File No. 333-130096
As filed with the SEC on January 3, 2006
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 x
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Pre-Effective Amendment No. 1
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Post-Effective Amendment No.
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(Check appropriate box or boxes)
MTB GROUP OF FUNDS
(Retail/Institutional 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,
/s/ David H. Ellison
David H. Ellison, President
The FBR Funds
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).
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 corresponding
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. In order to purchase Class A Shares of an MTB
Fund other than MTB Maryland or MTB Virginia (as the case may be) without paying
a sales charge, you or your financial intermediary must notify the Funds'
distributor, Edgewood Services, Inc. (Edgewood) or MTB Funds Shareholder
Services (MFSS) at time of purchase.
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?
The Acquiring Funds' adviser has committed to a two-year contractual cap
on the Acquiring Funds' expense ratios. As a result, 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) for the two-year period. 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.
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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MTB Maryland - Class A* 3.46% 5.43% 6.14% 5.00%
FBR Maryland 3.07% 5.04% 5.64% 5.72%
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. In order to purchase Class A Shares
of an MTB Fund other than MTB Maryland or MTB Virginia (as the case may be)
without paying a sales charge, you or your financial intermediary must notify
the Funds' distributor, Edgewood Services, Inc. (Edgewood) or MFSS at time of
purchase.
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.
- ------------------------------------------------------------------------------
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 have 1. Read the Proxy Statement and have
your Proxy card at hand. your Proxy card at hand.
2. Call the 1-800 number that appears 2. Go to the website printed on your
on your Proxy card. Proxy card.
3. Enter the 12-digit control number set 3. Enter the control number set
set forth on the Proxy card and forth on the Proxy card and
follow the simple instructions. follow the simple 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 and attached as
Exhibit C. 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, 2005, a Semi-Annual Report to
Shareholders of the MTB Funds for the semi-annual period ended October 31, 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 insofar as such financial statements relate to the Acquired Funds or
Acquiring Funds participating in the proposed Reorganizations (and not as they
relate to non-participating MTB Funds or FBR Funds).
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 FBR
Group...........................................................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 their
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 current
income 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 average portfolio
maturity parameters, each Acquiring Fund is managed so that its average maturity
is within the ranges of the Lehman Brothers 10 Year Municipal Bond Index
(maturities of 8-12 years) or 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 investing
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.
The following chart 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.
- ----------------------------------------------------------------------------------------------
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. The
thereunder. amount permitted to be
borrowed is that permitted
by law. May not purchase a
portfolio security if a
borrowing is outstanding.
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
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. (The Acquiring Funds limitation for (i) purchase
do not currently have a of publicly traded debt
securities lending program.) instruments; or (ii)
No percentage limit. repurchase agreements.
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
o Margin Purchases
Permitted only for (i) Permitted only for clearance
clearance of purchases of of transactions.
portfolio securities; (ii) derivative securities
transactions and (iii) for any purpose if
disclosed. (The Acquiring Funds do not currently
purchase securities on margin.)
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
o Short Sales
Not prohibited. Permitted only for clearance
of transactions.
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
o Put and Call Options
Not prohibited. Permitted only in connection
with standby commitments.
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
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 municipal
marketable securities of obligations secured by real
companies engaged in real estate or interests therein.
estate-related activities;
and (ii) securities
secured by real estate or
interests therein. (The
Acquiring Fund do not currently
purchase securities of companies
engaged in real
estate-related activities.)
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
o Commodities
Permitted if disclosed. (The Permitted only if acquired
Acquiring Funds do not as a result of ownership of
currently purchase securities or other
commodities.) instruments.
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
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 50% o Will comply with IRS
of assets, no more than 5% of diversification requirements
assets may be invested in a (which are the same 5%/50%
single issuer. and 25% issuer limitation).
o No more than 25% of assets o Limitation does not apply
may be invested in a single to U.S. government
issuer. securities.
o Limitation does not apply
to U.S. government securities.
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
o Concentration
May not concentrate in issuers May not concentrate (invest
primarily engaged in the same more than 25% of total
industry. Municipal bonds, assets) in issuers in any
except industrial revenue one industry. Excluded from
bonds, will not constitute an this limit are municipal
industry. obligations issued or
guaranteed by the U.S.
government, its agencies or
sponsored enterprises.
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
o 80% Tax-Free Policy
Will invest so that at least Will invest so that
at least 80% of the income it 80% of its income
is exempt distributes will be exempt from federal
income tax from federal regular income (including
AMT) and state tax and state income taxes. 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 actual fees and expenses that you may pay if you
buy and hold Shares of FBR Maryland, and the actual and pro forma combined fees
and expenses of Class A Shares of MTB Maryland immediately prior to and after
giving effect to the Reorganization. As described below, operating expenses of
MTB Maryland are shown both before and after giving effect to a contractual
waiver and reimbursement of expenses by MTB Investment Advisors, Inc. to limit
total operating expenses to not more than 0.85%, which will commence on the
effective date of the Reorganization and will continue through April 30, 2008
(or at least two years from the effective date of the Reorganization). There can
be no assurance that the waiver will be renewed at its expiration date.
Shareholders of FBR Maryland should also give consideration to the effect
on fees of FBR Maryland after October 31, 2005 resulting from events described
in Note 9 to the table.
Shareholder Fees MTB Maryland
Municipal Bond
Fund - Class A
FBR Maryland Shares (Actual
Tax-Free and Pro Forma
Portfolio Combined)
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a None 4.50%(1)
percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage of None None(2)
original purchase price or redemption proceeds, as
applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends None None
(and other Distributions) (as a percentage of offering
price)
Redemption Fee (including exchanges) (as a percentage of 1.00%(3) None
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)
Distribution (12b-1) Fee 0.250% 0.25%(5)
Shareholder Services Fee None 0.25%(6)
Other Expenses 0.330%(7) 0.21%(4)
------ -----
Total Annual Fund Operating Expenses (before fee waivers 0.955%(9) 1.41%
and expense reimbursements)
Contractual Fee Waivers and Reimbursement of Fund Expenses 0.000% 0.56%(4)
Total Anticipated Annual Fund Operating Expenses (after 0.955% 0.85%(8)
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 where the
purchase was made under an investment program where an investment
professional received an advance payment on the transaction.
(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 through the fiscal year
ending April 30, 2007. However, the rate at which expenses are accrued
during the fiscal period 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 commencing on
the effective date of the Reorganization and continuing through April 30,
2008 (or at least two years from the effective date of the Reorganization).
The management fee paid by the Fund (after the contractual waiver) is
expected to be 0.53% for the fiscal period ending April 30, 2007.
(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 period ending April 30, 2007.
(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
period ending April 30, 2007.
(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% (0.37% and 1.00%, after contractual
waivers), 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. The numbers in the MTB Maryland column show costs both with,
and without, reflecting the 4.50% sales charge generally applicable to the
purchase of MTB Maryland's Class A Shares. The 4.50% sales charge does not apply
to shareholders of FBR Maryland who receive Class A Shares of MTB Maryland in
the Reorganization.
MTB Maryland (1)
Without
Reflecting Sales
FBR Maryland Reflecting Sales Charge Charge
1 Year $97 $533 $87
3 Years $304 $709 $271
5 Years $528 $1,024 $601
10 Years $1,172 $1,917 $1,536
(1) The costs of MTB Maryland are the same on a pro forma basis.
FBR Virginia Tax-Free Portfolio - MTB Virginia Municipal Bond Fund
This table describes the actual fees and expenses that you may pay if you
buy and hold Shares of FBR Virginia and the actual and pro forma combined fees
and expenses of Class A Shares of MTB Virginia immediately prior to and after
giving effect to the Reorganization. As described below, operating expenses of
MTB Virginia are shown both before and after giving effect to a contractual
waiver and reimbursement of expenses by MTB Investment Advisors, Inc. to limit
total expenses to not more than 0.90%, which will commence on the effective date
of the Reorganization and will continue through April 30, 2008 (or at least two
years from the effective date of the Reorganization). There can be no assurance
that the waiver will be renewed at its expiration date.
Shareholders of FBR Virginia should also give consideration to the effect
on fees of FBR Maryland after October 31, 2005 resulting from events described
in Note 8 to the table.
MTB Virginia
Municipal
Bond Fund -
Class A
Shares
FBR (Actual and
Virginia Tax-Free Pro Forma
Shareholder Fees Portfolio Combined)
--------- ---------
Fees Paid Directly From Your Investment
Maximum Sales Charge (Load) Imposed on Purchases (as a None 4.50%(1)
percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a percentage None None(2)
of original purchase price or redemption proceeds, as
applicable)
Maximum Sales Charge (Load) Imposed on Reinvested None None
Dividends (and other Distributions) (as a percentage
of offering price)
Redemption Fee (including exchanges) (as a percentage 1.00%(3) None
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)
Distribution (12b-1) Fee 0.250% 0.25%
Shareholder Services Fee None 0.25%(5)
Other Expenses 0.350%(6) 1.24%4, (7)
------ -----
Total Annual Fund Operating Expenses (before fee 0.975%(8) 2.44%
waivers and expense reimbursements)
Contractual Fee Waivers and Reimbursement of Fund 0.000% 1.54%(4)
Expenses
Total Anticipated Annual Fund Operating Expenses 0.975% 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 where the
purchase was made under an investment program where an investment
professional received an advance payment on the transaction.
(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 through the fiscal year
ending April 30, 2007. However, the rate at which expenses are accrued
during the fiscal period 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 0.90% of average daily net assets for the period commencing on
the effective date of the Reorganization and continuing through April 30,
2008 (or at least two years from the effective date of the Reorganization).
The management fee paid by the Fund (after the contractual waiver) is
expected to be 0.00% for the fiscal period ending April 30, 2007.
(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 period
ending April 30, 2007.
(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 period ending April
30, 2007.
(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% (0.37% and 1.00% after contractual
waivers), 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. The numbers in the MTB Virginia column show costs both with,
and without, reflecting the 4.50% sales charge generally applicable to the
purchase of MTB Virginia's Class A Shares. The 4.50% sales charge does not apply
to shareholders of FBR Virginia who receive Class A Shares of MTB Virginia in
the Reorganization.
MTB Virginia (1)
Without
Reflecting Sales
FBR Virginia Reflecting Sales Charge Charge
-------------
1 Year $98 $538 $92
3 Years $307 $724 $287
5 Years $534 $1,263 $852
10 Years $1,184 $2,737 $2,395
(1) The costs of MTB Virginia are the same on a pro forma basis.
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 (formerly Allied
Investment Advisors, Inc.) since 1996 and a Vice President of M&T Bank since
April 1, 2003. She was a Portfolio Manager of Allfirst Bank from 1992 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 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,
which manages no-load mutual funds, managed approximately $1.9 billion of net
assets as of January 31, 2005.
Asset Management, Inc. (AMI), located at 5530 Wisconsin Avenue, Suite
1500, Chevy Chase, Maryland 20815, served as the sub-adviser to the Acquired
Funds pursuant to a Sub-Advisory Agreement between MMA and AMI, which was
terminated in October 2004, and thereafter until October 26, 2005, pursuant to
an Interim Sub-Advisory Agreement between MMA and AMI. Effective October 27,
2005, Chevy Chase Trust Company (CCTC), located at 7501 Wisconsin Avenue,
Bethesda, Maryland 20814, purchased substantially all of the assets of AMI and,
as a result, the former business of AMI is being operated as a division of CCTC.
The Board of Trustees of FBR Funds, including a majority of the Independent
Trustees, approved an interim subadvisory contract between FBRFA and CCTC so
that CCTC may continue to render investment management services to the Acquired
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 (or at least two years from the effective date of the Reorganization).
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. FBRFA 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. FBRFA has agreed to maintain these
expense limitations with regard to each Fund through November 1, 2006.
Administrative. 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, FBRFA 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, FBRFA 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. FBRFA 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. FBRFA compensates all personnel, Officers, and
Trustees of the FBR Funds if such persons are employees of the adviser.
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. FBR National has entered into an agreement with Cardinal Bank
(Cardinal), an unaffiliated Virginia-chartered bank, whereby Cardinal has agreed
to acquire certain of FBR National's fiduciary and other assets and assume FBR
National's deposit liabilities. Closing of the transaction, which is subject to
certain conditions, is anticipated to occur in the first quarter 2006. Upon
closing of the transaction, the FBR Funds' custodian services will be performed
by Cardinal.
Shareholder Servicing. 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.
Distribution (12b-1). 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.
Total Operating Expenses. 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 (or at least two
years from the effective date of the Reorganization).
The total operating expenses, as a percentage of average net assets, for
Shares of FBR Virginia were 0.98% 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 (or at least two years from the effective
date of the Reorganization). 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, check or Automated Clearing House once an account has been established, or
through 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. In order to
purchase Class A Shares of an MTB Fund other than MTB Maryland or MTB Virginia
(as the case may be) without paying a sales charge, you or your financial
intermediary must notify the Funds' distributor, Edgewood Services, Inc.
(Edgewood) or MTB Funds Shareholder Services (MFSS) at time of purchase.
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
Systematic
Retirement Investment Plan
Initial Subsequent Plan Retirement Plan Investment
Investment Investment Investment Subsequent Minimum
Fund 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., (the FBR Distributor) 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. In order to exchange
Class A Shares of an MTB Fund other than MTB Maryland or MTB Virginia (as the
case may be) without paying a sales charge (where, as described above, a sales
charge would otherwise be imposed), you or your financial intermediary must
notify Edgewood or MFSS at the time of the exchange.
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, 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 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 FBRFA and Friedman, Billings, Ramsey
Group Inc. (FBR Group) will indemnify MTBIA and each Acquiring Fund in certain
circumstances as described in the attached Plans.
Costs of Reorganization. Except as noted below regarding certain start-up
costs of MTB Virginia, the expenses of each Reorganization will be paid by
MTBIA, FBRFA 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 Tax-Free Fund -Class A Adjustments Shares
Portfolio Shares Pro Forma Combined
Net Assets* $36,215,097 $17,490,941 ___ $53,706,038
Net Asset Value $10.96 $10.17 ___ $10.17
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 Value $11.17 NA ___ $11.17
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 Acquired Funds or the Acquiring Funds in connection with the
Reorganizations. As of October 31, 2005, all portfolio securities held by the
Acquiring Funds were acceptable investments within the applicable guidelines of
the respective Acquiring Funds.
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 End) Appreciation/(Depreciation) Fund (Fiscal Year End) Appreciation/(Depreciation)
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
MTB Maryland (4/30/05) $5,825,072 FBR Maryland (10/31/05) $1,447,289
- ---------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------
FBR Virginia (10/31/05) $1,011,190
- ---------------------------------------------------------------------------------------------------
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, FBRFA and FBR Group
FBRFA/FBR Group and MTBIA have entered into a definitive agreement
(Agreement) regarding the sale by FBRFA/FBR Group to MTBIA of certain assets
relating to FBRFA's business of providing investment advisory and investment
management services to the Acquired Funds and FBRFA's cooperation in the
reorganization of the Acquired Funds and related matters. Pursuant to the
Agreement, FBRFA 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
FBRFA 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 FBR Group, which will effect an
assignment of MMA's advisory contracts to FBRFA; and a recent change in
ownership of FBR Maryland's and FBR Virginia's subadviser, AMI. FBRFA 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 Group. FBRFA 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.
FBRFA's recommendation was based on FBR Group's analysis that due to the
overall lower expense ratios through April 30, 2008 (or at least two years from
the effective date of the Reorganizations), 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 benefit of
extensive municipal bond portfolio 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 FBRFA 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 through April 30, 2008 (or at least two years from
the effective date of the Reorganizations);
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 or other funds in the MTB Fund
complex;
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 the distribution and marketing resources to potentially
increase the size of the Acquired Funds 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 (or at least two years from the effective
date of the Reorganizations). In addition, FBRFA and FBR Group 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 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 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 4,
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, 2005 have
been audited by Tait, Weller and Baker, their independent registered public
accounting firm. These financial statements for the Acquired Fundsare
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 MTB Maryland 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 MTB Maryland, together with the unaudited
financial statements of MTB Maryland contained in the MTB Funds' Semi-Annual
Report to Shareholders for the six months ended October 31, 2005, are
incorporated by reference into this Prospectus/Proxy Statement insofar as such
financial statements relate to MTB Maryland as an Acquiring Fund participating
in the Reorganization, and not to any other MTB Funds that are part of the MTB
Funds and described therein. Since MTB Virginia was organized for purposes of
the Reorganization, it has no past financial history.
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 FBRFA 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 FBRFA
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, 2005; 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 MTB Maryland 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 of the Acquired Funds 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 each of the payment of escrowed sub-advisory fees to AMI with
respect to an Acquired Fund, and the payment of escrowed sub-advisory fees to
CCTC with respect to an Acquired Fund, requires the vote of a "majority of the
outstanding voting securities" of such Acquired 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. In the event that, with respect to each of
Proposal 3 and Proposal 4, the shareholders of one Acquired Fund do not approve
the payment of the escrowed fees, the payment of escrowed fees will proceed with
respect to the Acquired Fund that has approved the payment.
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.
- ------------------------------------------------------------------------------
CATEGORY 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 meeting Shareholders' meetings
of the shareholders may be called except as required by law.
at any time by the Board, by the Special meetings of the
chairperson of the Board or by Shareholders of the Trust
the president for the purpose of or of any Series or Class
electing trustees as provided in may be called at any time
these By-Laws or for the purpose by the Trustees or by the
of taking action upon any other President or the Secretary
matter deemed by the Board to be for the purpose of taking
necessary or desirable. action upon any matter
requiring the vote or
authority of the Shareholders
of the Trust 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 Shareholder None, except as may be required Meetings of the
Meetings by Section 16 of the 1940 Act. Shareholders of the Trust
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 or Shareholders shall be sent
otherwise given in accordance or otherwise given to
with Section 4 of the Amended and Shareholders in accordance
Restated By-Laws not less than with Section 4 of the
seven (7) nor more than By-Laws not less than ten
ninety-three (93) days before the (10) nor more than ninety
date of the meeting. The notice (90) days before the date
shall specify (i) the place, date of the meeting. The notice
and hour of the meeting, and (ii) shall specify (i) the
the general nature of the place, date and hour of
business to be transacted. The the meeting, and (ii) the
notice of any meeting at which general nature of the
trustees are to be elected also business to be
shall include the name of any transacted. Except as
nominee or nominees who at the provided in the
time of the notice are intended Declaration of Trust, any
to be presented for election. action that may be taken
Except with respect to at any meeting of
adjournments as provided herein, Shareholders may be taken
no business shall be transacted without a meeting and
at such meeting other than that without prior notice if a
specified in the notice. Any consent in writing setting
action which may be taken at any forth the action to be
meeting of Shareholders may be taken is signed by the
taken without a meeting and holders of outstanding
without prior notice if a consent Shares having not less
in writing setting forth the than the minimum number of
action so taken is signed by the votes that would be
holders of Shares having not less necessary to authorize or
than the minimum number of votes take that action at a
that would be necessary to meeting at which all
authorize or take that action at Shares entitled to vote on
a meeting at which all Shares that action were present
entitled to vote on that action and voted provided,
were present and voted. however, that the
Shareholders receive any
necessary Information
Statement or other
necessary documentation in
conformity with the
requirements of the
Securities Exchange Act of
1934 or the rules or
regulations thereunder.
Record Date for Meetings Shareholders entitled to notice determining the
of any meeting or to vote or Shareholders entitled to
entitled to give consent to vote or act at any meeting
action without a meeting, the or adjournment or
Board of Trustees may fix in postponement thereof, the
advance a record date which shall Trustees may fix in
not be more than one hundred advance a record date
eighty (180) days nor less than which shall not be more
seven (7) days before the date of than ninety (90) days nor
any such meeting. If the Board of less than ten (10) days
Trustees does not so fix a record before the date of any
date, the record date for such meeting. Without
determining Shareholders entitled fixing a record date for a
to notice of or to vote at a meeting, the Trustees may
meeting of Shareholders shall be for voting and notice
at the close of business on the purposes close the
business day before the notice is register or transfer books
given or, if notice is waived, at for one or more Series (or
the close of business on the Classes) for all or any
business day which is five (5) part of the period between
business days before the day on the earliest date on which
which the meeting is held. a record date for such
meeting could be set in accordance
herewith and the date of such
meeting. If the Trustees do not
so fix a record date or close the
register or transfer 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 quorum is Except when a larger
required by applicable law, by quorum is required by
the By-Laws or by the Declaration applicable law, by the
of Trust, thirty-three and By-Laws or by the
one-third percent (33-1/3%) of Declaration of Trust,
the Shares present in person or thirty-three and one-third
represented by proxy and entitled percent (33-1/3%) of the
to vote at a Shareholders' Shares entitled to vote
meeting shall constitute a quorum shall constitute a quorum
at such meeting. When a separate at a Shareholders'
vote by one or more Series or meeting. When any one or
classes is required, thirty-three more Series (or Classes)
and one-third percent (33-1/3%) is to vote as a single
of the Shares of each such Series Class separate from any
or class present in person or other Shares, thirty-three
represented by proxy and entitled and one-third percent
to vote shall constitute a quorum (33-1/3%) of the Shares of
at a Shareholders' meeting of each such Series (or
such Series or class. Class) entitled to vote
shall constitute a quorum
at a Shareholders' meeting
of thatSeries(or Class).
Election of Trustees The Shareholders may elect The Shareholders may elect
Trustees, including filling any Trustees at any meeting of
vacancies in the Board of Shareholders called by the
Trustees, at any meeting of Trustees for that purpose.
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 from not a quorum is present,
time to time (and at any time may be adjourned from time
during the course of the meeting) to time by the vote of the
by a majority of the votes cast majority of the Shares
by those shareholders present in represented at that
person or by proxy, or by the meeting, either in person
chairperson of the meeting. Any or by proxy.
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 the power Any Trustee may be
Shareholders to remove a Trustee with removed only to the
or without cause at any meeting of extent provided by the 1940 Act
Shareholders by a vote of and the rules and regulations
two-thirds of the thereunder.
Outstanding Shares of the
Trust.
Personal Liability of The Trustees, officers, employees A Trustee, when acting in
Trustees and agents of the Trust, in such capacity, shall not
incurring any debts, liabilities be personally liable to
or obligations, or in limiting or any person other than the
omitting any other actions for or Trust or a beneficial
in connection with the Trust, are owner for any act,
or shall be deemed to be acting omission or obligation of
as Trustees, officers, employees the Trust or any Trustee.
or agents of the Trust and not in A Trustee shall not be
their own capacities. Subject to liable for any act or
Sections 3 and 5 of Article VII omission or any conduct
of the Amended and Restated whatsoever in his capacity
Agreement and Declaration of as Trustee, provided that
Trust, no Trustee, officer, nothing contained herein
employee or agent of the Trust or in the Delaware Act
shall be subject to any personal shall protect any Trustee
liability whatsoever in tort, against any liability to
contract, or otherwise, to any the Trust or to
other Person or Persons in Shareholders to which he
connection with the assets or would otherwise be subject
affairs of the Trust or of any by reason of willful
Series or class, save only that misfeasance, bad faith,
arising from his or her own gross negligence or
willful misfeasance, bad faith, reckless disregard of the
gross negligence or reckless duties involved in the
disregard of the duties involved conduct of the office of
in the conduct of his or her Trustee hereunder.
office or the discharge of his or
her duties.
Personal Liability of No Shareholder shall be subject No Shareholder shall be
Shareholders to any personal liability personally liable for the
whatsoever in tort, contract or debts, liabilities,
otherwise to any other Person or obligations and expenses
Persons in connection with the incurred by, contracted
assets or the affairs of the for, or otherwise existing
Trust or any Series or class. with respect to, the Trust
or any Series or Class.
Neither the Trust nor the
Trustees, nor any officer,
employee, or agent of the
Trust shallhave 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 The beneficial interest in
Shares; Par Value Trust shall at all times be the Trust shall be divided
divided into Shares, all without into one or more Series.
par value. The number of Shares The Trustees may divide
authorized hereunder is unlimited. each Series into one or
more Classes. 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 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 suchtime or
times and on such terms as
the Trustees may deemappropriate.
A-16
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. The 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 FBR Fund 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 FBR Fund 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:______________________________
FBR FUND 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:______________________________
B-15
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. The 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 FBR Fund 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 FBR Fund 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:______________________________
FBR FUND 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:______________________________
C-28
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 0.59% 5.02% 4.34%(3)
and Sale of Fund Shares(2)
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 4.50%
Purchases (as a percentage of offering price)
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase None(1)
price or redemption proceeds, as applicable)
Redemption Fee (as a percentage of None
amount redeemed, if applicable)
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 1.41%
(before fee waivers and expense reimbursements)
Contractual Fee Waivers and Reimbursements of Fund 0.56%
Expenses (2)
Total Anticipated Annual Fund Operating Expenses 0.85%
(after contractual fee waivers and 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 where
the purchase was made under an investment program where an investment
professional received an advance payment on the transaction.
(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
redemptions $533 $709 $1,024 $1,917
Expenses assuming $533 $709 $1,024 $1,917
no redemption
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 4.50%
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price or redemption None(1)
proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends (and other Distributions) (as a percentage None
of offering price)
Redemption Fee (as a percentage of amount None
redeemed if applicable),
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 0.25%
Shareholder Services Fee(3) 0.25%
Other Expenses(2) 1.24%
Total Annual Fund Operating Expenses (before fee waivers and 2.44%
expense reimbursements)
- ---------------------------------------------------------------
Contractual Fee Waivers and Reimbursements of Fund Expenses(2) 1.54%
- ---------------------------------------------------------------
- ---------------------------------------------------------------
Total Anticipated Annual Fund Operating Expenses (after 0.90% 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
where the purchase was made under an investment program where an
investment professional received an advance payment on the
transaction.
(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 $538 $724 redemption Expenses assuming $538 $724 no redemption
Principal Securities of the Funds
The principal securities of each of the Funds listed below are marked with an
"X".
Maryland Municipal Virginia Municipal
Bond Fund Bond Fund
Fixed Income Securities X X
Tax-Exempt Securities X X
General Obligation Bonds X X
Special Revenue Bonds X X
Tax Increment Financing Bonds X X
Municipal Notes X X
Variable Rate Demand Instruments X X
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 $250,000 3.75% 3.90%
$250,000 but less than $500,000 3.00% 3.09%
$500,000 but less than $1 million 2.00% 2.04%
$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
Request in Request in
Proper Order/ Proper Order and
Federal Funds Federal Funds
Received Before: Received After:
FUND TYPE (Eastern time) Results in: (Eastern time) Results in:
Receive next
Receive that day's calculated
Bond NYSE Close closing NAV 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
Request in Request in
Proper Order Proper Order
Received Before: Received After:
FUND TYPE/NAME (Eastern time) Results in: (Eastern time) Results in:
Receive that day's Receive next
closing NAV calculated NAV
Bond NYSE Close Next day wire NYSE Close 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. In order to exchange Class A
Shares of an MTB Fund other than MTB Maryland Municipal Bond Fund or MTB
Virginia Municipal Bond Fund (as the case may be) without paying a sales charge
(where a sales charge would otherwise be imposed), you or your financial
intermediary must notify Edgewood or MTB Funds Shareholder Services at the time
of the exchange.
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
Request in Request in
Proper Order Proper Order
Received Before: Received After:
FUND TYPE (Eastern time) Results in: (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
DIVIDENDS DECLARED/
FUND 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:
DISTRIBUTIONS ARE EXPECTED
FUND 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 Fund Susan L. Schnaars, CFA, CPA
Virginia Municipal Bond Fund Susan L. Schnaars, CFA, 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 (formerly, Allied
Investment Advisors, Inc.) since 1996 and a Vice President of M&T Bank since
April 1, 2003. She was a Portfolio Manager of Allfirst Bank from 1992 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)
Net Asset Net Distributions Distributions Total Net Asset Total
Year Value, Investment Net Realized from Net from Net Distributions Value, end Return (a)
Ended beginning Income and Unrealized Total from Investment Realized of period
April of period Gain (Loss) on Investment Income Gain on
30, Investments Operations Investments
Maryland Municipal Bond Fund
Class A Shares
2001 $9.48 0.43 0.42 0.85 (0.43) -- (0.43) $9.90 9.09%
2002 $9.90 0.42 0.18 0.60 (0.42) -- (0.42) $10.08 6.13%
2003 $10.08 0.40 0.34 0.74 (0.40) -- (0.40) $10.42 7.47%
2004 $10.42 0.39 (0.21) 0.18 (0.39) -- (0.39) $10.21 1.74%
2005 $10.21 0.39 0.15 0.54 (0.39) (0.04) (0.43) $10.32 5.40%
(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.
Ratios to Average Net Assets
Expense Net Assets,
Net Waiver/ end Portfolio
Investment Reimbursement (b) of period Turnover
Expenses Income (000 omitted) Rate
0.94% 4.38% 0.36% $24,671 29%
0.94% 4.16% 0.37% $26,666 9%
1.02% 3.89% 0.36% $25,233 18%
1.01% 3.84% 0.39% $20,948 17%
0.95% 3.82% 0.49% $19,639 13%
(b)This voluntary expense decrease is reflected in both the expense and
net investment income ratios shown.
HOW TO OBTAIN MORE INFORMATION ABOUT MTB GROUP OF FUNDS
A Statement of Additional Information (SAI) dated November 7, 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
D-1
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.
5. 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, 2005.
6. 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 and October 31, 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-CSRS on or about January __, 2006.
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,
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, 2005, including the Tait Weller Independent Registered Public
Accounting Firm's Report dated December 2, 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.
6. The Pro Forma Financial Information for the acquisitions described in the
Table of Contents, dated April 30, 2005 and October 31, 2005, is included
herein.
INTRODUCTION
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 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 arrangements 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.
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 Tax-Free Combined Municipal Tax-Free Combined
Bond Fund Portfolio Bond Fund Portfolio
- -------------------------------------------- -------------------------------------
Principal Value
Amount
MUNICIPAL BONDS - 98.8%(1)
- ------------------------------------------------------------------------------------------------------------------------------------
District of Columbia - 0.7%
$1,000,000 $- $1,000,000 Washington, DC, Metro Area Transit Authority, $1,103,850 $- $1,103,850
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, 4.125%, 3/1/2019 - 96,106 96,106
1,000,000 - 1,000,000 Anne Arundel County, MD, GO UT, 5.00% (Original 1,087,000 - 1,087,000
Issue Yield: 3.86%), 3/1/2016
2,000,000 - 2,000,000 Anne Arundel County, MD, GO, 6.00%, 9/1/2006 2,085,460 - 2,085,460
- - 1,230,000 1,230,000 Anne Arundel County, MD, PCR Baltimore Gas and - 1,273,111 1,273,111
Electric Co. Project, 6.0%, 4/1/2024
2,200,000 - 2,200,000 Anne Arundel County, MD, Refunding Revenue Bonds 2,358,642 - 2,358,642
National Business Park Project, 5.125%, 7/1/2028
- - 500,000 500,000 Anne Arundel County Solid Waste Project GO, - 519,175 519,175
5.50%, 9/1/2015
- - 725,000 725,000 Anne Arundel County Water and Sewer GO, 6.20%, - 738,847 738,847
Pre-refunded 8/1/2005
- - 335,000 335,000 Baltimore County, GO, 5.00% 6/1/2019 - 362,503 362,503
2,910,000 - 2,910,000 Baltimore County, MD, Convention Center, 3,165,207 - 3,165,207
Refunding Revenue Bonds, 5.375% (MBIA Insurance
Corp. INS), 9/1/2011
- - 700,000 700,000 Baltimore County, MD, Metropolitan District, GO, - 727,566 727,566
5.50%, Pre-refunded 6/1/2006
1,000,000 1,000,000 Baltimore County, MD, Port Facility, Refunding 1,077,600 - 1,077,600
Revenue Bonds, 6.50%, 10/1/2011
- - 400,000 400,000 Baltimore County, MD Port Facility Revenue, - 410,464 410,464
6.50%, 12/1/2010
- - 1,000,000 1,000,000 Baltimore, MD Public Improvement, Series A, - 1,059,000 1,059,000
5.50% Pre-refunded 10/15/2006
- - 500,000 500,000 Baltimore, MD GO, Series C, 5.50%, 10/15/2015 - 580,210 580,210
- - 100,000 100,000 Baltimore, MD School Board Commissioners, Series - 108,347 108,347
A, 5.00%, 5/1/2018
- - 500,000 500,000 Baltimore, MD Wastewater Project, Series A, - 593,350 593,350
6.00%, 7/1/2015
- - 500,000 500,000 Baltimore, MD Wastewater Project, Series A, - 523,275 523,275
5.125%, 7/1/2042
775,000 - 775,000 Baltimore, MD Water Projects, Revenue Bonds 873,797 - 873,797
(Series A), 5.375% (FGIC INS), 7/1/2015
3,000,000 - 3,000,000 Baltimore, MD, Refunding Revenue Bonds, (Series 3,379,380 - 3,379,380
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 Bonds, 5.25% 1,128,230 - 1,128,230
(FGIC INS), 7/1/2017
2,500,000 - 2,500,000 Calvert County, MD, Pollution Control, 5.55% 2,555,700 - 2,555,700
(Baltimore Gas & Electric Co.)/(MBIA Insurance
Corp. INS), 7/15/2014
2,000,000 - 2,000,000 Carroll County, MD, Revenue Bonds, 5.375% 2,136,040 - 2,136,040
(Fairhaven, Inc./Copper Ridge, Inc.)/(Radian
Asset Assurance INS), 1/1/2016
1,000,000 - 1,000,000 Frederick County, MD, Revenue Bonds, 5.75% 1,053,110 - 1,053,110
(Original Issue Yield: 5.88%), 9/1/2025
1,000,000 - 1,000,000 Frederick County, MD, Revenue Bonds, 5.90% 998,070 - 998,070
(Original Issue Yield: 5.95%), 1/1/2017
- - 300,000 300,000 Frederick County Public Facilities GO, 5.25%, - 325,041 325,041
7/1/2017
1,895,000 - 1,895,000 Harford County, MD, GO UT, 5.50%, 12/1/2008 2,049,765 - 2,049,765
1,480,000 - 1,480,000 Howard County, MD, GO UT, 5.25%, 8/15/2016, 1,657,171 - 1,657,171
Pre-refunded 2/15/2012
1,800,000 - 1,800,000 Howard County, MD, 5.25%, 8/15/2015, 1,980,342 - 1,980,342
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 MFH - 508,855 508,855
Development 4.90%, 7/1/2024
- - 500,000 500,000 Howard County Public Improvement GO, 5.50%, - 539,780 539,780
Pre-refunded 2/15/2008
2,000,000 - 2,000,000 Maryland National Capital Park & Planning 2,206,580 - 2,206,580
Commission, GO UT, 5.00% (Original Issue Yield:
3.40%), 1/15/2015
1,000,000 - 1,000,000 Maryland State Community Development 1,032,640 - 1,032,640
Administration, 5.05% (MFH LOC), 4/1/2008
2,000,000 - 2,000,000 Maryland State Community Development 2,102,180 - 2,102,180
Administration, 5.20%, 12/1/2029
935,000 - 935,000 Maryland State Community Development 970,867 - 970,867
Administration, (Series A), 5.60%, 3/1/2017
- - 275,000 275,000 Maryland State Community Development - 292,314 292,314
Administration Department of Housing and
Community Development, Infrastructure Series A,
5.00%, 6/1/2021
- - 115,000 115,000 Maryland State Community Development - 120,420 120,420
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 Development - 261,853 261,853
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 Development - 514,380 514,380
Administration Department of Housing and
Community Development, Residential Series B,
5.15%, 3/1/2008
- - 250,000 250,000 Maryland State Community Development - 255,488 255,488
Administration Department of Housing and
Community Development, Residential Series B,
5.375%, 9/1/2022
- - 360,000 360,000 Maryland State Community Development - 375,386 375,386
Administration Department of Housing and
Community Development, Residential Series E,
5.70%, 9/1/2017
- - 160,000 160,000 Maryland State Community Development - 161,341 161,341
Administration Department of Housing and
Community Development, Series A, 4.85%, 7/1/2024
- - 500,000 500,000 Maryland State Community Development - 510,485 510,485
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 Transportation, 1,155,100 - 1,155,100
5.50% (Original Issue Yield: 4.59%), 2/1/2016
1,375,000 - 1,375,000 Maryland State Department of Transportation, 1,517,711 - 1,517,711
Refunding Revenue Bonds, 5.00% (Original Issue
Yield: 3.95%), 5/1/2015
440,000 - 440,000 Maryland State Economic Development Corp., 4.65% 454,071 - 454,071
(GNMA Collateralized Home Mortgage Program COL),
12/20/2008
1,405,000 - 1,405,000 Maryland State Economic Development Corp., 1,487,951 - 1,487,951
5.60%, 6/1/2010
1,000,000 - 1,000,000 Maryland State Economic Development Corp., 6.00% 1,060,690 - 1,060,690
(Original Issue Yield: 6.054%), 6/1/2019
820,000 - 820,000 Maryland State Economic Development Corp., 888,978 - 888,978
7.125%, 4/1/2019
1,000,000 - 1,000,000 Maryland State Economic Development Corp., 995,610 - 995,610
8.25%, 11/1/2026
- - 750,000 750,000 Maryland State Economic Development Corp. - 835,387 835,387
Department of Transportation Headquarters,
5.375%, 6/1/2019
- - 500,000 500,000 Maryland State Economic Development Corp. Morgan - 526,950 526,950
State University, Series A, 6.00%, 7/1/2022
- - 350,000 350,000 Maryland State Economic Development Corp., - 367,087 367,087
University of Maryland, Series A, 5.75%,
10/1/2033
1,175,000 - 1,175,000 Maryland State Health & Higher Education 1,264,006 - 1,264,006
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 Education - 421,804 421,804
Facilities Authority, Board of Child Care,
4.75%, 7/1/2014
- - 500,000 500,000 Maryland State Health & Higher Education - 554,120 554,120
Facilities Authority, Frederick Memorial
Hospital, 5.25%, 7/1/2013
- - 500,000 500,000 Maryland State Health & Higher Education - 540,975 540,975
Facilities Authority, Good Samaritan Hospital,
5.70%, 7/1/2009
- - 250,000 250,000 Maryland State Health & Higher Education - 258,545 258,545
Facilities Authority, Greater Baltimore Medical
Center, 5.00%, 7/1/2020
- - 250,000 250,000 Maryland State Health & Higher Education - 264,328 264,328
Facilities Authority, Hebrew Home of Greater
Washington, 5.60%, 1/1/2020
- - 900,000 900,000 Maryland State Health & Higher Education - 929,763 929,763
Facilities Authority, Johns Hopkins, 5.00%,
5/15/2026
- - 500,000 500,000 Maryland State Health & Higher Education - 525,180 525,180
Facilities Authority, Johns Hopkins, 5.125%,
11/15/2034
- - 1,000,000 1,000,000 Maryland State Health & Higher Education - 1,125,250 1,125,250
Facilities Authority, Johns Hopkins, 6.00%,
Pre-refunded 7/1/2009
- - 250,000 250,000 Maryland State Health & Higher Education - 255,300 255,300
Facilities Authority, Kennedy Kreiger Issue,
4.875%, 7/1/2018
- - 500,000 500,000 Maryland State Health & Higher Education - 523,020 523,020
Facilities Authority, Kennedy Kreiger Issue,
5.50%, 7/1/2033
- - 1,205,000 1,205,000 Maryland State Health & Higher Education - 1,270,347 1,270,347
Facilities Authority, Loyola College, 5.50%,
10/1/2016
- - 250,000 250,000 Maryland State Health & Higher Education - 253,720 253,720
Facilities Authority, MedStar Health, 4.375%,
8/15/2013
- - 250,000 250,000 Maryland State Health & Higher Education - 263,538 263,538
Facilities Authority, MedStar Health, 5.50%,
8/15/2033
- - 500,000 500,000 Maryland State Health & Higher Education - 519,110 519,110
Facilities Authority, Sheppard Pratt, Series A,
5.25%, 7/1/2035
- - 500,000 500,000 Maryland State Health & Higher Education - 554,985 554,985
Facilities Authority, Suburban Hospital, Series
A, 5.50%, 7/1/2016
1,000,000 - 1,000,000 Maryland State Health & Higher Education 1,043,260 - 1,043,260
Facilities Authority, (Series A), 4.75%
(Original Issue Yield: 4.90%), 11/1/2014
1,740,000 - 1,740,000 Maryland State Health & Higher Education 1,902,029 - 1,902,029
Facilities Authority, (Series B), 5.00% (AMBAC
INS)/(Original Issue Yield: 3.84%), 7/1/2015
250,000 - 250,000 Maryland State Health & Higher Education 267,953 - 267,953
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 Education 1,000,080 - 1,000,080
Facilities Authority, 4.80%, 10/1/2028
2,500,000 1,030,000 3,530,000 Maryland State Health & Higher Education 2,691,650 1,120,712 3,812,362
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 Education 2,593,600 - 2,593,600
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 Education 1,580,120 - 1,580,120
Facilities Authority, 5.00% (Johns Hopkins
Hospital), 5/15/2013
1,500,000 - 1,500,000 Maryland State Health & Higher Education 1,582,965 - 1,582,965
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 Education 2,029,840 - 2,029,840
Facilities Authority, 5.00% (Mercy Ridge, Inc.),
4/1/2008
1,000,000 - 1,000,000 Maryland State Health & Higher Education 1,002,860 - 1,002,860
Facilities Authority, 5.00% (Original Issue
Yield: 5.20%), 7/1/2008
1,000,000 - 1,000,000 Maryland State Health & Higher Education 1,064,650 - 1,064,650
Facilities Authority, 5.00% (University of
Maryland Medical System), 7/1/2012
2,000,000 - 2,000,000 Maryland State Health & Higher Education 2,131,260 - 2,131,260
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 Education 2,160,420 - 2,160,420
Facilities Authority, 5.25% (FSA INS), 8/15/2011
1,585,000 - 1,585,000 Maryland State Health & Higher Education 1,720,755 - 1,720,755
Facilities Authority, 5.25% (FSA INS)/(Original
Issue Yield: 5.35%), 7/1/2020
2,000,000 - 2,000,000 Maryland State Health & Higher Education 2,161,660 - 2,161,660
Facilities Authority, 5.25% (Johns Hopkins
University)/(Original Issue Yield: 5.52%),
7/1/2017
925,000 - 925,000 Maryland State Health & Higher Education 967,883 - 967,883
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 Education 2,060,180 - 2,060,180
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 Education 1,195,688 1,062,780 2,258,468
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 Education 2,383,470 - 2,383,470
Facilities Authority, 6.00% (Carroll County, MD
General Hospital), 7/1/2037
1,370,000 - 1,370,000 Maryland State Health & Higher Education 1,521,673 - 1,521,673
Facilities Authority, 6.00% (Catholic Health
Initiatives), 12/1/2013
1,500,000 - 1,500,000 Maryland State Health & Higher Education 1,569,420 - 1,569,420
Facilities Authority, 6.00% (Original Issue
Yield: 6.05%), 1/1/2015
250,000 - 250,000 Maryland State Health & Higher Education 264,035 - 264,035
Facilities Authority, 6.00% (Original Issue
Yield: 6.05%), 7/1/2020
,500,000 - 1,500,000 Maryland State Health & Higher Education 1,565,760 - 1,565,760
Facilities Authority, 6.00% (Original Issue
Yield: 6.146%), 7/1/2031
1,000,000 - 1,000,000 Maryland State Health & Higher Education 1,057,900 - 1,057,900
Facilities Authority, Refunding Revenue Bonds,
5.00% (Original Issue Yield: 4.05%), 8/15/2011
950,000 - 950,000 Maryland State Health & Higher Education 1,000,949 - 1,000,949
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% (National Aquarium in 1,060,990 - 1,060,990
Baltimore, Inc.)/(Original Issue Yield: 5.21%),
11/1/2022
- - 10,000 10,000 Maryland State IDFA, Economic Revenue, Series - 10,052 10,052
1-11, 7.125%, 7/1/2006
1,000,000 - 1,000,000 Maryland State Stadium Authority, 5.50% (AMBAC 1,032,120 - 1,032,120
INS)/(Original Issue Yield: 5.55%), 3/1/2012
- - 1,000,000 1,000,000 Maryland State Stadium Authority Lease Revenue, - 1,024,430 1,024,430
Convention Center Expansion, 5.875%, 12/15/2013
- - 500,000 500,000 Maryland State Stadium Authority Lease Revenue, - 513,270 513,270
Ocean City Convention Center, 5.375%, 12/15/2015
- - 500,000 500,000 Maryland State Stadium Authority Lease Revenue, - 515,750 515,750
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 Authority, BWI - 544,455 544,455
Airport, 5.25%, 3/1/2012
- - 200,000 200,000 Maryland State Transportation Authority, BWI - 200,000 200,000
Airport, 2.95%, 5/5/2005
- - 250,000 250,000 Maryland State Transportation Authority, BWI - 271,332 271,332
Airport, 5.25%, 3/1/2014
900,000 - 900,000 Maryland Water Quality Financing Administration 902,835 - 902,835
Revolving Loan Fund, (Series A), 6.55%, 9/1/2014
- - 1,000,000 1,000,000 Maryland Water Quality Financing Administration - 1,005,130 1,005,130
Revolving Loan Fund Revenue, Series A, 6.00%,
9/1/2015
1,330,000 - 1,330,000 Montgomery County, MD, Revenue Authority Lease, 1,458,757 - 1,458,757
Revenue Bonds, 5.00%, 4/1/2013
250,000 - 250,000 Montgomery County, MD, Special Obligation, 269,423 - 269,423
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, Refunding Bonds 1,063,730 - 1,063,730
(Series A), 5.80% (Original Issue Yield: 5.90%),
7/1/2007
2,000,000 - 2,000,000 Montgomery County, MD, GO UT, 5.60% (Original 2,241,980 - 2,241,980
Issue Yield: 5.70%), 1/1/2016, Pre-refunded
1/1/2010
- - 600,000 600,000 Montgomery County Economic Development Trinity - 630,522 630,522
Health Group, 5.125% 12/1/2022
- - 475,000 475,000 Montgomery County GO, Series A, 5.00%, - 515,641 515,641
Pre-refunded 5/1/2009
- - 500,000 500,000 Montgomery County GO, Series A, 5.00% 5/1/2019 - 535,350 535,350
- - 300,000 300,000 Morgan State University Academic Revenue, Series - 321,555 321,555
A, 5.00% 7/1/2020
1,135,000 - 1,135,000 New Baltimore, MD, Board School Commerce, 1,227,139 - 1,227,139
Revenue Bonds, 5.00% (Original Issue Yield:
5.05%), 11/1/2013
2,500,000 - 2,500,000 Northeast, MD, Waste Disposal Authority, Revenue 2,544,325 - 2,544,325
Bonds, 7.20% (MBIA Insurance Corp. INS),
10/1/2006
- - 250,000 250,000 Northeast Maryland Waste Disposal Authority - 257,770 257,770
Revenue, Montgomery County Resource Recovery
Revenue, 6.00%, 7/1/2006
- - 100,000 100,000 Northeast Maryland Waste Disposal Authority - 100,000 100,000
Revenue, Harford County Resource Recovery
Revenue, 2.92%, 5/4/2005
- - 250,000 250,000 Northeast Maryland Waste Disposal Authority - 266,583 266,583
Revenue, Harford County Resource Recovery
Revenue, 5.25%, 3/15/2014
1,945,000 - 1,945,000 Prince George's County, MD, Consolidaed Public 2,161,556 - 2,161,556
Improvement GO UT, Pre-refunded, 5.50% (FSA
INS), 10/1/2010
55,000 - 55,000 Prince Georges County, MD, Consolidated Public 60,786 - 60,786
Improvement GO UT, Unrefunded, 5.50% (FSA INS),
10/1/2010
- - 100,000 100,000 Prince George's County Construction Public - 110,906 110,906
Improvement, 5.50%, Pre-refunded 10/1/2009
- - 1,000,000 1,000,000 Prince George's County GO Series A, 5.25%, - 1,054,780 1,054,780
Pre-refunded 3/15/2007
- - 1,250,000 1,250,000 Prince George's County PCR Potomac Electric - 1,388,300 1,388,300
Project, 5.75%, 3/15/2010
- - 50,000 50,000 Prince George's County SFH Mortgage Revenue - 51,737 51,737
FHLMC/FNMA/GNMA Collateral, Series A, 5.55%,
12/1/2033
- - 500,000 500,000 Puerto Rico Commonwealth Public Improvement, - 573,910 573,910
Series A, 5.50%, 7/1/2018
- - 150,000 150,000 (2) Puerto Rico Electric Power Authority, - 86,894 86,894
Capital Appreciation, 0.00%, 7/1/2017
- - 80,000 80,000 Puerto Rico Electric Power Authority Revenue, - 89,966 89,966
5.00%, 7/1/2019
- - 315,000 315,000 Puerto Rico Public Buildings Authority Revenue - 348,784 348,784
Government Facilities, Series G, 5.25%, 7/1/2013
- - 500,000 500,000 Puerto Rico Public Finance Corporation, Series - 551,720 551,720
A, 5.00%, Pre-refunded 8/1/2011
1,000,000 - 1,000,000 Queen Annes County, MD, 5.00% (MBIA Global 1,110,330 - 1,110,330
Funding LLC LOC), 11/15/2016
1,000,000 - 1,000,000 Queen Annes County, MD, Public Facility, 5.40% 1,065,040 - 1,065,040
(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 Facility, 6.00% 1,083,630 - 1,083,630
(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 Revenue Bonds 2,263,770 - 2,263,770
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 Revenue Bonds, 2,126,600 - 2,126,600
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, 4.45% (Original 1,167,078 - 1,167,078
Issue Yield: 4.50%), 7/1/2014
1,000,000 - 1,000,000 St. Mary's County, MD, GO UT, 5.00% (Original 1,081,940 - 1,081,940
Issue Yield: 5.00%), 10/1/2021
1,000,000 - 1,000,000 University of Maryland, Auxiliary Facility & 1,076,730 - 1,076,730
Tuition Refunding Revenue Bonds (Series A),
5.00%, 4/1/2009
1,000,000 - 1,000,000 University of Maryland, Revenue Bonds, 5.25%, 1,087,660 - 1,087,660
10/1/2011
- - 1,000,000 1,000,000 University of Maryland System Auxiliary Facility - 1,036,040 1,036,040
and Tuition Revenue, 5.60%, Pre-refunded,
4/1/2006
- - 250,000 250,000 University of Maryland System Auxiliary Facility - 263,380 263,380
and Tuition Revenue, 5.125%, Pre-refunded,
4/1/2007
- - 265,000 265,000 University of Maryland System Auxiliary Facility - 280,407 280,407
and Tuition Revenue, 5.00%, Pre-refunded,
4/1/2008
- - 500,000 500,000 Washington DC Metropolitan Area Transit - 570,655 570,655
Authority Revenue, 6.00%, 7/1/2010
1,000,000 1,000,000 Washington Suburban Sanitation District, MD, GO 1,219,970 1,219,970
UT , 6.00%, 6/1/2018
- - 1,000,000 1,000,000 Washington Suburban Sanitation District GO, - 1,078,150 1,078,150
5.00%, Pre-refunded, 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 UT, 6.25% (MBIA 1,186,630 - 1,186,630
Insurance Corp. INS), 7/1/2012
-----------
-----------
2,000,000 - 2,000,000 Puerto Rico HFA, Capital Funding Program, 5.00% 2,138,240 - 2,138,240
(Original Issue Yield: 4.22%), 12/1/2018
-----------
-----------
1,500,000 - 1,500,000 Puerto Rico Public Finance Corp., (Series A), 1,747,800 - 1,747,800
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 Securitization Corp., 2,163,660 - 2,163,660
Revenue Bonds, 7.00%, 6/1/2028
------------------------------------------------------------------------------------------
------------------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Total Municipal Bonds (identified cost of 119,323,431 37,227,667 156,551,098
$148,692,590)
-------------------------------------------------------------------------------
--------------------------------------------------
Mutual Fund Shares (3) - 0.0%
38,153 - 38,153 Maryland Municipal Cash Trust (AT NET ASSET 38,153 - 38,153
VALUE)
----------------------------------------
Total Investments - 98.8% (identified 119,361,584 37,227,667 156,589,251
cost $148,730,743)(4)
----------------------------------------
-----------------------------
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 Zero coupon bond.
3 Affiliated company.
4 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 value $119,361,584 $37,227,667 $ $156,589,251
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 fee - 11,640 - 11,640
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 fees 13,038 - - 13,038
Payable for distribution services fees 3,190 7,760 - 10,950
Payable for shareholder services fee 757 - - 757
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 investments 5,770,926 2,087,582 - 7,858,508
Accumulated net realized gain on 137,300 31,748 - 169,048
investments
Undistributed net investment income 17 - - 17
---------------- -------------- --------------
----------------------
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. The
sales charge will be waived on purchases by former FBR Maryland Tax-Free
Portfolio shareholders.
* 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
Portfolio Adjustment Combined
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 78,082 115,981 (90,278) (b) 103,785
fee
Custodian fees 6,172 - 1,787 7,959
(c)
Transfer and dividend disbursing agent 45,885 - 3,000 (d) 48,885
fees and 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 49,512 96,650 - 146,162
Shares
Distribution services fee - Class B 15,737 - - 15,737
Shares
Shareholder services fee - Class A 49,512 5,682 90,968 (g) 146,162
Shares
Shareholder services fee - Class B 5,246 - - 5,246
Shares
Shareholder services fee - 246,543 - - 246,543
Institutional I Shares
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 (227,397) (2,638) (55,244) (285,279)
adviser fee (j)
Waiver of portfolio accounting fees (11,260) - - (11,260)
Waiver of distribution services (14,987) - (66,864) (81,851)
fee-Class A Shares (k)
Waiver of shareholder services (41,284) - (104,878) (146,162)
fees-Class A Shares (l)
Waiver of shareholder services (411) - - (411)
fees-Class B Shares
Waiver of shareholder services (246,543) - - (246,543)
fees-Class 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 1,450,215 268,914 - 1,719,129
(depreciation) of investments
-------------------------------------------------------------------------------------
Net realized and unrealized gain 1,736,988 295,011 - 2,031,999
on investments
------------------ ------------- -------------- -------------------
Change in net assets $6,551,291 $1,839,203 $81,333 $8,471,827
resulting from 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. Description of the Fund
MTB Maryland Municipal Bond Fund, a series of MTB Group of Funds, is
registered under the Investment Company Act of 1940, as amended, as an
open-end, non-diversified investment company.
MTB Maryland Municipal Bond Fund consists of three classes of shares: Class A
Shares, Class B Shares and Institutional I Shares. All s hares of the Fund
have equal rights with respect to voting, except on class-specific matters.
Investment income, realized and unrealized gains and losses, and certain
fund-level expenses are allocated to each class based on relative average
daily net assets, except that each class bears certain expenses unique to
that class such as distribution and shareholder services fees. Dividends are
declared separately for each class. No class has preferential dividend
rights; differences in per share dividend rates are generally due to
differences in separate class expenses.
Note 2. 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 FBR Fund Advisers, Inc. and their affiliates.
Note 3. Portfolio Valuation
Fixed income securities, unlisted securities and short-term securities are
valued at the process provided by any independent pricing service. However,
short-term securities with remaining maturities of 60 days or less at the
time of purchase may be valued at amortized cost, which approximates fair
market value. Municipal bonds are valued by an independent pricing service,
taking into consideration yield, liquidity, risk, credit quality, coupon,
maturity, type of issue, and any other factors or market data the pricing
service deems relevant. Investments in other open-end regulated investment
companies are valued at net asset value. Securities for which no quotations
are readily available or whose values have been affected by a significant
event occurring between the close of their primary markets and the closing of
the NYSE are valued at fair value as determined in accordance with procedures
established by and under general supervision of the Board of Trustees.
Note 4. 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 5. Federal Income Taxes
Each fund has elected to be taxed as a "regulated investment company" under
the Internal Revenue Code. After the acquisition, MTB Maryland Municipal Bond
Fund intends to continue to qualify as a regulated investment company, if
such qualification is in the best interests of its shareholders, by complying
with the Subchapter M provision of the Internal Revenue Code and to
distribute to shareholders each year substantially all of their income.
Accordingly, no provisions for federal income tax are necessary.
The identified cost of investments for the funds is substantially the same
for both financial accounting and federal income tax purposes. The tax cost
of investments will remain unchanged for the combined fund.
Note 6. 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 ("MTB Pro Forma Combined Fund") 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 Pro Forma Combined 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 Pro Forma
Combined 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 MTB 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 MTB
Pro Forma Combined Fund Class A Shares based on the combined average net
assets of the Funds.
(l) Adjustment to reflect the waiver of shareholder services fee for MTB Pro
Forma Combined Fund Class A Shares based on the combined average net assets
of the Funds.
INTRODUCTION
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. As of April 30, 2005,
the MTB Virginia Municipal Bond Fund was not effective with the SEC and held
no investments.
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.
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 Forma Virginia Virginia Pro Forma
Municipal Tax-Free Combined Municipal Tax-Free Combined
Bond Fund Portfolio Bond Fund Portfolio
Principal Amount Value
MUNICIPAL BONDS - 98.8%
- -----------------------------------------------------------------------------------------------------------------------------------
Virginia - 98.8%
$- $650,000 $650,000 Albermarle County, VA IDA, Martha Jefferson $- $705,854 $705,854
Hospital, 5.25%, 10/1/2015
- 500,000 500,000 Alexandria, VA Construction, Public - 566,470 566,470
Improvement, 5.75%, Pre-refunded 6/15/2010
- 115,000 115,000 Alexandria, VA Redevelopment and Housing - 116,065 116,065
Authority, 5.5%, 1/1/2029
- 350,000 350,000 Arlington County GO, 5.25%, Pre-refunded - 390,036 390,036
2/1/2012
- 350,000 350,000 Arlington County IDA, MFH, Arna Valley View - 367,724 367,724
Apartments, 4.85%, 6/1/2012
- 500,000 500,000 Arlington County IDA MFH, Colonial Village - 521,290 521,290
Apartments, 5.15%, 11/1/2031
- 200,000 200,000 Chesterfield County IDA PCR, 5.875%, 6/1/2017 - 222,652 222,652
- 50,000 50,000 Chesterfield County IDA Lease Revenue, 4.75%, - 52,451 52,451
11/1/2016
- 650,000 650,000 Fairfax County IDA Revenue Inova, Health - 709,052 709,052
System Hospitals, 5.25%, 8/15/2019
- 230,000 230,000 Fairfax County IDA Revenue Inova, Health - 251,082 251,082
System Hospitals, 5.0%, 8/15/2023
- 100,000 100,000 Fairfax County IDA Revenue Inova, Health - 110,244 110,244
System Project, 5.0%, 8/15/2013
- 50,000 50,000 Fairfax County Sewer Revenue, 5.875%, - 52,836 52,836
Pre-refunded 7/15/2006
- 260,000 260,000 Fairfax County Water Authority Revenue, 5.0%, - 275,782 275,782
Pre-refunded 4/1/2007
- 800,000 800,000 Fairfax County Water Authority Revenue, 5.8%, - 896,520 896,520
1/1/2016
- 140,000 140,000 Fairfax County Water Authority Revenue, 5.0%, - 148,040 148,040
4/1/2016
- 100,000 100,000 Fairfax County Water Authority Revenue, 5.0%, - 112,311 112,311
4/1/2021
- 630,000 630,000 Fairfax County Water Authority Revenue, 6.0%, - 676,318 676,318
4/1/2022
- 705,000 705,000 Frederick County IDA Lease Revenue Government - 786,745 786,745
Complex Facilities, 5.0%, 12/1/2014
- 250,000 250,000 Fredericksburg, VA IDA Student Housing, - 255,225 255,225
Revenue Mary Washington College, Apartments
Project, 5.35%, 4/1/2029
- 350,000 350,000 Halifax County IDA Hospital Revenue, Halifax - 377,069 377,069
Regional Hospital, Inc, 5.0%, 9/1/2011
- 300,000 300,000 Hampton Roads Regional Jail Authority, Series - 315,213 315,213
A, 5.5%, Pre-refunded 7/1/2006
- 1,000,000 1,000,000 Hanover County GO, 5.4%, 7/15/2016 - 1,048,610 1,048,610
- 120,000 120,000 Henrico County, VA IDA Revenue Educational, - 124,379 124,379
Facilities-Collegiate Schools, 5.1%,
10/15/2029
- 250,000 250,000 Henrico County, VA Economic Development, - 263,318 263,318
Authority Revenue Bon Secours, Health
Systems, Inc., 5.6%, 11/15/2030
- 500,000 500,000 Loudoun County GO, Series B, 5.25%, 12/1/2014 - 570,215 570,215
- 200,000 200,000 Loudoun County, VA IDA, Howard Hughes Medical - 200,000 200,000
Institute, Series F, 2.98%, 5/4/2005
- 245,000 245,000 Metropolitan Washington DC Airport, Authority - 264,612 264,612
System, Series D, 5.375%, 10/1/2018
- 335,000 335,000 Metropolitan Washington DC Airport, Authority - 360,487 360,487
System, Series D, 5.375%, 10/1/2019
- 500,000 500,000 Montgomery County IDA, Series C, 5.125%, - 533,295 533,295
1/15/2019
- 500,000 500,000 Newport News, VA GO, 5.75%, Pre-refunded - 534,320 534,320
1/15/2007
- 500,000 500,000 Newport News, VA GO, 5.0%, 3/1/2018 - 527,800 527,800
- 500,000 500,000 Norfolk, VA Water Revenue, 5.75%, 11/1/2012 - 517,615 517,615
- 500,000 500,000 Norfolk, VA Water Revenue, 5.875%, 11/1/2015 - 517,795 517,795
- 500,000 500,000 Prince William County Service Authority, - 552,920 552,920
Water and Sewer System Revenue, 5.5%,
Pre-refunded 7/1/2009
- 250,000 250,000 Puerto Rico Commonwealth Highway and - 282,177 282,177
Transportation Authority Revenue, Series W,
5.5%, 7/1/2013
- 215,000 215,000 Puerto Rico Commonwealth GO, Public - 222,706 222,706
Improvement, Series A, 5.0%, 7/1/2033
- 1,000,000 1,000,000 Puerto Rico Public Buildings Authority - 1,107,250 1,107,250
Revenue Government Facilities, Series G,
5.25%, 7/1/2013
- 250,000 250,000 Puerto Rico Public Finance Corporation, - 275,860 275,860
Commonwealth, Series A, 5.0%, Pre-refunded
8/1/2011
- 200,000 200,000 Richmond, VA Metropolitan Authority - 228,296 228,296
Expressway Revenue, 5.25%, 7/15/2017
- 1,000,000 1,000,000 Richmond, VA Public Utilities Revenue, Series - 1,059,030 1,059,030
A, 5.25%, 1/15/2018
- 500,000 500,000 Richmond, VA Refunding and Improvement GO, - 536,660 536,660
Series A, 5.125%, 1/15/2016
- 300,000 300,000 Roanoke, VA GO Public Improvement, Series B, - 326,700 326,700
5.0%, 10/1/2011
- 1,000,000 1,000,000 Southeastern Public Servicing Authority, - 1,117,280 1,117,280
Series B, 5.0%, 7/1/2015
- 580,000 580,000 Suffolk, VA Redevelopment and Housing - 615,049 615,049
Authority MFH Village Apartments, Series A,
5.6%, 2/1/2033
- 575,000 575,000 Upper Occoquan Sewage Authority Revenue, - 652,395 652,395
Series A, 5.15%, 7/1/2020
- 50,000 50,000 Virginia Beach, VA Development Authority - 55,849 55,849
Revenue General Hospital Project, 5.125%,
2/15/2018
- 1,075,000 1,075,000 Virginia Beach, VA Public Improvement GO, - 1,153,765 1,153,765
5.0%, Pre-refunded 8/1/2008
- 250,000 250,000 Virginia Beach, VA Public Improvement GO, - 277,425 277,425
Series B, 5.0%, 5/1/2020
- 50,000 50,000 Virginia Beach, VA Development Authority - 52,118 52,118
Revenue Town Center Project, Series A, 4.25%,
8/1/2013
- 100,000 100,000 Virginia Beach, VA Development Authority, - 108,385 108,385
Lease Revenue Social Services Facility, 5.0%,
12/1/2017
- 250,000 250,000 Virginia Commonwealth Transportation Board - 276,278 276,278
Revenue U.S. Route 58 Corridor Development,
5.5%, Pre-refunded 5/15/2009
- 100,000 100,000 Virginia Housing Development Authority, - 105,103 105,103
Revenue Rental Housing, Series L, 5.35%,
2/1/2009
- 80,000 80,000 Virginia Housing Development Authority, - 84,074 84,074
Revenue Rental Housing, Series H, 5.25%,
11/1/2010
- 500,000 500,000 Virginia Housing Development Authority, - 528,380 528,380
Revenue Rental Housing, Series N, 5.125%,
1/1/2015
- 300,000 300,000 Virginia MFH Development Authority, Series G, - 313,749 313,749
5.0%, 11/1/2013
- 500,000 500,000 Virginia Port Authority Commonwealth Revenue, - 520,260 520,260
5.9%, Pre-refunded 7/1/2006
- 350,000 350,000 Virginia Public School Authority Revenue, - 375,644 375,644
Series A, 5.0%, Pre-refunded 8/1/2008
- 750,000 750,000 Virginia State GO, 5.25%, Pre-refunded - 815,760 815,760
6/1/2009
- 350,000 350,000 Winchester, VA Public Improvement, 5.625%, - 394,719 394,719
Pre-refunded 6/1/2010
-----------------------------------------
Total Investments - 98.8% - 25,409,257 25,409,257
(Identified Cost $23,913,550)
-----------------------------------------
-----------------------------------------
Other Assets and Liabilities - 1.2% - 312,443 312,443
-----------------------------------------
-----------------------------------------
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 Tax-Free Adjustment Combined
Bond 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
=================== ================= ================ ==============
=================== ================= ================ ==============
$- $11.37 $- $11.37 *
Net Asset Value Per Share
=================== ================= ================ ==============
=================== ================= ================ ==============
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. The
sales charge will be waived on purchases by former FBR Virginia Tax-Free
Portfolio shareholders.
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 Tax-Free Adjustment Combined
Bond 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 - (13,732) - (13,732)
(depreciation) 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. Description of the Fund
MTB Virginia Municipal Bond Fund, a series of MTB Group of Funds, is
registered under the Investment Company Act of 1940, as amended, as an
open-end, non-diversified investment company.
MTB Virginia Municipal Bond Fund consists of one class of shares: Class A
Shares.
Note 2. 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 FBR Fund Advisers, Inc. and their affiliates.
Note 3. 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 4. Portfolio Valuation
Fixed income securities, unlisted securities and short-term securities are
valued at the process provided by an independent pricing service. However,
short-term securities with remaining maturities of 60 days or less at the
time of purchase may be valued at amortized cost, which approximates fair
market value. Municipal bonds are valued by an independent pricing service,
taking into consideration yield, liquidity, risk, credit quality, coupon,
maturity, type of issue, and any other factors or market data the pricing
service deems relevant. Investments in other open-end regulated investment
companies are valued at net asset value. Securities for which no quotations
are readily available or whose values have been affected by a significant
event occurring between the close of their primary markets and the closing of
the NYSE are valued at fair value as determined in accordance with procedures
established by and under general supervision of the Board of Trustees.
Note 5. 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 6. Federal Income Taxes
Each fund has elected to be taxed as a "regulated investment company" under
the Internal Revenue Code. After the acquisition, MTB Virginia Municipal Bond
Fund intends to continue to qualify as a regulated investment company, if
such qualification is in the best interests of its shareholders, by complying
with the Subchapter M provision of the Internal Revenue Code and to
distribute to shareholders each year substantially all of their income.
Accordingly, no provisions for federal income tax are necessary.
The identified cost of investments for the funds is substantially the same
for both financial accounting and federal income tax purposes. The tax cost
of investments will remain unchanged for the combined fund.
Note 7. 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 ("MTB Pro Forma Combined Fund")
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 Pro Forma Combined 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 MTB Pro Forma Combined
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 MTB 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 expense structure for
the MTB Pro Forma Combined Fund.
(e) Adjustment to reflect Trustees' fees as a separate fund expense and to
reflect the current expense structure for the MTB Pro Forma Combined Fund.
(f) Adjustment to reflect auditing fees as a separate fund expense and to
reflect the current expense structure for the MTB Pro Forma Combined Fund.
(g) Adjustment to reflect legal fees as a separate fund expense and to
reflect the current expense structure for the MTB Pro Forma Combined Fund.
(h) Adjustment to reflect portfolio accounting fees as a separate fund
expense and to reflect the current expense structure for the MTB Pro Forma
Combined 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 MTB Pro Forma Combined 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 Pro Forma Combined
Fund.
(k) Adjustment to reflect printing and postage as a separate fund expense and
to reflect the current expense structure for the MTB Pro Forma Combined Fund.
(l) Adjustment to reflect insurance premiums as a separate fund expense and
to reflect the current expense structure for the MTB Pro Forma Combined Fund.
(m) Miscellaneous expenses are adjusted to reflect the current expense
structure for the MTB Pro Forma Combined 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 Pro Forma
Combined Fund.
INTRODUCTION
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 six months ended October 31,
2005. These statements have been derived from the books and records utilized
in calculating daily net asset values at October 31, 2005.
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.
MTB Maryland Municipal Bond Fund
FBR Maryland Tax-Free Portfolio
Pro Forma Combining Portfolios of Investments
October 31, 2005 (unaudited)
MTB FBR
MTB Maryland Maryland
Maryland FBR Pro Forma Municipal Tax-Free Pro Forma
Municipal Maryland Combined Bond Fund Portfolio Combined
Bond Fund Tax-Free
Portfolio
Principal Amount Value
MUNICIPAL BONDS - 98.1%
District of Columbia - 0.7%
$1,000,000 $- $1,000,000 Washington, DC, Metro Area Transit Authority, $1,075,330 $- $1,075,330
Refunding Revenue Bonds, 5.00% (MBIA Insurance
Corp. INS)/(Original Issue Yield: 3.55%),
1/1/2012
Maryland - 91.2%
95,000 95,000 Anne Arundel County, MD, GO, 4.125%, 3/1/2019 - 94,082 94,082
1,000,000 - 1,000,000 Anne Arundel County, MD, GO UT, 5.00% (Original 1,064,920 - 1,064,920
Issue Yield: 3.86%), 3/1/2016
2,000,000 - 2,000,000 Anne Arundel County, MD, GO, 6.00%, 9/1/2006 2,049,000 - 2,049,000
- 1,230,000 1,230,000 Anne Arundel County, MD, PCR Baltimore Gas ans - 1,247,454 1,247,454
Electric Co. Project, 6.00%, 4/1/2024
2,200,000 - 2,200,000 Anne Arundel County, MD, Refunding Revenue 2,312,156 - 2,312,156
Bonds National Business Park Project, 5.125%,
7/1/2028
- 500,000 500,000 Anne Arundel County Solid Waste Project GO, - 513,130 513,130
5.50%, 9/1/2015
- 335,000 335,000 Baltimore County, GO, 5.00% 6/1/2019 - 356,004 356,004
2,910,000 - 2,910,000 Baltimore County, MD, Convention Center, 3,115,271 - 3,115,271
Refunding Revenue Bonds, 5.375% (MBIA Insurance
Corp. INS), 9/1/2011
1,000,000 - 1,000,000 Baltimore County, MD, Port Facility, Refunding 1,054,110 - 1,054,110
Revenue Bonds, 6.50%, 10/1/2011
- 400,000 400,000 Baltimore County, MD Port Facility Revenue, - 424,060 424,060
6.50%, 12/1/2010
- 260,000 260,000 Baltimore, MD Public Improvement, Series A, - 280,943 280,943
5.00% 10/15/2016
- 1,000,000 1,000,000 Baltimore, MD Public Improvement, Series A, - 1,042,670 1,042,670
5.50% Pre-refunded 10/15/2006
- 500,000 500,000 Baltimore, MD GO, Series C, 5.50%, 10/15/2015 - 563,245 563,245
- 100,000 100,000 Baltimore, MD School Board Commissioners, - 106,154 106,154
Series A, 5.00%, 5/1/2018
- 500,000 500,000 Baltimore, MD Wastewater Project, Series A, - 575,985 575,985
6.00%, 7/1/2015
- 500,000 500,000 Baltimore, MD Wastewater Project, Series A, - 516,330 516,330
5.125%, 7/1/2042
775,000 - 775,000 Baltimore, MD Water Projects, Revenue Bonds 853,035 - 853,035
(Series A), 5.375% (FGIC INS), 7/1/2015
3,000,000 - 3,000,000 Baltimore, MD, Refunding Revenue Bonds, (Series 3,295,590 - 3,295,590
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 Bonds, 5.25% 1,097,460 - 1,097,460
(FGIC INS), 7/1/2017
2,500,000 - 2,500,000 Calvert County, MD, Pollution Control, 5.55% 2,530,325 - 2,530,325
(Baltimore Gas & Electric Co.)/(MBIA Insurance
Corp. INS), 7/15/2014
2,000,000 - 2,000,000 Carroll County, MD, Revenue Bonds, 5.375% 2,104,360 - 2,104,360
(Fairhaven, Inc./Copper Ridge, Inc.)/(Radian
Asset Assurance INS), 1/1/2016
1,000,000 - 1,000,000 Frederick County, MD, Revenue Bonds, 5.75% 1,037,260 - 1,037,260
(Original Issue Yield: 5.88%), 9/1/2025
1,000,000 - 1,000,000 Frederick County, MD, Revenue Bonds, 5.90% 998,130 - 998,130
(Original Issue Yield: 5.95%), 1/1/2017
- 300,000 300,000 Federick County Public Facilities GO, 5.25%, - 322,344 322,344
Pre-refunded 7/1/2009
1,895,000 - 1,895,000 Harford County, MD, GO UT, 5.50%, 12/1/2008 2,015,522 - 2,015,522
1,480,000 - 1,480,000 Howard County, MD, GO UT, 5.25%, 8/15/2016, 1,611,039 - 1,611,039
Pre-refunded 2/15/2012
1,800,000 - 1,800,000 Howard County, MD, 5.25%, 8/15/2015, 1,947,294 - 1,947,294
Pre-refunded 2/15/2012
125,000 - 125,000 Howard County, MD, 5.25%, 8/15/2015 136,067 - 136,067
- 500,000 500,000 Howard County Housing Opportunity MFH - 503,485 503,485
Development 4.90%, 7/1/2024
- 500,000 500,000 Howard County Public Improvement GO, 5.50%, - 529,865 529,865
Pre-refunded 2/15/2008
765,000 - 765,000 Maryland State Community Development 782,557 - 782,557
Administration, 5.05% (MFH LOC), 4/1/2008
2,000,000 - 2,000,000 Maryland State Community Development 2,084,060 - 2,084,060
Administration, 5.20%, 12/1/2029
935,000 - 935,000 Maryland State Community Development 962,227 - 962,227
Administration, (Series A), 5.60%, 3/1/2017
- 275,000 275,000 Maryland State Community Development - 287,870 287,870
Administration Department of Housing and
Community Development, Infrastructure Series A,
5.00%, 6/1/2021
- 115,000 115,000 Maryland State Community Development - 118,580 118,580
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 Development - 257,732 257,732
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 Development - 508,735 508,735
Administration Department of Housing and
Community Development, Residential Series B,
5.15%, 3/1/2008
- 250,000 250,000 Maryland State Community Development - 252,785 252,785
Administration Department of Housing and
Community Development, Residential Series B,
5.375%, 9/1/2022
- 360,000 360,000 Maryland State Community Development - 371,218 371,218
Administration Department of Housing and
Community Development, Residential Series E,
5.70%, 9/1/2017
- 155,000 155,000 Maryland State Community Development - 153,489 153,489
Administration Department of Housing and
Community Development, Series A, 4.85%, 7/1/2024
- 500,000 500,000 Maryland State Community Development - 504,930 504,930
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 Transportation, 1,124,610 - 1,124,610
5.50% (Original Issue Yield: 4.59%), 2/1/2016
1,375,000 - 1,375,000 Maryland State Department of Transportation, 1,477,561 - 1,477,561
Refunding Revenue Bonds, 5.00% (Original Issue
Yield: 3.95%), 5/1/2015
390,000 - 390,000 Maryland State Economic Development Corp., 399,188 - 399,188
4.65% (GNMA Collateralized Home Mortgage
Program COL), 12/20/2008
1,205,000 - 1,205,000 Maryland State Economic Development Corp., 1,261,984 - 1,261,984
5.60%, 6/1/2010
1,000,000 - 1,000,000 Maryland State Economic Development Corp., 1,050,320 - 1,050,320
6.00% (Original Issue Yield: 6.054%), 6/1/2019
820,000 - 820,000 Maryland State Economic Development Corp., 878,523 - 878,523
7.125%, 4/1/2019
1,000,000 - 1,000,000 Maryland State Economic Development Corp., 977,710 - 977,710
8.25%, 11/1/2026
- 750,000 750,000 Maryland State Economic Development Corp. - 817,890 817,890
Department of Transportation Headquarters,
5.375%, 6/1/2019
- 500,000 500,000 Maryland State Economic Development Corp. - 519,790 519,790
Morgan State University, Series A, 6.00%,
7/1/2022
- 350,000 350,000 Maryland State Economic Development Corp., - 365,333 365,333
University of Maryland, Series A, 5.75%,
10/1/2033
1,175,000 - 1,175,000 Maryland State Health & Higher Educational 1,243,326 - 1,243,326
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 Educational - 412,176 412,176
Facilities Authority, Board of Child Care,
4.75%, 7/1/2014
- 500,000 500,000 Maryland State Health & Higher Educational - 539,155 539,155
Facilities Authority, Frederick Memorial
Hospital, 5.25%, 7/1/2013
- 500,000 500,000 Maryland State Health & Higher Educational - 530,130 530,130
Facilities Authority, Good Samaritan Hospital,
5.70%, 7/1/2009
- 250,000 250,000 Maryland State Health & Higher Educational - 255,420 255,420
Facilities Authority, Greater Baltimore Medical
Center, 5.00%, 7/1/2020
- 1,000,000 1,000,000 Maryland State Health & Higher Educational - 1,051,630 1,051,630
Facilities Authority, Hebrew Home of Greater
Washington, 5.80%, 1/1/2032
- 250,000 250,000 Maryland State Health & Higher Educational - 260,675 260,675
Facilities Authority, Hebrew Home of Greater
Washington, 5.60%, 1/1/2020
- 900,000 900,000 Maryland State Health & Higher Educational - 920,043 920,043
Facilities Authority, Johns Hopkins, 5.00%,
5/15/2026
- 500,000 500,000 Maryland State Health & Higher Educational - 518,815 518,815
Facilities Authority, Johns Hopkins, 5.125%,
11/15/2034
- 1,000,000 1,000,000 Maryland State Health & Higher Educational - 1,100,120 1,100,120
Facilities Authority, Johns Hopkins, 6.00%,
Pre-refunded 7/1/2009
- 250,000 250,000 Maryland State Health & Higher Educational - 251,015 251,015
Facilities Authority, Kennedy Kreiger Issue,
4.875%, 7/1/2018
- 500,000 500,000 Maryland State Health & Higher Educational - 516,035 516,035
Facilities Authority, Kennedy Kreiger Issue,
5.50%, 7/1/2033
- 1,205,000 1,205,000 Maryland State Health & Higher Educational - 1,253,851 1,253,851
Facilities Authority, Loyola College, 5.50%,
10/1/2016
- 250,000 250,000 Maryland State Health & Higher Educational - 248,762 248,762
Facilities Authority, MedStar Health, 4.375%,
8/15/2013
- 250,000 250,000 Maryland State Health & Higher Educational - 256,633 256,633
Facilities Authority, MedStar Health, 5.50%,
8/15/2033
- 500,000 500,000 Maryland State Health & Higher Educational - 513,280 513,280
Facilities Authority, Sheppard Pratt, Series A,
5.25%, 7/1/2035
- 500,000 500,000 Maryland State Health & Higher Educational - 541,845 541,845
Facilities Authority, Suburban Hospital, Series
A, 5.50%, 7/1/2016
1,000,000 - 1,000,000 Maryland State Health & Higher Educational 1,024,690 - 1,024,690
Facilities Authority, (Series A), 4.75%
(Original Issue Yield: 4.90%), 11/1/2014
1,740,000 - 1,740,000 Maryland State Health & Higher Educational 1,857,380 - 1,857,380
Facilities Authority, (Series B), 5.00% (AMBAC
INS)/(Original Issue Yield: 3.84%), 7/1/2015
250,000 - 250,000 Maryland State Health & Higher Educational 260,830 - 260,830
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 Educational 1,000,080 - 1,000,080
Facilities Authority, 4.80%, 10/1/2028
2,500,000 1,030,000 3,530,000 Maryland State Health & Higher Educational 2,672,075 1,081,974 3,754,049
Facilities Authority, 5.00% (AMBAC
INS)/(Original Issue Yield: 5.27%), 7/1/2027
2,500,000 - 2,500,000 Maryland State Health & Higher Educational 2,551,650 - 2,551,650
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 Educational 1,541,429 - 1,541,429
Facilities Authority, 5.00% (Johns Hopkins
Hospital), 5/15/2013
1,500,000 - 1,500,000 Maryland State Health & Higher Educational 1,561,245 - 1,561,245
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 Educational 2,026,640 - 2,026,640
Facilities Authority, 5.00% (Mercy Ridge,
Inc.), 4/1/2008
1,000,000 - 1,000,000 Maryland State Health & Higher Educational 1,001,210 - 1,001,210
Facilities Authority, 5.00% (Original Issue
Yield: 5.20%), 7/1/2008
1,000,000 - 1,000,000 Maryland State Health & Higher Educational 1,045,390 - 1,045,390
Facilities Authority, 5.00% (University of
Maryland Medical System), 7/1/2012
2,000,000 - 2,000,000 Maryland State Health & Higher Educational 2,102,360 - 2,102,360
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 Educational 2,123,340 - 2,123,340
Facilities Authority, 5.25% (FSA INS), 8/15/2011
1,585,000 - 1,585,000 Maryland State Health & Higher Educational 1,696,378 - 1,696,378
Facilities Authority, 5.25% (FSA INS)/(Original
Issue Yield: 5.35%), 7/1/2020
2,000,000 - 2,000,000 Maryland State Health & Higher Educational 2,130,300 - 2,130,300
Facilities Authority, 5.25% (Johns Hopkins
University)/(Original Issue Yield: 5.52%),
7/1/2017
845,000 - 845,000 Maryland State Health & Higher Educational 877,972 - 877,972
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 Educational 2,057,400 - 2,057,400
Facilities Authority, 5.625% (Mercy Medical
Center)/(Original Issue Yield: 5.80%), 7/1/2031
1,135,000 - 1,135,000 Maryland State Health & Higher Educational 1,186,325 - 1,186,325
Facilities Authority, 5.80% (Original Issue
Yield: 5.93%), 1/1/2032
2,250,000 - 2,250,000 Maryland State Health & Higher Educational 2,376,698 - 2,376,698
Facilities Authority, 6.00% (Carroll County, MD
General Hospital), 7/1/2037
1,370,000 - 1,370,000 Maryland State Health & Higher Educational 1,500,862 - 1,500,862
Facilities Authority, 6.00% (Catholic Health
Initiatives), 12/1/2013
1,500,000 - 1,500,000 Maryland State Health & Higher Educational 1,555,845 - 1,555,845
Facilities Authority, 6.00% (Original Issue
Yield: 6.05%), 1/1/2015
250,000 - 250,000 Maryland State Health & Higher Educational 261,588 - 261,588
Facilities Authority, 6.00% (Original Issue
Yield: 6.05%), 7/1/2020
1,500,000 - 1,500,000 Maryland State Health & Higher Educational 1,553,745 - 1,553,745
Facilities Authority, 6.00% (Original Issue
Yield: 6.146%), 7/1/2031
1,000,000 - 1,000,000 Maryland State Health & Higher Educational 1,051,370 - 1,051,370
Facilities Authority, Refunding Revenue Bonds,
5.00% (Original Issue Yield: 4.05%), 8/15/2011
950,000 - 950,000 Maryland State Health & Higher Educational 987,611 - 987,611
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% (National Aquarium 1,040,800 - 1,040,800
in Baltimore, Inc.)/(Original Issue Yield:
5.21%), 11/1/2022
- 10,000 10,000 Maryland State IDFA, Economic Revenue, Series - 10,067 10,067
1-11, 7.125%, 7/1/2006
- 1,000,000 1,000,000 Maryland State IDFA, Our Lady of Good Counsel, - 1,012,480 1,012,480
6.00%, 5/1/2035
1,000,000 - 1,000,000 Maryland State Stadium Authority, 5.50% (AMBAC 1,017,980 - 1,017,980
INS)/(Original Issue Yield: 5.55%), 3/1/2012
- 1,000,000 1,000,000 Maryland State Stadium Authority Lease Revenue, - 1,013,830 1,013,830
Convention Center Expansion, 5.875%, 12/15/2013
- 500,000 500,000 Maryland State Stadium Authority Lease Revenue, - 506,355 506,355
Ocean City Convention Center, 5.375%, 12/15/2015
- 500,000 500,000 Maryland State Stadium Authority Lease Revenue, - 508,925 508,925
Sports Facilities, 5.55%, 3/1/2013
2,000,000 - 2,000,000 Maryland State, 5.50%, 3/1/2013 2,226,820 - 2,226,820
- 500,000 500,000 Maryland State Transportation Authority, BWI - 534,030 534,030
Airport, 5.25%, 3/1/2012
- 250,000 250,000 Maryland State Transportation Authority, BWI - 266,075 266,075
Airport, 5.25%, 3/1/2014
1,330,000 - 1,330,000 Montgomery County, MD, Revenue Authority Lease, 1,425,162 - 1,425,162
Revenue Bonds, 5.00%, 4/1/2013
250,000 - 250,000 Montgomery County, MD, Special Obligation, 263,688 - 263,688
Special Tax, 5.375% (Radian Group, Inc.
INS)/(Original Issue Yield: 5.48%), 7/1/2020
2,000,000 - 2,000,000 Montgomery County, MD, GO UT, 5.60% (Original 2,188,100 - 2,188,100
Issue Yield: 5.70%), 1/1/2016, Pre-refunded
1/1/2010
- 600,000 600,000 Montgomery County Economic Development Trinity - 622,632 622,632
Health Group, 5.125% 12/1/2022
- 475,000 475,000 Montgomery County GO, Series A, 5.00% - 506,170 506,170
Pre-refunded 5/1/2009
- 500,000 500,000 Montgomery County GO, Series A, 5.00% - 532,810 532,810
Pre-refunded 5/1/2009
- 300,000 300,000 Morgan State University Academic Revenue, - 315,768 315,768
Series A, 5.00% 7/1/2020
1,135,000 - 1,135,000 New Baltimore, MD, Board School Commerce, 1,205,892 - 1,205,892
Revenue Bonds, 5.00% (Original Issue Yield:
5.05%), 11/1/2013
2,500,000 - 2,500,000 Northeast, MD, Waste Disposal Authority, 2,517,600 - 2,517,600
Revenue Bonds, 7.20% (MBIA Insurance Corp.
INS), 10/1/2006
- 250,000 250,000 Northeast Maryland Waste Disposal Authority - 261,140 261,140
Revenue, Harford County Resource Recovery
Revenue, 5.25%, 3/15/2014
- 250,000 250,000 Northeast Maryland Waste Disposal Authority - 254,085 254,085
Revenue, Montgomery County Resource Recovery
Revenue, 6.00%, 7/1/2006
1,945,000 - 1,945,000 Prince Georges County, MD, Consolidaed Public 2,116,938 - 2,116,938
Improvement GO UT, Prerefunded, 5.50% (FSA
INS), 10/1/2010
55,000 - 55,000 Prince Georges County, MD, Consolidated Public 59,651 - 59,651
Improvement GO UT, Unrefunded, 5.50% (FSA INS),
10/1/2010
- 100,000 100,000 Prince George's County Construction Public - 108,772 108,772
Improvement, 5.50%, Pre-refunded 10/1/2009
- 1,000,000 1,000,000 Prince George's County GO, 5.25%, Pre-refunded - 1,038,240 1,038,240
3/15/2007
- 1,250,000 1,250,000 Prince George's County PCR Potomac Electric - 1,356,063 1,356,063
Project, 5.75%, 3/15/2010
- 40,000 40,000 Prince George's County SFH Mortgage Revenue - 41,304 41,304
FHLMC/FNMA/GNMA Collateral, Series A, 5.55%,
12/1/2033
1,000,000 - 1,000,000 Queen Annes County, MD, 5.00% (MBIA Global 1,078,140 - 1,078,140
Funding LLC LOC), 11/15/2016
1,000,000 - 1,000,000 Queen Annes County, MD, Public Facility, 6.00% 1,065,730 - 1,065,730
(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 Revenue Bonds 2,198,858 - 2,198,858
Academic and Auxiliary Fee (Series A), 4.50%
(AMBAC INS)/(Original Issue Yield: 4.65%),
9/1/2030
1,000,000 - 1,000,000 St. Mary's College, MD, Refunding Revenue 1,047,840 - 1,047,840
Bonds, 5.25% (MBIA Insurance Corp.
INS)/(Original Issue Yield: 5.30%), 9/1/2027
(Pre-refunded to 9/1/2017)
2,255,000 - 2,255,000 St. Mary's County, MD, GO UT, 5.00%, 10/1/2018 2,384,031 - 2,384,031
1,000,000 - 1,000,000 St. Mary's County, MD, GO UT, 5.00% (Original 1,050,570 - 1,050,570
Issue Yield: 5.00%), 10/1/2021
1,000,000 - 1,000,000 University of Maryland, Auxiliary Facility & 1,054,310 - 1,054,310
Tuition Refunding Revenue Bonds (Series A),
5.00%, 4/1/2009
1,000,000 - 1,000,000 University of Maryland, Revenue Bonds, 5.25%, 1,067,550 - 1,067,550
10/1/2011
- 750,000 750,000 University of Maryland System Auxiliary - 765,435 765,435
Facility and Tuition Revenue, 5.60%,
Pre-refunded 4/1/2006
- 250,000 250,000 University of Maryland System Auxiliary - 259,360 259,360
Facility and Tuition Revenue, 5.125%,
Pre-refunded 4/1/2007
- 265,000 265,000 University of Maryland System Auxiliary - 275,727 275,727
Facility and Tuition Revenue, 5.00%,
Pre-refunded 4/1/2008
- 500,000 500,000 Washington DC Metropolitan Area Transit - 555,345 555,345
Authority Revenue, 6.00%, 7/1/2010
1,000,000 1,000,000 Washington Suburban Sanitation District, MD, GO 1,184,750 1,184,750
UT , 6.00%, 6/1/2018
- 1,000,000 1,000,000 Washington Suburban Sanitation District GO, - 1,057,940 1,057,940
5.00%, Pre-refunded 6/1/2009
Total 103,662,428 33,288,215 136,950,643
Puerto Rico - 4.7%
1,000,000 - 1,000,000 Commonwealth of Puerto Rico, GO UT, 6.25% (MBIA 1,152,250 - 1,152,250
Insurance Corp. INS), 7/1/2012
2,000,000 - 2,000,000 Puerto Rico HFA, Capital Funding Program, 5.00% 2,088,420 - 2,088,420
(Original Issue Yield: 4.22%), 12/1/2018
- 250,000 250,000 Puerto Rico Commonwealth Infrastructure - 251,890 251,890
Financing Authority Special Tax Revenue, Series
B, 5.00%, 7/1/2041
- 500,000 500,000 Puerto Rico Commonwealth Public Improvement, - 552,925 552,925
Series A, 5.50%, 7/1/2018
- 330,000 330,000 Puerto Rico Electric Power Authority Revenue - 357,572 357,572
5.00%, 7/1/2019
- 150,000 150,000(2) Puerto Rico Electric Power Authority, - 86,739 86,739
Capital Appreciation, 0.00%, 7/1/2017
- 315,000 315,000 Puerto Rico Public Buildings Authority Revenue - 337,998 337,998
Government Facilities, Series G, 5.25%, 7/1/2013
- 500,000 500,000 Puerto Rico Public Finance Corporation, Series - 538,155 538,155
A, 5.00%, Pre-refunded 8/1/2011
1,500,000 - 1,500,000 Puerto Rico Public Finance Corp., (Series A), 1,678,500 - 1,678,500
5.375% (AMBAC INS)/(Original Issue Yield:
4.94%), 6/1/2019
Total 4,919,170 2,125,279 7,044,449
Wisconsin - 1.5%
2,000,000 - 2,000,000 Badger, WI, Tobacco Asset Securitization Corp., 2,235,580 - 2,235,580
Revenue Bonds, 7.00%, 6/1/2028
Shares
Total Municipal Bonds (identified cost of 111,892,508 35,413,494 147,306,002
$141,970,611)
Mutual Fund(3) -
0.4%
674,655 - 674,655 Maryland Municipal Cash Trust (AT NET ASSET 674,655 - 674,655
VALUE)
Total Investments - 98.5% 112,567,163 35,413,494 147,980,657
(identified cost $142,645,266)(3)
Other Assets and Liabilities - 1.5% 1,360,802 801,603 2,162,405
Total Net Assets - 100% $113,927,965 $36,215,097 $150,143,062
1. At October 31, 2005, the MTB Maryland Municipal Bond Fund held no
securities that are subject to the federal alternative minimum tax.
2 Zero coupon bond.
3 Affiliated company.
4 The cost of investments for federal tax purposes amounts to $108,622,370
for MTB Maryland Municipal Bond Fund and $33,966,205 for FBR Maryland
Tax-Free Portfolio.
Note: The categories of investments are shown as a percentage of total net
assets at October 31, 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
October 31, 2005 (unaudited)
MTB FBR
Maryland Maryland Pro Forma Proforma
Municipal Bond Fund Tax-Free Portfolio Adjustment Combined
Assets:
Investments in securities, at value $112,567,163 $35,413,494 $- $147,980,657
Cash - 358,244 - 358,244
Income receivable 1,692,730 492,689 - 2,185,419
Receivable for shares sold 95 1,200 - 1,295
Prepaid expenses - - - -
Total assets 114,259,988 36,265,627 - 150,525,615
Liabilities:
Income distribution payable 291,407 18,450 - 309,857
Payable for shares redeemed - 2,978 - 2,978
Payable for investment advisory fee - 11,568 - 11,568
Payable for administration fee - 9,254 - 9,254
Payable for transfer and dividend disbursing - - - -
agent fees and expenses
Payable for audit fees - - - -
Payable for Trustees' fees 1,070 - - 1,070
Payable for portfolio accounting fees - - - -
Payable for distribution services fees 2,914 7,712 - 10,626
Payable for shareholder services fee 405 - - 405
Accrued expenses 36,227 568 - 36,795
Total liabilities 332,023 50,530 - 382,553
Net Assets $113,927,965 $36,215,097 $- $150,143,062
Net Assets Consists of:
Paid in capital $109,730,263 $34,686,649 $- 144,416,912
Net unrealized appreciation of investments 3,888,102 1,447,289 - 5,335,391
Accumulated net realized gain on investments 341,962 77,829 - 419,791
Undistributed (distributions in excess of ) (32,362) 3,330 - (29,032)
net investment income
Total Net Assets $113,927,965 $36,215,097 $- $150,143,062
Net Assets:
Class A Shares $17,534,025 $36,215,097 $- $53,749,122
Class B Shares $1,966,132 $- $- $1,966,132
Institutional I Shares $94,427,808 $- $- $94,427,808
Shares Outstanding:
Class A Shares 1,724,084 3,305,688 $255,285 (a) 5,285,057
Class B Shares 192,953 - - 192,953
Institutional I Shares 9,275,768 - - 9,275,768
Net Asset Value Per Share
Class A Shares $10.17 $10.96 $- $10.17
Class B Shares $10.19 $- $- $10.19
Institutional I Shares $10.18 $- $- $10.18
Offering Price Per Share
Class A Shares $10.65 * $- $- $10.65 *
Class B Shares $10.19 $- $- $10.19
Institutional I Shares $10.18 $- $- $10.18
Redemption Proceeds Per Share
Class A Shares $10.17 $- $- $10.17
Class B Shares $9.68 ** $- $- $9.68 **
Institutional I Shares $10.18 $- $- $10.18
Investments, at identified cost $108,679,061 $33,966,205 $- $142,645,266
Investments in affiliated issuers $674,655 $- $- $674,655
* Computation of offering price per share 100/95.5 of net asset value. The
sales charge will be waived on purchases by former FBR Maryland Tax-Free
Portfolio shareholders.
** 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 six months ended October 31, 2005 (unaudited)
MTB FBR
Maryland Maryland Pro Forma Pro Forma
Municipal Bond Fund Tax-Free Portfolio Adjustment Combined
Investment Income:
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Dividends $ 6,784 (1) $ - $- $ 6,783
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Interest 2,732,560 915,482 - 3,648,042
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total Investment Income: 2,739,344 915,482 - 3,654,826
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Expenses:
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Investment advisory fee 414,849 70,219 60,856 (a) 545,924
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Administrative personnel and services fee 38,955 56,175 (43,872) (b) 51,258
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Custodian fees 2,963 - 900 (c) 3,863
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and 19,098 - 1,512 (d) 20,610
expenses
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Directors'/Trustees' fees 3,912 - - 3,912
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Auditing fees 6,838 - 1,223 (e) 8,061
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Legal fees 1,606 - - 1,606
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Portfolio accounting fees 23,194 - 7,204 (f) 30,398
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Distribution services fee - Class A Shares 23,686 46,812 - 70,498
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Distribution services fee - Class B Shares 7,297 - - 7,297
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Shareholder services fee - Class A Shares 23,800 2,923 43,889 (g) 70,612
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Shareholder services fee - Class B Shares 2,201 - - 2,201
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Shareholder services fee - Institutional I Shares 121,877 - - 121,877
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Share registration costs 16,475 - - 16,475
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Printing and postage 3,911 - 504 (h) 4,415
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Insurance premiums 6,133 - - 6,133
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Miscellaneous 1,511 3,658 (3,658) (i) 1,511
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total expenses 718,306 179,787 68,558 966,651
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Waivers and Reimbursement --
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Waiver/reimbursement of investment adviser (112,745) - (19,915) (j) (132,660)
fee
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Waiver of distribution services fee-Class A (13,350) - (26,215) (k) (39,565)
Shares
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Waiver of shareholder services fees-Class A (23,840) - (46,772) (l) (70,612)
Shares
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Waiver of shareholder services fees-Class B (98) - - (98)
Shares
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Waiver of shareholder services fees-Class (121,877) - - (121,877)
Institutional I Shares
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Total Waivers and Reimbursements (271,910) - (92,902) (364,812)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net Expenses 446,396 179,787 (24,344) 601,839
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net investment income $2,292,948 $735,695 $24,344 $3,052,987
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Loss on Investments:
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments 204,662 46,081 - 250,743
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (1,882,824) (640,293) - (2,523,117)
(depreciation) of investments
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on (1,678,162) (594,212) - (2,272,374)
investments
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting from $614,786 $141,483 $24,344 $780,613
operations
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
(1) Including $1,574 received from affiliated
issuers.
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
(See Legend to Pro Forma Adjustments on the
following page)
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
(See Notes to Pro Forma Financial Statements)
- -----------------------------------------------------------------------------------------------------------------------------------
MTB Maryland Municipal Bond Fund
FBR Maryland Tax-Free Portfolio
Notes to Pro Forma Financial Statements
Six Months Ended October 31, 2005 (Unaudited)
Note 1. Description of the Fund
MTB Maryland Municipal Bond Fund, a series of MTB Group of Funds, is
registered under the Investment Company Act of 1940, as amended, as an
open-end, non-diversified investment company.
MTB Maryland Municipal Bond Fund consists of three classes of shares: Class A
Shares, Class B Shares and Institutional I Shares. All s hares of the Fund
have equal rights with respect to voting, except on class-specific matters.
Investment income, realized and unrealized gains and losses, and certain
fund-level expenses are allocated to each class based on relative average
daily net assets, except that each class bears certain expenses unique to
that class such as distribution and shareholder services fees. Dividends are
declared separately for each class. No class has preferential dividend
rights; differences in per share dividend rates are generally due to
differences in separate class expenses.
Note 2. 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 October 31,
2005. These statements have been derived from the books and records utilized
in calculating daily net asset values at October 31, 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 six months ended October 31, 2005, MTB Maryland Municipal Bond Fund
and FBR Maryland Tax-Free Portfolio 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 FBR Fund Advisers, Inc. and their affiliates.
Note 3. Portfolio Valuation
Fixed income securities, unlisted securities and short-term securities are
valued at the process provided by any independent pricing service. However,
short-term securities with remaining maturities of 60 days or less at the
time of purchase may be valued at amortized cost, which approximates fair
market value. Municipal bonds are valued by an independent pricing service,
taking into consideration yield, liquidity, risk, credit quality, coupon,
maturity, type of issue, and any other factors or market data the pricing
service deems relevant. Investments in other open-end regulated investment
companies are valued at net asset value. Securities for which no quotations
are readily available or whose values have been affected by a significant
event occurring between the close of their primary markets and the closing of
the NYSE are valued at fair value as determined in accordance with procedures
established by and under general supervision of the Board of Trustees.
Note 4. Shares of Beneficial Interest
The Pro Forma Class A Shares net asset value per share assumes the issuance
of 3,560,973 Class A Shares of the MTB Maryland Municipal Bond Fund in
exchange for 3,305,688 shares of the FBR Maryland Tax-Free Portfolio which
would have been issued at October 31, 2005 in connection with the proposed
reorganization.
Note 5. Federal Income Taxes
Each fund has elected to be taxed as a "regulated investment company" under
the Internal Revenue Code. After the acquisition, MTB Maryland Municipal Bond
Fund intends to continue to qualify as a regulated investment company, if
such qualification is in the best interests of its shareholders, by complying
with the Subchapter M provision of the Internal Revenue Code and to
distribute to shareholders each year substantially all of their income.
Accordingly, no provisions for federal income tax are necessary.
The identified cost of investments for the funds is substantially the same
for both financial accounting and federal income tax purposes. The tax cost
of investments will remain unchanged for the combined fund.
Note 6. 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 ("MTB Pro Forma Combined Fund") 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 Pro Forma Combined 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 Pro Forma
Combined 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 October 31, 2005, FBR National provided
administrative, transfer agency and custodial services to the FBR Maryland
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 Fund on the MTB 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 MTB Pro Forma Combined Fund.
(k) Adjustment to reflect the waiver of distribution services fees for MTB
Pro Forma Combined Fund Class A Shares based on the combined average net
assets of the Funds.
(l) Adjustment to reflect the waiver of shareholder services fee for MTB Pro
Forma Combined Fund Class A Shares based on the combined average net assets
of the Funds.
INTRODUCTION
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 six months ended October 31,
2005. These statements have been derived from the books and records utilized
in calculating daily net asset values at October 31, 2005. As of October 31,
2005, MTB Virginia Municipal Bond Fund was not effective with the SEC and
held no investments.
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.
MTB Virginia Municipal Bond Fund
FBR Virginia Tax-Free Portfolio
Pro Forma Combining Portfolio of Investments
October 31, 2005 (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
MTB FBR MTB FBR
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Virginia Virginia Pro Forma Virginia Virginia Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Municipal Bond Fund Tax-Free Combined Municipal Tax-Free Combined
Portfolio Bond Fund Portfolio
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Principal Amount Value
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
MUNICIPAL BONDS - 98.8%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Virginia - 91.5%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
$- $650,000 $650,000 Albermarle County, VA IDA, Martha $- $692,503 $692,503
Jefferson Hospital, 5.25%, 10/1/2015
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 500,000 500,000 Alexandria, VA Construction, Public - 553,165 553,165
Improvement, 5.75%, Pre-refunded
6/15/2010
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 250,000 250,000 Alexandria, VA IDA Educational - 256,432 256,432
Facilities Episcopal High School,
5.00%, 1/1/2029
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 115,000 115,000 Alexandria, VA Redevelopment and - 115,385 115,385
Housing Authority, 5.5%, 1/1/2029
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 350,000 350,000 Arlington County GO, 5.25%, - 379,981 379,981
Pre-refunded 2/1/2012
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 350,000 350,000 Arlington County IDA, MFH, Arna - 362,334 362,334
Valley View Apartments, 4.85%,
6/1/2012
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 500,000 500,000 Arlington County IDA MFH, Colonial - 513,510 513,510
Village Apartments, 5.15%, 11/1/2031
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 200,000 200,000 Chesterfield County IDA PCR, 5.875%, - 219,014 219,014
6/1/2017
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 50,000 50,000 Chesterfield County IDA Lease - 51,742 51,742
Revenue, 4.75%, 11/1/2016
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 650,000 650,000 Fairfax County IDA Revenue Inova, - 688,779 688,779
Health System Hospitals, 5.25%,
8/15/2019
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 230,000 230,000 Fairfax County IDA Revenue Inova, - 240,789 240,789
Health System Hospitals, 5.0%,
8/15/2023
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 100,000 100,000 Fairfax County IDA Revenue Inova, - 107,526 107,526
Health System Project, 5.0%,
8/15/2013
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 50,000 50,000 Fairfax County Sewer Revenue, 5.875%, - 51,965 51,965
Pre-refunded 7/15/2006
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 260,000 260,000 Fairfax County Water Authority - 271,778 271,778
Revenue, 5.0%, Pre-refunded 4/1/2007
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 800,000 800,000 Fairfax County Water Authority - 872,704 872,704
Revenue, 5.8%, 1/1/2016
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 140,000 140,000 Fairfax County Water Authority - 145,865 145,865
Revenue, 5.0%, 4/1/2016
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 100,000 100,000 Fairfax County Water Authority - 108,887 108,887
Revenue, 5.0%, 4/1/2021
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 630,000 630,000 Fairfax County Water Authority - 664,826 664,826
Revenue, 6.0%, 4/1/2022
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 705,000 705,000 Frederick County IDA Lease Revenue - 762,669 762,669
Government Complex Facilities,5.0%,
12/1/2014
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 250,000 250,000 Fredericksburg, VA IDA Student - 251,417 251,417
Housing, Revenue Mary Washington
College, Apartments Project, 5.35%,
4/1/2029
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 350,000 350,000 Halifax County IDA Hospital Revenue, - 368,946 368,946
Halifax Regional Hospital, Inc, 5.0%,
9/1/2011
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 300,000 300,000 Hampton Roads Regional Jail - 310,641 310,641
Authority, Series A, 5.5%,
Pre-refunded 7/1/2006
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 1,000,000 1,000,000 Hanover County GO, 5.4%, 7/15/2016 - 1,035,190 1,035,190
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 120,000 120,000 Henrico County, VA IDA Revenue - 123,268 123,268
Educational, Facilities-Collegiate
Schools, 5.10%, 10/15/2029
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 250,000 250,000 Henrico County, VA Economic - 260,602 260,602
Development, Authority Revenue Bon
Secours, Health Systems, Inc., 5.60%,
11/15/2030
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 500,000 500,000 Loudoun County GO, Series B, 5.25%, - 552,380 552,380
12/1/2014
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 245,000 245,000 Metropolitan Washington DC Airport, - 258,943 258,943
Authority System, Series D, 5.375%,
10/1/2018
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 335,000 335,000 Metropolitan Washington DC Airport, - 353,656 353,656
Authority System, Series D, 5.375%,
10/1/2019
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 500,000 500,000 Montgomery County IDA, Series C, - 526,445 526,445
5.125%, 1/15/2019
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 250,000 500,000 Newport News, VA GO, 5.75%, - 262,580 262,580
Pre-refunded 1/15/2007
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 500,000 500,000 Newport News, VA GO, 5.0%, 3/1/2018 - 521,465 521,465
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 500,000 500,000 Norfolk, VA Water Revenue, 5.75%, - 516,450 516,450
11/1/2012
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 500,000 500,000 Norfolk, VA Water Revenue, 5.875%, - 516,630 516,630
11/1/2015
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 500,000 500,000 Prince William County Service - 541,515 541,515
Authority, Water and Sewer System
Revenue, 5.5%, Pre-refunded 7/1/2009
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 200,000 200,000 Richmond, VA Metropolitan, Authority - 221,586 221,586
Expressway Revenue, 5.25%, 7/15/2017
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 1,000,000 1,000,000 Richmond, VA Public Utilities - 1,044,220 1,044,220
Revenue, Series A, 5.25%, 1/15/2018
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 500,000 500,000 Richmond, VA Refunding and - 537,805 537,805
Improvement GO, Series A, 5.125%,
Pre-refunded 1/15/2010
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 300,000 300,000 Roanoke, VA GO Public Improvement, - 319,380 319,380
Series B, 5.0%, 10/1/2011
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 1,000,000 1,000,000 Southeastern Public Servicing - 1,084,440 1,084,440
Authority, Series B, 5.0%, 7/1/2015
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 580,000 580,000 Suffolk, VA Redevelopment and - 604,459 604,459
Housing, Authority MFH Village
Apartments, Series A, 5.6%, 2/1/2033
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 575,000 575,000 Upper Occoquan Sewage Authority - 631,666 631,666
Revenue, Series A, 5.15%, 7/1/2020
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 50,000 50,000 Virginia Beach, VA Development - 54,150 54,150
Authority Revenue General Hospital
Project, 5.125%, 2/15/2018
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 500,000 500,000 Virginia Beach, VA Development - 503,225 503,225
Authority Revenue Residential Care
Facility, 5.375%, 11/1/2032
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 1,075,000 1,075,000 Virginia Beach, VA Public Improvement - 1,134,383 1,134,383
GO, 5.0%, Pre-refunded 8/1/2008
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 250,000 250,000 Virginia Beach, VA Public Improvement - 270,300 270,300
GO, Series B, 5.0%, 5/1/2020
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 50,000 50,000 Virginia Beach, VA Development - 51,146 51,146
Authority Revenue Town Center Project
Phase I, Series A, 4.25%, 8/1/2013
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 100,000 100,000 Virginia Beach, VA Development - 106,651 106,651
Authority, Lease Revenue Social
Services Facility, 5.0%, 12/1/2017
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 250,000 250,000 Virginia Commonwealth Transportation - 270,688 270,688
Board Revenue U.S. Route 58 Corridor
Development, 5.5%, Pre-refunded
5/15/2009
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 100,000 100,000 Virginia Housing Development - 103,570 103,570
Authority, Revenue Rental Housing,
Series L, 5.35%, 2/1/2009
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 80,000 80,000 Virginia Housing Development - 82,881 82,881
Authority, Revenue Rental Housing,
Series H, 5.25%, 11/1/2010
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 500,000 500,000 Virginia Housing Development - 520,170 520,170
Authority, Revenue Rental Housing,
Series N, 5.125%, 1/1/2015
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 300,000 300,000 Virginia MFH Development Authority, - 310,356 310,356
Series G, 5.0%, 11/1/2013
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 100,000 100,000 Virginia Port Authority Commonwealth - 102,760 102,760
Revenue, 5.9%, Pre-refunded 7/1/2006
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 350,000 350,000 Virginia Public School Authority - 369,334 369,334
Revenue, Series A, 5.0%, Pre-refunded
8/1/2008
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 750,000 750,000 Virginia State GO, 5.25%, - 799,740 799,740
Pre-refunded 6/1/2009
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 350,000 350,000 Winchester, VA Public Improvement, - 385,119 385,119
5.625%, Pre-refunded 6/1/2010
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total - 22,968,011 22,968,011
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Puerto Rico - 7.3%
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 250,000 250,000 Puerto Rico Commonwealth Highway and - 272,625 272,625
Transportation Authority Revenue,
Series W, 5.5%, 7/1/2013
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 215,000 215,000 Puerto Rico Commonwealth GO, Public - 217,715 217,715
Improvement, Series A, 5.0%, 7/1/2033
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 1,000,000 1,000,000 Puerto Rico Public Buildings - 1,073,010 1,073,010
Authority Revenue Government
Facilities, Series G, 5.25%, 7/1/2013
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- 250,000 250,000 Puerto Rico Public Finance - 269,078 269,078
Corporation, Commonwealth, Series
A,5.0%, Pre-refunded 8/1/2011
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total - 1,832,428 1,832,428
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investments - 98.8% - 24,800,439 24,800,439
(Identified Cost $23,789,249)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Other Assets and Liabilities - 1.2% - 306,979 306,979
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Net Assets - 100% $- $25,107,418 $ 25,107,418
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Note: The categories of investments are shown as a percentage of
total net assets at October 31, 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
October 31, 2005 (unaudited)
- -----------------------------------------------------------------------------------------------------------------
MTB FBR
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Virginia Virginia Pro Forma Proforma
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Municipal Bond Tax-Free Adjustment Combined
Fund Portfolio
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Assets:
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Investments in securities, at value $ - $ 24,800,439 $- $24,800,439
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Cash - 29,411 - 29,411
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Income receivable - 371,117 - 371,117
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Receivable for shares sold - 1 - 1
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Total assets - 25,200,968 - 25,200,968
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Liabilities:
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Income distribution payable - 10,717 - 10,717
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Payable for shares redeemed - 62,246 - 62,246
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Payable for investment advisory fee - 8,069 - 8,069
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Payable for administration fee - 6,456 - 6,456
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Payable for distribution services fees - 5,380 - 5,380
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Accrued expenses - 682 - 682
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Total liabilities - 93,550 - 93,550
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Net Assets $ - $ 25,107,418 $- $25,107,418
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Net Assets Consists of:
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Paid-in capital $- $ 23,867,291 $- $23,867,291
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Net unrealized appreciation - 1,011,190 - 1,011,190
(depreciation) of investments
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Accumulated net realized gain on - 228,212 - 228,212
investments
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Undistributed net investment income - 725 - 725
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Total Net Assets $- $ 25,107,418 $- $25,107,418
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Shares Outstanding - 2,248,603 - 2,248,603
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Net Asset Value Per Share $- $11.17 $- $11.17
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Offering Price Per Share $- $11.17 $- $11.70 *
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Redemption Proceeds Per Share $- $11.17 $- $11.17
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Investments, at identified cost $- $ 23,789,249 $- $23,789,249
- -----------------------------------------------------------------------------------------------------------------
* Computation of offering price per share 100/95.5 of net asset value. The
sales charge will be waived on purchases by former FBR Virginia Tax-Free
Portfolio shareholders.
MTB Virginia Municipal Bond Fund
FBR Virginia Tax-Free Portfolio
Pro Forma Combining Statements of Operations
For the Six Months Ended October 31, 2005 (unaudited)
- ------------------------------------------------------------------------------------------------------------------------------------
MTB FBR
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Virginia Virginia Pro Forma Pro Forma
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Municipal Bond Fund Tax-Free Portfolio Adjustment Combined
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Investment Income:
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Interest $ - $587,739 $- $587,739
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Investment Income: - 587,739 - 587,739
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Expenses:
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Investment advisory fee - 48,291 41,852 (a) 90,143
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Administrative personnel and services fee - 38,633 (34,564) (b) 4,069
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Custodian fees - - 690 (c) 690
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Transfer and dividend disbursing agent - - 10,541 (d) 10,541
fees and expenses
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Directors'/Trustees' fees - - 4,152 (e) 4,152
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Auditing fees - - 6,781 (f) 6,781
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Legal fees - - 1,966 (g) 1,966
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Portfolio accounting fees - - 6,959 (h) 6,959
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Distribution services fee - Class A Shares - 32,194 - 32,194
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Shareholder services fee - Class A Shares - 3,591 28,603 (i) 32,194
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Share registration costs - - 14,206 (j) 14,206
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Printing and postage - - 3,781 (k) 3,781
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Insurance premiums - - 4,537 (l) 4,537
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Miscellaneous - 3,503 (2,535) (m) 968
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total expenses - 126,212 86,970 213,182
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Waivers and Reimbursement --
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Waiver/reimbursement of investment - - (65,090) (n) (65,090)
adviser fee
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Waiver of shareholder services - - (32,194) (o) (32,194)
fees-Class A Shares
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Total Waivers and Reimbursements - - (97,284) (97,284)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net Expenses - 126,212 126,212
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net investment income $- $461,527 $- $461,527
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Realized and Unrealized Loss on
Investments:
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized gain on investments - 30,935 - 30,935
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net change in unrealized appreciation - (484,517) - (484,517)
(depreciation) of investments
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Net realized and unrealized gain - (453,582) - (453,582)
(loss) on investments
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
Change in net assets resulting $ - $7,945 $- $7,945
from operations
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
(See Legend to Pro Forma Adjustments on
the following page)
- ------------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------------------------------
(See Notes to Pro Forma Financial
Statements)
- ------------------------------------------------------------------------------------------------------------------------------------
MTB Virginia Municipal Bond Fund
FBR Virginia Tax-Free Portfolio
Notes to Pro Forma Financial Statements
Six Months Ended October 31, 2005 (Unaudited)
Note 1. Description of the Fund
MTB Virginia Municipal Bond Fund, a series of MTB Group of Funds, is
registered under the Investment Company Act of 1940, as amended, as an
open-end, non-diversified investment company.
MTB Virginia Municipal Bond Fund consists of one class of shares: Class A
Shares.
Note 2. 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 six months ended October 31,
2005. These statements have been derived from the books and records utilized
in calculating daily net asset values at October 31, 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 October 31, 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 FBR Fund Advisers, Inc. and their affiliates.
Note 3. Portfolio of Investments
The MTB Virginia Municipal Bond Fund had not become effective with the
Securities and Exchange Commission as of October 31, 2005. The Portfolio of
Investments provided is for the FBR Virginia Tax-Free Portfolio as of October
31, 2005, and it is not anticipated to change significantly in connection
with the proposed reorganization.
Note 4. Portfolio Valuation
Fixed income securities, unlisted securities and short-term securities are
valued at the process provided by an independent pricing service. However,
short-term securities with remaining maturities of 60 days or less at the
time of purchase may be valued at amortized cost, which approximates fair
market value. Municipal bonds are valued by an independent pricing service,
taking into consideration yield, liquidity, risk, credit quality, coupon,
maturity, type of issue, and any other factors or market data the pricing
service deems relevant. Investments in other open-end regulated investment
companies are valued at net asset value. Securities for which no quotations
are readily available or whose values have been affected by a significant
event occurring between the close of their primary markets and the closing of
the NYSE are valued at fair value as determined in accordance with procedures
established by and under general supervision of the Board of Trustees.
Note 5. Shares of Beneficial Interest
The Pro Forma Class A Shares net asset value per share assumes the issuance
of 2,248,603 Class A Shares of the MTB Virginia Municipal Bond Fund in
exchange for 2,248,603 Shares of the FBR Virginia Tax-Free Portfolio which
would have been issued at October 31, 2005 in connection with the proposed
reorganization.
Note 6. Federal Income Taxes
Each fund has elected to be taxed as a "regulated investment company" under
the Internal Revenue Code. After the acquisition, MTB Virginia Municipal Bond
Fund intends to continue to qualify as a regulated investment company, if
such qualification is in the best interests of its shareholders, by complying
with the Subchapter M provision of the Internal Revenue Code and to
distribute to shareholders each year substantially all of their income.
Accordingly, no provisions for federal income tax are necessary.
The identified cost of investments for the funds is substantially the same
for both financial accounting and federal income tax purposes. The tax cost
of investments will remain unchanged for the combined fund.
Note 7. 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 ("MTB Pro Forma Combined Fund")
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 Pro Forma Combined 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 October 31, 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 MTB 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 Pro Forma Combined 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 Pro Forma Combined Fund.
(f) Adjustment to reflect auditing fees as a separate fund expense and to
reflect the current expense structure for the MTB Pro Forma Combined Fund.
(g) Adjustment to reflect legal fees as a separate fund expense and to
reflect the current expense structure for the MTB Pro Forma Combined Fund.
(h) Adjustment to reflect portfolio accounting fees as a separate fund
expense and to reflect the current expense structure for the MTB Pro Forma
Combined 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 Pro Forma Combined
Fund.
(k) Adjustment to reflect printing and postage as a separate fund expense and
to reflect the current expense structure for the MTB Pro Forma Combined Fund.
(l) Adjustment to reflect insurance premiums as a separate fund expense and
to reflect the current expense structure for the MTB Pro Forma Combined Fund.
(m) Miscellaneous expenses are adjusted to reflect the current expense
structure for the MTB Pro Forma Combined 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 MTB Pro
Forma Combined Fund Class A Shares to reflect the 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.
1001 Nineteenth Street North
Arlington, Virginia 22209
Distributor
FBR INVESTMENT SERVICES, INC.
1001 Nineteenth Street North
Arlington, Virginia 22209
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; (45)
(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 and Baker LLP; +
(15) Not applicable;
(16) Conformed copy of Power of Attorney of the Registrant; +
(17) (a) Form of Proxy - FBR Maryland Tax-Free Portfolio; (45)
(b) Form of Proxy - FBR Virginia Tax-Free Portfolio. (45)
- -------------------------------------------------
+ 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).
45. Response is incorporated by reference to Registrant's Registration
Statement on Form N-14 filed December 2, 2005 (Files Nos. 333-130096 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 3rd day of January, 2006.
MTB GROUP OF FUNDS
By: /s/C. Grant Anderson
C. Grant Anderson, Secretary
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 January 3, 2006
the Persons Listed
Below
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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 N. Paddock* 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