File No.
33-_______
As filed with the SEC on December 2, 2005
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
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Pre-Effective Amendment No.
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Post-Effective Amendment No.
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(Check appropriate box or boxes)
MTB GROUP OF FUNDS
(Exact Name of Registrant as Specified in Charter)
(412) 288-1900
(Area Code and Telephone Number)
5800 Corporate Drive
Pittsburgh, Pennsylvania 15237-7010
(Address of Principal Executive Offices --
Number, Street, City, State, Zip Code)
C. Grant Anderson, Esquire
Reed Smith LLP
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(Name and Address of Agent for Service --
Number, Street, City, State, Zip Code)
Copies to:
Matthew G. Maloney, Esquire
Dickstein Shapiro Morin & Oshinsky, LLP
2101 L Street, NW
Washington, D.C. 20037-1526
(202) 828-2218
Approximate Date of Proposed Public Offering: As soon as
practicable after this Registration Statement becomes effective
under the Securities Act of 1933, as amended. The public offering of shares
of Registrant's series is on-going. The title of securities being registered
is shares of beneficial interest.
No filing fee is due because Registrant is relying on Section 24(f) of the
Investment Company Act of 1940, as amended.
PROXY MATERIALS
THE FBR FUNDS
FBR Maryland Tax-Free Portfolio
FBR Virginia Tax-Free Portfolio
1001 Nineteenth Street North
Arlington, VA 22209
1-888-888-0025
www.fbrfunds.com
January __, 2006
Dear Shareholder:
A Special Meeting of the Shareholders of the FBR Maryland Tax-Free
Portfolio (FBR Maryland) and FBR Virginia Tax-Free Portfolio (FBR Virginia)
(each, an Acquired Fund), mutual fund series of The FBR Funds (FBR Funds),
will be held at 10:00 a.m. on February 24, 2006, at FBR Funds' principal
executive offices, 1001 Nineteenth Street North, Arlington, VA 22209.
The purpose of the meeting is to ask shareholders to consider the
following proposals:
o Approval of a proposed Agreement and Plan of Reorganization (Maryland
Plan), whereby FBR Maryland will transfer its assets to the MTB Maryland
Municipal Bond Fund (MTB Maryland) (FBR Maryland shareholders only);
o Approval of a proposed Agreement and Plan of Reorganization (Virginia Plan,
and together with the Maryland Plan, referred to as the Plans), whereby FBR
Virginia will transfer its assets and liabilities to the MTB Virginia
Municipal Bond Fund (MTB Virginia) (FBR Virginia shareholders only);
o Approval of the payment of sub-advisory fees to Asset Management, Inc. for
the period November 1, 2004 through October 26, 2005 (shareholders of each
Acquired Fund to vote separately);
o Approval of the payment of sub-advisory fees to Chevy Chase Trust Company
since October 27, 2005 (shareholders of each Acquired Fund to vote
separately); and
o Approval of any other matters as may properly come before the Meeting and
any adjournment or postponement thereof.
MTB Maryland and MTB Virginia (Acquiring Funds) are separate series of
the MTB Group of Funds, a Delaware statutory Trust, managed by MTB Investment
Advisors, Inc. (MTBIA), a subsidiary of Manufacturers and Traders Trust
Company (M&T Bank). The Acquiring Funds have similar investment strategies
and objectives to their respective Acquired Funds.
I and the Independent Trustees of FBR Funds believe that the proposed
reorganizations may benefit shareholders of the Acquired Funds by providing
them the opportunity to become part of a larger and more diverse family of 31
retail mutual funds.
The FBR Funds' Board ("FBR Board") considered various factors in
reviewing the proposals regarding the Agreements and Plans of Reorganization
on behalf of the shareholders of each Acquired Fund, including, but not
limited to, the following: (i) any change in investment objectives, policies
and limitations; (ii) comparative historical investment performance; (iii)
comparative historical and pro forma expense ratios; (iv) whether the
proposed reorganization would have any tax consequences to shareholders; and
(v) the depth and experience of MTBIA.
Based on its review of these and other factors, the FBR Board
unanimously determined that the reorganizations are in the best interests of
the shareholders of each Acquired Fund and recommended that the shareholders
of each Acquired Fund vote in FAVOR of the proposals presented in the Proxy
Statement. The matters referred to above are discussed in detail in the
combined prospectus/proxy statement attached to this letter.
Your vote is important. Please review this proxy statement and sign and
return each proxy card you have received today. You may also vote by
telephone or via the Internet as explained in the enclosed proxy materials.
If you have questions regarding any of the proposals or need assistance in
completing your proxy card, please contact [ ], a professional proxy
solicitation firm, toll-free at [ ]. As the meeting date approaches, if we
have still not received your executed ballot, you may receive a call from [
] reminding you to vote your shares.
Sincerely,
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David H. Ellison, President
The FBR Funds
5
QUESTIONS AND ANSWERS RELATING TO THE REORGANIZATION
The enclosed materials include a Prospectus/Proxy Statement containing
information you need to make an informed decision. However, we thought it
also would be helpful to begin by answering some of the important questions
you might have about the proposed reorganization.
WHAT WILL HAPPEN TO MY ACQUIRED FUND INVESTMENT IF THE PROPOSED
REORGANIZATION WITH RESPECT TO MY ACQUIRED FUND IS APPROVED?
If the proposed reorganization with respect to your Acquired Fund is
approved, you will become a shareholder of Class A Shares of the
corresponding Acquiring Fund on or about the close of business on February
24, 2006, and will no longer be a shareholder of your Acquired Fund, which
will cease operations at that time. You will automatically receive Class A
shares of the Acquiring Fund having an aggregate value equal to the value of
your Acquired Fund shares at the time of the reorganization. No sales charge
will be imposed at the time of the transaction either on the Acquiring Fund
shares you receive or the Acquired Fund shares you give up in the
reorganization, and you will not be required to take any affirmative steps or
incur any costs to receive the Acquiring Fund shares in the reorganization.
WHAT ARE THE BENEFITS OF THE PROPOSED REORGANIZATIONS FOR ME?
Among the benefits of the proposed reorganization to you as a
shareholder of an Acquired Fund are the following. Class A Shares of the
Acquiring Funds have a lower annual expense ratio (because the adviser to
each Acquiring Fund has committed to a two-year contractual expense
limitation of 0.85% and 0.90%, respectively, for MTB Maryland and MTB
Virginia). In comparison, the current expense ratios for the Acquired Funds
are 0.96% for FBR Maryland and 0.97% for FBR Virginia. MTB Maryland's total
assets ($113.8 million as of October 31, 2005) is significantly larger than
FBR Maryland's (which had total assets of $36.2 million as of October 31,
2005). MTB Maryland's size may enable it to enjoy economies of scale, such
as lower total operating expenses and the possibility of more efficient
execution of its portfolio purchases and sales, and to own a more diverse
portfolio of securities and other investments.
The reorganization is structured to enable you to become a holder of
Class A Shares of the Acquiring Funds on a tax-free, load-free basis, and
thereafter you will be able to purchase additional Class A Shares of the
Acquiring Funds, exchange your Class A Shares of the Acquiring Funds for
Class A Shares of other MTB Funds and purchase Class A Shares of any other
MTB mutual fund, all without a sales load.
DO THE FUNDS HAVE SIMILAR INVESTMENT OBJECTIVES AND POLICIES?
Yes. There are some minor differences in the investment objectives and
principal strategies of the Acquired Funds and the corresponding Acquiring
Fund, although each Acquiring Fund and Acquired Fund seeks current income
that is exempt from federal, state and local income tax by investing
primarily in investment grade municipal securities. In that regard, the
Acquired Funds' objectives are directed to producing income that is exempt
from both the federal regular income tax and the federal alternative minimum
tax (AMT). In comparison, the Acquiring Funds' objectives are only directed
to producing income that is exempt from federal regular income tax. However,
MTB Maryland has been and expects to continue to be managed to minimize
income that is subject to AMT. Historically, MTB Maryland's management has
met FBR Maryland's objective. While MTB Virginia is a newly created series,
it also expects to be managed to meet FBR Virginia's objective. However,
there can be no guarantee that the Acquiring Funds will do so in the future.
HOW DO THE EXPENSE RATIOS OF THE FUNDS COMPARE?
As a shareholder of the Acquiring Funds you will experience a reduced
expense ratio (i.e., the fund's annual operating expenses expressed as a
percentage of its average daily net assets). The current expense ratio of
MTB Maryland is 1.41% per year (and 0.83% after voluntary fee waivers) and of
MTB Virginia is 2.44% per year (and 0.90% after voluntary fee waivers), as
compared to 0.96% per year for FBR Maryland and 0.97% per year for FBR
Virginia. In each case, the Acquiring Fund's adviser has committed to a
two-year contractual cap on the Acquiring Funds' expense ratios.
HOW DO THE FUNDS COMPARE IN TERMS OF HISTORICAL PERFORMANCE?
The historical performance of MTB Maryland and FBR Maryland has been
similar. The following table shows the average annual total returns (before
deducting the applicable sales charge) for the two funds for the one-,
three-, five- and 10-year periods ended December 31, 2004. The table also
sets forth such returns for FBR Virginia. No comparable information is set
forth for MTB Virginia, because MTB Virginia has not commenced operations.
1 Year 3 Years 5 Years 10 Years
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10 Years
MTB Maryland - Class A* 3.46% 5.43% 6.14% 5.00%
FBR Maryland 3.07% 5.04% 5.64% 5.72%
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MTB Virginia - Class A* NA NA NA NA
FBR Virginia 3.05% 5.60% 6.30% 5.88%
Past performance is no guarantee of future results.
*Class A Shares are subject to a maximum sales charge of 4.50%, but the
average annual total returns are calculated without any sales charge since
shareholders of the Acquired Funds will be able to purchase Class A Shares at
no-load.
WHAT ARE THE TAX CONSEQUENCES OF THE PROPOSED REORGANIZATION?
The proposed reorganization has been structured so it is not a taxable
event for federal income tax purposes. You will not recognize any capital
gain or loss as a direct result of the reorganization. Your tax basis in
your Acquired Fund shares will carry over to the Class A shares of the
Acquiring Fund you receive in the reorganization. FBR Maryland is required
by the Maryland Plan to make certain taxable distributions of dividends and
net capital gains realized immediately before the closing date - these
distributions may include gains realized on the disposition of portfolio
securities in connection with the reorganization.
Shareholders will incur capital gains or losses if they sell their
shares before or after the reorganization becomes effective. Shareholders
will also be responsible for tax obligations associated with monthly or
periodic dividend and capital gains distributions that occur prior to and
after the reorganization. Please note that retirement accounts generally are
exempt from such tax consequences, and therefore investment in shares of
either of the Acquired Funds or either of the Acquiring Funds may not be
appropriate for retirement accounts. For further details, contact FBR Funds
or MTB Funds and consult a tax advisor.
WHAT PRIVILEGES WILL I HAVE AS A SHAREHOLDER OF THE ACQUIRING FUNDS?
As a holder of Class A shares of an Acquiring Fund, upon the
reorganization, you will have the right to exchange your MTB Maryland or MTB
Virginia shares into Class A shares of any other MTB mutual fund at no load.
There are currently 29 other retail MTB funds, including a full range of
different types of equity, fixed-income and money market funds. If you would
like to add to your Class A holdings of the Acquiring Fund or make
investments in any other MTB Fund after the reorganization, you will be able
to purchase Class A shares of any MTB Fund at no load.
MTB Funds also offer systematic investment and withdrawal programs, as
well as purchases and redemptions by wire and telephone redemption and
exchange privileges.
WHO WILL PAY THE EXPENSES OF THE PROPOSED REORGANIZATIONS?
MTB Investment Advisors, Inc. and Money Management Advisers, Inc., and
their affiliates, and not the MTB Funds or the FBR Funds, will pay the costs
and expenses related to the proposed reorganizations.
WHAT WILL HAPPEN TO MY FBR FUND ACCOUNT?
After the reorganization, Acquired Fund shareholders will be assigned a
new account at the MTB Funds and their Acquired Fund accounts will be closed.
This process will occur automatically, with no action required by you. There
will be no change in the aggregate value of your account as a result of the
reorganization, although the number of shares and the net asset value per
share may change. Your investments in any other FBR Fund (in other words, any
FBR Fund that is not an Acquired Fund) will remain unaffected by this
reorganization. As a result, you may receive account statements from MTB
Funds with respect to your newly acquired Class A Shares of the Acquiring
Funds as well as account statements from FBR Funds for any other investments
in the FBR Fund family.
WILL ALL OF MY CURRENT FBR FUND ACCOUNT OPTIONS, SUCH AS SYSTEMATIC PURCHASES
AND WITHDRAWAL PLANS, TRANSFER OVER TO MTB FUNDS?
Various types of account servicing options you have previously selected
will transfer automatically to new MTB Fund accounts. Shortly after the
reorganization, shareholders will receive information that further describes
these options, along with materials concerning the MTB Funds' diversified
product line and shareholder services.
HOW DOES THE BOARD OF TRUSTEES OF THE FUND RECOMMEND I VOTE?
The Board of Trustees of FBR Funds, including all of its independent
trustees, unanimously approved the proposed reorganizations as being in the
best interests of the Acquired Funds' shareholders, and unanimously
recommends that shareholders of the Acquired Funds approve it as well.
HOW DO I VOTE MY SHARES?
You can vote in any one of the following ways:
o By mail: complete and sign the enclosed proxy card and mail it in the
enclosed postage-paid envelope.
o By telephone: call 1-800-690-6903, follow the simple recorded
instructions and have your proxy card nearby.
o By Internet: log onto www.proxyweb.com, follow the simple instructions
and have your proxy card nearby.
o In person at the meeting.
HOW DO I SIGN THE PROXY CARD?
Individual Accounts: Shareholders should sign exactly as their names
appear on the account registration shown on the card.
Joint Accounts: Both owners must sign exactly as their names appear
in the registration.
All Other Accounts: The person signing must indicate his or her
capacity. For example, a trustee for a trust or
other entity should sign, "Jane F. Doe, Trustee."
WHERE CAN I GET MORE INFORMATION ABOUT THIS REORGANIZATION?
Contact FBR Funds at 1001 Nineteenth Street North, Arlington, VA 22209,
1-888-888-0025 or MTB Funds at Federated Investors Tower, Pittsburgh, PA
15222-3779, 1-800-836-2211 or contact your sales representative.
Additionally, we encourage you to contact your financial advisor.
THE FBR FUNDS
FBR Maryland Tax-Free Portfolio
FBR Virginia Tax-Free Portfolio
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD FEBRUARY 24, 2006
To the Shareholders of the Above Named Funds:
Notice is hereby given that a Special Meeting of Shareholders of each
of the series listed above (each, an Acquired Fund) of The FBR Funds, will be
held on February 24, 2006, at 10:00 A.M. Eastern Time (Meeting), in the
principal executive offices of the Funds at 1001 Nineteenth Street North,
Arlington, VA 22209, for the purpose of considering and acting on the
following matters:
Funds Affected Proposal
===============================================================================
FBR Maryland 1. To approve a proposed Agreement and Plan of
Reorganization pursuant to which MTB Maryland
Municipal Bond Fund (MTB Maryland) would acquire
all of the assets of FBR Maryland Tax-Free
Portfolio (FBR Maryland) in exchange solely for
Class A Shares of MTB Maryland, to be distributed
pro rata by FBR Maryland to its shareholders, in
complete termination and liquidation of FBR
Maryland (FBR Maryland vote separately);
FBR Virginia 2. To approve a proposed Agreement and Plan of
Reorganization pursuant to which MTB Virginia
Municipal Bond Fund (MTB Virginia) would acquire
all of the assets of FBR Virginia Tax-Free
Portfolio (FBR Virginia) in exchange solely for
MTB Virginia's assumption of FBR Virginia's
liabilities and Class A Shares of MTB Virginia,
to be distributed pro rata by FBR Virginia to its
shareholders, in complete termination and
liquidation of FBR Virginia (FBR Virginia to vote
separately);
Both Funds 3. To approve the payment of fees held in escrow
pursuant to an Interim Sub-Advisory Agreement
dated November 1, 2004, to Asset Management,
Inc., for the period November 1, 2004 through
October 26, 2005 (shareholders of each Acquired
Fund to vote separately);
Both Funds 4. To approve the payment of fees held in escrow
pursuant to an Interim Sub-Advisory Agreement
dated October 27, 2005, to Chevy Chase Trust
Company, for the period since October 27, 2005
(shareholders of each Acquired Fund to vote
separately); and
Both Funds 5. To consider and act upon any matters incidental
to the foregoing and to transact such other
business as may properly come before the Meeting
and any adjournment or postponement thereof.
The FBR Board has fixed the close of business on January 6, 2006, as
the record date for determining shareholders entitled to notice of and to
vote at the Meeting. Each share of an Acquired Fund is entitled to one vote
with respect to each proposal, with fractional votes for fractional shares.
Regardless of whether you plan to attend the Meeting, PLEASE COMPLETE,
SIGN, DATE AND PROMPTLY RETURN THE ENCLOSED PROXY CARD IN THE ENVELOPE
PROVIDED SO THAT YOU WILL BE REPRESENTED AT THE MEETING -- OR YOU MAY VOTE BY
TELEPHONE OR ON THE INTERNET AS DESCRIBED BELOW. If you have submitted a
proxy card and are present at the Meeting, you may change the vote specified
in the proxy at that time. However, attendance in person at the Meeting, by
itself, will not revoke a previously tendered proxy.
By Order of the Board of
Trustees,
------------------------------------
Kimberly Ochterski
Secretary, The FBR Funds
January __, 2006
YOUR VOTE IS IMPORTANT
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You can help avoid the necessity and expense of sending follow-up letters to
ensure a quorum by promptly signing and returning the enclosed proxy card.
If you are unable to attend the meeting, please mark, sign, date and return
the enclosed proxy card so that the necessary quorum may be represented at
the special meeting. The enclosed envelope requires no postage if mailed in
the United States.
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In addition to voting by mail you may also vote by either telephone or via
the Internet, as follows:
To vote by Telephone: To vote by Internet:
================================================================================
1. Read the Proxy Statement and 1. Read the Proxy Statement and have
have your Proxy card at hand. your Proxy card at hand.
2. Call the 1-800 number that 2. Go to the website printed on your
appears on your Proxy card. Proxy card.
3. Enter the 12-digit control 3. Enter the control number set forth
number set forth on the Proxy on the Proxy card and follow the
card and follow the simple simple instructions.
instructions.
PRELIMINARY
PROSPECTUS/PROXY STATEMENT
January __, 2006
Acquisition of the Assets of
FBR MARYLAND TAX-FREE PORTFOLIO
a mutual fund series of The FBR Funds
1001 Nineteenth Street North
Arlington, Virginia 22209
Telephone No.: 1-888-888-0025
By and in exchange for Class A Shares of
MTB MARYLAND MUNICIPAL BOND FUND
a mutual fund series of MTB Group of Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7010
Telephone No.: 1-800-836-2211
Acquisition of the Assets and Assumption of All Liabilities of
FBR VIRGINIA TAX-FREE PORTFOLIO
a mutual fund series of FBR Funds
1001 Nineteenth Street North
Arlington, Virginia 22209
Telephone No.: 1-888-888-0025
By and in exchange for Class A Shares of
MTB VIRGINIA MUNICIPAL BOND FUND
a mutual fund series of MTB Group of Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7010
Telephone No.: 1-800-836-2211
This Prospectus/Proxy Statement describes the proposals (Proposals 1
and 2) for reorganizations (Reorganizations) pursuant to separate Agreements
and Plans of Reorganization (Plans), pursuant to which FBR Maryland Tax-Free
Portfolio (FBR Maryland) and FBR Virginia Tax-Free Portfolio (FBR Virginia)
(each, an Acquired Fund) would transfer all their assets to MTB Maryland
Municipal Bond Fund (MTB Maryland) and MTB Virginia Municipal Bond Fund (MTB
Virginia) (each, an Acquiring Fund), respectively, in exchange for Class A
Shares (Acquiring Fund Shares) of the respective Acquiring Fund and, in the
case of MTB Virginia, its assumption of all liabilities of FBR Virginia. The
Acquiring Fund Shares will be distributed pro rata by each FBR Fund to its
respective shareholders in complete liquidation and dissolution of the
Acquired Funds. As a result of the Reorganizations, each owner of shares of
the Acquired Funds will become the owner of Acquiring Fund Shares, having a
total net asset value equal to the total net asset value of his or her
holdings in the applicable Acquired Fund as of the close of business on the
date of the Reorganization (the "Closing Date"). A form of each Plan is
attached as Exhibits A and B.
The Board of Trustees of The FBR Funds (FBR Funds) believes that the
proposed Reorganizations are in the best interests of the Acquired Funds and
their shareholders. For a comparison of the investment objectives, policies
and limitations, risks and fees of the Acquired Funds and the Acquiring
Funds, see "Summary - Comparison of Investment Objectives, Policies, Risks
and Limitations" and "Comparative Fee Tables," respectively.
This Prospectus/Proxy Statement also describes proposals (Proposals 3
and 4) for the payment of sub-advisory fees to Asset Management, Inc. (former
sub-adviser to the Acquired Funds) for the period November 1, 2004 through
October 26, 2005) and to Chevy Chase Trust Company (current subadviser to the
Acquired Funds) since October 27, 2005.
This Prospectus/Proxy Statement should be retained for future
reference. It sets forth concisely the information about each Acquiring Fund
that a prospective investor should know before investing. This
Prospectus/Proxy Statement is accompanied by the Prospectus of the Acquiring
Funds, dated November 7, 2005 which is incorporated herein by reference. A
Statement of Additional Information for the Acquiring Funds, dated November
7, 2005, a Prospectus and Statement of Additional Information for the FBR
Funds, each dated February 28, 2005, and a Statement of Additional
Information relating to this Prospectus/Proxy Statement dated January __,
2006, have been filed with the Securities and Exchange Commission
(Commission) and are incorporated herein by reference. An Annual Report to
Shareholders of the FBR Funds for the fiscal year ended October 31, 2004, a
Semi-Annual Report to Shareholders of the FBR Funds for the semi-annual
period ended April 30, 2005, and an Annual Report to Shareholders of the MTB
Funds for the fiscal year ended April 30, 2005 have also been filed with the
SEC and are incorporated herein by reference.
Copies of the Prospectuses, Statements of Additional Information,
Annual Reports and Semi-Annual Reports and other information about the MTB
Funds and the FBR Funds (each, a Fund, and together, Funds) may be obtained
without charge by writing to or by calling the MTB Funds or the FBR Funds at
the addresses and telephone numbers shown above.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES, OR PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS/PROXY STATEMENT. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROSPECTUS/PROXY STATEMENT
AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN
OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS
HAVING BEEN AUTHORIZED BY THE FUNDS.
THE SHARES OFFERED BY THIS PROSPECTUS/PROXY STATEMENT ARE NOT DEPOSITS
OR OBLIGATIONS OF, OR GUARANTEED OR ENDORSED BY, ANY BANK, AND ARE NOT
FEDERALLY INSURED BY, GUARANTEED BY, OBLIGATIONS OF OR OTHERWISE SUPPORTED BY
THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL
RESERVE BOARD OR ANY OTHER GOVERNMENTAL AGENCY. AN INVESTMENT IN THE FUNDS
INVOLVES INVESTMENT RISKS, INCLUDING POSSIBLE LOSS OF THE PRINCIPAL AMOUNT
INVESTED.
This Prospectus/Proxy Statement is expected to be sent to shareholders
on or about January 17, 2006.
TABLE OF CONTENTS
Page
3
PROPOSALS 1 AND 2............................................................4
SUMMARY......................................................................4
The Proposed Reorganizations...........................................4
Comparison of Investment Objectives, Policies, Risks and
Limitations......................................................5
Comparative Fee Tables.................................................7
Performance Information...............................................10
Fund Management.......................................................10
Advisory and Other Fee Arrangements...................................11
Purchases, Redemptions and Exchange Procedures........................13
Dividends and Other Distributions.....................................16
INFORMATION ABOUT THE REORGANIZATIONS.......................................17
Description of the Proposed Reorganizations...........................17
Description of the Acquiring Funds' Shares and Capitalization.........17
Federal Income Tax Consequences.......................................18
Agreement Among MTBIA, MMA and Friedman, Billings, Ramsey Group,
Inc................................20
Reasons for the Reorganizations.......................................20
Consideration by the Board of FBR Funds...............................20
Consideration by the Board of MTB Funds...............................21
Section 15(f) of the 1940 Act.........................................21
Comparative Information on Shareholder Rights and Obligations.........21
PROPOSAL 3 .................................................................22
PROPOSAL 4..................................................................24
INFORMATION ABOUT THE MTB FUNDS AND THE FBR FUNDS...........................25
INFORMATION ABOUT THE PROXY SOLICITATION AND THE SPECIAL MEETING............26
SHARE OWNERSHIP OF THE FUNDS AND CERTAIN INTERESTS.........................27
OTHER MATTERS AND DISCRETION OF ATTORNEYS NAMED IN THE PROXY................28
AGREEMENT AND PLAN OF REORGANIZATION (MARYLAND FUNDS)................EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION (VIRGINIA FUNDS)................EXHIBIT B
PROSPECTUS FOR THE MTB FUNDS, DATED NOVEMBER 7, 2005.................EXHIBIT C
MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE (MTB MARYLAND FUND)......EXHIBIT D
PROPOSALS 1 AND 2
SUMMARY
This summary is qualified in its entirety by reference to the
additional information contained elsewhere in this Prospectus/Proxy
Statement, the Statement of Additional Information relating to this
Prospectus/Proxy Statement, the Prospectuses and Statements of Additional
Information of the MTB Funds and the FBR Funds and the Plans.
The Proposed Reorganizations
The Board of Trustees (FBR Board or Trustees) of FBR Funds has voted
unanimously to recommend to holders of shares of each Acquired Fund the
approval of the Plans whereby (a) MTB Maryland would acquire all of the
assets of FBR Maryland in exchange for Class A Shares of MTB Maryland to be
distributed pro rata by FBR Maryland to its shareholders in complete
liquidation and dissolution of FBR Maryland; and (b) MTB Virginia would
acquire all of the assets of FBR Virginia in exchange for Class A Shares of
MTB Virginia to be distributed pro rata by FBR Virginia to its shareholders
and MTB Virginia's assumption of FBR Virginia's liabilities in complete
liquidation and dissolution of FBR Virginia. As a result of the
Reorganizations, each shareholder of the Acquired Funds will become the owner
of Acquiring Fund Shares having a total net asset value equal to the total
net asset value of his or her holdings in the applicable Acquired Fund as of
the close of business on the date of the Reorganizations, i.e., the Closing
Date (as hereinafter defined).
The FBR Board, including the Trustees who are not "interested persons"
within the meaning of Section 2(a)(19) of the Investment Company Act of 1940
(1940 Act), has unanimously concluded that each Reorganization would be in
the best interests of the respective Acquired Fund and its shareholders, and
that the economic interests of shareholders would not be diluted as a result
of the transactions contemplated by the Reorganization. In addition, the FBR
Board concluded that the Reorganization of FBR Maryland would give its
shareholders the opportunity to participate in a significantly larger fund
with similar investment objectives, policies and strategies. While MTB
Virginia is a newly-created shell portfolio that will succeed to the business
and operations of FBR Virginia, the FBR Board was provided with information
about greater distribution and asset growth opportunities as a result of FBR
Virginia's reorganization into MTB Virginia.
As a condition to the Reorganizations, the MTB Funds and the FBR Funds
will receive an opinion of counsel that the Reorganizations will be
considered a tax-free "Reorganization" under applicable provisions of the
Internal Revenue Code, so that neither the Acquiring Funds nor the Acquired
Funds or its shareholders will recognize any gain or loss and the tax basis
of the Acquiring Fund Shares received by the applicable Acquired Fund's
shareholders will be the same as the tax basis of their shares in the
applicable Acquired Fund. Before the Reorganizations, FBR Maryland expects to
distribute ordinary income and realized capital gains, if any, to its
shareholders. See "Information about the Reorganizations - Federal Income Tax
Consequences."
THE BOARD OF TRUSTEES OF FBR FUNDS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
APPROVAL OF THE REORGANIZATIONS.
Comparison of Investment Objectives, Policies, Risks and Limitations
This section will help you compare the investment objectives and
policies of each Acquired Fund with its corresponding Acquiring Fund. Please
be aware that this is only a brief discussion. More complete information may
be found in the MTB Funds' and FBR Funds' prospectuses.
Investment Objectives and Policies of the Acquiring Funds and
corresponding Acquired Funds. The investment objectives of each Acquiring
Fund and each Acquired Fund are similar in that each Fund seeks to provide
income (current income in the case of the Acquiring Funds) exempt from
federal, state (Maryland or Virginia as the case may be) and local income
taxes. The only difference is that each Acquired Fund's objective is directed
to producing income that is exempt from both the federal regular income tax
and the federal alternative minimum tax (AMT), whereas each corresponding
Acquiring Fund's objective is only directed to producing income that is
exempt from federal regular income tax. As a matter of internal policy,
however, MTBIA will manage (and with respect to MTB Maryland, has managed)
each Acquiring Fund in a way that minimizes AMT, while retaining the
flexibility to purchase tax-exempt securities that may be subject to AMT if
market circumstances dictate such action (for example, due to supply and
demand, credit quality concerns, yields, etc.).
Each Acquired Fund and Acquiring Fund is non-diversified, which means
that it can invest a larger percentage of assets in a smaller number of
issuers. Each Acquired Fund and each Acquiring Fund will invest in
investment grade securities. In addition, each Acquired Fund will ordinarily
invest in securities that are A rated or better, while the Acquiring Funds'
prospectus has no provision to that effect. As a matter of internal
operating policy, however, each Acquiring Fund will primarily purchase
securities that are rated A or better, but may also invest in investment
grade securities that are rated BBB or better. Each Acquired Fund's average
portfolio maturity will ordinarily exceed ten years. Although the Acquiring
Funds' prospectus has no provision dealing with average portfolio maturity,
each Acquiring Fund is managed to the Lehman Brothers 10 Year Municipal Bond
Index (maturities of 8-12 years) and the Lehman Brothers 7 Year Municipal
Bond Index (maturities of 6-8 years).
Risks. Investments in the MTB Funds and the FBR Funds are not
guaranteed. As with any mutual fund, the value of the Funds' shares will
change and you could lose money by investing in the Funds. The risks
associated with investment in each Acquiring Fund and each Acquired Fund are
similar in that each Fund is subject to credit, interest rate, call,
non-diversification, state-specific (Maryland or Virginia, as the case may
be), tax and market risks. Credit risk is the risk that the issuer of the
bond will not pay or is perceived as less likely to pay the interest and
principal payments when due. Interest-rate risk is the risk that interest
rates will rise and the value of the bonds will fall. Interest rate risk is
generally greater the longer the remaining maturity of the bonds. Prices will
usually decrease more for a longer-term bond when interest rates rise. Call
risk is when issuers of securities may redeem the securities prior to
maturity at a price below their current market value. Non-diversification
risk is when a fund may invest a higher percentage of its assets among fewer
issuers of portfolio securities. Maryland or Virginia state risks involve the
funds being more susceptible to any economic, business, political or other
developments which generally affect securities issued by Maryland/Virginia
issuers. The economies of Maryland and Virginia, respectively, are relatively
diversified across the service, trade and government sectors, but could be
adversely impacted by changes to any of these sectors. Tax risk is the risk
that tax exempt securities may fail to meet certain legal requirements. This
may cause the interest received and distributed by the Funds to shareholders
to be taxable. Also, changes or proposed changes in federal tax laws may
cause the prices of tax exempt securities to fall. Market risk is composed
of two components described above - interest rate risk and credit risk. It
also includes the fluctuation of market prices with the forces of supply and
demand. Municipal bonds may, therefore, decline in value even if the overall
market is doing well.
Investment Limitations. In addition to the objectives, policies and
risks described above, each Acquiring Fund and Acquired Fund is subject to
certain investment limitations which are substantially similar to one
another, and to certain additional policies, all as described in the MTB
Funds' and the FBR Funds' Prospectuses and Statements of Additional
Information.
Following is a comparison of the fundamental investment policy
restrictions, i.e., those that cannot be changed without shareholder
approval, of the Acquiring Funds and Acquired Funds.
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Acquiring Funds Acquired Funds
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
o Borrowing
Permitted to the extent Permitted only as a
permitted by 1940 Act or any temporary measure to
rule, order or interpretation facilitate redemptions.
thereunder. The amount permitted to be
borrowed is that permitted
by law. May not purchase a
portfolio security if a
borrowing is outstanding.
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- -------------------------------------------------------------------------------------
o Lending
Permitted only for (i) May lend without limitation
purchase of debt or (ii) an up to 1/3 of its total
authorized securities lending assets. May lend without
program. No percentage limit. limitation for (i) purchase
of publicly traded debt
instruments; or (ii)
repurchase agreements.
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- -------------------------------------------------------------------------------------
o Margin Purchases
Permitted only for (i) Permitted only for
clearance of purchases of clearance of transactions.
portfolio securities; (ii)
derivative securities
transactions and (iii) for
any purpose if disclosed.
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- -------------------------------------------------------------------------------------
o Short Sales
Not prohibited. Permitted only for
clearance of transactions.
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- -------------------------------------------------------------------------------------
o Put and Call
Options Not prohibited. Permitted only in
connection with standby
commitments.
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- -------------------------------------------------------------------------------------
o Securities
Underwriting Prohibited, except as a Prohibited, except as a
statutory underwriter. statutory underwriter.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
o Real Estate
Transactions Permitted only for (i) Permitted only for
marketable securities of municipal obligations
companies engaged in real secured by real estate or
estate-related activities; interests therein.
and (ii) securities secured
by real estate or interests
therein.
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- -------------------------------------------------------------------------------------
o Commodities
Permitted if disclosed. Permitted only if acquired
as a result of ownership of
securities or other
instruments.
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- -------------------------------------------------------------------------------------
o Senior Securities
Permitted to the extent Permitted to the extent
permitted by law, rules, permitted under applicable
orders and interpretations. law, regulations,
interpretations and
exemptive letters.
- -------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------
o Diversification o Except with respect to o Will comply with IRS
50% of assets, no more diversification
than 5% of assets may be requirements (which are
invested in a single the same 5%/50% and 25%
issuer. issuer limitation).
o No more than 25% of o Limitation does not
assets may be invested in apply to U.S. government
a single issuer. securities.
o Limitation does not
apply to U.S. government
securities.
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- -------------------------------------------------------------------------------------
o Concentration
May not concentrate in May not concentrate (invest
issuers primarily engaged in more than 25% of total
the same industry. Municipal assets) in issuers in any
bonds, except industrial one industry. Excluded
revenue bonds, will not from this limit are
constitute an industry. municipal obligations
issued or guaranteed by the
U.S. government, its
agencies or sponsored
enterprises.
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- -------------------------------------------------------------------------------------
o 80% Tax-Free
Policy Will invest so that at least Will invest so that at
80% of the income it least 80% of its income is
distributes will be exempt exempt from federal income
from federal regular income tax (including AMT) and
tax and state income taxes. state income tax.
- -------------------------------------------------------------------------------------
Comparative Fee Tables
The Funds, like all mutual funds, incur certain expenses in their
operations. These expenses include management fees, as well as the costs of
maintaining accounts, providing shareholder liaison and distribution services
and other activities. Set forth in the tables below is information regarding
the fees and expenses currently incurred by each Acquiring Fund and each
Acquired Fund, respectively, and pro forma fees for each Acquired Fund after
giving effect to the Reorganizations.
FBR Maryland Tax-Free Portfolio - MTB Maryland Municipal Bond Fund
This table describes the fees and expenses that you may pay if you buy
and hold Shares of the FBR Maryland Tax-Free Portfolio and Class A Shares of
the MTB Maryland Municipal Bond Fund, and the pro forma fees and expenses of
Class A Shares of the MTB Maryland Municipal Bond Fund on a combined basis
after giving effect to the Reorganization.
Shareholder Fees FBR Maryland Tax-Free MTB Maryland MTB Maryland
Municipal Bond
Municipal Bond Fund - Class A
Fund - Class A Shares Pro Forma
Portfolio Shares Combined
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases None 4.50%(1) 4.50%(1)
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a None None(2) None(2)
percentage of original purchase price or
redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested None None None
Dividends (and other Distributions) (as a
percentage of offering price)
Redemption Fee (including exchanges) (as a 1.00%(3) None None
percentage of amount redeemed, if applicable)
Annual Fund Operating Expenses (Before Waiver and
Reimbursement)(4)
Expenses That are Deducted From Fund Assets (as a
percentage of average net assets)
Management Fee 0.375% 0.70%(4) 0.70%(4)
Distribution (12b-1) Fee 0.250% 0.25%(5) 0.25%(5)
Shareholder Services Fee None 0.25%(6) 0.25%(6)
Other Expenses 0.330%(7) 0.21%(4) 0.21%(4)
------ ----- -----
Total Annual Fund Operating Expenses (before fee 0.955%(9) 1.41%(8) 1.41%(8)
waivers and expense reimbursements)
Contractual Fee Waivers and Reimbursement of Fund 0.000% 0.56%(4) 0.56%(4)
Expenses
Total Anticipated Annual Fund Operating Expenses 0.955% 0.85%(8) 0.85%(8)
(after contractual waivers and reimbursements)
- --------------------------------
(1) The sales charge will be waived on purchases by former Acquired Fund
shareholders.
(2) For purchases over $1,000,000 or more, a 1% Contingent Deferred Sales
Charge may be imposed if redeemed within 18 months of purchase.
(3) A redemption fee applies only to redemptions (including exchanges) of
Fund shares made within 90 days of purchase. In addition, FBR Funds
charge a $10.00 wire fee for all redemption proceeds paid by federal
wire made through the Fund's transfer agent, except on certain
institutional and broker/dealer accounts.
(4) For the MTB Maryland Municipal Bond Fund and ProForma Combined, the
percentages shown are based on anticipated expenses for the entire
fiscal year ending April 30, 2006. However, the rate at which expenses
are accrued during the fiscal year may not be constant and at any
particular point, may be greater or less than the stated average
percentage. The Advisor has contractually agreed to waive all or a
portion of its investment advisory fee (based on average daily net
assets) and other fees (including the distribution (12b-1) and
shareholder services fees) which it is otherwise entitled to receive
and/or reimburse certain operating expenses of the Fund in order to
limit the Fund's Class A Shares total operating expenses to not more
than 0.85% of average daily net assets for the period through April 30,
2008. The management fee paid by the Fund (after the contractual waiver
and an additional voluntary waiver of .02%) is expected to be 0.51% for
the fiscal year ending April 30, 2006.
(5) A portion of the distribution (12b-1) fee for the Fund's Class A Shares
has been contractually waived. The distribution (12b-1) fee paid by the
Fund's Class A Shares (after the contractual waiver) is expected to be
0.11% for the fiscal year ending April 30, 2006.
(6) The shareholder services fee for the Fund's Class A Shares has been
contractually waived. The shareholder services fee paid by the Fund's
Class A Shares (after the contractual waiver) will be 0.00%, for the
fiscal year ending April 30, 2006.
(7) Other Expenses are based on actual amounts that the Fund incurred during
its most recent fiscal year. This item may fluctuate from year to year
based on a Fund's investment operations and asset size.
(8) The Total Actual Annual Fund Operating Expenses (after waivers) for the
Fund's Class A Shares were 0.95% for the fiscal year ended April 30,
2005.
(9) Prior to November 1, 2005, the FBR Funds had entered into an agreement
with FBR National Trust Company (FBR National) for Fund Administration,
Fund Accounting Services, Transfer Agency Services and Custody Services.
Under this agreement, FBR National provided or paid the cost of such
services and normal operating expenses. As of November 1, 2005, the FBR
Funds will contract directly with a third party for transfer agency and
fund accounting services, and pay for all operating costs. These
contractual changes are expected to increase "Other Expenses" and "Total
Annual Fund Operating Expenses" to 0.45% and 1.08%, respectively, for
the fiscal period ending October 31, 2006.
Example
This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each respective Fund's
Class A Shares for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that each Fund's Class A Shares
operating expenses remain the same. Although your actual costs and returns
may be higher or lower, based on these assumptions your costs would be:
MTB Maryland
FBR Maryland MTB Maryland Municipal Bond
Tax-Free Municipal Bond Fund Pro Forma
Portfolio Fund Combined
1 Year $97 $533 $533
3 Years $304 $709 $709
5 Years $528 $1,024 $1,024
10 Years $1,172 $1,917 $1,917
FBR Virginia Tax-Free Portfolio - MTB Virginia Municipal Bond Fund
This table describes the fees and expenses that you may pay if you buy
and hold Shares of the FBR Virginia Tax-Free Portfolio and Class A Shares of
the MTB Virginia Municipal Bond Fund, and the pro forma fees and expenses of
Class A Shares of the MTB Virginia Municipal Bond Fund on a combined basis
after giving effect to the Reorganization.
FBR VirginiaTax-Free MTB Virginia MTB Virginia Municipal
Portfolio Municipal Bond Bond Fund - Class A
Fund - Class A Shares Pro Forma
Shareholder Fees Shares Combined
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases None 4.50%(1) 4.50%(1)
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a None None(2) None(2)
percentage of original purchase price or
redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested None None None
Dividends (and other Distributions) (as a
percentage of offering price)
Redemption Fee (including exchanges) (as a 1.00%(3) None None
percentage of amount redeemed, if applicable)
Annual Fund Operating Expenses (Before Waiver and
Reimbursement)(4)
Expenses That are Deducted From Fund Assets (as a
percentage of average net assets)
Management Fee 0.375% 0.70%(4) 0.70%(4)
Distribution (12b-1) Fee 0.250% 0.25% 0/25%
Shareholder Services Fee None 0.25%(5) 0.25%(5)
Other Expenses 0.340%(6) 1.24%(4) 1.24%(4)
------ ----- -----
Total Annual Fund Operating Expenses (before fee 0.965%(8) 2.44% 2.44%
waivers and expense reimbursements)
Contractual Fee Waivers and Reimbursement of Fund 0.000% 1.54%(4) 1.54%(4)
Expenses
Total Anticipated Annual Fund Operating Expenses 0.965% 0.90% 0.90%
(after contractual waivers and reimbursements)
- --------------------------------
(1) The sales charge will be waived on purchases by former Acquired Fund
shareholders.
(2) For purchases over $1,000,000 or more, a 1% Contingent Deferred Sales
Charge may be imposed if redeemed within 18 months of purchase.
(3) A redemption fee applies only to redemptions (including exchanges) of
Fund shares made within 90 days of purchase. In addition, FBR Funds
charge a $10.00 wire fee for all redemption proceeds paid by federal
wire made through the Fund's transfer agent, except on certain
institutional and broker/dealer accounts.
(4) For the MTB Virginia Municipal Bond Fund and ProForma Combined the
percentages shown are based on anticipated expenses for the entire
fiscal year ending April 30, 2006. However, the rate at which expenses
are accrued during the fiscal year may not be constant and at any
particular point, may be greater or less than the stated average
percentage. The Advisor has contractually agreed to waive all or a
portion of its investment advisory fee (based on average daily net
assets) and other fees (including the shareholder services fee) which it
is otherwise entitled to receive and/or reimburse certain operating
expenses of the Fund in order to limit the Fund's Class A Shares total
operating expenses to not more than 0.90% of average daily net assets
for the period starting from the effective date of the reorganization
through April 30, 2008. The management fee paid by the Fund (after the
contractual waiver) is expected to be 0.00% for the fiscal year ending
April 30, 2006.
(5) The shareholder services fee for the Fund's Class A Shares has been
contractually waived. The shareholder services fee paid by the Fund's
Class A Shares (after the contractual waiver) will be 0.00% for the
fiscal year ending April 30, 2006.
(6) Other Expenses are based on actual amounts that the Fund incurred during
its most recent fiscal year. This item may fluctuate from year to year
based on a Fund's investment operations and asset size.
(7) The advisor expects to contractually reimburse certain operating
expenses of the Fund. Total other expenses paid by the Fund (after the
contractual reimbursement) are expected to be 0.65% for the fiscal year
ending April 30, 2006.
(8) Prior to November 1, 2005, the FBR Funds had entered into an agreement
with FBR National Trust Company (FBR National) for Fund Administration,
Fund Accounting Services, Transfer Agency Services and Custody Services.
Under this agreement, FBR National provided or paid the cost of such
services and normal operating expenses. As of November 1, 2005, the FBR
Funds will contract directly with a third party for transfer agency and
fund accounting services, and pay for all operating costs. These
contractual changes are expected to increase "Other Expenses" and "Total
Annual Fund Operating Expenses" to 0.58% and 1.21%, respectively, for
the fiscal period ending October 31, 2006.
Example
This example is intended to help you compare the cost of investing in
the Funds with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each respective Fund's
Class A Shares for the time periods indicated and then redeem all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that each Fund's Class A Shares
operating expenses remain the same. Although your actual costs and returns
may be higher or lower, based on these assumptions your costs would be:
MTB Virginia
FBR Virginia MTB Virginia Municipal Bond
Tax-Free Municipal Bond Fund Pro Forma
Portfolio Fund Combined
1 Year $98 $538 $538
3 Years $307 $724 $724
5 Years $534 $1,263 $1,263
10 Years $1,184 $2,737 $2,737
Performance Information
The Prospectus of the Acquiring Funds dated November 7, 2005, a copy of
which is attached hereto as Exhibit C, contains a risk/return bar chart and
an average annual total return table which set forth the performance of MTB
Maryland for certain calendar periods ended December 31, 2004, and is
incorporated by reference herein. In addition, attached hereto as Exhibit D
is management's discussion of the performance of MTB Maryland for its most
recent fiscal year ended April 30, 2005. MTB Virginia has recently organized
for the purpose of continuing the operations of FBR Virginia, and has no
assets or prior history of investment operations. FBR Virginia will be the
"accounting survivor" to MTB Virginia as a result of the Reorganization and,
accordingly, FBR Virginia's financial history and performance will be carried
over upon consummation of the Reorganization.
Fund Management
MTB Funds. The Board of Trustees (Board) of the MTB Funds governs the
MTB Funds and selects and oversees the Advisor, MTB Investment Advisors, Inc.
(MTBIA), a subsidiary of M&T Bank. The Advisor manages each MTB Fund's
assets, including buying and selling portfolio securities. The Advisor's
address is 100 E. Pratt Street, 17th Floor, Baltimore, MD 21202.
M&T Bank is the principal banking subsidiary of M&T Bank Corporation, a
regional bank holding company in existence since 1969. M&T Bank was founded
in 1892 and provides comprehensive banking and financial services to
individuals, governmental entities and businesses throughout New York State,
Pennsylvania, Maryland and parts of Virginia, West Virginia, the District of
Columbia and Delaware. As of June 30, 2005, M&T Bank Corporation had over
$54.5 billion in assets. MTBIA and entities affiliated with MTBIA or its
predecessors have served as investment advisor to MTB Funds since 1988 and,
as of June 30, 2005, it managed approximately $11.1 billion in assets. As
part of its regular banking operations, M&T Bank may make loans to public
companies. Thus, it may be possible, from time to time, for the MTB Funds to
hold or acquire the securities of issuers which are also lending clients of
M&T Bank. The lending relationship will not be a factor in the selection of
securities.
The annual investment advisory fee payable to MTBIA for managing each
Acquiring Fund is 0.70% of the Fund's average daily net assets. MTBIA may
voluntarily waive a portion of its fee or reimburse the Fund for certain
operating expenses.
The following individual serves as portfolio manager of the Acquiring Funds.
Susan L. Schnaars, CFA, CPA, is responsible for managing several large
institutional accounts, in addition to her portfolio management duties. She
has been a Vice President and Portfolio Manager of MTBIA since 1996 and a
Vice President of M&T Bank since April 1, 2003. She was a Vice President of
Allfirst Bank from 1995 until its acquisition by M&T Bank in April 2003. Ms.
Schnaars is a holder of the right to use the Chartered Financial Analyst
designation and a Certified Public Accountant, and has more than 17 years of
experience in the investment industry. She earned her B.S. and M.S. from
Drexel University.
FBR Funds. On October 25, 2005, the Board of Trustees of the Funds,
including a majority of "disinterested" Trustees as that term is defined in
the 1940 Act, voted unanimously to assign the investment advisory agreement
between the Funds and Money Management Advisers, Inc. (MMA), the Funds'
investment adviser since inception, to FBR Fund Advisers, Inc. (FBRFA), 1001
Nineteenth Street North, Arlington, VA 22209. Both MMA and FBRFA are wholly
owned subsidiaries of Friedman, Billings, Ramsey Group, Inc. The assignment
of the investment advisory agreement was effective on November 1, 2005.
FBRFA was organized as a Delaware corporation in 1996 and is registered
with the Securities and Exchange Commission as an investment adviser. FBRFA,
who manages no-load mutual funds, managed approximately $342 million of net
assets as of January 31, 2005.
Until October 26, 2005, the Adviser, on behalf of the FBR Funds,
retained Asset Management, Inc. (AMI), located at 5530 Wisconsin Avenue,
Suite 1500, Chevy Chase, Maryland 20815, to serve as the investment
sub-adviser to the Acquired Funds. The Sub-Advisory Agreement between MMA and
AMI, by its terms, and in accordance with certain provisions of the 1940 Act,
was terminated upon the assignment of the contract to the Estate of Arthur
Adler, Jr. as a result of the death of Mr. Arthur Adler, Jr., President and
controlling owner of AMI, which effected a change in control of AMI, at which
point, MMA and AMI entered into an Interim Sub-Advisory Agreement.
Effective October 27, 2005, Chevy Chase Trust Company (CCTC), located
at 7501 Wisconsin Avenue, Bethesda, Maryland 20814, entered into an agreement
to purchase substantially all of the assets of AMI. Pursuant to the
agreement, AMI will be operated as a division of CCTC. The Board of Trustees
of FBR Funds, including a majority of the Independent Trustees, has voted in
person at its October 25, 2005 meeting to approve an interim subadvisory
contract so that the Subadviser may continue to render investment management
services to the Funds until consummation of the Reorganization.
Advisory and Other Fee Arrangements
The following table compares management fees for each Acquiring Fund
and each corresponding Acquired Fund. The table shows fees before any waivers
or reimbursements (Total) and fees after any waivers or reimbursements (Net).
- ---------------------------------------------------------------------------
Fund Name Advisory Fee Total Advisory Fee Net*
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
MTB Maryland 0.70% 0.51%
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
FBR Maryland 0.375% 0.375%
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
MTB Virginia 0.70% 0.00%
- ---------------------------------------------------------------------------
- ---------------------------------------------------------------------------
FBR Virginia 0.375% 0.375%
- ---------------------------------------------------------------------------
*MTBIA has contractually committed to waive its advisory fees and/or
reimburse fund expenses to limit overall Acquiring Fund expenses through
April 30, 2008. In addition, MTBIA may voluntarily waive its advisory fees
from time to time in its sole discretion. This will have the effect of
causing the net advisory fee to be 0.51% for MTB Maryland and 0.00% for MTB
Virginia. Money Management Advisers, Inc. has agreed in writing to waive a
portion of its investment advisory fees and assume certain expenses of each
Fund to the extent annual fund operating expenses exceed 1.00% of each Fund's
average daily net assets. The Adviser has agreed to maintain these expense
limitations with regard to each Fund through November 1, 2006.
Federated Services Company (Fed Services), a wholly-owned subsidiary of
Federated Investors, Inc. (FII), and M&T Securities, Inc., an affiliate of
M&T Bank, serve as co-administrators to the MTB Funds and provide certain
administrative personnel and services necessary to operate the MTB Funds. Fed
Services and M&T Securities, Inc. provide these services at an annual rate
based upon the average aggregate daily net assets of the MTB Funds. The rate
charged by Fed Services is based on a scale that ranges from 0.06% to 0.01%.
The rate charged by M&T Securities, Inc. is based on a scale that ranges from
0.04% down to 0.015%. Fed Services and M&T Securities, Inc. may choose
voluntarily to waive all of a portion of their fee.
Effective November 1, 2005, FBR Fund Advisers, Inc. provides day-to-day
administrative services to the FBR Funds including monitoring portfolio
compliance, determining compliance with provisions of the Internal Revenue
Code, oversight of the service providers and preparing the Fund's
registration statements. Pursuant to the Agreement, the Adviser receives a
fee of 0.06% of the first $2 billion of average daily net assets of the Fund,
0.05% of the next $1 billion of average daily net assets of the Fund and
0.035% of the Fund's average daily net assets in excess of $3 billion. The
Adviser also provides the FBR Funds with office space, facilities and
business equipment and generally administers the FBR Funds' business affairs
and provides the services of executive and clerical personnel for
administering the affairs of the FBR Funds. The Adviser compensates all
personnel, Officers, and Trustees of the FBR Funds if such persons are
employees of the adviser or administrator.
FBR National Trust Company (FBR National), a wholly-owned subsidiary of
Friedman, Billings, Ramsey Group, Inc., serves as the FBR Funds' custodian of
the cash and securities of FBR Funds. Prior to November 1, 2005, FBR
National also served as administrator, transfer agent and dividend disbursing
agent, and fund accounting agent for FBR Funds, and subcontracted to
Integrated Fund Services, Inc. (Integrated) the transfer agency, dividend
disbursement agency and fund accounting services. The rate charged by FBR
National for administrative services was 0.30% of average daily net assets.
Effective November 1, 2005, FBR Funds have contracted directly with
Integrated for the provision of transfer agency, dividend disbursement agency
and fund accounting services.
The Class A Shares of each MTB Fund have adopted a Shareholder Services
Plan pursuant to which they may pay financial intermediaries, including M&T
Securities, Inc., a fee in an amount computed at an annual rate of 0.25% of
the average daily net assets of the Fund's Class A Shares to finance the
maintenance of shareholder accounts and the provision of other shareholder
services. FBR Funds do not have a shareholder services plan.
Edgewood Services, Inc. (Edgewood) is the principal distributor for
shares of the MTB Funds and offers shares of the MTB Funds on a continuous,
best-efforts basis under a Distributor's Contract. Shares may be purchased
through M&T Bank, M&T Securities, Inc. or through a broker-dealer or
financial intermediary that has an agreement with Edgewood (Authorized
Dealer). The Class A Shares of the MTB Funds have adopted a Rule 12b-1
Distribution Plan pursuant to which they may pay distribution fees to
financial intermediaries (which may be paid through Edgewood) at an annual
rate of up to 0.25% of the average daily net assets of the MTB Funds for the
sale, distribution, administration, customer servicing and recordkeeping of
these Shares. These fees may be paid to Edgewood, MTBIA and their affiliates.
Because these fees are paid out of a Fund's assets continuously, over time
they will increase the cost of an investment and may cost a shareholder more
than paying other types of sales charges.
FBR Investment Services, Inc. is the principal distributor for shares
of the FBR Funds. The FBR Funds have adopted a distribution plan pursuant to
Rule 12b-1 under the 1940 Act which allows the Funds to pay distribution fees
for the sale and distribution of its shares. Under this plan, each Fund pays
a distribution fee at an annual rate of up to 0.25% of the Fund's average
daily net assets.
The total operating expenses, as a percentage of average net assets,
for Class A Shares of MTB Maryland were 0.83% of average daily net assets
(after waivers) for the fiscal year ended April 30, 2005. Without such
waivers, the expense ratio of Class A Shares of MTB Maryland would have been
1.41% of average daily net assets. The total operating expenses, as a
percentage of average net assets, for Shares of FBR Maryland were 0.96% of
average daily net assets for the fiscal year ended October 31, 2005. MTBIA
has agreed to contractually waive all or a portion of its investment advisory
fee and other fees and/or reimburse certain operating expenses of MTB
Maryland in order to limit such Fund's total operating expenses to not more
than 0.85% of average daily net assets of its Class A Shares for the period
starting with the effective date of the Reorganization through April 30, 2008.
The total operating expenses, as a percentage of average net assets,
for Shares of FBR Virginia were 0.97% of average daily net assets for the
fiscal year ended October 31, 2005. MTB Virginia will commence operations on
the effective date of the reorganization. MTBIA has agreed to contractually
waive all or a portion of its investment advisory fee and other fees and/or
reimburse certain operating expenses of MTB Virginia in order to limit such
Fund's total operating expenses to not more than 0.90% of average daily net
assets of its Class A Shares for the period starting with the effective date
of the Reorganization through April 30, 2008. The total anticipated operating
expenses of MTB Virginia's Class A Shares before fee waivers and expense
reimbursements for the fiscal year ending April 30, 2006 are 2.44%.
Purchases, Redemptions and Exchange Procedures
The transfer agent and dividend disbursing agent for the MTB Funds is
Boston Financial Data Services, Inc. (BFDS). Services provided by BFDS
include the issuance, cancellation and transfer of the Funds' shares, and the
maintenance of records regarding the ownership of such shares. Integrated
provides transfer agency services to the FBR Funds.
Reference is made to the Prospectus of the MTB Funds dated November 7,
2005 and the Prospectus of the FBR Funds dated February 28, 2005 for a
complete description of the purchase, exchange and redemption procedures
applicable to purchases, exchanges and redemptions of the MTB and FBR Funds,
respectively, each of which is incorporated by reference thereto. Set forth
below is a brief description of the significant purchase, exchange and
redemption procedures applicable to the MTB Funds' shares and the FBR Funds'
shares.
Purchases
Purchases of shares of MTB Funds may be made directly with MTB Funds,
by wire or check once an account has been established, through M&T
Securities, Inc. or a financial intermediary. The purchase price of Class A
Shares of the MTB Funds is based on net asset value (NAV), plus any
applicable sales charges. However, FBR Fund shareholders will not be charged
these sales charges in connection with the Reorganizations or on additional
purchases of these shares. Additionally, shareholders of the FBR Funds who
received Class A Shares of an Acquiring Fund in connection with the
Reorganizations will not be subject to the sales charges on future purchases
of Class A Shares of any MTB Fund.
The maximum front-end sales charge applicable to Class A Shares of MTB
Maryland and MTB Virginia is 4.50%. A contingent deferred sales charge (CDSC)
of 1.00% of the redemption amount applies to each such Fund's Class A Shares
redeemed up to 18 months after purchase under certain investment programs
where (i) the amount of the purchase was $1 million or greater and thus not
subject to a front-end sales charge; and (ii) an investment professional
received an advance payment on the transaction.
The FBR Funds' shares are sold at NAV, without any front-end sales
charge or CDSC.
The following charts show the minimum initial and subsequent investment
amounts for the FBR Funds and Class A Shares of the MTB Funds:
Minimum Investments
Fund Initial Subsequent Retirement Systematic
Investment Plan
Plan Retirement Plan Investment
Investment Investment Investment Subsequent Minimum
Minimum Minimum Minimums* Investment Minimum (Initial/Subsequent)
------- ------- --------- --------------------
FBR Funds $2,000 None $1,000 None $500/$50
MTB Funds $500** $25 None NA $500/$25
*These Funds are generally not suitable for retirement plans.
**Initial Investment Minimums of the MTB Funds will be waived in
connection with consummation of the Reorganization.
Purchases of shares of the MTB Funds may be made through a financial
intermediary, directly from the Funds, through an exchange from the same
share class of another MTB mutual fund, or by systematic investments. The MTB
Funds reserve the right to reject any request to purchase or exchange shares.
Purchases of shares of the FBR Funds may be made through the transfer
agent, FBR Investment Services, Inc., an authorized broker-dealer or other
financial intermediaries authorized to receive orders.
The NAV for the Acquiring Funds is determined at the end of regular
trading of the NYSE, which is generally 4:00 p.m. (Eastern time) but may vary
due to market circumstances or other reasons on each day the NYSE is open.
The NAV for the Acquired Funds is computed daily as of the close of regular
trading on the NYSE (normally 4:00 p.m. Eastern time) on each day that the
NYSE is open.
Exchanges
Class A Shares of an MTB Fund may be exchanged for Class A Shares of
another MTB Fund at the NAV next determined after the Fund's receipt of the
exchange in proper form. If you exchange from an MTB Fund that has no sales
charge into an MTB Fund that imposes a sales charge, you will be subject to
the sales charge, unless you previously paid a sales charge on shares of an
MTB Fund and exchanged those shares into the MTB Fund that had no sales
charge. The exchange is subject to any minimum initial or subsequent minimum
investment amounts of the fund into which the exchange is being made, and is
treated as a sale of your shares for federal tax purposes. Holders of shares
of an Acquired Fund who receive Class A Shares of the corresponding Acquiring
Fund in connection with the Reorganization may exchange shares of the
Acquiring Fund, or any Class A Shares of another MTB Fund they subsequently
purchased, into Class A Shares of any other MTB Fund without paying a sales
charge.
Shareholders of the FBR Funds can exchange their shares for shares of
any other FBR Fund, but the proceeds of shares exchanged within 90 days of
purchase will be subject to a 1% redemption fee. The FBR Fund you are
exchanging into must be available for sale in your state and the registration
for both accounts must be identical. Exchanges will be effected at the
respective NAVs of the Funds involved as next determined after receipt of the
exchange request. The exchange privilege may be modified or withdrawn at any
time and is subject to certain limitations.
Redemptions
When the NYSE is open, redemptions of the MTB Funds may be made through
a financial intermediary or directly from the Funds, subject to daily cutoff
times. To redeem directly from the Fund, call the Fund at 1-800-836-2211. To
redeem by mail, send a written request to MTB Funds, P. O. Box 8477, Boston,
MA 02266-8477.
Redemptions of shares of the FBR Funds may be made through the transfer
agent, FBR Investment Services, Inc. (the FBR Distributor), selected
broker-dealers or other financial intermediaries authorized to receive
orders, by mail, telephone, exchange into another FBR mutual fund, or
systematic withdrawal.
Frequent Trading
Each of the MTB Funds' Board and the FBR Funds' Board has adopted
policies and procedures regarding frequent trading.
MTB Funds. Frequent or short-term trading into and out of a Fund can
have adverse consequences for the Fund and shareholders who use the Fund as a
long-term investment vehicle. Such trading in significant amounts can disrupt
the Fund's investment strategies (e.g., by requiring it to sell investments
at inopportune times or maintain excessive short-term or cash positions to
support redemptions), increase brokerage and administrative costs, and affect
the timing and amount of taxable gains distributed by the Fund. Investors
engaged in such trading may also seek to profit by anticipating changes in
the Fund's NAV in advance of the time as of which NAV is calculated or
through an overall strategy to buy and sell Shares in response to incremental
changes in the Fund's NAV.
The MTB Funds' Board has approved policies and procedures intended to
discourage excessive, frequent or short-term trading of the Funds' Shares.
The Funds' fair valuation procedures are intended in part to discourage
short-term trading strategies by reducing the potential for these strategies
to succeed. See "How are Shares Priced?" in the Prospectus for the Acquiring
Funds. The Funds also monitor trading in Shares in an effort to identify
disruptive trading activity. The Funds monitor trades into and out of the
Funds within a period of 30 days or less, where both the purchase and sale
are at least $100,000. The Funds may also monitor trades into and out of the
Funds over periods longer than 30 days. Whether or not the specific
monitoring limits are exceeded, the Funds' management or MTBIA may determine
from the amount, frequency or pattern of purchases and redemptions or
exchanges that a shareholder is engaged in excessive trading that is or could
be detrimental to the Funds and other shareholders and may preclude the
shareholder from making further purchases or exchanges of Shares. The Funds'
management and MTBIA may also take action to suspend further trading by a
financial intermediary if it is deemed to be engaged in excessive trading
and/or does not cooperate satisfactorily with requests for details about
trading activity. No matter how the Funds define their limits on frequent
trading of Shares, other purchases and sales of Shares may have adverse
effects on the management of a Fund's portfolio and its performance. Also, it
is possible that frequent trading may occur in the Funds without being
identified because certain investors may seek to hide their identity or
trading activity, or there may be operational or technical limitations that
limit the Funds' ability to monitor and restrict frequent trading.
The MTB Funds' objective is that their restrictions on short-term
trading should apply to all shareholders, regardless of the number or type of
accounts in which Shares are held. However, the Funds anticipate that
limitations on their ability to identify trading activity to specific
shareholders, including where shares are held through financial
intermediaries in multiple or omnibus accounts, will mean that these
restrictions may not be able to be applied uniformly in all cases. For
example, while the Funds will seek the cooperation of financial
intermediaries to enforce the Funds' policies on frequent trading, certain
intermediaries may be unwilling or unable to implement such policies.
Therefore, the Funds may be unable to uniformly monitor and restrict trading
activity through such intermediaries. Also, because certain of the Funds are
sold to participant-directed employee benefit plans, and there may be
regulatory constraints on the plans' ability to limit trading by the
individual participants, the Funds may not be able to effectively monitor or
restrict trading by these participants. (It should be noted that neither of
the Acquiring Funds are sold to employment benefit plans.)
MTBIA will provide to the Funds' Board a quarterly report of all
potential occurrences which were detected during the preceding quarter, and a
description of any action taken with respect thereto.
FBR Funds. The FBR Funds are intended for long-term investors and not
for those who wish to trade frequently in their shares. Frequent trading
into and out of a Fund can have adverse consequences for the Fund and
long-term shareholders. The FBR Funds believe that frequent or excessive
short-term trading activity by Fund shareholders may be detrimental to
long-term shareholders because those activities may, among other things, (a)
dilute the value of shares held by long-term shareholders, (b) cause the
Funds (other than the FBR Fund for Government Investors) to maintain a larger
cash position than each such Fund would otherwise need, (c) increase
brokerage commissions and related costs and expenses (such as custody and
administrative costs and expenses), and (d) incur additional tax liability.
To protect against such activity, the FBR Board has adopted policies and
procedures to curtail frequent or excessive short-term trading activity by
Fund shareholders.
In accordance with this policy, if you redeem or exchange shares within
90 days of purchasing them, the Funds will charge a redemption fee of 1% of
the amount redeemed. At the present time FBR Funds does not impose limits on
the frequency of purchases and redemptions, nor does it limit the number of
exchanges in a given period, but reserves the right to impose such measures
in the future. FBR Funds allows exchanges into any of the Funds. FBR Funds
reserves the right to modify, withdraw or impose certain limitations at any
time with respect to the exchange privilege. FBR Funds reserves the right to
modify the redemption fee to meet any regulatory requirements that may be
imposed in the future.
The 1% redemption fee on shares redeemed (including exchanges) within
90 days of purchase is deducted from the redemption proceeds, is payable to
the applicable Fund and is intended to offset out-of-pocket administrative
costs and portfolio transaction costs caused by short-term trading. To
calculate the redemption fee, the Funds will use the "first-in, first-out"
(FIFO) method to determine the holding period. Under this method, the date of
the redemption will be compared with the earliest purchase date of shares
held in the account. Subject to the advance approval of FBR Funds' chief
compliance officer, the redemption fee may be waived on certain exempt
transactions and accounts including (1) shares redeemed due to death or
disability of a shareholder; (2) transfer of assets within the same Fund; and
(3) shares redeemed in omnibus accounts of a financial intermediary, such as
a broker/dealer or retirement plan fiduciary, if those institutions have not
yet implemented the system requirements necessary to monitor and assess the
redemption fee on redemptions and exchanges of Fund shares of participants in
the omnibus accounts. FBR Funds expects that, over time, waivers with respect
to these omnibus accounts will be eliminated as operating systems are
improved to enable the assessment of the fee on shares held through these
types of accounts. However, there can be no guarantee this will occur.
Dividends and Other Distributions
The Acquiring Funds declare any dividends daily and pay them monthly to
shareholders. In addition, the Acquiring Funds pay any capital gains at least
annually. Unless a shareholder otherwise instructs, dividends and/or capital
gain distributions will be reinvested automatically in additional shares of
the Acquiring Funds at net asset value.
The Acquired Funds declare any dividends daily and pay them monthly to
shareholders. Capital gains distributions are paid at least annually. Unless
a shareholder elects to receive dividends and capital gains distributions in
cash, they will automatically be reinvested in additional shares of the
Acquired Funds.
It is anticipated that the Acquiring Funds' distributions will be
primarily dividends that are exempt from federal income tax, although a
portion of each Acquiring Fund's dividends may not be so exempt and/or may be
subject to AMT. Dividends may be subject to state and local taxes, although
each of these Acquiring Fund's dividends will be exempt from Maryland and
Virginia state personal income tax to the extent that they are derived from
interest on obligations exempt from Maryland or Virginia personal income
taxes, respectively. Capital gains and non-exempt dividends are taxable
whether paid in cash or reinvested in the Acquiring Funds. Redemptions and
exchanges are taxable sales. Investors should consult their tax adviser
regarding federal, state and local tax liability.
Any income dividends paid by FBR Maryland and FBR Virginia should
generally be exempt from federal income taxes, including AMT, and should also
be exempt from state income taxes for resident shareholders in Maryland or
Virginia, as applicable, and in certain cases, exempt from local taxes.
Distributions that are derived from net long-term capital gains generally
will be taxed as long-term capital gains. Dividend distributions and
short-term capital gains generally will be taxed as ordinary income.
INFORMATION ABOUT THE REORGANIZATIONS
Description of the Proposed Reorganizations
This summary is qualified in its entirety by reference to the two forms
of Plans found in Exhibits A and B. The Plans provide for the Reorganizations
to occur at the close of business on or about February 24, 2006 (the "Closing
Date"). The Plans provide that all of the assets of FBR Maryland and FBR
Virginia will be transferred to MTB Maryland and MTB Virginia, respectively,
at the close of business or at such other time as to which the Funds may
agree (the "Effective Time") on the Closing Date of the Reorganizations. In
exchange for the transfer of these assets, each Acquiring Fund will
simultaneously issue at the Effective Time of the Reorganization a number of
full and fractional shares of the Class A Shares of the Acquiring Fund to the
corresponding Acquired Fund equal in value to the aggregate net asset value
of the corresponding Acquired Fund calculated before the Effective Time of
the Reorganization, and MTB Virginia will assume all liabilities of FBR
Virginia.
Following the transfer of assets in exchange for shares of the
respective Acquiring Fund, each corresponding Acquired Fund will distribute
all the shares of the respective Acquiring Fund pro rata to its shareholders
of record in complete liquidation and termination of the corresponding
Acquired Fund. Shareholders of each Acquired Fund owning shares at the
Effective Time of the reorganization will receive a number of Class A Shares
of the corresponding Acquiring Fund with the same aggregate value as the
shareholder had in the Acquired Fund immediately before the Reorganizations.
Such distribution will be accomplished by the establishment of accounts in
the names of each Acquired Fund's shareholders on the share records of the
corresponding Acquiring Fund's transfer agent. Each account will receive the
respective pro rata number of full and fractional shares of the Acquiring
Fund due to the shareholders of the corresponding Acquired Fund. The Acquired
Funds will then be liquidated and terminated.
The MTB Funds do not issue share certificates to shareholders. Class A
Shares of each Acquiring Fund to be issued will have no preemptive or
conversion rights. No sales charges will be imposed in connection with the
receipt of such shares by the Acquired Funds' shareholders.
The Plans contain customary representations, warranties and conditions.
The Plans provide that the consummation of the Reorganizations with respect
to each Acquired Fund and the corresponding Acquiring Fund is conditioned
upon, among other things: (i) approval of the Reorganization by the relevant
Acquired Fund's shareholders; and (ii) the receipt by the FBR Funds and the
MTB Funds of a tax opinion to the effect that the Reorganization will be
tax-free to the Acquired Fund, its shareholders and the Acquiring Fund.
Either Plan may be terminated with respect to the Reorganization if, before
the Closing Date, any of the required conditions have not been met, the
representations and warranties are not true or the Board of FBR Funds or MTB
Funds, as the case may be, determines that the Reorganization is not in the
best interests of the shareholders of the Acquired Fund or the corresponding
Acquiring Fund, respectively. The Plan also provides that MMA and Friedman,
Billings, Ramsey Group Inc. will indemnify MTBIA and each Acquiring Fund in
certain circumstances as described in the attached Plans.
Costs of Reorganization. The expenses of each Reorganization will be
paid by MTBIA, MMA and their affiliates. Reorganization expenses include,
without limitation: (a) expenses associated with the preparation and filing
of this Prospectus/Proxy Statement; (b) postage; (c) printing; (d) accounting
fees; (e) legal fees incurred by each fund; (f) solicitation costs; and (g)
other related administrative or operational costs. Any registration or
licensing fee will be borne by the Acquiring Fund incurring such fee. Any
brokerage charges associated with the disposition by an Acquiring Fund, after
the Reorganization, of securities acquired by it from an Acquired Fund, will
be borne by the Acquiring Fund. MTB Virginia will pay for certain of its
initial start up costs, including state blue sky expenses.
Description of the Acquiring Funds' Shares and Capitalization
Class A Shares of the Acquring Funds to be issued to shareholders of
the corresponding Acquired Funds under the Plans will be fully paid and
non-assessable when issued, transferable without restriction and will have no
preemptive or conversion rights. Reference is hereby made to the Prospectus
of the MTB Funds provided herewith as Exhibit C for additional information
about the Class A Shares of the Acquiring Funds.
The following tables show the net assets of each Acquiring Fund and the
corresponding Acquired Fund as of October 31, 2005, and on a pro forma basis
as of that date:
MTB MARYLAND - FBR MARYLAND
The following table sets forth the unaudited capitalization of FBR
Maryland's shares into MTB Maryland's Class A Shares as of October 31, 2005:
MTB Maryland
MTB Maryland Municipal Bond
Municipal Bond Fund - Class A
FBR Maryland Fund -Class A Adjustments Shares
Tax-Free Portfolio Shares Pro Forma Combined
--------- ------ ------------------
Net Assets* $36,215,097 $17,490,941 ___ $53,706,038
Net Asset $10.96 $10.17 ___ $10.17
Value Per Share
Shares 3,305,688 1,719,848 255,285 5,280,821
Outstanding
*Does not reflect additional $96,348,470 assets of MTB Maryland
represented by other share classes.
MTB VIRGINIA - FBR VIRGINIA
The following table sets forth the unaudited capitalization of FBR
Virginia's shares into MTB Virginia's Class A Shares as of October 31, 2005:
MTB Virginia
MTB Virginia Municipal Bond
Municipal Bond Fund - Class A
FBR Virginia Fund -Class A Adjustments Shares
Tax-Free Portfolio Shares Pro Forma Combined
--------- ------ ------------------
Net Assets $25,107,418 NA ___ $25,107,418
Net Asset $11.17 NA ___ $11.17
Value Per Share
Shares 2,248,603 NA ___ 2,248,603
Outstanding
Federal Income Tax Consequences
As a condition to their Reorganization, MTB Maryland and FBR Maryland
will receive an opinion of counsel, each substantially to the effect that, on
the basis of the existing provisions of the Internal Revenue Code (Code) and
the regulations thereunder, current administrative rules and court decisions,
for federal income tax purposes:
o the Reorganization will qualify as a tax-free reorganization under Section
368(a)(1)(C) of the Code, and FBR Maryland and MTB Maryland each will be a
"party to a reorganization" within the meaning of Section 368(b) of the
Code;
o MTB Maryland will recognize no gain or loss upon its receipt of FBR
Maryland's assets in exchange solely for MTB Maryland's Class A Shares;
o FBR Maryland will recognize no gain or loss upon the transfer of its assets
to MTB Maryland in exchange solely for MTB Maryland's Class A Shares or the
distribution of MTB Maryland's Class A Shares, pro rata, to FBR Maryland's
shareholders in constructive exchange for their FBR Maryland's shares;
o the shareholders of FBR Maryland will recognize no gain or loss upon the
exchange of their FBR Maryland shares for MTB Maryland's Class A Shares;
o MTB Maryland's tax basis in each FBR Maryland asset it receives in the
Reorganization will be the same as FBR Maryland's tax basis in that asset
immediately prior to the Reorganization;
o MTB Maryland's holding period for each such asset will include the period
during which the asset was held by FBR Maryland;
o FBR Maryland's shareholder's aggregate tax basis in the shares of MTB
Maryland's Class A Shares received by each shareholder of FBR Maryland
pursuant to the Reorganization will be the same as the aggregate tax basis
of the shares of FBR Maryland held by such shareholder immediately prior to
the Reorganization; and
o FBR Maryland's shareholder's holding period for MTB Maryland's Class A
Shares it receives pursuant to the Reorganization will include the period
during which the shareholder held FBR Maryland shares exchanged therefor,
provided FBR Maryland shares were held as capital assets at the Effective
Time.
MTB Virginia and FBR Virginia will receive a similar opinion to the
same substantive effect, reciting minor factual distinctions arising from the
fact that their Reorganization will be governed by Section 368(a)(1)(F) of
the Code.
Each foregoing opinion may state that no opinion is expressed as to the
effect of either Reorganization on the Acquiring Fund, the Acquired Fund or
the Acquired Fund's shareholders with respect to any asset as to which
unrealized gain or loss is required to be recognized for federal income tax
purposes at the end of a taxable year (or on the termination or transfer
thereof) under a mark-to-market system of accounting.
It is not anticipated that there will be material sales of portfolio
securities by the FBR Funds or the MTB Funds in connection with the
Reorganizations.
Shareholders of the FBR Fund should consult their tax advisors
regarding the effect of the Reorganization in light of their individual
circumstances. Because the foregoing discussion only relates to the federal
income tax consequences of the Reorganization, those shareholders also should
consult their tax advisors about state and local tax consequences of the
Reorganization.
Before its Reorganization, FBR Maryland expects to distribute ordinary
income and realized capital gains, if any, to shareholders.
The following funds had the following tax basis appreciation or
(depreciation) as of each fund's fiscal year end.
- ---------------------------------------------------------------------------------
Fund (Fiscal Year Appreciation/(Depreciation Fund (Fiscal Appreciation/(Depreciation)
End) Year End)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
MTB Maryland $5,825,072 FBR Maryland $2,349,560
(4/30/05) (10/31/04)
- ---------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------
FBR Virginia $1,943,282
(10/31/04)
- ---------------------------------------------------------------------------------
The Reorganizations will not require either of the Acquired Funds to
dispose of a material portion of their portfolio securities prior to the
Reorganizations due to non-conformance of those securities with the
investment objectives, policies or limitations of the corresponding Acquiring
Fund, nor will the Reorganizations require either of the Acquiring Funds to
sell acquired portfolio securities, other than in the ordinary course of
business, in order to rebalance their portfolios to comply with the
prospectus limitations of the Acquiring Funds.
Agreement Among MTBIA, MMA and Friedman, Billings, Ramsey Group, Inc.
MMA/Friedman, Billings, Ramsey Group, Inc. and MTBIA have entered into
a definitive agreement (Agreement) regarding the sale by MMA/Friedman,
Billings, Ramsey Group, Inc. to MTBIA of certain assets relating to MMA's
business of providing investment advisory and investment management services
to the Acquired Funds and MMA's cooperation in the reorganization of the
Acquired Funds and related matters. Pursuant to the Agreement, MMA will
receive from MTBIA a lump sum payment on the closing date of the
Reorganization based primarily upon the net assets of the Acquired Funds.
Consummation of the agreement is conditioned upon, among other things,
shareholders of the Acquired Funds approving the Reorganization.
Reasons for the Reorganizations
MMA has determined to eliminate FBR Maryland and FBR Virginia from its
product lineup in order to concentrate on its core competency, which is the
management of equity funds. This decision was made for various reasons,
including the relatively low, and static, net asset level of FBR Maryland and
FBR Virginia; a structural change within MMA's parent organization, Friedman,
Billings, Ramsey Group, Inc., (FBR) which will effect an assignment of MMA's
advisory contracts to FBR Fund Advisers, Inc. (FBR Adviser); and a recent
change in ownership of FBR Maryland's and FBR Virginia's subadviser, Asset
Management, Inc. FBR considered various alternatives to the proposed
Reorganizations, including combining FBR Maryland and FBR Virginia with
portfolios of other mutual fund complexes, or liquidating them. MTB Maryland
and MTB Virginia were chosen following extensive due diligence undertaken by
FBR. FBR decided to recommend the proposed Reorganizations after
considering: (1) the (a) investment objectives, policies and limitations;
(b) historical investment performance; (c) investment advisory fees and other
expenses; (d) types of share classes; and (e) number of investment options
available to shareholders of the MTB Funds relative to the FBR Funds; and (2)
the capabilities, practices, resources and brand identification of MTBIA,
including its well-developed distribution network.
The FBR Adviser's recommendation was based on FBR's analysis that due
to the overall lower expense ratios, corresponding share classes that offer
no-load privileges, similar investment objectives and performance history (in
the case of MTB Maryland), the Acquiring Funds represent the best alternative
for the shareholders of the Acquired Funds. In addition, the proposed
Reorganizations would offer shareholders of the Acquired Funds: (1) the
opportunity to become part of a larger and more diverse family of 31 retail
mutual funds; (2) the opportunity to invest in potentially larger funds which
can spread relative fixed costs over a larger asset base; and (3) the
opportunity to invest in a family of mutual funds managed by an investment
adviser that has extensive investment management resources.
Consideration by the Board of FBR Funds
The Board of Trustees of FBR Funds considered the transactions at a
meeting held on October 25, 2005. The Board received, reviewed and discussed
a significant amount of information concerning MTBIA, the MTB Funds and the
proposed Reorganizations; met with representatives of MMA and MTBIA; and
considered the terms of the Reorganizations and its benefits to shareholders
of the Acquired Funds. After consultation with independent legal counsel,
the Board, including those members who are not "interested persons" (within
the meaning of the 1940 Act), unanimously approved the Plans and the proposed
Reorganizations with respect to the Acquired Funds and recommended their
approval by the shareholders of the Acquired Funds. In approving the
Reorganizations, the Board determined that participation in the
Reorganizations is in the best interests of the Acquired Funds and their
shareholders and that the economic interests of the shareholders of the
Acquired Funds would not be diluted as a result of the Reorganizations.
The Trustees considered the following matters, among others, in
approving the proposal:
o expense ratios and information regarding fees and expenses of the
Acquired Funds and the Acquiring Funds and, in particular,
although the management fees of the Acquiring Funds are higher
than those of the corresponding Acquired Funds, MTBIA has agreed
to contractually limit the Acquiring Funds' expenses so that net
expenses are lower than the net expenses of the corresponding
Acquired Fund;
o that although the Acquired Funds have no sales load and will be
converted into a class of Acquiring Fund shares with a sales
load, Acquired Fund shareholders will not incur such a load in
connection with the Reorganizations or in connection with future
purchases of shares corresponding to the Acquiring Funds;
o the relative investment performance of the Maryland Tax- Free
Portfolio as compared to the MTB Maryland Municipal Bond Fund;
o the similarity of investment objectives and strategies of the
Acquired Funds with those of the Acquiring Funds;
o the fact that neither the Acquired Funds nor the Acquiring Funds
will bear any of the fees and expenses of the Reorganizations
because the fees and expenses are being borne by each of the
advisers and their affiliates;
o the tax consequences of the Reorganization to the Acquired Funds
and their shareholders, including the tax-free nature of the
transaction; and
o that MTBIA has greater potential for increasing the size of the
Acquired Funds due to the resources that MTBIA has devoted to the
distribution of mutual funds and the marketing relationships it
has established and that over the long-term, if this potential
for a larger asset base is realized, it may reduce the Acquired
Funds' per share operating expenses and increase the portfolio
management options available to the Funds.
In addition, the Board of Trustees of the Acquired Funds considered
that the Reorganization presents an opportunity for the Acquiring Funds to
acquire substantial investment assets without the obligation to pay
commissions or other transactions costs that a fund normally incurs when
purchasing securities. The Board of Trustees also considered that the
Reorganizations presented the Acquired Funds with the opportunity to benefit
from MTBIA's investment experience and expertise in state tax-free investment
management.
Consideration by the Board of MTB Funds
The Board of Trustees of the MTB Funds met on November 2, 2005, to
receive information concerning the FBR Funds, to review this information and
to consider the terms of the proposed Reorganizations. After consultation
with legal counsel, the Board members present, including those members who
are not "interested persons" (within the meaning of the 1940 Act),
unanimously approved the Plans with respect to the Acquiring Funds. The
shareholders of the Acquiring Funds are not required to approve the
Reorganizations.
Section 15(f) of the 1940 Act
Section 15(f) of the 1940 Act provides that an investment
advisor/sub-advisor to a mutual fund (or its affiliates) may receive any
amount or benefit in connection with a sale of any interest in such advisor
which results in an assignment of an advisory contract if two conditions are
satisfied. One condition is that, for a period of three years after such
assignment, at least 75% of the board of trustees of the fund cannot be
"interested persons" of the new advisor or its predecessor. The second
condition is that no "unfair burden" be imposed on the investment company as
a result of the assignment or any express or implied terms, conditions or
understandings applicable thereto.
In connection with the first condition of Section 15(f), MTB Funds
currently meets this condition and expects to be able to continue meeting
this condition. With respect to the second condition of Section 15(f), an
"unfair burden" on a fund is defined in the 1940 Act to include any
arrangement during the two-year period after any such transaction occurs
whereby the investment advisor or its predecessor, or any interested person
of such advisor, predecessor, or successor, receives or is entitled directly
or indirectly to receive any compensation of two types. The first type is
compensation from any person in connection with the purchase or sale of
securities or other property to, from or on behalf of the fund, other than
bona fide ordinary compensation as principal underwriter for such fund. The
second type is compensation from the fund or its security holders for other
than bona fide investment advisory or other services.
As described above under "Summary - Advisory and Other Fee
Arrangements," MTBIA has agreed to contractually limit the overall expense
level of each Acquiring Fund through April 30, 2008. In addition, MMA and
Friedman, Billings, Ramsey Group, Inc. has each represented to the Board of
the MTB Funds, and MTBIA has represented to the Board of FBR Funds, that to
the best of their knowledge the reorganizations will not impose an unfair
burden on the Acquired Funds.
BASED ON THIS INFORMATION, THE FBR FUNDS BOARD UNANIMOUSLY RECOMMENDS THAT
THE SHAREHOLDERS OF EACH FBR FUND APPROVE THE RESPECTIVE REORGANIZATION.
Comparative Information on Shareholder Rights and Obligations
General. MTB Funds and FBR Funds each is an open-end management
investment company registered under the 1940 Act which continuously offers to
sell shares at their current net asset value (plus applicable sales charges
in the case of MTB Funds). MTB Funds and FBR Funds are both organized as
Delaware statutory trusts. MTB Funds and FBR Funds are both governed by their
respective Declarations of Trust, Bylaws and Boards of Trustees, in addition
to applicable state and federal law. The rights of shareholders of the MTB
Funds and the FBR Funds are set forth in the applicable Declaration of Trust
and Bylaws. Annex A to this Prospectus/Proxy Statement describes the
significant rights of shareholders of the MTB Funds and shareholders of the
FBR Funds.
PROPOSAL 3
Approval of the Payment of Escrowed Sub-Advisory Fees to Asset Management,
Inc.
(Each Acquired Fund Voting Separately)
Under this Proposal, shareholders of each of the Acquired Funds are
being asked to approve the payment of escrowed sub-advisory fees to Asset
Management, Inc. ("AMI"), the firm that served as sub-adviser to each of the
Acquired Funds until October 26, 2005. The escrowed fees are for the period
from November 1, 2004 through October 26, 2005 (the "Covered Period"). On
October 26, 2005, the assets of AMI were acquired by Chevy Chase Trust
Company ("CCTC") and CCTC assumed the sub-investment advisory duties with
respect to each of the Acquired Funds that were previously provided by AMI.
Former employees of AMI, including the portfolio managers for each of the
Acquired Funds, are currently employees of CCTC and they continue to provide
portfolio management services to the Acquired Funds as employees of CCTC.
As the Acquired Fund's sub-adviser during the Covered Period, AMI was
responsible for continually conducting investment research and supervision
for each of the Acquired Funds and was responsible for the purchase and sale
of each Acquired Fund's portfolio investments. AMI was registered as an
investment adviser with the SEC under the Investment Advisers Act of 1940
during the Covered Period. AMI was founded by the late Arthur A. Adler, Jr.
in 1977.
The Sub-Advisory Agreements between Money Management Advisers, Inc.
("MMA"), and AMI in existence prior to the Covered Period (the "Original
Agreements"), by their terms, and in accordance with relevant provisions of
the 1940 Act, were terminated upon the assignment of the contracts to the
Estate of Arthur Adler Jr. as a result of the death of Mr. Adler, the
controlling owner of AMI, which effected a change in control of AMI for
purposes of the 1940 Act. MMA and AMI then entered into Interim Sub-Advisory
Agreements (the "Interim Agreements") with respect to each of the Acquired
Funds effective as of November 1, 2004. Under these Interim Agreements,
amounts payable to AMI for sub-advisory services to each of the Acquired
Funds were held in escrow in an interest-bearing escrow account with each
Acquired Fund's custodian bank, pending shareholder approval of new
sub-investment advisory agreements with AMI. The escrow agent is authorized
to release the money in this escrow account to AMI after a majority of each
respective Acquired Funds' outstanding voting securities has approved such
new sub-advisory agreements with AMI. However, because a meeting of
shareholders of the Acquired Funds will not be held to consider such new
sub-advisory agreements and rather, as discussed more fully in Proposals 1
and 2 above, the Acquired Funds are each now proposed to be reorganized with
the MTB Funds, you are being asked to approve the payment of the escrowed
monies to AMI.
The Board of Trustees of the Acquired Funds approved the use of the
Interim Agreements even though the Interim Agreements had not received
shareholder approval based upon the Board's determination that the continued
use of AMI as sub-adviser to the Acquired Funds following the death of Mr.
Adler and during the administration of the Estate of Mr. Adler was in the
best interests of the shareholders of each of the Funds. The Board
considered, among other things, that: (1) AMI was skilled in managing the
types of tax-free municipal portfolio securities that are invested in by the
Acquired Funds, (2) AMI had performed well as sub-adviser under the Original
Agreements and the performance results achieved by AMI for each Fund were
consistent with their applicable benchmark indices, and (3) it was therefore
reasonable and beneficial to retain the services of AMI while the Estate of
Mr. Adler was being administered and action with respect to the ultimate
disposition of AMI by the Estate of Mr. Adler was pending.
AMI, relying on equitable principles, has sought approval from the
Board of Trustees to allow AMI to be paid all of the escrowed amounts
(including interest earned), as compensation for services provided to the
Acquired Funds for the Covered Period. With respect to FBR Virginia, the
amount of the escrowed fees is $47,085.44. With respect to FBR Maryland the
amount of the escrowed fees is $68,449.98. The Board of Trustees has
indicated its willingness to approve the payment of the escrowed fees to AMI,
subject to shareholder approval. In approving such payments, the Trustees,
including the Independent Trustees who were represented by independent legal
counsel (as defined in the 1940 Act), reviewed the legal issues presented to
the Board in connection with the proposed payment. Among other things, the
Trustees considered that:
o the 1940 Act permits a court to enforce a contract that otherwise
violates the 1940 Act or rules hereunder should the court determine
that such enforcement would produce a more equitable result than
non-enforcement and would not be inconsistent with the underlying
purposes of the 1940 Act;
o should Board or shareholder approval be withheld, AMI will likely seek
to retain some or all of these payments (and be paid some or all of the
escrowed payments) through legal action on the grounds that it would be
unjust to withhold payments for services rendered under the Interim
Agreements; and
o the Acquired Funds and their shareholders have experienced no economic
harm during the applicable period when AMI served as sub-adviser to the
Funds under the Interim Agreements, and the amounts that were paid and
escrowed would have been no more than what the Acquired Funds would
have paid had the Original Agreements remained in effect.
Accordingly, the Board is requesting that shareholders of each of the
Acquired Funds approve the request for the payment of the subject escrowed
fees. The Board has determined that it is reasonable to pay AMI such fees,
subject to shareholder approval. In the event that shareholders do not
approve Proposal 3, the Board of Trustees of FBR Funds will determine what
course of action to take with respect to the escrowed payments.
THE BOARD OF TRUSTEES OF FBR FUNDS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE RELEASE OF THE ESCROWED SUB-ADVISORY FEES
PROPOSAL 4
Approval of the Payment of Escrowed Sub-Advisory Fees to Chevy Chase Trust
Company
(Each Acquired Fund Voting Separately)
Under this Proposal, shareholders of each of the Acquired Funds are
being asked to approve the payment of escrowed sub-advisory fees to Chevy
Chase Trust Company ("CCTC"), the current sub-adviser to each of the Acquired
Funds, for the period since October 27, 2005 (the "Covered Period"). On
October 26, 2005, CCTC acquired the assets of AMI, Inc., the firm that
previously served as sub-adviser to the Acquired Funds, and CCTC assumed the
sub-investment advisory duties with respect to each of the Acquired Funds
that were previously provided by AMI. Former employees of AMI, including the
portfolio managers for each of the Acquired Funds, are currently employees of
CCTC and they continue to provide portfolio management services to the
Acquired Funds as employees of CCTC.
As the Acquired Funds' sub-adviser, CCTC is responsible for continually
conducting investment research and supervision for each of the Acquired
Funds and is responsible for the purchase and sale of each Acquired Fund's
portfolio investments. CCTC is registered as an investment adviser with the
SEC under the Investment Advisers Act of 1940.
At its meeting held on October 25, 2005, the Board of Trustees of the
Acquired Funds approved Interim Sub-Advisory Agreements with CCTC (the "CCTC
Interim Agreements") in connection with CCTC's acquisition of the assets of
AMI. The acquisition of the assets of AMI by CCTC effected a change in
control of AMI for purposes of the 1940 Act, and the existing interim
sub-advisory agreements with AMI then in effect with respect to each of the
Acquired Funds (the "AMI Interim Agreements") were terminated upon the
assignment of these contracts to CCTC. Under the CCTC Interim Agreements,
amounts payable to CCTC for sub-advisory services to each of the Acquired
Funds are currently being held in escrow in an interest-bearing escrow
account with each Acquired Fund's custodian bank, pending shareholder
approval of new sub-investment advisory agreements with CCTC. The escrow
agent is authorized to release the money in this escrow account to CCTC after
a majority of each respective Acquired Funds' outstanding voting securities
has approved such new sub-advisory agreements with CCTC. However, because a
meeting of shareholders of the Acquired Funds will not be held to consider
such new sub-advisory agreements with CCTC and rather, as discussed more
fully in Proposals 1 and 2 above, the Acquired Funds are each now proposed to
be reorganized with the MTB Funds, you are being asked to approve the payment
of the escrowed monies to CCTC.
The Board of Trustees of the Acquired Funds approved the use of the
CCTC Interim Agreements even though the CCTC Interim Agreements had not
received shareholder approval based upon the Board's determination that the
use of CCTC as sub-adviser to the Acquired Funds following CCTC's acquisition
of the assets of AMI was in the best interests of the shareholders of each of
the Funds. The Board considered, among other things, that: (1) the former
employees of AMI, including the portfolio managers to the Acquired Funds, had
become employees of CCTC and would be able to continue providing portfolio
management services to the Acquired Funds while employed at CCTC; (2) the
Board wished to provide for the continued management and operation of the
assets of the Acquired Funds while it made the necessary arrangements for the
reorganization of the Acquired Funds with the MTB Funds; and (3) it was
therefore reasonable and beneficial to retain the services of CCTC as
successor to AMI in order to assure the continued management and operations
of the Acquired Funds pending their reorganization.
CCTC, relying on equitable principles, has sought approval from the
Board of Trustees to allow CCTC to be paid all of the escrowed amounts
(including interest earned), as compensation for services to the Acquired
Funds for the Covered Period. With respect to FBR Virginia, the amount of
the escrowed fees expected to be paid to CCTC is estimated to be
approximately $15,000, based upon the current net assets of that Fund and the
anticipated closing of the reorganization transaction with MTB Virginia on or
about February 24, 2006. With respect to FBR Maryland, the amount of the
escrowed fees expected to be paid to CCTC is estimated to be approximately
$20,000, based upon the current net assets of that Fund and the anticipated
closing of the reorganization transaction with MTB Maryland on or about
February 24, 2006. The Board of Trustees has indicated its willingness to
approve the payment of the escrowed fees to CCTC, subject to shareholder
approval. In approving such payments, the Trustees, including the
Independent Trustees who were represented by independent legal counsel (as
defined in the 1940 Act), reviewed the legal issues presented to the Board in
connection with the proposed payment. Among other things, the Trustees
considered that:
o the 1940 Act permits a court to enforce a contract that otherwise violates
the 1940 Act or rules hereunder should the court determine that such
enforcement would produce a more equitable result than non-enforcement and
would not be inconsistent with the underlying purposes of the 1940 Act;
o should Board or shareholder approval be withheld, CCTC may seek to retain
some or all of these payments (and be paid some or all of the escrowed
payments) through legal action on the grounds that it would be unjust to
withhold payments for services rendered under the CCTC Interim Agreements;
and
o the Acquired Funds and their shareholders have experienced no economic harm
during the applicable period while CCTC has been serving as sub-adviser to
the Acquired Funds under the CCTC Interim Agreements.
Accordingly, the Board is requesting that shareholders of each of the
Acquired Funds approve the request for the payment of the subject escrowed
fees. The Board has determined that it is reasonable to pay CCTC such fees,
subject to shareholder approval. In the event that shareholders do not
approve Proposal 3, the Board of Trustees of FBR Funds will determine what
course of action to take with respect to the escrowed payments.
THE BOARD OF TRUSTEES OF FBR FUNDS UNANIMOUSLY RECOMMENDS THAT YOU VOTE FOR
THE RELEASE OF THE ESCROWED SUB-ADVISORY FEES
INFORMATION ABOUT THE MTB FUNDS AND THE FBR FUNDS
Information concerning the operation and management of the Acquiring
Funds is included in their current prospectus, which is incorporated herein
by reference and which accompanies this Prospectus/Proxy Statement as Exhibit
C. Additional information about the Acquiring Funds is included in the
Statement of Additional Information for the Acquiring Funds dated November 7,
2005, which is available upon request and without charge by calling
1-800-836-2211.
Information about the Acquired Funds is included in their current
prospectus dated February 28, 2005, which is incorporated by reference
herein. Additional information is included in the Statement of Additional
Information of the Acquired Funds dated February 28, 2005, which is available
upon request and without charge by calling 1-888-888-0025. The Acquired
Funds' current prospectus and Statement of Additional Information have been
filed with the SEC.
The MTB Funds and the FBR Funds are each subject to the informational
requirements of the Securities Act of 1933, the Securities Exchange Act of
1934, and the 1940 Act, and in accordance therewith files reports and other
information with the Securities and Exchange Commission. These items can be
obtained by calling or writing the MTB Funds or the FBR Funds and can also be
inspected and copied by the public at the public reference facilities
maintained by the Securities and Exchange Commission in Washington, DC
located at Room 1580, 100 F Street, N.E., Washington, DC 20549 and at certain
of its regional offices located at 175 West Jackson Boulevard, Suite 900,
Chicago, Illinois 60604 and 233 Broadway, New York, NY 10279. Copies of such
material can be obtained at prescribed rates from the Public Reference
Branch, Office of Consumer Affairs and Information Services, Securities and
Exchange Commission, Washington, DC 20549, or obtained electronically from
the Securities and Exchange Commission's Internet website
(http://www.sec.gov).
Fiscal Year End and Financial Statements. The fiscal year end of each
Acquiring Fund is April 30, and the fiscal year end of each FBR Fund is
October 31.
The financial statements of the Acquired Funds contained in the FBR
Funds' annual report to shareholders for the fiscal year ended October 31,
2004 have been audited by Tait, Weller and Baker, their independent
registered public accounting firm. These financial statements for the
Acquired Funds, together with the unaudited financial statements contained in
the Acquired Funds' Semi-Annual Report to Shareholders for the six months
ended April 30, 2005, are incorporated by reference into this
Prospectus/Proxy Statement insofar as such financial statements relate to the
FBR Funds participating in the Reorganizations and not to any other FBR Funds
that are part of the FBR Funds and described therein.
The financial statements of the MTB Funds contained in the MTB Funds'
Annual Report to Shareholders for the fiscal year ended April 30, 2005 have
been audited by Ernst & Young LLP, their independent registered public
accounting firm. These financial statements for the MTB Funds are
incorporated by reference into this Prospectus/Proxy Statement insofar as
such financial statements relate to the Acquiring Funds participating in the
Reorganizations, and not to any other MTB Funds that are part of the MTB
Funds and described therein.
INFORMATION ABOUT THE PROXY SOLICITATION AND THE SPECIAL MEETING
The cost of the solicitation, including the printing and mailing of
proxy materials, will be borne by MTBIA and MMA or their affiliates, and not
by the MTB Funds or the FBR Funds. In addition to solicitations through the
mail, proxies may be solicited by officers, employees, and agents of each
Fund, or, if necessary, a communications firm retained for this purpose.
Such solicitations may be by telephone, internet or otherwise. Any
telephonic solicitations will follow procedures designed to ensure accuracy
and prevent fraud, including requiring identifying shareholder information,
recording the shareholder's instructions, and confirming to the shareholder
after the fact. Shareholders who communicate proxies by telephone or by
other electronic means have the same power and authority to issue, revoke, or
otherwise change their voting instructions as shareholders submitting proxies
in written form. MTBIA and MMA or their affiliates may reimburse custodians,
nominees, and fiduciaries for the reasonable costs incurred by them in
connection with forwarding solicitation materials to the beneficial owners of
shares held of record by such persons.
The purpose of the Special Meeting is set forth in the accompanying
Notice. The Board of Trustees of the FBR Funds knows of no business other
than that mentioned in the Notice that will be presented for consideration at
the Special Meeting. Should other business properly be brought before the
Special Meeting, proxies will be voted in accordance with the best judgment
of the persons named as proxies. This Prospectus/Proxy Statement and the
enclosed proxy card are expected to be mailed on or about January 17, 2006,
to shareholders of record at the close of business on January 6, 2006 (the
"Record Date").
The Annual Report for the FBR Funds, which contains audited financial
statements for the fiscal year ended October 31, 2004; and the Semi-Annual
Report for the FBR Funds, which contains unaudited financial statements for
the six-month period ended April 30, 2005, were previously mailed to
shareholders. The MTB Funds or the FBR Funds, as the case may be, will
promptly provide, without charge and upon request, to each person to whom
this Prospectus/Proxy Statement is delivered, a copy of the Annual Report for
the MTB Funds, which contains audited financial statements for the fiscal
year ended April 30, 2005 and the Annual Report and/or the Semi-Annual Report
for the FBR Funds. Requests may be made in writing to the MTB Funds' and the
FBR Funds' principal executive offices or by calling the MTB Funds or the FBR
Funds. The principal executive offices for the MTB Funds and FBR Funds are
located at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237 and 1001
Nineteenth Street North, Arlington, VA 22209, respectively. The MTB Funds'
toll-free telephone number is 1-800-836-2211 and FBR Funds' toll-free
telephone number is 1-888-888-0025.
Only shareholders of record on the Record Date will be entitled to vote
at the Special Meeting. Each share of the Acquired Funds is entitled to one
vote on the matters that pertain to their Acquired Fund. Fractional shares
are entitled to proportionate shares of one vote. The votes of shareholders
of the Acquiring Funds are not being solicited since their approval is not
required in order to effect each Reorganization.
Any person giving a proxy has the power to revoke it any time prior to
its exercise by executing a superseding proxy or by submitting a
written notice of revocation to the Secretary of the FBR Funds. In addition,
although mere attendance at the Special Meeting will not revoke a proxy, a
shareholder present at the Special Meeting may withdraw his or her proxy and
vote in person. All properly executed and unrevoked proxies received in time
for the Special Meeting will be voted in accordance with the instructions
contained in the proxies. If no instruction is given on the proxy, the
persons named as proxies will vote the shares represented thereby in favor of
the matter set forth in the attached Notice.
Each Acquired Fund will vote separately on the approval of its
respective Plan (Proposals 1 and 2, respectively) and each Acquired Fund will
vote separately on both the approval of the payment of escrowed sub-advisory
fees to AMI (Proposal 3) and the payment of escrowed sub-advisory fees to
CCTC (Proposal 4). In order to hold the Special Meeting with respect to an
FBR Fund, a "quorum" of shareholders of that Fund must be present. Holders
of at least one-third of the total number of shares of the Acquired Fund
outstanding as of the Record Date, present in person or by proxy, shall be
required to constitute a quorum for the purpose of voting on the proposal
relating to that Fund.
Approval of the Reorganization with respect to an Acquired Fund
requires the vote of a majority of the shares voted of such Acquired Fund.
In the event that shareholders of one Acquired Fund do not approve the Plan,
the Reorganization will proceed with respect to the Acquired Fund that has
approved the Plan, subject to the other conditions in the Plan having been
met.
Approval of both the payment of escrowed sub-advisory fees to AMI and
the payment of escrowed sub-advisory fees to CCTC requires the vote of a
"majority of the outstanding voting securities" of each Fund, as defined in
and required by the 1940 Act. This vote requires the lesser of (a) 67% or
more of the voting securities of the Acquired Fund present at the meeting, if
the holders of more than 50% of the outstanding voting securities of such
Acquired Fund are present or represented by proxy; or (b) more than 50% of
the outstanding voting securities of such Acquired Fund.
For purposes of determining a quorum for transacting business at the
Special Meeting, abstentions and broker "non-votes" (that is, proxies from
brokers or nominees indicating that such persons have not received
instructions from the beneficial owner or other persons entitled to vote
shares on a particular matter with respect to which the brokers or nominees
do not have discretionary power) will be treated as shares that are present
but which have not been voted. For this reason, abstentions and broker
non-votes will have the effect of a "no" vote for purposes of obtaining the
requisite approval of each proposal.
If a quorum for the Special Meeting of an Acquired Fund is not present,
the persons named as proxies may vote those proxies that have been received
to adjourn the Special Meeting to a later date. In the event that a quorum
is present but sufficient votes in favor of the proposal have not been
received, the persons named as proxies may propose one or more adjournments
of the Special Meeting to permit further solicitations of proxies with
respect to the proposal. All such adjournments will require the affirmative
vote of a majority of the shares present in person or by proxy at the session
of the Special Meeting to be adjourned. The persons named as proxies will
vote AGAINST an adjournment those proxies that they are required to vote
against the proposal, and will vote in FAVOR of such an adjournment all other
proxies that they are authorized to vote. A shareholder vote may be taken on
the proposal in this Prospectus/Proxy Statement prior to any such adjournment
if sufficient votes have been received for approval.
SHARE OWNERSHIP OF THE FUNDS AND CERTAIN INTERESTS
MTB Maryland
As of the Record Date, the Officers and Trustees of the MTB Funds owned
less than 1% of MTB Maryland's outstanding Class A Shares.
At the close of business on the Record Date, the following persons
owned beneficially or of record as indicated, to the knowledge of management,
more than 5% of the outstanding Class A Shares of MTB Maryland:
Class A Shares - ______________.
Upon consummation of the Reorganization, such persons would own shares
as follows based upon information as of the Record Date:
Class A Shares - _______________.
MTB Virginia
As of the Record Date, there were no shares outstanding.
FBR Maryland
As of the Record Date, there were _____ shares outstanding of FBR
Maryland, and the Officers and Trustees of FBR Funds, as a group, owned less
than 1% of the outstanding shares of FBR Maryland.
At the close of business on the Record Date, the following persons
owned beneficially or of record as indicated, to the knowledge of management,
more than 5% of the outstanding shares of FBR Maryland:
- --------------.
Upon consummation of the Reorganization, such persons would own shares
as follows based upon information as of the Record Date:
- ---------------.
FBR Virginia
As of the Record Date, there were _____ shares outstanding of FBR
Virginia, and the Officers and Trustees of FBR Funds, as a group, owned less
than 1% of the outstanding shares of FBR Virginia.
At the close of business on the Record Date, the following persons
owned beneficially or of record as indicated, to the knowledge of management,
more than 5% of the outstanding shares of FBR Virginia:
- --------------.
Because MTB Virginia does not expect to issue shares prior to the
consummation of the Reorganization, the foregoing shareholders would own the
same share amounts and percentages of Class A Shares of MTB Virginia based
upon information as of the Record Date.
Shareholders owning 25% or more of outstanding shares may be able to
affect the outcome of certain matters presented for vote of shareholders.
OTHER MATTERS AND DISCRETION OF PERSONS NAMED IN THE PROXY
The FBR Funds are not required, and do not intend, to hold regular
annual meetings of shareholders. Shareholders wishing to submit proposals
for consideration for inclusion in a Proxy Statement for the next meeting of
shareholders should send their written proposals to The FBR Funds, 1001
Nineteenth Street North, Arlington, VA 22209, so that they are received
within a reasonable time before any such meeting.
No business other than the matters described above is expected to come
before the Special Meeting, but should any other matter requiring a vote of
shareholders arise, including any question as to an adjournment or
postponement of the Special Meeting, the persons named on the enclosed proxy
card will vote on such matters according to their best judgment in the
interests of the FBR Funds.
- ------------------------------------------------------------------------------
SHAREHOLDERS ARE REQUESTED TO COMPLETE, DATE AND SIGN THE ENCLOSED PROXY CARD
AND RETURN IT IN THE ENCLOSED ENVELOPE, WHICH NEEDS NO POSTAGE IF MAILED IN
THE UNITED STATES.
- ------------------------------------------------------------------------------
ANNEX A
CATEGORY MTB FUNDS FBR FUNDS
- -------- --------- ---------
Preemptive Rights None None
Preferences None Subject to the further
provisions of the
Declaration of Trust and
any applicable
requirements of the 1940
Act, the Trustees shall
have full power and
authority, in their sole
discretion, and without
obtaining any
authorization or vote of
the Shareholders of any
Series or Class thereof,
to establish and designate
and change in any manner
any Series or Class
thereof and fix such
preferences, voting
powers, rights, duties and
privileges and business
purpose of each Series or
Class thereof as the
Trustees may from time to
time determine, which
preferences, voting
powers, rights, duties and
privileges may be senior
or subodinate to (or in
the case of business
purpose, different from)
any existing Series or
Class thereof and may be
limited to specified
property or obligations of
the Trust of profits and
losses associated with
specified property or
obligations of the Trust,
provided, however, that
the Trustees may not
change Outstanding Shares
in a manner materially
adverse to Shareholders of
such Shares.
Annual Meetings There shall be no annual There shall be no annual
Shareholders' meetings. A Shareholders' meetings
meeting of the except as required by law.
shareholders may be called Special meetings of the
at any time by the Board, Shareholders of the Trust
by the chairperson of the or of any Series or Class
Board or by the president may be called at any time
for the purpose of by the Trustees or by the
electing trustees as President or the Secretary
provided in these By-Laws for the purpose of taking
or for the purpose of action upon any matter
taking action upon any requiring the vote or
other matter deemed by the authority of the
Board to be necessary or Shareholders of the Trust
desirable. or of any Series or Class
as provided in the By-Laws
or Declaration of Trust or
upon any other matter as
to which such vote or
authority is deemed by the
Trustees or the President
to be necessary or
desirable.
Right to Call None, except as may be Meetings of the
Shareholder Meetings required by Section 16 of Shareholders of the Trust
the 1940 Act. or of any Series or Class
may be called for any
purpose deemed necessary
or desirable upon the
written request of the
Shareholders holding at
least ten percent (10%) of
the outstanding Shares of
the Trust entitled to vote
at such meeting, provided
that (1) such request
shall state the purposes
of such meeting and the
matters proposed to be
acted on, and (2) the
Shareholders requesting
such a meeting shall have
paid to the Trust the
reasonably estimated cost
of preparing and mailing
the notice thereof, which
the Secretary shall
determine and specify to
such Shareholders.
Notice of Meetings All notices of meetings of All notices of meetings of
shareholders shall be sent Shareholders shall be sent
or otherwise given in or otherwise given to
accordance with Section 4 Shareholders in accordance
of the Amended and with Section 4 of the
Restated By-Laws not less By-Laws not less than ten
than seven (7) nor more (10) nor more than ninety
than ninety-three (93) (90) days before the date
days before the date of of the meeting. The notice
the meeting. The notice shall specify (i) the
shall specify (i) the place, date and hour of
place, date and hour of the meeting, and (ii) the
the meeting, and (ii) the general nature of the
general nature of the business to be
business to be transacted. transacted. Except as
The notice of any meeting provided in the
at which trustees are to Declaration of Trust, any
be elected also shall action that may be taken
include the name of any at any meeting of
nominee or nominees who at Shareholders may be taken
the time of the notice are without a meeting and
intended to be presented without prior notice if a
for election. Except with consent in writing setting
respect to adjournments as forth the action to be
provided herein, no taken is signed by the
business shall be holders of outstanding
transacted at such meeting Shares having not less
other than that specified than the minimum number of
in the notice. Any action votes that would be
which may be taken at any necessary to authorize or
meeting of Shareholders take that action at a
may be taken without a meeting at which all
meeting and without prior Shares entitled to vote on
notice if a consent in that action were present
writing setting forth the and voted provided,
action so taken is signed however, that the
by the holders of Shares Shareholders receive any
having not less than the necessary Information
minimum number of votes Statement or other
that would be necessary to necessary documentation in
authorize or take that conformity with the
action at a meeting at requirements of the
which all Shares entitled Securities Exchange Act of
to vote on that action 1934 or the rules or
were present and voted. regulations thereunder.
Record Date for Meetings determining the determining the
Shareholders entitled to Shareholders entitled to
notice of any meeting or vote or act at any meeting
to vote or entitled to or adjournment or
give consent to action postponement thereof, the
without a meeting, the Trustees may fix in
Board of Trustees may fix advance a record date
in advance a record date which shall not be more
which shall not be more than ninety (90) days nor
than one hundred eighty less than ten (10) days
(180) days nor less than before the date of any
seven (7) days before the such meeting. Without
date of any such meeting. fixing a record date for a
If the Board of Trustees meeting, the Trustees may
does not so fix a record for voting and notice
date, the record date for purposes close the
determining Shareholders register or transfer books
entitled to notice of or for one or more Series (or
to vote at a meeting of Classes) for all or any
Shareholders shall be at part of the period between
the close of business on the earliest date on which
the business day before a record date for such
the notice is given or, if meeting could be set in
notice is waived, at the accordance herewith and
close of business on the the date of such meeting.
business day which is five If the Trustees do not so
(5) business days before fix a record date or close
the day on which the the register or transfer
meeting is held. books of the affected
Series or Classes, the
record date for
determining Shareholders
entitled to notice of or
to vote at a meeting of
Shareholders shall be the
close of business on the
business day next
preceding the day on which
notice is given or, if
notice is waived, at the
close of business on the
business day next
preceding the day on which
the meeting is held.
Quorum for Meeting Except when a larger Except when a larger
quorum is required by quorum is required by
applicable law, by the applicable law, by the
By-Laws or by the By-Laws or by the
Declaration of Trust, Declaration of Trust,
thirty-three and one-third thirty-three and one-third
percent (33-1/3%) of the percent (33-1/3%) of the
Shares present in person Shares entitled to vote
or represented by proxy shall constitute a quorum
and entitled to vote at a at a Shareholders'
Shareholders' meeting meeting. When any one or
shall constitute a quorum more Series (or Classes)
at such meeting. When a is to vote as a single
separate vote by one or Class separate from any
more Series or classes is other Shares, thirty-three
required, thirty-three and and one-third percent
one-third percent (33-1/3%) of the Shares of
(33-1/3%) of the Shares of each such Series (or
each such Series or class Class) entitled to vote
present in person or shall constitute a quorum
represented by proxy and at a Shareholders' meeting
entitled to vote shall of that Series (or Class).
constitute a quorum at a
Shareholders' meeting of
such Series or class.
Election of Trustees The Shareholders may elect The Shareholders may elect
Trustees, including Trustees at any meeting of
filling any vacancies in Shareholders called by the
the Board of Trustees, at Trustees for that purpose.
any meeting of
Shareholders called by the
Board of Trustees for that
purpose. A meeting of
Shareholders for the
purpose of electing one or
more Trustees may be
called by the Board of
Trustees or, to the extent
provided by the 1940 Act
and the rules and
regulations thereunder, by
the Shareholders.
Adjournment of Meetings Any shareholders' meeting, Any meeting of
whether or not a quorum is Shareholders, whether or
present, may be adjourned not a quorum is present,
from time to time (and at may be adjourned from time
any time during the course to time by the vote of the
of the meeting) by a majority of the Shares
majority of the votes cast represented at that
by those shareholders meeting, either in person
present in person or by or by proxy.
proxy, or by the
chairperson of the
meeting. Any adjournment
may be with respect to one
or more proposals, but not
necessarily all proposals,
to be voted or acted upon
at such meeting and any
adjournment will not delay
or otherwise affect the
effectiveness and validity
of a vote or other action
taken at a shareholders'
meeting prior to
adjournment.
Removal of Trustees by Shareholders shall have Any Trustee may be removed
Shareholders the power to remove a with or without cause at
Trustee only to the extent any meeting of
provided by the 1940 Act Shareholders by a vote of
and the rules and two-thirds of the
regulations thereunder. Outstanding Shares of the
Trust.
Personal Liability of The Trustees, officers, A Trustee, when acting in
Trustees employees and agents of such capacity, shall not
the Trust, in incurring be personally liable to
any debts, liabilities or any person other than the
obligations, or in Trust or a beneficial
limiting or omitting any owner for any act,
other actions for or in omission or obligation of
connection with the Trust, the Trust or any Trustee.
are or shall be deemed to A Trustee shall not be
be acting as Trustees, liable for any act or
officers, employees or omission or any conduct
agents of the Trust and whatsoever in his capacity
not in their own as Trustee, provided that
capacities. Subject to nothing contained herein
Sections 3 and 5 of or in the Delaware Act
Article VII of the Amended shall protect any Trustee
and Restated Agreement and against any liability to
Declaration of Trust, no the Trust or to
Trustee, officer, employee Shareholders to which he
or agent of the Trust would otherwise be subject
shall be subject to any by reason of willful
personal liability misfeasance, bad faith,
whatsoever in tort, gross negligence or
contract, or otherwise, to reckless disregard of the
any other Person or duties involved in the
Persons in connection with conduct of the office of
the assets or affairs of Trustee hereunder.
the Trust or of any Series
or class, save only that
arising from his or her
own willful misfeasance,
bad faith, gross
negligence or reckless
disregard of the duties
involved in the conduct of
his or her office or the
discharge of his or her
duties.
Personal Liability of No Shareholder shall be No Shareholder shall be
Shareholders subject to any personal personally liable for the
liability whatsoever in debts, liabilities,
tort, contract or obligations and expenses
otherwise to any other incurred by, contracted
Person or Persons in for, or otherwise existing
connection with the assets with respect to, the Trust
or the affairs of the or any Series or Class.
Trust or any Series or Neither the Trust nor the
class. Trustees, nor any officer,
employee, or agent of the
Trust shall have any power
to bind personally any
Shareholders, nor, except
as specifically provided
herein, to call upon any
Shareholder for the
payment of any sum of
money or assessment
whatsoever other than such
as the Shareholder may at
any time personally agree
to pay. Shareholders shall
have the same limitation
of personal liability as
is extended to
shareholders of a private
corporation for profit
incorporated in the State
of Delaware.
Number of Authorized The beneficial interest in The beneficial interest in
Shares; Par Value the Trust shall at all the Trust shall be divided
times be divided into into one or more Series.
Shares, all without par The Trustees may divide
value. The number of each Series into one or
Shares authorized more Classes. Subject to
hereunder is unlimited. the further provisions of
the Declaration of Trust
and any applicable
requirements of the 1940
Act, the Trustees shall
have full power and
authority, in their sole
discretion, and without
obtaining any
authorization or vote on
the Shareholders of any
Series or Class thereof,
to divide the beneficial
interest in each Series or
Class thereof into Shares,
with or without par value
as the Trustees shall
determine; and issue
Shares without limitation
as to number (including
fractional Shares) to such
Persons and for such
amount and type of
consideration, subject to
any restriction set forth
in the By-Laws, including
cash or securities, at
such time or times and on
such terms as the Trustees
may deem appropriate.
EXHIBIT A
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this ____ day of _______, 2005, by and between MTB Group of Funds, a
Delaware statutory trust, with its principal place of business at 5800
Corporate Drive, Pittsburgh, PA, 15237 (the "MTB Trust"), with respect to MTB
Maryland Municipal Bond Fund (the "Acquiring Fund"), a series of the MTB
Trust, and The FBR Funds, a Delaware statutory trust, with its principal
place of business at 1001 Nineteenth Street North, Arlington, VA 22209 (the
"FBR Trust"), with respect to FBR Maryland Tax-Free Portfolio, a series of
the FBR Trust ("Acquired Fund" and, collectively with the Acquiring Fund, the
"Funds").
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368 of the United States
Internal Revenue Code of 1986, as amended (the "Code") and the Treasury
Regulations promulgated thereunder. The reorganization will consist of:
(i) the transfer of all of the assets of the Acquired Fund in exchange for
Class A Shares of the Acquiring Fund ("Acquiring Fund Shares"); and (ii) the
distribution of the Acquiring Fund Shares to the holders of the shares of the
Acquired Fund and the liquidation of the Acquired Fund as provided herein,
all upon the terms and conditions set forth in this Agreement (the
"Reorganization").
WHEREAS, the Acquiring Fund and the Acquired Fund are a separate series
of the MTB Trust and the FBR Trust, respectively, and the MTB Trust and the
FBR Trust are open-end, registered management investment companies and the
Acquired Fund owns securities that generally are assets of the character in
which the Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund and the Acquired Fund are each authorized
to issue their shares of beneficial interest;
WHEREAS, the Trustees of the MTB Trust have determined that the
Reorganization, with respect to the Acquiring Fund, is in the best interests
of the Acquiring Fund and that the interests of the existing shareholders of
the Acquiring Fund will not be diluted as a result of the Reorganization;
WHEREAS, the Trustees of the FBR Trust have determined that the
Reorganization, with respect to the Acquired Fund, is in the best interests
of the Acquired Fund and that the interests of the existing shareholders of
the Acquired Fund will not be diluted as a result of the Reorganization;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree
as follows:
ARTICLE I
TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING
FUND SHARES AND LIQUIDATION OF THE ACQUIRED FUND
1.1 THE EXCHANGE. Subject to the terms and conditions contained
herein and on the basis of the representations and warranties contained
herein, the Acquired Fund agrees to transfer all of its assets, as set forth
in paragraph 1.2, to the Acquiring Fund. In exchange, the Acquiring Fund
agrees to deliver to the Acquired Fund the number of full and fractional
Acquiring Fund Shares, determined by (a) multiplying the shares outstanding
of the Acquired Fund by (b) the ratio computed by dividing (x) the net asset
value per share of the Acquired Fund by (y) the net asset value per share of
the Acquiring Fund Shares computed in the manner and as of the time and date
set forth in paragraph 2.2. Holders of shares of the Acquired Fund will
receive Acquiring Fund Shares. Such transactions shall take place at the
closing on the Closing Date provided for in paragraph 3.1.
1.2 ASSETS TO BE ACQUIRED. The assets of the Acquired Fund to be
acquired by the Acquiring Fund shall consist of all property, including,
without limitation, all cash, securities, commodities, interests in futures
and dividends or interest receivable, stock splits, settlement rights and
payments owned by the Acquired Fund and any deferred or prepaid expenses
shown as an asset on the books of the Acquired Fund on the Closing Date.
The Acquired Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of the Acquired
Fund's assets as of the date of such statements. The Acquired Fund hereby
represents that as of the date of the execution of this Agreement, there have
been no changes in its financial position as reflected in such financial
statements other than those occurring in the ordinary course of business in
connection with the purchase and sale of securities, the issuance and
redemption of Acquired Fund shares and the payment of normal operating
expenses, dividends and capital gains distributions.
1.3 LIABILITIES TO BE DISCHARGED. The Acquired Fund will discharge
all of its liabilities and obligations prior to the Closing Date.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing
Date as is conveniently practicable: (a) the Acquired Fund will distribute in
complete liquidation of the Acquired Fund, pro rata to its shareholders of
record, determined as of the close of business on the Closing Date (the
"Acquired Fund Shareholders"), all of the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1; and (b) the Acquired Fund will
thereupon proceed to dissolve and terminate as set forth in paragraph 1.8
below. Such distribution will be accomplished by the transfer of Acquiring
Fund Shares credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share records of the Acquiring Fund in
the name of the Acquired Fund Shareholders, and representing the respective
pro rata number of Acquiring Fund Shares due such shareholders. All issued
and outstanding shares of the Acquired Fund (the "Acquired Fund Shares") will
simultaneously be canceled on the books of the Acquired Fund. The Acquiring
Fund shall not issue certificates representing Acquiring Fund Shares in
connection with such transfer. After the Closing Date, the Acquired Fund
shall not conduct any business except in connection with its termination.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Acquiring Fund
Shares will be issued simultaneously to the Acquired Fund, in an amount equal
in value to the aggregate net asset value of the Acquired Fund Shares, to be
distributed to Acquired Fund Shareholders.
1.6 TRANSFER TAXES. Any transfer taxes payable upon the issuance of
Acquiring Fund Shares in a name other than the registered holder of the
Acquired Fund Shares on the books of the Acquired Fund as of that time shall,
as a condition of such issuance and transfer, be paid by the person to whom
such Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the
Acquired Fund is and shall remain the responsibility of the Acquired Fund.
1.8 TERMINATION. The Acquired Fund shall be terminated promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.4.
1.9 BOOKS AND RECORDS. All books and records of the Acquired Fund,
including all books and records required to be maintained under the
Investment Company Act of 1940 (the "1940 Act"), and the rules and
regulations thereunder, shall be available to the Acquiring Fund from and
after the Closing Date and shall be turned over to the Acquiring Fund as soon
as practicable following the Closing Date.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Acquired Fund's assets to
be acquired by the Acquiring Fund hereunder shall be the value of such assets
at the closing on the Closing Date, using the valuation procedures set forth
in the MTB Trust's Amended and Restated Agreement and Declaration of Trust
(the "Trust Instrument"), the Acquiring Fund's then current Prospectus and
Statement of Additional Information, and the MTB Trust's Pricing Committee
Procedures, or such other valuation procedures as shall be mutually agreed
upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of Acquiring
Fund Shares shall be the net asset value per share computed at the closing on
the Closing Date, using the valuation procedures set forth in the MTB Trust
Instrument the Acquiring Fund's then current Prospectus and Statement of
Additional Information, and the MTB Trust's Pricing Committee Procedures, or
such other valuation procedures as shall be mutually agreed upon by the
parties.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund Shares to
be issued (including fractional shares, if any) in exchange for the Acquired
Fund's assets, shall be determined by (a) multiplying the shares outstanding
of the Acquired Fund by (b) the ratio computed by (x) dividing the net asset
value per share of the Acquired Fund by (y) the net asset value per share of
the Acquiring Fund determined in accordance with paragraph 2.2.
2.4 DETERMINATION OF VALUE. All computations of value shall be made
by State Street Bank and Trust Company, on behalf of the Acquiring Fund and
the Acquired Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The closing shall occur on or about February 24,
2006, or such other date(s) as the parties may agree to in writing (the
"Closing Date"). All acts taking place at the closing shall be deemed to
take place at 4:00 p.m. Eastern Time on the Closing Date unless otherwise
provided herein. The closing shall be held at the offices of Federated
Services Company, 1001 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779,
or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. FBR National Trust Company, as
custodian for the Acquired Fund (the "Custodian"), shall deliver at the
Closing a certificate of an authorized officer stating that: (a) the Acquired
Fund's portfolio securities, cash, and any other assets have been delivered
in proper form to the Acquiring Fund on the Closing Date; and (b) all
necessary taxes including all applicable federal and state stock transfer
stamps, if any, shall have been paid, or provision for payment shall have
been made, in conjunction with the delivery of portfolio securities by the
Acquired Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the
scheduled Closing Date, either: (a) the NYSE or another primary exchange on
which the portfolio securities of the Acquiring Fund or the Acquired Fund are
purchased or sold, shall be closed to trading or trading on such exchange
shall be restricted; or (b) trading or the reporting of trading on the NYSE
or elsewhere shall be disrupted so that accurate appraisal of the value of
the net assets of the Acquiring Fund or the Acquired Fund is impracticable,
the Closing Date shall be postponed until the first business day after the
day when trading is fully resumed and reporting is restored, or such other
date(s) as the parties may agree to in writing.
3.4 TRANSFER AGENT'S CERTIFICATE. Integrated Fund Services, Inc., as
transfer agent for the Acquired Fund as of the Closing Date, shall deliver at
the Closing a certificate of an authorized officer stating that its records
contain the names and addresses of Acquired Fund Shareholders, and the number
and percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
or cause Boston Financial Data Services, its transfer agent, to issue and
deliver a confirmation evidencing Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the MTB Trust or provide evidence
satisfactory to the Acquired Fund that the Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, share certificates, receipts and other documents, if
any, as such other party or its counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE ACQUIRED FUND. The FBR Trust, on behalf
of the Acquired Fund, represents and warrants to the MTB Trust, on behalf of
the Acquiring Fund, as follows:
a) The Acquired Fund is a legally designated, separate series of a
statutory trust duly organized, validly existing, and in good standing
under the laws of the State of Delaware.
b) The FBR Trust is registered as an open-end management investment
company under the 1940 Act, and the FBR Trust's registration with the
Securities and Exchange Commission (the "Commission") as an investment
company under the 1940 Act is in full force and effect.
c) The current Prospectus and Statement of Additional Information of the
Acquired Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933 (the "1933 Act") and the
1940 Act, and the rules and regulations thereunder, and do not include
any untrue statement of a material fact or omit to state any material
fact required to be stated or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
d) The Acquired Fund is not, and the execution, delivery, and performance
of this Agreement (subject to shareholder approval) will not, result in
the violation of any provision of the FBR Trust's Trust Instrument or
By-Laws or of any material agreement, indenture, instrument, contract,
lease, or other undertaking to which the Acquired Fund is a party or by
which it is bound.
e) The Acquired Fund has no material contracts or other commitments (other
than this Agreement) that will be terminated with liability to it
before the Closing Date, except for liabilities, if any, to be
discharged as provided in paragraph 1.3 hereof.
f) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquired Fund or any
of its properties or assets, which, if adversely determined, would
materially and adversely affect its financial condition, the conduct of
its business, or the ability of the Acquired Fund to carry out the
transactions contemplated by this Agreement. The Acquired Fund knows
of no facts that might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that could
materially and adversely affect its business or its ability to
consummate the transactions contemplated herein.
g) The audited financial statements of the Acquired Fund as of October 31,
2005, and for the fiscal year then ended have been prepared in
accordance with generally accepted accounting principles, and such
statements (copies of which have been furnished to the MTB Trust on
behalf of the Acquiring Fund) fairly reflect the financial condition of
the Acquired Fund as of such date, and there are no known contingent
liabilities of the Acquired Fund as of such date that are not disclosed
in such statements.
h) Since the date of the financial statements referred to in paragraph (g)
above, there have been no material adverse changes in the Acquired
Fund's financial condition, assets, liabilities or business (other than
changes occurring in the ordinary course of business), or any
incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the MTB Trust on behalf of the Acquiring
Fund. For the purposes of this paragraph (h), a decline in the net
asset value of the Acquired Fund shall not constitute a material
adverse change.
i) All federal and other tax returns and reports of the Acquired Fund
required by law to be filed, have been filed, and all federal and other
taxes shown to be due on such returns and reports have been paid or
provision shall have been made for the payment thereof. To the best of
the FBR Trust's knowledge, no such return is currently under audit, and
no assessment has been asserted with respect to such returns.
j) All issued and outstanding shares of the Acquired Fund are duly and
validly issued and outstanding, fully paid and non-assessable by the
Acquired Fund. All of the issued and outstanding shares of the
Acquired Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the Acquired
Fund's transfer agent as provided in paragraph 3.4. The Acquired Fund
has no outstanding options, warrants, or other rights to subscribe for
or purchase any of the Acquired Fund Shares, and has no outstanding
securities convertible into any of the Acquired Fund Shares.
k) At the Closing Date, the Acquired Fund will have good and marketable
title to the Acquired Fund's assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.2, and full right, power, and authority to
sell, assign, transfer, and deliver such assets hereunder, free of any
lien or other encumbrance, except those liens or encumbrances to which
the Acquiring Fund has received notice, and, upon delivery and payment
for such assets, and the filing of any articles, certificates or other
documents under the laws of the state of Delaware, the Acquiring Fund
will acquire good and marketable title, subject to no restrictions on
the full transfer of such assets, other than such restrictions as might
arise under the 1933 Act, and other than as disclosed to and accepted
by the Acquiring Fund.
l) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquired
Fund. Subject to approval by the Acquired Fund Shareholders, this
Agreement constitutes a valid and binding obligation of the Acquired
Fund, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights and to general
equity principles.
m) The information to be furnished by the Acquired Fund for use in
no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in
connection with the transactions contemplated herein shall be accurate
and complete in all material respects and shall comply in all material
respects with federal securities and other laws and regulations.
n) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information furnished
by the FBR Trust with respect to the Acquired Fund for use in the Proxy
Materials (as defined in paragraph 5.7), or any other materials
provided in connection with the Reorganization, does not and will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated or necessary to make the
statements, in light of the circumstances under which such statements
were made, not misleading.
o) The Acquired Fund has elected to qualify and has qualified as a
"regulated investment company" under the Code (a "RIC"), as of and
since its first taxable year; has been a RIC under the Code at all
times since the end of its first taxable year when it so qualified; and
qualifies and will continue to qualify as a RIC under the Code for its
taxable year ending upon its liquidation.
p) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the Securities Exchange Act of 1934 (the
"1934 Act"), the 1940 Act or Delaware law for the execution of this
Agreement by the FBR Trust, for itself and on behalf of the Acquired
Fund, except for the effectiveness of the Registration Statement, and
the filing of any articles, certificates or other documents that may be
required under Delaware law, and except for such other consents,
approvals, authorizations and filings as have been made or received,
and such consents, approvals, authorizations and filings as may be
required subsequent to the Closing Date, it being understood, however,
that this Agreement and the transactions contemplated herein must be
approved by the shareholders of the Acquired Fund as described in
paragraph 5.2.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The MTB Trust, on behalf
of the Acquiring Fund, represents and warrants to the FBR Trust, on behalf of
the Acquired Fund, as follows:
a) The Acquiring Fund is a legally designated, separate series of a
business trust, duly organized, validly existing and in good standing
under the laws of the State of Delaware.
b) The MTB Trust is registered as an open-end management investment
company under the 1940 Act, and the MTB Trust's registration with the
Commission as an investment company under the 1940 Act is in full force
and effect.
c) The current Prospectus and Statement of Additional Information of the
Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and
regulations thereunder, and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
or necessary to make such statements therein, in light of the
circumstances under which they were made, not misleading.
d) The Acquiring Fund is not, and the execution, delivery and performance
of this Agreement will not, result in a violation of the MTB Trust's
Trust Instrument or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
e) Except as otherwise disclosed in writing to and accepted by the
Acquired Fund, no litigation, administrative proceeding or
investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or
any of its properties or assets, which, if adversely determined, would
materially and adversely affect its financial condition, the conduct of
its business or the ability of the Acquiring Fund to carry out the
transactions contemplated by this Agreement. The Acquiring Fund knows
of no facts that might form the basis for the institution of such
proceedings and it is not a party to or subject to the provisions of
any order, decree, or judgment of any court or governmental body that
could materially and adversely affect its business or its ability to
consummate the transaction contemplated herein.
f) The audited financial statements of the Acquiring Fund as of April 30,
2005 and for the fiscal year then ended have been prepared in
accordance with generally accepted accounting principles, and such
statements (copies of which have been furnished to the FBR Trust on
behalf of the Acquired Funds fairly reflect the financial condition of
the Acquiring Fund as of such date, and there are no known contingent
liabilities of the Acquiring Fund as of such date that are not
disclosed in such statements.
g) The unaudited financial statements of the Acquiring Fund as of October
31, 2005, and for the six months then ended have been prepared in
accordance with generally accepted accounting principles, and such
statements (copies of which have been furnished to the FBR Trust on
behalf of the Acquired Fund) fairly reflect the financial condition of
the Acquiring Fund as of October 31, 2005, and there are no know
contingent liabilities of the Acquiring Fund as of such date that are
not disclosed in such statements.
h) Since the date of the financial statements referred to in paragraph (g)
above, there have been no material adverse changes in the Acquiring
Fund's financial condition, assets, liabilities or business (other than
changes occurring in the ordinary course of business), or any
incurrence by the Acquiring Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the Acquired Fund. For the purposes of
this paragraph (h), a decline in the net asset value of the Acquiring
Fund shall not constitute a material adverse change.
i) All federal and other tax returns and reports of the Acquiring Fund
required by law to be filed have been filed. All federal and other
taxes shown to be due on such returns and reports have been paid or
provision shall have been made for their payment. To the best of the
Acquiring Fund's knowledge, no such return is currently under audit,
and no assessment has been asserted with respect to such returns.
j) All issued and outstanding Acquiring Fund Shares are duly and validly
issued and outstanding, fully paid and non-assessable by the Acquiring
Fund. The Acquiring Fund has no outstanding options, warrants, or
other rights to subscribe for or purchase any Acquiring Fund Shares,
and there are no outstanding securities convertible into any Acquiring
Fund Shares.
k) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation of
the Acquiring Fund, enforceable in accordance with its terms, subject
as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights
and to general equity principles.
l) Acquiring Fund Shares to be issued and delivered to the Acquired Fund
for the account of the Acquired Fund Shareholders pursuant to the terms
of this Agreement will, at the Closing Date, have been duly
authorized. When so issued and delivered, such shares will be duly and
validly issued Acquiring Fund Shares, and will be fully paid and
non-assessable.
m) The information to be furnished by the Acquiring Fund for use in
no-action letters, registration statements, proxy materials, and other
documents that may be necessary in connection with the transactions
contemplated herein shall be accurate and complete in all material
respects and shall comply in all material respects with federal
securities and other laws and regulations.
n) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information furnished
by the MTB Trust with respect to the Acquiring Fund for use in the
Proxy Materials (as defined in paragraph 5.7), or any other materials
provided in connection with the Reorganization, does not and will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated or necessary to make the
statements, in light of the circumstances under which such statements
were made, not misleading.
o) The Acquiring Fund has elected to qualify and has qualified as a RIC
under the Code as of and since its first taxable year; has been a RIC
under the Code at all times since the end of its first taxable year
when it so qualified; and qualifies and shall continue to qualify as a
RIC under the Code for its current taxable year.
p) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the 1934 Act, the 1940 Act or Delaware law
for the execution of this Agreement by the MTB Trust, for itself and on
behalf of the Acquiring Fund, or the performance of the Agreement by
the MTB Trust, for itself and on behalf of the Acquiring Fund, except
for the effectiveness of the Registration Statement, and the filing of
any articles, certificates or other documents that may be required
under Delaware law, and such other consents, approvals, authorizations
and filings as have been made or received, and except for such
consents, approvals, authorizations and filings as may be required
subsequent to the Closing Date.
q) The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act,
and any state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquiring Fund and the
Acquired Fund will each operate its respective business in the ordinary
course between the date of this Agreement and the Closing Date, it being
understood that such ordinary course of business will include customary
dividends and shareholder purchases and redemptions.
5.2 APPROVAL OF SHAREHOLDERS. The FBR Trust will call a special
meeting of the Acquired Fund Shareholders to consider and act upon this
Agreement and to take all other appropriate action necessary to obtain
approval of the transactions contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Acquired Fund covenants that the
Acquiring Fund Shares to be issued pursuant to this Agreement are not being
acquired for the purpose of making any distribution, other than in connection
with the Reorganization and in accordance with the terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Acquired Fund will assist the
Acquiring Fund in obtaining such information as the Acquiring Fund reasonably
requests concerning the beneficial ownership of the Acquired Fund's shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Acquired Fund will each take or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper
or advisable to consummate and make effective the transactions contemplated
by this Agreement, including any actions required to be taken after the
Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable,
but in any case within sixty days after the Closing Date, the Acquired Fund
shall furnish the Acquiring Fund, in such form as is reasonably satisfactory
to the Acquiring Fund, a statement of the earnings and profits of the
Acquired Fund for federal income tax purposes that will be carried over by
the Acquiring Fund as a result of Section 381 of the Code, and which will be
certified by the FBR Trust's Treasurer.
5.7 PREPARATION OF REGISTRATION STATEMENT AND SCHEDULE 14A PROXY
STATEMENT. The MTB Trust will prepare and file with the Commission a
registration statement on Form N-14 relating to the Acquiring Fund Shares to
be issued to shareholders of the Acquired Fund (the "Registration
Statement"). The Registration Statement on Form N-14 shall include a proxy
statement of the Acquired Fund and a Prospectus of the Acquiring Fund
relating to the transactions contemplated by this Agreement. The
Registration Statement shall be in compliance with the 1933 Act, the 1934 Act
and the 1940 Act, as applicable. Each party will provide the other party
with the materials and information necessary to prepare the registration
statement on Form N-14 (the "Proxy Materials"), for inclusion therein, in
connection with the meeting of the Acquired Fund's Shareholders to consider
the approval of this Agreement and the transactions contemplated herein.
5.8 PAYMENT OF DIVIDENDS AND CAPITAL GAINS. The Acquired Fund shall
have declared and paid a dividend or dividends which, together with all
previous such dividends, shall have the effect of distributing to its
shareholders all of the Acquired Fund's investment company taxable income
(computed without regard to any deduction for dividends paid), if any, plus
the excess, if any, of its interest income excludible from gross income under
Section 103(a) of the Code over its deductions disallowed under Sections 265
and 171(a)(2) of the Code for all taxable periods or years ending on or
before the Closing Date, and all of its net capital gains realized (after
reduction for any capital loss carry forward), if any, in all taxable periods
or years ending on or before the Closing Date.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by the Acquiring
Fund pursuant to this Agreement on or before the Closing Date, and, in
addition, subject to the following conditions:
6.1 All representations and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Closing Date, with the same
force and effect as if made on and as of the Closing Date and all covenants
of the Acquiring Fund contained in this Agreement shall have been complied
with in all material respects as of the Closing Date. The Acquiring Fund
shall have delivered to the Acquired Fund a certificate executed in the
Acquiring Fund's name by the MTB Trust's President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance satisfactory to the
Acquired Fund and dated as of the Closing Date, to such effect and as to such
other matters as the Acquired Fund shall reasonably request.
6.2 The Acquired Fund shall have received an opinion of Reed Smith
LLP, counsel to the MTB Trust ("Counsel"), substantially to the effect that:
a) The Acquiring Fund is a validly existing series of the MTB Trust, a
statutory trust duly formed and validly existing and in good standing
under the laws of the State of Delaware with the power under its Trust
Instrument to carry on its business and to own all of its properties
and assets.
b) This Agreement (a) has been duly authorized and executed by the MTB
Trust on behalf of the Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by the
Acquired Fund, is a legal, valid and binding obligation of the
Acquiring Fund, enforceable against the Acquiring Fund in accordance
with its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, receivership, fraudulent
conveyance, moratorium or other laws of general application relating to
or affecting the enforcement of creditors' rights and remedies, as from
time to time in effect, (ii) application of equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) and (iii) principles of course of
dealing or course of performance and standards of good faith, fair
dealing, materiality and reasonableness that may be applied by a court
to the exercise of rights and remedies.
c) The Acquiring Fund's Shares to be issued and delivered to the
Acquired Fund Shareholders under this Agreement, assuming their due
delivery as contemplated by this Agreement, will be duly authorized and
validly issued and outstanding and fully paid and non-assessable
(except as disclosed in the MTB Trust's then current prospectus and
statement of additional information).
d) The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not (a)
materially violate the MTB Trust's Trust Instrument or By-laws or any
provision of any agreement known to Counsel, to which the MTB Trust
(with respect to the Acquiring Fund) is a party or by which it is bound
or (b) to the knowledge of Counsel, result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree known to Counsel to which the MTB Trust (with
respect to the Acquiring Fund) is a party or by which it (with respect
to the Acquiring Fund) is bound.
e) To the knowledge of Counsel, no consent, approval, authorization
or order of any Delaware or Federal Court or governmental authority of
the State of Delaware or the United States of America is required for
the consummation by the MTB Trust on behalf of the Acquiring Fund, of
the transactions contemplated by this Agreement, except such as may be
required under the 1933 Act, the 1934 Act and the 1940 Act.
f) The MTB Trust is registered with the SEC as an investment
company, and to the knowledge of Counsel, no order has been issued or
proceeding instituted to suspend such registration.
g) To the knowledge of Counsel, (a) no litigation, administrative
proceeding, or investigation of or before any court or governmental
body is pending or threatened as to the MTB Trust (with respect to the
Acquiring Fund) or any of its properties or assets attributable or
allocable to the Acquiring Fund and (b) the Trust (with respect to the
Acquiring Fund) is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially and adversely affects the Acquiring Fund's business.
In rendering such opinion, Counsel may (i) rely, as to matters governed
by the laws of the State of Delaware, on an opinion of competent Delaware
counsel, (ii) make assumptions regarding the authenticity, genuineness,
and/or conformity of documents and copies thereof without independent
verification thereof, and other customary assumptions as the parties may
agree, (iii) limit such opinion to applicable federal and state law, (iv)
define the word "knowledge" and related terms to mean the knowledge of
attorneys then with such firm who have devoted substantive attention to
matters directly related to this Agreement and the Reorganization; and (v)
rely on certificates of officers or trustees of the MTB Trust, in each case
reasonably acceptable to the MTB Trust.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by the Acquired Fund
pursuant to this Agreement, on or before the Closing Date and, in addition,
shall be subject to the following conditions:
7.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and as of the Closing Date, with the same force and effect as
if made on and as of such Closing Date and all covenants of the Acquired Fund
contained in this Agreement shall have been complied with in all material
respects as of the Closing Date. The Acquired Fund shall have delivered to
the Acquiring Fund on such Closing Date a certificate executed in the
Acquired Fund's name by the FBR Trust's President or Vice President and the
Treasurer or Assistant Treasurer, in form and substance satisfactory to the
Acquiring Fund and dated as of such Closing Date, to such effect and as to
such other matters as the Acquiring Fund shall reasonably request.
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities, together with a list
of the Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer of the FBR Trust.
7.3 The Acquiring Fund shall have received an opinion of Dechert LLP,
counsel to the FBR Trust ("Counsel"), substantially to the effect that:
a) The Acquired Fund is a validly existing series of the FBR Trust, a
statutory trust duly formed and validly existing and in good standing
under the laws of the State of Delaware with the power under its Trust
Instrument to carry on its business and to own all of its properties
and assets.
b) This Agreement (a) has been duly authorized and executed by the FBR
Trust on behalf of the Acquired Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by the
Acquiring Fund, is a legal, valid and binding obligation of the
Acquired Fund, enforceable against the Acquired Fund in accordance with
its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, receivership, fraudulent
conveyance, moratorium or other laws of general application relating to
or affecting the enforcement of creditors' rights and remedies, as from
time to time in effect, (ii) application of equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) and (iii) principles of course of
dealing or course of performance and standards of good faith, fair
dealing, materiality and reasonableness that may be applied by a court
to the exercise of rights and remedies.
c) All issued and outstanding shares of the Acquired Fund are duly
authorized and validly issued and outstanding and fully paid and
non-assessable (except as disclosed in the FBR Trust's then current
prospectus and statement of additional information).
d) The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not (a)
materially violate the FBR Trust's Trust Instrument or By-laws or any
provision of any agreement known to Counsel, to which the FBR Trust
(with respect to the Acquired Fund) is a party or by which it is bound
or (b) to the knowledge of Counsel, result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree known to Counsel to which the FBR Trust (with
respect to the Acquired Fund) is a party or by which it (with respect
to the Acquired Fund) is bound.
e) To the knowledge of Counsel, no consent, approval, authorization
or order of any Delaware or Federal Court or governmental authority of
the State of Delaware or the United States of America is required for
the consummation by the FBR Trust on behalf of the Acquired Fund, of
the transactions contemplated by this Agreement, except such as may be
required under the 1933 Act, the 1934 Act and the 1940 Act.
f) The FBR Trust is registered with the SEC as an investment
company, and to the knowledge of Counsel, no order has been issued or
proceeding instituted to suspend such registration.
g) To the knowledge of Counsel, (a) no litigation, administrative
proceeding, or investigation of or before any court or governmental
body is pending or threatened as to the FBR Trust (with respect to the
Acquired Fund) or any of its properties or assets attributable or
allocable to the Acquired Fund and (b) the FBR Trust (with respect to
the Acquired Fund) is not a party to or subject to the provisions of
any order, decree, or judgment of any court or governmental body that
materially and adversely affects the Acquired Fund's business.
In rendering such opinion, Counsel may (i) rely, as to matters governed
by the laws of the State of Delaware, on an opinion of competent Delaware
counsel, (ii) make assumptions regarding the authenticity, genuineness,
and/or conformity of documents and copies thereof without independent
verification thereof, and other customary assumptions as the parties may
agree, (iii) limit such opinion to applicable federal and state law, (iv)
define the word "knowledge" and related terms to mean the knowledge of
attorneys then with such firm who have devoted substantive attention to
matters directly related to this Agreement and the Reorganization; and (v)
rely on certificates of officers or trustees of the FBR Trust, in each case
reasonably acceptable to the FBR Trust.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRING FUND AND ACQUIRED FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein, with
respect to the Acquired Fund, shall have been approved by the requisite vote
of the holders of the outstanding shares of the Acquired Fund in accordance
with applicable law and the provisions of the FBR Trust's Trust Instrument
and By-Laws. Certified copies of the resolutions evidencing such approval
shall have been delivered to the Acquiring Fund. Notwithstanding anything
herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may
waive the conditions set forth in this paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, or instituted any
proceeding seeking to enjoin the consummation of the transactions
contemplated by this Agreement under Section 25(c) of the 1940 Act.
Furthermore, no action, suit or other proceeding shall be threatened or
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with
this Agreement or the transactions contemplated herein.
8.3 All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities
(including those of the Commission and of State securities authorities,
including any necessary "no-action" positions and exemptive orders from such
federal and state authorities) to permit consummation of the transactions
contemplated herein shall have been obtained, except where failure to obtain
any such consent, order, or permit would not involve a risk of a material
adverse effect on the assets or properties of the Acquiring Fund or the
Acquired Fund, provided that either party hereto may waive any such
conditions for itself.
8.4 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued. To the best knowledge of the parties to this Agreement, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
8.5 The parties shall have received an opinion of Reed Smith LLP
substantially to the effect that for federal income tax purposes:
a) The transfer of all of the Acquired Fund's assets to the Acquiring Fund
solely in exchange for Acquiring Fund Shares (followed by the
distribution of Acquiring Fund Shares to the Acquired Fund Shareholders
in dissolution and liquidation of the Acquired Fund) will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and
the Acquiring Fund and the Acquired Fund will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code.
b) No gain or loss will be recognized by the Acquiring Fund upon the
receipt of the assets of the Acquired Fund solely in exchange for
Acquiring Fund Shares.
c) No gain or loss will be recognized by the Acquired Fund upon the
transfer of the Acquired Fund's assets to the Acquiring Fund solely in
exchange for Acquiring Fund Shares or upon the distribution (whether
actual or constructive) of Acquiring Fund Shares to Acquired Fund
Shareholders in exchange for their Acquired Fund Shares.
d) No gain or loss will be recognized by any Acquired Fund Shareholder
upon the exchange of its Acquired Fund Shares for Acquiring Fund Shares.
e) The aggregate tax basis of the Acquiring Fund Shares received by each
Acquired Fund Shareholder pursuant to the Reorganization will be the
same as the aggregate tax basis of the Acquired Fund Shares held by it
immediately prior to the Reorganization. The holding period of
Acquiring Fund Shares received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund Shares exchanged
therefor were held by such shareholder, provided the Acquired Fund
Shares are held as capital assets at the time of the Reorganization.
f) The tax basis of the Acquired Fund's assets acquired by the Acquiring
Fund will be the same as the tax basis of such assets to the Acquired
Fund immediately prior to the Reorganization. The holding period of
the assets of the Acquired Fund in the hands of the Acquiring Fund will
include the period during which those assets were held by the Acquired
Fund.
Such opinion shall be based on customary assumptions and such
representations as Reed Smith LLP may reasonably request, and the
Acquired Fund and Acquiring Fund will cooperate to make and certify the
accuracy of such representations. The foregoing opinion may state that
no opinion is expressed as to the effect of the Reorganization on the
Acquiring Fund, the Acquired Fund or any Acquired Fund Shareholder with
respect to any asset as to which unrealized gain or loss is required to
be reorganized for federal income tax purposes at the end of a taxable
year (or on the termination or transfer thereof) under a mark-to-market
system of accounting. Notwithstanding anything herein to the contrary,
neither the Acquiring Fund nor the Acquired Fund may waive the
conditions set forth in this paragraph 8.5.
ARTICLE IX
EXPENSES
9.1 MTB Investment Advisors, Inc. ("MTBIA"), on behalf of the
Acquiring Fund, and Money Management Advisers, Inc., on behalf of the
Acquired Fund, or their respective affiliates will pay all expenses
associated with Acquiring Fund's and Acquired Fund's, as the case may be,
participation in the Reorganization. Reorganization expenses include,
without limitation: (a) expenses associated with the preparation and filing
of the Proxy Materials; (b) postage; (c) printing; (d) accounting fees;
(e) legal fees incurred by each Fund; (f) solicitation costs of the
transaction; and (g) other related administrative or operational costs.
Registration fees will be borne by the MTB Trust on an as-incurred basis.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The MTB Trust, on behalf of the Acquiring Fund, and the FBR
Trust, on behalf of the Acquired Fund, agree that neither party has made to
the other party any representation, warranty and/or covenant not set forth
herein, and that this Agreement constitutes the entire agreement between the
parties.
10.2 Except as specified in the next sentence set forth in this
paragraph 10.2, the representations, warranties, and covenants contained in
this Agreement or in any document delivered pursuant to or in connection with
this Agreement, shall not survive the consummation of the transactions
contemplated hereunder. The covenants to be performed after the Closing Date
shall continue in effect beyond the consummation of the transactions
contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
MTB Trust and the FBR Trust. In addition, either the MTB Trust or the FBR
Trust may at its option terminate this Agreement at or before the Closing
Date due to:
a) a breach by the other of any representation, warranty, or agreement
contained herein to be performed at or before the Closing Date, if not
cured within 30 days;
b) a condition herein expressed to be precedent to the obligations of the
terminating party that has not been met and it reasonably appears that
it will not or cannot be met; or
c) a determination by a party's Board of Trustees, as appropriate, that
the consummation of the transactions contemplated herein is not in the
best interest of the FBR Trust or the MTB Trust, respectively, and
notice given to the other party hereto.
The failure of the Acquired Fund to consummate the
transactions contemplated in this Agreement, or the FBR Virginia Tax-Free
Portfolio to consummate the transaction in its Agreement and Plan of
Reorganization with MTB Virginia Municipal Bond Fund, will not affect the
consummation of the Reorganization with respect to the other Acquired Fund.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Acquired Fund, the MTB Trust, the FBR Trust, or their
respective Trustees or officers, to the other party or its Trustees or
officers.
ARTICLE XII
INDEMNIFICATION
12.1 Money Management Advisers, Inc. and Friedman, Billings, Ramsey
Group, Inc. (together, the "Indemnitors") agree to indemnify and hold
harmless MTBIA and the Acquiring Fund from and against any and all claims,
demands, liens, suits, causes of action, obligations, liabilities, damages,
losses, shareholder dilution, fees, penalties, expenses (including reasonable
attorneys' fees), fines, judgments, and orders resulting from or arising out
of, and costs associated with, the matter described under -- "Fund Manager -
Sub-Adviser" in the Fixed Income Prospectus dated February 28, 2005 of FBR
Trust, as it may be further amended or supplemented.
ARTICLE XIII
AMENDMENTS
13.1 This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the officers of the FBR
Trust and the MTB Trust as specifically authorized by their respective Board
of Trustees; provided, however, that following the meeting of the Acquired
Fund Shareholders called by the Acquired Fund pursuant to paragraph 5.2 of
this Agreement, no such amendment may have the effect of changing the
provisions for determining the number of Acquiring Fund Shares to be issued
to the Acquired Fund Shareholders under this Agreement to the detriment of
such shareholders without their further approval.
ARTICLE XIV
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided
in this paragraph, no assignment or transfer hereof or of any rights or
obligations hereunder shall be made by any party without the written consent
of the other party. Nothing herein expressed or implied is intended or shall
be construed to confer upon or give any person, firm, or corporation, other
than the parties hereto and their respective successors and assigns, any
rights or remedies under or by reason of this Agreement.
14.5 It is expressly agreed that the obligations of the Acquiring
Fund shall not be binding upon any of the MTB Trust Trustees, shareholders,
nominees, officers, agents or employees of the MTB Trust personally, but
shall bind only the trust property of the Acquiring Fund as provided in the
Trust Instrument of the MTB Trust. The execution and delivery of this
Agreement have been authorized by the Trustees of the MTB Trust and signed by
authorized officers of the MTB Trust acting as such. Neither the
authorization of such Trustees nor the execution and delivery by such
officers shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Acquiring Fund as provided in the MTB Trust's Trust
Instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all
as of the date first written above.
THE FBR FUNDS
on behalf of its portfolio, FBR Maryland
Tax-Free Portfolio
Name: ______________________________
Title:______________________________
MTB GROUP OF FUNDS
on behalf of its portfolio,
MTB Maryland Municipal Bond Fund
Name: ______________________________
Title:______________________________
MTB INVESTMENT ADVISORS, INC.,
with respect to the agreement described
in Article IX, Section 9.1 of the
Agreement
Name: ______________________________
Title:______________________________
MONEY MANAGEMENT ADVISERS, INC.,
with respect to the agreements described
in Article IX, Section 9.1 and Article
XII, Section 12.1 of the Agreement
Name: ______________________________
Title:______________________________
FRIEDMAN, BILLINGS, RAMSEY
GROUP, INC.,
with respect to the agreement described
in Article XII, Section 12.1 of the
Agreement
Name: ______________________________
Title:______________________________
Exhibit B
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this ____ day of _______, 2005, by and between MTB Group of Funds, a
Delaware statutory trust, with its principal place of business at 5800
Corporate Drive, Pittsburgh, PA, 15237 (the "MTB Trust"), with respect to MTB
Virginia Municipal Bond Fund (the "Acquiring Fund"), a newly-organized series
of the MTB Trust, and The FBR Funds, a Delaware statutory trust, with its
principal place of business at 1001 Nineteenth Street North, Arlington, VA
22209 (the "FBR Trust"), with respect to FBR Virginia Tax-Free Portfolio, a
series of the FBR Trust ("Acquired Fund" and, collectively with the Acquiring
Fund, the "Funds").
This Agreement is intended to be, and is adopted as, a plan of
reorganization within the meaning of Section 368 of the United States
Internal Revenue Code of 1986, as amended (the "Code") and the Treasury
Regulations promulgated thereunder. The reorganization will consist of:
(i) the transfer of all of the assets of the Acquired Fund in exchange for
Class A Shares of the Acquiring Fund ("Acquiring Fund Shares"); (ii) the
assumption by the Acquiring Fund of the liabilities of the Acquired Fund; and
(iii) the distribution of the Acquiring Fund Shares to the holders of the
shares of the Acquired Fund and the liquidation of the Acquired Fund as
provided herein, all upon the terms and conditions set forth in this
Agreement (the "Reorganization").
WHEREAS, the Acquiring Fund and the Acquired Fund are a separate series
of the MTB Trust and the FBR Trust, respectively, and the MTB Trust and the
FBR Trust are open-end, registered management investment companies and the
Acquired Fund owns securities that generally are assets of the character in
which the Acquiring Fund is permitted to invest;
WHEREAS, the Acquiring Fund and the Acquired Fund are each authorized
to issue their shares of beneficial interest;
WHEREAS, the Trustees of the MTB Trust have determined that the
Reorganization, with respect to the Acquiring Fund, is in the best interests
of the Acquiring Fund and that the interests of the existing shareholders of
the Acquiring Fund will not be diluted as a result of the Reorganization;
WHEREAS, the Trustees of the FBR Trust have determined that the
Reorganization, with respect to the Acquired Fund, is in the best interests
of the Acquired Fund and that the interests of the existing shareholders of
the Acquired Fund will not be diluted as a result of the Reorganization;
NOW, THEREFORE, in consideration of the premises and of the covenants
and agreements hereinafter set forth, the parties hereto covenant and agree
as follows:
ARTICLE I
TRANSFER OF ASSETS OF THE ACQUIRED FUND IN EXCHANGE FOR ACQUIRING FUND SHARES
AND THE ASSUMPTION OF ACQUIRED FUNDS' LIABILITIES; LIQUIDATION OF THE
ACQUIRED FUND
1.1 THE EXCHANGE. Subject to the terms and conditions contained
herein and on the basis of the representations and warranties contained
herein, the Acquired Fund agrees to transfer all of its assets, as set forth
in paragraph 1.2, to the Acquiring Fund. In exchange, the Acquiring Fund
agrees to (i) deliver to the Acquired Fund the number of full and fractional
Acquiring Fund Shares equal to the number of full and fractional number of
shares of the Acquired Fund ("Acquired Fund Shares") outstanding at the
Closing Date, so that the net asset value per share of the Acquired Fund
Shares becomes the net asset value per share of the Acquiring Fund computed
in the manner and as of the time and date set forth in paragraph 2.2; and
(ii) to assume all of the liabilities of the Acquired Fund, as set forth in
paragraph 1.3. Holders of Acquired Fund Shares will receive Acquiring Fund
Shares. Such transactions shall take place at the closing on the Closing
Date provided for in paragraph 3.1.
1.2 ASSETS TO BE ACQUIRED. The assets of the Acquired Fund to be
acquired by the Acquiring Fund shall consist of all property, including,
without limitation, all cash, securities, commodities, interests in futures
and dividends or interest receivable, stock splits, settlement rights and
payments owned by the Acquired Fund and any deferred or prepaid expenses
shown as an asset on the books of the Acquired Fund on the Closing Date.
The Acquired Fund has provided the Acquiring Fund with its most recent
audited financial statements, which contain a list of all of the Acquired
Fund's assets as of the date of such statements. The Acquired Fund hereby
represents that as of the date of the execution of this Agreement, there have
been no changes in its financial position as reflected in such financial
statements other than those occurring in the ordinary course of business in
connection with the purchase and sale of securities, the issuance and
redemption of Acquired Fund Shares and the payment of normal operating
expenses, dividends and capital gains distributions.
1.3 LIABILITIES TO BE DISCHARGED. The Acquired Fund will endeavor to
discharge all of its liabilities and obligations prior to the Closing Date.
Notwithstanding the foregoing, any liabilities not so discharged shall be
assumed by the Acquiring Fund, which assumed liabilities shall include all of
such Acquired Fund's liabilities, debts, obligations, and duties of whichever
kind or nature, whether absolute, accrued, contingent, or otherwise, whether
or not determinable at the Closing Date, and whether or not specifically
referred to in this Agreement.
1.4 LIQUIDATION AND DISTRIBUTION. On or as soon after the Closing
Date as is conveniently practicable: (a) the Acquired Fund will distribute in
complete liquidation of the Acquired Fund, pro rata to its shareholders of
record, determined as of the close of business on the Closing Date (the
"Acquired Fund Shareholders"), all of the Acquiring Fund Shares received by
the Acquired Fund pursuant to paragraph 1.1; and (b) the Acquired Fund will
thereupon proceed to dissolve and terminate as set forth in paragraph 1.8
below. Such distribution will be accomplished by the transfer of Acquiring
Fund Shares credited to the account of the Acquired Fund on the books of the
Acquiring Fund to open accounts on the share records of the Acquiring Fund in
the name of the Acquired Fund Shareholders, and representing the respective
pro rata number of Acquiring Fund Shares due such shareholders. All issued
and outstanding shares of the Acquired Fund (the "Acquired Fund Shares") will
simultaneously be canceled on the books of the Acquired Fund. The Acquiring
Fund shall not issue certificates representing Acquiring Fund Shares in
connection with such transfer. After the Closing Date, the Acquired Fund
shall not conduct any business except in connection with its termination.
1.5 OWNERSHIP OF SHARES. Ownership of Acquiring Fund Shares will be
shown on the books of the Acquiring Fund's transfer agent. Acquiring Fund
Shares will be issued simultaneously to the Acquired Fund, in an amount equal
in value to the aggregate net asset value of the Acquired Fund Shares, to be
distributed to Acquired Fund Shareholders.
1.6 TRANSFER TAXES. Any transfer taxes payable upon the issuance of
Acquiring Fund Shares in a name other than the registered holder of the
Acquired Fund Shares on the books of the Acquired Fund as of that time shall,
as a condition of such issuance and transfer, be paid by the person to whom
such Acquiring Fund Shares are to be issued and transferred.
1.7 REPORTING RESPONSIBILITY. Any reporting responsibility of the
Acquired Fund is and shall remain the responsibility of the Acquired Fund.
1.8 TERMINATION. The Acquired Fund shall be terminated promptly
following the Closing Date and the making of all distributions pursuant to
paragraph 1.4.
1.9 BOOKS AND RECORDS. All books and records of the Acquired Fund,
including all books and records required to be maintained under the
Investment Company Act of 1940 (the "1940 Act"), and the rules and
regulations thereunder, shall be available to the Acquiring Fund from and
after the Closing Date and shall be turned over to the Acquiring Fund as soon
as practicable following the Closing Date.
ARTICLE II
VALUATION
2.1 VALUATION OF ASSETS. The value of the Acquired Fund's assets to
be acquired by the Acquiring Fund hereunder shall be the value of such assets
at the closing on the Closing Date, using the valuation procedures set forth
in the MTB Trust's Amended and Restated Agreement and Declaration of Trust
(the "Trust Instrument"), the Acquiring Fund's then current Prospectus and
Statement of Additional Information, and the MTB Trust's Pricing Committee
Procedures, or such other valuation procedures as shall be mutually agreed
upon by the parties.
2.2 VALUATION OF SHARES. The net asset value per share of Acquiring
Fund Shares shall be the net asset value per share computed at the closing on
the Closing Date, using the valuation procedures set forth in the MTB Trust
Instrument, the Acquiring Fund's then current Prospectus and Statement of
Additional Information, and the MTB Trust's Pricing Committee Procedures, or
such other valuation procedures as shall be mutually agreed upon by the
parties.
2.3 SHARES TO BE ISSUED. The number of the Acquiring Fund Shares to
be issued (including fractional shares, if any) in exchange for the Acquired
Fund's assets, shall be determined by (a) multiplying the shares outstanding
of the Acquired Fund by (b) the ratio computed by (x) dividing the net asset
value per share of the Acquired Fund by (y) the net asset value per share of
the Acquiring Fund determined in accordance with paragraph 2.2.
2.4 DETERMINATION OF VALUE. All computations of value shall be made
by State Street Bank and Trust Company, on behalf of the Acquiring Fund and
the Acquired Fund.
ARTICLE III
CLOSING AND CLOSING DATE
3.1 CLOSING DATE. The closing shall occur on or about February 24,
2006, or such other date(s) as the parties may agree to in writing (the
"Closing Date"). All acts taking place at the closing shall be deemed to
take place at 4:00 p.m. Eastern Time on the Closing Date unless otherwise
provided herein. The closing shall be held at the offices of Federated
Services Company, 1001 Liberty Avenue, Pittsburgh, Pennsylvania 15222-3779,
or at such other time and/or place as the parties may agree.
3.2 CUSTODIAN'S CERTIFICATE. FBR National Trust Company, as
custodian for the Acquired Fund (the "Custodian"), shall deliver at the
Closing a certificate of an authorized officer stating that: (a) the Acquired
Fund's portfolio securities, cash, and any other assets have been delivered
in proper form to the Acquiring Fund on the Closing Date; and (b) all
necessary taxes including all applicable federal and state stock transfer
stamps, if any, shall have been paid, or provision for payment shall have
been made, in conjunction with the delivery of portfolio securities by the
Acquired Fund.
3.3 EFFECT OF SUSPENSION IN TRADING. In the event that on the
scheduled Closing Date, either: (a) the NYSE or another primary exchange on
which the portfolio securities of the Acquiring Fund or the Acquired Fund are
purchased or sold, shall be closed to trading or trading on such exchange
shall be restricted; or (b) trading or the reporting of trading on the NYSE
or elsewhere shall be disrupted so that accurate appraisal of the value of
the net assets of the Acquiring Fund or the Acquired Fund is impracticable,
the Closing Date shall be postponed until the first business day after the
day when trading is fully resumed and reporting is restored, or such other
date(s) as the parties may agree to in writing.
3.4 TRANSFER AGENT'S CERTIFICATE. Integrated Fund Services, Inc., as
transfer agent for the Acquired Fund as of the Closing Date, shall deliver at
the Closing a certificate of an authorized officer stating that its records
contain the names and addresses of Acquired Fund Shareholders, and the number
and percentage ownership of outstanding shares owned by each such shareholder
immediately prior to the Closing. The Acquiring Fund shall issue and deliver
or cause Boston Financial Data Services, its transfer agent, to issue and
deliver a confirmation evidencing Acquiring Fund Shares to be credited on the
Closing Date to the Secretary of the MTB Trust or provide evidence
satisfactory to the Acquired Fund that the Acquiring Fund Shares have been
credited to the Acquired Fund's account on the books of the Acquiring Fund.
At the Closing, each party shall deliver to the other such bills of sale,
checks, assignments, share certificates, receipts and other documents, if
any, as such other party or its counsel may reasonably request.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
4.1 REPRESENTATIONS OF THE ACQUIRED FUND. The FBR Trust, on behalf
of the Acquired Fund, represents and warrants to the MTB Trust, on behalf of
the Acquiring Fund, as follows:
q) The Acquired Fund is a legally designated, separate series of a
statutory trust duly organized, validly existing, and in good standing
under the laws of the State of Delaware.
r) The FBR Trust is registered as an open-end management investment
company under the 1940 Act, and the FBR Trust's registration with the
Securities and Exchange Commission (the "Commission") as an investment
company under the 1940 Act is in full force and effect.
s) The current Prospectus and Statement of Additional Information of the
Acquired Fund conform in all material respects to the applicable
requirements of the Securities Act of 1933 (the "1933 Act") and the
1940 Act, and the rules and regulations thereunder, and do not include
any untrue statement of a material fact or omit to state any material
fact required to be stated or necessary to make the statements therein,
in light of the circumstances under which they were made, not
misleading.
t) The Acquired Fund is not, and the execution, delivery, and performance
of this Agreement (subject to shareholder approval) will not, result in
the violation of any provision of the FBR Trust's Trust Instrument or
By-Laws or of any material agreement, indenture, instrument, contract,
lease, or other undertaking to which the Acquired Fund is a party or by
which it is bound.
u) The Acquired Fund has no material contracts or other commitments (other
than this Agreement) that will be terminated with liability to it
before the Closing Date, except for liabilities, if any, to be
discharged as provided in paragraph 1.3 hereof.
v) Except as otherwise disclosed in writing to and accepted by the
Acquiring Fund, no litigation, administrative proceeding, or
investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquired Fund or any
of its properties or assets, which, if adversely determined, would
materially and adversely affect its financial condition, the conduct of
its business, or the ability of the Acquired Fund to carry out the
transactions contemplated by this Agreement. The Acquired Fund knows
of no facts that might form the basis for the institution of such
proceedings and is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that could
materially and adversely affect its business or its ability to
consummate the transactions contemplated herein.
w) The audited financial statements of the Acquired Fund as of October 31,
2005, and for the fiscal year then ended have been prepared in
accordance with generally accepted accounting principles, and such
statements (copies of which have been furnished to the MTB Trust on
behalf of the Acquiring Fund) fairly reflect the financial condition of
the Acquired Fund as of such date, and there are no known contingent
liabilities of the Acquired Fund as of such date that are not disclosed
in such statements.
x) Since the date of the financial statements referred to in paragraph (g)
above, there have been no material adverse changes in the Acquired
Fund's financial condition, assets, liabilities or business (other than
changes occurring in the ordinary course of business), or any
incurrence by the Acquired Fund of indebtedness maturing more than one
year from the date such indebtedness was incurred, except as otherwise
disclosed to and accepted by the MTB Trust on behalf of the Acquiring
Fund. For the purposes of this paragraph (h), a decline in the net
asset value of the Acquired Fund shall not constitute a material
adverse change.
y) All federal and other tax returns and reports of the Acquired Fund
required by law to be filed, have been filed, and all federal and other
taxes shown to be due on such returns and reports have been paid or
provision shall have been made for the payment thereof. To the best of
the FBR Trust's knowledge, no such return is currently under audit, and
no assessment has been asserted with respect to such returns.
z) All issued and outstanding shares of the Acquired Fund are duly and
validly issued and outstanding, fully paid and non-assessable by the
Acquired Fund. All of the issued and outstanding shares of the
Acquired Fund will, at the time of the Closing Date, be held by the
persons and in the amounts set forth in the records of the Acquired
Fund's transfer agent as provided in paragraph 3.4. The Acquired Fund
has no outstanding options, warrants, or other rights to subscribe for
or purchase any of the Acquired Fund Shares, and has no outstanding
securities convertible into any of the Acquired Fund Shares.
aa) At the Closing Date, the Acquired Fund will have good and marketable
title to the Acquired Fund's assets to be transferred to the Acquiring
Fund pursuant to paragraph 1.2, and full right, power, and authority to
sell, assign, transfer, and deliver such assets hereunder, free of any
lien or other encumbrance, except those liens or encumbrances to which
the Acquiring Fund has received notice, and, upon delivery and payment
for such assets, and the filing of any articles, certificates or other
documents under the laws of the state of Delaware, the Acquiring Fund
will acquire good and marketable title, subject to no restrictions on
the full transfer of such assets, other than such restrictions as might
arise under the 1933 Act, and other than as disclosed to and accepted
by the Acquiring Fund.
bb) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquired
Fund. Subject to approval by the Acquired Fund Shareholders, this
Agreement constitutes a valid and binding obligation of the Acquired
Fund, enforceable in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization, moratorium, and
other laws relating to or affecting creditors' rights and to general
equity principles.
cc) The information to be furnished by the Acquired Fund for use in
no-action letters, applications for orders, registration statements,
proxy materials, and other documents that may be necessary in
connection with the transactions contemplated herein shall be accurate
and complete in all material respects and shall comply in all material
respects with federal securities and other laws and regulations.
dd) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information furnished
by the FBR Trust with respect to the Acquired Fund for use in the Proxy
Materials (as defined in paragraph 5.7), or any other materials
provided in connection with the Reorganization, does not and will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated or necessary to make the
statements, in light of the circumstances under which such statements
were made, not misleading.
ee) The Acquired Fund has elected to qualify and has qualified as a
"regulated investment company" under the Code (a "RIC"), as of and
since its first taxable year; has been a RIC under the Code at all
times since the end of its first taxable year when it so qualified; and
qualifies and will continue to qualify as a RIC under the Code for its
taxable year ending upon its liquidation.
ff) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the Securities Exchange Act of 1934 (the
"1934 Act"), the 1940 Act or Delaware law for the execution of this
Agreement by the FBR Trust, for itself and on behalf of the Acquired
Fund, except for the effectiveness of the Registration Statement, and
the filing of any articles, certificates or other documents that may be
required under Delaware law, and except for such other consents,
approvals, authorizations and filings as have been made or received,
and such consents, approvals, authorizations and filings as may be
required subsequent to the Closing Date, it being understood, however,
that this Agreement and the transactions contemplated herein must be
approved by the shareholders of the Acquired Fund as described in
paragraph 5.2.
4.2 REPRESENTATIONS OF THE ACQUIRING FUND. The MTB Trust, on behalf
of the Acquiring Fund, represents and warrants to the FBR Trust, on behalf of
the Acquired Fund, as follows:
r) The Acquiring Fund is a legally designated, separate series of a
business trust, duly organized, validly existing and in good standing
under the laws of the State of Delaware.
s) The MTB Trust is registered as an open-end management investment
company under the 1940 Act, and the MTB Trust's registration with the
Commission as an investment company under the 1940 Act is in full force
and effect.
t) The current Prospectus and Statement of Additional Information of the
Acquiring Fund conform in all material respects to the applicable
requirements of the 1933 Act and the 1940 Act and the rules and
regulations thereunder, and do not include any untrue statement of a
material fact or omit to state any material fact required to be stated
or necessary to make such statements therein, in light of the
circumstances under which they were made, not misleading.
u) The Acquiring Fund is not, and the execution, delivery and performance
of this Agreement will not, result in a violation of the MTB Trust's
Trust Instrument or By-Laws or of any material agreement, indenture,
instrument, contract, lease, or other undertaking to which the
Acquiring Fund is a party or by which it is bound.
v) Except as otherwise disclosed in writing to and accepted by the
Acquired Fund, no litigation, administrative proceeding or
investigation of or before any court or governmental body is presently
pending or to its knowledge threatened against the Acquiring Fund or
any of its properties or assets, which, if adversely determined, would
materially and adversely affect its financial condition, the conduct of
its business or the ability of the Acquiring Fund to carry out the
transactions contemplated by this Agreement. The Acquiring Fund knows
of no facts that might form the basis for the institution of such
proceedings and it is not a party to or subject to the provisions of
any order, decree, or judgment of any court or governmental body that
could materially and adversely affect its business or its ability to
consummate the transaction contemplated herein.
w) All federal and other tax returns and reports of the Acquiring Fund
required by law to be filed have been filed. All federal and other
taxes shown to be due on such returns and reports have been paid or
provision shall have been made for their payment. To the best of the
Acquiring Fund's knowledge, no such return is currently under audit,
and no assessment has been asserted with respect to such returns.
x) Any issued and outstanding Acquiring Fund Shares prior to the Closing
Date represent the initial capital and are duly and validly issued and
outstanding, fully paid and non-assessable by the Acquiring Fund. The
Acquiring Fund has no outstanding options, warrants, or other rights to
subscribe for or purchase any Acquiring Fund Shares, and there are no
outstanding securities convertible into any Acquiring Fund Shares.
y) The execution, delivery and performance of this Agreement have been
duly authorized by all necessary action on the part of the Acquiring
Fund, and this Agreement constitutes a valid and binding obligation of
the Acquiring Fund, enforceable in accordance with its terms, subject
as to enforcement, to bankruptcy, insolvency, reorganization,
moratorium, and other laws relating to or affecting creditors' rights
and to general equity principles.
z) Acquiring Fund Shares to be issued and delivered to the Acquired Fund
for the account of the Acquired Fund Shareholders pursuant to the terms
of this Agreement will, at the Closing Date, have been duly
authorized. When so issued and delivered, such shares will be duly and
validly issued Acquiring Fund Shares, and will be fully paid and
non-assessable.
aa) The information to be furnished by the Acquiring Fund for use in
no-action letters, registration statements, proxy materials, and other
documents that may be necessary in connection with the transactions
contemplated herein shall be accurate and complete in all material
respects and shall comply in all material respects with federal
securities and other laws and regulations.
bb) From the effective date of the Registration Statement (as defined in
paragraph 5.7), through the time of the meeting of the Acquired Fund
Shareholders and on the Closing Date, any written information furnished
by the MTB Trust with respect to the Acquiring Fund for use in the
Proxy Materials (as defined in paragraph 5.7), or any other materials
provided in connection with the Reorganization, does not and will not
contain any untrue statement of a material fact or omit to state a
material fact required to be stated or necessary to make the
statements, in light of the circumstances under which such statements
were made, not misleading.
cc) The Acquiring Fund will qualify as a RIC under the Code for its first
taxable year ending after the Closing Date.
dd) No governmental consents, approvals, authorizations or filings are
required under the 1933 Act, the 1934 Act, the 1940 Act or Delaware law
for the execution of this Agreement by the MTB Trust, for itself and on
behalf of the Acquiring Fund, or the performance of the Agreement by
the MTB Trust, for itself and on behalf of the Acquiring Fund, except
for the effectiveness of the Registration Statement, and the filing of
any articles, certificates or other documents that may be required
under Delaware law, and such other consents, approvals, authorizations
and filings as have been made or received, and except for such
consents, approvals, authorizations and filings as may be required
subsequent to the Closing Date.
ee) The Acquiring Fund agrees to use all reasonable efforts to obtain the
approvals and authorizations required by the 1933 Act, the 1940 Act,
and any state Blue Sky or securities laws as it may deem appropriate in
order to continue its operations after the Closing Date.
ARTICLE V
COVENANTS OF THE ACQUIRING FUND AND THE ACQUIRED FUND
5.1 OPERATION IN ORDINARY COURSE. The Acquired Fund will operate its
business in the ordinary course between the date of this Agreement and the
Closing Date, it being understood that such ordinary course of business will
include customary dividends and shareholder purchases and redemptions.
5.2 APPROVAL OF SHAREHOLDERS. The FBR Trust will call a special
meeting of the Acquired Fund Shareholders to consider and act upon this
Agreement and to take all other appropriate action necessary to obtain
approval of the transactions contemplated herein.
5.3 INVESTMENT REPRESENTATION. The Acquired Fund covenants that the
Acquiring Fund Shares to be issued pursuant to this Agreement are not being
acquired for the purpose of making any distribution, other than in connection
with the Reorganization and in accordance with the terms of this Agreement.
5.4 ADDITIONAL INFORMATION. The Acquired Fund will assist the
Acquiring Fund in obtaining such information as the Acquiring Fund reasonably
requests concerning the beneficial ownership of the Acquired Fund's shares.
5.5 FURTHER ACTION. Subject to the provisions of this Agreement, the
Acquiring Fund and the Acquired Fund will each take or cause to be taken, all
action, and do or cause to be done, all things reasonably necessary, proper
or advisable to consummate and make effective the transactions contemplated
by this Agreement, including any actions required to be taken after the
Closing Date.
5.6 STATEMENT OF EARNINGS AND PROFITS. As promptly as practicable,
but in any case within sixty days after the Closing Date, the Acquired Fund
shall furnish the Acquiring Fund, in such form as is reasonably satisfactory
to the Acquiring Fund, a statement of the earnings and profits of the
Acquired Fund for federal income tax purposes that will be carried over by
the Acquiring Fund as a result of Section 381 of the Code, and which will be
certified by the FBR Trust's Treasurer.
5.7 PREPARATION OF REGISTRATION STATEMENT AND SCHEDULE 14A PROXY
STATEMENT. The MTB Trust will prepare and file with the Commission a
registration statement on Form N-14 relating to the Acquiring Fund Shares to
be issued to shareholders of the Acquired Fund (the "Registration
Statement"). The Registration Statement on Form N-14 shall include a proxy
statement of the Acquired Fund and a Prospectus of the Acquiring Fund
relating to the transactions contemplated by this Agreement. The
Registration Statement shall be in compliance with the 1933 Act, the 1934 Act
and the 1940 Act, as applicable. Each party will provide the other party
with the materials and information necessary to prepare the registration
statement on Form N-14 (the "Proxy Materials"), for inclusion therein, in
connection with the meeting of the Acquired Fund's Shareholders to consider
the approval of this Agreement and the transactions contemplated herein.
ARTICLE VI
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRED FUND
The obligations of the Acquired Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquiring Fund of all the obligations to be performed by the Acquiring
Fund pursuant to this Agreement on or before the Closing Date, and, in
addition, subject to the following conditions:
6.1 All representations and warranties of the Acquiring Fund
contained in this Agreement shall be true and correct in all material
respects as of the date hereof and as of the Closing Date, with the same
force and effect as if made on and as of the Closing Date and all covenants
of the Acquiring Fund contained in this Agreement shall have been complied
with in all material respects as of the Closing Date. The Acquiring Fund
shall have delivered to the Acquired Fund a certificate executed in the
Acquiring Fund's name by the MTB Trust's President or Vice President and its
Treasurer or Assistant Treasurer, in form and substance satisfactory to the
Acquired Fund and dated as of the Closing Date, to such effect and as to such
other matters as the Acquired Fund shall reasonably request.
6.2 The Acquired Fund shall have received an opinion of Reed Smith
LLP, counsel to the MTB Trust ("Counsel"), substantially to the effect that:
a) The Acquiring Fund is a validly existing series of the MTB Trust, a
statutory trust duly formed and validly existing and in good standing
under the laws of the State of Delaware with the power under its Trust
Instrument to carry on its business and to own all of its properties
and assets.
b) This Agreement (a) has been duly authorized and executed by the MTB
Trust on behalf of the Acquiring Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by the
Acquired Fund, is a legal, valid and binding obligation of the
Acquiring Fund, enforceable against the Acquiring Fund in accordance
with its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, receivership, fraudulent
conveyance, moratorium or other laws of general application relating to
or affecting the enforcement of creditors' rights and remedies, as from
time to time in effect, (ii) application of equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) and (iii) principles of course of
dealing or course of performance and standards of good faith, fair
dealing, materiality and reasonableness that may be applied by a court
to the exercise of rights and remedies.
c) The Acquiring Fund's Shares to be issued and delivered to the
Acquired Fund Shareholders under this Agreement, assuming their due
delivery as contemplated by this Agreement, will be duly authorized and
validly issued and outstanding and fully paid and non-assessable
(except as disclosed in the MTB Trust's then current prospectus and
statement of additional information).
d) The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not (a)
materially violate the MTB Trust's Trust Instrument or By-laws or any
provision of any agreement known to Counsel, to which the MTB Trust
(with respect to the Acquiring Fund) is a party or by which it is bound
or (b) to the knowledge of Counsel, result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree known to Counsel to which the MTB Trust (with
respect to the Acquiring Fund) is a party or by which it (with respect
to the Acquiring Fund) is bound.
e) To the knowledge of Counsel, no consent, approval, authorization
or order of any Delaware or Federal Court or governmental authority of
the State of Delaware or the United States of America is required for
the consummation by the MTB Trust on behalf of the Acquiring Fund, of
the transactions contemplated by this Agreement, except such as may be
required under the 1933 Act, the 1934 Act and the 1940 Act.
f) The MTB Trust is registered with the SEC as an investment
company, and to the knowledge of Counsel, no order has been issued or
proceeding instituted to suspend such registration.
g) To the knowledge of Counsel, (a) no litigation, administrative
proceeding, or investigation of or before any court or governmental
body is pending or threatened as to the MTB Trust (with respect to the
Acquiring Fund) or any of its properties or assets attributable or
allocable to the Acquiring Fund and (b) the Trust (with respect to the
Acquiring Fund) is not a party to or subject to the provisions of any
order, decree, or judgment of any court or governmental body that
materially and adversely affects the Acquiring Fund's business.
In rendering such opinion, Counsel may (i) rely, as to matters governed
by the laws of the State of Delaware, on an opinion of competent Delaware
counsel, (ii) make assumptions regarding the authenticity, genuineness,
and/or conformity of documents and copies thereof without independent
verification thereof, and other customary assumptions as the parties may
agree, (iii) limit such opinion to applicable federal and state law, (iv)
define the word "knowledge" and related terms to mean the knowledge of
attorneys then with such firm who have devoted substantive attention to
matters directly related to this Agreement and the Reorganization; and (v)
rely on certificates of officers or trustees of the MTB Trust, in each case
reasonably acceptable to the MTB Trust.
ARTICLE VII
CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUND
The obligations of the Acquiring Fund to consummate the transactions
provided for herein shall be subject, at its election, to the performance by
the Acquired Fund of all the obligations to be performed by the Acquired Fund
pursuant to this Agreement, on or before the Closing Date and, in addition,
shall be subject to the following conditions:
7.1 All representations and warranties of the Acquired Fund contained
in this Agreement shall be true and correct in all material respects as of
the date hereof and as of the Closing Date, with the same force and effect as
if made on and as of such Closing Date and all covenants of the Acquired Fund
contained in this Agreement shall have been complied with in all material
respects as of the Closing Date. The Acquired Fund shall have delivered to
the Acquiring Fund on such Closing Date a certificate executed in the
Acquired Fund's name by the FBR Trust's President or Vice President and the
Treasurer or Assistant Treasurer, in form and substance satisfactory to the
Acquiring Fund and dated as of such Closing Date, to such effect and as to
such other matters as the Acquiring Fund shall reasonably request.
7.2 The Acquired Fund shall have delivered to the Acquiring Fund a
statement of the Acquired Fund's assets and liabilities, together with a list
of the Acquired Fund's portfolio securities showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Closing Date, certified by the Treasurer of the FBR Trust.
7.3 The Acquiring Fund shall have received an opinion of Dechert LLP,
counsel to the FBR Trust ("Counsel"), substantially to the effect that:
a) The Acquired Fund is a validly existing series of the FBR Trust, a
statutory trust duly formed and validly existing and in good standing
under the laws of the State of Delaware with the power under its Trust
Instrument to carry on its business and to own all of its properties
and assets.
b) This Agreement (a) has been duly authorized and executed by the FBR
Trust on behalf of the Acquired Fund and (b) assuming due
authorization, execution, and delivery of this Agreement by the
Acquiring Fund, is a legal, valid and binding obligation of the
Acquired Fund, enforceable against the Acquired Fund in accordance with
its terms, except as such enforceability may be limited by (i)
bankruptcy, insolvency, reorganization, receivership, fraudulent
conveyance, moratorium or other laws of general application relating to
or affecting the enforcement of creditors' rights and remedies, as from
time to time in effect, (ii) application of equitable principles
(regardless of whether such enforceability is considered in a
proceeding in equity or at law) and (iii) principles of course of
dealing or course of performance and standards of good faith, fair
dealing, materiality and reasonableness that may be applied by a court
to the exercise of rights and remedies.
c) All issued and outstanding shares of the Acquired Fund are duly
authorized and validly issued and outstanding and fully paid and
non-assessable (except as disclosed in the FBR Trust's then current
prospectus and statement of additional information).
d) The execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated hereby will not (a)
materially violate the FBR Trust's Trust Instrument or By-laws or any
provision of any agreement known to Counsel, to which the FBR Trust
(with respect to the Acquired Fund) is a party or by which it is bound
or (b) to the knowledge of Counsel, result in the acceleration of any
obligation, or the imposition of any penalty, under any agreement,
judgment, or decree known to Counsel to which the FBR Trust (with
respect to the Acquired Fund) is a party or by which it (with respect
to the Acquired Fund) is bound.
e) To the knowledge of Counsel, no consent, approval, authorization
or order of any Delaware or Federal Court or governmental authority of
the State of Delaware or the United States of America is required for
the consummation by the FBR Trust on behalf of the Acquired Fund, of
the transactions contemplated by this Agreement, except such as may be
required under the 1933 Act, the 1934 Act and the 1940 Act.
f) The FBR Trust is registered with the SEC as an investment
company, and to the knowledge of Counsel, no order has been issued or
proceeding instituted to suspend such registration.
g) To the knowledge of Counsel, (a) no litigation, administrative
proceeding, or investigation of or before any court or governmental
body is pending or threatened as to the FBR Trust (with respect to the
Acquired Fund) or any of its properties or assets attributable or
allocable to the Acquired Fund and (b) the FBR Trust (with respect to
the Acquired Fund) is not a party to or subject to the provisions of
any order, decree, or judgment of any court or governmental body that
materially and adversely affects the Acquired Fund's business.
In rendering such opinion, Counsel may (i) rely, as to matters governed
by the laws of the State of Delaware, on an opinion of competent Delaware
counsel, (ii) make assumptions regarding the authenticity, genuineness,
and/or conformity of documents and copies thereof without independent
verification thereof, and other customary assumptions as the parties may
agree, (iii) limit such opinion to applicable federal and state law, (iv)
define the word "knowledge" and related terms to mean the knowledge of
attorneys then with such firm who have devoted substantive attention to
matters directly related to this Agreement and the Reorganization; and (v)
rely on certificates of officers or trustees of the FBR Trust, in each case
reasonably acceptable to the FBR Trust.
ARTICLE VIII
FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE
ACQUIRING FUND AND ACQUIRED FUND
If any of the conditions set forth below do not exist on or before the
Closing Date with respect to the Acquired Fund or the Acquiring Fund, the
other party to this Agreement shall, at its option, not be required to
consummate the transactions contemplated by this Agreement:
8.1 This Agreement and the transactions contemplated herein, with
respect to the Acquired Fund, shall have been approved by the requisite vote
of the holders of the outstanding shares of the Acquired Fund in accordance
with applicable law and the provisions of the FBR Trust's Trust Instrument
and By-Laws. Certified copies of the resolutions evidencing such approval
shall have been delivered to the Acquiring Fund. Notwithstanding anything
herein to the contrary, neither the Acquiring Fund nor the Acquired Fund may
waive the conditions set forth in this paragraph 8.1.
8.2 On the Closing Date, the Commission shall not have issued an
unfavorable report under Section 25(b) of the 1940 Act, or instituted any
proceeding seeking to enjoin the consummation of the transactions
contemplated by this Agreement under Section 25(c) of the 1940 Act.
Furthermore, no action, suit or other proceeding shall be threatened or
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with
this Agreement or the transactions contemplated herein.
8.3 All required consents of other parties and all other consents,
orders, and permits of federal, state and local regulatory authorities
(including those of the Commission and of State securities authorities,
including any necessary "no-action" positions and exemptive orders from such
federal and state authorities) to permit consummation of the transactions
contemplated herein shall have been obtained, except where failure to obtain
any such consent, order, or permit would not involve a risk of a material
adverse effect on the assets or properties of the Acquiring Fund or the
Acquired Fund, provided that either party hereto may waive any such
conditions for itself.
8.4 The Registration Statement shall have become effective under the
1933 Act, and no stop orders suspending the effectiveness thereof shall have
been issued. To the best knowledge of the parties to this Agreement, no
investigation or proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
8.5 The parties shall have received an opinion of Reed Smith LLP
substantially to the effect that for federal income tax purposes:
g) The transfer of all 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 (followed by the
distribution of Acquiring Fund Shares to the Acquired Fund Shareholders
in dissolution and liquidation of the Acquired Fund) will constitute a
"reorganization" within the meaning of Section 368(a) of the Code, and
the Acquiring Fund and the Acquired Fund will each be a "party to a
reorganization" within the meaning of Section 368(b) of the Code.
h) 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.
i) 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
(whether actual or constructive) of Acquiring Fund Shares to Acquired
Fund Shareholders in exchange for their Acquired Fund Shares.
j) No gain or loss will be recognized by any Acquired Fund Shareholder
upon the exchange of its Acquired Fund Shares for Acquiring Fund Shares.
k) The aggregate tax basis of the Acquiring Fund Shares received by each
Acquired Fund Shareholder pursuant to the Reorganization will be the
same as the aggregate tax basis of the Acquired Fund Shares held by it
immediately prior to the Reorganization. The holding period of
Acquiring Fund Shares received by each Acquired Fund Shareholder will
include the period during which the Acquired Fund Shares exchanged
therefor were held by such shareholder, provided the Acquired Fund
Shares are held as capital assets at the time of the Reorganization.
l) The tax basis of the Acquired Fund's assets acquired by the Acquiring
Fund will be the same as the tax basis of such assets to the Acquired
Fund immediately prior to the Reorganization. The holding period of
the assets of the Acquired Fund in the hands of the Acquiring Fund will
include the period during which those assets were held by the Acquired
Fund.
Such opinion shall be based on customary assumptions and such
representations as Reed Smith LLP may reasonably request, and the
Acquired Fund and Acquiring Fund will cooperate to make and certify the
accuracy of such representations. The foregoing opinion may state that
no opinion is expressed as to the effect of the Reorganization on the
Acquiring Fund, the Acquired Fund or any Acquired Fund Shareholder with
respect to any asset as to which unrealized gain or loss is required to
be reorganized for federal income tax purposes at the end of a taxable
year (or on the termination or transfer thereof) under a mark-to-market
system of accounting. Notwithstanding anything herein to the contrary,
neither the Acquiring Fund nor the Acquired Fund may waive the
conditions set forth in this paragraph 8.5.
ARTICLE IX
EXPENSES
9.1 MTB Investment Advisors, Inc ("MTBIA"), on behalf of the
Acquiring Fund, and Money Management Advisers, Inc., on behalf of the
Acquired Fund, or their respective affiliates will pay all expenses
associated with Acquiring Fund's and Acquired Fund's, as the case may be,
participation in the Reorganization. Reorganization expenses include,
without limitation: (a) expenses associated with the preparation and filing
of the Proxy Materials; (b) postage; (c) printing; (d) accounting fees;
(e) legal fees incurred by each Fund; (f) solicitation costs of the
transaction; and (g) other related administrative or operational costs.
Registration fees will be borne by the MTB Trust on an as-incurred basis.
ARTICLE X
ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1 The MTB Trust, on behalf of the Acquiring Fund, and the FBR
Trust, on behalf of the Acquired Fund, agree that neither party has made to
the other party any representation, warranty and/or covenant not set forth
herein, and that this Agreement constitutes the entire agreement between the
parties.
10.2 Except as specified in the next sentence set forth in this
paragraph 10.2, the representations, warranties, and covenants contained in
this Agreement or in any document delivered pursuant to or in connection with
this Agreement, shall not survive the consummation of the transactions
contemplated hereunder. The covenants to be performed after the Closing Date
shall continue in effect beyond the consummation of the transactions
contemplated hereunder.
ARTICLE XI
TERMINATION
11.1 This Agreement may be terminated by the mutual agreement of the
MTB Trust and the FBR Trust. In addition, either the MTB Trust or the FBR
Trust may at its option terminate this Agreement at or before the Closing
Date due to:
d) a breach by the other of any representation, warranty, or agreement
contained herein to be performed at or before the Closing Date, if not
cured within 30 days;
e) a condition herein expressed to be precedent to the obligations of the
terminating party that has not been met and it reasonably appears that
it will not or cannot be met; or
f) a determination by a party's Board of Trustees, as appropriate, that
the consummation of the transactions contemplated herein is not in the
best interest of the FBR Trust or the MTB Trust, respectively, and
notice given to the other party hereto.
The failure of the Acquired Fund to consummate the transactions
contemplated in this Agreement, or the FBR Maryland Tax-Free Portfolio to
consummate the transaction in its Agreement and Plan of Reorganization with
MTB Maryland Municipal Bond Fund, will not affect the consummation of the
Reorganization with respect to the other Acquired Fund.
11.2 In the event of any such termination, in the absence of willful
default, there shall be no liability for damages on the part of either the
Acquiring Fund, the Acquired Fund, the MTB Trust, the FBR Trust, or their
respective Trustees or officers, to the other party or its Trustees or
officers.
ARTICLE XII
INDEMNIFICATION
12.1 Money Management Advisers, Inc. and Friedman, Billings, Ramsey
Group, Inc. (together, the "Indemnitors") agree to indemnify and hold
harmless MTBIA and the Acquiring Fund from and against any and all claims,
demands, liens, suits, causes of action, obligations, liabilities, damages,
losses, shareholder dilution, fees, penalties, expenses (including reasonable
attorneys' fees), fines, judgments, and orders resulting from or arising out
of, and costs associated with, the matter described under -- "Fund Manager -
Sub-Adviser" in the Fixed Income Prospectus dated February 28, 2005 of FBR
Trust, as it may be further amended or supplemented.
ARTICLE XIII
AMENDMENTS
13.1 This Agreement may be amended, modified, or supplemented in such
manner as may be mutually agreed upon in writing by the officers of the FBR
Trust and the MTB Trust as specifically authorized by their respective Board
of Trustees; provided, however, that following the meeting of the Acquired
Fund Shareholders called by the Acquired Fund pursuant to paragraph 5.2 of
this Agreement, no such amendment may have the effect of changing the
provisions for determining the number of Acquiring Fund Shares to be issued
to the Acquired Fund Shareholders under this Agreement to the detriment of
such shareholders without their further approval.
ARTICLE XIV
HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT;
LIMITATION OF LIABILITY
14.1 The Article and paragraph headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement.
14.2 This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
14.3 This Agreement shall be governed by and construed in accordance
with the laws of the State of Delaware.
14.4 This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but, except as provided
in this paragraph, no assignment or transfer hereof or of any rights or
obligations hereunder shall be made by any party without the written consent
of the other party. Nothing herein expressed or implied is intended or shall
be construed to confer upon or give any person, firm, or corporation, other
than the parties hereto and their respective successors and assigns, any
rights or remedies under or by reason of this Agreement.
14.5 It is expressly agreed that the obligations of the Acquiring Fund
shall not be binding upon any of the MTB Trust Trustees, shareholders,
nominees, officers, agents or employees of the MTB Trust personally, but
shall bind only the trust property of the Acquiring Fund as provided in the
Trust Instrument of the MTB Trust. The execution and delivery of this
Agreement have been authorized by the Trustees of the MTB Trust and signed by
authorized officers of the MTB Trust acting as such. Neither the
authorization of such Trustees nor the execution and delivery by such
officers shall be deemed to have been made by any of them individually or to
impose any liability on any of them personally, but shall bind only the trust
property of the Acquiring Fund as provided in the MTB Trust's Trust
Instrument.
IN WITNESS WHEREOF, the parties have duly executed this Agreement, all
as of the date first written above.
THE FBR FUNDS
on behalf of its portfolio, FBR Virginia
Tax-Free Portfolio
Name: ______________________________
Title:______________________________
MTB GROUP OF FUNDS
on behalf of its portfolio,
MTB Maryland Virginia Bond Fund
Name: ______________________________
Title:______________________________
MTB INVESTMENT ADVISORS, INC.,
with respect to the agreement described
in Article IX, Section 9.1 of the
Agreement
Name: ______________________________
Title:______________________________
MONEY MANAGEMENT ADVISERS, INC.,
with respect to the agreements described
in Article IX, Section 9.1 and Article
XII, Section 12.1 of the Agreement
Name: ______________________________
Title:______________________________
FRIEDMAN, BILLINGS, RAMSEY
GROUP, INC.,
with respect to the agreement described
in Article XII, Section 12.1 of the
Agreement
Name: ______________________________
Title:______________________________
Exhibit C
[Logo of MTB Group of Funds]
www.mtbfunds.com
Managed by MTB Investment Advisors, Inc. -- www.mtbia.com
November 7, 2005
CLASS A SHARES
MTB Maryland Municipal Bond Fund
MTB Virginia Municipal Bond Fund
[Logo of MTB Group of Funds]
Prospectus dated November 7, 2005
Introduction - Information Common to All Funds
Each portfolio (each, a Fund) of MTB Group of Funds (Trust) is a mutual fund.
A mutual fund pools shareholders' money and, using professional investment
managers, invests it in securities.
Each Fund has its own investment goal and strategies for reaching that goal.
The investment advisor invests each Fund's assets in a way that the advisor
believes will help a Fund achieve its goal. Still, investing in each Fund
involves risk, and there is no guarantee that a Fund will achieve its goal.
The investment advisor's judgments about the markets, the economy, or
companies may not anticipate actual market movements, economic conditions or
company performance, and these judgments may affect the return on your
investment. In fact, no matter how good a job the investment advisor does,
you could lose money on your investment in a Fund, just as you could with
other investments. A Fund share is not a bank deposit and it is not insured
or guaranteed by the FDIC or any government agency.
The value of your investment in a Fund is based on the market prices of the
securities the Fund holds. These prices change daily due to economic and
other events that affect particular companies and other issuers. These price
movements, sometimes called volatility, may be greater or lesser depending on
the types of securities a Fund owns and the markets in which they trade. The
effect on a Fund of a change in the value of a single security will depend on
how widely the Fund diversifies its holdings.
How to Read this Prospectus
MTB Group of Funds is a mutual fund family that offers different classes of
shares in separate Funds. The Funds have individual investment goals and
strategies. This prospectus gives you important information about the Class A
Shares of the MTB Maryland Municipal Bond Fund and the MTB Virginia Municipal
Bond Fund (Funds) that you should know before investing. Please read this
prospectus and keep it for future reference.
MTB Funds o Are NOT FDIC Insured o Have No Bank Guarantee o May Lose Value
Managed by MTB Investment Advisors, Inc.
The Securities and Exchange Commission has not approved or disapproved these
securities or passed upon the adequacy of this prospectus. Any representation
to the contrary is a criminal offense.
This prospectus has been arranged into different sections so that you can
easily review this important information. For more detailed information about
each Fund, please see:
Contents
Fund Goals, Strategies, Risks and Performance 1
Bond Funds
Maryland Municipal Bond Fund Symbol: ARMRX
(Class A Shares);
Virginia Municipal Bond Fund Symbol: RSXIX
(Class A Shares);
Principal Securities of the Funds
Other Investment Strategies
Specific Risks of Investing in the Funds
How Are Shares Priced?
How to Purchase, Redeem, and Exchange Shares
Account and Share Information
Who Manages the Funds?
Portfolio Managers
Financial Highlights
How to Obtain More Information About MTB
Group of Funds
FUND GOALS, STRATEGIES, RISKS AND PERFORMANCE
The Trust offers a total of 36 funds with various classes in separate
prospectuses. Class A and Class B Shares have different expenses and other
characteristics, allowing you to choose the class that suits your needs. You
should consider the amount you want to invest, how long you plan to invest,
how long you plan to have it invested, and whether you plan to make
additional investments. This prospectus offers Class A Shares of the Fund.
The Maryland Municipal Bond Fund offers B Shares in a separate prospectus.
The following pages describe the investment goals (objectives), strategies
and principal risks of the Funds whose Class A Shares are offered by this
prospectus. There can be no assurance that a Fund will achieve its goal.
However, each Fund endeavors to do so by following the strategies and
policies described in this prospectus.
The investment goal of each Fund may only be changed upon the approval of a
majority of the outstanding Shares of the Fund which may be affected by the
changes. Certain investment strategies may be changed without shareholder
approval, although a Fund will provide shareholders with at least 60 days
prior written notice of a change in its 80% investment policy.
Performance and Financial History of MTB Maryland Municipal Bond Fund
The MTB Maryland Municipal Bond Fund is the successor to the ARK Maryland
Tax-Free Portfolio, a portfolio of the ARK Funds pursuant to a reorganization
(ARK Reorganization) which took place on August 22, 2003 (the Closing Date).
Prior to that date, MTB Maryland Municipal Bond Fund had no investment
operations. Accordingly, the performance information provided in the
prospectus for periods prior to the Closing Date is historical information
for the ARK Maryland Tax-Free Portfolio. The ARK Maryland Tax-Free Portfolio
was managed by Allied Investment Advisors, Inc. (AIA), which became a
wholly-owned subsidiary of Manufacturers and Traders Trust Company (M&T Bank)
on April 1, 2003, when M&T Bank Corporation acquired Allfirst Financial Inc.,
Allfirst Bank (AllFirst) and their affiliates. On August 22, 2003, the
investment advisory operations of M&T Asset Management, a department of M&T
Bank, which was the pre-Reorganization advisor to the Trust, were transferred
to AIA (which was renamed MTB Investment Advisors, Inc.). Effective on that
date, MTB Investment Advisors, Inc. (MTBIA) became the investment advisor to
the Trust. The MTB Maryland Municipal Bond Fund has investment objectives and
policies that are substantially similar to those of the ARK Maryland Tax-Free
Portfolio, although MTB Maryland Municipal Bond Fund has different fee and
expense arrangements than the ARK Maryland Tax-Free Portfolio.
Prior to August 15, 2003, MTB Group of Funds was known as Vision Group of
Funds. Prior to August 11, 2000, Vision Group of Funds was known as Vision
Group of Funds, Inc.
Performance
On the following pages is performance information for the MTB Maryland
Municipal Bond Fund. This information gives you some indication of the risks
of an investment in a Fund by comparing each Fund's performance with a broad
measure of market performance. While past performance of a Fund does not
necessarily predict future performance, the following information provides
you with the historical performance information to assist you in analyzing
how each Fund's investment risks may be balanced by their potential rewards.
For more current performance information, call 800 836-2211. No performance
for the Virginia Municipal Bond Fund is presented because Virginia Municipal
Bond Fund is a newly-created Fund which has not yet commenced operations.
Bar Charts
The bar chart represents the (historical) calendar year performance of Class
A Shares of the MTB Maryland Municipal Bond Fund without reflecting the
applicable sales charge imposed on Class A Shares. If these charges or fees
had been included, the return would have been lower. Following the bar chart
is the year-to-date performance of Class A Shares through the most recent
calendar quarter, again, without reflecting any applicable sales charge
imposed on Class A Shares. Also provided is the best and worst calendar
quarter performance for Class A Shares through the most recent calendar year.
Average Annual Total Return Tables
Following the bar chart is a performance table showing the Average Annual
Total Return for Class A Shares, of the Fund as compared to an appropriate
broad-based securities market index for certain periods ended December 31,
2004. The Fund's total return figures reflect the maximum sales charge that
could apply. The market indices are unmanaged and are not adjusted for any
sales charges, expenses or other fees the SEC requires to be reflected in a
Fund's performance. You cannot invest directly in an index.
Risks Common to the Funds
The Shares offered by this prospectus are not deposits or obligations of any
bank, are not endorsed or guaranteed by any bank and are not insured or
guaranteed by the U.S. government, the Federal Deposit Insurance Corporation,
the Federal Reserve Board, or any other government agency.
MTB MARYLAND MUNICIPAL BOND FUND
Cusip: 55376T569 Symbol: ARMRX (Class A Shares)
Goal
Current income exempt from federal regular income tax and Maryland state and
local income taxes.
Strategy
Under normal circumstances, the Fund invests its assets so that at least 80%
of the income it distributes will be exempt from federal regular income tax
and personal income tax imposed by the State of Maryland and Maryland
municipalities. The principal issuers of these securities are state and local
governments and agencies located in Maryland, as well as the District of
Columbia, Puerto Rico, and other U.S. territories and possessions. However,
the income on these securities may be subject to the federal alternative
minimum tax. The Fund is non-diversified, which means it can invest a larger
percentage of assets in a small number of issuers. The Fund invests in
investment grade municipal securities.
In selecting securities, the Fund's Advisor considers the future direction of
interest rates and the shape of the yield curve, as well as credit quality
and sector allocation issues. Sector allocation issues involve the relative
attractiveness of rates and market opportunities in sectors such as general
obligation or revenue bonds.
Risks
All mutual funds take investment risks. Therefore, it is possible to lose
money by investing in the Fund. The primary factors that may reduce the
Fund's returns include:
o Interest Rate Risks. Prices of fixed income securities generally fall
when interest rates rise.
o Credit Risks. There is a possibility that issuers of securities in
which the Fund may invest may default in the payment of interest or
principal on the securities when due, which would cause the Fund to
lose money.
o Call Risks. Issuers of securities may redeem the securities prior to
maturity at a price below their current market value.
o Tax Risks. Failure of a municipal security to meet certain legal
requirements may cause the interest received and distributed by the
Fund to shareholders to be taxable.
o Risks of Non-Diversification. The Fund may invest a higher percentage
of its assets among fewer issuers of portfolio securities.
o Maryland Investment Risks. The Fund will be more susceptible to any
economic, business, political or other developments which generally
affect securities issued by Maryland issuers. The economy of Maryland
is relatively diversified across the service, trade and government
sectors, but could be adversely impacted by changes to any of these
sectors.
Performance Information
Risk/Return Bar Chart
The graphic presentation here displayed consists of a bar chart representing
the annual total returns of Maryland Municipal Bond Fund's Class A Shares as
of the calendar year-end for each of the last eight years.
The `x' axis reflects the "% Total Return" beginning with "-4%" and
increasing in increments of 2% up to "12%".
The "y" axis represents calculation periods from the earliest calendar year
end of the Fund's start of business through the calendar year ended December
31, 2004. The light gray shaded areas features eight distinct horizontal
bars, each highlighted in white, and each visually representing by length the
total return percentages for the calendar year stated directly at its end.
The calculated total return percentage for the Fund for each calendar year is
stated directly above each respective bar, for the calendar years 1997
through 2004. The percentages noted are: 8.11%, 5.46%, (3.54)%, 10.02%,
4.49%, 8.34%, 4.45%, 3.46%.
The total returns displayed for the Fund do not reflect the payment of any
sales charges or recurring shareholder account fees. If these charges or
fees had been included, the returns shown would have been lower.
Performance Over 8 Years
Best Quarter
4.24%
(12/31/00)
Worst Quarter
(2.11)%
(6/30/04)
The bar chart shows the variability of the Fund's Class A Shares total
returns on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
The Fund's Class A Shares total return for the nine-month period from January
1, 2005 to September 30, 2005 was 1.83%.
Average Annual Total Return Table
The following table represents the Fund's Class A Shares Average Annual Total
Returns, reduced to reflect applicable sales charges, for the calendar
periods ended December 31, 2004. Return Before Taxes is shown. In addition,
Return After Taxes is shown for the Fund's Class A Shares to illustrate the
effect of federal taxes on Fund returns. Actual after-tax returns depend on
each investor's personal tax situation and are likely to differ from those
shown. The table also shows returns for the Lehman Brothers 10 Year Municipal
Bond Index (LB10MB), Lehman Brothers 7 Year Municipal Bond Index (LB7MB),
broad-based market indexes, and Lipper Other States Intermediate Municipal
Debt Funds Average (LOSIMDFA). The LB10MB is a widely recognized index of
long-term investment grade tax-exempt bonds. The index includes general
obligation bonds, revenue bonds, insured bonds and prerefunded bonds with
maturities between eight and twelve years. The LB7MB is a widely recognized
index of long-term investment grade tax-exempt bonds. The index includes
general obligation bonds, revenue bonds, insured bonds and prerefunded bonds
with maturities between six and eight years. LOSIMDFA is a composite of
mutual funds, designated by Lipper, Inc., with goals similar to the Fund's
goals. Total returns for the indexes shown do not reflect sales charges,
expenses or other fees that the SEC requires to be reflected in the Fund's
performance. The indexes are unmanaged, and it is not possible to invest
directly in an index or average.
(For the periods ended December 31, 2004)
Start of
1 Year 5 Years Performance(1)
Class A Shares
Return Before Taxes (1.17)% 5.16% 4.41%(3)
Return After Taxes on (1.23)% 5.15% 4.35%(3)
Distributions(2)
Return After Taxes on
Distributions
and Sale of Fund Shares(2) 0.59% 5.02% 4.34%(3)
LB10MB 4.15% 7.04% 6.31%
LB7MB 3.15% 6.61% 5.91%
LOSIMDFA 2.35% 5.37% 4.47%
(1) The Fund's Class A Shares start of performance date was November 18,
1996.
(2) After-tax returns are calculated using a standard set of assumptions. The
stated returns assume the highest historical federal income and capital
gains tax rates. Return After Taxes on Distributions assumes a continued
investment in the Fund and shows the effect of taxes on Fund
distributions. Return After Taxes on Distributions and Sale of Fund
Shares assumes all shares were redeemed at the end of each measurement
period, and shows the effect of any taxable gain (or offsetting loss) on
redemption, as well as the effects of taxes on Fund distributions. These
after-tax returns do not reflect the effect of any applicable state and
local taxes. After-tax returns are not relevant to investors holding
shares through tax-deferred programs, such as IRA and 401(k) plans.
(3) The start of performance date was November 18, 1996. Class A Shares of
the Fund were offered beginning January 2, 1997. Performance results
shown before that date are for the Fund's Institutional I Shares and have
been adjusted for the maximum sales charge and total annual operating
expenses applicable to the Fund's Class A Shares. The Fund's
Institutional I Shares, which are not offered by this prospectus,
commenced operations on November 18, 1996. The Fund's Class A Shares
annual returns would have been substantially similar to those of the
Fund's Institutional I Shares because Shares of each class are invested
in the same portfolio of securities.
Past performance is no guarantee of future results. This information
provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
rewards.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and
hold the Fund's Class A Shares.
Shareholder Fees
Fees Paid Directly From Your Investment
Class A
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering 4.50%
price)
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase
price or redemption proceeds, as None(1)
applicable)
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends (and other
Distributions)
(as a percentage of offering price) None
Redemption Fee (as a percentage of
amount redeemed, if applicable) None
Exchange Fee None
Annual Fund Operating Expenses
Expenses That are Deducted From Fund Assets
(as a percentage of average net assets)
Class A
Management Fee(2) 0.70%
Distribution (12b-1) Fee(3) 0.25%
Shareholder Services Fee(4) 0.25%
Other Expenses(2) 0.21%
Total Annual Fund Operating Expenses
(before fee waivers and expense 1.41%
reimbursements)
Contractual Fee Waivers and 0.56%
Reimbursements of Fund Expenses (2)
Total Anticipated Annual Fund
Operating Expenses
(after contractual fee waivers and 0.85%
reimbursements)(5)
(1 For purchases over $1,000,000 or more, a 1% Contingent Deferred Sales
Charge may be imposed if redeemed within 18 months of purchase.
(2 The percentages shown are based on anticipated expenses for the entire
fiscal year ending April 30, 2006. However, the rate at which expenses
are accrued during the fiscal year may not be constant and at any
particular point, may be greater or less than the stated average
percentage. The Advisor has agreed to contractually waive all or a
portion of its investment advisory fee (based on average daily net
assets) and other fees (including the distribution (12b-1) and
shareholder services fees) which it is otherwise entitled to receive
and/or reimburse certain operating expenses of the Fund in order to
limit the Fund's Class A Shares total operating expenses to not more
than 0.85% of average daily net assets for the period through April 30,
2008. The management fee paid by the Fund (after the contractual waiver
and an additional voluntary waiver of .02%) is expected to be 0.51% for
the fiscal year ending April 30, 2006.
(3) A portion of the distribution (12b-1) fee for the Fund's Class A Shares
has been contractually waived. The distribution (12b-1) fee paid by the
Fund's Class A Shares (after the contractual waiver) is expected to be
0.11% for the fiscal year ending April 30, 2006.
(4) The shareholder services fee for the Fund's Class A Shares has been
contractually waived. The shareholder services fee paid by the Fund's
Class A Shares (after the contractual waiver) will be 0.00%, for the
fiscal year ending April 30, 2006.
(5) The Total Actual Annual Fund Operating Expenses (after waivers) for the
Fund's Class A Shares were 0.95% for the fiscal year ended April 30,
2005.
Example
This Example is intended to help you compare the cost of investing in the
Fund's Class A Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Class A Shares for
the time periods indicated and then redeem all of your Shares at the end of
those periods. Expenses assuming no redemption are also shown. The Example
also assumes that your investment has a 5% return each year and that the
Fund's Class A Shares operating expenses are shown in the table and remain
the same.
Although your actual costs and returns may be higher or lower, based on these
assumptions your costs would be:
Class A 1 Year 3 Years 5 Years 10 Years
Expenses assuming
redemption $ 533 $ 709 $ 1,024 $ 1,917
Expenses assuming
no redemption $ 533 $ 709 $ 1,024 $ 1,917
MTB VIRGINIA MUNICIPAL BOND FUND
Cusip: 55376V796 Symbol: RSXIX (Class A Shares)
Goal
Current income exempt from federal regular income tax and Virginia state and
local income taxes.
Strategy
Under normal circumstances, the Fund invests its assets so that at least 80%
of the income it distributes will be exempt from federal regular income tax
and personal income tax imposed by the Commonwealth of Virginia and Virginia
municipalities. The principal issuers of these securities are state and local
governments and agencies located in Virginia, as well as the District of
Columbia, Puerto Rico, and other U.S. territories and possessions. However,
the income on these securities may be subject to the federal alternative
minimum tax. The Fund is non-diversified, which means it can invest a larger
percentage of assets in a small number of issuers. The Fund invests in
investment grade municipal securities.
In selecting securities, the Fund's Advisor considers the future direction of
interest rates and the shape of the yield curve, as well as credit quality
and sector allocation issues. Sector allocation issues involve the relative
attractiveness of rates and market opportunities in sectors such as general
obligation or revenue bonds.
Risks
All mutual funds take investment risks. Therefore, it is possible to lose
money by investing in the Fund. The primary factors that may reduce the
Fund's returns include:
o Interest Rate Risks. Prices of fixed income securities generally fall
when interest rates rise.
o Credit Risks. There is a possibility that issuers of securities in
which the Fund may invest may default in the payment of interest or
principal on the securities when due, which would cause the Fund to
lose money.
o Call Risks. Issuers of securities may redeem the securities prior to
maturity at a price below their current market value.
o Tax Risks. Failure of a municipal security to meet certain legal
requirements may cause the interest received and distributed by the
Fund to shareholders to be taxable.
o Risks of Non-Diversification. The Fund may invest a higher percentage
of its assets among fewer issuers of portfolio securities.
o Virginia Investment Risks. The Fund will be more susceptible to any
economic, business, political or other developments which generally
affect securities issued by Virginia issuers. The economy of Virginia
is relatively diversified across the service, trade and government
sectors, but could be adversely impacted by changes to any of these
sectors.
Performance Information
A performance bar chart and total return information for the Fund will be
provided after the Fund has commenced operations.
Fees and Expenses
This table describes the fees and expenses that you may pay if you buy and
hold the Fund's Class A Shares.
Shareholder Fees
Fees Paid Directly From Your Investment
Class A
Maximum Sales Charge (Load)
Imposed on Purchases
(as a percentage of offering 4.50%
price)
Maximum Deferred Sales Charge
(Load) (as a
percentage of original
purchase price or redemption
proceeds, as applicable) None(1)
Maximum Sales Charge (Load)
Imposed on Reinvested
Dividends (and other
Distributions) (as a percentage
of offering price) None
Redemption Fee (as a
percentage of amount,
redeemed if applicable) None
Exchange Fee None
Annual Fund Operating Expenses
Expenses That are Deducted From Fund Assets
(as a percentage of average net assets)
Class A
Management Fee(2) 0.70%
Distribution (12b-1) 0.25%
Fee
Shareholder Services 0.25%
Fee(3)
Other Expenses(2) 1.24%
Total Annual Fund
Operating Expenses
(before fee waivers 2.44%
and expense
reimbursements)
- ----------------------
Contractual Fee
Waivers and
Reimbursements of
Fund Expenses(2) 1.54%
- ----------------------
- ----------------------
Total Anticipated 0.90%
Annual Fund
Operating Expenses
(after contractual
fee waivers and
reimbursements)(4)
(1) For purchases over $1,000,000 or more, a 1% Contingent Deferred Sales
Charge may be imposed if redeemed within 18 months of purchase.
(2) The percentages shown are based on anticipated expenses for the entire
fiscal year ending April 30, 2006. However, the rate at which expenses
are accrued during the fiscal year may not be constant and at any
particular point, may be greater or less than the stated average
percentage. The Advisor has agreed to contractually waive all or a
portion of its investment advisory fee (based on average daily net
assets) and other fees (including the distribution (12b-1) and
shareholder services fees) which it is entitled to receive and/or
reimburse certain operating expenses of the Fund in order to limit the
Fund's Class A Shares total operating expenses to not more than 0.90% of
average daily net assets for the period starting from the effective date
of the reorganization through April 30, 2008. The management fee paid by
the Fund (after the contractual waiver) is expected to be 0.00% for the
fiscal year ending April 30, 2006.
(3) The shareholder services fee for the Fund's Class A Shares has been
contractually waived. The shareholder services fee paid by the Fund's
Class A Shares (after the contractual waiver) will be 0.00% for the
fiscal year ended April 30, 2006.
(4) The advisor expects to contractually reimburse certain operating expenses
of the Fund. Total other expenses paid by the Fund (after the
contractual reimbursement) are expected to be 0.65% for the fiscal year
ending April 30, 2006.
Example
This Example is intended to help you compare the cost of investing in the
Fund's Class A Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in the Fund's Class A Shares for
the time periods indicated and then redeem all of your Shares at the end of
those periods. Expenses assuming no redemption are also shown. The Example
also assumes that your investment has a 5% return each year and that the
Fund's Class A Shares operating expenses are before waivers as shown in the
table and remain the same. Although your actual costs and returns may be
higher or lower, based on these assumptions your costs would be:
Class A 1 Year 3 Years
Expenses assuming
redemption $ 538 $ 724
Expenses assuming
no redemption $ 538 $ 724
Principal Securities of the Funds
The principal securities of each of the Funds listed below are marked with an
"X".
Maryland Virginia
Municipal Municipal
Bond Fund Bond Fund
Fixed Income X X
Securities
Tax-Exempt X X
Securities
General Obligation X X
Bonds
Special Revenue X X
Bonds
Tax Increment X X
Financing Bonds
Municipal Notes X X
Variable Rate X X
Demand Instruments
Principal Securities of the Funds
The following list is a description of the principal securities in which the
Funds may invest. More information on the principal and acceptable
investments of the Funds is contained in the Funds' Statement of Additional
Information.
Fixed Income Securities
Fixed income securities (bonds) pay interest, dividends or distributions at a
specified rate. The rate may be a fixed percentage of the principal or
adjusted periodically. In addition, the issuer of a fixed income security
must repay the principal amount of the security, normally within a specified
time. Fixed income securities provide more regular income than equity
securities. However, the returns on fixed income securities are limited and
normally do not increase with the issuer's earnings. This limits the
potential appreciation of fixed income securities as compared to equity
securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease
depending upon whether it costs less (a discount) or more (a premium) than
the principal amount. If the issuer may redeem the security before its
scheduled maturity, the price and yield on a discount or premium security may
change based upon the probability of an early redemption. Securities with
higher risks generally have higher yields.
The following describes the principal types of fixed income securities in
which a Fund may invest.
Tax-Exempt Securities
Tax-exempt securities are fixed income securities that pay interest that is
not subject to regular federal income taxes. Typically, states, counties,
cities and other political subdivisions and authorities issue tax-exempt
securities. The market categorizes tax-exempt securities by their source of
repayment. Interest income on such securities may be subject to the federal
alternative minimum tax (AMT) for individuals and corporations.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes sufficient
to pay principal and interest on the bonds. However, the issuer's authority
to impose additional taxes may be limited by its charter or state law.
Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues received by
the issuer such as specific taxes, assessments, tolls, or fees. Bondholders
may not collect from the municipality's general taxes or revenues. For
example, a municipality may issue bonds to build a toll road, and pledge the
tolls to repay the bonds. Therefore, a shortfall in the tolls normally would
result in a default on the bonds.
Tax Increment Financing Bonds
Tax increment financing (TIF) bonds are payable from increases in taxes or
other revenues attributable to projects financed by the bonds. For example, a
municipality may issue TIF bonds to redevelop a commercial area. The TIF
bonds would be payable solely from any increase in sales taxes collected from
merchants in the area. The bonds could default if merchants' sales, and
related tax collections, failed to increase as anticipated.
Municipal Notes
Municipal notes are short-term tax-exempt securities. Many municipalities
issue such notes to fund their current operations before collecting taxes or
other municipal revenues. Municipalities may also issue notes to fund capital
projects prior to issuing long-term bonds. The issuers typically repay the
notes at the end of their fiscal year, either with taxes, other revenues or
proceeds from newly issued notes or bonds.
Variable Rate Demand Instruments
Variable rate demand instruments are tax-exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a
variable rate intended to cause the securities to trade at their face value.
A Fund treats variable rate demand instruments as short-term securities even
though their maturity may extend beyond 397 days because, within 397 days,
their variable interest rate adjusts in response to changes in market rates
and the repayment of their principal amount can be demanded.
Other Investment Strategies
Temporary Defensive Investments
The Funds may temporarily depart from their principal investment strategies
by investing their assets in cash and shorter-term debt securities and
similar obligations. They may do this to minimize potential losses and
maintain liquidity to meet shareholder redemptions during adverse market
conditions. This may cause a Fund to fail to meet its investment objective
and to give up greater investment returns to maintain the safety of
principal, that is, the original amount invested by shareholders. Interest
income from temporary investments may be taxable to shareholders as ordinary
income.
Investment Ratings For Investment Grade Securities
The Advisor or sub-advisor will determine whether a security is investment
grade based upon the credit ratings given by one or more nationally
recognized rating services. For example, Standard and Poor's, a rating
service, assigns ratings to investment grade securities (AAA, AA, A, and BBB)
based on their assessment of the likelihood of the issuer's inability to pay
interest or principal (default) when due on each security. Lower credit
ratings correspond to higher credit risk. If a security has not received a
rating, a Fund must rely entirely upon the Advisor's or sub-advisor's credit
assessment that the security is comparable to investment grade.
Specific Risks of Investing in The Funds
Interest Rate Risks
Prices of fixed income securities rise and fall in response to changes in the
interest rate paid by similar securities. Generally, when interest rates
rise, prices of fixed income securities fall. However, market factors, such
as the demand for particular fixed income securities, may cause the price of
certain fixed income securities to fall while the prices of other securities
rise or remain unchanged.
Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.
Credit Risks
Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, a Fund
will lose money.
Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investors Service. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not
received a rating, a Fund must rely entirely upon the Advisor's credit
assessment.
Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable maturity
(the spread) measures the additional interest paid for risk. Spreads may
increase generally in response to adverse economic or market conditions. A
security's spread may also increase if the security's rating is lowered, or
the security is perceived to have an increased credit risk. An increase in
the spread will cause the price of the security to decline.
Credit risk includes the possibility that a party to a transaction involving
a Fund will fail to meet its obligations. This could cause a Fund to lose the
benefit of the transaction or prevent a Fund from selling or buying other
securities to implement its investment strategy.
Call Risks
Call risk is the possibility that an issuer may redeem a fixed income
security before maturity (a call) at a price below its current market price.
An increase in the likelihood of a call may reduce the security's price.
If a fixed income security is called, a Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.
Tax Risks
In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest
received and distributed by Maryland Municipal Bond Fund and Virginia
Municipal Bond Fund to their shareholders to be taxable.
Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.
Income from Maryland Municipal Bond Fund and Virginia Municipal Bond Fund may
be subject to the alternative minimum tax (AMT).
Risks Of Non-Diversification
Maryland Municipal Bond Fund and Virginia Municipal Bond Fund are
non-diversified. Compared to diversified mutual funds, each of these Funds
may invest a higher percentage of its assets among fewer issuers of portfolio
securities. This increases a Fund's risk by magnifying the impact (positively
or negatively) that any one issuer has on a Fund's Share price and
performance.
Maryland Investment Risks
Maryland Municipal Bond Fund emphasizes investments in Maryland and is more
subject to events that may adversely affect Maryland issuers compared to
funds that invest in multiple states.
Maryland's economy is relatively diversified across the service, trade and
government sectors. The high proportion of federal government jobs, which
contributes to high wealth levels, made the state vulnerable to the recession
and concurrent federal downsizing in the early 1990's; however, Maryland's
economic growth rate has improved and is nearing the national average.
Virginia Investment Risks
Since the Fund invests primarily in issuers from Virginia, the Fund may be
subject to additional risks compared to funds that invest in multiple states.
Virginia's credit strength is based on its substantial resources,
conservative financial and budget management, strong demographics and broad
based economy. Virginia's economy has strong ties to government and
defense-related industries, as well as high technology industries, trade and
tourism. Any downturn in these industries may adversely affect the economy of
the state.
Fund Expenses
Pursuant to an SEC exemptive order, the Funds are permitted to invest in
shares of MTB money market funds as a means of managing uninvested cash.
These investments will cause a duplication of expenses. The Advisor may
waive certain fees in connection with these investments.
How Are Shares Priced?
The Trust offers seven classes of Shares: Class A Shares, Class B Shares,
Class C Shares, Class S Shares, Institutional Shares, Institutional I Shares
and Institutional II Shares. All Share classes have different sales charges
and other expenses, which affect their performance. Each Share class
represents interests in a single portfolio of securities. This prospectus
relates only to Class A Shares. The differences between the classes relate to
the timing and amount of asset-based sales charges and other expenses which
an investor bears directly or indirectly as a shareholder. Contact your
financial intermediary or call the MTB Group of Funds (MTB Funds) at
800-836-2211 for more information about Institutional Shares, Institutional I
Shares, Institutional II Shares, Class B Shares, Class C Shares and Class S
Shares.
The NAV of Shares of the Funds fluctuates and is generally based upon the
market value of portfolio securities and other assets of the Fund. The NAV is
determined at the end of regular trading of the NYSE, which is generally 4:00
p.m. (Eastern time) but may vary due to market circumstances or other reasons
(NYSE Close) on each day the NYSE is open. Fixed income securities are
generally valued according to the mean between bid and asked prices as
furnished by an independent pricing service, except that fixed income
securities with remaining maturities of less than 60 days at time of purchase
may be valued at amortized cost.
A Fund may use the fair value of a security to calculate its NAV when, for
example, (1) a portfolio security is not traded in a public market or the
principal market in which the security trades is closed, (2) trading in a
portfolio security is suspended and not resumed prior to the normal market
close, (3) a portfolio security is not traded in significant volume for a
substantial period, or (4) the Fund's Advisor determines that the quotation
or price for a portfolio security provided by a dealer or independent pricing
service is inaccurate.
Fair valuation procedures are also used when a significant event affecting
the value of a portfolio security is determined to have occurred between the
time when the price of the portfolio security is determined and the close of
trading on the NYSE, which is when the Fund's NAV is computed. An event is
considered significant if there is both an affirmative expectation that the
security's value will change in response to the event and a reasonable basis
for quantifying the resulting change in value. Significant events include
significant general securities market movements occurring between the time
when the price of the portfolio security is determined and the close of
trading on the NYSE. For domestic fixed income securities, such events may
occur where the cut-off time for the market information used by the
independent pricing service is earlier than the end of regular trading on the
NYSE. In such cases, use of fair valuation can reduce an investor's ability
to seek to profit by estimating the Fund's NAV in advance of the time when
the NAV is calculated.
In some cases, events affecting the issuer of a portfolio security may be
considered significant events. Examples of potentially significant events
include announcements concerning earnings, acquisitions, new products,
management changes, litigation developments, a strike or natural disaster
affecting the company's operations or regulatory changes or market
developments affecting the issuer's industry occurring between the time when
the price of the portfolio security is determined and the close of trading on
the NYSE.
There can be no assurance that the Fund could purchase or sell a portfolio
security at the price used to calculate the Fund's NAV. In the case of fair
valued portfolio securities, lack of information and uncertainty as to the
significance of information may lead to a conclusion that a prior valuation
is the best indication of a portfolio security's present value. Fair
valuations generally remain unchanged until new information becomes
available. Consequently, changes in the fair valuation of portfolio
securities may be less frequent and of greater magnitude than changes in the
price of portfolio securities valued at their last sale price, by an
independent pricing service, or based on market quotations. Fair valuation
determinations often involve the consideration of a number of subjective
factors, and the fair value price may be higher or lower than a readily
available market quotation.
To the extent any fund invests in other investment companies, the
prospectuses for those companies explain the circumstances under which they
will use fair value pricing and the effects of using fair value pricing.
Sales Charge When You Purchase Class A Shares
The Class A Shares of the Funds bear front-end sales charges. When the Funds
receive your purchase request in proper form (as described in this
prospectus), it is processed at the next calculated NAV plus any applicable
front-end sales charge as is shown in the tables below.
Class A Shares of each Fund are sold at their NAV next determined after an
order is received, plus a sales charge as follows:
Sales Charge as a Sales Charge as a
Percentage of Public Percentage of
Purchase Amount Offering Price NAV
Less than $100,000 4.50% 4.71%
$100,000 but less than 3.75% 3.90%
$250,000
$250,000 but less than 3.00% 3.09%
$500,000
$500,000 but less than $1 2.00% 2.04%
million
$1 million or greater* 0.00% 0.00%
Class A Shares NAV Commission Payments
Your investment professional is entitled to receive an advanced commission
payment on sales of $1 million or more of Class A Shares of the Funds as
follows:
Advance Commission
as a Percentage of
Purchase Amount Public Offering Price
$1 million - $2,999,999.99 0.75%
$3 million up to $4,999,999.99 0.50%
Over $5 million 0.25%
The following reductions and eliminations of sales charges apply only to
Class A Shares.
The sales charge at purchase may be reduced by:
o purchasing Shares in greater quantities to reduce the applicable sales
charge (purchases made at one time by a trustee or fiduciary for a
single trust estate or a single fiduciary account can be combined);
o combining concurrent purchases of Shares:
- by you, your spouse, and your children under age 21; or
- of the same share class of two or more MTB Funds (other than money
market funds);
o accumulating purchases (in calculating the sales charge on an
additional purchase, include the current value of previous Share
purchases still invested in the Fund); or
o signing a Letter of Intent (LOI) committing to purchase a certain
dollar amount of the same class of Shares within a 13 month period to
combine such purchases in calculating the sales charge. The Fund's
custodian will hold Shares in escrow equal to the maximum applicable
sales charge. If you complete the LOI, the custodian will release the
Shares in escrow to your account. If you do not fulfill the LOI, the
custodian will redeem the appropriate amount from the Shares held in
escrow to pay the sales charges that were not applied to your purchases.
The sales charge may be eliminated when you purchase Shares:
o by exchanging Shares from the same share class of another MTB Fund
(other than a money market fund);
o through wrap accounts or other investment programs where you pay the
investment professional directly for services;
o through investment professionals that receive no portion of the sales
charge;
o as a current or retired/former Trustee, Director or employee of the
Fund, the Advisor, the Distributor, the Sub-advisor and their
affiliates, M&T Bank Corporation and their subsidiaries and the
immediate family members of these individuals. (immediate family member
is defined as any parent, spouse of a parent, child, spouse of a child,
spouse, brother or sister, and includes step and adoptive relationships
of these people) because there are nominal sales efforts associated
with their purchases;
o as an employee of a dealer which has a selling group agreement with the
Distributor and consents to such purchases;
o as holders of the FBR Funds who receive Class A Shares of the
corresponding MTB Fund in connection with the Reorganization or in
connection with future purchases of Class A Shares of the corresponding
MTB Fund with respect to those accounts created in connection with the
Reorganization; or
o as an investor referred by any sub-advisor to the Funds.
If your investment qualifies for a reduction or elimination of the sales
charge, you or your financial intermediary must notify the Fund's
Distributor, Edgewood Services Inc., or MTB Funds Shareholder Services at
time of purchase. If the Distributor or MTB Funds Shareholder Services is not
notified at the time of purchase, you may receive the reduced sales charge
only on additional purchases, and not retroactively on previous purchases.
Keep in mind that financial intermediaries may charge you additional fees for
their services in connection with your Share transactions.
How to Purchase, Redeem, and Exchange Shares
When the NYSE is open for business, you may purchase, redeem, or exchange
Shares by phone, mail, or wire through your financial intermediary or MTB
Funds, subject to daily cutoff times. Your order will be processed at the
next calculated NAV, plus any sales charges or less any CDSC as applicable,
after your order request is received by the Fund or its designated agent in
proper form. The NYSE is closed on weekends and on the following holidays:
New Year's Day, Martin Luther King, Jr. Day, President's Day, Good Friday,
Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day. Purchases and redemptions by wire will not be available on days the
Federal Reserve wire system is closed. In addition to the scheduled NYSE
holidays noted above, the Federal Reserve wire system is scheduled to be
closed on the following days: Columbus Day and Veterans' Day. The Funds do
not issue share certificates and they reserve the right to reject any
purchase request for any reason.
Through Your Financial Intermediary
Shareholders normally purchase Shares through investment professionals and
different types of customer accounts at financial intermediaries. You should
read this prospectus together with any agreements between you and your
financial intermediary to learn about procedures to follow, the services
provided, the fees charged for those services, required earlier cutoff times
than shown in this prospectus, and any restrictions and limitations imposed.
Directly With MTB Funds
By Phone
MTB Funds 800-836-2211
The Funds reserve the right to modify or terminate the phone redemption and
exchange privileges at any time.
Shareholders will be notified prior to any modification or termination. Your
phone instructions may be electronically recorded for your protection.
Shareholders who purchase shares by phone or accept the phone redemption or
exchange privilege authorize the Trust and its agents to act upon their
telephonic instructions for any account for which they have authorized such
services. Redeeming or exchanging Shares over the phone is convenient, but
not without risk. Although the Funds have created certain safeguards and
procedures to confirm the identity of callers and the authenticity of
instructions, the Funds are not responsible for any losses or costs incurred
by following phone instructions we reasonably believe to be genuine. If you
transact with the Funds over the phone, you will generally bear the risk of
any loss.
By Mail
MTB Group of Funds
P.O. Box 8477
Boston, MA 02266-8477
By Federal Reserve System Wire
Send your wire to:
State Street Bank and Trust Company
Boston, MA
Dollar Amount of Wire
ABA Number: 011000028
Attn: (MTB Fund Name)
Wire Order Number, Dealer Number or Group Number
Nominee/Institution Name
Further Credit To: (Account name and number)
Purchasing Shares
To purchase Shares of a Fund for the first time, complete and sign a new
account application, selecting one of the Payment Methods below. Mail your
application to MTB Funds to establish your new account.
Minimum Initial Investment Amount: $500
Minimum Subsequent Investment Amount: $25
Minimum Balance $250
The minimum initial and subsequent investment amounts may be waived or
lowered from time to time. An investor's minimum investment will be
calculated by combining all accounts it maintains with the Funds provided the
investor identifies its other Fund accounts at the time of investment.
Employees of M&T Bank and its affiliates are exempt from the minimums stated
above.
Accounts With Low Balances
Due to the high cost of maintaining accounts with low balances,
non-retirement accounts may be closed if redemptions or exchanges cause the
account balance to fall below $250. Before an account is closed, you will be
notified and allowed 30 days to purchase additional Shares to meet the
minimum account balance required.
Payment Methods
Payment may be made by check, Federal Reserve System wire, or Automated
Clearing House (ACH). Where a Fund offers more than one Share class and you
do not specify the class choice on your form of payment, you automatically
will receive Class A Shares. Each payment must be accompanied by your name,
the Fund's name and Share class, and your account number (if established).
By Check
Make your check payable to (Name of the Fund and Class of Shares) and mail it
to MTB Funds along with your application. Current shareholders can purchase
additional Shares by sending a check to MTB Funds accompanied by purchase
instructions.
Purchase orders by mail are considered received after payment by check has
been converted into federal funds. This is normally the next business day
after the check is received. However, payment may be delayed up to seven
business days to allow your purchase payment to clear.
The Funds do not accept cash, money orders, credit cards, travelers checks,
counter checks, or third party checks (for example, checks made payable to a
third party and endorsed over to MTB Funds or checks made payable to the MTB
Funds by a party other than the shareholder of record).
By Federal Reserve System Wire
Once your account is established, ask your bank to wire money to the Fund's
custodian bank, accompanied by purchase instructions. For additional
purchases, wire your money with instructions. Wire orders will only be
accepted on days on which the Funds, M&T Bank, and the Federal Reserve wire
system are open for business. Some financial institutions may charge a fee
for wire services. The Funds also reserve the right to charge a processing
fee for wire transfers. Below is a chart that shows the different cutoff
times for processing Fund purchases and what it means to you. The Funds are
not responsible for delays in the receipt of wires.
Your Purchase Your Purchase
FUND TYPE Request in Results in: Request in
Proper Order/ Proper Order and
Federal Funds Federal Funds
Received Before: Received After:
(Eastern time) (Eastern time) Results in:
Receive
NYSE Close Receive that next
Bond day's closing NAV calculated
NYSE Close NAV
By ACH
Once your account is established, transfer money via ACH from your checking
or NOW deposit account to your Fund account. Since ACH transfers overnight,
you will not begin earning dividends until the next business day.
Systematic Investment Program
Once you have opened a Fund account, you can add to your investment on a
regular basis in amounts of $25 or more through automatic deductions from
your checking or NOW deposit account. To sign up for this program, please
call MTB Funds for an application.
Employees of M&T Bank and its affiliates are not subject to a minimum
investment amount.
Redeeming Shares
To redeem shares you must provide us with your name, the Fund's name and
Share class, your account number, the number of shares or dollar amount you
wish to redeem, and your choice of Payment Option. If you do not specify a
Payment Option, a check will be mailed to you at your address of record.
Redemption requests for Shares held through an IRA account must be made by
mail and not by phone.
By Phone
Call MTB Funds. You are automatically eligible to make phone redemptions
unless you decline the privilege at the time you open your account. It is
recommended that you provide the necessary information for the phone
redemption option on your initial application. If you do not do this and
later wish to take advantage of the phone redemption privilege, call MTB
Funds for authorization forms.
By Mail
Send your written request to MTB Funds.
Payment Options
You may receive your redemption proceeds by check, Federal Reserve System
wire, or ACH transfer to your designated bank account.
By Check
Normally, a check for redemption proceeds is mailed within one business day
after your redemption order is received, but in no event more than seven
business days after receipt of a proper redemption request.
By Federal Reserve System Wire
Wire transfers of redemption proceeds can only be made on days on which the
Federal Reserve wire system, M&T Bank, and the Funds are open for business.
Certain financial institutions may charge a fee for the receipt of wire
transfers. The Funds also reserve the right to charge a processing fee for
wire transfers. Below is a chart that shows the different cutoff times for
processing Fund redemptions by wire and what it means to you.
Your Redemption Your Redemption
FUND TYPE/NAME Request in Results in: Request in
Proper Order Proper Order
Received Before: Received After:
(Eastern time) (Eastern time) Results in:
Receive
NYSE Close Receive that next
Bond day's closing NAV calculated
NYSE Close NAV
Next day wire Second day
wire
By ACH
You may have redemption proceeds sent directly to your checking or NOW
deposit account via ACH transfer from the Fund. If you place your order by
3:00 p.m. (Eastern time), you will receive that day's closing NAV and any
dividends earned that day. Since ACH transfers are processed overnight, you
will not receive redemption proceeds until the second business day.
Systematic Withdrawal Program
You may automatically redeem Shares in a minimum amount of $50 on a regular
basis. Your account must be worth at least $10,000 at the time the program is
established. This program may reduce, and eventually deplete, your account.
Payments should not be considered yield or income. Generally, it is not
advisable to continue to purchase Class A Shares subject to a sales charge
while redeeming Shares using this program. For more information and an
application form for this program call MTB Funds.
Additional Conditions
Signature Guarantees
You must have a signature guarantee (STAMP 2000 Medallion Guarantee) on
written redemption requests:
o when you are requesting a redemption of $50,000 or more;
o when you want a redemption to be sent to an address other than the one
you have on record with the Fund; or
o when you want the redemption payable to someone other than the
shareholder of record.
Your signature can be guaranteed by any federally insured financial
institution (such as a bank or credit union) or a broker-dealer that is a
domestic stock exchange member, but not by a notary public.
Limitations on Redemption Proceeds
Redemption proceeds are normally transmitted within one business day (or
sooner, as described under "Payment Options") after receiving a request in
proper form. However, payment may be delayed up to seven days:
o to allow your purchase payment to clear;
o during periods of market volatility; or
o when a shareholder's trade activity or amount adversely impacts a
Fund's ability to manage its assets.
Redemption In Kind
Although the Funds intend to pay Share redemptions in cash, each Fund
reserves the right to pay the redemption price in whole or in part by a
distribution of the Fund's portfolio securities.
Redemption From Retirement Accounts
In the absence of your specific instructions, 10% of the value of your
redemption from a retirement account in a Fund may be withheld for taxes.
This withholding only applies to certain types of retirement accounts.
Exchanging Shares
You may exchange Shares of a Fund for the same Share class of another MTB
Fund. All exchange requests must include your name and account number, the
Fund's name and Share class, the number of shares or dollar amount you wish
to exchange and the name of the Fund into which the exchange is to be made.
In order to exchange Shares you must submit your request in proper form and:
o meet the minimum initial investment requirements (if the exchange
results in the establishment of a new account);
o establish an account in the Fund you want to acquire if you do not have
an account in that Fund;
o ensure that the account registrations are identical;
o receive a prospectus for the Fund into which you wish to exchange; and
o only exchange into a Fund that may be legally sold in your state of
residence.
An exchange is treated as a redemption and subsequent purchase and is a
taxable transaction. The Funds may modify or terminate the exchange privilege
at any time, and shareholders will be notified prior to any modification or
termination.
Class A Share Exchanges
Exchanges at NAV
If you exchange between Funds with different sales charges, the exchange will
be made at NAV. However, you would pay applicable sales charges when
exchanging Shares from one of the Money Market Funds into one of the Bond,
Balanced, or Stock Funds.
If as a holder of the FBR Funds, you receive in the Reorganization (or
subsequently purchase) Class A Shares of the corresponding MTB Fund without
paying a sales charge in the circumstances described under "How are Shares
Priced- Sales Charge When You Purchase Class A Shares", you may exchange such
Shares into Shares of any other MTB Fund at NAV.
If you paid a sales charge once (including Shares acquired through
reinvestment of dividends and capital gains), you will not have to pay the
sales charge again upon exchange. This is true even if you exchange out of a
Fund with a sales charge, then into a Fund without a sales charge and back
into a Fund with a sales charge.
Exchanges Subject to a Sales Charge
If you purchased into a Fund without a sales charge, and exchange into a Fund
with a sales charge, you will be assessed the applicable sales charge when
you make the exchange. However, the sales charge will not be applied to any
Shares that you acquired through reinvestment of dividends and capital gains.
Dividends of the Class A Shares of the Money Market Funds can be reinvested
into Class A Shares of any other MTB Fund at NAV at time of payment.
By Phone
To request an exchange, and for additional information about the exchange
privilege, call MTB Funds. Below is a chart that shows the cutoff time for
processing Fund exchanges and what it means to you.
Your Exchange Your Exchange
FUND TYPE Request in Results in: Request in
Proper Order Proper Order
Received Before: Received After:
(Eastern time) (Eastern time) Results in:
All Funds NYSE Close Same day exchange NYSE Close Next day
exchange
You will not receive a dividend from the Fund into which you are exchanging
on the date of the exchange.
You will automatically be eligible for phone exchanges, unless you decline
this privilege at the time you open your account. It is recommended that you
provide the necessary information for the phone exchange option on your
initial application. If you do not do this and later wish to take advantage
of the privilege, call MTB Funds for authorization forms.
By Mail
Send your written request to MTB Funds.
Systematic Exchange Program
You may exchange Shares from one Fund into the same share class of another
Fund on a monthly, quarterly or annual basis. Exchanges must be at least $25
and are subject to limitations as described above. For more information and
an application form for this Program, call MTB Funds.
Frequent Trading Policies
Frequent or short-term trading into and out of a Fund can have adverse
consequences for the Fund and shareholders who use the Fund as a long-term
investment vehicle. Such trading in significant amounts can disrupt the
Fund's investment strategies (e.g., by requiring it to sell investments at
inopportune times or maintain excessive short-term or cash positions to
support redemptions), increase brokerage and administrative costs, and affect
the timing and amount of taxable gains distributed by the Fund. Investors
engaged in such trading may also seek to profit by anticipating changes in
the Fund's NAV in advance of the time as of which NAV is calculated or
through an overall strategy to buy and sell Shares in response to incremental
changes in the Fund's NAV.
The Funds' Board has approved policies and procedures intended to discourage
excessive, frequent or short-term trading of the Funds' Shares. The Funds'
fair valuation procedures are intended in part to discourage short-term
trading strategies by reducing the potential for these strategies to succeed.
See "How are Shares Priced?" The Funds also monitor trading in Shares in an
effort to identify disruptive trading activity. The Funds monitor trades into
and out of the Funds within a period of 30 days or less, where both the
purchase and sale are at least $100,000. The Funds may also monitor trades
into and out of the Funds over periods longer than 30 days. Whether or not
the specific monitoring limits are exceeded, the Funds' management or Adviser
may determine from the amount, frequency or pattern of purchases and
redemptions or exchanges that a shareholder is engaged in excessive trading
that is or could be detrimental to the Funds and other shareholders and may
preclude the shareholder from making further purchases or exchanges of
Shares. The Funds' management and Adviser may also take action to suspend
further trading by a financial intermediary if it is deemed to be engaged in
excessive trading and/or does not cooperate satisfactorily with requests for
details about trading activity. No matter how the Funds define their limits
on frequent trading of Shares, other purchases and sales of Shares may have
adverse effects on the management of a Fund's portfolio and its performance.
Also, it is possible that frequent trading may occur in the Funds without
being identified because certain investors may seek to hide their identity or
trading activity, or there may be operational or technical limitations that
limit the Funds' ability to monitor and restrict frequent trading.
The Funds' objective is that their restrictions on short-term trading should
apply to all shareholders, regardless of the number or type of accounts in
which Shares are held. However, the Funds anticipate that limitations on
their ability to identify trading activity to specific shareholders,
including where shares are held through financial intermediaries in multiple
or omnibus accounts, will mean that these restrictions may not be able to be
applied uniformly in all cases. For example, while the Funds will seek the
cooperation of financial intermediaries to enforce the Funds' policies on
frequent trading, certain intermediaries may be unwilling or unable to
implement such policies. Therefore, the Funds may be unable to uniformly
monitor and restrict trading activity through such intermediaries. Also,
because certain of the Funds are sold to participant-directed employee
benefit plans, and there may be regulatory constraints on the plans' ability
to limit trading by the individual participants, the Funds may not be able to
effectively monitor or restrict trading by these participants.
The Adviser will provide to the Funds' Board a quarterly report of all
potential occurrences which were detected during the preceding quarter, and a
description of any action taken with respect thereto.
Account And Share Information
Corporate Resolutions
Corporations and certain other organizations may be required to furnish
evidence of the authority of persons designated on the account application to
effect transactions on behalf of the organization.
Confirmations And Account Statements
You will receive confirmation of purchases, redemptions and exchanges (except
systematic transactions). Shareholders also will receive quarterly statements
reporting all account activity, including systematic transactions, dividends
and capital gains paid.
Retirement Investments
Shares of the Funds can be purchased as an investment for retirement plans or
IRA accounts. You may be subject to an annual IRA account fee. Maryland
Municipal Bond Fund and Virginia Municipal Bond Fund are generally not
appropriate for retirement plans or IRA accounts. For further details,
contact MTB Funds and consult a tax advisor.
Distribution of Fund Shares
Edgewood Services, Inc. (Distributor), whose address is 5800 Corporate Drive,
Pittsburgh, PA 15237, serves as the Distributor of the Funds offered by this
Prospectus. The Distributor is a subsidiary of Federated Investors, Inc.
(Federated).
The Fund's Distributor markets the Shares described in this prospectus to
institutions or individuals, directly or through a financial intermediary
that has an agreement with the Distributor. When the Distributor receives
marketing fees and sales charges, it may pay some or all of them to financial
intermediaries. The Distributor and its affiliates may pay out of their
assets other amounts (including items of material value) to financial
intermediaries for marketing and servicing Shares. Financial intermediaries
include the Advisor and its affiliates. You should consult your financial
intermediary to determine what types of compensation it may receive for
selling Fund shares.
The Distributor may, from time to time in its sole discretion, institute one
or more promotional incentive programs for dealers, which will be paid for by
the Distributor from any sales charge it receives or from any other sources
available to it, including amounts made available by the Distributor's
affiliate (Federated Services Company), and the Advisor and its affiliates
out of their reasonable profits and other resources. Under any such program,
the Distributor may provide cash or non-cash compensation as recognition for
past sales or encouragement for future sales that may include the following:
merchandise, travel expenses, prizes, meals, and lodgings, and gifts that do
not exceed $100 per year, per individual.
Rule 12b-1 Plans
The Funds have adopted a Rule 12b-1 Plan on behalf of Class A Shares, which
allows them to pay distribution fees to financial intermediaries (which may
be paid through the Distributor) at an annual rate of up to 0.25% of the
average daily net assets of the Funds for Class A Shares, for the sale,
distribution, administration, customer servicing and recordkeeping of these
Shares. These fees may be paid to the Distributor, the Advisor and their
affiliates. The Funds may waive or reduce the maximum amount of Rule 12b-1
fees they pay from time to time in their sole discretion. In addition, a
financial intermediary (including the Distributor, the Advisor or their
affiliates) may voluntarily waive or reduce any fees to which they may be
entitled. Because these Shares pay marketing fees on an ongoing basis, your
investment cost may be higher over time than other shares with different
sales charges and marketing fees.
Shareholder Services
The Funds have adopted a Shareholder Services Plan on behalf of Class A
Shares, which is administered by Federated Services Company to pay service
fees to financial intermediaries (which may include the Distributor, the
Advisor or their affiliates). M&T Securities, Inc. (M&T Securities) and other
financial intermediaries are entitled to receive a shareholder services fee
for acting as shareholder servicing agent for the Funds, providing
shareholder assistance, communicating or facilitating purchases and
redemptions of Shares, and distributing prospectuses and other information.
Additional Payments to Financial Intermediaries
The Distributor and its affiliates (including Federated Services Company) may
pay out of their own reasonable resources and profits amounts (including
items of material value) to certain financial intermediaries (which may
include the Advisor and its affiliates) to support the sale of Shares or
provide services to Fund shareholders. The Advisor and its affiliates may pay
out of their own reasonable resources and profits amounts (including items of
material value) to certain financial intermediaries (including the
Distributor and Federated Services Company) to support the sale of Shares or
provide services to the Fund shareholders. The amounts of these payments
could be significant, and may create an incentive for the financial
intermediaries or its employees or associated persons to recommend or sell
Shares of the Fund to you. These payments are not reflected in the fees and
expenses listed in the fee table section of the Funds' prospectus because
they are not paid by the Fund.
These payments are negotiated and may be based on such factors as the number
or value of Shares that the financial intermediary sells or may sell; the
value of client assets invested; or the type and nature of services or
support furnished by the financial intermediary. These payments may be in
addition to payments made by the Fund to the financial intermediary under a
Rule 12b-1 Plan and/or shareholder service fee arrangement. You can ask your
financial intermediary for information about any payments it receives from
the Distributor, the Advisor, their affiliates, or the Fund and any services
the financial intermediary provides. The SAI contains additional information
on the types of additional payments that may be paid.
Dividends and Capital Gains
FUND DIVIDENDS DECLARED/
DIVIDENDS PAID
Maryland Municipal Bond Fund, Virginia Municipal
Bond Fund Daily/Monthly
Only shareholders of a Fund on the record date are entitled to receive
payments of dividends and/or capital gains.
In addition, each Fund intends to pay any capital gains at least annually.
Your dividends and capital gains distributions will be automatically
reinvested in additional Shares without a sales charge, unless you elect cash
payments.
If you purchase Shares just before a Fund declares a dividend (other than a
Fund that declares dividends daily) or capital gain distribution, you will
pay the full price for the Shares and then receive a portion of the price
back in the form of a distribution, whether or not you reinvest the
distribution in Shares. Therefore, you should consider the tax implications
of purchasing Shares shortly before a Fund declares a dividend or capital
gain.
Tax Information
The Funds send you an annual statement of your account activity to assist you
in completing your federal, state and local tax returns. Fund distributions
of dividends and capital gains are taxable to you whether paid in cash or
reinvested in a Fund. Tax information will be mailed to you on or before
January 31 each year. Capital gains distributions are taxable at different
rates depending upon the length of time a Fund holds its assets.
The Funds' distributions are expected to be as follows:
FUND DISTRIBUTIONS ARE EXPECTED
TO BE PRIMARILY:
Maryland Municipal Bond Fund, Virginia Municipal
Bond Fund Dividends
It is anticipated that distributions for Maryland Municipal Bond Fund and
Virginia Municipal Bond Fund will be primarily dividends that are exempt from
federal income tax, although a portion of each Fund's dividends may not be
exempt. Dividends may be subject to state and local taxes, although the
dividends of the Maryland Municipal Bond Fund and Virginia Municipal Bond
Fund will be exempt, respectively, from Maryland or Virginia state personal
income tax to the extent that they are derived from interest on obligations
exempt from Maryland or Virginia personal income taxes, respectively.
Redemptions and exchanges are taxable sales. Capital gains and non-exempt
dividends are taxable whether paid in cash or reinvested in the Fund. Please
consult your tax advisor regarding your federal, state, and local tax
liability.
Portfolio Holdings Information
Information concerning each Fund's portfolio holdings is available in the
"Funds & Performance" section of the MTB Group of Funds website at
www.mtbfunds.com. A complete listing of each Fund's portfolio holdings as of
the end of each month is posted on the website approximately 60 days after
the end of the month and remains there until it is replaced with information
for the next month. You may access this from the "Funds & Performance" page:
click on "Fund Holdings," choose from the menu of "Equity Fund Holdings,"
"Fixed Income Holdings," or "Money Market Fund Holdings," and select the name
of the Fund from the appropriate menu.
Summary portfolio composition information as of the close of each quarter is
posted on the website approximately 30 days after the end of the quarter and
remains there until replaced by the information for the succeeding quarter.
The summary portfolio composition information may include the following types
of information, but is subject to change:
o identification of the Fund's top ten holdings;
o percentage breakdowns of the portfolio holdings by sector, credit
quality, and/or country, as applicable.
You may access this from the "Funds & Performance" page: click on "Class A
Funds Quarterly Fact Sheets" or "Institutional Funds Quarterly Fact Sheets,"
and select the appropriate link opposite the name of the Fund. You may also
access a complete set of these monthly/quarterly fact sheets by clicking on
"Prospectus and Fund Guide" and selecting "Retail Fund Guide."
In addition, each Fund's annual and semiannual reports contain complete
listings of the Fund's portfolio holdings as of the end of the Fund's second
and fourth fiscal quarters. You may access this from the "Funds &
Performance" page: click on "Prospectus & Fund Guide" and select the desired
report from the following options: "Semi-Annual Report Money Market Funds,"
"Semi-Annual Report Fluctuating Funds" or "Annual Report." Each Fund prepares
a report on Form N-Q of its portfolio holdings as of the end of the Fund's
first and third fiscal quarters. Fiscal quarter information is made available
on the website within 70 days after the end of the fiscal quarter. Each of
these fiscal quarter reports containing complete listings of the Fund's
portfolio holdings is filed with the SEC within 60 days of the end of the
reporting period at the SEC's website at www.sec.gov and is posted on the
Funds' website at www.mtbfunds.com.
Who Manages The Funds?
The Board of Trustees (the Board) governs the Funds. The Board selects and
oversees the Advisor, MTB Investment Advisors, Inc. ("MTBIA"), a subsidiary
of M&T Bank. The Advisor manages each Fund's assets, including buying and
selling portfolio securities. The Advisor's address is 100 E. Pratt Street,
17th Floor, Baltimore, MD 21202.
M&T Bank is the principal banking subsidiary of M&T Bank Corporation, a
regional bank holding company in existence since 1969. M&T Bank was founded
in 1892 and provides comprehensive banking and financial services to
individuals, governmental entities and businesses throughout New York State,
Pennsylvania, Maryland and parts of Virginia, West Virginia, the District of
Columbia and Delaware. As of June 30, 2005, M&T Bank Corporation had over
$54.5 billion in assets. MTBIA and entities affiliated with MTBIA or its
predecessors have served as investment advisor to MTB Funds since 1988 and,
as of June 30, 2005, it managed approximately $11.1 billion in assets. As
part of its regular banking operations, M&T Bank may make loans to public
companies. Thus, it may be possible, from time to time, for the Funds to hold
or acquire the securities of issuers which are also lending clients of M&T
Bank. The lending relationship will not be a factor in the selection of
securities.
For its services under an Advisory Contract, the Advisor receives an annual
Advisory Fee from each Fund, equal to a percentage of each Fund's average
daily net assets as follows:
FUND ADVISORY FEE
Maryland Municipal Bond Fund 0.70%
Virginia Municipal Bond Fund 0.70%
The Advisor may voluntarily waive a portion of its fee or reimburse a Fund
for certain operating expenses.
In addition to the investment management services provided by MTBIA, MTBIA's
affiliate M&T Securities, Inc. also provides administrative services to the
Funds and is entitled to receive a maximum fee of 0.04% of the Funds' average
daily net assets for such administrative services. M&T Securities, Inc. and
its affiliates also may receive up to 0.25% of the Funds' average daily net
assets for shareholder services under the Shareholder Services Plan described
in "Shareholder Services" and up to 0.25% of average daily net assets of the
Funds' Class A Shares for distribution services provided to the Funds under
the Rule 12b-1 Plan described in "Rule 12b-1 Plan."
A discussion of the Board's review of the Funds' investment advisory
contracts is available in the Funds' Annual Shareholder reports dated April
30, 2005.
Sub-Advisors
The Advisor (subject to the approval of the Board) may select and replace
sub-advisors and amend Sub-Advisory agreements between the Advisor and the
sub-advisors without obtaining shareholder approval. The foregoing applies
to all Funds except the three Managed Allocation Funds.
Portfolio Managers
FUND MANAGER(S)
Maryland Municipal Bond Susan L. Schnaars, CFA,
Fund CPA
Virginia Municipal Bond Susan L. Schnaars, CFA,
Fund CPA
Portfolio Manager Biographies
Susan L. Schnaars, CFA, CPA, is responsible for managing several large
institutional accounts, in addition to her portfolio management duties. She
has been a Vice President and Portfolio Manager of MTBIA since 1996 and a
Vice President of M&T Bank since April 1, 2003. She was a Vice President of
Allfirst Bank from 1995 until its acquisition by M&T Bank in April 2003. Ms.
Schnaars is a CFA Charterholder and a Certified Public Accountant, and has
more than 16 years of experience in the investment industry. She earned her
B.S. and M.S. from Drexel University.
The Fund's SAI provides additional information about the Portfolio Manager's
compensation, management of other accounts, and ownership of securities in
the Funds.
Financial Highlights
The following financial highlights are intended to help you understand the
financial performance of MTB Maryland Municipal Bond Fund's Class A Shares
for the past five fiscal years. Some of the information is presented on a
per Share basis. Total returns represent the rate an investor would have
earned (or lost) on an investment in a Fund, assuming reinvestment of all
dividends and capital gains.
MTB Maryland Municipal Bond Fund acquired ARK Maryland Tax-Free Portfolio in
a tax-free reorganization on August 22, 2003. The following financial
information incorporates the operations prior to August 22, 2003. The
financial information for the ARK Maryland Tax-Free Portfolio for the periods
prior to August 22, 2003 has been audited by KPMG LLP. The information for
the MTB Maryland Municipal Bond Fund for the periods beginning August 22,
2004 has been audited by Ernst & Young LLP, independent registered public
accounting firm, whose report, along with the MTB Maryland Municipal Bond
Fund's audited financial statements, is included in the April 30, 2005 Annual
Report of the Trust.
Financial highlights for MTB Virginia Municipal Bond are not included in this
Prospectus because the Fund is a newly-created Fund which has not yet
commenced operations.
Prior to August 15, 2003, MTB Group of Funds was known as Vision Group of
Funds. Prior to August 11, 2000, Vision Group of Funds was known as Vision
Group of Funds, Inc.
MTB Group of Funds Financial Highlights
(For a share outstanding throughout each period)
Ratios to Average Net Assets
Net Asset Net Net DistributDistributioTotal Net AssetTotal Expenses Net Expense Net Asset Portfolio
Year Value, InvestmeRealized from Net from DistributValue, Return InvestmentWaiver/ end Turnover
EndedBeginni Income and UnrealiTotal Investment Net of Income Reimbursemen of(b) Rate
Aprilof Gain from Income Realized Period period
30, Period (Loss) on Investme Gain on (000 omitted)
InvestmentsOperatio Investments
Maryland Municipal Bond Fund
Class A Shares
2001 $9.4 0.43 0.42 0.85 (0.43) -- (0.43) $9.90 9.09 90.94% 4.38% 0.36% $24,671 29%
[GRAPHIC OMITTED]
2002 $9.9 0.42 0.18 0.60 (0.42) -- (0.42) $10.08 6.13 30.94% 4.16% 0.37% $26,666 9%
[GRAPHIC OMITTED]
2003 $10.0 0.40 0.34 0.74 (0.40) -- (0.40) $10.42 7.47 71.02% 3.89% 0.36% $25,233 18%
[GRAPHIC OMITTED]
2004 $10.4 0.39 (0.21) 0.18 (0.39) -- (0.39) $10.21 1.74 41.01% 3.84% 0.39% $20,948 17%
[GRAPHIC OMITTED]
2005 $10.2 0.39 0.15 0.54 (0.39) (0.0 ) (0.43) $10.32 5.40 00.95% 3.82% 0.49% $19,639 13%
(a) Based on net asset value, which does not reflect the sales charge,
redemption fee or contingent deferred sales charge, if applicable. Total
returns for periods of less than one year are not annualized.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown.
D-3
HOW TO OBTAIN MORE INFORMATION ABOUT MTB GROUP OF FUNDS
A Statement of Additional Information (SAI) dated November __, 2005, is
incorporated by reference into this prospectus. Additional information about
the Fund's investments is available in the SAIs and in the Annual and
Semi-Annual Reports to shareholders of the MTB Group of Funds as they become
available. The Annual Report discusses market conditions and investment
strategies that significantly affected the Funds' performance during its last
fiscal year. To obtain the SAI, the Annual and Semi-Annual Reports (when
available) and other information without charge, and make inquiries, call 800
836-2211.
These documents, as well as additional information about the Funds (include
portfolio holdings, performance and distributions) are available on MTB's
website at www.mtbfunds.com.
To Obtain More Information:
Phone: Call 1-800-836-2211
Web: www.mtbfunds.com
Automated price, yield, and performance
information--24 hours a day, 7 days a week:
Call 1-800-836-2211
SEC: You can also obtain the SAI or the Annual and Semi-Annual Reports, as
well as other information about MTB Group of Funds, from the SEC's website
(http://www.sec.gov). You may review and copy documents at the SEC Public
Reference Room in Washington, D.C. (for information call 202 942-8090). You
may request documents by mail from the SEC, upon payment of a duplicating
fee, by (1) writing to: Securities and Exchange Commission, Public Reference
Section, Washington, D.C. 20549-0102 or (2) sending an electronic request to
publicinfo@sec.gov.
Cusip 55376T569
Investment Advisor
MTB Investment Advisors, Inc.
100 E. Pratt Street
17th Floor
Baltimore, MD 21202
www.mtbia.com
Distributor
Edgewood Services, Inc.
5800 Corporate Drive
Pittsburgh, PA 15237-5829
Co-Administrator
M&T Securities, Inc.
One M&T Plaza
Buffalo, NY 14203
Co-Administrator
Federated Services Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Transfer Agent and Dividend Disbursing Agent
Boston Financial Data Services, Inc.
2 Heritage Drive North
Quincy, MA 02171
Custodian and Fund Accountant
State Street Corporation
P.O. Box 8609
Boston, MA 02266-8609
Independent Registered Public Accounting Firm
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
SEC File No. 811-5514
33270 (12/05)
We are pleased to send you this Prospectus for Class A Shares of MTB Group of
Funds. The prospectus contains important information about your investments
in MTB Group of Funds.
Since we are required by law to send a prospectus to each person listed as a
shareholder, you (or your household) may receive more than one prospectus.
1-800-836-2211 / mtbfunds.com
MTB FUNDS
100 E. PRATT ST. (15th FLOOR)
BALTIMORE, MD 21202
www.mtbia.com
MTB-PRO-001-0805
Exhibit D
Management's Discussion of Fund Performance - MTB Maryland Municipal Bond Fund
April 30, 2005
As expected, the Federal Reserve Board (Fed) began raising the federal funds
target rate in June of 2004 and as a result, short-term municipal yields have
risen 130 basis points. Short-duration* securities have generated a total
retun of less than 2% over the past year. Conversely, yields on longer-term
securities have fallen approximately 50 basis points since this point last
year, after rising last spring just prior to the Fed's initial action. The
yield on ten-year municipal bonds fell 25 basis points to end the period at
3.68%, while the yield on thirty-year bonds fell 50 basis points to 4.41%,
resulting in increasing bond prices and total returns of 6.75% for 10-year
municipal bonds and almost 11% for 30-year securities. The yield curve has
continued to flatten (178 basis points), with little change in the yield on
securities with 5-7 year maturities, whose return was roughly the coupon
generated from the assets.
The state of Maryland's general obligation bonds continue to be rated in the
highest rating category (Aaa/AAA) by all three rating agencies. The Fund's
overall credit quality is Aa2. This slightly lower quality bias was a
contributing factor to the Fund's strong outperformance for the past year.
Early in the year the portfolio's exposure to discount securities in longer
maturities and high coupon, short-duration securities also boosted
performance as the yield curve flattened. More recently, we have reduced our
holdings in discount securities in favor of securities with maturities in the
10-20 year range that are being priced to their shorter call dates.
*Duration is a measure of a security's price sensitivity to changes in
interest rates. Securities with longer durations are more sensitive to
changes in interest rates than securities of shorter duration.
Income generated by this Fund may be subject to the federal alternative
minimum tax.
STATEMENT OF ADDITIONAL INFORMATION
January __, 2006
Acquisition of the Assets of
FBR MARYLAND TAX-FREE PORTFOLIO
a mutual fund series of The FBR Funds
1001 Nineteenth Street North
Arlington, Virginia 22209
1-888-888-0025
By and in exchange for Class A Shares of
MTB MARYLAND MUNICIPAL BOND FUND
a mutual fund series of MTB Group of Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7010
Telephone No: 1-800-836-2211
Acquisition of the Assets and Liabilities of
FBR VIRGINIA TAX-FREE PORTFOLIO
a mutual fund series of FBR Funds
1001 Nineteenth Street North
Arlington, Virginia 22209
1-888-888-0025
By and in exchange for Class A Shares of
MTB VIRGINIA MUNICIPAL BOND FUND
a mutual fund series of MTB Group of Funds
5800 Corporate Drive
Pittsburgh, PA 15237-7010
Telephone No: 1-800-836-2211
This Statement of Additional Information, dated January __, 2006, is
not a prospectus. A Proxy Statement and Prospectus, dated January __, 2006,
related to the above-referenced matter may be obtained from MTB Group of
Funds at 5800 Corporate Drive, Pittsburgh, PA 15237-7010. This Statement of
Additional Information should be read in conjunction with such Proxy
Statement and Prospectus.
TABLE OF CONTENTS
1. Statement of Additional Information of MTB Maryland Municipal Bond Fund
and MTB Virginia Municipal Bond Fund, mutual fund series of MTB Group
of Funds, dated November 7, 2005.
2. Statement of Additional Information of FBR Maryland Tax-Free Portfolio
and FBR Virginia Tax-Free Portfolio, mutual fund series of The FBR
Funds, dated February 28, 2005.
3. Audited Financial Statements of MTB Maryland Municipal Bond Fund, a
series of MTB Group of Funds, dated April 30, 2005.
4. Unaudited Financial Statements of MTB Maryland Municipal Bond Fund, a
mutual fund series of MTB Group of Funds, dated October 31, 2005 (to be
filed by amendment).
5. Audited Financial Statements of FBR Maryland Tax-Free Portfolio and FBR
Virginia Tax-Free Portfolio, a series of The FBR Funds, dated October
31, 2004.
6. Unaudited Financial Statements of FBR Maryland Tax-Free Portfolio and
FBR Virginia Tax-Free Portfolio, mutual fund series of The FBR Funds, dated
April 30, 2005.
7. Audited Financial Statements of FBR Maryland Tax-Free Portfolio and FBR
Virginia Tax-Free Portfolio, a series of The FBR Funds, dated October
31, 2005 (to be filed by amendment).
8. Pro Forma Financial Information for the acquisition of FBR Maryland
Tax-Free Portfolio by MTB Maryland Municipal Bond Fund and the
acquisition of FBR Virginia Tax-Free Portfolio by MTB Virginia
Municipal Bond Fund, as of April 30, 2005.
INFORMATION INCORPORATED BY REFERENCE
1. Statement of Additional Information of MTB Maryland Municipal Bond Fund
and MTB Virginia Municipal Bond Fund, mutual fund series of MTB Group
of Funds, dated November 7, 2005.
The Statement of Additional Information of MTB Maryland Municipal Bond
Fund and MTB Virginia Municipal Bond Fund, mutual fund series of MTB Group of
Funds, is incorporated by reference to Post-Effective Amendment No. 66 on
Form N-1A, which was filed with the Securities and Exchange Commission on or
about October 7, 2005.
2. Statement of Additional Information of FBR Maryland Tax-Free Portfolio
and FBR Virginia Tax-Free Portfolio, mutual fund series of The FBR
Funds, dated February 28, 2005.
The Statement of Additional Information of FBR Maryland Tax-Free
Portfolio and FBR Virginia Tax-Free Portfolio, mutual fund series of The FBR
Funds, is incorporated by reference to Post-Effective Amendment No. 3 on Form
N-1A, which was filed with the Securities and Exchange Commission on or
about February 25, 2005.
3. Financial Statements of MTB Maryland Municipal Bond Fund, a series of
MTB Group of Funds, dated April 30, 2005.
The audited financial statements of MTB Maryland Municipal Bond Fund, a
mutual fund series of MTB Group of Funds, dated April 30, 2005, including the
Ernst & Young LLP Independent Registered Public Accounting Firm's Report
dated June 10, 2005 related thereto, are incorporated by reference to the
Annual Report to Shareholders of MTB Group of Funds that was filed with the
Securities and Exchange Commission on Form N-CSR on or about June 29, 2005.
4. Unaudited Financial Statements of MTB Maryland Municipal Bond Fund, a
mutual fund series of MTB Group of Funds, dated October 31, 2005.
The unaudited financial statements of MTB Maryland Municipal Bond Fund,
a mutual fund series of MTB Group of Funds dated October 31, 2005, are
incorporated by reference to the Semi-Annual Report to Shareholders of the
MTB Group of Funds which will be filed with the Securities and Exchange
Commission on Form N-CSR on or about December __, 2005.
5. Financial Statements of FBR Maryland Tax-Free Portfolio and FBR
Virginia Tax-Free Portfolio, mutual fund series of The FBR Funds, dated
October 31, 2004.
The audited financial statements of FBR Maryland Tax-Free Portfolio and
FBR Virginia Tax-Free Portfolio, mutual fund series of The FBR Funds, dated
October 31, 2004, including the Tait Weller Independent Registered Public
Accounting Firm's Report dated December 10, 2004 related thereto, are
incorporated by reference to the Annual Report to Shareholders of The FBR
Funds, that was filed with the Securities and Exchange Commission on Form
N-CSR on or about January 6, 2005.
6. Unaudited Financial Statements of FBR Maryland Tax-Free Portfolio and
FBR Virginia Tax-Free Portfolio, mutual fund series of The FBR Funds,
dated April 30, 2005.
The unaudited financial statements of FBR Maryland Tax-Free Portfolio
and FBR Virginia Tax-Free Portfolio, mutual fund series of The FBR Funds
dated April 30, 2005, are incorporated by reference to the Semi-Annual
Report to Shareholders of The FBR Funds that was filed with the Securities
and Exchange Commission on Form N-CSR on or about July 6, 2005.
7. Financial Statements of FBR Maryland Tax-Free Portfolio and FBR
Virginia Tax-Free Portfolio, mutual fund series of The FBR Funds, dated
October 31, 2005.
The audited financial statements of FBR Maryland Tax-Free Portfolio and
FBR Virginia Tax-Free Portfolio, mutual fund series of The FBR Funds, dated
October 31, 2004, including the Tait Weller Independent Registered Public
Accounting Firm's Report dated December __, 2005 related thereto, are
incorporated by reference to the Annual Report to Shareholders of The FBR
Funds, which will be filed with the Securities and Exchange Commission on
Form N-CSR on or about January __, 2006.
8. The Pro Forma Financial Information for the acquisitions described in
the Table of Contents, dated April 30, 2005, is included herein.
MTB Maryland Municipal Bond Fund
FBR Maryland Tax-Free Portfolio
Pro Forma Combining Portfolios of Investments
April 30, 2005 (unaudited)
MTB FBR MTB FBR
Maryland Maryland Pro Forma Maryland Maryland Pro Forma
Municipal Bond Tax-Free Portfolio Combined Municipal Bond Fun Tax-Free Combined
Fund Portfolio
- ------------------------------------------------- -------------------------------------------------------
Principal Value
Amount
MUNICIPAL BONDS - 98.8%
- --------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 0.7%
$1,000,000 $- $1,000,000 Washington, DC, Metro Area Transit $1,103,850 $- $1,103,850
Authority, Refunding Revenue
Bonds, 5.00% (MBIA Insurance Corp.
INS)/(Original Issue Yield:
3.55%), 1/1/2012
Maryland - 93.5%
95,000 95,000 Anne Arundel County, MD, GO, - 96,106 96,106
4.125%, 3/1/2019
1,000,000 - 1,000,000 Anne Arundel County, MD, GO UT, 1,087,000 - 1,087,000
5.00% (Original Issue Yield:
3.86%), 3/1/2016
2,000,000 - 2,000,000 Anne Arundel County, MD, GO, 2,085,460 - 2,085,460
6.00%, 9/1/2006
- 1,230,000 1,230,000 Anne Arundel County, MD, PCR - 1,273,111 1,273,111
Baltimore Gas and Electric Co.
Project, 6.0%, 4/1/2024
2,200,000 - 2,200,000 Anne Arundel County, MD, Refunding 2,358,642 - 2,358,642
Revenue Bonds National Business
Park Project, 5.125%, 7/1/2028
- 500,000 500,000 Anne Arundel County Solid Waste - 519,175 519,175
Project GO, 5.50%, 9/1/2015
- 725,000 725,000 Anne Arundel County Water and - 738,847 738,847
Sewer GO, 6.20%, Pre-refunded
8/1/2005
- 335,000 335,000 Baltimore County, GO, 5.00% - 362,503 362,503
6/1/2019
2,910,000 - 2,910,000 Baltimore County, MD, Convention 3,165,207 - 3,165,207
Center, Refunding Revenue Bonds,
5.375% (MBIA Insurance Corp. INS),
9/1/2011
- 700,000 700,000 Baltimore County, MD, Metropolitan - 727,566 727,566
District, GO, 5.50%, Pre-refunded
6/1/2006
1,000,000 1,000,000 Baltimore County, MD, Port 1,077,600 - 1,077,600
Facility, Refunding Revenue Bonds,
6.50%, 10/1/2011
- 400,000 400,000 Baltimore County, MD Port Facility - 410,464 410,464
Revenue, 6.50%, 12/1/2010
- 1,000,000 1,000,000 Baltimore, MD Public Improvement, - 1,059,000 1,059,000
Series A, 5.50% Pre-refunded
10/15/2006
- 500,000 500,000 Baltimore, MD GO, Series C, 5.50%, - 580,210 580,210
10/15/2015
- 100,000 100,000 Baltimore, MD School Board - 108,347 108,347
Commissioners, Series A, 5.00%,
5/1/2018
- 500,000 500,000 Baltimore, MD Wastewater Project, - 593,350 593,350
Series A, 6.00%, 7/1/2015
- 500,000 500,000 Baltimore, MD Wastewater Project, - 523,275 523,275
Series A, 5.125%, 7/1/2042
775,000 - 775,000 Baltimore, MD Water Projects, 873,797 - 873,797
Revenue Bonds (Series A), 5.375%
(FGIC INS), 7/1/2015
3,000,000 - 3,000,000 Baltimore, MD, Refunding Revenue 3,379,380 - 3,379,380
Bonds, (Series A), 5.75% (FSA
INS)/(Original Issue Yield:
5.80%), 7/1/2030, Pre-refunded
7/1/2010
1,000,000 - 1,000,000 Baltimore, MD, Refunding Revenue 1,128,230 - 1,128,230
Bonds, 5.25% (FGIC INS), 7/1/2017
2,500,000 - 2,500,000 Calvert County, MD, Pollution 2,555,700 - 2,555,700
Control, 5.55% (Baltimore Gas &
Electric Co.)/(MBIA Insurance
Corp. INS), 7/15/2014
2,000,000 - 2,000,000 Carroll County, MD, Revenue Bonds, 2,136,040 - 2,136,040
5.375% (Fairhaven, Inc./Copper
Ridge, Inc.)/(Radian Asset
Assurance INS), 1/1/2016
1,000,000 - 1,000,000 Frederick County, MD, Revenue 1,053,110 - 1,053,110
Bonds, 5.75% (Original Issue
Yield: 5.88%), 9/1/2025
1,000,000 - 1,000,000 Frederick County, MD, Revenue 998,070 - 998,070
Bonds, 5.90% (Original Issue
Yield: 5.95%), 1/1/2017
- 300,000 300,000 Frederick County Public Facilities - 325,041 325,041
GO, 5.25%, 7/1/2017
1,895,000 - 1,895,000 Harford County, MD, GO UT, 5.50%, 2,049,765 - 2,049,765
12/1/2008
1,480,000 - 1,480,000 Howard County, MD, GO UT, 5.25%, 1,657,171 - 1,657,171
8/15/2016, Pre-refunded 2/15/2012
1,800,000 - 1,800,000 Howard County, MD, 5.25%, 1,980,342 - 1,980,342
8/15/2015, Pre-refunded 2/15/2012
125,000 - 125,000 Howard County, MD, 5.25%, 8/15/2015 139,964 - 139,964
- 500,000 500,000 Howard County Housing Opportunity - 508,855 508,855
MFH Development 4.90%, 7/1/2024
- 500,000 500,000 Howard County Public Improvement - 539,780 539,780
GO, 5.50%, Pre-refunded 2/15/2008
2,000,000 - 2,000,000 Maryland National Capital Park & 2,206,580 - 2,206,580
Planning Commission, GO UT, 5.00%
(Original Issue Yield: 3.40%),
1/15/2015
1,000,000 - 1,000,000 Maryland State Community 1,032,640 - 1,032,640
Development Administration, 5.05%
(MFH LOC), 4/1/2008
2,000,000 - 2,000,000 Maryland State Community 2,102,180 - 2,102,180
Development Administration, 5.20%,
12/1/2029
935,000 - 935,000 Maryland State Community 970,867 - 970,867
Development Administration,
(Series A), 5.60%, 3/1/2017
- 275,000 275,000 Maryland State Community - 292,314 292,314
Development Administration
Department of Housing and
Community Development,
Infrastructure Series A, 5.00%,
6/1/2021
- 115,000 115,000 Maryland State Community - 120,420 120,420
Development Administration
Department of Housing and
Community Development, MFH Insured
Mortgage Loan, Series A, 5.30%,
5/15/2022
- 250,000 250,000 Maryland State Community - 261,853 261,853
Development Administration
Department of Housing and
Community Development, MFH Insured
Mortgage Loan, Series B, 5.50%,
5/15/2021
- 500,000 500,000 Maryland State Community - 514,380 514,380
Development Administration
Department of Housing and
Community Development, Residential
Series B, 5.15%, 3/1/2008
- 250,000 250,000 Maryland State Community - 255,488 255,488
Development Administration
Department of Housing and
Community Development, Residential
Series B, 5.375%, 9/1/2022
- 360,000 360,000 Maryland State Community - 375,386 375,386
Development Administration
Department of Housing and
Community Development, Residential
Series E, 5.70%, 9/1/2017
- 160,000 160,000 Maryland State Community - 161,341 161,341
Development Administration
Department of Housing and
Community Development, Series A,
4.85%, 7/1/2024
- 500,000 500,000 Maryland State Community - 510,485 510,485
Development Administration
Department of Housing and
Community Development, SFH Series
2, 5.00%, 4/1/2017
1,000,000 - 1,000,000 Maryland State Department of 1,155,100 - 1,155,100
Transportation, 5.50% (Original
Issue Yield: 4.59%), 2/1/2016
1,375,000 - 1,375,000 Maryland State Department of 1,517,711 - 1,517,711
Transportation, Refunding Revenue
Bonds, 5.00% (Original Issue
Yield: 3.95%), 5/1/2015
440,000 - 440,000 Maryland State Economic 454,071 - 454,071
Development Corp., 4.65% (GNMA
Collateralized Home Mortgage
Program COL), 12/20/2008
1,405,000 - 1,405,000 Maryland State Economic 1,487,951 - 1,487,951
Development Corp., 5.60%, 6/1/2010
1,000,000 - 1,000,000 Maryland State Economic 1,060,690 - 1,060,690
Development Corp., 6.00% (Original
Issue Yield: 6.054%), 6/1/2019
820,000 - 820,000 Maryland State Economic 888,978 - 888,978
Development Corp., 7.125%, 4/1/2019
1,000,000 - 1,000,000 Maryland State Economic 995,610 - 995,610
Development Corp., 8.25%, 11/1/2026
- 750,000 750,000 Maryland State Economic - 835,387 835,387
Development Corp. Department of
Transportation Headquarters,
5.375%, 6/1/2019
- 500,000 500,000 Maryland State Economic - 526,950 526,950
Development Corp. Morgan State
University, Series A, 6.00%,
7/1/2022
- 350,000 350,000 Maryland State Economic - 367,087 367,087
Development Corp., University of
Maryland, Series A, 5.75%,
10/1/2033
1,175,000 - 1,175,000 Maryland State Health & Higher 1,264,006 - 1,264,006
Education Facilities Authority,
(Series A) Revenue Bonds, 5.25%
(Medlantic/Helix Parent,
Inc.)/(FSA INS), 8/15/2012
- 400,000 400,000 Maryland State Health & Higher - 421,804 421,804
Education Facilities Authority,
Board of Child Care, 4.75%,
7/1/2014
- 500,000 500,000 Maryland State Health & Higher - 554,120 554,120
Education Facilities Authority,
Frederick Memorial Hospital,
5.25%, 7/1/2013
- 500,000 500,000 Maryland State Health & Higher - 540,975 540,975
Education Facilities Authority,
Good Samaritan Hospital, 5.70%,
7/1/2009
- 250,000 250,000 Maryland State Health & Higher - 258,545 258,545
Education Facilities Authority,
Greater Baltimore Medical Center,
5.00%, 7/1/2020
- 250,000 250,000 Maryland State Health & Higher - 264,328 264,328
Education Facilities Authority,
Hebrew Home of Greater Washington,
5.60%, 1/1/2020
- 900,000 900,000 Maryland State Health & Higher - 929,763 929,763
Education Facilities Authority,
Johns Hopkins, 5.00%, 5/15/2026
- 500,000 500,000 Maryland State Health & Higher - 525,180 525,180
Education Facilities Authority,
Johns Hopkins, 5.125%, 11/15/2034
- 1,000,000 1,000,000 Maryland State Health & Higher - 1,125,250 1,125,250
Education Facilities Authority,
Johns Hopkins, 6.00%, Pre-refunded
7/1/2009
- 250,000 250,000 Maryland State Health & Higher - 255,300 255,300
Education Facilities Authority,
Kennedy Kreiger Issue, 4.875%,
7/1/2018
- 500,000 500,000 Maryland State Health & Higher - 523,020 523,020
Education Facilities Authority,
Kennedy Kreiger Issue, 5.50%,
7/1/2033
- 1,205,000 1,205,000 Maryland State Health & Higher - 1,270,347 1,270,347
Education Facilities Authority,
Loyola College, 5.50%, 10/1/2016
- 250,000 250,000 Maryland State Health & Higher - 253,720 253,720
Education Facilities Authority,
MedStar Health, 4.375%, 8/15/2013
- 250,000 250,000 Maryland State Health & Higher - 263,538 263,538
Education Facilities Authority,
MedStar Health, 5.50%, 8/15/2033
- 500,000 500,000 Maryland State Health & Higher - 519,110 519,110
Education Facilities Authority,
Sheppard Pratt, Series A, 5.25%,
7/1/2035
- 500,000 500,000 Maryland State Health & Higher - 554,985 554,985
Education Facilities Authority,
Suburban Hospital, Series A,
5.50%, 7/1/2016
1,000,000 - 1,000,000 Maryland State Health & Higher 1,043,260 - 1,043,260
Education Facilities Authority,
(Series A), 4.75% (Original Issue
Yield: 4.90%), 11/1/2014
1,740,000 - 1,740,000 Maryland State Health & Higher 1,902,029 - 1,902,029
Education Facilities Authority,
(Series B), 5.00% (AMBAC
INS)/(Original Issue Yield:
3.84%), 7/1/2015
250,000 - 250,000 Maryland State Health & Higher 267,953 - 267,953
Education Facilities Authority,
(Series B), 5.00% (AMBAC
INS)/(Original Issue Yield:
4.59%), 7/1/2024
1,000,000 - 1,000,000 Maryland State Health & Higher 1,000,080 - 1,000,080
Education Facilities Authority,
4.80%, 10/1/2028
2,500,000 1,030,000 3,530,000 Maryland State Health & Higher 2,691,650 1,120,712 3,812,362
Education Facilities Authority
Helix Health, 5.00% (AMBAC
INS)/(Original Issue Yield:
5.27%), 7/1/2027
2,500,000 - 2,500,000 Maryland State Health & Higher 2,593,600 - 2,593,600
Education Facilities Authority,
5.00% (Frederick Memorial
Hospital)/(Original Issue Yield:
5.20%), 7/1/2022
1,465,000 - 1,465,000 Maryland State Health & Higher 1,580,120 - 1,580,120
Education Facilities Authority,
5.00% (Johns Hopkins Hospital),
5/15/2013
1,500,000 - 1,500,000 Maryland State Health & Higher 1,582,965 - 1,582,965
Education Facilities Authority,
5.00% (MBIA Insurance Corp.
INS)/(Original Issue Yield:
5.17%), 7/1/2019
2,000,000 - 2,000,000 Maryland State Health & Higher 2,029,840 - 2,029,840
Education Facilities Authority,
5.00% (Mercy Ridge, Inc.), 4/1/2008
1,000,000 - 1,000,000 Maryland State Health & Higher 1,002,860 - 1,002,860
Education Facilities Authority,
5.00% (Original Issue Yield:
5.20%), 7/1/2008
1,000,000 - 1,000,000 Maryland State Health & Higher 1,064,650 - 1,064,650
Education Facilities Authority,
5.00% (University of Maryland
Medical System), 7/1/2012
2,000,000 - 2,000,000 Maryland State Health & Higher 2,131,260 - 2,131,260
Education Facilities Authority,
5.125% (Johns Hopkins
University)/(Original Issue Yield:
5.54%), 7/1/2020
2,000,000 - 2,000,000 Maryland State Health & Higher 2,160,420 - 2,160,420
Education Facilities Authority,
5.25% (FSA INS), 8/15/2011
1,585,000 - 1,585,000 Maryland State Health & Higher 1,720,755 - 1,720,755
Education Facilities Authority,
5.25% (FSA INS)/(Original Issue
Yield: 5.35%), 7/1/2020
2,000,000 - 2,000,000 Maryland State Health & Higher 2,161,660 - 2,161,660
Education Facilities Authority,
5.25% (Johns Hopkins
University)/(Original Issue Yield:
5.52%), 7/1/2017
925,000 - 925,000 Maryland State Health & Higher 967,883 - 967,883
Education Facilities Authority,
5.50% (Howard County General
Hospital, MD)/(Original Issue
Yield: 5.68%), 7/1/2013
2,000,000 - 2,000,000 Maryland State Health & Higher 2,060,180 - 2,060,180
Education Facilities Authority,
5.625% (Mercy Medical
Center)/(Original Issue Yield:
5.80%), 7/1/2031
1,135,000 1,000,000 2,135,000 Maryland State Health & Higher 1,195,688 1,062,780 2,258,468
Education Facilities Authority,
Hebrew Home of Greater Washington,
5.80% (Original Issue Yield:
5.93%), 1/1/2032
2,250,000 - 2,250,000 Maryland State Health & Higher 2,383,470 - 2,383,470
Education Facilities Authority,
6.00% (Carroll County, MD General
Hospital), 7/1/2037
1,370,000 - 1,370,000 Maryland State Health & Higher 1,521,673 - 1,521,673
Education Facilities Authority,
6.00% (Catholic Health
Initiatives), 12/1/2013
1,500,000 - 1,500,000 Maryland State Health & Higher 1,569,420 - 1,569,420
Education Facilities Authority,
6.00% (Original Issue Yield:
6.05%), 1/1/2015
250,000 - 250,000 Maryland State Health & Higher 264,035 - 264,035
Education Facilities Authority,
6.00% (Original Issue Yield:
6.05%), 7/1/2020
1,500,000 - 1,500,000 Maryland State Health & Higher 1,565,760 - 1,565,760
Education Facilities Authority,
6.00% (Original Issue Yield:
6.146%), 7/1/2031
1,000,000 - 1,000,000 Maryland State Health & Higher 1,057,900 - 1,057,900
Education Facilities Authority,
Refunding Revenue Bonds, 5.00%
(Original Issue Yield: 4.05%),
8/15/2011
950,000 - 950,000 Maryland State Health & Higher 1,000,949 - 1,000,949
Education Facilities Authority,
(Series A), 5.375% (Loyola College
in Maryland, Inc.)/(MBIA Insurance
Corp. INS)/(Original Issue Yield:
5.45%), 10/1/2011
1,000,000 - 1,000,000 Maryland State IDFA, 5.10% 1,060,990 - 1,060,990
(National Aquarium in Baltimore,
Inc.)/(Original Issue Yield:
5.21%), 11/1/2022
- 10,000 10,000 Maryland State IDFA, Economic - 10,052 10,052
Revenue, Series 1-11, 7.125%,
7/1/2006
1,000,000 - 1,000,000 Maryland State Stadium Authority, 1,032,120 - 1,032,120
5.50% (AMBAC INS)/(Original Issue
Yield: 5.55%), 3/1/2012
- 1,000,000 1,000,000 Maryland State Stadium Authority - 1,024,430 1,024,430
Lease Revenue, Convention Center
Expansion, 5.875%, 12/15/2013
- 500,000 500,000 Maryland State Stadium Authority - 513,270 513,270
Lease Revenue, Ocean City
Convention Center, 5.375%,
12/15/2015
- 500,000 500,000 Maryland State Stadium Authority - 515,750 515,750
Lease Revenue, Sports Facilities,
5.55%, 3/1/2013
2,000,000 - 2,000,000 Maryland State, 5.50%, 3/1/2013 2,294,940 - 2,294,940
- 500,000 500,000 Maryland State Transportation - 544,455 544,455
Authority, BWI Airport, 5.25%,
3/1/2012
- 200,000 200,000 Maryland State Transportation - 200,000 200,000
Authority, BWI Airport, 2.95%,
5/5/2005
- 250,000 250,000 Maryland State Transportation - 271,332 271,332
Authority, BWI Airport, 5.25%,
3/1/2014
900,000 - 900,000 Maryland Water Quality Financing 902,835 - 902,835
Administration Revolving Loan
Fund, (Series A), 6.55%, 9/1/2014
- 1,000,000 1,000,000 Maryland Water Quality Financing - 1,005,130 1,005,130
Administration Revolving Loan Fund
Revenue, Series A, 6.00%, 9/1/2015
1,330,000 - 1,330,000 Montgomery County, MD, Revenue 1,458,757 - 1,458,757
Authority Lease, Revenue Bonds,
5.00%, 4/1/2013
250,000 - 250,000 Montgomery County, MD, Special 269,423 - 269,423
Obligation, Special Tax, 5.375%
(Radian Group, Inc. INS)/(Original
Issue Yield: 5.48%), 7/1/2020
1,000,000 - 1,000,000 Montgomery County, MD, GO UT, 1,063,730 - 1,063,730
Refunding Bonds (Series A), 5.80%
(Original Issue Yield: 5.90%),
7/1/2007
2,000,000 - 2,000,000 Montgomery County, MD, GO UT, 2,241,980 - 2,241,980
5.60% (Original Issue Yield:
5.70%), 1/1/2016, Pre-refunded
1/1/2010
- 600,000 600,000 Montgomery County Economic - 630,522 630,522
Development Trinity Health Group,
5.125% 12/1/2022
- 475,000 475,000 Montgomery County GO, Series A, - 515,641 515,641
5.00%, Pre-refunded 5/1/2009
- 500,000 500,000 Montgomery County GO, Series A, - 535,350 535,350
5.00% 5/1/2019
- 300,000 300,000 Morgan State University Academic - 321,555 321,555
Revenue, Series A, 5.00% 7/1/2020
1,135,000 - 1,135,000 New Baltimore, MD, Board School 1,227,139 - 1,227,139
Commerce, Revenue Bonds, 5.00%
(Original Issue Yield: 5.05%),
11/1/2013
2,500,000 - 2,500,000 Northeast, MD, Waste Disposal 2,544,325 - 2,544,325
Authority, Revenue Bonds, 7.20%
(MBIA Insurance Corp. INS),
10/1/2006
- 250,000 250,000 Northeast Maryland Waste Disposal - 257,770 257,770
Authority Revenue, Montgomery
County Resource Recovery Revenue,
6.00%, 7/1/2006
- 100,000 100,000 Northeast Maryland Waste Disposal - 100,000 100,000
Authority Revenue, Harford County
Resource Recovery Revenue, 2.92%,
5/4/2005
- 250,000 250,000 Northeast Maryland Waste Disposal - 266,583 266,583
Authority Revenue, Hartford County
Resource Recovery Revenue, 5.25%,
3/15/2014
1,945,000 - 1,945,000 Prince George's County, MD, 2,161,556 - 2,161,556
Consolidaed Public Improvement GO
UT, Pre-refunded, 5.50% (FSA INS),
10/1/2010
55,000 - 55,000 Prince Georges County, MD, 60,786 - 60,786
Consolidated Public Improvement GO
UT, Unrefunded, 5.50% (FSA INS),
10/1/2010
- 100,000 100,000 Prince George's County - 110,906 110,906
Construction Public Improvement,
5.50%, Pre-refunded 10/1/2009
- 1,000,000 1,000,000 Prince George's County GO Series - 1,054,780 1,054,780
A, 5.25%, Pre-refunded 3/15/2007
- 1,250,000 1,250,000 Prince George's County PCR Potomac - 1,388,300 1,388,300
Electric Project, 5.75%, 3/15/2010
- 50,000 50,000 Prince George's County SFH - 51,737 51,737
Mortgage Revenue FHLMC/FNMA/GNMA
Collateral, Series A, 5.55%,
12/1/2033
- 500,000 500,000 Puerto Rico Commonwealth Public - 573,910 573,910
Improvement, Series A, 5.50%,
7/1/2018
- 150,000 150,000 Puerto Rico Electric Power - 86,894 86,894
Authority, Capital Appreciation,
0.00%, 7/1/2017
- 80,000 80,000 Puerto Rico Electric Power - 89,966 89,966
Authority Revenue, 5.00%, 7/1/2019
- 315,000 315,000 Puerto Rico Public Buildings - 348,784 348,784
Authority Revenue Government
Facilities, Series G, 5.25%,
7/1/2013
- 500,000 500,000 Puerto Rico Public Finance - 551,720 551,720
Corporation, Series A, 5.00%,
Pre-refunded 8/1/2011
1,000,000 - 1,000,000 Queen Annes County, MD, 5.00% 1,110,330 - 1,110,330
(MBIA Global Funding LLC LOC),
11/15/2016
1,000,000 - 1,000,000 Queen Annes County, MD, Public 1,065,040 - 1,065,040
Facility, 5.40% (FGIC
INS)/(Original Issue Yield:
5.48%), 11/15/2011 (Pre-refunded
to 11/15/2007)
1,000,000 - 1,000,000 Queen Annes County, MD, Public 1,083,630 - 1,083,630
Facility, 6.00% (FGIC
INS)/(Original Issue Yield:
5.25%), 11/15/2008 (Pre-refunded
to 11/15/2007)
2,250,000 - 2,250,000 St. Mary's College, MD, Refunding 2,263,770 - 2,263,770
Revenue Bonds Academic and
Auxiliary Fee (Series A), 4.50%
(AMBAC INS)/(Original Issue Yield:
4.65%), 9/1/2030
2,000,000 - 2,000,000 St. Mary's College, MD, Refunding 2,126,600 - 2,126,600
Revenue Bonds, 5.25% (MBIA
Insurance Corp. INS)/(Original
Issue Yield: 5.30%), 9/1/2027
(Pre-refunded to 9/1/20017)
1,100,000 - 1,100,000 St. Mary's County, MD, GO UT, 1,167,078 - 1,167,078
4.45% (Original Issue Yield:
4.50%), 7/1/2014
1,000,000 - 1,000,000 St. Mary's County, MD, GO UT, 1,081,940 - 1,081,940
5.00% (Original Issue Yield:
5.00%), 10/1/2021
1,000,000 - 1,000,000 University of Maryland, Auxiliary 1,076,730 - 1,076,730
Facility & Tuition Refunding
Revenue Bonds (Series A), 5.00%,
4/1/2009
1,000,000 - 1,000,000 University of Maryland, Revenue 1,087,660 - 1,087,660
Bonds, 5.25%, 10/1/2011
- 1,000,000 1,000,000 University of Maryland System - 1,036,040 1,036,040
Auxiliary Facility and Tuition
Revenue, 5.60%, 4/1/2006
- 250,000 250,000 University of Maryland System - 263,380 263,380
Auxiliary Facility and Tuition
Revenue, 5.125%, 4/1/2007
- 265,000 265,000 University of Maryland System - 280,407 280,407
Auxiliary Facility and Tuition
Revenue, 5.00%, 4/1/2008
- 500,000 500,000 Washington DC Metropolitan Area - 570,655 570,655
Transit Authority Revenue, 6.00%,
7/1/2010
1,000,000 1,000,000 Washington Suburban Sanitation 1,219,970 1,219,970
District, MD, GO UT , 6.00%,
6/1/2018
- 1,000,000 1,000,000 Washington Suburban Sanitation - 1,078,150 1,078,150
District GO, 5.00%, 6/1/2009
---------------------------------------------------------------------------------------
Total 110,983,251 37,227,667 148,210,918
---------------------------------------------------------------------------------------
-----------------------------------------
Puerto Rico - 3.2%
1,000,000 - 1,000,000 Commonwealth of Puerto Rico, GO 1,186,630 - 1,186,630
UT, 6.25% (MBIA Insurance Corp.
INS), 7/1/2012
2,000,000 - 2,000,000 Puerto Rico HFA, Capital Funding 2,138,240 - 2,138,240
Program, 5.00% (Original Issue
Yield: 4.22%), 12/1/2018
1,500,000 - 1,500,000 Puerto Rico Public Finance Corp., 1,747,800 - 1,747,800
(Series A), 5.375% (AMBAC
INS)/(Original Issue Yield:
4.94%), 6/1/2019
Total 5,072,670 - 5,072,670
---------------------------------------------------------------------------------------
Wisconsin - 1.4%
2,000,000 - 2,000,000 Badger, WI, Tobacco Asset 2,163,660 - 2,163,660
Securitization Corp., Revenue
Bonds, 7.00%, 6/1/2028
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
----------------------------------------------------------------------------
Total Municipal Bonds (identified 119,323,431 37,227,667 156,551,098
cost of $148,692,590)
----------------------------------------------------------------------------
-----------------------------------------
Mutual Fund Shares (2) - 0.0%
38,153 - 38,153 Maryland Municipal Cash Trust (AT 38,153 - 38,153
NET ASSET VALUE)
----------------------------------------------------------
Total Investments - 119,361,584 37,227,667 156,589,251
98.8%
(identified cost $148,730,743)(3)
----------------------------------------------------------
------------------------------------------------
Other Assets and Liabilities - 1.2% 1,307,581 626,516 1,934,097
----------------------------------------------------------
------------------------------------------------
Total Net Assets - 100% $120,669,165 $37,854,183 $158,523,348
=======================---------=============--------------
1 At April 30, 2005, the MTB Maryland Municipal Bond Fund held no securities
that are subject to the federal alternative minimum tax.
2 Affiliated company.
3 The cost of investments for federal tax purposes amounts to $113,590,658 for
MTB Maryland Municipal Bond Fund and $35,140,085 for FBR Maryland Tax-Free
Portfolio.
Note: The categories of investments are shown as a percentage of total net
assets at April 30, 2005.
The following acronyms are used throughout this portfolio:
AMBAC American Municipal Bond Assurance Corporation
COL Collateralized
FSA Financial Security Assurance
GNMA Government National Mortgage Association
GO General
Obligations
HFA Housing Finance Authority
IDFA Industrial Development Finance Authority
INS Insured
LOC Letter of Credit
MFH Multi-Family
Housing
PCR Pollution Control Revenue
SFH Single Family
Housing
UT Unlimited Tax
MTB Maryland Municipal Bond Fund
FBR Maryland Tax-Free Portfolio
Pro Forma Combining Statements of Assets and Liabilities
April 30, 2005 (unaudited)
MTB FBR
Maryland Maryland Pro Forma Proforma
Municipal Bond Fund Tax-Free Portfolio Adjustment Combined
Assets:
Investments in securities, at $119,361,584 $37,227,667 $- $156,589,251
value
Cash 988 95,244 - 96,232
Income receivable 1,765,675 500,659 - 2,266,334
Receivable for shares sold 13,765 75,000 - 88,765
------ ------ ------
Total assets 121,142,012 37,898,570 - 159,040,582
Liabilities:
Income distribution payable 311,103 12,191 - 323,294
Payable for shares redeemed 114,853 2,618 - 117,471
Payable for investment advisory - 11,640 - 11,640
fee
Payable for administration fee - 9,312 - 9,312
Payable for transfer and dividend 15,341 - - 15,341
disbursing agent fees and expenses
Payable for audit fees 12,744 - - 12,744
Payable for Trustees' fees 373 - - 373
Payable for portfolio accounting 13,038 - - 13,038
fees
Payable for distribution services 3,190 7,760 - 10,950
fees
Payable for shareholder services 757 - - 757
fee
Accrued expenses 1,448 866 - 2,314
Total liabilities 472,847 44,387 - 517,234
Net Assets $120,669,165 $37,854,183 $- $158,523,348
Net Assets Consists of:
Paid in capital $114,760,922 $35,734,853 $- $150,495,775
Net unrealized appreciation of 5,770,926 2,087,582 - 7,858,508
investments
Accumulated net realized gain on 137,300 31,748 - 169,048
investments
Undistributed net investment 17 - - 17
income
Total Net Assets $120,669,165 $37,854,183 $- $158,523,348
Net Assets:
Class A Shares $19,639,294 $37,854,183 $- $57,493,477
Class B Shares $1,895,735 $- $- $1,895,735
Institutional I Shares $99,134,136 $- $- $99,134,136
Shares Outstanding:
Class A Shares 1,902,560 3,399,758 268,283 5,570,601
(a)
Class B Shares 183,291 - - 183,291
Institutional I Shares 9,594,190 - - 9,594,190
Net Asset Value Per Share
Class A Shares $10.32 $11.13 $- $10.32
Class B Shares $10.34 $- $- $10.34
Institutional I Shares $10.33 $- $- $10.33
Offering Price Per Share*
Class A Shares $10.81 $- $- $10.81
* *
Class B Shares $10.34 $- $- $10.34
Institutional I Shares $10.33 $- $- $10.33
Redemption Proceeds Per Share*
Class A Shares $10.32 $- $- $10.32
Class B Shares $9.82 $- $- $9.82
** **
Institutional I Shares $10.33 $- $- $10.33
Investments, at identified cost $113,590,658 $35,140,085 $- $148,730,743
Investments in affiliated issuers $38,153 $- $- $38,153
* Computation of offering price per share 100/95.5 of net asset value.
** Computation of redemption price per share 95/100 of net asset value.
(a) Adjustment to reflect share balance as a result of the combination.
(See Notes to Pro Forma Financial
Statements)
MTB Maryland Municipal Bond Fund
FBR Maryland Tax-Free Portfolio
Pro Forma Combining Statements of Operations
For the year ended April 30, 2005 (unaudited)
MTB FBR
Maryland Maryland Pro Forma Pro Forma
Municipal Bond Fund Tax-Free Adjustment Combined
Portfolio
Investment Income:
Dividends $9,878 (1) $- $- $9,878
Interest 5,747,763 1,913,227 - 7,660,990
Total Investment Income: 5,757,641 1,913,227 - 7,670,868
Expenses:
Investment advisory fee 843,639 144,976 125,646 (a) 1,114,261
Administrative personnel and services fee 78,082 115,981 (90,278) (b) 103,785
Custodian fees 6,172 - 1,787 7,959
(c)
Transfer and dividend disbursing agent fees and 45,885 - 3,000 (d) 48,885
expenses
Directors'/Trustees' fees 8,717 - - 8,717
Auditing fees 11,025 - 2,427 (e) 13,452
Legal fees 5,413 - - 5,413
Portfolio accounting fees 46,199 - 19,487 65,686
(f)
Distribution services fee - Class A Shares 49,512 96,650 - 146,162
Distribution services fee - Class B Shares 15,737 - - 15,737
Shareholder services fee - Class A Shares 49,512 5,682 90,968 (g) 146,162
Shareholder services fee - Class B Shares 5,246 - - 5,246
Shareholder services fee - Institutional I Shares 246,543 - - 246,543
Share registration costs 41,651 - - 41,651
Printing and postage 10,314 - 1,000 (h) 11,314
Insurance premiums 18,194 - - 18,194
Miscellaneous 3,379 8,384 (8,384) 3,379
(i)
Total expenses 1,485,220 371,673 145,653 2,002,546
Waivers and Reimbursement --
Waiver/reimbursement of investment adviser (227,397) (2,638) (55,244) (285,279)
fee (j)
Waiver of portfolio accounting fees (11,260) - - (11,260)
Waiver of distribution services fee-Class A (14,987) - (66,864) (81,851)
Shares (k)
Waiver of shareholder services fees-Class A (41,284) - (104,878) (146,162)
Shares (l)
Waiver of shareholder services fees-Class B (411) - - (411)
Shares
Waiver of shareholder services fees-Class (246,543) - - (246,543)
Institutional I Shares
Total Waivers and Reimbursements (541,882) (2,638) (226,986) (771,506)
Net Expenses 943,338 369,035 (81,333) 1,231,040
Net investment income $4,814,303 $1,544,192 $81,333 $6,439,828
Realized and Unrealized Gain on Investments:
Net realized gain on investments 286,773 26,097 - 312,870
Net change in unrealized appreciation (depreciation) 1,450,215 268,914 - 1,719,129
of investments
Net realized and unrealized gain on 1,736,988 295,011 - 2,031,999
investments
Change in net assets resulting from $6,551,291 $1,839,203 $81,333 $8,471,827
operations
(1) Including $5,077 received from affiliated
issuers.
(See Notes to Pro Forma Financial Statements)
MTB Maryland Municipal Bond Fund
FBR Maryland Tax-Free Portfolio
Notes to Pro Forma Financial Statements
Year Ended April 30, 2005 (Unaudited)
Note 1. Basis of Combination
The accompanying unaudited Pro Forma Combining Portfolios of Investments,
Statements of Assets and Liabilities and Statements of Operations (Pro Forma
Financial Statements) reflect the accounts of MTB Maryland Municipal Bond
Fund and FBR Maryland Tax-Free Portfolio (individually referred to as the
"Fund", or collectively as the "Funds"), for the year ended April 30, 2005.
These statements have been derived from the books and records utilized in
calculating daily net asset values at April 30, 2005.
The Pro Forma Financial Statements should be read in conjunction with the
historical financial statements of the Funds which have been incorporated by
reference in the Statement of Additional Information. The Funds follow
generally accepted accounting principles in the United States of America
applicable to management investment companies which are disclosed in the
historical financial statements of each fund.
The Pro Forma Financial Statements give effect to the proposed exchange of
assets of FBR Maryland Tax-Free Portfolio for Class A Shares of MTB Maryland
Municipal Bond Fund. Under generally accepted accounting principles, MTB
Maryland Municipal Bond Fund will be the surviving entity for accounting
purposes with its historical cost of investment securities and results of
operations being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the
anticipated advisory fee arrangement for the surviving entity. Certain other
operating costs have also been adjusted to reflect anticipated expenses of
the combined entity. Other costs which may change as a result of the
reorganization are currently undeterminable.
For the year ended April 30, 2005, MTB Maryland Municipal Bond Fund paid and
FBR Maryland Tax-Free Portfolio would have paid investment advisory fees
computed at the annual rate of 0.70% and 0.375%, respectively, as a
percentage of average daily net assets.
All costs with respect to the exchange will be borne by MTB Investment
Advisors, Inc. and Money Management Advisers, Inc. and their affiliates.
Note 2. Shares of Beneficial Interest
The Pro Forma Class A Shares net asset value per share assumes the issuance
of 3,668,041 Class A Shares of the MTB Maryland Municipal Bond Fund in
exchange for 3,399,758 shares of the FBR Maryland Tax-Free Portfolio which
would have been issued at April 30, 2005 in connection with the proposed
reorganization.
Note 3. Proforma Adjustments
(a) MTB Investment Advisors, Inc. (the "Advisor"), receives for its services
an annual investment advisory fee equal to 0.70% of the average daily net
assets of the MTB Maryland Municipal Bond Fund, a series of MTB Group of
Funds (the "MTB Fund"). FBR Fund Advisers, Inc. serves as investment advisor
to the FBR Maryland Tax-Free Portfolio and receives for its services an
annual investment advisory fee equal to 0.375% of the average daily net
assets of the FBR Maryland Tax-Free Portfolio. An adjustment to the combined
investment advisory fee reflects investment advisory fees charged at 0.70% of
the pro forma combined fund's average daily net assets.
The Advisor has agreed to contractually waive all or a portion of its
investment advisory fee and/or reimburse certain operating expenses of the
MTB Fund in order to limit the MTB Fund's Class A Shares total operating
expenses to no more than 0.85% of average daily net assets for the period
starting from the effective date of the Reorganization through April 30,
2008. The Advisor may also voluntarily choose to waive a portion of its fee
and/or reimburse certain operating expenses of the MTB Fund. The Advisor can
modify or terminate this voluntary waiver and/or reimbursement at any time at
its sole discretion.
(b) Federated Services Company (FServ) and M&T Securities, Inc. (M&T
Securities) serve as co-administrators to the MTB Fund and provide the MTB
Fund with certain administrative personnel and services necessary to operate
the MTB Fund. The fees paid to FServ and M&T Securities are based on the
level of average aggregate daily net assets of the MTB Fund. FServ and M&T
Securities may each voluntarily choose to waive any portion of its fee. FServ
and M&T Securities can each modify or terminate its voluntary waiver at any
time at its sole
discretion. As of April 30, 2005, FBR National provided administrative,
transfer agency and custodial services to the FBR Maryland Tax-Free Portfolio
and pays operating expenses (not including extraordinary legal fees,
marketing costs, outside of routine shareholder communications and interest
costs) of the Fund. For these services, FBR National received a fee at an
annual rate based on the Fund's average daily net assets. An adjustment to
the combined administrative personnel and services fee reflects the fee
structure of the MTB Fund on the pro forma combined fund's average daily net
assets.
(c) Adjustment to reflect custodian fees resulting from the combining of two
portfolios into one.
(d) Adjustment to reflect transfer and dividend disbursing agent fees and
expenses due to the combining of two portfolios into one.
(e) Adjustment to reflect auditing fee resulting from the combining of two
portfolios into one.
(f) Adjustment to reflect portfolio accounting fee resulting from the
combining of two portfolios into one.
(g) Under the terms of a Shareholder Services Agreement with FServ and M&T
Securities, M&T Securities may receive from FServ up to 0.25% of average net
assets of the MTB Fund's shares. M&T Securities may voluntarily choose to
waive any portion of its fee with respect to the Funds.
(h) Printing and postage expenses are adjusted to reflect fees resulting from
the combining of two portfolios into one.
(i) Miscellaneous expenses are adjusted to reflect fees resulting from the
combining of two portfolios into one.
(j) Adjustment to reflect the waiver of investment adviser fee based on the
combined average net assets of the Funds.
(k) Adjustment to reflect the waiver of distribution services fees For Class
A Shares based on the combined average net assets of the Funds.
(l) Adjustment to reflect the waiver of shareholder services fee For Class A
Shares based on the combined average net assets of the Funds.
MTB Virginia Municipal
Bond Fund
FBR Virginia Tax-Free
Portfolio
Pro Forma Combining Portfolio of
Investments
April 30, 2005 (unaudited)
MTB FBR MTB FBR
Virginia Virginia Pro Virginia Virginia Pro Forma
Forma
Municipal Tax-Free Municipal Tax-Free Combined
Bond Fund Portfolio Combined Bond Fund Portfolio
Principal Amount Value
MUNICIPAL BONDS - 98.8%
- -------------------------------------------------------------------------------------------------------
Virginia - 98.8%
Albermarle County, VA IDA, $- $705,854 $705,854
$- $650,000 $650,000 Martha Jefferson Hospital,
5.25%, 10/1/2015
Alexandria, VA - 566,470 566,470
- 500,000 500,000 Construction, Public
Improvement, 5.75%,
Pre-refunded 6/15/2010
Alexandria, VA - 116,065 116,065
- 115,000 115,000 Redevelopment and Housing
Authority, 5.5%, 1/1/2029
Arlington County GO, 5.25%, - 390,036 390,036
- 350,000 350,000 Pre-refunded 2/1/2012
Arlington County IDA, MFH, - 367,724 367,724
- 350,000 350,000 Arna Valley View
Apartments, 4.85%, 6/1/2012
Arlington County IDA MFH, - 521,290 521,290
- 500,000 500,000 Colonial Village
Apartments, 5.15%,
11/1/2031
Chesterfield County IDA - 222,652 222,652
- 200,000 200,000 PCR, 5.875%, 6/1/2017
Chesterfield County IDA - 52,451 52,451
- 50,000 50,000 Lease Revenue, 4.75%,
11/1/2016
Fairfax County IDA Revenue - 709,052 709,052
- 650,000 650,000 Inova, Health System
Hospitals, 5.25%, 8/15/2019
Fairfax County IDA Revenue - 251,082 251,082
- 230,000 230,000 Inova, Health System
Hospitals, 5.0%, 8/15/2023
Fairfax County IDA Revenue - 110,244 110,244
- 100,000 100,000 Inova, Health System
Project, 5.0%, 8/15/2013
Fairfax County Sewer - 52,836 52,836
- 50,000 50,000 Revenue, 5.875%,
Pre-refunded 7/15/2006
Fairfax County Water - 275,782 275,782
- 260,000 260,000 Authority Revenue, 5.0%,
Pre-refunded 4/1/2007
Fairfax County Water - 896,520 896,520
- 800,000 800,000 Authority Revenue, 5.8%,
1/1/2016
Fairfax County Water - 148,040 148,040
- 140,000 140,000 Authority Revenue, 5.0%,
4/1/2016
Fairfax County Water - 112,311 112,311
- 100,000 100,000 Authority Revenue, 5.0%,
4/1/2021
Fairfax County Water - 676,318 676,318
- 630,000 630,000 Authority Revenue, 6.0%,
4/1/2022
Frederick County IDA Lease - 786,745 786,745
- 705,000 705,000 Revenue Government Complex
Facilities, 5.0%, 12/1/2014
Fredericksburg, VA IDA - 255,225 255,225
- 250,000 250,000 Student Housing, Revenue
Mary Washington College,
Apartments Project, 5.35%,
4/1/2029
Halifax County IDA Hospital - 377,069 377,069
- 350,000 350,000 Revenue, Halifax Regional
Hospital, Inc, 5.0%,
9/1/2011
Hampton Roads Regional Jail - 315,213 315,213
- 300,000 300,000 Authority, Series A, 5.5%,
Pre-refunded 7/1/2006
Hanover County GO, 5.4%, - 1,048,610 1,048,610
- 1,000,000 1,000,000 7/15/2016
Henrico County, VA IDA - 124,379 124,379
- 120,000 120,000 Revenue Educational,
Facilities-Collegiate
Schools, 5.1%, 10/15/2029
Henrico County, VA Economic - 263,318 263,318
- 250,000 250,000 Development, Authority
Revenue Bon Secours, Health
Systems, Inc., 5.6%,
11/15/2030
Loudoun County GO, Series - 570,215 570,215
- 500,000 500,000 B, 5.25%, 12/1/2014
Loudoun County, VA IDA, - 200,000 200,000
- 200,000 200,000 Howard Hughes Medical
Institute, Series F,
2.98%, 5/4/2005
Metropolitan Washington DC - 264,612 264,612
- 245,000 245,000 Airport, Authority System,
Series D, 5.375%, 10/1/2018
Metropolitan Washington DC - 360,487 360,487
- 335,000 335,000 Airport, Authority System,
Series D, 5.375%, 10/1/2019
Montgomery County IDA, - 533,295 533,295
- 500,000 500,000 Series C, 5.125%, 1/15/2019
Newport News, VA GO, 5.75%, - 534,320 534,320
- 500,000 500,000 Pre-refunded 1/15/2007
Newport News, VA GO, 5.0%, - 527,800 527,800
- 500,000 500,000 3/1/2018
Norfolk, VA Water Revenue, - 517,615 517,615
- 500,000 500,000 5.75%, 11/1/2012
Norfolk, VA Water Revenue, - 517,795 517,795
- 500,000 500,000 5.875%, 11/1/2015
Prince William County - 552,920 552,920
- 500,000 500,000 Service Authority, Water
and Sewer System Revenue,
5.5%, Pre-refunded 7/1/2009
Puerto Rico Commonwealth - 282,177 282,177
- 250,000 250,000 Highway and Transportation
Authority Revenue, Series
W, 5.5%, 7/1/2013
Puerto Rico Commonwealth - 222,706 222,706
- 215,000 215,000 GO, Public Improvement,
Series A, 5.0%, 7/1/2033
Puerto Rico Public - 1,107,250 1,107,250
- 1,000,000 1,000,000 Buildings Authority Revenue
Government Facilities,
Series G, 5.25%, 7/1/2013
Puerto Rico Public Finance - 275,860 275,860
- 250,000 250,000 Corporation, Commonwealth,
Series A, 5.0%,
Pre-refunded 8/1/2011
Richmond, VA Metropolitan - 228,296 228,296
- 200,000 200,000 Authority Expressway
Revenue, 5.25%, 7/15/2017
Richmond, VA Public - 1,059,030 1,059,030
- 1,000,000 1,000,000 Utilities Revenue, Series
A, 5.25%, 1/15/2018
Richmond, VA Refunding and - 536,660 536,660
- 500,000 500,000 Improvement GO, Series A,
5.125%, 1/15/2016
Roanoke, VA GO Public - 326,700 326,700
- 300,000 300,000 Improvement, Series B,
5.0%, 10/1/2011
Southeastern Public - 1,117,280 1,117,280
- 1,000,000 1,000,000 Servicing Authority, Series
B, 5.0%, 7/1/2015
Suffolk, VA Redevelopment - 615,049 615,049
- 580,000 580,000 and Housing Authority MFH
Village Apartments, Series
A, 5.6%, 2/1/2033
Upper Occoquan Sewage - 652,395 652,395
- 575,000 575,000 Authority Revenue, Series
A, 5.15%, 7/1/2020
Virginia Beach, VA - 55,849 55,849
- 50,000 50,000 Development Authority
Revenue General Hospital
Project, 5.125%, 2/15/2018
Virginia Beach, VA Public - 1,153,765 1,153,765
- 1,075,000 1,075,000 Improvement GO, 5.0%,
Pre-refunded 8/1/2008
Virginia Beach, VA Public - 277,425 277,425
- 250,000 250,000 Improvement GO, Series B,
5.0%, 5/1/2020
Virginia Beach, VA - 52,118 52,118
- 50,000 50,000 Development Authority
Revenue Town Center
Project, Series A, 4.25%,
8/1/2013
Virginia Beach, VA - 108,385 108,385
- 100,000 100,000 Development Authority,
Lease Revenue Social
Services Facility, 5.0%,
12/1/2017
Virginia Commonwealth - 276,278 276,278
- 250,000 250,000 Transportation Board
Revenue U.S. Route 58
Corridor Development, 5.5%,
Pre-refunded 5/15/2009
Virginia Housing - 105,103 105,103
- 100,000 100,000 Development Authority,
Revenue Rental Housing,
Series L, 5.35%, 2/1/2009
Virginia Housing - 84,074 84,074
- 80,000 80,000 Development Authority,
Revenue Rental Housing,
Series H, 5.25%, 11/1/2010
Virginia Housing - 528,380 528,380
- 500,000 500,000 Development Authority,
Revenue Rental Housing,
Series N, 5.125%, 1/1/2015
Virginia MFH Development - 313,749 313,749
- 300,000 300,000 Authority, Series G, 5.0%,
11/1/2013
Virginia Port Authority - 520,260 520,260
- 500,000 500,000 Commonwealth Revenue, 5.9%,
Pre-refunded 7/1/2006
Virginia Public School - 375,644 375,644
- 350,000 350,000 Authority Revenue, Series
A, 5.0%, Pre-refunded
8/1/2008
Virginia State GO, 5.25%, - 815,760 815,760
- 750,000 750,000 Pre-refunded 6/1/2009
Winchester, VA Public - 394,719 394,719
- 350,000 350,000 Improvement, 5.625%,
Pre-refunded 6/1/2010
------------------------------------
Total Investments - - 25,409,257 25,409,257
98.8%
(Amortized Cost $23,913,550)
------------------------------------
------------------------------------
Other Assets and - 312,443 312,443
Liabilities - 1.2%
------------------------------------
------------------------------------
Total Net Assets - 100% $- $25,721,700 $25,721,700
====================================
Note: The categories of investments are shown as a percentage of total net
assets at April 30, 2005.
The following acronyms are used throughout this portfolio:
GO General Obligation
IDA Industrial Development
Authority
MFH Multi-Family Housing
PCR Pollution Control Revenue
MTB Virginia Municipal Bond Fund
FBR Virginia Tax-Free Portfolio
Pro Forma Combining Statements of Assets &
Liabilities
April 30, 2005 (unaudited)
- -----------------------------------------------------------------
MTB FBR
Virginia Virginia Pro Forma Proforma
Municipal Bond Tax-Free Adjustment Combined
Fund Portfolio
Assets:
Investments in securities, at value $- $25,409,257 $ $25,409,257
$-
Cash - 33,010 - 33,010
Income receivable - 375,016 - 375,016
Receivable for shares sold - 1 - 1
--------------- ---------------- ------------ -------------
Total assets - 25,817,284 - 25,817,284
--------------- ---------------- ------------ -------------
Liabilities:
Payable for investments purchased
Income distribution payable - 9,601 - 9,601
Payable for shares redeemed - 65,269 - 65,269
Payable for investment advisory fee - 7,911 - 7,911
Payable for administration fee - 6,329 - 6,329
Payable for distribution services fees - 5,274 - 5,274
Accrued expenses - 1,200 - 1,200
--------------- ---------------- ------------ -------------
Total liabilities - 95,584 - 95,584
--------------- ---------------- ------------ -------------
--------------- ---------------- ------------ -------------
Net Assets $- $25,721,700 $- $25,721,700
=============== ================ ============ =============
Net Assets Consists of:
Paid-in capital $- $24,028,716 $- $24,028,716
Net unrealized appreciation (depreciation) of - 1,495,707 - 1,495,707
investments
Accumulated net realized gain on investments - 197,277 - 197,277
Undistributed net investment income - - - -
--------------- ---------------- ------------ -------------
--------------- ---------------- ------------ -------------
Total Net Assets $- $25,721,700 $- $25,721,700
=============== ================ ============ =============
Shares Outstanding - 2,263,130 - 2,263,130
=============== ================ ============ =============
=============== ================ ============ =============
Net Asset Value Per Share $- $11.37 $- $11.37
=============== ================ ============ =============
=============== ================ ============ =============
Offering Price Per Share* $- $11.37 $- $11.91
*
=============== ================ ============ =============
=============== ================ ============ =============
Redemption Proceeds Per Share* $- $11.37 $- $11.37
=============== ================ ============ =============
Investments, at identified cost $- $23,913,550 $- $23,913,550
--------------- ---------------- ------------ -------------
* Computation of offering price per share 100/95.5 of net asset value.
MTB Virginia Municipal Bond Fund
FBR Virginia Tax-Free Portfolio
Pro Forma Combining Statements of Operations
April 30, 2005 (unaudited)
MTB FBR
Virginia Virginia Pro Forma Pro Forma
Municipal Bond Tax-Free Adjustment Combined
Fund Portfolio
------------------------------------------- -----------
Investment Income:
Interest $- $1,266,014 $- $1,266,014
-------------- ------------- ---------- -----------
Total Investment Income: - 1,266,014 - 1,266,014
Expenses:
Investment advisory fee - 102,692 89,000 (a) 191,692
Administrative personnel and services fee - 82,154 (64,299) (b) 17,855
Custodian fees - - 1,369 1,369
(c)
Transfer and dividend disbursing agent fees and - - 20,911 (d) 20,911
expenses
Directors'/Trustees' fees - - 8,236 (e) 8,236
Auditing fees - - 13,452 13,452
(f)
Legal fees - - 3,900 (g) 3,900
Portfolio accounting fees - - 13,804 (h) 13,804
Distribution services fee - Class A Shares - 68,462 - 68,462
Shareholder services fee - Class A Shares - 7,837 60,625 68,462
(i)
Share registration costs - - 28,181 28,181
(j)
Printing and postage - - 7,500 7,500
(k)
Insurance premiums - - 9,000 9,000
(l)
Miscellaneous - 8,028 (5,028) (m) 3,000
-------------- -------------
---------- -----------
Total expenses - 269,173 186,651 455,824
-------------- ------------- ---------- -----------
-----------
Waivers and Reimbursement --
Waiver/reimbursement of investment adviser - (3,249) (136,412) (n)(139,661)
fee
Waiver of shareholder services fees-Class A - - (68,462) (o) (68,462)
Shares
-------------- ------------- ----------
-----------
Total Waivers and Reimbursements - (3,249) (204,874) (208,123)
-------------- ------------- ---------- -----------
Net Expenses - 265,924 (18,223) 247,701
-------------- ------------- ----------
-----------
Net investment income $- $1,000,090 $18,223 $1,018,313
-------------- ------------- ---------- -----------
Realized and Unrealized Gain on Investments:
Net realized gain on investments - 335,078 - 335,078
Net change in unrealized appreciation (depreciation) - (13,732) - (13,732)
of investments
-------------- ------------- ---------- -----------
Net realized and unrealized gain on - 321,346 - 321,346
investments
-------------- ------------- ---------- -----------
Change in net assets resulting from $- $1,321,436 $18,223 $1,339,659
operations
-------------- ------------- ---------- -----------
(See Notes to Pro Forma Financial Statements)
MTB Virginia Municipal Bond Fund
FBR Virginia Tax-Free Portfolio
Notes to Pro Forma Financial Statements
Year Ended April 30, 2005 (Unaudited)
Note 1. Basis of Combination
The accompanying unaudited Pro Forma Combining Portfolios of Investments,
Statements of Assets and Liabilities and Statements of Operations (Pro Forma
Financial Statements) reflect the accounts of MTB Virginia Municipal Bond
Fund and FBR Virginia Tax-Free Portfolio (individually referred to as the
"Fund", or collectively as the "Funds"), for the year ended April 30, 2005.
These statements have been derived from the books and records utilized in
calculating daily net asset values at April 30, 2005.
The Pro Forma Financial Statements should be read in conjunction with the
historical financial statements of the Funds which have been incorporated by
reference in the Statement of Additional Information. The Funds follow
generally accepted accounting principles in the United States of America
applicable to management investment companies which are disclosed in the
historical financial statements of each fund.
The Pro Forma Financial Statements give effect to the proposed exchange of
assets of FBR Virginia Tax-Free Portfolio for Class A Shares of MTB Virginia
Municipal Bond Fund. Under generally accepted accounting principles, FBR
Virginia Tax-Free Portfolio will be the surviving entity for accounting
purposes with its historical cost of investment securities and results of
operations being carried forward.
The Pro Forma Financial Statements have been adjusted to reflect the
anticipated advisory fee arrangement for the surviving entity. Certain other
operating costs have also been adjusted to reflect anticipated expenses of
the combined entity. Other costs which may change as a result of the
reorganization are currently undeterminable.
For the year ended April 30, 2005, FBR Virginia Tax-Free Portfolio paid and
MTB Virginia Municipal Bond Fund would have paid investment advisory fees
computed at the annual rate of 0.375% and 0.70%, respectively, as a
percentage of average daily net assets.
All costs with respect to the exchange will be borne by MTB Investment
Advisors, Inc. and Money Management Advisers, Inc. and their affiliates.
Note 2. Portfolio of Investments
The MTB Virginia Municipal Bond Fund had not become effective with the
Securities and Exchange Commission as of April 30, 2005. The Portfolio of
Investments provided is for the FBR Virginia Tax-Free Portfolio as of April
30, 2005, and it is not anticipated to change significantly in connection
with the proposed reorganization.
Note 3. Shares of Beneficial Interest
The Pro Forma Class A Shares net asset value per share assumes the issuance
of 2,263,130 Class A Shares of the MTB Virginia Municipal Bond Fund in
exchange for 2,263,130 Shares of the FBR Virginia Tax-Free Portfolio which
would have been issued at April 30, 2005 in connection with the proposed
reorganization.
Note 4. Proforma Adjustments
(a) MTB Investment Advisors, Inc. (the "Advisor"), will receive for its
services an annual investment advisory fee equal to 0.70% of the average
daily net assets of the MTB Virginia Municipal Bond Fund, a series of MTB
Group of Funds (the "MTB Fund"). FBR Fund Advisers, Inc. serves as
investment advisor to the FBR Virginia Tax-Free Portfolio and receives for
its services an annual investment advisory fee equal to 0.375% of the average
daily net assets of the FBR Virginia Tax-Free Portfolio. An adjustment to the
combined investment advisory fee reflects investment advisory fees charged at
0.70% of the pro forma combined fund's average daily net assets.
The Advisor has agreed to contractually waive all or a portion of its
investment advisory fee and/or reimburse certain operating expenses of the
MTB Fund in order to limit the Fund's Class A Shares total operating expenses
to no more than 0.90% of average daily net assets for the period starting
from the effective date of the Reorganization through April 30, 2008. The
Advisor may also voluntarily choose to waive a portion of its fee and/or
reimburse certain operating expenses of the Fund. The Advisor can modify or
terminate this voluntary waiver and/or reimbursement at any time at its sole
discretion.
(b) Federated Services Company (FServ) and M&T Securities, Inc. (M&T
Securities) serve as co-administrators to the MTB Fund and provide the MTB
Fund with certain administrative personnel and services necessary to operate
the MTB Fund. The fees paid to FServ and M&T Securities are based on the
level of average aggregate daily net assets of the MTB Fund. FServ and M&T
Securities may each voluntarily choose to waive any portion of its fee. FServ
and M&T Securities can each modify or terminate its voluntary waiver at any
time at its sole discretion. As of April 30, 2005, FBR National provided
administrative, transfer agency and custodial services to the FBR Virginia
Tax-Free Portfolio and paid operating expenses (not including extraordinary
legal fees, marketing costs, outside of routine shareholder communications
and interest costs) of the Fund. For these services, FBR National received a
fee at an annual rate based on the Fund's average daily net assets. An
adjustment to the combined administrative personnel and services fee reflects
the fee structure of the MTB Funds on the pro forma combined fund's average
daily net assets.
(c) Adjustment to reflect the custodian fees as a separate fund expense and
to reflect the current expense structure for the MTB Fund.
(d) Adjustment to reflect the transfer and dividend disbursing agent fees and
expenses as a separate fund expense and to reflect the current expense
structure for the MTB Fund.
(e) Adjustment to reflect Trustees' fees as a separate fund expense and to
reflect the current expense structure for the MTB Fund.
(f) Adjustment to reflect auditing fees as a separate fund expense and to
reflect the current expense structure for the MTB Fund.
(g) Adjustment to reflect legal fees as a separate fund expense and to
reflect the current expense structure for the MTB Fund.
(h) Adjustment to reflect portfolio accounting fees as a separate fund
expense and to reflect the current expense structure for the MTB Fund.
(i) Under the terms of a Shareholder Services Agreement with FServ and M&T
Securities, M&T Securities may receive from FServ up to 0.25% of average net
assets of the Fund's Class A shares. M&T Securities may voluntarily choose to
waive any portion of its fee with respect to the Fund.
(j) Adjustment to reflect share registration fees as a separate fund expense
and to reflect the current expense structure for the MTB Fund.
(k) Adjustment to reflect printing and postage as a separate fund expense and
to reflect the current expense structure for the MTB Fund.
(l) Adjustment to reflect insurance premiums as a separate fund expense and
to reflect the current expense structure for the MTB Fund.
(m) Miscellaneous expenses are adjusted to reflect the current expense
structure for the MTB Fund.
(n) Adjustment to reflect the waiver of investment adviser fee to reflect
the contractual waiver agreed to by the Advisor.
(o) Adjustment to reflect the waiver of shareholder services fee for Class A
Shares to reflect the current expense structure for the MTB Fund.
THE FBR FUNDS
FBR Maryland Tax-Free Portfolio
FBR Virginia Tax-Free Portfolio
Investment Adviser and Administrator
FBR FUND ADVISERS, INC.
4922 Fairmont Avenue
Bethesda, MD 20814
Distributor
FBR INVESTMENT SERVICES, INC.
4922 Fairmont Avenue
Bethesda, MD 20814
PART C
OTHER INFORMATION
Item 15. Indemnification
Indemnification is provided to officers and Trustees of the
Registrant pursuant to Section 4 of Article VII of the
Registrant's Amended and Restated Agreement and Declaration of
Trust ("Declaration of Trust"). The Registrant's officers and
Trustees are also entitled to purchase with Trust property
coverage under an Errors & Omissions Policy pursuant to Section 7
of Article VII of the Declaration of Trust.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933, as amended (the "1933 Act"), may be
permitted to Trustees, officers, and controlling persons of the
Registrant by the Registrant pursuant to the Declaration of Trust
or otherwise, the Registrant is aware that, in the opinion of the
Securities and Exchange Commission ("SEC"), such indemnification
is against public policy as expressed in the 1933 Act, and,
therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment
by the Registrant of expenses incurred or paid by Trustees,
officers, or controlling persons of the Registrant in connection
with the successful defense of any act, suit, or proceeding) is
asserted by such Trustees, officers, or controlling persons in
connection with the shares being registered, the 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 whether such indemnification by it is
against public policy as expressed in the 1933 Act and will be
governed by the final adjudication of such issues.
Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940, as
amended (the "1940 Act"), for Trustees, officers, and controlling
persons of the Registrant by the Registrant pursuant to the
Declaration of Trust or otherwise, the Registrant is aware of the
position of the SEC as set forth in Investment Company Act
Release No. IC-11330. Therefore, the Registrant undertakes that,
in addition to complying with the applicable provisions of the
Declaration of Trust or otherwise, in the absence of a final
decision on the merits by a court or other body before which the
proceeding was brought, that an indemnification payment will not
be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by a
majority vote of a quorum of non-party Trustees who are not
"interested persons" of the Registrant or (ii) by independent
legal counsel in a written opinion that the indemnitee was not
liable for an act of willful misfeasance, bad faith, gross
negligence, or reckless disregard of duties. The Registrant
further undertakes that advancement of expenses incurred in the
defense of a proceeding (upon undertaking for repayment unless it
is ultimately determined that indemnification is appropriate)
against an officer, Trustee, or controlling person of the
Registrant will not be made absent the fulfillment of at least
one of the following conditions: (i) the indemnitee provides
security for his undertaking; (ii) the Registrant is insured
against losses arising by reason of any lawful advances; or (iii)
a majority of a quorum of disinterested non-party Trustees, or
independent legal counsel in a written opinion, makes a factual
determination that there is reason to believe the indemnitee will
be entitled to indemnification.
Item 16. Exhibits
(1) (a) Conformed copy of Amended and Restated Agreement and
Declaration of Trust of MTB Group of Funds, a Delaware Statutory
Trust; (41)
(b) Conformed copy of Amendment to Certificate of Trust of MTB
Group of Funds, a Delaware Statutory Trust; (38)
(2) (a) Copy of Amended and Restated By-Laws of MTB Group of Funds, a
Delaware Statutory Trust; (38)
(b) Copy of Amendment #1 to the Amended and Restated By-Laws of
MTB Group of Funds; (41)
(c) Copy of Amendment #2 to the Amended and Restated By-Laws of
MTB Group of Funds; (44)
(3) Not applicable.
(4) Forms of Agreement and Plans of Reorganization are filed herewith
as Exhibits A and B to the Proxy Statement/Prospectus.
(5) The rights of security holders of the Registrant are defined in
the following sections of the Registrant's Amended and Restated
Agreement and Declaration of Trust and By-Laws:
(a)Agreement and Declaration of Trust. See Article III, "Shares,"
Section 6; Article V, "Shareholders' Voting Powers and Meetings,"
Section 1; and Article VI, "Net Asset Value, Distributions and
Redemptions," Section 2.
(b)By-Laws. See Article II, "Meetings of Shareholders," Section 6
and Section 9.
(6) (a) Conformed copy of Investment Advisory Agreement of the
Registrant (27 funds) dated August 22, 2003; (39)
(b) Conformed copy of Investment Advisory Agreement of the
Registrant (2 money market funds) dated August 22, 2003; (43)
(c) Conformed copy of Investment Advisory Agreement of the
Registrant (5 funds) dated August 22, 2003; (39)
(d) Conformed copy of Sub-Advisory Agreement for the MTB Small
Cap Stock Fund (Mazama Capital Management, Inc.), dated August
22, 2003; (39)
(e) Conformed copy of Sub-Advisory Agreement for MTB Small Cap
Stock Fund (LSV Asset Management), dated August 22, 2003; (39)
(f) Conformed copy of Sub-Advisory Agreement for MTB
International Equity (UBS Global Asset Management), dated August
22, 2003; (39)
(g) Conformed copy of Amendment to Sub-Advisory Agreement for MTB
Small Cap Stock Fund (Mazama Capital Management, Inc.); (39)
(h) Conformed copy of Amendment to Sub-Advisory Agreement for MTB
Small Cap Stock Fund (LSV Asset Management); (39)
(i) Conformed copy of Amendment to Sub-Advisory Agreement for MTB
International Equity Fund (UBS Global Asset Management
(Americas), Inc.); (39)
(j) Conformed copy of Investment Advisory Contract Letter
Agreement, dated April 1, 2004; (39)
(k) Conformed copy of Sub-Advisory Agreement for MTB Large Cap
Value Fund and MTB Large Cap Value Fund II (NWQ Investment
Management Company, LLC) dated December 8, 2004; (42)
(l) Conformed copy of Sub-Advisory Agreement for MTB Equity
Income Fund (DePrince, Race & Zollo, Inc.) dated December 8,
2004; (42)
(m) Conformed copy of Investment Advisory Contract Letter
Agreement, dated February 15, 2005 (Variable Annuity Funds); (44)
(n) Conformed copy of Investment Sub-Advisory Contract Letter
Agreement for the Mid Cap Stock Fund, dated December 8, 2004; (43)
(o) Conformed copy of Investment Sub-Advisory Contract Letter
Agreement for the Small Cap Stock Fund, dated December 8, 2004;
(43)
(p) Conformed copy of Schedule A to the Investment Advisory
Agreement of the Registrant (27 funds) dated August 22, 2003; (43)
(q) Conformed copy of Schedule A to the Investment Advisory
Agreement of the Registrant (2 money market funds); (44)
(r) Conformed copy of Schedule A to the Investment Advisory
Agreement of the Registrant (27 funds); (44)
(7) (a) Conformed copy of Distributor's Contract of the Registrant,
dated August 15, 2003; (39)
(b) Conformed copy of Amendment to Distributor's Contract
(September 22, 2003); (39)
(c) Conformed copy of Amendment #1 to Exhibit B to the
Distributor's Contract; (43)
(d) Conformed copy of Agreement for Administrative Services
between the Registrant and Manufacturers and Traders Trust
Company; (43)
(e) Form of Mutual Fund Sales and Services Agreement of the
Registrant; (40)
(8) Not applicable;
(9) (a) Conformed copy of Custodian Agreement of the Registrant,
dated December 7, 2004 and copy of Schedules A-D to the Custodian
Agreement of the Registrant; (42)
(b) Conformed copy of Custody, Fund Accounting and Fund
Administration Fee Schedule; (40)
(c) Conformed copy of Securities Lending Authorization Agreement
between MTB Group of Fund and State Street Bank & Trust Company;
(41)
(d) Copy of Appendix A to the Custodian Agreement between the
Registrant and State Street Bank, dated April 29, 2005; (43)
(e) Conformed copy of Funds Transfer Addendum to the Custodian
Contract; (44)
(10) (a) Conformed copy of Rule 12b-1 Agreement of the Registrant and
Edgewood Services, Inc.; (41)
(b) Conformed copy of Rule 12b-1 Plan regarding Class B Shares
and Class C Shares of the Registrant; (40)
(c) Conformed copy of Rule 12b-1 Plan (non-Class B Shares and
Class C Shares) of the Registrant; (40)
(d) Copy of Dealer (Sales) Agreement; (7)
(e) Copy of Amendment #1 to Exhibit A to the Rule 12b-1 Plan; (43)
(f) Conformed copy of Contract Defining Responsibility for Fees
Under Non-Conforming Dealer Agreement; (43)
(11) Form of Opinion and Consent of Counsel (Reed Smith LLP) as to the
legality of the securities being registered; +
(12) Form of Tax Opinion of Reed Smith LLP, supporting the tax matters
and consequences to shareholders for the reorganization pursuant
to Section 368(a)(1)(C) of the Internal Revenue Code discussed in
the Proxy Statement/Prospectus for the Reorganization; (to be
filed by amendment)
(13) (a) Copy of Recordkeeping Agreement of the Registrant; (43)
(b) Copy of Recordkeeping Agreement of the Registrant for the VA
Funds; (43)
(c) Conformed copy of Agreement for Administrative Services and
Transfer Agency Services between the Registrant and Federated
Services Company, dated November 1, 2000; (43)
(d) Conformed copy of Financial Administration and Accounting
Services Agreement between Registrant and State Street Bank and
Trust Company, dated November 8, 2000; (43)
(e) Conformed copy of Shareholder Services Agreement of the
Registrant, dated November 8, 2000; (43)
(f) Conformed copy of Shareholder Services Plan, dated November
1, 2000; (43)
(g) Conformed copy of Shareholder Services Plan for the VA Funds,
dated February 22, 2005; (43)
(h) Conformed copy of Participation Agreement of the Registrant,
including Exhibits A-E; (36)
(i) Conformed copy of Indemnification Agreement of the
Registrant; (36)
(j) Conformed copy of Service Mark License Agreement; (39)
(k) Conformed copy of Assignment and Consent of Fund
Participation Agreement; (40)
(l) Conformed copy of Participation Agreement among MTB Group of
Funds, Edgewood Services, Inc., MTB Investment Advisors, Inc.,
TransAmerica Life Insurance Co. and TransAmerica Financial Life Insurance
Co.; (41)
(m) Conformed copy of Participation Agreement among MTB Group of
Funds, Edgewood Services, Inc., MTB Investment Advisors, Inc., and
Hartford Life Insurance Company, dated May 1, 2004, including
Schedules A-E; (42)
(n) Conformed copy of Agreement for Transfer Agency Services
between the Registrant and Boston Financial Data Services, Inc.,
dated November 1, 2000; (43)
(o) Conformed copy of Amendment No. 1 to Schedules A and C of the
Participation Agreement with TransAmerica Life Insurance Co. and
TransAmerica Financial Life Insurance Co.; (43)
(p) Conformed copy of Amendment #9 to the Agreement for
Administrative Services and Transfer Agency Services between the
Registrant and Federated Services Company; (44)
(q) Conformed copy of Amended and Restated Financial
Administration and Accounting Services Agreement between the
Registrant and State Street Bank and Trust Company; (44)
(r) Conformed copy of Assignment of Contracts between Federated
Services Company and State Street Bank and Trust Company; (44)
(14) (a) Conformed copy of Consent of Independent Registered Public
Accounting Firm for MTB Group of Funds, Ernst & Young LLP; +
(b) Conformed copy of Consent of Independent Registered Public
Accounting Firm for The FBR Funds, Tait Weller; +
(15) Not applicable;
(16) (a) Conformed copy of Power of Attorney of the Registrant; (39)
(b)Conformed copy of Power of Attorney of Richard J. Thomas; (39)
(c) Conformed copy of Power of Attorney of Chairman and Trustee
Joseph J. Castiglia; (41)
(17) (a) Form of Proxy - FBR Maryland Tax-Free Portfolio; +
(b) Form of Proxy - FBR Virginia Tax-Free Portfolio. +
- -------------------------------------------------
+ All exhibits have been filed electronically.
7. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed June 17, 1993. (File Nos. 33-20673
and 811-5514)
36. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 54 on Form N-1A filed June 27, 2002 (File Nos. 33-20673
and 811-5514)
38. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 57 on Form N-1A filed August 22, 2003 (File Nos. 33-20673
and 811-5514).
39. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 59 on Form N-1A filed April 28, 2004 (File Nos. 33-20673
and 811-5514).
40. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 60 on Form N-1A filed July 1, 2004 (File Nos. 33-20673 and
811-5514).
41. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 61 on Form N-1A filed August 27, 2004 (File Nos. 33-20673
and 811-5514).
42. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 62 on Form N-1A filed February 11, 2005 (File Nos.
33-20673 and 811-5514).
43. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 63 on Form N-1A filed April 28, 2005 (File Nos. 33-20673
and 811-5514).
44. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 65 on Form N-1A filed August 29, 2005 (File Nos. 33-20673
and 811-5514).
Item 17. Undertakings
(1) The undersigned 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 of 1933, as amended
(the "1933 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 undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as a 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 undersigned Registrant agrees to file by Post-Effective
Amendment the opinion of counsel regarding the tax consequences
of the proposed reorganization required by Item 16(12) of Form
N-14 within a reasonable time after receipt of such opinion.
SIGNATURES
As required by the Securities Act of 1933, this Registration Statement
has been signed on behalf of the Registrant, in the City of Pittsburgh,
Commonwealth of Pennsylvania, on the 2nd day of December, 2005.
MTB GROUP OF FUNDS
By: /s/C. Grant Anderson
C. Grant Anderson, Secretary
Attorney in Fact for Joseph J.
Castiglia
As required by the Securities Act of 1933, this Registration Statement
has been signed by the following person in the capacity and on the dates
indicated.
NAME: TITLE: DATE:
/s/ C. Grant Anderson Attorney in Fact for December 2, 2005
the Persons Listed
Below
- ------------------------------
C. Grant Anderson
Joseph J. Castiglia* Chairman of the
Board and Trustee
Charles L. Davis, Jr.* Chief Executive
Officer
(Principal Executive
Officer)
Carl W. Jordan* President
Richard J. Thomas* Treasurer
(Principal Financial
Officer)
William H. Cowie, Jr.* Trustee
John S. Cramer* Trustee
Mark J. Czarnecki* Trustee
Daniel R. Gernatt, Jr.* Trustee
Richard B. Seidel* Trustee
Marguerite D. Hambleton* Trustee
* By Power of Attorney