoints Tim Bresnahan with full power of substitution as
proxies of the undersigned, to vote, as designated on reverse, at the
above-stated Joint 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 Joint Special Meeting, upon the matters listed on the
reverse side and upon any other matter which may come before the Joint Special
Meeting in their discretion.
THIS VOTING INSTRUCTION FORM IS VALID ONLY WHEN SIGNED AND DATED.
PART C. OTHER INFORMATION
ITEM 15. INDEMNIFICATION
Article VIII, Sections 1 and 2 of the Registrant's Declaration of Trust provides
as follows:
"Trustees, Officers, etc.
Section 1. The Trust shall indemnify each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers
or trustees of another organization in which the Trust has any interest as
a shareholder, creditor or otherwise) (hereinafter referred to as a
"Covered Person") against all liabilities and expenses, including but not
limited to amounts paid in satisfaction of judgments, in compromise or as
fines and penalties, and counsel fees reasonably incurred by any Covered
Person in connection with the defense or disposition of any action, suit
or other proceeding, whether civil or criminal, before any court or
administrative or legislative body, in which such Covered Person may be or
may have been involved as a party or otherwise or with which such Covered
Person may be or may have been threatened, while in office or thereafter,
by reason of being or having been such a Covered Person except with
respect to any matter as to which such Covered Person shall have been
finally adjudicated in any such action, suit or other proceeding to be
liable to the Trust or its Shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved
in the conduct of such Covered Person's office. Expenses, including
counsel fees so incurred by any such Covered Person (but excluding amounts
paid in satisfaction of judgments, in compromise or as fines or
penalties), shall be paid from time to time by the Trust in advance of the
final disposition of any such action, suit or proceeding upon receipt of
an undertaking by or on behalf of such Covered Person to repay amounts so
paid to the Trust if it is ultimately determined that indemnification of
such expenses is not authorized under this Article, provided, however,
that either (a) such Covered Person shall have provided appropriate
security for such undertaking, (b) the Trust shall be insured against
losses arising from any such advance payments or (c) either a majority of
the disinterested Trustees acting on the matter (provided that a majority
of the disinterested Trustees then in office act on the matter), or
independent legal counsel in a written opinion, shall have determined,
based upon a review of readily available facts (as opposed to a full trial
type inquiry) that there is reason to believe that such Covered Person
will be found entitled to indemnification under this Article.
Compromise Payment
Section 2. As to any matter disposed of (whether by a compromise payment,
pursuant to a consent decree or otherwise) without an adjudication by a
court, or by any other body before which the proceeding was brought, that
such Covered Person either (a) did not act in good faith in the reasonable
belief that his action was in the best interests of the Trust or (b) is
liable to the Trust or its Shareholders by reason of willful misfeasance,
bad faith, gross negligence or reckless disregard of the duties involved
in the conduct of his or her office, indemnification shall be provided if
(a) approved as in the best interests of the Trust, after notice that it
involves such indemnification, by at least a majority of the disinterested
Trustees acting on the matter (provided that a majority of the
disinterested Trustees then in office act on the matter) upon a
determination, based upon a review of readily available facts (as opposed
to a full trial type inquiry) that such Covered Person acted in good faith
in the reasonable belief that his action was in the best interests of the
Trust and is not liable to the Trust or its Shareholders by reasons of
willful misfeasance, bad faith, gross negligence or reckless disregard of
the duties involved in the conduct of his or her office, or (b) there has
been obtained an opinion in writing of independent legal counsel, based
upon a review of readily available facts (as opposed to a full trial type
inquiry) to the effect that such Covered Person appears to have acted in
good faith in the reasonable belief that his action was in the best
interests of the Trust and that such indemnification would not protect
such Person against any liability to the Trust to which he would otherwise
be subject by reason of willful misfeasance, bad faith, gross negligence
or reckless disregard of the duties involved in the conduct of his office.
Any approval pursuant to this Section shall not prevent the recovery from
any Covered Person of any amount paid to such Covered Person in accordance
with this Section as indemnification if such Covered Person is
subsequently adjudicated by a court of competent jurisdiction not to have
acted in good faith in the reasonable belief that such Covered Person's
action was in the best interests of the Trust or to have been liable to
the Trust or its Shareholders by reason of willful misfeasance, bad faith,
gross negligence or reckless disregard of the duties involved in the
conduct of such Covered Person's office."
Insofar as indemnification for liability arising under the Securities Act
of 1933 may be permitted to trustees, officers, and controlling persons of
Registrant pursuant to the foregoing provisions, or otherwise, Registrant
has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in
the Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
Registrant of expenses incurred or paid by a trustee, officer, or
controlling person of Registrant in the successful defense of any action,
suit, or proceeding) is asserted by such trustee, officer, or controlling
person in connection with the securities being registered, Registrant
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question of whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
In addition, the Trust maintains a directors and officer liability
insurance policy with a maximum coverage of $5,000,000.
ITEM 16. EXHIBITS
(1) Agreement and Declaration of Trust of BB&T Variable Insurance Funds (the
"Registrant") (1)
(2) Bylaws of Registrant (1)
(3) Not Applicable.
(4) Form of Agreement and Plan of Reorganization (5)
(5) (i) Article III, Article V, Article VIII, Section 4, and Article IX,
Sections 1, 4, 5, and 7 of the Agreement and Declaration of Trust
(1)
(ii) Article 9, Article 10, Section 6, Article 11 of the By-laws (1)
(6) (i) Form of Investment Advisory Agreement (2)
(ii) Form of Investment Sub-Advisory Agreement between BB&T Asset
Management, Inc. and Scott and Stringfellow, Inc. (2)
(iii) Form of Investment Sub-Advisory Agreement between BB&T Asset
Management, Inc. and Sterling Capital Management LLC (4)
(7) Not Applicable.
(8) Not applicable.
(9) Form of Custody Agreement between the Registrant and US Bank (2)
(10) (i) Form of Management and Administration Agreement between Registrant
and BB&T Asset Management, Inc. (2)
(ii) Form of Sub-Administration Agreement between Registrant and BISYS
Fund Services Ohio, Inc. (2)
(iii) Form of Fund Accounting Agreement between Registrant and BISYS Fund
Services Ohio, Inc. (2)
(iv) Form of Transfer Agency Agreement between Registrant and BISYS Fund
Services Ohio, Inc. (2)
(v) Form of Fund Participation Agreement (2)
(vi) Form of Variable Contract Owner Servicing Agreement (2)
(vii) Form of Compliance Services Agreement (2)
(11) Opinion and Consent of Ropes & Gray LLP regarding Securities (5)
(12) Opinion and Consent of Ropes & Gray LLP Regarding Tax Matters will be
filed by amendment.
(13) (i) Form of Code of Ethics of Registrant (2)
(ii) Code of Ethics of BB&T Asset Management, Inc. (4)
(iii) Form of Code of Ethics of Scott & Stringfellow, Inc. (2)
(iv) Code of Ethics of BISYS Fund Services Ohio, Inc. and Certain
Affiliated Companies of BISYS Fund Services Ohio, Inc. (3)
(14) Consent of KPMG LLP (6)
(15) Not Applicable.
(16) Powers of Attorney.
(i)
POWER OF ATTORNEY
December 1, 2006
Laura C. Bingham, whose signature appears below, does hereby constitute and
appoint Alan G. Priest, Alyssa Albertelli, Alexandra Oprescu and Melissa S.
Gainor, each individually, her true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
BB&T Variable Insurance Funds (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the initial filing of
any Registration Statement on Form N-14 by the Trust, relating to the proposed
reorganization of BB&T Large Cap Growth VIF, a series of the Trust, with and
into BB&T Large Cap VIF, a series of the Trust, and any and all amendments
(including post-effective amendments) to said Registration Statements, pursuant
to said Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee and/or officer of the Trust any and all such initial
filings and amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
/s/ Laura C. Bingham
------------------------------
Laura C. Bingham
(ii)
POWER OF ATTORNEY
December 1, 2006
Thomas W. Lambeth, whose signature appears below, does hereby constitute and
appoint Alan G. Priest, Alyssa Albertelli, Alexandra Oprescu and Melissa S.
Gainor, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
BB&T Variable Insurance Funds (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the initial filing of
any Registration Statement on Form N-14 by the Trust, relating to the proposed
reorganization of BB&T Large Cap Growth VIF, a series of the Trust, with and
into BB&T Large Cap VIF, a series of the Trust, and any and all amendments
(including post-effective amendments) to said Registration Statements, pursuant
to said Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee and/or officer of the Trust any and all such initial
filings and amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
/s/ Thomas W. Lambeth
------------------------------
Thomas W. Lambeth
(iii)
POWER OF ATTORNEY
December 1, 2006
Drew T. Kagan, whose signature appears below, does hereby constitute and appoint
Alan G. Priest, Alyssa Albertelli, Alexandra Oprescu and Melissa S. Gainor, each
individually, his true and lawful attorneys and agents, with power of
substitution or resubstitution, to do any and all acts and things and to execute
any and all instruments which said attorneys and agents, each individually, may
deem necessary or advisable or which may be required to enable BB&T Variable
Insurance Funds (the "Trust"), to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended ("Acts"), and any
rules, regulations or requirements of the Securities and Exchange Commission in
respect thereof, in connection with the initial filing of any Registration
Statement on Form N-14 by the Trust, relating to the proposed reorganization of
BB&T Large Cap Growth VIF, a series of the Trust, with and into BB&T Large Cap
VIF, a series of the Trust, and any and all amendments (including post-effective
amendments) to said Registration Statements, pursuant to said Acts, including
specifically, but without limiting the generality of the foregoing, the power
and authority to sign in the name and on behalf of the undersigned as a trustee
and/or officer of the Trust any and all such initial filings and amendments
filed with the Securities and Exchange Commission under said Acts, and any other
instruments or documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, or either of them, shall do or
cause to be done by virtue thereof.
/s/ Drew T. Kagan
------------------------------
Drew T. Kagan
(iv)
POWER OF ATTORNEY
December 1, 2006
Keith F. Karlawish, whose signature appears below, does hereby constitute and
appoint Alan G. Priest, Alyssa Albertelli, Alexandra Oprescu and Melissa S.
Gainor, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
BB&T Variable Insurance Funds (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the initial filing of
any Registration Statement on Form N-14 by the Trust, relating to the proposed
reorganization of BB&T Large Cap Growth VIF, a series of the Trust, with and
into BB&T Large Cap VIF, a series of the Trust, and any and all amendments
(including post-effective amendments) to said Registration Statements, pursuant
to said Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee and/or officer of the Trust any and all such initial
filings and amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
/s/ Keith F. Karlawish
------------------------------
Keith F. Karlawish
(v)
POWER OF ATTORNEY
December 1, 2006
Douglas R. Van Scoy, whose signature appears below, does hereby constitute and
appoint Alan G. Priest, Alyssa Albertelli, Alexandra Oprescu and Melissa S.
Gainor, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
BB&T Variable Insurance Funds (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the initial filing of
any Registration Statement on Form N-14 by the Trust, relating to the proposed
reorganization of BB&T Large Cap Growth VIF, a series of the Trust, with and
into BB&T Large Cap VIF, a series of the Trust, and any and all amendments
(including post-effective amendments) to said Registration Statements, pursuant
to said Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee and/or officer of the Trust any and all such initial
filings and amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
/s/ Douglas R. Van Scoy
------------------------------
Douglas R. Van Scoy
(vi)
POWER OF ATTORNEY
December 1, 2006
Troy A. Sheets, whose signature appears below, does hereby constitute and
appoint Alan G. Priest, Alyssa Albertelli, Alexandra Oprescu and Melissa S.
Gainor, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
BB&T Variable Insurance Funds (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the initial filing of
any Registration Statement on Form N-14 by the Trust, relating to the proposed
reorganization of BB&T Large Cap Growth VIF, a series of the Trust, with and
into BB&T Large Cap VIF, a series of the Trust, and any and all amendments
(including post-effective amendments) to said Registration Statements, pursuant
to said Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee and/or officer of the Trust any and all such initial
filings and amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
/s/ Troy A. Sheets
------------------------------
Troy A. Sheets
(vii)
POWER OF ATTORNEY
December 1, 2006
James L. Roberts, whose signature appears below, does hereby constitute and
appoint Alan G. Priest, Alyssa Albertelli, Alexandra Oprescu and Melissa S.
Gainor, each individually, his true and lawful attorneys and agents, with power
of substitution or resubstitution, to do any and all acts and things and to
execute any and all instruments which said attorneys and agents, each
individually, may deem necessary or advisable or which may be required to enable
BB&T Variable Insurance Funds (the "Trust"), to comply with the Investment
Company Act of 1940, as amended, and the Securities Act of 1933, as amended
("Acts"), and any rules, regulations or requirements of the Securities and
Exchange Commission in respect thereof, in connection with the initial filing of
any Registration Statement on Form N-14 by the Trust, relating to the proposed
reorganization of BB&T Large Cap Growth VIF, a series of the Trust, with and
into BB&T Large Cap VIF, a series of the Trust, and any and all amendments
(including post-effective amendments) to said Registration Statements, pursuant
to said Acts, including specifically, but without limiting the generality of the
foregoing, the power and authority to sign in the name and on behalf of the
undersigned as a trustee and/or officer of the Trust any and all such initial
filings and amendments filed with the Securities and Exchange Commission under
said Acts, and any other instruments or documents related thereto, and the
undersigned does hereby ratify and confirm all that said attorneys and agents,
or either of them, shall do or cause to be done by virtue thereof.
/s/ James L. Roberts
------------------------------
James L. Roberts
(17) (i) Class A, Class B, and Class C Shares Prospectus for the BB&T Funds,
dated February 1, 2006 (5)
(ii) Institutional Shares Prospectus for the BB&T Funds, dated February
1, 2006, as amended May 30, 2006 (5)
(iii) Prospectus for the Large Cap Growth VIF, dated May 1, 2006 (5)
(iv) Prospectus for the Large Cap VIF, dated May 1, 2006 (5)
(v) Statement of Additional Information for the BB&T Funds, dated
February 1, 2006 (5)
(vi) Statement of Additional Information for the BB&T Variable Insurance
Funds, dated May 1, 2006 (5)
(vii) BB&T Funds' Annual Report for the period ended September 30, 2006
(6)
(viii) BB&T Variable Insurance Funds' Annual Report for the period ended
December 31, 2005 (5)
(ix) BB&T Variable Insurance Funds' Semi-annual Report for the period
ended June 30, 2006 (5)
(1) Previously filed on December 13, 2004 and incorporated by reference herein.
(2) Previously filed on February 14, 2005 and incorporated by reference herein.
(3) Previously filed on March 1, 2006 and incorporated by reference herein.
(4) Previously filed on April 28, 2006 and incorporated by reference herein.
(5) Previously filed on November 15, 2006 and incorporated by reference herein.
(6) Previously filed on December 1, 2006 and incorporated by reference herein.
ITEM 17. UNDERTAKINGS
(1) The Registrant agrees that prior to any public reoffering of the
securities registered through the use of a prospectus which is a
part of this registration statement by any person or party who is
deemed to be an underwriter within the meaning of Rule 145(c) of the
Securities Act, the reoffering prospectus will contain the
information called for
by the applicable registration form for reofferings by persons who
may be deemed underwriters, in addition to the information called
for by the other items of the applicable form.
(2) The Registrant agrees that every prospectus that is filed under
paragraph (1) above will be filed as part of an amendment to the
registration statement and will not be used until the amendment is
effective, and that, in determining any liability under the 1933
Act, each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein, and the
offering of the securities at that time shall be deemed to be the
initial bona fide offering of them.
(3) The Registrant agrees to file an opinion of counsel supporting the
tax consequences of the proposed reorganization as an amendment to
this Registration Statement within a reasonable time after receipt
of such opinion.
NOTICE
A copy of the Agreement and Declaration of Trust of the BB&T Variable
Insurance Funds is on file with the Secretary of State of The Commonwealth of
Massachusetts and notice is hereby given that this instrument is executed on
behalf of the Registrant by officers of the registrant as officers and not
individually and that the obligations of or arising out of this instrument are
not binding upon any of the trustees, officers or shareholders individually but
are binding only upon the assets and property of the Registrant.
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement has been
signed on behalf of the Registrant in the City of Washington, District of
Columbia, on the 13th day of December 2006.
BB&T VARIABLE INSURANCE FUNDS
/s/ Keith F. Karlawish
--------------------------
* Keith F. Karlawish
President
Signature Title Date
-------------------------- ------------------ -----------------
/s/ Keith F. Karlawish President, Trustee December 13, 2006
--------------------------
* Keith F. Karlawish
/s/ James L. Roberts Trustee December 13, 2006
--------------------------
*James L. Roberts
/s/ Thomas W. Lambeth Trustee December 13, 2006
--------------------------
*Thomas W. Lambeth
/s/ Troy A. Sheets Treasurer December 13, 2006
--------------------------
*Troy A. Sheets
/s/ Douglas R. Van Scoy Trustee December 13, 2006
--------------------------
*Douglas R. Van Scoy
/s/ Drew T. Kagan Trustee December 13, 2006
--------------------------
*Drew T. Kagan
/s/ Laura C. Bingham Trustee December 13, 2006
--------------------------
*Laura C. Bingham
* By: /s/ Alan G. Priest
----------------------------
Alan G. Priest
Attorney-in-Fact, pursuant to powers of attorney filed herewith.