1933 Act File No. 33-37525
1940 Act File No. 811-6201
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 5 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 6 X
THE BILTMORE MUNICIPAL FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
X on December 10, 1994 pursuant to paragraph (a) of Rule 485.
Registrant has filed with the Securities and Exchange Commission
a declaration pursuant to Rule 24f-2 under the Investment Company
Act of 1940, and:
X filed the Notice required by that Rule on January 15, 1994;
or
intends to file the Notice required by that Rule on or about
____________; or
during the most recent fiscal year did not sell any
securities pursuant to Rule 24f-2 under the Investment Company
Act of 1940, and, pursuant to Rule 24f-2(b)(2), need not file
the Notice.
Copies to:
Donald W. Smith, Esquire Alan C. Porter, Esquire
Kirkpatrick & Lockhart Piper & Marbury
1800 M. Street, N.W. 1200 Nineteenth Street,
N.W.
Washington, D.C. 20036-5891 Washington, D.C. 20036-
2430
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of The Biltmore
Municipal Funds, which consists of three portfolios: (1) Georgia
Municipal Bond Fund, (2) North Carolina Municipal Bond Fund, and
(3) South Carolina Municipal Bond Fund, relates only to two
portfolios, Georgia Municipal Bond Fund and North Carolina
Municipal Bond Fund, and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-3) Cover Page.
Item 2. Synopsis (1-3) Summary of Fund
Expenses.
Item 3. Condensed Financial
Information (3) Financial Highlights.
Item 4. General Description of
Registrant (1-3) Performance Information;
General Information;
Investment Information;
Investment Objective;
Investment Policies; (3) South
Carolina Municipal Bonds; (1-
3) Municipal Bond Insurance;
Investment Risks; Non-
Diversification; Investment
Limitations.
Item 5. Management of the Fund (1-3) The Biltmore Municipal
Funds Information; Management
of The Biltmore Municipal
Funds; Distribution of Fund
Shares; (1-2) Shareholder
Servicing Arrangements; (1-3)
Administration of the Fund;
Expenses of the Fund.
Item 6. Capital Stock and Other
Securities (1-3) Dividends; Capital
Gains; Shareholder
Information; Voting Rights;
Massachusetts Business Trusts;
Effect of Banking Laws; Tax
Information; Federal Income
Tax; (1) Georgia Taxes; (2)
North Carolina Taxes; (3)
South Carolina Taxes; (1-3)
Other State and Local Taxes.
Item 7. Purchase of Securities Being
Offered (1-3) Net Asset Value;
Investing in the Fund; Share
Purchases; (1-2) Through the
Trust Divisions of the
Wachovia Banks; Through
Wachovia Securities, Inc.; (3)
Through Wachovia Bank of South
Carolina, N.A.; Through the
Other Wachovia Banks; Through
Wachovia Brokerage Service; (1-
3) Through Authorized Broker
Dealers; Minimum Investment
Required; What Shares Cost;
Purchases at Net Asset Value;
Sales Charge Reallowance;
Reducing the Sales Charge;
Certificates and
Confirmations.
Item 8. Redemption or Repurchase (1-3) Redeeming Shares;
Systematic Withdrawal Program;
Accounts with Low Balances;
(3) Redemption in Kind.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL
INFORMATION.
Item 10. Cover Page (1-3) Cover Page.
Item 11. Table of Contents (1-3) Table of Contents.
Item 12. General Information and
History (1-3) General Information
About the Fund.
Item 13. Investment Objectives and
Policies (1-3) Investment Objective and
Policies; Investment
Limitations.
Item 14. Management of the Fund (1-3) The Biltmore Municipal
Funds Management.
Item 15. Control Persons and Principal
Holders of Securities Not applicable.
Item 16. Investment Advisory and Other
Services (1-3) Investment Advisory
Services; Administrative
Services.
Item 17. Brokerage Allocation (1-3) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered (1-3) Purchasing Shares;
Determining Net Asset Value;
Redeeming Shares.
Item 20. Tax Status (1-3) Tax Status.
Item 21. Underwriters Not Applicable.
Item 22. Calculation of Performance
Data (1-3) Total Return; Yield; Tax-
Equivalent; Yield Performance
Comparisons.
Item 23. Financial Statements (3) Filed in Part A.; (1-2) to
be filed by Amendment.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED OCTOBER 10, 1994
GEORGIA MUNICIPAL BOND FUND
(A PORTFOLIO OF THE BILTMORE MUNICIPAL FUNDS)
PROSPECTUS
The shares of Georgia Municipal Bond Fund (the "Fund") offered by this
prospectus represent interests in a non-diversified portfolio of securities
which is an investment portfolio of The Biltmore Municipal Funds (the "Trust"),
an open-end management investment company (a mutual fund). The investment
objective of the Fund is to provide current income which is exempt from federal
regular income tax and the personal income taxes imposed by the State of
Georgia. The Fund invests primarily in a portfolio of municipal securities
which are exempt from federal regular income tax and the personal income taxes
imposed by the State of Georgia ("Georgia Municipal Securities"). These
securities include those issued by or on behalf of the State of Georgia and
Georgia political subdivisions and municipalities, as well as those issued by
states, territories, and possessions of the United States which are exempt from
federal regular income tax and the Georgia personal income taxes.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR
OBLIGATIONS OF WACHOVIA BANK OF GEORGIA, N.A. OR ITS
AFFILIATES, ARE NOT ENDORSED OR GUARANTEED BY WACHOVIA BANK OF
GEORGIA, N.A. OR ITS AFFILIATES, AND ARE NOT INSURED BY THE
FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE
SHARES INVOLVES INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS
OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December
, 1994 with the Securities and Exchange Commission. The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information free of charge, obtain other information, or make inquiries about
the Fund by calling or writing The Biltmore Shareholder Servicing Center, 1-
800-994-4414, 101 Greystone Boulevard, Room 108, Columbia, South Carolina
29226.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus dated December , 1994
TABLE OF CONTENTS
- -------------------------------------
SUMMARY OF FUND EXPENSES 1
- -------------------------------------
GENERAL INFORMATION 2
- -------------------------------------
INVESTMENT INFORMATION 2
- -------------------------------------
Investment Objectives 2
Investment Policies 2
Acceptable Investments 3
Characteristics 3
Participation Interests 4
Variable Rate Municipal
Securities 4
Municipal Leases 4
Investing in Securities of Other
Investment Companies 4
Restricted and Illiquid
Securities 4
When-Issued and Delayed Delivery
Transactions 4
Lending of Portfolio Securities 5
Temporary Investments 5
Georgia Municipal Securities 5
Municipal Bond Insurance 6
Investment Risks 7
Non-Diversification 8
Investment Limitations 8
THE BILTMORE MUNICIPAL FUNDS
INFORMATION 8
- -------------------------------------
Management of The Biltmore
Municipal Funds 8
Board of Trustees 8
Investment Adviser 8
Advisory Fees 8
Adviser's Background 9
Distribution of Fund Shares 9
Shareholder Servicing Arrangements 9
Administration of the Fund 10
Administrative Services 10
Custodian 10
Transfer Agent, Dividend
Disbursing Agent, and Portfolio
Recordkeeper 10
Legal Services 10
Independent Auditor 10
Expenses of the Fund 10
NET ASSET VALUE 11
- -------------------------------------
INVESTING IN THE FUND 11
Share Purchases 11
Through the Trust Divisions of
the Wachovia Banks 11
Through Wachovia Securities, Inc.11
By Mail 11
By Wire 11
Through Authorized Broker/
Dealers 12
Minimum Investment Required 12
What Shares Cost 12
Purchases at Net Asset Value 13
Sales Charge Reallowance 13
Reducing the Sales Charge 13
Quantity Discounts and
Accumulated Purchases 13
Letter of Intent 14
Concurrent Purchases 14
Reinvestment Privilege 14
Systematic Investment Program 14
Certificates and Confirmations 15
Dividends 15
Capital Gains 15
Exchange Privilege 15
Exchange by Telephone 16
REDEEMING SHARES 17
- -------------------------------------
By Telephone 17
By Mail 17
Systematic Withdrawal Program 18
Accounts with Low Balances 18
SHAREHOLDER INFORMATION 19
- -------------------------------------
Voting Rights 19
Massachusetts Business Trusts 19
EFFECT OF BANKING LAWS 19
- -------------------------------------
TAX INFORMATION 20
- -------------------------------------
Federal Income Tax 20
Georgia Taxes 21
Other State and Local Taxes 22
PERFORMANCE INFORMATION 22
- -------------------------------------
ADDRESSES 23
- -------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price)................................................... 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).............................. None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)............ None
Redemption Fee (as a percentage of amount redeemed, if
applicable)....................................................... None
Exchange Fee...................................................... None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
<S> <C> <C>
Management Fee (after waiver) (1)................................. 0.15%
12b-1 Fees........................................................ None
Other Expenses (after waiver)(2)................................ 0.77%
Shareholder Servicing Agent Fee (3)............................. 0.00%
Total Fund Operating Expenses (after waiver) (4).............. 0.92%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.75%.
(2) Other Expenses are 1.20% absent the voluntary waiver tby the administrator.
The administrator can terminate this voluntary waiver at any time at its
sole discretion.
(3) The Fund has no present intention of paying or accruing the shareholder
servicing agent fee during the fiscal year ending November 30, 1995. If the
Fund were paying or accuring the shareholder servicing agent fee, the Fund
would be able to pay up to 0.25 of 1% of the Fund's average daily net
assets for the shareholder servicing agent fee. See "The Biltmore Municipal
Funds Information."
(4) The Total Fund Operating Expenses are estimated to be 1.95%, absent the
anticipated voluntary waivers by the Fund's adviser and administrator.
*Total Fund Operating Expenses in the table above are estimated based on
average expenses expected to be incurred during the period ending November 30,
1995. During the course of this period, expenses may be more or less than the
average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "THE BILTMORE MUNICIPAL FUNDS INFORMATION" AND "INVESTING IN THE
FUND."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return; (2) redemption at the end
of each time period and (3) payment of the maximum sales
load. As noted in the table above, the Fund charges no
redemption fees................................................ $54 $73
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE
IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER 30, 1995.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Biltmore Municipal Funds (the "Trust") was established as a Massachusetts
business trust under a Declaration of Trust dated August 15, 1990. The
Declaration of Trust permits The Biltmore Municipal Funds to offer separate
series of shares of beneficial interest representing interests in separate
portfolios of securities. This prospectus relates only to The Biltmore
Municipal Funds' Georgia municipal securities portfolio, known as Georgia
Municipal Bond Fund (the "Fund"). The shares in any one portfolio may be
offered in separate classes. As of the date of this prospectus, the Board of
Trustees ("Trustees") has not established classes of shares of the Fund. The
Fund is designed primarily for customers of Wachovia Bank of Georgia, N.A. and
its correspondents or affiliates who desire a convenient means of accumulating
an interest in a professionally managed, non-diversified portfolio investing
primarily in municipal bonds. Wachovia Bank of Georgia, N.A. is the investment
adviser to the Fund. A minimum initial investment of $500 is required.
Subsequent investments must be in amounts of at least $100. The Fund is not
likely to be a suitable investment for non-Georgia taxpayers or for retirement
plans since it intends to invest primarily in Georgia Municipal Securities.
Fund shares are sold at net asset value plus an applicable sales charge and are
redeemed at net asset value.
The other portfolios in the Trust are North Carolina Municipal Bond Fund and
South Carolina Municipal Bond Fund (collectively, hereinafter referred to as
the "Funds").
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and the personal income taxes imposed by
the State of Georgia. (Federal regular income tax does not include the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations.) Interest income of the Fund that is exempt from the income taxes
described above retains its tax-exempt status when distributed to the Fund's
shareholders. However, income distributed by the Fund may not necessarily be
exempt from state or municipal taxes in states other than Georgia. While there
is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus. The investment objective cannot be changed without approval of
shareholders. Unless indicated otherwise, the investment policies may be
changed by the Trustees without the approval of shareholders. Shareholders will
be notified before any material changes in these policies become effective.
INVESTMENT POLICIES
The Fund attempts to achieve its investment objective by investing in a
professionally managed portfolio consisting primarily of municipal securities
exempt from federal regular income tax and the personal income taxes imposed by
the State of Georgia. As a matter of fundamental investment policy which may
not be changed without shareholder approval, the Fund will invest its assets so
that, under normal circumstances, at least 80% of its total assets are invested
in obligations, the interest income from which is exempt from federal regular
income tax and the personal income taxes imposed by the State of Georgia.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in Georgia Municipal Securities, which are:
. obligations, including industrial development bonds, issued on behalf of
the State of Georgia, its political subdivisions or agencies;
. obligations issued by or on behalf of any state, territory or possession
of the United States, including the District of Columbia, or any
political subdivision or agency of any of these; and
. participation interests, as described below, in any of the above
obligations,
the interest from which is, in the opinion of bond counsel for the issuers
or in the opinion of officers of the Fund and/or the Fund's adviser,
exempt from both federal regular income tax and the personal income taxes
imposed by the State of Georgia. It is likely that shareholders who are
subject to alternative minimum tax will be required to include interest
from a portion of the municipal securities owned by the Fund in
calculating the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.
While the Fund intends to invest primarily in securities issued by or on
behalf of the State of Georgia and its political subdivisions, it will
invest in other securities issued by states, territories, and possessions
of the United States which are exempt from federal regular income tax and
the personal income taxes imposed by the State of Georgia. The Fund will
invest in such securities in instances where, in the judgment of the
Fund's adviser, the supply and yield of such securities would be
beneficial to the Fund's performance.
CHARACTERISTICS. The Georgia Municipal Securities which the Fund buys are
subject to the following quality standards:
. rated A or above by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Ratings Group ("Standard & Poor's"). A description of
the rating categories is contained in the Appendix to the Statement of
Additional Information;
. insured by a municipal bond insurance company which is rated AAA by
Standard & Poor's or Aaa by Moody's;
. guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest;
. fully collateralized by an escrow of U.S. government securities; or
. unrated if determined to be of comparable quality to one of the
foregoing rating categories by the Fund's adviser.
The prices of fixed income securities fluctuate inversely to the direction
of interest rates.
If a security loses its rating or has its rating reduced after the Fund
has purchased it, the Fund is not required to sell or otherwise dispose of
the security, but may consider doing so. If ratings made by Moody's or
Standard & Poor's change because of changes in those organizations or in
their ratings systems, the Fund will attempt to identify other rating
organizations and systems with comparable standards, in accordance with
the investment policies of the Fund.
PARTICIPATION INTERESTS. The Fund may purchase participation interests
from financial institutions such as commercial banks, savings and loan
associations, and insurance companies. These participation interests would
give the Fund undivided interests in Georgia Municipal Securities. The
financial institutions from which the Fund purchases participation
interests frequently provide or secure irrevocable letters of credit or
guarantees to assure that the participation interests are of high quality.
The Trustees will establish guidelines pursuant to which the Fund's
adviser determines that participation interests meet the prescribed
quality standards for the Fund.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the Georgia Municipal
Securities which the Fund purchases may have variable interest rates.
Variable interest rates are ordinarily based on a published interest rate,
interest rate index or a similar standard, such as the 91-day U.S.
Treasury bill rate. Many variable rate municipal securities are subject to
payment of principal on demand by the Fund, usually in not more than seven
days. All variable rate municipal securities will meet the quality
standards for the Fund. The Fund's adviser monitors the pricing, quality,
and liquidity of the variable rate municipal securities, including
participation interests held by the Fund, on the basis of published
financial information and reports of the rating agencies and other
analytical services pursuant to guidelines established by the Trustees.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities and may be considered to be illiquid. They may take the
form of a lease, an installment purchase contract, or a conditional sales
contract.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3%
of the total outstanding voting stock of any investment company, invest more
than 5% of its total assets in any one investment company, or invest more than
10% of its total assets in investment companies in general. The Fund will
invest in other investment companies primarily for the purpose of investing
short-term cash which has not yet been invested in other portfolio
instruments. The Fund's adviser will waive its investment advisory fee on
assets invested in securities of open-end investment companies.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which
are subject to restrictions on resale under federal securities laws. To the
extent these securities are not determined to be liquid, the Fund will limit
its purchase of these securities, together with other securities considered to
be illiquid, to 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase Georgia
Municipal Securities on a when-issued or delayed delivery basis. These
transactions are arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the
market values of the securities purchased may vary from the purchase prices.
Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Fund's adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Fund may realize short-term profits or losses
upon the sale of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or a long-term basis to
broker/dealers, banks, or other institutional borrowers of securities. The
Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions which the Fund's adviser has determined are creditworthy
under guidelines established by the Trustees, and will receive collateral in
the form of cash or U.S. government securities equal to at least 100% of the
value of the securities loaned at all times. It is not anticipated that the
Fund will engage in securities lending if such lending generates taxable
income.
TEMPORARY INVESTMENTS. From time to time on a temporary basis, or when the
Fund's adviser determines that market conditions call for a temporary
defensive posture, the Fund may invest in short-term tax-exempt or taxable
temporary investments. These temporary investments include: notes issued by or
on behalf of municipal or corporate issuers; obligations issued or guaranteed
by the U.S. government, its agencies, or instrumentalities; other debt
securities; commercial paper; certificates of deposit of banks; shares of
other investment companies; and repurchase agreements (arrangements in which
the organization selling the Fund a bond or temporary investment agrees at the
time of sale to repurchase it at a mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments. However,
the Fund's adviser will limit temporary investments to those it considers to
be of comparable quality to the Fund's acceptable investments.
Although the Fund is permitted to make taxable, temporary investments, there
is no current intention of generating income subject to federal regular income
tax. However, it is anticipated that certain temporary investments will
generate income which is subject to Georgia state income tax.
GEORGIA MUNICIPAL SECURITIES
Georgia Municipal Securities are generally issued to finance public works,
such as airports, bridges, highways, housing, hospitals, schools, streets, and
water and sewer works. They are also issued to repay outstanding obligations,
to raise funds for general operating expenses, and to make loans to other
public institutions and facilities. Georgia Municipal Securities include
industrial development bonds issued by or on behalf of public authorities to
provide financing aid to acquire sites or construct or equip facilities for
privately or publicly owned corporations. The availability of this financing
encourages these corporations to locate within the sponsoring communities and
thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment
of principal and interest. However, interest on and principal of revenue bonds
are payable only from the revenue generated by the facility financed by the
bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general revenues
of a municipality or public authority. Industrial development bonds are
typically classified as revenue bonds; the industry which is the beneficiary of
such bonds is generally the only source of payment for the bonds.
The Fund will not generally invest more than 25% of its total assets in any one
industry. Governmental issuers of municipal securities are not considered part
of any "industry." However, municipal securities backed only by the assets and
revenues of nongovernmental users may, for this purpose, be deemed to be
related to the industry in which such nongovernmental users engage, and the 25%
limitation would apply to such obligations. It is nonetheless possible that the
Fund may invest more than 25% of its assets in a broader segment of the
municipal securities market, such as revenue obligations of hospitals and other
health care facilities, housing agency revenue obligations, or airport revenue
obligations. This would be the case only if the Fund's adviser determines that
the yields available from obligations in a particular segment of the market
justified the additional risks associated with a large investment in such
segment. Although such obligations could be supported by the credit of
governmental users or by the credit of nongovernmental users engaged in a
number of industries, economic, business, political and other developments
generally affecting the revenues of such users (for example, proposed
legislation or pending court decisions affecting the financing of such projects
and market factors affecting the demand for their services or products) may
have a general adverse effect on all municipal securities in such a market
segment.
MUNICIPAL BOND INSURANCE
The Fund may purchase municipal securities covered by insurance which
guarantees the timely payment of principal at maturity and interest on such
securities. These insured municipal securities are either (1) covered by an
insurance policy applicable to a particular security, whether obtained by the
issuer of the security or by a third party ("Issuer-Obtained Insurance") or (2)
insured under master insurance policies issued by municipal bond insurers,
which may be purchased by the Fund (the "Policies").
The Fund will require or obtain municipal bond insurance when purchasing
municipal securities which would not otherwise meet the Fund's quality
standards. The Fund may also require or obtain municipal bond insurance when
purchasing or holding specific municipal securities when, in the opinion of the
Fund's adviser, such insurance would benefit the Fund (for example, through
improvement of portfolio quality or increased liquidity of certain securities).
The Fund's adviser anticipates that between 10% and 50% of the Fund's net
assets will be invested in municipal securities which are insured.
Issuer-Obtained Insurance policies are noncancellable and continue in force as
long as the municipal securities are outstanding and their respective insurers
remain in business. If a municipal security is covered by Issuer-Obtained
Insurance, then such security need not be insured by the Policies purchased by
the Fund.
The Fund may purchase two types of Policies issued by municipal bond insurers.
One type of Policy covers certain municipal securities only during the period
in which they are in the Fund's portfolio. In the event that a municipal
security covered by such a Policy is sold from the Fund, the insurer of the
relevant Policy will be liable only for those payments of interest and
principal which are due and owing at the time of sale.
The other type of Policy covers municipal securities not only while they remain
in the Fund's portfolio but also until their final maturity even if they are
sold out of the Fund's portfolio, so that the coverage
may benefit all subsequent holders of those municipal securities. The Fund will
obtain insurance which covers municipal securities until final maturity even
after they are sold out of the Fund's portfolio only if, in the judgment of the
Fund's adviser, the Fund would receive net proceeds from the sale of those
securities, after deducting the cost of such permanent insurance and related
fees, significantly in excess of the proceeds it would receive if such
municipal securities were sold without insurance. Payments received from
municipal bond issuers may not be tax-exempt income to shareholders of the
Fund.
The premiums for the Policies are paid by the Fund and the yield on the Fund's
portfolio is reduced thereby. Premiums for the Policies are paid by the Fund
monthly, and are adjusted for purchases and sales of municipal securities
during the month. The Fund may purchase Policies from MBIA Corp. ("MBIA"),
AMBAC Indemnity Corporation ("AMBAC"), Financial Guaranty Insurance Company
("FGIC"), or any other municipal bond insurer which is rated AAA by Standard &
Poor's or Aaa by Moody's. Each Policy guarantees the payment of principal and
interest on those municipal securities it insures. The Policies will have the
same general characteristics and features. A municipal security will be
eligible for coverage if it meets certain requirements set forth in a Policy.
In the event interest or principal on an insured municipal security is not paid
when due, the insurer covering the security will be obligated under its Policy
to make such payment not later than 30 days after it has been notified by the
Fund that such non-payment has occurred.
MBIA, AMBAC, and FGIC will not have the right to withdraw coverage on
securities insured by their Policies so long as such securities remain in the
Fund's portfolio, nor may MBIA, AMBAC, or FGIC cancel their Policies for any
reason except failure to pay premiums when due. MBIA, AMBAC, and FGIC will
reserve the right at any time upon 90 days' written notice to the Fund to
refuse to insure any additional municipal securities purchased by the Fund
after the effective date of such notice. The Trustees will reserve the right to
terminate any of the Policies if they determine that the benefits to the Fund
of having its portfolio insured under such Policy are not justified by the
expense involved.
Additionally, the Trustees reserve the right to enter into contracts with
insurance carriers other than MBIA, AMBAC, or FGIC if such carriers are rated
AAA by Standard & Poor's or Aaa by Moody's.
INVESTMENT RISKS
Yields on Georgia Municipal Securities depend on a variety of factors,
including: the general conditions of the municipal bond market; the size of the
particular offering; the maturity of the obligations; and the rating of the
issue. Further, any adverse economic conditions or developments affecting the
State of Georgia or its municipalities could impact the Fund's portfolio. The
Fund's concentration in securities issued by the State of Georgia and its
political subdivisions provides a greater level of risk than a fund which is
diversified across numerous states and municipal entities. Georgia's dependence
on agriculture, manufacturing, tourism, and service industries leaves it
vulnerable to both the business cycle and long term national economic trends.
The ability of the Fund to achieve its investment objective also depends on the
continuing ability of the issuers of Georgia Municipal Securities and
participation interests, or the guarantors of either, to meet their obligations
for the payment of interest and principal when due. Investing in Georgia
Municipal Securities which meet the Fund's quality standards may not be
possible if the State of Georgia or its municipalities do not maintain their
current credit ratings. In addition, the
issuance, tax exemption and liquidity of Georgia Municipal Securities may be
adversely affected by judicial, legislative or executive action, including,
but not limited to, rulings of state and federal courts, amendments to the
state and federal constitutions, changes in statutory law, and changes in
administrative regulations, as well as voter initiatives.
NON-DIVERSIFICATION
The Fund is a non-diversified investment company. As such, there is no limit
on the percentage of assets which can be invested in any single issuer. An
investment in the Fund, therefore, will entail greater risk than would exist
in a diversified investment company because the higher percentage of
investments among fewer issuers may result in greater fluctuation in the total
market value of the Fund's portfolio. Any economic, political, or regulatory
developments affecting the value of the securities in the Fund's portfolio
will have a greater impact on the total value of the portfolio than would be
the case if the portfolio were diversified among more issuers. The Fund may
purchase an issue of municipal securities in its entirety.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable year, with regard to at least 50% of the Fund's total assets, no more
than 5% of its total assets are invested in the securities of a single issuer
and that with respect to the remainder of the Fund's total assets, no more
than 25% of its total assets are invested in the securities of a single
issuer.
INVESTMENT LIMITATIONS
The Fund will not:
. borrow money or pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its total assets and
pledge assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder
approval.
THE BILTMORE MUNICIPAL FUNDS INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF THE BILTMORE MUNICIPAL FUNDS
BOARD OF TRUSTEES. The Biltmore Municipal Funds are managed by a Board of
Trustees. The Board of Trustees is responsible for managing the business
affairs of The Biltmore Municipal Funds and for exercising all of the powers
of The Biltmore Municipal Funds except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with The
Biltmore Municipal Funds, investment decisions for the Fund are made by
Wachovia Bank of Georgia, N.A., the Fund's adviser (the "Bank" or the
"Adviser"), subject to direction by the Trustees. The Adviser continually
conducts investment research and supervision for the Fund and is responsible
for the purchase or sale of portfolio instruments, for which it receives an
annual fee from the Fund.
ADVISORY FEES. The Adviser is entitled to receive an annual investment
advisory fee equal to 0.75 of 1% of the Fund's average daily net assets. The
investment advisory contract allows the voluntary waiver
of the investment advisory fee or the reimbursement of expenses by the Adviser
from time to time. The Adviser can terminate any voluntary waiver of its fee or
reimbursement of expenses at any time in its sole discretion.
Investment decisions for the Fund will be made independently from those of any
fiduciary or other accounts that may be managed by the Bank or its affiliates.
If, however, such accounts, the Fund, or the Bank for its own account are
simultaneously engaged in transactions involving the same securities, the
transactions may be combined and allocated to each account. This system may
adversely affect the price the Fund pays or receives, or the size of the
position it obtains. The Adviser may engage, for its own account or for other
accounts managed by the Bank, in other transactions involving Georgia Municipal
Securities which may have adverse effects on the market for securities in the
Fund's portfolio.
ADVISER'S BACKGROUND. Wachovia Bank of Georgia, N.A. is a direct, wholly-owned
subsidiary of Wachovia Corporation, a registered bank holding company
headquartered in Winston-Salem, North Carolina and Atlanta, Georgia. Through
offices in eight states, Wachovia Corporation and its subsidiaries provide a
broad range of financial services to individuals and businesses.
Wachovia Bank of Georgia, N.A., a national banking association, offers
financial services that include, but are not limited to, commercial and
consumer loans, corporate, institutional, and personal trust services, demand
and time deposit accounts, letters of credit and international financial
services.
The Adviser employs an experienced staff of professional investment analysts,
portfolio managers and traders. The Adviser uses fundamental analysis and other
investment management disciplines to identify investment opportunities.
Wachovia Bank of North Carolina, N.A., Wachovia Bank of Georgia, N.A., and
Wachovia Bank of South Carolina, N.A. (collectively the "Wachovia Banks") have
been managing trust assets for over 100 years, with approximately $16.6 billion
in managed assets as of June 30, 1994. The Adviser has not previously served as
an investment adviser to a mutual fund. The Adviser's affiliate, Wachovia Bank
of South Carolina, N.A., has served as investment adviser to the Trust's South
Carolina Municipal Bond Portfolio since its inception on August 5, 1990.
Michael Peters has been the Fund's portfolio manager since the Fund's inception
in December of 1994. Mr. Peters joined Wachovia Bank of Georgia, N.A. in 1994,
and also serves as an officer of both Wachovia Bank of North Carolina, N.A. and
Wachovia Bank of South Carolina, N.A. Mr. Peters was employed with NationsBank
from 1990 to 1993, and from 1986 to 1990 was employed with First Bank of
Whiting. Mr. Peters received his M.B.A. from Indiana University and is a member
of the Institute of Chartered Financial Analysts.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the distributor (the "Distributor") for shares of
the Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICING ARRANGEMENTS
Federated Administrative Services, Pittsburgh, Pennsylvania, a subsidiary of
Federated Investors, is the Fund's shareholder servicing agent (the "Shareholder
Servicing Agent"). The Fund may pay the Shareholder Servicing Agent a fee based
on the average daily net asset value of shares for which it provides shareholder
services. These shareholder services include, but are not limited to,
distributing prospectuses and other information, providing shareholder
assistance and communicating or facilitating purchases and redemptions
of shares. This fee will be computed at an annual rate equal to 0.25
of 1% of the Fund's average daily net assets for which the Shareholder
Servicing Agent provides services; however, the Shareholder Servicing
Agent may choose voluntarily to waive all or a portion of its fee at any
time or pay all or some of its fees to financial institutions
or other financial service providers.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides the Fund with the
administrative personnel and services necessary to operate the Fund. Such
services include the preparation of filings with the Securities and Exchange
Commission and other regulatory authorities, assistance with respect to
meetings of the Trustees, shareholder servicing and accounting services, and
other administrative services. Federated Administrative Services provides
these at an annual rate, computed and payable daily, as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY
MAXIMUM NET ASSETS OF THE TRUST
ADMINISTRATIVE FEE AND THE BILTMORE FUNDS
------------------ -----------------------------------
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall aggregate at
least $50,000 for each portfolio of the Trust. Federated Administrative
Services may choose voluntarily to waive or reimburse a portion of its fee at
any time.
CUSTODIAN. Wachovia Bank of North Carolina, N.A., Winston-Salem, North
Carolina is custodian (the "Custodian") for the securities and cash of the
Fund.
Under the Custodian Agreement, the Custodian holds the Fund's portfolio
securities in safekeeping and keeps all necessary records and documents
relating to its duties. For the services to be provided to the Trust pursuant
to the Custodian Agreement, the Trust pays the Custodian an annual fee based
upon the average daily net assets of the Fund and payable monthly.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO
RECORDKEEPER. Federated Services Company, Pittsburgh, Pennsylvania, is
disbursing agent for the Fund and transfer agent for the shares of the Fund.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments.
LEGAL SERVICES. Legal services for the Fund are provided by Kirkpatrick &
Lockhart, Washington, D.C. Piper & Marbury, Washington, D.C., serves as
counsel to the independent Trustees.
INDEPENDENT AUDITOR. The independent auditor for the Fund is Ernst & Young
LLP, Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of The Biltmore
Municipal Funds' expenses. These expenses include, but are not limited to, the
cost of: organizing The Biltmore Municipal Funds and continuing its existence;
Trustees' fees; investment advisory and administrative services; printing
prospectuses and other Fund documents for shareholders; registering The
Biltmore Municipal Funds, the Fund and shares of the Fund; taxes and
commissions; issuing, purchasing, repurchasing, and redeeming shares; fees for
custodians, transfer agents, dividend disbursing agents, shareholder servicing
agents, and registrars; printing, mailing, auditing, accounting, and legal
expenses; reports to shareholders and government agencies; meetings of
Trustees and shareholders and proxy solicitations therefor; insurance
premiums; association membership dues; and such nonrecurring and extraordinary
items as may arise. However, the Adviser may voluntarily waive and/or
reimburse some expenses.
NET ASSET VALUE
- ------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
- -------------------------------------------------------------------------------
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business. Shares of the Fund may be
purchased through the Trust Divisions of the Wachovia Banks, Wachovia
Securities, Inc. or authorized broker/dealers which have a sales agreement
with the Distributor. All purchase orders must be transmitted to the Fund by
5:00 p.m. (Eastern time). Texas residents must purchase shares through an
authorized registered broker/dealer or through Federated Securities Corp. at
1-800-356-2805. In connection with the sale of Fund shares, the Distributor
may from time to time offer certain items of nominal value to any shareholder
or investor. The Fund and the Distributor reserve the right to reject any
purchase request.
THROUGH THE TRUST DIVISIONS OF THE WACHOVIA BANKS. Trust customers of the
Wachovia Banks may place an order to purchase shares of the Fund by
telephoning, sending written instructions, or placing the order in person with
their account officer in accordance with the procedures established by the
Wachovia Banks and as set forth in the relevant account agreement.
Payment may be made to the Wachovia Banks by check, by wire of federal funds,
or by debiting a customer's account with the Wachovia Banks. Purchase orders
must normally be received by the Wachovia Banks by 3:00 p.m. (Eastern time),
in order for shares to be purchased at that day's price. It is the
responsibility of the Wachovia Banks to transmit orders promptly to the Fund.
Shares of the Fund cannot be purchased by wire on any day on which the
Wachovia Banks, the New York Stock Exchange and the Federal Reserve Wire
System are not open for business.
THROUGH WACHOVIA SECURITIES INC. Customers of Wachovia Securities, Inc.,
Wachovia Brokerage Service or Wachovia Investments may place an order to
purchase shares by telephoning The Biltmore Shareholder Servicing Center at 1-
800-994-4414, sending written instructions, or placing an order in person.
Payment may be made by check, by wire of federal funds (the customer's bank
sends money to the Fund's bank through the Federal Reserve Wire System) or by
debiting a customer's account at Wachovia Securities, Inc. Purchase orders
must normally be communicated to Wachovia Securities, Inc. before 3:30 p.m.
(Eastern time). Wachovia Securities, Inc., a wholly-owned subsidiary of
Wachovia Corporation, is a registered broker/dealer and a member of the
National Association of Securities Dealers, Inc. Wachovia Brokerage Service
and Wachovia Investments are business units of Wachovia Securities, Inc.
BY MAIL. To purchase shares of the Fund through Wachovia Securities, Inc.
by mail, send a check made payable to Georgia Municipal Bond Fund to The
Biltmore Shareholder Servicing Center, 101 Greystone Boulevard, Room 108,
Columbia, South Carolina, 29226. Orders by mail are considered received
after payment by check is converted by Wachovia Securities, Inc. into
federal funds. This is normally the next business day after Wachovia
Securities, Inc. receives the check.
BY WIRE. To purchase shares of the Fund through Wachovia Securities, Inc.
by wire, wire funds as follows:
Wachovia Securities, Inc. ABA Number 0531-00494 Credit: 8735-001342
Further credit to: Georgia Municipal Bond Fund Re: (Customer name and
brokerage account number)
Shares of the Fund cannot be purchased by wire on any day on which the
Wachovia Banks, the New York Stock Exchange and the Federal Reserve Wire
System are not open for business.
THROUGH AUTHORIZED BROKER/DEALERS. An investor may place an order through
authorized brokers and dealers to purchase shares of the Fund. Shares will be
purchased at the public offering price next determined after the Fund receives
the purchase request. Purchase requests through registered broker/dealers must
normally be received by the broker/dealer and transmitted to the Fund before
3:30 p.m. (Eastern time) in order for shares to be purchased at that day's
public offering price.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $500. Subsequent
investments must be in amounts of at least $100. These minimums may be waived
for purchases by the Trust Divisions of the Wachovia Banks for their fiduciary
or custodial accounts. An institutional investor's minimum investment will be
calculated by combining all accounts it maintains with the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order
is received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF PERCENTAGE OF NET
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE AMOUNT INVESTED
- --------------------- --------------------- -----------------
<S> <C> <C>
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 2.50% 2.56%
$500,000 but less than $750,000 2.00% 2.04%
$750,000 but less than $1 million 1.00% 1.01%
$1 million or more 0.25% 0.25%
</TABLE>
During a special offering period, there will be no sales charge assessed on
shares purchased on or before March 31, 1995. Purchases made during this
special offering period cannot be exchanged for other shares of the Trust, The
Biltmore Funds or International Equity Fund, until April 30, 1995.
The net asset value is determined at or after the close of the New York Stock
Exchange, Monday through Friday, except on: (i) days on which there are not
sufficient changes in the value of the Fund's portfolio securities that its
net asset value might be materially affected; (ii) days during which no shares
are tendered for redemption and no orders to purchase shares are received; or
(iii) the following holidays: New Year's Day, Martin Luther King Day,
Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at net asset
value, without a sales charge, by investment advisers registered under the
Investment Advisers Act of 1940 purchasing on behalf of their clients, and by
the Wachovia Banks for funds which are held in a fiduciary, agency, custodial,
or similar capacity. Trustees, officers, directors and emeritus directors,
advisory board members, employees and retired employees of the Fund, the
Wachovia Banks, the spouses and children under the age of 21 of such persons,
and any trusts, pension profit-sharing plans and individual retirement
accounts operated for such persons, may purchase shares of the Fund at net
asset value. In addition, trustees, officers, directors and employees of the
Distributor and its affiliates, and any bank or investment dealer who has a
sales agreement with the Distributor relating to the Fund, may also purchase
shares at their net asset value.
SALES CHARGE REALLOWANCE
For shares sold with a sales charge, the Wachovia Banks or an affiliated
broker or a dealer will receive up to 100% of the applicable sales charge for
purchases of Fund shares made directly through the Wachovia Banks or such
broker or dealer.
The sales charge for shares sold other than through the Wachovia Banks or
registered broker/dealers will be retained by the Distributor. However, the
Distributor, at its sole discretion, may uniformly offer to pay all dealers
selling shares of the Fund, all or a portion of the sales charge it normally
retains. If accepted by the dealer, such additional payments will be
predicated upon the amount of Fund shares sold.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of Fund shares through:
. quantity discounts and accumulated purchases;
. signing a 13-month letter of intent; or
. using the reinvestment privilege.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table in this
prospectus under the section entitled "What Shares Cost," larger purchases
reduce the sales charge paid. The Fund will combine purchases made on the same
day by the investor, his spouse, and his children under age 21 when it
calculates the sales charge.
If an additional purchase of Fund shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$90,000 and he purchases $10,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 3.75%, not 4.50%.
To receive the sales charge reduction, the Wachovia Banks, Wachovia Securities,
Inc., or the Distributor must be notified by the shareholder or by his
financial institution at the time the purchase is made that Fund shares are
already owned or that purchases are being combined. The Fund will reduce the
sales charge after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the Fund over the next 13 months, the sales charge may be reduced by
signing a letter of intent to that effect. This letter of intent includes a
provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the custodian to hold
4.50% of the total amount intended to be purchased in escrow (in shares) until
such purchase is completed.
The 4.50% held in escrow will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in the letter of intent
is not purchased. In this event, an appropriate number of escrowed shares may
be redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase shares, but
if the shareholder does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. This letter may
be dated as of a prior date to include any purchases made within the past 90
days.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of shares in
portfolios in The Biltmore Funds and in The Biltmore Municipal Funds (such as
the Fund), the purchase price of which includes a sales charge. For example, if
a shareholder concurrently invested $70,000 in one of the portfolios of The
Biltmore Funds with a sales charge, and $40,000 in a portfolio of The Biltmore
Municipal Funds with a sales charge, the sales charge would be reduced.
To receive this sales charge reduction, the Wachovia Banks, Wachovia
Securities, Inc. or the Distributor must be notified by the agent placing the
order at the time the concurrent purchases are made. The sales charge will be
reduced after the purchase is confirmed.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 90 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge. The
Wachovia Banks, Wachovia Securities, Inc., or the Distributor must be notified
by the shareholder in writing or by his financial institution of the
reinvestment in order to eliminate a sales charge. If the shareholder redeems
his shares in the Fund, there may be tax consequences.
SYSTEMATIC INVESTMENT PROGRAM. Once a Fund account has been opened,
shareholders may add to their investment on a regular basis in a minimum amount
of $100. Under this program, funds may be automatically withdrawn periodically
from the shareholder's checking account at the Wachovia Banks, and invested in
Fund shares at the net asset value next determined after an order is received
by the Fund, plus the applicable sales charge. A shareholder may apply for
participation in this program through the Wachovia Banks, Wachovia Securities,
Inc. or through the Distributor.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless
requested in writing to the Fund.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during
that month.
DIVIDENDS
Dividends are declared daily and are paid monthly. Dividends are declared just
prior to determining net asset value. If an order for shares is placed on the
preceding business day, shares purchased by wire begin earning dividends on the
business day wire payment is received by the Custodian. If the order for shares
and payment by wire are received on the same day, shares begin earning
dividends on the next business day. Shares purchased by check begin earning
dividends on the business day after the check is converted into federal funds.
Unless cash payments are requested by contacting the Fund, dividends are
automatically reinvested on payment dates in additional shares of the Fund at
the payment date's net asset value without a sales charge.
CAPITAL GAINS
Distributions of any net realized long-term capital gains realized by the Fund,
if any, will be made at least annually.
EXCHANGE PRIVILEGE
Shareholders of the Fund may exchange all or some of their Fund shares for:
shares in other portfolios of the Trust, shares in portfolios of The Biltmore
Funds or shares of the International Equity Fund. The Biltmore Funds are
advised by Wachovia Investment Management Group, a business unit of Wachovia
Bank of North Carolina, N.A., and distributed by Federated Securities Corp. The
Trust consists of the Fund, North Carolina Municipal Bond Fund and South
Carolina Municipal Bond Fund. The South Carolina Municipal Bond Fund is advised
by Wachovia Bank of South Carolina, N.A., a national banking association
headquartered in Columbia, South Carolina. It is the primary subsidiary of
South Carolina National Corporation, a bank holding company with a commercial
bank subsidiary and a federal savings bank subsidiary in South Carolina. The
North Carolina Municipal Bond Fund is advised by Wachovia Bank of North
Carolina, N.A. The North Carolina and South Carolina Municipal Bond Funds are
distributed by Federated Securities Corp. The International Equity Fund is
advised by Fiduciary International, Inc. and distributed by Federated
Securities Corp. The Biltmore Funds consist of the following portfolios:
Biltmore Balanced Fund, Biltmore Emerging Markets Fund, Biltmore Equity Fund,
Biltmore Equity Index Fund, Biltmore Fixed Income Fund, Biltmore Money Market
Fund (Institutional Shares and Investment Shares), Biltmore Prime Cash
Management Fund (Institutional Shares), Biltmore Quantitative Equity Fund,
Biltmore Short-Term Fixed Income Fund, Biltmore Special Values Fund, Biltmore
Tax-Free Money Market Fund (Institutional Shares and Investment Shares), and
Biltmore U.S. Treasury Money Market Fund (Institutional Shares and Investment
Shares). (The International Equity Fund, the portfolios of the Trust, and The
Biltmore Funds are referred to in this section as the "Portfolios.")
Shareholders of the Fund have easy access to the Portfolios through a telephone
exchange program. The exchange privilege is available to shareholders residing
in any state in which the shares being acquired may be legally sold. Prior to
any exchange, the shareholder should review a copy of the current prospectus of
the Portfolio into which an exchange is to be effected. Shareholders
contemplating exchanges between the Fund and the Trust's other portfolios
should consult their tax advisers, since the tax advantages of each Fund may
vary.
Shares of the Portfolios may be exchanged for shares of the Fund at net asset
value without a sales charge (if previously paid). Shares of Portfolios with a
sales charge may be exchanged at net asset value for shares of other Portfolios
with an equal sales charge or no sales charge. Shares of Portfolios with no
sales charge acquired by direct purchase or reinvestment of dividends on such
shares may be exchanged for shares of Portfolios at net asset value.
Shareholders using this privilege must exchange shares having a net asset value
at least equal to the minimum investment of the Portfolio into which they are
exchanging. An exchange order must comply with the requirements for a
redemption and purchase order and must specify the dollar value or number of
shares to be exchanged. Shareholders who desire to automatically exchange
shares of a predetermined amount on a monthly, quarterly, or annual basis may
take advantage of a systematic exchange privilege. A shareholder may obtain
further information on these exchange privileges by calling the Fund, Wachovia
Securities, Inc. or, in the case of customers of the Wachovia Banks, the
shareholder's account officer.
Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange will be redeemed at the next-determined net asset
value. Written exchange instructions may require a signature guarantee.
Exercise of this privilege is treated as a sale for federal income tax purposes
and, depending on the circumstances, a short or long-term capital gain or loss
may be realized. The exchange privilege may be modified or terminated at any
time. Shareholders will be notified of the modification or termination of the
exchange privilege.
EXCHANGE BY TELEPHONE. Instructions for exchanges between the Portfolios and
the Fund may be given by telephone to Wachovia Securities, Inc., and in the
case of customers of the Wachovia Banks, the customer's account officer. Shares
may be exchanged by telephone only between fund accounts having identical
shareholder registrations. Exchange instructions given by telephone may be
electronically recorded. If reasonable procedures are not followed by the Fund,
it may be liable for losses due to unauthorized or fraudulent telephone
instructions.
Telephone exchange instructions must be received before 4:00 p.m. (Eastern
time) for shares to be exchanged the same day. The telephone exchange privilege
may be modified or terminated at any time. Shareholders will be notified of
such modification or termination. Shareholders may have difficulty in making
exchanges by telephone through banks, brokers, and other financial institutions
during times of drastic economic or market changes. If a shareholder cannot
contact his bank, broker, or financial institution by telephone, it is
recommended that an exchange request be made in writing and sent by overnight
mail.
REDEEMING SHARES
- -------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the
Fund receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Telephone or written requests for
redemptions must be received in proper form and can be made through the
Wachovia Banks, Wachovia Securities, Inc., or directly to the Fund.
BY TELEPHONE. A shareholder may redeem shares of the Fund by calling the
Wachovia Banks (call toll-free 1-800-763-7277) to request the redemption.
Telephone redemption instructions may be recorded. Shares will be redeemed at
the net asset value next determined after the Fund receives the redemption
request from the Wachovia Banks. Redemption requests made through the Wachovia
Banks must be received by the Wachovia Banks before 3:00 p.m. (Eastern time)
in order for shares to be redeemed at that day's net asset value. The Wachovia
Banks are responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. Registered
broker/dealers may charge customary fees and commissions for this service. If
reasonable procedures are not followed by the Fund, it may be liable for
unauthorized or fraudulent telephone instructions.
A shareholder who is a customer of Wachovia Securities, Inc. and who has
completed a telephone redemption authorization form, may redeem shares of the
Fund by phone by calling The Biltmore Shareholder Servicing Center at 1-800-
994-4414. A shareholder who is a customer of the Wachovia Banks and whose
account agreement with the Wachovia Banks permits telephone redemption may
redeem shares of the Fund by telephoning his account officer. An authorization
permitting the Wachovia Banks to accept telephone requests is included as part
of a shareholder's account agreement. Shares will be redeemed at the net asset
value next determined after the Fund receives the redemption request.
Redemption requests must be received by 4:00 p.m. (Eastern time) in order for
shares to be redeemed at that day's net asset value. In no event will proceeds
be credited more than seven days after a proper request for redemption has
been received. In the event of drastic economic or market changes, a
shareholder may experience difficulty in redeeming by telephone. If such a
case should occur, another method of redemption should be considered.
BY MAIL. A shareholder may redeem Fund shares by sending a written request to
the Wachovia Banks. The written request should include the shareholder's name,
the Fund name, the account number, and the share or dollar amount requested.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request to the
Fund. Shareholders should call the Wachovia Banks for assistance in redeeming
by mail.
A shareholder who is a customer of Wachovia Securities, Inc. may redeem shares
by sending a written request to Wachovia Securities, Inc. The written request
should include the shareholder's name and address, the Fund name, the
brokerage account number, and the share or dollar amount requested.
Shareholders should call Wachovia Securities, Inc. for assistance in redeeming
by mail. Normally, a check for the proceeds is mailed within five business
days, but in no event more than seven days, after receipt of a proper written
redemption request.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
. a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
. a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchanges;
. a savings bank or savings and loan association whose deposits are
insured by the Savings Association Insurance Fund ("SAIF"), which is
administered by the FDIC; or
. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to Fund
shares, and the fluctuation of the net asset value of Fund shares redeemed
under this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in the Fund. For this reason, payments under this
program should not be considered as yield or income on the shareholder's
investment in the Fund. To be eligible to participate in this program, a
shareholder must have an account value of at least $10,000. A shareholder may
apply for participation in this program through his financial institution. For
shares sold with a sales charge, it is not advisable for shareholders to be
purchasing shares while participating in this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $500. This
requirement does not apply, however, if the balance falls below $500 because of
changes in the Fund's net asset value. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to purchase
additional shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in The Biltmore Municipal Funds have equal voting rights except that only
shares of the Fund are entitled to vote on matters affecting only the Fund. As
a Massachusetts business trust, The Biltmore Municipal Funds are not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust's or the Fund's operation and for the election
of Trustees under certain circumstances. Trustees may be removed by the
Trustees or by shareholders at a special meeting. A special meeting of the
shareholders shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of The Biltmore
Municipal Funds.
MASSACHUSETTS BUSINESS TRUSTS
Under certain circumstances, shareholders may be held personally liable under
Massachusetts law for acts or obligations of the Trust on behalf of the Fund.
To protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument the Trust or its Trustees
enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations on behalf of the Fund, the Trust is required by its Declaration of
Trust to use the property of the Fund to protect or compensate the shareholder.
On request, the Trust will defend any claim made and pay any judgment against a
shareholder for any act or obligation of the Trust on behalf of the Fund.
Therefore, financial loss resulting from liability as a shareholder of the Fund
will occur only if the Trust cannot meet its obligations to indemnify
shareholders and pay judgments against them from assets of the Fund.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling or distributing most securities.
However, such banking laws and regulations do not prohibit such a holding
company affiliate or banks generally from acting as investment adviser,
transfer agent or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of such a customer.
The Wachovia Banks are subject to such banking laws and regulations.
The Wachovia Banks believe that they may perform the services for the Fund
contemplated by the advisory agreement and the Custodian Agreement with The
Biltmore Municipal Funds without violation of the Glass-Steagall Act or other
applicable banking laws or regulations. Changes in either federal or state
statutes and regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, as well as further judicial or administrative
decisions or interpretations of such or future statutes and regulations, could
prevent the Wachovia Banks from continuing to perform all or a part of the
above services for their customers and/or the Fund. If they were prohibited
from engaging in these customer-related activities, the Trustees would consider
alternative advisers and means of continuing available investment services. In
such event, changes in the operation of the Fund may occur, including possible
termination of any automatic or other Fund share investment and redemption
services then being provided by the Wachovia Banks. It is not expected that
existing shareholders would suffer any adverse financial consequences (if
another adviser with equivalent abilities to Wachovia Bank of Georgia, N.A. is
found) as a result of any of these occurrences.
State securities laws governing the ability of depository institutions to act
as underwriters or distributors of securities may differ from interpretations
given to the Glass-Steagall Act and, therefore, banks and financial
institutions may be required to register as dealers pursuant to state law.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund expects to pay no federal regular income tax because it intends to
meet requirements of the Internal Revenue Code applicable to regulated
investment companies and to receive the special tax treatment afforded to such
companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by The
Biltmore Municipal Funds portfolios will not be combined for tax purposes with
those realized by the Fund.
Shareholders are not required to pay federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest income earned on some municipal bonds may be included
in calculating the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.
The alternative minimum tax, equal to up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is equal
to the regular taxable income of the taxpayer increased by certain "tax
preference" items not included in regular taxable income and increased or
reduced by certain alternative minimum tax adjustments.
The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons, and other public facilities,
private activity bonds provide benefits to private parties. The Fund may
purchase all types of municipal bonds, including private activity bonds. Thus,
should it purchase any such bonds, a portion of the Fund's dividends may be
treated as a tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund
which represent interest on municipal bonds may become subject to the 20%
corporate alternative minimum tax because the
dividends are included in a corporations's "adjusted current earnings." The
corporate alternative minimum tax treats 75% of the excess of the taxpayer's
"adjusted current earnings" over the taxpayer's preadjustment alternative
minimum taxable income as an alternative minimum tax adjustment. "Adjusted
current earnings" is based upon the concept of a corporation's "earnings and
profits". Since "earnings and profits" generally includes the full amount of
any Fund dividend, and preadjustment alternative minimum taxable income does
not include the portion of the Fund's dividend attributable to municipal bonds
which are not private activity bonds, 75% of the difference will be included in
the calculation of the corporation's alternative minimum tax.
Shareholders should consult with their tax advisers to determine whether they
are subject to the alternative minimum tax or the corporate alternative minimum
tax and, if so, the tax treatment of dividends paid by the Fund.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
Distributions representing net long-term capital gains realized by the Fund, if
any, will be taxable as long-term capital gains regardless of the length of
time shareholders have held their shares.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
GEORGIA TAXES
Under existing Georgia law, shareholders of the Fund will not be subject to
Georgia income taxes on Fund dividends to the extent that such dividends
represent "exempt-interest dividends" as defined in the Internal Revenue Code
of 1986, as amended, which are directly attributable to (i) interest-bearing
obligations issued by or on behalf of the State of Georgia or its political
subdivisions; or (ii) interest on obligations of the United States or any other
issuer whose obligations are exempt from state income taxes under federal law.
To the extent that distributions by the Fund are derived from capital gains on
such obligations, or from dividends or capital gains on other types of
obligations, such distributions will be subject to Georgia income taxes.
The Trust, as a Massachusetts business trust, is not expected to be required to
pay the annual Georgia intangible property tax on the securities it holds. It
is, however, the current practice of the Georgia Department of Revenue to
subject trust interests similar to the shares to the intangibles tax at a rate
equal to 10 cents per $1,000 of value, if the owners of such interests reside
or have their principal business location in Georgia. The Department of Revenue
is currently considering whether the taxable value of trust interests
representing beneficial interests in tax-exempt securities may be reduced to
take into account the exempt nature of such securities. Georgia law exempts the
following securities from the intangibles tax: (1) obligations of the United
States (including United States government agencies and corporations
established by Acts of Congress); (ii) obligations of the State of Georgia
(including its political subdivisions or public institutions); and (iii)
industrial development revenue bonds issued pursuant to the laws of Georgia.
OTHER STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from state income taxes in states
other than Georgia or from personal property taxes. State laws differ on this
issue, and shareholders are urged to consult their own tax advisers regarding
the status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its total return, yield, and tax-
equivalent yield.
Total return represents the change, over a specific period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gain distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the offering price per share of the Fund on the
last day of the period. This number is then annualized using semi-annual
compounding. The tax-equivalent yield of the Fund is calculated similarly to
the yield, but is adjusted to reflect the taxable yield that the Fund would
have had to earn to equal its actual yield, assuming a specific tax rate. The
yield and the tax-equivalent yield do not necessarily reflect income actually
earned by the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of the maximum sales load
which, if excluded, would increase the total return, yield, and tax-equivalent
yield.
From time to time, the Fund may advertise its performance using certain
reporting services and/or compare its performance to certain indices.
ADDRESSES
- --------------------------------------------------------------------------------
Georgia Municipal Bond Fund Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Wachovia Bank of Georgia, N.A. 191 Peachtree Street, N.E.
Atlanta, Georgia 30303
- --------------------------------------------------------------------------------
Custodian
Wachovia Bank of North Carolina, N.A. Wachovia Trust Operations
301 North Main Street
Winston-Salem, North
Carolina 27150
- --------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent, and Portfolio Recordkeeper
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Counsel to The Biltmore Municipal Funds
Kirkpatrick & Lockhart 1800 M Street, N.W.
Washington, D.C. 20036-2430
- --------------------------------------------------------------------------------
Counsel to the Independent Trustees
Piper & Marbury 1200 Nineteenth Street,
N.W.
Washington, D.C. 20036-2430
- --------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania
15219
- --------------------------------------------------------------------------------
The Biltmore Shareholder Servicing Center
101 Greystone Boulevard
Room 108
Columbia, South Carolina
29226
- --------------------------------------------------------------------------------
Georgia Municipal Bond Fund
A Non-diversified Portfolio of The
Biltmore Municipal Funds
An Open-End, Management Investment
Company
Prospectus
December , 1994
[LOGO] FEDERATED SECURITIES CORP.
--------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
G00481-05 (9/94)
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
any offers to buy be accepted prior to the time the registration statement
becomes effective. This Statement of Additional Information does not constitute
a prospectus.
SUBJECT TO COMPLETION, PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION DATED
OCTOBER 10, 1994
GEORGIA MUNICIPAL BOND FUND
(A PORTFOLIO OF THE BILTMORE MUNICIPAL FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospectus of
Georgia Municipal Bond Fund (the "Fund") dated December , 1994. This State-
ment is not a prospectus itself. To receive a copy of the prospectus write the
Fund or call The Biltmore Shareholder Servicing Center toll-free 1-800-994-
4414.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated December , 1994
LOGO
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- --------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- --------------------------------------
Acceptable Investments 1
When-Issued and Delayed Delivery
Transactions 1
Repurchase Agreements 1
Lending of Portfolio Securities 2
Portfolio Turnover 2
Municipal Bond Insurance 2
INVESTMENT LIMITATIONS 3
- --------------------------------------
Georgia Investment Risks 5
THE BILTMORE MUNICIPAL FUNDS
MANAGEMENT 5
- --------------------------------------
Officers and Trustees 5
Fund Ownership 6
Trustee Liability 6
INVESTMENT ADVISORY SERVICES 6
- --------------------------------------
Adviser to the Fund 6
Advisory Fees 6
ADMINISTRATIVE SERVICES 6
- --------------------------------------
Transfer Agent and Dividend
Disbursing Agent 6
BROKERAGE TRANSACTIONS 7
- --------------------------------------
PURCHASING SHARES 7
- --------------------------------------
Distribution of Shares 7
Conversion to Federal Funds 7
DETERMINING NET ASSET VALUE 7
- --------------------------------------
Valuing Municipal Bonds 7
REDEEMING SHARES 7
- --------------------------------------
Redemption in Kind 7
TAX STATUS 8
- --------------------------------------
The Fund's Tax Status 8
Shareholders' Tax Status 8
TOTAL RETURN 8
- --------------------------------------
YIELD 8
- --------------------------------------
TAX-EQUIVALENT YIELD 8
- --------------------------------------
Tax-Equivalency Table 9
PERFORMANCE COMPARISONS 9
- --------------------------------------
APPENDIX 11
- --------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in The Biltmore Municipal Funds (the "Trust") which was
established as a Massachusetts business trust under a Declaration of Trust
dated August 15, 1990. Prior to June 3, 1993, the Trust was known as "The
Passageway Funds."
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide for its shareholders current
income which is exempt from federal regular income tax and the personal income
taxes imposed by the State of Georgia. The objective cannot be changed without
approval of shareholders.
ACCEPTABLE INVESTMENTS
If a high-rated security loses its rating or has its rating reduced after
the Fund has purchased it, the Fund is not required to drop the security
from its portfolio, but may consider doing so. If ratings made by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("S&P") change because of changes in those organizations or in their
rating systems, the Fund will try to use comparable ratings as standards
in accordance with the investment policies described in the Fund's
prospectus.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right
to demand payment of the principal amounts of the participation interests
plus accrued interest on short notice (usually within seven days).
VARIABLE RATE MUNICIPAL SECURITIES
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital
appreciation or depreciation is less for variable rate municipal
securities than for fixed income obligations.
Many municipal securities with variable interest rates purchased by the
Fund are subject to repayment of principal (usually within seven days) on
the Fund's demand. The terms of these variable rate demand instruments
require payment of principal obligations, the issuer of the participation
interests, or a guarantor of either issuer.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests which represent undivided proportional interests in lease
payments by a governmental or non-profit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or
the nature of the appropriation for the lease. In particular, lease
obligations may be subject to periodic appropriation. If the entity does
not appropriate funds for future lease payments, the entity cannot be
compelled to make such payments. Furthermore, a lease may provide that
the certificate trustee cannot accelerate lease obligations upon default.
The trustee would only be able to enforce lease payments as they become
due. In the event of a default or failure of appropriation, it is
unlikely that the trustee would be able to obtain an acceptable
substitute source of payment or that the substitute source of payment
will generate tax-exempt income.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. No fees or expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and
maintained until the transaction has been settled. The Fund does not intend to
engage in when-issued and delayed delivery transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities or
certificates of deposit to the Fund and agree at the time of sale to repurchase
them at a mutually agreed upon time and price within one year from the date of
acquisition. The Fund or its custodian will take possession of the securities
subject to repurchase agreements. To the extent that the original seller does
not repurchase the securities from the Fund, the Fund could receive less than
the repurchase price on any sale of such securities. In the event that such a
defaulting seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund believes
that under the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or disposition
of such securities. The Fund may only enter into repurchase agreements with
banks and other recognized financial institutions, such as broker/dealers,
which are found by the Fund's adviser to be creditworthy.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking short-
term profits, securities in its portfolio will be sold whenever the Fund's ad-
viser believes it is appropriate to do so in light of the Fund's investment ob-
jective, without regard to the length of time a particular security may have
been held. It is not anticipated that the portfolio trading engaged in by the
Fund will result in its annual rate of portfolio turnover exceeding 100% under
normal market conditions.
MUNICIPAL BOND INSURANCE
Under the Policies (as such term is defined in the prospectus), municipal bond
insurers unconditionally guarantee to the Fund the timely payment of principal
and interest on the insured municipal securities when and as such payments
shall become due but shall not be paid by the issuer, except that in the event
of any acceleration of the due date of the principal by reason of mandatory or
optional redemption (other than acceleration by reason of mandatory sinking
fund payments), default or otherwise, the payments guaranteed will be made in
such amounts and at such times as payments of principal would have been due had
there not been such acceleration. The municipal bond insurers will be
responsible for such payments less any amounts received by the Fund from any
trustee for the municipal bond issuers or from any other source. The Policies
do not guarantee payment on an accelerated basis, the payment of any redemption
premium, the value for the shares of the Fund, or payments of any tender
purchase price upon the tender of the municipal securities. The Policies also
do not insure against nonpayment of principal of or interest on the securities
resulting from the insolvency, negligence or any other act or omission of the
trustee or other paying agent for the securities. However, with respect to
small issue industrial development municipal bonds and pollution control
revenue municipal bonds covered by the Policies, the municipal bond insurers
guarantee the full and complete payments required to be made by or on behalf of
an issuer of such municipal securities if there occurs any change in the tax-
exempt status of interest on such municipal securities, including principal,
interest or premium payments, if any, as and when required to be made by or on
behalf of the issuer pursuant to the terms of such municipal securities. A
when-issued municipal security will be covered under the Policies upon the
settlement date of the issuer of such when-issued municipal securities. In
determining to insure municipal securities held by the Fund, each municipal
bond insurer has applied its own standard, which corresponds generally to the
standards it has established for determining the insurability of new issues of
municipal securities. This insurance is intended to reduce financial risk, but
the cost thereof and compliance with investment restrictions imposed under the
Policies will reduce the yield to shareholders of the Fund.
If a Policy terminates as to municipal securities sold by the Fund on the date
of sale, in which event municipal bond insurers will be liable only for those
payments of principal and interest that are then due and owing, the provision
for insurance will not enhance the marketability of securities held by the
Fund, whether or not the securities are in default or subject to significant
risk of default, unless the option to obtain permanent insurance is exercised.
On the other hand, since issuer-obtained insurance will remain in effect as
long as the insured municipal securities are outstanding, such insurance may
enhance the marketability of municipal securities covered thereby, but the
exact effect, if any, on marketability cannot be estimated. The Fund generally
intends to retain any securities that are in default or subject to significant
risk of default and to place a value on the insurance, which ordinarily will be
the difference between the market value of the defaulted security and the
market value of similar securities of minimum investment grade (i.e., rated BBB
by S&P or Baa by Moody's) that are not in default. To the extent that the Fund
holds defaulted securities, it may be limited in its ability to manage its
investment and to purchase other municipal securities. Except as described
above with respect to securities that are in default or subject to significant
risk of default, the Fund will not place any value on the insurance in valuing
the municipal securities that it holds.
Municipal bond insurance may be provided by one or more of the following
insurers or any other municipal bond insurer which is rated Aaa by Moody's or
AAA by S&P.
MUNICIPAL BOND INVESTORS ASSURANCE CORP.
Municipal Bond Investors Assurance Corp. ("MBIA") is a wholly-owned
subsidiary of MBIA, Inc., a Connecticut insurance company, which is owned
by AEtna Casualty & Surety, Credit Local DeFrance CAECL, and the public.
The investors of MBIA, Inc., are not obligated to pay the obligations of
MBIA. MBIA, domiciled in New York, is regulated by the New York State
Insurance Department and licensed to do business in various states. The
address of MBIA is 113 King Street, Armonk, New York, 10504, and its
telephone number is (914) 273-4345. As of June 1, 1994, S&P has rated the
claims-paying ability of MBIA "AAA."
AMBAC INDEMNITY CORPORATION
AMBAC Indemnity Corporation ("AMBAC") is a Wisconsin-domiciled stock
insurance company, regulated by the Insurance Department of Wisconsin,
and licensed to do business in various states. AMBAC is a wholly-owned
subsidiary of AMBAC, Inc., a financial holding company which is owned by
the public. Copies of certain statutorily required filings of AMBAC can
be obtained from AMBAC. The address of AMBAC's administrative offices is
One State Street Plaza, 17th Floor, New York, New York 10004, and its
telephone number is (212) 668-0340. As of June 1, 1994, S&P has rated the
claims-paying ability of AMBAC "AAA."
FINANCIAL GUARANTY INSURANCE COMPANY
Financial Guaranty Insurance Company ("Financial Guaranty") is a wholly-
owned subsidiary of FGIC Corporation, a Delaware holding company. FGIC
Corporation is 99% owned by General Electric Capital Corporation, with
the other 1% ownership coming from the Sumitomo Marine & Fire Insurance
Company Ltd. The investors of FGIC Corporation are not obligated to pay
the debts of or the claims against Financial Guaranty. Financial Guaranty
is subject to regulation by the New York State Insurance Department and
is licensed to do business in various states. The address of Financial
Guaranty is 115 Broadway, New York, New York 10006, and its telephone
number is (212) 312-3000. As of June 1, 1994, S&P has rated the claims-
paying ability of Financial Guaranty "AAA."
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of securities.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities, except that the Fund may
borrow money in amounts up to one-third of the value of its total assets,
including the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of its total assets are
outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its assets except to
secure permitted borrowings.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, although it may invest in
municipal bonds secured by real estate or interests in real estate.
INVESTING IN COMMODITIES
The Fund will not buy or sell commodities, commodity contracts, or
commodities futures contracts.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities. The
Fund may, however, acquire publicly or non-publicly issued municipal
bonds or temporary investments or enter into repurchase agreements in
accordance with its investment objective, policies, and limitations and
its Declaration of Trust.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in
any one industry, except that the Fund may invest 25% or more of its
assets in certain broad segments of the municipal securities market, such
as revenue obligations of hospitals and other health care facilities,
housing agency revenue obligations, or airport revenue obligations.
Governmental issuers of municipal securities are not considered part of
any "industry." The Fund may invest 25% or more of the value of its total
assets in cash, cash items, or securities issued or guaranteed by the
government of the United States or its agencies, or instrumentalities and
repurchase agreement collateralized by such U.S. government securities.
Concentrating investments in one industry may subject the Fund to more
risk than if it did not concentrate.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of the value of its total assets
in securities subject to restrictions on resale under the Securities Act
of 1933, except for restricted securities determined to be liquid under
criteria established by the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
obligations, including repurchase agreements providing for settlement in
more than seven days after notice, and certain restricted securities.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
industrial development bonds where the principal and interest are the
responsibility of companies (or guarantors, where applicable) with less
than three years of continuous operations, including the operation of any
predecessor.
INVESTING IN OPTIONS
The Fund will not buy or sell puts, calls, straddles, spreads, or any
combination of these.
INVESTING IN MINERALS
The Fund will not purchase or sell oil, gas, or other mineral exploration
or development programs, or leases.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not own more than 3% of the total outstanding voting stock
of any investment company, invest more than 5% of its total assets in any
investment company, or invest more than 10% of its total assets in
investment companies in general. The Fund will purchase securities of
investment companies only in open-market transactions involving only
customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation, or
acquisition of assets. While it is the Fund's adviser's policy to waive
its investment advisory fee on assets invested in securities of open-end
investment companies, it should be noted that investment companies incur
certain expenses such as custodian and transfer agent fees, and therefore
any investment by the Fund in shares of another investment company would
be subject to such duplicate expenses.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction.
The Fund does not expect to borrow money or pledge securities in excess of 5%
of the value of its net assets in the coming fiscal year.
In order to comply with certain state restrictions, the Fund will not invest in
real estate limited partnerships or oil, or other mineral leases.
GEORGIA INVESTMENT RISKS
Georgia's economy is based on manufacturing (textiles, food products, paper
products, electronic equipment and aircraft), trade and a growing service
sector. Atlanta, with a service-oriented economy, is a trade, service and
transportation center for the Southeast region and is the focus of economic
growth in the State. In most other cities in Georgia, manufacturing
predominates. The State economy was only mildly affected by the early 1980's
recession and grew rapidly for most of the decade, with employment and personal
income growth in excess of comparable national rates. Despite continued
population growth, personal income per capita has steadily gained relative to
the nation. The economy began to slow in 1989, with less vigorous job growth
evident and relative per capita income position slipping.
Throughout the 1980's the State's expanding economy fostered strong income and
sales tax growth. This enabled the State to record fairly strong fiscal
operations from fiscal years 1984-1989.
The State experienced an economic downturn in the early 1990's, as operating
deficits were recorded in fiscal years 1990-1992. However, in fiscal years 1993
and 1994, the State ended with operating surpluses due to strong revenue growth
which will be used to augment reserves. The State's debt rating was affirmed as
"Aaa" by Moody's in July, 1994.
Except for the major building projects necessary for the 1996 Summer Olympics,
it appears unlikely that areas in and around metropolitan Atlanta will
experience the building construction rates of the mid to late 1980's.
THE BILTMORE MUNICIPAL FUNDS MANAGEMENT
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OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations
during the past five years and their present positions. Each of the Trustees
and officers listed below holds an identical position with The Biltmore Funds,
another investment company which is advised by Wachovia Bank of North Carolina,
N.A. Except as listed below, none of the Trustees or officers are affiliated
with Wachovia Bank of North Carolina, N.A., Federated Investors, Federated
Securities Corp., Federated Services Company or Federated Administrative
Services.
- --------------------------------------------------------------------------------
James A. Hanley
Trustee
Retired; Vice President and Treasurer, Abbott Laboratories (health care
products) until 1992.
- --------------------------------------------------------------------------------
Malcolm T. Hopkins
Trustee
Private investor and consultant; Director, The Columbia Gas System, Inc.
(integrated natural gas production, transmission and distribution); Director,
MAPCO, Inc. (diversified energy); Director, Metropolitan Series Funds, Inc. and
MetLife Portfolios, Inc. (investment companies); Director, Kinder-Care Learning
Centers, Inc. (child care); and Director, U.S. Home Corp. (residential builders
and land development).
- --------------------------------------------------------------------------------
Samuel E. Hudgins
Trustee
President, Percival, Hudgins & Company, Inc. (investment bankers/financial
consultants); Director, Atlantic American Corporation (insurance holding
company); Director, Bankers Fidelity Life Insurance Company; Director and Vice
Chairman, Leath Furniture, Inc. (retail furniture); President, Atlantic
American Corporation until 1988; Director, Vice Chairman and Chief Executive
Officer, Rhodes, Inc. (retail furniture) until 1988; Chairman and Director,
Atlantic American Life Insurance Co., Georgia Casualty & Surety Company, and
Bankers Fidelity Life Insurance until 1988.
- --------------------------------------------------------------------------------
J. Berkley Ingram, Jr.
Trustee
Real estate investor and partner; Director, VF Corporation (apparel company).
- --------------------------------------------------------------------------------
D. Dean Kaylor
Trustee
Retired; Executive Vice President and Chief Financial Officer, NBD Bank, N.A.
and NBD Bancorp, Inc. (bank and bank-holding company) until 1990.
- --------------------------------------------------------------------------------
John W. McGonigle
President and Treasurer
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Trustee, Federated Services Company;
Executive Vice President, Secretary and Trustee, Federated Administrative
Services; Executive Vice President and Director, Federated Securities Corp.
- --------------------------------------------------------------------------------
Ronald M. Petnuch
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; formerly, Associate
Corporate Counsel, Federated Investors; Vice President and Assistant Treasurer
of certain investment companies for which Federated Securities Corp. is the
principal distributor.
- --------------------------------------------------------------------------------
Joseph M. Huber
Secretary
Corporate Counsel, Federated Investors.
- --------------------------------------------------------------------------------
The address of the Trustees and officers of the Trust is Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEE LIABILITY
The Biltmore Municipal Funds' Declaration of Trust provides that the Trustees
are not liable for errors of judgment or mistakes of fact or law. However, they
are not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's adviser is Wachovia Bank of Georgia, N.A. (the "Adviser").
The Adviser shall not be liable to the Fund or any shareholder for any losses
that may be sustained in the purchase, holding, lending, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Fund.
ADVISORY FEES
For its advisory services, Wachovia Bank of Georgia, N.A. receives an annual
investment advisory fee as described in the prospectus.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for the fees set
forth in the prospectus.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Fund. The fee is based on the size, type, and number of accounts
and transactions made by shareholders.
Federated Services Company also maintains the Trust's accounting records. The
fee is based on the level of the Fund's average net assets for the period plus
out-of-pocket expenses.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better
price and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees. The Adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished directly to
the Fund or to the Adviser and may include:
. advice as to the advisability of investing in securities;
. security analysis and reports;
. economic studies;
. industry studies;
. receipt of quotations for portfolio evaluations; and
. similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage
and research services provided.
Research services provided by brokers may be used by the Adviser or by its
affiliates in advising other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Except under certain circumstances described in the prospectus, shares are sold
at their net asset value plus a sales charge on days the New York Stock
Exchange, the Wachovia Banks (as such term is defined in the prospectus) and
the Federal Reserve Wire System are open for business. The procedure for
purchasing shares of the Fund is explained in the prospectus under "Investing
in the Fund."
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. The Wachovia Banks act as the shareholders' agent in depositing
checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value
is calculated by the Fund are described in the prospectus.
VALUING MUNICIPAL BONDS
The Trustees use an independent pricing service to value municipal bonds. The
independent pricing service takes into consideration yield, stability, risk,
quality, coupon rate, maturity, type of issue, trading characteristics, special
circumstances of a security or trading market, and any other factors or market
data it considers relevant in determining valuations for normal institutional
size trading units of debt securities, and does not rely exclusively on quoted
prices.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares."
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the right,
under certain circumstances, to pay the redemption price in whole or in part by
a distribution of securities from the Fund's portfolio. Redemption in kind will
be made in conformity with applicable Securities and Exchange Commission rules,
taking such securities at the same value employed in determining net asset
value and selecting the securities in a manner the Trustees determine to be
fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company
Act of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund Expects to pay no federal income tax because it intends to meet
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must, among
other requirements:
. derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
. derive less than 30% of its gross income from the sale of securities held
less than three months;
. invest in securities within certain statutory limits; and
. distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
No portion of any income dividend paid by the Fund is eligible for the
dividends received deductions available to corporations.
CAPITAL GAINS
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because of:
. the availability of higher relative yields;
. differentials in market values;
. new investment opportunities;
. changes in creditworthiness of an issuer; or
. an attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they
are taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the net asset value per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at
the beginning of the period with $1,000, less any applicable sales load,
adjusted over the period by any additional shares, assuming the monthly
reinvestment of all dividends and distributions.
YIELD
- --------------------------------------------------------------------------------
The yield for the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the net asset value per share on the last day of
the period. This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a twelve-month period and is reinvested
every six months. The yield does not necessarily reflect income actually earned
by the Fund because of certain adjustments required by the Securities and
Exchange Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, performance will be reduced for those shareholders paying those fees.
TAX-EQUIVALENT YIELD
- --------------------------------------------------------------------------------
The tax-equivalent yield of the Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to earn
to equal its actual yield, assuming that income is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the Fund's
portfolio generally remains free from federal regular income tax, and is
often free from state and local taxes as well. As the table below
indicates, a "tax-free" investment is an attractive choice for investors,
particularly in times of narrow spreads between tax-free and taxable
yields.
<TABLE>
<CAPTION>
TAXABLE YIELD EQUIVALENT FOR 1994
STATE OF GEORGIA
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Tax Bracket:
Federal: 15.00% 28.00% 31.00% 36.00% 39.60%
Combined Federal and State: 21.000% 34.000% 37.000% 42.000% 45.600%
Joint Return: $1-38,000 $38,001-91,850 $91,851-100,000 $140,001-250,000 Over $250,000
Single Return: $1-22,750 $22,751-55,100 $55,101-115,000 $115,001-250,000 Over $250,000
- -----------------------------------------------------------------------------------------------------------
Tax-Exempt Yield Taxable Yield Equivalent
- -----------------------------------------------------------------------------------------------------------
1.50% 1.90% 2.27% 2.38% 2.59% 2.76%
2.00 2.53 3.03 3.17 3.45 3.68
2.50 3.16 3.79 3.97 4.31 4.60
3.00 3.80 4.55 4.76 5.17 5.51
3.50 4.43 5.30 5.56 6.03 6.43
4.00 5.06 6.06 6.35 6.90 7.35
4.50 5.70 6.82 7.14 7.76 8.27
5.00 6.33 7.58 7.94 8.62 9.19
5.50 6.96 8.33 8.73 9.48 10.11
6.00 7.59 9.09 9.52 10.34 11.03
6.50 8.23 9.85 10.32 11.21 11.95
7.00 8.86 10.61 11.11 12.07 12.87
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in calculating
the taxable yield equivalent. Furthermore, additional state and local taxes
paid on comparable taxable investments were not used to increase federal
deductions.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
. portfolio quality;
. average portfolio maturity;
. type of instruments in which the portfolio is invested;
. changes in interest rates and market value of portfolio securities;
. changes in the Fund's expenses; and
. various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of yield and total return as
described below.
From time to time, the Fund may advertise its performance compared to similar
funds or portfolios using certain financial publications and/or compare its
performance to certain indices.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors, such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
.Lipper Analytical Services, Inc. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of time.
From time to time, the Fund will quote its Lipper ranking in the general
municipal bond funds category in advertising and sales literature.
.Morningstar Inc., an independent rating service is the publisher of the bi-
weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000 NASDAQ-
listed mutual funds of all types, according to their risk-adjusted returns.
The maximum rating is five stars, and ratings are effective for two weeks.
.Lehman Brothers State General Obligations Index is an index comprised of all
state general obligation debt issues and is compiled without regard to
maturities. These bonds are rated A or better and represent a variety of
coupon ranges. Index figures are total returns calculated for one, three, and
twelve month periods as well as year-to-date. Total returns are also
calculated as of the index inception, December 31, 1979.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. The total returns
represent the historic change in the value of an investment in the Fund based
on monthly reinvestment of dividends over a specified period of time.
Advertisements may quote performance information which does not reflect the
effect of a sales load.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD & POOR'S RATINGS GROUP MUNICIPAL BOND RATING DEFINITIONS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC--Debt rated "BB", "B", "CCC" and "CC" is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "CC" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
outweighed by large uncertainties of major risk exposure to adverse conditions.
C--The rating "C" is reversed for income bonds on which no interest is being
paid.
D--Debt rated "D" is in default, and payment of interest and/or repayment of
principal is in arrears.
STANDARD & POOR'S RATINGS GROUP MUNICIPAL NOTE RATING DEFINITIONS
SP-1--Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given
a plus sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
SP-3--Speculative capacity to pay principal and interest.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATING DEFINITIONS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3--Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes
in circumstances than obligations carrying the higher designations.
B--Issues rated "B" are regarded as having only speculative capacity for timely
payment.
C--This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D--Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATING DEFINITIONS
Aaa--Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in "Aaa"
securities.
A--Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are Ba are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B--Bonds which are rated B generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated Ca represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM DEBT RATING DEFINITIONS
PRIME-1--ISSUERS rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
. Leading market positions in well established industries;
. High rates of return on funds employed;
. Conservative capitalization structure with moderate reliance on debt and ample
asset protection;
. Broad margins in earning coverage of fixed financial charges and high internal
cash generation; and
. Well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
PRIME-3--Issuers rated PRIME-3 (or related supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.
Not Prime--Issuers rated Not Prime do not fall within any of the Prime rating
categories.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1--Issuersrated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. Prime-1
repayment capacity will normally be evidenced by the following characteristics:
. Leading market positions in well established industries;
. High rates of return on funds employed;
. Conservative capitalization structure with moderate reliance on debt and ample
asset protection;
. Broad margins in earning coverage of fixed financial charges and high internal
cash generation; and
. Well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
PRIME-3--Issuers rated PRIME-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME--Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.
MOODY'S INVESTORS SERVICE, INC. SHORT TERM LOAN RATING DEFINITIONS
MIG 1/VMIG 1--This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG 2/VMIG 2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3--This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
G00481-06
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these
securities in any State in which such offer, solicitation or sale would be
unlawful prior to registration or qualification under the securities laws of
any such State.
SUBJECT TO COMPLETION, PRELIMINARY PROSPECTUS DATED OCTOBER 10, 1994
NORTH CAROLINA MUNICIPAL BOND FUND
(A PORTFOLIO OF THE BILTMORE MUNICIPAL FUNDS)
PROSPECTUS
The shares of North Carolina Municipal Bond Fund (the "Fund") offered by this
prospectus represent interests in a non-diversified portfolio of securities
which is an investment portfolio of The Biltmore Municipal Funds (the "Trust"),
an open-end management investment company (a mutual fund). The investment
objective of the Fund is to provide current income which is exempt from federal
regular income tax and the income taxes imposed by the State of North Carolina.
The Fund invests primarily in a portfolio of municipal securities which are
exempt from federal regular income tax and the North Carolina state income
taxes ("North Carolina Municipal Securities"). These securities include those
issued by or on behalf of the State of North Carolina and North Carolina
political subdivisions and municipalities, as well as those issued by states,
territories, and possessions of the United States which are exempt from federal
regular income tax and the North Carolina state income taxes. In addition, the
Fund intends to qualify as an investment exempt from the North Carolina
Intangible Personal Property tax.
The shares offered by this prospectus are not deposits or
obligations of Wachovia Bank of North Carolina, N.A. or its
affiliates, are not endorsed or guaranteed by Wachovia Bank of
North Carolina, N.A. or its affiliates, and are not insured by
the Federal Deposit Insurance Corporation, the Federal Reserve
Board, or any other government agency. Investment in these
shares involves investment risks, including the possible loss of
principal.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated December
, 1994 with the Securities and Exchange Commission. The information contained
in the Statement of Additional Information is incorporated by reference into
this prospectus. You may request a copy of the Statement of Additional
Information free of charge, obtain other information, or make inquiries about
the Fund by calling or writing The Biltmore Shareholder Servicing Center, 1-
800-994-4414, 101 Greystone Boulevard, Room 108, Columbia, South Carolina
29226.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.
Prospectus dated December , 1994
TABLE OF CONTENTS
- -------------------------------------
SUMMARY OF FUND EXPENSES 1
- -------------------------------------
GENERAL INFORMATION 2
- -------------------------------------
INVESTMENT INFORMATION 2
- -------------------------------------
Investment Objectives 2
Investment Policies 2
Acceptable Investments 3
Characteristics 3
Participation Interests 4
Variable Rate Municipal
Securities 4
Municipal Leases 4
Investing in Securities of Other
Investment Companies 4
Restricted and Illiquid
Securities 4
When-Issued and Delayed Delivery
Transactions 4
Lending of Portfolio Securities 5
Temporary Investments 5
North Carolina Municipal
Securities 5
Municipal Bond Insurance 6
Investment Risks 7
Non-Diversification 8
Investment Limitations 8
THE BILTMORE MUNICIPAL FUNDS
INFORMATION 8
- -------------------------------------
Management of The Biltmore
Municipal Funds 8
Board of Trustees 8
Investment Adviser 8
Advisory Fees 9
Adviser's Background 9
Distribution of Fund Shares 9
Shareholder Servicing Arrangements 10
Administration of the Fund 10
Administrative Services 10
Custodian 10
Transfer Agent, Dividend
Disbursing Agent, and Portfolio
Recordkeeper 10
Legal Services 10
Independent Auditor 10
Expenses of the Fund 11
NET ASSET VALUE 11
- -------------------------------------
INVESTING IN THE FUND 11
Share Purchases 11
Through the Trust Divisions of
the Wachovia Banks 11
Through Wachovia Securities, Inc.11
By Mail 12
By Wire 12
Through Authorized Broker/
Dealers 12
Minimum Investment Required 12
What Shares Cost 13
Purchases at Net Asset Value 13
Sales Charge Reallowance 13
Reducing the Sales Charge 14
Quantity Discounts and
Accumulated Purchases 14
Letter of Intent 14
Concurrent Purchases 14
Reinvestment Privilege 15
Systematic Investment Program 15
Certificates and Confirmations 15
Dividends 15
Capital Gains 15
Exchange Privilege 15
Exchange by Telephone 16
REDEEMING SHARES 17
- -------------------------------------
By Telephone 17
By Mail 17
Systematic Withdrawal Program 18
Accounts with Low Balances 18
SHAREHOLDER INFORMATION 19
- -------------------------------------
Voting Rights 19
Massachusetts Business Trusts 19
EFFECT OF BANKING LAWS 19
- -------------------------------------
TAX INFORMATION 20
- -------------------------------------
Federal Income Tax 20
North Carolina Taxes 21
Other State and Local Taxes 21
PERFORMANCE INFORMATION 22
- -------------------------------------
ADDRESSES 23
- -------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of
offering price).................................................... 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)............................... None
Contingent Deferred Sales Charge (as a percentage of original
purchase price or redemption proceeds, as applicable)............. None
Redemption Fee (as a percentage of amount redeemed, if applicable). None
Exchange Fee....................................................... None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
<S> <C> <C>
Management Fee (after waiver) (1).................................. 0.15%
12b-1 Fees......................................................... None
Other Expenses (after waiver)(2)................................... 0.70%
Shareholder Servicing Agent Fee (3).............................. 0.00%
Total Fund Operating Expenses (after waiver) (4)............... 0.85%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.75%.
(2) Other Expenses are 0.84% absent the voluntary waiver tby the administrator.
The administrator can terminate this voluntary waiver at any time at its
sole discretion.
(3) The Fund has no present intention of paying or accruing the shareholder
servicing agent fee during the fiscal year ending November 30, 1995. If the
Fund were paying or accruing the shareholder servicing agent fee, the Fund
would be able to pay up to 0.25 of 1% of the Fund's average daily net
assets for the shareholder servicing agent fee. See "The Biltmore Municipal
Funds Information."
(4) The Total Fund Operating Expenses are estimated to be 1.5%, absent the
anticipated voluntary waivers by the Fund's adviser and administrator.
* Total Fund Operating Expenses in the table above are estimated based on
average expenses expected to be incurred during the period ending November
30, 1995. During the course of this period, expenses may be more or less than
the average amount shown.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "THE BILTMORE MUNICIPAL FUNDS INFORMATION" AND "INVESTING IN THE
FUND."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
- ------- ------ -------
<S> <C> <C>
You would pay the following expenses on a $1,000 investment,
assuming (1) 5% annual return; (2) redemption at the end of each
time period; and (3) payment of the maximum sales load. As noted
in the table above, the Fund charges no redemption fees......... $53 $71
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE
IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER 30, 1995.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Biltmore Municipal Funds (the "Trust") was established as a Massachusetts
business trust under a Declaration of Trust dated August 15, 1990. The
Declaration of Trust permits The Biltmore Municipal Funds to offer separate
series of shares of beneficial interest representing interests in separate
portfolios of securities. This prospectus relates only to The Biltmore
Municipal Funds' North Carolina municipal securities portfolio, known as North
Carolina Municipal Bond Fund (the "Fund"). The shares in any one portfolio may
be offered in separate classes. As of the date of this prospectus, the Board of
Trustees ("Trustees") has not established classes of shares of the Fund. The
Fund is designed primarily for customers of the Wachovia Bank of North
Carolina, N.A. and its correspondents or affiliates who desire a convenient
means of accumulating an interest in a professionally managed, non-diversified
portfolio investing primarily in municipal bonds. The Wachovia Bank of North
Carolina, N.A. is the investment adviser to the Fund. A minimum initial
investment of $500 is required. Subsequent investments must be in amounts of at
least $100. The Fund is not likely to be a suitable investment for non-North
Carolina taxpayers or for retirement plans since it intends to invest primarily
in North Carolina Municipal Securities.
Fund shares are sold at net asset value plus an applicable sales charge and are
redeemed at net asset value.
The other portfolios in the Trust are Georgia Municipal Bond Fund and South
Carolina Municipal Bond Fund (collectively, hereinafter referred to as the
"Funds").
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and the income tax imposed by the State
of North Carolina. In addition, the Fund intends to qualify as an investment
substantially exempt from the North Carolina Intangible Personal Property tax
("intangibles tax"). (Federal regular income tax does not include the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations.) Interest income of the Fund that is exempt from the income taxes
described above retains its tax-exempt status when distributed to the Fund's
shareholders. However, income distributed by the Fund may not necessarily be
exempt from state or municipal taxes in states other than North Carolina. While
there is no assurance that the Fund will achieve its investment objective, it
endeavors to do so by following the investment policies described in this
prospectus. The investment objective cannot be changed without approval of
shareholders. Unless indicated otherwise, the investment policies may be
changed by the Trustees without the approval of shareholders. Shareholders will
be notified before any material changes in these policies become effective.
INVESTMENT POLICIES
The Fund attempts to achieve its investment objective by investing in a
professionally managed portfolio consisting primarily of municipal securities
exempt from federal regular income tax and the North Carolina state income
taxes. As a matter of fundamental investment policy which may not be
changed without shareholder approval, the Fund will invest its assets so that,
under normal circumstances, at least 80% of its total assets are invested in
obligations, the interest income from which is exempt from federal regular
income tax and the income tax and intangibles tax imposed by the State of
North Carolina.
ACCEPTABLE INVESTMENTS
The Fund invests primarily in North Carolina Municipal Securities, which
are:
. obligations, including industrial development bonds, issued on behalf of
the State of North Carolina, its political subdivisions or agencies;
. obligations issued by or on behalf of any state, territory or possession
of the United States, including the District of Columbia, or any
political subdivision or agency of any of these; and
. participation interests, as described below, in any of the above
obligations,
the interest from which is, in the opinion of bond counsel for the issuers
or in the opinion of officers of the Fund and/or the Fund's adviser,
exempt from both federal regular income tax and the North Carolina income
tax and intangibles tax. It is likely that shareholders who are subject to
alternative minimum tax will be required to include interest from a
portion of the municipal securities owned by the Fund in calculating the
federal individual alternative minimum tax or the federal alternative
minimum tax for corporations.
While the Fund intends to invest primarily in securities issued by or on
behalf of the State of North Carolina and its political subdivisions, it
will invest in other securities issued by states, territories, and
possessions of the United States which are exempt from federal regular
income tax and the North Carolina income tax and intangibles tax. The Fund
will invest in such securities in instances where, in the judgment of the
Fund's adviser, the supply and yield of such securities would be
beneficial to the Fund's performance.
CHARACTERISTICS. The North Carolina Municipal Securities which the Fund
buys are subject to the following quality standards:
. rated A or above by Moody's Investors Service, Inc. ("Moody's") or
Standard & Poor's Ratings Group ("Standard & Poor's"). A description of
the rating categories is contained in the Appendix to the Statement of
Additional Information;
. insured by a municipal bond insurance company which is rated AAA by
Standard & Poor's or Aaa by Moody's;
. guaranteed at the time of purchase by the U.S. government as to the
payment of principal and interest;
. fully collateralized by an escrow of U.S. government securities; or
. unrated if determined to be of comparable quality to one of the
foregoing rating categories by the Fund's adviser.
The prices of fixed income securities fluctuate inversely to the direction
of interest rates.
If a security loses its rating or has its rating reduced after the Fund has
purchased it, the Fund is not required to sell or otherwise dispose
of the security, but may consider doing so. If ratings made by Moody's or
Standard & Poor's change because of changes in those organizations or
in their ratings systems, the Fund will attempt to identify other rating
organizations and systems with comparable standards, in accordance with
the investment policies of the Fund.
PARTICIPATION INTERESTS. The Fund may purchase participation interests
from financial institutions such as commercial banks, savings and loan
associations, and insurance companies. These participation interests would
give the Fund undivided interests in North Carolina Municipal Securities.
The financial institutions from which the Fund purchases participation
interests frequently provide or secure irrevocable letters of credit or
guarantees to assure that the participation interests are of high quality.
The Trustees will establish guidelines pursuant to which the Fund's
adviser determines that participation interests meet the prescribed
quality standards for the Fund.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the North Carolina Municipal
Securities which the Fund purchases may have variable interest rates.
Variable interest rates are ordinarily based on a published interest rate,
interest rate index or a similar standard, such as the 91-day U.S.
Treasury bill rate. Many variable rate municipal securities are subject to
payment of principal on demand by the Fund, usually in not more than seven
days. All variable rate municipal securities will meet the quality
standards for the Fund. The Fund's adviser monitors the pricing, quality,
and liquidity of the variable rate municipal securities, including
participation interests held by the Fund, on the basis of published
financial information and reports of the rating agencies and other
analytical services pursuant to guidelines established by the Trustees.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities and may be considered to be illiquid. They may take the
form of a lease, an installment purchase contract, or a conditional sales
contract.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3%
of the total outstanding voting stock of any investment company, invest more
than 5% of its total assets in any one investment company, or invest more than
10% of its total assets in investment companies in general. The Fund will
invest in other investment companies primarily for the purpose of investing
short-term cash which has not yet been invested in other portfolio
instruments. The Fund's adviser will waive its investment advisory fee on
assets invested in securities of open-end investment companies.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies but which
are subject to restrictions on resale under federal securities laws. To the
extent these securities are not determined to be liquid, the Fund will limit
its purchase of these securities, together with other securities considered to
be illiquid, to 15% of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase North
Carolina Municipal Securities on a when-issued or delayed delivery basis.
These transactions are arrangements in which the Fund purchases securities
with payment and delivery scheduled for a future time. The seller's failure to
complete these transactions may cause the Fund to miss a price or yield
considered to be advantageous. Settlement dates may be a month or more after
entering into these transactions, and the market values of the securities
purchased may vary from the purchase prices. Accordingly, the Fund may pay
more or less than the market value of the securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Fund's Adviser
deems it appropriate to do so. In addition, the Fund may enter into
transactions to sell its purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Fund may realize short-term profits or losses
upon the sale of such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or a long-term basis to
broker/dealers, banks, or other institutional borrowers of securities. The
Fund will only enter into loan arrangements with broker/dealers, banks, or
other institutions which the Fund's adviser has determined are creditworthy
under guidelines established by the Trustees, and will receive collateral in
the form of cash or U.S. government securities equal to at least 100% of the
value of the securities loaned at all times. It is not anticipated that the
Fund will engage in securities lending if such lending generates taxable
income.
TEMPORARY INVESTMENTS. From time to time on a temporary basis, or when the
Fund's adviser determines that market conditions call for a temporary
defensive posture, the Fund may invest in short-term tax-exempt or taxable
temporary investments. These temporary investments include: notes issued by or
on behalf of municipal or corporate issuers; obligations issued or guaranteed
by the U.S. government, its agencies, or instrumentalities; other debt
securities; commercial paper; certificates of deposit of banks; shares of
other investment companies; and repurchase agreements (arrangements in which
the organization selling the Fund a bond or temporary investment agrees at the
time of sale to repurchase it at a mutually agreed upon time and price).
There are no rating requirements applicable to temporary investments. However,
the Fund's adviser will limit temporary investments to those it considers to
be of comparable quality to the Fund's acceptable investments.
Although the Fund is permitted to make taxable, temporary investments, there
is no current intention of generating income subject to federal regular income
tax. However, it is anticipated that certain temporary investments will
generate income which is subject to North Carolina state income tax.
NORTH CAROLINA MUNICIPAL SECURITIES
North Carolina Municipal Securitiess are generally issued to finance public
works, such as airports, bridges, highways, housing, hospitals, schools,
streets, and water and sewer works. They are also issued to repay outstanding
obligations, to raise funds for general operating expenses, and to make loans
to other public institutions and facilities. North Carolina Municipal
Securities include industrial development bonds issued by or on behalf of
public authorities to provide financing aid to acquire sites or construct or
equip facilities for privately or publicly owned corporations. The
availability of this financing encourages these corporations to locate within
the sponsoring communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment
of principal and interest. However, interest on and principal of revenue bonds
are payable only from the revenue generated by the facility financed by the
bond or other specified sources of revenue. Revenue bonds do not represent a
pledge of credit or create any debt of or charge against the general revenues
of a municipality or public authority. Industrial development bonds are
typically classified as revenue bonds; the industry which is the beneficiary of
such bonds is generally the only source of payment for the bonds.
The Fund will not generally invest more than 25% of its total assets in any one
industry. Governmental issuers of municipal securities are not considered part
of any "industry." However, municipal securities backed only by the assets and
revenues of nongovernmental users may, for this purpose, be deemed to be
related to the industry in which such nongovernmental users engage, and the 25%
limitation would apply to such obligations. It is nonetheless possible that the
Fund may invest more than 25% of its assets in a broader segment of the
municipal securities market, such as revenue obligations of hospitals and other
health care facilities, housing agency revenue obligations, or airport revenue
obligations. This would be the case only if the Fund's adviser determines that
the yields available from obligations in a particular segment of the market
justified the additional risks associated with a large investment in such
segment. Although such obligations could be supported by the credit of
governmental users or by the credit of nongovernmental users engaged in a
number of industries, economic, business, political and other developments
generally affecting the revenues of such users (for example, proposed
legislation or pending court decisions affecting the financing of such projects
and market factors affecting the demand for their services or products) may
have a general adverse effect on all municipal securities in such a market
segment.
MUNICIPAL BOND INSURANCE
The Fund may purchase municipal securities covered by insurance which
guarantees the timely payment of principal at maturity and interest on such
securities. These insured municipal securities are either (1) covered by an
insurance policy applicable to a particular security, whether obtained by the
issuer of the security or by a third party ("Issuer-Obtained Insurance") or (2)
insured under master insurance policies issued by municipal bond insurers,
which may be purchased by the Fund (the "Policies").
The Fund will require or obtain municipal bond insurance when purchasing
municipal securities which would not otherwise meet the Fund's quality
standards. The Fund may also require or obtain municipal bond insurance when
purchasing or holding specific municipal securities when, in the opinion of the
Fund's adviser, such insurance would benefit the Fund (for example, through
improvement of portfolio quality or increased liquidity of certain securities).
The Fund's adviser anticipates that between 10% and 50% of the Fund's net
assets will be invested in municipal securities which are insured.
Issuer-Obtained Insurance policies are noncancellable and continue in force as
long as the municipal securities are outstanding and their respective insurers
remain in business. If a municipal security is covered by Issuer-Obtained
Insurance, then such security need not be insured by the Policies purchased by
the Fund.
The Fund may purchase two types of Policies issued by municipal bond insurers.
One type of Policy covers certain municipal securities only during the period
in which they are in the Fund's portfolio. In the event that a municipal
security covered by such a Policy is sold from the Fund, the insurer of the
relevant Policy will be liable only for those payments of interest and
principal which are due and owing at the time of sale.
The other type of Policy covers municipal securities not only while they
remain in the Fund's portfolio but also until their final maturity even if
they are sold out of the Fund's portfolio, so that the coverage
may benefit all subsequent holders of those municipal securities. The Fund
will obtain insurance which covers municipal securities until final maturity
even after they are sold out of the Fund's portfolio only if, in the judgment
of the Fund's adviser, the Fund would receive net proceeds from the sale of
those securities, after deducting the cost of such permanent insurance and
related fees, significantly in excess of the proceeds it would receive if such
municipal securities were sold without insurance. Payments received from
municipal bond issuers may not be tax-exempt income to shareholders of the
Fund.
The premiums for the Policies are paid by the Fund and the yield on the Fund's
portfolio is reduced thereby. Premiums for the Policies are paid by the Fund
monthly, and are adjusted for purchases and sales of municipal securities
during the month. The Fund may purchase Policies from MBIA Corp. ("MBIA"),
AMBAC Indemnity Corporation ("AMBAC"), Financial Guaranty Insurance Company
("FGIC"), or any other municipal bond insurer which is rated AAA by Standard &
Poor's or Aaa by Moody's. Each Policy guarantees the payment of principal and
interest on those municipal securities it insures. The Policies will have the
same general characteristics and features. A municipal security will be
eligible for coverage if it meets certain requirements set forth in a Policy.
In the event interest or principal on an insured municipal security is not
paid when due, the insurer covering the security will be obligated under its
Policy to make such payment not later than 30 days after it has been notified
by the Fund that such non-payment has occurred.
MBIA, AMBAC, and FGIC will not have the right to withdraw coverage on
securities insured by their Policies so long as such securities remain in the
Fund's portfolio, nor may MBIA, AMBAC, or FGIC cancel their Policies for any
reason except failure to pay premiums when due. MBIA, AMBAC, and FGIC will
reserve the right at any time upon 90 days' written notice to the Fund to
refuse to insure any additional municipal securities purchased by the Fund
after the effective date of such notice. The Trustees will reserve the right
to terminate any of the Policies if they determine that the benefits to the
Fund of having its portfolio insured under such Policy are not justified by
the expense involved.
Additionally, the Trustees reserve the right to enter into contracts with
insurance carriers other than MBIA, AMBAC, or FGIC if such carriers are rated
AAA by Standard & Poor's or Aaa by Moody's.
INVESTMENT RISKS
Yields on North Carolina Municipal Securities depend on a variety of factors,
including: the general conditions of the municipal bond market; the size of
the particular offering; the maturity of the obligations; and the rating of
the issue. Further, any adverse economic conditions or developments affecting
the State of North Carolina or its municipalities could impact the Fund's
portfolio. The Fund's concentration in securities issued by the State of North
Carolina and its political subdivisions provides a greater level of risk than
a fund which is diversified across numerous states and municipal entities.
North Carolina's dependence on agriculture, manufacturing, tourism, and
service industries leaves it vulnerable to both the business cycle and long
term national economic trends. The ability of the Fund to achieve its
investment objective also depends on the continuing ability of the issuers of
North Carolina Municipal Securities and participation interests, or the
guarantors of either, to meet their obligations for the payment of interest
and principal when due. Investing in North Carolina Municipal Securities which
meet the Fund's quality standards may not be possible if the State of North
Carolina or its municipalities do not maintain their current credit ratings.
In addition, the issuance, tax exemption and liquidity of North Carolina
Municipal Securities may be adversely affected by judicial, legislative or
executive action, including, but not limited to, rulings of state and federal
courts, amendments to the state and federal constitutions, changes in statutory
law, and changes in administrative regulations, as well as voter initiatives.
NON-DIVERSIFICATION
The Fund is a non-diversified investment company. As such, there is no limit
on the percentage of assets which can be invested in any single issuer. An
investment in the Fund, therefore, will entail greater risk than would exist
in a diversified investment company because the higher percentage of
investments among fewer issuers may result in greater fluctuation in the total
market value of the Fund's portfolio. Any economic, political, or regulatory
developments affecting the value of the securities in the Fund's portfolio
will have a greater impact on the total value of the portfolio than would be
the case if the portfolio were diversified among more issuers. The Fund may
purchase an issue of municipal securities in its entirety.
However, the Fund intends to comply with Subchapter M of the Internal Revenue
Code. This undertaking requires that, at the end of each quarter of each
taxable year, with regard to at least 50% of the Fund's total assets, no more
than 5% of its total assets are invested in the securities of a single issuer
and that with respect to the remainder of the Fund's total assets, no more
than 25% of its total assets are invested in the securities of a single
issuer.
INVESTMENT LIMITATIONS
The Fund will not:
. borrow money or pledge securities except, under certain circumstances,
the Fund may borrow up to one-third of the value of its total assets and
pledge assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder
approval.
THE BILTMORE MUNICIPAL FUNDS INFORMATION
- -------------------------------------------------------------------------------
MANAGEMENT OF THE BILTMORE MUNICIPAL FUNDS
BOARD OF TRUSTEES. The Biltmore Municipal Funds are managed by a Board of
Trustees. The Board of Trustees is responsible for managing the business
affairs of The Biltmore Municipal Funds and for exercising all of the powers
of The Biltmore Municipal Funds except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with The
Biltmore Municipal Funds, investment decisions for the Fund are made by
Wachovia Bank of North Carolina, N.A., the Fund's adviser (the "Bank" or the
"Adviser"), subject to direction by the Trustees. The Adviser continually
conducts investment research and supervision for the Fund and is responsible
for the purchase or sale of portfolio instruments, for which it receives an
annual fee from the Fund.
ADVISORY FEES. The Adviser is entitled to receive an annual investment advisory
fee equal to 0.75 of 1% of the Fund's average daily net assets. The investment
advisory contract allows the voluntary waiver of the investment advisory fee or
the reimbursement of expenses by the Adviser from time to time. The Adviser can
terminate any voluntary waiver of its fee or reimbursement of expenses at any
time in its sole discretion.
Investment decisions for the Fund will be made independently from those of any
fiduciary or other accounts that may be managed by the Bank or its affiliates.
If, however, such accounts, the Fund, or the Bank for its own account are
simultaneously engaged in transactions involving the same securities, the
transactions may be combined and allocated to each account. This system may
adversely affect the price the Fund pays or receives, or the size of the
position it obtains. The Adviser may engage, for its own account or for other
accounts managed by the Bank, in other transactions involving North Carolina
Municipal Securities which may have adverse effects on the market for
securities in the Fund's portfolio.
ADVISER'S BACKGROUND. Wachovia Bank of North Carolina, N.A. is a direct,
wholly-owned subsidiary of Wachovia Corporation, a registered bank holding
company headquartered in Winston-Salem, North Carolina and Atlanta, Georgia.
Through offices in eight states, Wachovia Corporation and its subsidiaries
provide a broad range of financial services to individuals and businesses.
Wachovia Bank of North Carolina, N.A., a national banking association, offers
financial services that include, but are not limited to, commercial and
consumer loans, corporate, institutional, and personal trust services, demand
and time deposit accounts, letters of credit and international financial
services.
The Adviser employes an experienced staff of professional investment analysts,
portfolio managers and traders. The Adviser uses fundamental analysis and other
investment management disciplines to identify investment opportunities.
Wachovia Bank of North Carolina, N.A., Wachovia Bank of South Carolina, N.A.,
and Wachovia Bank of Georgia, N.A. (collectively the "Wachovia Banks") have
been managing trust assets for over 100 years, with approximately $16.6 billion
in managed assets as of June 30, 1994. Wachovia Investment Management Group, a
business unit of the Adviser, has served as investment adviser to another
investment company, The Biltmore Funds, since March 9, 1992.
Michael Peters has been the Fund's portfolio manager since the Fund's inception
in December of 1994. Mr. Peters joined Wachovia Bank of North Carolina, N.A. in
1993, and also serves as an officer of both Wachovia Bank of Georgia, N.A. and
Wachovia Bank of South Carolina, N.A. Mr. Peters was employed with NationsBank
from 1990 to 1993, and from 1986 to 1990 was employed with First Bank of
Whiting. Mr. Peters received his M.B.A. from Indiana University and is a member
of the Institute of Chartered Financial Analysts.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the distributor (the "Distributor") for shares of
the Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
SHAREHOLDER SERVICING ARRANGEMENTS
Federated Administrative Services, Pittsburgh, Pennsylvania, a subsidiary of
Federated Investors, is the Fund's shareholder servicing agent (the "Shareholder
Servicing Agent"). The Fund may pay the Shareholder Servicing Agent a fee based
on the average daily net asset value of shares for which it provides shareholder
services. These shareholder services include, but are not limited to,
distributing prospectuses and other information, providing shareholder
assistance
and communicating or facilitating purchases and redemptions of shares. This fee
will be computed at an annual rate equal to 0.25 of 1% of the Fund's average
daily net assets for which the Shareholder Servicing Agent provides services;
however, the Shareholder Servicing Agent may choose voluntarily to waive all
or a portion of its fee at any time or pay all or some of its fees to
financial institutions or other financial service providers.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides the Fund with the
administrative personnel and services necessary to operate the Fund. Such
services include the preparation of filings with the Securities and Exchange
Commission and other regulatory authorities, assistance with respect to
meetings of the Trustees, shareholder servicing and accounting services, and
other administrative services. Federated Administrative Services provides
these at an annual rate, computed and payable daily, as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY
MAXIMUM NET ASSETS OF THE TRUST
ADMINISTRATIVE FEE AND THE BILTMORE FUNDS
------------------ -----------------------------------
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall aggregate at
least $50,000 for each portfolio of the Trust. Federated Administrative
Services may choose voluntarily to waive or reimburse a portion of its fee at
any time.
CUSTODIAN. Wachovia Bank of North Carolina, N.A., Winston-Salem, North
Carolina is custodian (the "Custodian") for the securities and cash of the
Fund.
Under the Custodian Agreement, the Custodian holds the Fund's portfolio
securities in safekeeping and keeps all necessary records and documents
relating to its duties. For the services to be provided to the Trust pursuant
to the Custodian Agreement, the Trust pays the Custodian an annual fee based
upon the average daily net assets of the Fund and payable monthly.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO
RECORDKEEPER. Federated Services Company, Pittsburgh, Pennsylvania, is
disbursing agent for the Fund and transfer agent for the shares of the Fund.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments.
LEGAL SERVICES. Legal services for the Fund are provided by Kirkpatrick &
Lockhart, Washington, D.C. Piper & Marbury, Washington, D.C., serves as
counsel to the independent Trustees.
INDEPENDENT AUDITOR. The independent auditor for the Fund is Ernst & Young
LLP, Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of The Biltmore
Municipal Funds' expenses. These expenses include, but are not limited to, the
cost of: organizing The Biltmore Municipal Funds and continuing its existence;
Trustees' fees; investment advisory and administrative services; printing
prospectuses and other Fund documents for shareholders; registering The
Biltmore Municipal Funds, the Fund and shares of the Fund; taxes and
commissions; issuing, purchasing, repurchasing, and redeeming shares; fees for
custodians, transfer agents, dividend disbursing agents, shareholder servicing
agents, and registrars; printing, mailing, auditing, accounting, and legal
expenses; reports to shareholders and government agencies; meetings of
Trustees and shareholders and proxy solicitations therefor; insurance
premiums; association membership dues; and such nonrecurring and extraordinary
items as may arise. However, the Adviser may voluntarily waive and/or
reimburse some expenses.
NET ASSET VALUE
- -------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
- -------------------------------------------------------------------------------
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business. Shares of the Fund may be
purchased through the Trust Divisions of the Wachovia Banks, Wachovia
Securities, Inc. or authorized broker/dealers which have a sales agreement
with the Distributor. All purchase orders must be transmitted to the Fund by
5:00 p.m. (Eastern time). Texas residents must purchase shares through an
authorized registered broker/dealer or through Federated Securities Corp. at
1-800-356-2805. In connection with the sale of Fund shares, the Distributor
may from time to time offer certain items of nominal value to any shareholder
or investor. The Fund and the Distributor reserve the right to reject any
purchase request.
THROUGH THE TRUST DIVISIONS OF THE WACHOVIA BANKS. Trust customers of the
Wachovia Banks may place an order to purchase shares of the Fund by
telephoning, sending written instructions, or placing the order in person with
their account officer in accordance with the procedures established by the
Wachovia Banks and as set forth in the relevant account agreement.
Payment may be made to the Wachovia Banks by check, by wire of federal funds,
or by debiting a customer's account with the Wachovia Banks. Purchase orders
must normally be received by the Wachovia Banks by 3:00 p.m. (Eastern time),
in order for shares to be purchased at that day's price. It is the
responsibility of the Wachovia Banks to transmit orders promptly to the Fund.
Shares of the Fund cannot be purchased by wire on any day on which the
Wachovia Banks, the New York Stock Exchange and the Federal Reserve Wire
System are not open for business.
THROUGH WACHOVIA SECURITIES, INC. Customers of Wachovia Securities, Inc.,
Wachovia Brokerage Service or Wachovia Investments may place an order to
purchase shares by telephoning The Biltmore Shareholder Servicing Center at
1-800-994-4414, sending written instructions, or placing an order in person.
Payment may be made by check, by wire of federal funds (the customer's bank
sends money to the Fund's bank through the Federal Reserve Wire System) or by
debiting a customer's account at Wachovia Securities, Inc. Purchase orders must
normally be communicated to Wachovia Securities, Inc. before 3:30 p.m. (Eastern
time). Wachovia Securities, Inc., a wholly-owned subsidiary of Wachovia
Corporation, is a registered broker/dealer and a member of the National
Association of Securities Dealers, Inc. Wachovia Brokerage Service and
Wachovia Investments are business units of Wachovia Securities, Inc.
BY MAIL. To purchase shares of the Fund through Wachovia Securities, Inc.
by mail, send a check made payable to North Carolina Municipal Bond Fund
to The Biltmore Shareholder Servicing Center, 101 Greystone Boulevard,
Room 108, Columbia, South Carolina, 29226. Orders by mail are considered
received after payment by check is converted by Wachovia Securities, Inc.
into federal funds. This is normally the next business day after Wachovia
Securities, Inc. receives the check.
BY WIRE. To purchase shares of the Fund through Wachovia Securities, Inc.
by wire, wire funds as follows:
Wachovia Securities, Inc. ABA Number 0531-00494 Credit: 8735-001342
Further credit to: North Carolina Municipal Bond Fund Re: (Customer name
and brokerage account number)
Shares of the Fund cannot be purchased by wire on any day on which the
Wachovia Banks, the New York Stock Exchange and the Federal Reserve Wire
System are not open for business.
THROUGH AUTHORIZED BROKER/DEALERS. An investor may place an order through
authorized brokers and dealers to purchase shares of the Fund. Shares will be
purchased at the public offering price next determined after the Fund receives
the purchase request. Purchase requests through registered broker/dealers must
normally be received by the broker/dealer and transmitted to the Fund before
3:30 p.m. (Eastern time) in order for shares to be purchased at that day's
public offering price.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $500. Subsequent
investments must be in amounts of at least $100. These minimums may be waived
for purchases by the Trust Divisions of the Wachovia Banks for their fiduciary
or custodial accounts. An institutional investor's minimum investment will be
calculated by combining all accounts it maintains with the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS A SALES CHARGE AS A
PERCENTAGE OF PERCENTAGE OF NET
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE AMOUNT INVESTED
- --------------------- --------------------- -----------------
<S> <C> <C>
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 2.50% 2.56%
$500,000 but less than $750,000 2.00% 2.04%
$750,000 but less than $1 million 1.00% 1.01%
$1 million or more 0.25% 0.25%
</TABLE>
During a special offering period, there will be no sales charge assessed on
shares purchased on or before March 31, 1995. Purchases made during this
special offering period cannot be exchanged for other shares of the Trust, The
Biltmore Funds, or International Equity Fund, until April 30, 1995.
The net asset value is determined at or after the close of the New York Stock
Exchange, Monday through Friday, except on: (i) days on which there are not
sufficient changes in the value of the Fund's portfolio securities that its net
asset value might be materially affected; (ii) days during which no shares are
tendered for redemption and no orders to purchase shares are received; or (iii)
the following holidays: New Year's Day, Martin Luther King Day, Presidents'
Day, Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day,
Veterans' Day, Thanksgiving Day and Christmas Day.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at net asset
value, without a sales charge, by investment advisers registered under the
Investment Advisers Act of 1940 purchasing on behalf of their clients, and by
the Wachovia Banks for funds which are held in a fiduciary, agency, custodial,
or similar capacity. Trustees, officers, directors and emeritus directors,
advisory board members, employees and retired employees of the Fund, the
Wachovia Banks, the spouses and children under the age of 21 of such persons,
and any trusts, pension profit-sharing plans and individual retirement accounts
operated for such persons, may purchase shares of the Fund at net asset value.
In addition, trustees, officers, directors and employees of the Distributor and
its affiliates, and any bank or investment dealer who has a sales agreement
with the Distributor relating to the Fund, may also purchase shares at their
net asset value.
SALES CHARGE REALLOWANCE
For shares sold with a sales charge, the Wachovia Banks or an affiliated broker
or a dealer will receive up to 100% of the applicable sales charge for
purchases of Fund shares made directly through the Wachovia Banks or such
broker or dealer.
The sales charge for shares sold other than through the Wachovia Banks or
registered broker/dealers will be retained by the Distributor. However, the
Distributor, at its sole discretion, may uniformly offer to pay all dealers
selling shares of the Fund, all or a portion of the sales charge it normally
retains. If accepted by the dealer, such additional payments will be predicated
upon the amount of Fund shares sold.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of Fund shares through:
. quantity discounts and accumulated purchases;
. signing a 13-month letter of intent; or
. using the reinvestment privilege.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table in this
prospectus under the section entitled "What Shares Cost," larger purchases
reduce the sales charge paid. The Fund will combine purchases made on the same
day by the investor, his spouse, and his children under age 21 when it
calculates the sales charge.
If an additional purchase of Fund shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$90,000 and he purchases $10,000 more at the current public offering price,
the sales charge on the additional purchase according to the schedule now in
effect would be 3.75%, not 4.50%.
To receive the sales charge reduction, the Wachovia Banks, Wachovia
Securities, Inc., or the Distributor must be notified by the shareholder or by
his financial institution at the time the purchase is made that Fund shares
are already owned or that purchases are being combined. The Fund will reduce
the sales charge after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the Fund over the next 13 months, the sales charge may be reduced by
signing a letter of intent to that effect. This letter of intent includes a
provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the custodian to hold
4.50% of the total amount intended to be purchased in escrow (in shares) until
such purchase is completed.
The 4.50% held in escrow will be applied to the shareholder's account at the
end of the 13-month period unless the amount specified in the letter of intent
is not purchased. IN this event, an appropriate number of escrowed shares may
be redeemed in order TO realize the difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase shares,
but if the shareholder does, each purchase during the period will be at the
sales charge applicable to the total amount intended to be purchased. This
letter may be dated as of a prior date to include any purchases made within
the past 90 days.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of shares in
portfolios in The Biltmore Funds and in The Biltmore Municipal Funds (such as
the Fund), the purchase price of which includes a sales charge. For example,
if a shareholder concurrently invested $70,000 in one of the portfolios of The
Biltmore Funds with a sales charge, and $40,000 in a portfolio of The Biltmore
Municipal Funds with a sales charge, the sales charge would be reduced.
To receive this sales charge reduction, the Wachovia Banks, Wachovia
Securities, Inc. or the Distributor must be notified by the agent placing the
order at the time the concurrent purchases are made. The sales charge will be
reduced after the purchase is confirmed.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 90 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge. The
Wachovia Banks, Wachovia Securities, Inc., or the Distributor must be notified
by the shareholder in writing or by his financial institution of the
reinvestment in order to eliminate a sales charge. If the shareholder redeems
his shares in the Fund, there may be tax consequences.
SYSTEMATIC INVESTMENT PROGRAM. Once a Fund account has been opened,
shareholders may add to their investment on a regular basis in a minimum amount
of $100. Under this program, funds may be automatically withdrawn periodically
from the shareholder's checking account at the Wachovia Banks, and invested in
Fund shares at the net asset value next determined after an order is received
by the Fund, plus the applicable sales charge. A shareholder may apply for
participation in this program through the Wachovia Banks, Wachovia Securities,
Inc. or through the Distributor.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless
requested in writing to the Fund.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during
that month.
DIVIDENDS
Dividends are declared daily and are paid monthly. Dividends are declared just
prior to determining net asset value. If an order for shares is placed on the
preceding business day, shares purchased by wire begin earning dividends on the
business day wire payment is received by the Custodian. If the order for shares
and payment by wire are received on the same day, shares begin earning
dividends on the next business day. Shares purchased by check begin earning
dividends on the business day after the check is converted into federal funds.
Unless cash payments are requested by contacting the Fund, dividends are
automatically reinvested on payment dates in additional shares of the Fund at
the payment date's net asset value without a sales charge.
CAPITAL GAINS
Distributions of any net realized long-term capital gains realized by the Fund,
if any, will be made at least annually.
EXCHANGE PRIVILEGE
Shareholders of the Fund may exchange all or some of their Fund shares for:
shares in other portfolios of the Trust, shares in portfolios of The Biltmore
Funds or shares of the International Equity Fund. The Biltmore Funds are
advised by Wachovia Investment Management Group, a business unit of the
Adviser, and distributed by Federated Securities Corp. The Trust consists of
the Fund, Georgia Municipal Bond Fund and South Carolina Municipal Bond Fund.
The South Carolina Municipal Bond Fund is advised by Wachovia Bank of South
Carolina, N.A., a national banking association headquartered in Columbia, South
Carolina. It is the primary subsidiary of South Carolina National Corporation,
a bank holding company with a commercial bank subsidiary and federal savings
bank subsidiary in South Carolina. The Georgia Municipal Bond Fund is advised by
Wachovia Bank of Georgia, N.A. The Georgia and South Carolina Municipal Bond
Funds are distributed by Federated Securities Corp. The International Equity
Fund is advised by Fiduciary International, Inc. and distributed by Federated
Securities Corp. The Biltmore Funds consist of the following portfolios:
Biltmore Balanced Fund, Biltmore Emerging Markets Fund, Biltmore Equity Fund,
Biltmore Equity Index Fund, Biltmore Fixed Income Fund, Biltmore Money Market
Fund (Institutional Shares and Investment Shares), Biltmore Prime Cash
Management Fund (Institutional Shares), Biltmore Quantitative Equity Fund,
Biltmore Short-Term Fixed Income Fund, Biltmore Special Values Fund, Biltmore
Tax-Free Money Market Fund (Institutional Shares and Investment Shares), and
Biltmore U.S. Treasury Money Market Fund (Institutional Shares and Investment
Shares). (The International Equity Fund, the portfolios of the Trust, and The
Biltmore Funds are referred to in this section as the "Portfolios.")
Shareholders of the Fund have easy access to the Portfolios through a
telephone exchange program. The exchange privilege is available to
shareholders residing in any state in which the shares being acquired may be
legally sold. Prior to any exchange, the shareholder should review a copy of
the current prospectus of the Portfolio into which an exchange is to be
effected. Shareholders contemplating exchanges between the Fund and the
Trust's other portfolios should consult their tax advisers, since the tax
advantages of each Fund may vary.
Shares of the Portfolios may be exchanged for shares of the Fund at net asset
value without a sales charge (if previously paid). Shares of Portfolios with a
sales charge may be exchanged at net asset value for shares of other
Portfolios with an equal sales charge or no sales charge. Shares of Portfolios
with no sales charge acquired by direct purchase or reinvestment of dividends
on such shares may be exchanged for shares of Portfolios at net asset value.
Shareholders using this privilege must exchange shares having a net asset
value at least equal to the minimum investment of the Portfolio into which
they are exchanging. An exchange order must comply with the requirements for a
redemption and purchase order and must specify the dollar value or number of
shares to be exchanged. Shareholders who desire to automatically exchange
shares of a predetermined amount on a monthly, quarterly, or annual basis may
take advantage of a systematic exchange privilege. A shareholder may obtain
further information on these exchange privileges by calling the Fund, Wachovia
Securities, Inc. or, in the case of customers of the Wachovia Banks, the
shareholder's account officer.
Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange will be redeemed at the next-determined net
asset value. Written exchange instructions may require a signature guarantee.
Exercise of this privilege is treated as a sale for federal income tax
purposes and, depending on the circumstances, a short or long-term capital
gain or loss may be realized. The exchange privilege may be modified or
terminated at any time. Shareholders will be notified of the modification or
termination of the exchange privilege.
EXCHANGE BY TELEPHONE. Instructions for exchanges between the Portfolios and
the Fund may be given by telephone to Wachovia Securities, Inc., and in the
case of customers of the Wachovia Banks, the customer's account officer.
Shares may be exchanged by telephone only between fund accounts having
identical shareholder registrations. Exchange instructions given by telephone
may be electronically recorded. If reasonable procedures are not followed by
the Fund, it may be liable for losses due to unauthorized or fraudulent
telephone instructions.
Telephone exchange instructions must be received before 4:00 p.m. (Eastern
time) for shares to be exchanged the same day. The telephone exchange
privilege may be modified or terminated at any time. Shareholders will be
notified of such modification or termination. Shareholders may have difficulty
in making exchanges by telephone through banks, brokers, and other financial
institutions during times of drastic economic or market changes. If a
shareholder cannot contact his bank, broker, or financial institution by
telephone, it is recommended that an exchange request be made in writing and
sent by overnight mail.
REDEEMING SHARES
- -------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the
Fund receives the redemption request. Redemptions will be made on days on
which the Fund computes its net asset value. Telephone or written requests for
redemptions must be received in proper form and can be made through the
Wachovia Banks, Wachovia Securities, Inc., or directly to the Fund.
BY TELEPHONE. A shareholder may redeem shares of the Fund by calling the
Wachovia Banks (call toll-free 1-800-763-7277) to request the redemption.
Telephone redemption instructions may be recorded. Shares will be redeemed at
the net asset value next determined after the Fund receives the redemption
request from the Wachovia Banks. Redemption requests made through the Wachovia
Banks must be received by the Wachovia Banks before 3:00 p.m. (Eastern time)
in order for shares to be redeemed at that day's net asset value. The Wachovia
Banks are responsible for promptly submitting redemption requests and
providing proper written redemption instructions to the Fund. Registered
broker/dealers may charge customary fees and commissions for this service. If
reasonable procedures are not followed by the Fund, it may be liable for
unauthorized or fraudulent telephone instructions.
A shareholder who is a customer of Wachovia Securities, Inc. and who has
completed a telephone redemption authorization form, may redeem shares of the
Fund by phone by calling The Biltmore Shareholder Servicing Center at 1-800-
994-4414. A shareholder who is a customer of the Wachovia Banks and whose
account agreement with the Wachovia Banks permits telephone redemption may
redeem shares of the Fund by telephoning his account officer. An authorization
permitting the Wachovia Banks to accept telephone requests is included as part
of a shareholder's account agreement. Shares will be redeemed at the net asset
value next determined after the Fund receives the redemption request.
Redemption requests must be received by 4:00 p.m. (Eastern time) in order for
shares to be redeemed at that day's net asset value. In no event will proceeds
be credited more than seven days after a proper request for redemption has
been received. In the event of drastic economic or market changes, a
shareholder may experience difficulty in redeeming by telephone. If such a
case should occur, another method of redemption should be considered.
BY MAIL. A shareholder may redeem Fund shares by sending a written request to
the Wachovia Banks. The written request should include the shareholder's name,
the Fund name, the account number, and the share or dollar amount requested.
If share certificates have been issued, they must be properly endorsed and
should be sent by registered or certified mail with the written request to the
Fund. Shareholders should call the Wachovia Banks for assistance in redeeming
by mail.
A shareholder who is a customer of Wachovia Securities, Inc. may redeem shares
by sending a written request to Wachovia Securities, Inc. The written request
should include the shareholder's name and address, the Fund name, the brokerage
account number, and the share or dollar amount requested. Shareholders should
call Wachovia Securities, Inc. for assistance in redeeming by mail. Normally, a
check for the proceeds is mailed within five business days, but in no event
more than seven days, after receipt of a proper written redemption request.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
. a trust company or commercial bank whose deposits are insured by the
Bank Insurance Fund ("BIF"), which is administered by the Federal Deposit
Insurance Corporation ("FDIC");
. a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchanges;
. a savings bank or savings and loan association whose deposits are
insured by the Savings Association Insurance Fund ("SAIF"), which is
administered by the FDIC; or
. any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and its transfer agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and its transfer agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by the shareholder. Depending upon the amount of the withdrawal payments, the
amount of dividends paid and capital gains distributions with respect to Fund
shares, and the fluctuation of the net asset value of Fund shares redeemed
under this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in the Fund. For this reason, payments under this
program should not be considered as yield or income on the shareholder's
investment in the Fund. To be eligible to participate in this program, a
shareholder must have an account value of at least $10,000. A shareholder may
apply for participation in this program through his financial institution. For
shares sold with a sales charge, it is not advisable for shareholders to be
purchasing shares while participating in this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $500. This
requirement does not apply, however, if the balance falls below $500 because of
changes in the Fund's net asset value. Before shares are redeemed to close an
account, the shareholder is notified in writing and allowed 30 days to
purchase additional shares to meet the minimum requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each portfolio
in The Biltmore Municipal Funds have equal voting rights except that only
shares of the Fund are entitled to vote on matters affecting only the Fund. As
a Massachusetts business trust, The Biltmore Municipal Funds are not required
to hold annual shareholder meetings. Shareholder approval will be sought only
for certain changes in the Trust's or the Fund's operation and for the election
of Trustees under certain circumstances. Trustees may be removed by the
Trustees or by shareholders at a special meeting. A special meeting of the
shareholders shall be called by the Trustees upon the written request of
shareholders owning at least 10% of the outstanding shares of The Biltmore
Municipal Funds.
MASSACHUSETTS BUSINESS TRUSTS
Under certain circumstances, shareholders may be held personally liable under
Massachusetts law for acts or obligations of the Trust on behalf of the Fund.
To protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument the Trust or its Trustees
enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations on behalf of the Fund, the Trust is required by its Declaration of
Trust to use the property of the Fund to protect or compensate the shareholder.
On request, the Trust will defend any claim made and pay any judgment against a
shareholder for any act or obligation of the Trust on behalf of the Fund.
Therefore, financial loss resulting from liability as a shareholder of the Fund
will occur only if the Trust cannot meet its obligations to indemnify
shareholders and pay judgments against them from assets of the Fund.
EFFECT OF BANKING LAWS
- --------------------------------------------------------------------------------
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing, controlling or
distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling or distributing most securities.
However, such banking laws and regulations do not prohibit such a holding
company affiliate or banks generally from acting as investment adviser,
transfer agent or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of such a customer.
Wachovia Bank of North Carolina, N.A. is subject to such banking laws and
regulations.
Wachovia Bank of North Carolina, N.A. believes that it may perform the services
for the Fund contemplated by its advisory agreement and its Custodian Agreement
with The Biltmore Municipal Funds without violation of the Glass-Steagall Act
or other applicable banking laws or regulations. Changes in either federal or
state statutes and regulations relating to the permissible activities of banks
and their subsidiaries or affiliates, as well as further judicial or
administrative decisions or interpretations of such or future statutes and
regulations, could prevent Wachovia Bank of North Carolina, N.A. from
continuing to perform all or a part of the above services for its customers
and/or the Fund. If it were prohibited from engaging in these customer-related
activities, the Trustees would consider alternative advisers and means of
continuing available investment services. In such event, changes in the
operation of the Fund may occur, including possible termination of any
automatic or other Fund share investment and redemption services then being
provided by Wachovia Bank of North Carolina, N.A. It is not expected that
existing shareholders would suffer any adverse financial consequences (if
another adviser with equivalent abilities to Wachovia Bank of North Carolina,
N.A. is found) as a result of any of these occurrences.
State securities laws governing the ability of depository institutions to act
as underwriters or distributors of securities may differ from interpretations
given to the Glass-Steagall Act and, therefore, banks and financial
institutions may be required to register as dealers pursuant to state law.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund expects to pay no federal regular income tax because it intends to
meet requirements of the Internal Revenue Code applicable to regulated
investment companies and to receive the special tax treatment afforded to such
companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by The
Biltmore Municipal Funds portfolios will not be combined for tax purposes with
those realized by the Fund.
Shareholders are not required to pay federal regular income tax on any
dividends received from the Fund that represent net interest on tax-exempt
municipal bonds. However, under the Tax Reform Act of 1986, dividends
representing net interest income earned on some municipal bonds may be included
in calculating the federal individual alternative minimum tax or the federal
alternative minimum tax for corporations.
The alternative minimum tax, equal to up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is equal
to the regular taxable income of the taxpayer increased by certain "tax
preference" items not included in regular taxable income and increased or
reduced by certain alternative minimum tax adjustments.
The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons, and other public facilities,
private activity bonds provide benefits to private parties. The Fund may
purchase all types of municipal bonds, including private activity bonds. Thus,
should it purchase any such bonds, a portion of the Fund's dividends may be
treated as a tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund
which represent interest on municipal bonds may become subject to the 20%
corporate alternative minimum tax because the dividends are included in a
corporations's "adjusted current earnings." The corporate alternative minimum
tax treats 75% of the excess of the taxpayer's "adjusted current earnings" over
the taxpayer's preadjustment alternative minimum taxable income as an
alternative minimum tax adjustment. "Adjusted current earnings" is based upon
the concept of a corporation's "earnings and profits". Since "earnings and
profits" generally includes the full amount of any Fund dividend, and
preadjustment alternative minimum taxable income does not include the portion
of the Fund's dividend attributable to municipal bonds which are not private
activity bonds, 75% of the difference will be included in the calculation of
the corporation's alternative minimum tax.
Shareholders should consult with their tax advisers to determine whether they
are subject to the alternative minimum tax or the corporate alternative minimum
tax and, if so, the tax treatment of dividends paid by the Fund.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
Distributions representing net long-term capital gains realized by the Fund, if
any, will be taxable as long-term capital gains regardless of the length of
time shareholders have held their shares.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
NORTH CAROLINA TAXES
Under existing North Carolina law, shareholders of the Fund will not be subject
to North Carolina income taxes on Fund dividends to the extent that such
dividends represent "exempt-interest dividends" as defined in the Internal
Revenue Code of 1986, as amended, which are directly attributable to (i)
interest on obligations of the State of North Carolina or any of its political
subdivisions; or (ii) interest on obligations of the United States or its
possessions.
To the extent that distributions by the Fund are derived from capital gains on
such obligations, or from dividends or capital gains on other types of
obligations, such distributions will be subject to North Carolina income taxes.
For purposes of the North Carolina Intangibles Personal Property tax,
shareholders may exclude from the share value of the Fund that proportion of
the total share value which is attributable to the value of the direct
obligations of the State of North Carolina, its political subdivisions, the
United States and its political subdivisions held in the Fund as of December 31
of the taxable year.
OTHER STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from state income taxes in states
other than North Carolina or from personal property taxes. State laws differ on
this issue, and shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its total return, yield, and tax-
equivalent yield.
Total return represents the change, over a specific period of time, in the
value of an investment in the Fund after reinvesting all income and capital
gain distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the offering price per share of the Fund on the
last day of the period. This number is then annualized using semi-annual
compounding. The tax-equivalent yield of the Fund is calculated similarly to
the yield, but is adjusted to reflect the taxable yield that the Fund would
have had to earn to equal its actual yield, assuming a specific tax rate. The
yield and the tax-equivalent yield do not necessarily reflect income actually
earned by the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of the maximum sales load
which, if excluded, would increase the total return, yield, and tax-equivalent
yield.
From time to time, the Fund may advertise its performance using certain
reporting services and/or compare its performance to certain indices.
ADDRESSES
- --------------------------------------------------------------------------------
North Carolina Municipal Bond Fund Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
Wachovia Bank of North Carolina, N.A. 301 North Main Street
Winston-Salem, North
Carolina 27150
- --------------------------------------------------------------------------------
Custodian
Wachovia Bank of North Carolina, N.A. Wachovia Trust Operations
301 North Main Street
Winston-Salem, North
Carolina 27150
- --------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent, and Portfolio Recordkeeper
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Counsel to The Biltmore Municipal Funds
Kirkpatrick & Lockhart 1800 M Street, N.W.
Washington, D.C. 20036-2430
- --------------------------------------------------------------------------------
Counsel to the Independent Trustees
Piper & Marbury 1200 Nineteenth Street,
N.W.
Washington, D.C. 20036-2430
- --------------------------------------------------------------------------------
Independent Auditors
Ernst & Young LLP One Oxford Centre
Pittsburgh, Pennsylvania
15219
- --------------------------------------------------------------------------------
The Biltmore Shareholder Servicing Center 101 Greystone Boulevard
Room 108
Columbia, South Carolina
29226
- --------------------------------------------------------------------------------
North Carolina Municipal Bond Fund
A Non-diversified Portfolio of The
Biltmore Municipal Funds
An Open-End, Management Investment
Company
Prospectus
December , 1994
LOGO
G00481-03 (9/94)
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
any offers to buy be accepted prior to the time the registration statement
becomes effective. This Statement of Additional Information does not constitute
a prospectus.
SUBJECT TO COMPLETION, PRELIMINARY STATEMENT OF ADDITIONAL INFORMATION
DATED OCTOBER 10, 1994
NORTH CAROLINA MUNICIPAL BOND FUND
(A PORTFOLIO OF THE BILTMORE MUNICIPAL FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the prospec-
tus of North Carolina Municipal Bond Fund (the "Fund") dated December ,
1994. This Statement is not a prospectus itself. To receive a copy of the
prospectus write the Fund or call The Biltmore Shareholder Servicing Cen-
ter toll-free 1-800-994-4414.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated December , 1994
LOGO
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- --------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- --------------------------------------
Acceptable Investments 1
When-Issued and Delayed Delivery
Transactions 1
Repurchase Agreements 1
Lending of Portfolio Securities 2
Portfolio Turnover 2
Municipal Bond Insurance 2
INVESTMENT LIMITATIONS 3
- --------------------------------------
North Carolina Investment Risks 5
THE BILTMORE MUNICIPAL FUNDS
MANAGEMENT 5
- --------------------------------------
Officers and Trustees 5
Fund Ownership 6
Trustee Liability 6
INVESTMENT ADVISORY SERVICES 6
- --------------------------------------
Adviser to the Fund 6
Advisory Fees 6
ADMINISTRATIVE SERVICES 6
- --------------------------------------
Transfer Agent and Dividend
Disbursing Agent 7
BROKERAGE TRANSACTIONS 7
- --------------------------------------
PURCHASING SHARES 7
- --------------------------------------
Distribution of Shares 7
Conversion to Federal Funds 7
DETERMINING NET ASSET VALUE 7
- --------------------------------------
Valuing Municipal Bonds 7
REDEEMING SHARES 8
- --------------------------------------
Redemption in Kind 8
TAX STATUS 8
- --------------------------------------
The Fund's Tax Status 8
Shareholders' Tax Status 8
TOTAL RETURN 8
- --------------------------------------
YIELD 8
- --------------------------------------
TAX-EQUIVALENT YIELD 9
- --------------------------------------
Tax-Equivalency Table 9
PERFORMANCE COMPARISONS 9
- --------------------------------------
APPENDIX 11
- --------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in The Biltmore Municipal Funds (the "Trust") which was
established as a Massachusetts business trust under a Declaration of Trust
dated August 15, 1990. Prior to June 3, 1993, the Trust was known as "The
Passageway Funds."
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide for its shareholders current
income which is exempt from federal regular income tax and the income taxes
imposed by the State of North Carolina. In addition, the Fund intends to
qualify as an investment exempt from the North Carolina Intangibles Personal
Property tax. The objective cannot be changed without approval of shareholders.
ACCEPTABLE INVESTMENTS
If a high-rated security loses its rating or has its rating reduced after
the Fund has purchased it, the Fund is not required to drop the security
from its portfolio, but may consider doing so. If ratings made by Moody's
Investors Service, Inc. ("Moody's") or Standard & Poor's Ratings Group
("S&P") change because of changes in those organizations or in their
rating systems, the Fund will try to use comparable ratings as standards
in accordance with the investment policies described in the Fund's
prospectus.
PARTICIPATION INTERESTS
The financial institutions from which the Fund purchases participation
interests frequently provide or secure from another financial institution
irrevocable letters of credit or guarantees and give the Fund the right
to demand payment of the principal amounts of the participation interests
plus accrued interest on short notice (usually within seven days).
VARIABLE RATE MUNICIPAL SECURITIES
Variable interest rates generally reduce changes in the market value of
municipal securities from their original purchase prices. Accordingly, as
interest rates decrease or increase, the potential for capital
appreciation or depreciation is less for variable rate municipal
securities than for fixed income obligations.
Many municipal securities with variable interest rates purchased by the
Fund are subject to repayment of principal (usually within seven days) on
the Fund's demand. The terms of these variable rate demand instruments
require payment of principal obligations, the issuer of the participation
interests, or a guarantor of either issuer.
MUNICIPAL LEASES
The Fund may purchase municipal securities in the form of participation
interests which represent undivided proportional interests in lease
payments by a governmental or non-profit entity. The lease payments and
other rights under the lease provide for and secure the payments on the
certificates. Lease obligations may be limited by municipal charter or
the nature of the appropriation for the lease. In particular, lease
obligations may be subject to periodic appropriation. If the entity does
not appropriate funds for future lease payments, the entity cannot be
compelled to make such payments. Furthermore, a lease may provide that
the certificate trustee cannot accelerate lease obligations upon default.
The trustee would only be able to enforce lease payments as they become
due. In the event of a default or failure of appropriation, it is
unlikely that the trustee would be able to obtain an acceptable
substitute source of payment or that the substitute source of payment
will generate tax-exempt income.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. No fees or expenses, other than normal
transaction costs, are incurred. However, liquid assets of the Fund sufficient
to make payment for the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market daily and
maintained until the transaction has been settled.
The Fund does not intend to engage in when-issued and delayed delivery
transactions to an extent that would cause the segregation of more than 20% of
the total value of its assets.
REPURCHASE AGREEMENTS
Repurchase agreements are arrangements in which banks, broker/dealers, and
other recognized financial institutions sell U.S. government securities or
certificates of deposit to the Fund and agree at the time of sale to repurchase
them at a mutually agreed upon time and price within one year from the date of
acquisition. The Fund or its custodian will take possession of the securities
subject to repurchase agreements. To the extent that the original seller does
not repurchase the securities from the Fund, the Fund could receive less than
the repurchase price on any sale of such securities. In the event that such a
defaulting seller filed for bankruptcy or became insolvent, disposition of such
securities by the Fund might be delayed pending court action. The Fund believes
that under the regular procedures normally in effect for custody of the Fund's
portfolio securities subject to repurchase agreements, a court of competent
jurisdiction would rule in favor of the Fund and allow retention or disposition
of such securities. The Fund may only enter into repurchase agreements with
banks and other recognized financial institutions, such as broker/dealers,
which are found by the Fund's adviser to be creditworthy.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the
option of the Fund or the borrower. The Fund may pay reasonable administrative
and custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash or equivalent collateral to the borrower or
placing broker.
PORTFOLIO TURNOVER
Although the Fund does not intend to invest for the purpose of seeking short-
term profits, securities in its portfolio will be sold whenever the Fund's ad-
viser believes it is appropriate to do so in light of the Fund's investment ob-
jective, without regard to the length of time a particular security may have
been held. It is not anticipated that the portfolio trading engaged in by the
Fund will result in its annual rate of portfolio turnover exceeding 100% under
normal market conditions.
MUNICIPAL BOND INSURANCE
Under the Policies (as such term is defined in the prospectus), municipal bond
insurers unconditionally guarantee to the Fund the timely payment of principal
and interest on the insured municipal securities when and as such payments
shall become due but shall not be paid by the issuer, except that in the event
of any acceleration of the due date of the principal by reason of mandatory or
optional redemption (other than acceleration by reason of mandatory sinking
fund payments), default or otherwise, the payments guaranteed will be made in
such amounts and at such times as payments of principal would have been due had
there not been such acceleration. The municipal bond insurers will be
responsible for such payments less any amounts received by the Fund from any
trustee for the municipal bond issuers or from any other source. The Policies
do not guarantee payment on an accelerated basis, the payment of any redemption
premium, the value for the shares of the Fund, or payments of any tender
purchase price upon the tender of the municipal securities. The Policies also
do not insure against nonpayment of principal of or interest on the securities
resulting from the insolvency, negligence or any other act or omission of the
trustee or other paying agent for the securities. However, with respect to
small issue industrial development municipal bonds and pollution control
revenue municipal bonds covered by the Policies, the municipal bond insurers
guarantee the full and complete payments required to be made by or on behalf of
an issuer of such municipal securities if there occurs any change in the tax-
exempt status of interest on such municipal securities, including principal,
interest or premium payments, if any, as and when required to be made by or on
behalf of the issuer pursuant to the terms of such municipal securities. A
when-issued municipal security will be covered under the Policies upon the
settlement date of the issuer of such when-issued municipal securities. In
determining to insure municipal securities held by the Fund, each municipal
bond insurer has applied its own standard, which corresponds generally to the
standards it has established for determining the insurability of new issues of
municipal securities. This insurance is intended to reduce financial risk, but
the cost thereof and compliance with investment restrictions imposed under the
Policies will reduce the yield to shareholders of the Fund.
If a Policy terminates as to municipal securities sold by the Fund on the date
of sale, in which event municipal bond insurers will be liable only for those
payments of principal and interest that are then due and owing, the provision
for insurance will not enhance the marketability of securities held by the
Fund, whether or not the securities are in default or subject to significant
risk of default, unless the option to obtain permanent insurance is exercised.
On the other hand, since issuer-obtained insurance will remain in effect as
long as the insured municipal securities are outstanding, such insurance may
enhance the marketability of municipal securities covered thereby, but the
exact effect, if any, on marketability cannot be estimated. The Fund generally
intends to retain any securities that are in default or subject to significant
risk of default and to place a value on the insurance, which ordinarily will be
the difference between the market value of the defaulted security and the
market value of similar securities of minimum investment grade (i.e., rated BBB
by S&P or Baa by Moody's) that are not in default. To the extent that the Fund
holds defaulted securities, it may be limited in its ability to manage its
investment and to purchase other municipal securities. Except as described
above with respect to securities that are in default or subject to significant
risk of default, the Fund will not place any value on the insurance in valuing
the municipal securities that it holds.
Municipal bond insurance may be provided by one or more of the following
insurers or any other municipal bond insurer which is rated Aaa by Moody's or
AAA by S&P.
MUNICIPAL BOND INVESTORS ASSURANCE CORP.
Municipal Bond Investors Assurance Corp. ("MBIA") is a wholly-owned
subsidiary of MBIA, Inc., a Connecticut insurance company, which is owned
by AEtna Casualty & Surety, Credit Local DeFrance CAECL, and the public.
The investors of MBIA, Inc., are not obligated to pay the obligations of
MBIA. MBIA, domiciled in New York, is regulated by the New York State
Insurance Department and licensed to do business in various states. The
address of MBIA is 113 King Street, Armonk, New York, 10504, and its
telephone number is (914) 273-4345. As of June 1, 1994, S&P has rated the
claims-paying ability of MBIA "AAA."
AMBAC INDEMNITY CORPORATION
AMBAC Indemnity Corporation ("AMBAC") is a Wisconsin-domiciled stock
insurance company, regulated by the Insurance Department of Wisconsin,
and licensed to do business in various states. AMBAC is a wholly-owned
subsidiary of AMBAC, Inc., a financial holding company which is owned by
the public. Copies of certain statutorily required filings of AMBAC can
be obtained from AMBAC. The address of AMBAC's administrative offices is
One State Street Plaza, 17th Floor, New York, New York 10004, and its
telephone number is (212) 668-0340. As of June 1, 1994, S&P has rated the
claims-paying ability of AMBAC "AAA."
FINANCIAL GUARANTY INSURANCE COMPANY
Financial Guaranty Insurance Company ("Financial Guaranty") is a wholly-
owned subsidiary of FGIC Corporation, a Delaware holding company. FGIC
Corporation is 99% owned by General Electric Capital Corporation, with
the other 1% ownership coming from the Sumitomo Marine & Fire Insurance
Company Ltd. The investors of FGIC Corporation are not obligated to pay
the debts of or the claims against Financial Guaranty. Financial Guaranty
is subject to regulation by the New York State Insurance Department and
is licensed to do business in various states. The address of Financial
Guaranty is 115 Broadway, New York, New York 10006, and its telephone
number is (212) 312-3000. As of June 1, 1994, S&P has rated the claims-
paying ability of Financial Guaranty "AAA."
INVESTMENT LIMITATIONS
- --------------------------------------------------------------------------------
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin but may obtain such short-term credits as may be necessary for
clearance of purchases and sales of securities.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities, except that the Fund may
borrow money in amounts up to one-third of the value of its total assets,
including the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous. The Fund will not purchase any
securities while borrowings in excess of 5% of its total assets are
outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate its assets except to
secure permitted borrowings.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its investment
objective, policies, and limitations.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, although it may invest in
municipal bonds secured by real estate or interests in real estate.
INVESTING IN COMMODITIES
The Fund will not buy or sell commodities, commodity contracts, or
commodities futures contracts.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities. The
Fund may, however, acquire publicly or non-publicly issued municipal
bonds or temporary investments or enter into repurchase agreements in
accordance with its investment objective, policies, and limitations and
its Declaration of Trust.
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in
any one industry, except that the Fund may invest generally 25% or more
of its assets in certain broad segments of the municipal securities
market, such as revenue obligations of hospitals and other health care
facilities, housing agency revenue obligations, or airport revenue
obligations. Governmental issuers of municipal securities are not
considered part of any "industry." The Fund may invest 25% or more of the
value of its total assets in cash, cash items, or securities issued or
guaranteed by the government of the United States or its agencies, or
instrumentalities and repurchase agreement collateralized by such U.S.
government securities. Concentrating investments in one industry may
subject the Fund to more risk than if it did not concentrate.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of the value of its total assets
in securities subject to restrictions on resale under the Securities Act
of 1933, except for restricted securities determined to be liquid under
criteria established by the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
obligations, including repurchase agreements providing for settlement in
more than seven days after notice, and certain restricted securities.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
industrial development bonds where the principal and interest are the
responsibility of companies (or guarantors, where applicable) with less
than three years of continuous operations, including the operation of any
predecessor.
INVESTING IN OPTIONS
The Fund will not buy or sell puts, calls, straddles, spreads, or any
combination of these.
INVESTING IN MINERALS
The Fund will not purchase or sell oil, gas, or other mineral exploration
or development programs, or leases.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will not own more than 3% of the total outstanding voting stock
of any investment company, invest more than 5% of its total assets in any
investment company, or invest more than 10% of its total assets in
investment companies in general. The Fund will purchase securities of
investment companies only in open-market transactions involving only
customary broker's commissions. However, these limitations are not
applicable if the securities are acquired in a merger, consolidation, or
acquisition of assets. While it is the Fund's adviser's policy to waive
its investment advisory fee on assets invested in securities of open-end
investment companies, it should be noted that investment companies incur
certain expenses such as custodian and transfer agent fees, and therefore
any investment by the Fund in shares of another investment company would
be subject to such duplicate expenses.
Except with respect to borrowing money, if a percentage limitation is adhered
to at the time of investment, a later increase or decrease in percentage
resulting from any change in value or net assets will not result in a violation
of such restriction.
The Fund does not expect to borrow money or pledge securities in excess of 5%
of the value of its net assets in the coming fiscal year.
In order to comply with certain state restrictions, the Fund will not invest in
real estate limited partnerships or oil, gas, or other mineral leases.
NORTH CAROLINA INVESTMENT RISKS
The State of North Carolina's credit strength is derived from a diversified
economy, relatively low unemployment rates, strong financial management, and a
low debt burden. In recent years, the State's economy has become less dependent
on agriculture (primarily tobacco) and manufacturing (textiles and furniture)
and has experienced increased activity in financial services, research, high
technology manufacturing, and tourism. North Carolina did not escape the
effects of the economic slowdown; however, the State is now experiencing an
increase in economic development. Long-term personal income trends indicate
gains; however, wealth levels still continue to lag the national average. State
unemployment rates consistently fall below the national average. For August,
1994, North Carolina reported an unemployment rate of 4.9 percent versus the
national average of 6.1 percent.
North Carolina is a very conservative debt issuer and has maintained debt
levels that are low due to constitutional debt limitations. Conservative
policies also dominate the State's financial operations. The State's
administration continually demonstrates its ability and willingness to adjust
financial planning and budgeting to preserve financial balance. The State's
finances, which enjoyed surpluses and adequate reserves throughout the 1980's,
began reflecting the economic downturn in fiscal 1990. To close the shortfalls
that emerged because of weakening revenues, the State increased its sales and
corporate tax rates and implemented expenditure reductions and restrictions.
Management's actions resulted in a budget surplus for fiscal 1992 and fiscal
1993. Available unreserved balances and budget stabilization reserves totaled
$440 million at the end of fiscal 1994, which is equivalent to 4.1% of annual
expenditures. The financials of many North Carolina municipalities are also
strong, and over 25 percent of all Aaa-rated tax-exempt bonds issued by local
municipalities throughout the country are issued by cities and towns located in
the State.
The Fund's concentration in securities issued by the State and its political
subdivisions provides a greater level of risk than a fund which is diversified
across numerous states and municipal entities. The ability of the State or its
municipalities to meet their obligations will depend on the availability of tax
and other revenues; economic, political, and demographic conditions within the
State; and the underlying fiscal condition of the State, its counties, and its
municipalities.
THE BILTMORE MUNICIPAL FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations
during the past five years, and their present positions. Each of the Trustees
and officers listed below holds an identical position with The Biltmore Funds,
another investment company which is advised by Wachovia Bank of North Carolina,
N.A. Except as listed below, none of the Trustees or officers are affiliated
with Wachovia Bank of North Carolina, N.A., Federated Investors, Federated
Securities Corp., Federated Services Company or Federated Administrative
Services.
- --------------------------------------------------------------------------------
James A. Hanley
Trustee
Retired; Vice President and Treasurer, Abbott Laboratories (health care
products) until 1992.
- --------------------------------------------------------------------------------
Malcolm T. Hopkins
Trustee
Private investor and consultant; Director, The Columbia Gas System, Inc.
(integrated natural gas production, transmission and distribution); Director,
MAPCO, Inc. (diversified energy); Director, Metropolitan Series Funds, Inc. and
MetLife Portfolios, Inc. (investment companies); Director, Kinder-Care Learning
Centers, Inc. (child care); and Director, U.S. Home Corp. (residential builders
and land development).
- --------------------------------------------------------------------------------
Samuel E. Hudgins
Trustee
President, Percival, Hudgins & Company, Inc. (investment bankers/financial
consultants); Director, Atlantic American Corporation (insurance holding
company); Director, Bankers Fidelity Life Insurance Company; Director and Vice
Chairman, Leath Furniture, Inc. (retail furniture); President, Atlantic
American Corporation until 1988; Director, Vice Chairman and Chief Executive
Officer, Rhodes, Inc. (retail furniture) until 1988; Chairman and Director,
Atlantic American Life Insurance Co., Georgia Casualty & Surety Company, and
Bankers Fidelity Life Insurance until 1988.
- --------------------------------------------------------------------------------
J. Berkley Ingram, Jr.
Trustee
Real estate investor and partner; Director, VF Corporation (apparel company).
- --------------------------------------------------------------------------------
D. Dean Kaylor
Trustee
Retired; Executive Vice President and Chief Financial Officer, NBD Bank, N.A.
and NBD Bancorp, Inc. (bank and bank-holding company) until 1990.
- --------------------------------------------------------------------------------
John W. McGonigle
President and Treasurer
Vice President, Secretary, General Counsel, and Trustee, Federated Investors;
Vice President, Secretary, and Trustee, Federated Advisers, Federated
Management, and Federated Research; Trustee, Federated Services Company;
Executive Vice President, Secretary and Trustee, Federated Administrative
Services; Executive Vice President and Director, Federated Securities Corp.
- --------------------------------------------------------------------------------
Ronald M. Petnuch
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; formerly, Associate
Corporate Counsel, Federated Investors; Vice President and Assistant Treasurer
of certain investment companies for which Federated Securities Corp. is the
principal distributor.
- --------------------------------------------------------------------------------
Joseph M. Huber
Secretary
Corporate Counsel, Federated Investors.
- --------------------------------------------------------------------------------
The address of the Trustees and officers of the Trust is Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEE LIABILITY
The Biltmore Municipal Funds' Declaration of Trust provides that the Trustees
are not liable for errors of judgment or mistakes of fact or law. However, they
are not protected against any liability to which they would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND
The Fund's adviser is Wachovia Bank of North Carolina, N.A. (the "Adviser").
The Adviser shall not be liable to the Fund or any shareholder for any losses
that may be sustained in the purchase, holding, lending, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Fund.
ADVISORY FEES
For its advisory services, Wachovia Bank of North Carolina, N.A. receives an
annual investment advisory fee as described in the prospectus.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for the fees set
forth in the prospectus.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company serves as transfer agent and dividend disbursing
agent for the Fund. The fee is based on the size, type, and number of accounts
and transactions made by shareholders.
Federated Services Company also maintains the Trust's accounting records. The
fee is based on the level of the Fund's average net assets for the period plus
out-of-pocket expenses.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better
price and execution of the order can be obtained elsewhere. The Adviser makes
decisions on portfolio transactions and selects brokers and dealers subject to
review by the Trustees. The Adviser may select brokers and dealers who offer
brokerage and research services. These services may be furnished directly to
the Fund or to the Adviser and may include:
. advice as to the advisability of investing in securities;
. security analysis and reports;
. economic studies;
. industry studies;
. receipt of quotations for portfolio evaluations; and
. similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage
and research services provided.
Research services provided by brokers may be used by the Adviser or by its
affiliates in advising other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce their expenses.
PURCHASING SHARES
- --------------------------------------------------------------------------------
Except under certain circumstances described in the prospectus, shares are sold
at their net asset value plus a sales charge on days the New York Stock
Exchange, the Wachovia Banks (as such term is defined in the prospectus) and
the Federal Reserve Wire System are open for business. The procedure for
purchasing shares of the Fund is explained in the prospectus under "Investing
in the Fund."
DISTRIBUTION OF SHARES
Federated Securities Corp. is the principal distributor for shares of the Fund.
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds before shareholders begin to
earn dividends. The Wachovia Banks act as the shareholders' agent in depositing
checks and converting them to federal funds.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value
is calculated by the Fund are described in the prospectus.
VALUING MUNICIPAL BONDS
The Trustees use an independent pricing service to value municipal bonds. The
independent pricing service takes into consideration yield, stability, risk,
quality, coupon rate, maturity, type of issue, trading characteristics, special
circumstances of a security or trading market, and any other factors or market
data it considers relevant in determining valuations for normal institutional
size trading units of debt securities, and does not rely exclusively on quoted
prices.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares."
REDEMPTION IN KIND
Although the Trust intends to redeem shares in cash, it reserves the right,
under certain circumstances, to pay the redemption price in whole or in part by
a distribution of securities from the Fund's portfolio. Redemption in kind will
be made in conformity with applicable Securities and Exchange Commission rules,
taking such securities at the same value employed in determining net asset
value and selecting the securities in a manner the Trustees determine to be
fair and equitable.
The Trust has elected to be governed by Rule 18f-1 of the Investment Company
Act of 1940 under which the Trust is obligated to redeem shares for any one
shareholder in cash only up to the lesser of $250,000 or 1% of the Fund's net
asset value during any 90-day period.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund expects to pay no federal income tax because it intends to meet
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund must, among
other requirements:
. derive at least 90% of its gross income from dividends, interest, and gains
from the sale of securities;
. derive less than 30% of its gross income from the sale of securities held
less than three months;
. invest in securities within certain statutory limits; and
. distribute to its shareholders at least 90% of its net income earned during
the year.
SHAREHOLDERS' TAX STATUS
No portion of any income dividend paid by the Fund is eligible for the
dividends received deductions available to corporations.
CAPITAL GAINS
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value on
securities held to maturity. Sales would generally be made because of:
. the availability of higher relative yields;
. differentials in market values;
. new investment opportunities;
. changes in creditworthiness of an issuer; or
. an attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they
are taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the net asset value per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at
the beginning of the period with $1,000, less any applicable sales load,
adjusted over the period by any additional shares, assuming the monthly
reinvestment of all dividends and distributions.
YIELD
- --------------------------------------------------------------------------------
The yield for the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the net asset value per share on the last day of
the period. This value is then annualized using semi-annual compounding. This
means that the amount of income generated during the thirty-day period is
assumed to be generated each month over a twelve-month period and is reinvested
every six months. The yield does not necessarily reflect income actually earned
by the Fund because of certain adjustments required by the Securities and
Exchange Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the
Fund, performance will be reduced for those shareholders paying those fees.
TAX-EQUIVALENT YIELD
- --------------------------------------------------------------------------------
The tax-equivalent yield of the Fund is calculated similarly to the yield, but
is adjusted to reflect the taxable yield that the Fund would have had to earn
to equal its actual yield, assuming that income is 100% tax-exempt.
TAX-EQUIVALENCY TABLE
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the Fund's
portfolio generally remains free from federal regular income tax, and is
often free from state and local taxes as well. As the table below
indicates, a "tax-free" investment is an attractive choice for investors,
particularly in times of narrow spreads between tax-free and taxable
yields.
<TABLE>
<CAPTION>
TAXABLE YIELD EQUIVALENT FOR 1994
STATE OF NORTH CAROLINA
- ------------------------------------------------------------------------------------------------------------------
<C> <S> <C> <C> <C> <C> <C>
TAX BRACKET:
FEDERAL: 15.00% 28.00% 31.00% 31.00% 36.00% 39.60%
COMBINED
FEDERAL
AND STATE: 22.00% 35.00% 38.00% 38.75% 43.75% 47.35%
- ------------------------------------------------------------------------------------------------------------------
JOINT RETURN: $1-38,000 $38,001-91,850 $91,851-100,000 $100,001-140,000 $140,001-250,000 Over $250,000
SINGLE RETURN: $1-22,750 $22,751-55,100 $55,101-60,000 $60,001-115,000 $115,001-250,000 Over $250,000
- ------------------------------------------------------------------------------------------------------------------
TAX-EXEMPT YIELD TAXABLE YIELD EQUIVALENT
- ------------------------------------------------------------------------------------------------------------------
3.50% 4.49% 5.38% 5.65% 5.71% 6.22% 6.65%
4.00 5.13 6.15 6.45 6.53 7.11 7.60
4.50 5.77 6.92 7.26 7.35 8.00 8.55
5.00 6.41 7.69 8.06 8.16 8.89 9.50
5.50 7.05 8.46 8.87 8.98 9.78 10.45
6.00 7.69 9.23 9.68 9.80 10.67 11.40
6.50 8.33 10.00 10.48 10.61 11.56 12.35
7.00 8.97 10.77 11.29 11.43 12.44 13.30
7.50 9.62 11.54 12.10 12.24 13.33 14.25
8.00 10.26 12.31 12.90 13.06 14.22 15.19
</TABLE>
Note: The maximum marginal tax rate for each bracket was used in calculating
the taxable yield equivalent. Furthermore, additional state and local taxes
paid on comparable taxable investments were not used to increase federal
deductions.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
. portfolio quality;
. average portfolio maturity;
. type of instruments in which the portfolio is invested;
. changes in interest rates and market value of portfolio securities;
. changes in the Fund's expenses; and
. various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and offering price per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of yield and total return as
described below.
From time to time, the Fund may advertise its performance compared to similar
funds or portfolios using certain financial publications and/or compare its
performance to certain indices.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors, such as the composition of any index
used, prevailing market conditions, portfolio compositions of other funds, and
methods used to value portfolio securities and compute offering price. The
financial publications and/or indices which the Fund uses in advertising may
include:
.LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in net asset value over a specific period of time.
From time to time, the Fund will quote its Lipper ranking in the general
municipal bond funds category in advertising and sales literature.
.MORNINGSTAR INC., an independent rating service is the publisher of the bi-
weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000 NASDAQ-
listed mutual funds of all types, according to their risk-adjusted returns.
The maximum rating is five stars, and ratings are effective for two weeks.
.LEHMAN BROTHERS STATE GENERAL OBLIGATIONS INDEX is an index comprised of all
state general obligation debt issues and is compiled without regard to
maturities. These bonds are rated A or better and represent a variety of
coupon ranges. Index figures are total returns calculated for one, three, and
twelve month periods as well as year-to-date. Total returns are also
calculated as of the index inception, December 31, 1979.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. The total returns
represent the historic change in the value of an investment in the Fund based
on monthly reinvestment of dividends over a specified period of time.
Advertisements may quote performance information which does not reflect the
effect of a sales load.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD & POOR'S RATINGS GROUP MUNICIPAL BOND RATING DEFINITIONS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC--Debt rated "BB", "B", "CCC" and "CC" is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "CC" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
outweighed by large uncertainties of major risk exposure to adverse conditions.
C--The rating "C" is reversed for income bonds on which no interest is being
paid.
D--Debt rated "D" is in default, and payment of interest and/or repayment of
principal is in arrears.
STANDARD & POOR'S RATINGS GROUP MUNICIPAL NOTE RATING DEFINITIONS
SP-1--Very strong or strong capacity to pay principal and interest. Those
issues determined to possess overwhelming safety characteristics will be given
a plus sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
SP-3--Speculative capacity to pay principal and interest.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATING DEFINITIONS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1".
A-3--Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of changes
in circumstances than obligations carrying the higher designations.
B--Issues rated "B" are regarded as having only speculative capacity for timely
payment.
C--This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D--Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATING DEFINITIONS
Aaa--Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements
are likely to change, such changes as can be visualized are most unlikely to
impair the fundamentally strong position of such issues.
Aa--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins
of protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in "Aaa"
securities.
A--Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated "Baa" are considered as medium grade obligations,
i.e., they are neither highly protected nor poorly secured. Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
Ba--Bonds which are "Ba" are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B--Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
Caa--Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
Ca--Bonds which are rated "Ca" represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated "C" are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM DEBT RATING DEFINITIONS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
. Leading market positions in well established industries;
. High rates of return on funds employed;
. Conservative capitalization structure with moderate reliance on debt and ample
asset protection;
. Broad margins in earning coverage of fixed financial charges and high internal
cash generation; and
. Well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
PRIME-3--Issuers rated PRIME-3 (or related supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect
of industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial
leverage. Adequate alternate liquidity is maintained.
NOT PRIME--Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
.Leading market positions in well established industries;
.High rates of return on funds employed;
.Conservative capitalization structure with moderate reliance on debt and ample
asset protection;
.Broad margins in earning coverage of fixed financial charges and high internal
cash generation; and
.Well-established access to a range of financial markets and assured sources of
alternate liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
PRIME-3--Issuers rated PRIME-3 (or related supporting institutions) have an
acceptable capacity for repayment of short-term promissory obligations. The
effects of industry characteristics and market composition may be more
pronounced. Variability in earnings and profitability may result in changes in
the level of debt protection measurements and the requirement for relatively
high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME--Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.
MOODY'S INVESTORS SERVICE, INC. SHORT TERM LOAN RATING DEFINITIONS
MIG 1/VMIG 1--This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG 2/VMIG 2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3--This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
G00481-04
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a)Financial Statements: (3) filed in Part A; (1-2) to
be filed by Amendment;
(b)Exhibits:
(1) Conformed Copy of Declaration of Trust of the
Registrant (1.);
(i) Conformed copies of Amendment Nos. 1 - 4 to
the Declaration of Trust dated August 15,
1990;+
(2) Copy of By-Laws of the Registrant (1.);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of
Beneficial Interest of the Registrant (2.)(7.);
(5) (i) Conformed Copy of Investment Advisory Contract of the
Registrant and Exhibit A thereto (to file the executed
version of the Investment advisory Contract between the
Trust and Wachovia Bank of South Carolina, N.A. on behalf of
South Carolina Municipal Bond Fund);+
(ii) Form of Investment Advisory Contract of the
Registrant between the Trust and Wachovia Bank of
Georgia N.A. on behalf of Georgia Municipal Bond
Fund;+
(iii) Form of Investment Advisory Contract of the
Registrant between the Trust and Wachovia Bank of North
Carolina, N.A. on behalf of North Carolina Municipal Bond
Fund;+
(6) (i) Conformed Copy of
Distributor's Contract of the Registrant and
Exhibit A thereto;+
(ii) Form of Exhibit B to the Distributor's
Contract;
(7) Not applicable;
(8) (i) Form of Custodian Agreement of the
Registrant(5.);
(ii) Conformed copy of new Custodian Agreement of
the Registrant and Exhibits A-C thereto; +
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's
Initial Registration Statement on Form N-1A filed October
29, 1990. (File Nos. 33-37525 and 811-6201)
2. Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed November 30,
1990. (File Nos. 33-37525 and 811-6201)
3. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 1 on Form N-1A filed May 28, 1991.
(File Nos. 33-37525 and 811-6201)
4. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 2 on Form N-1A filed November 27,
1991. (File Nos. 33-37525 and 811-6201)
5. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 3 on Form N-lA filed November 23,
1992. (File Nos. 33-37525 and 811-6201)
6. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 4 on Form N-1A filed January 28,
1994. (File Nos. 33-37525 and 811-6201)
7. To be filed by Amendment.
(9) Form of Transfer Agency and Service Agreement of
the Registrant(5);
(i) Conformed copy of new Portfolio Accounting and
Shareholder Recordkeeping Agreement of Registrant
and Schedule F thereto;+
(ii) Copy of Schedule G to new Portfolio
Accounting and Recordkeeping Agreement;+
(iii) Conformed Copy of Administrative Services
Areement;+
(10) Paper copy of Opinion and Consent of Counsel as to
legality of shares being registered (2.);
(11) Paper Copy of Opinion and Consent of Special Tax
Counsel for South Carolina Municipal Bond
Fund(4.);
(12) Not Applicable;
(13) Conformed copy of Initial Capital Understanding
(2.);
(14) Not Applicable;
(15) Not Applicable;
(16) Schedule for Computation of Fund Performance Data
(3.);
(17) Not Applicable (Financial Data Schedules);
(18) Paper Copy of Power of Attorney (5.);
Item 25. Persons Controlled by or Under Common Control with
Registrant
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of September 23,
1994
Shares of beneficial interest
no par value
South Carolina Municipal Bond Fund 1,813
Item 27. Indemnification: (1.)
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of
the investment advisers, see the section entitled
"The Biltmore Municipal Funds Information -
Management of The Biltmore Municipal Funds" in Part
A for each of the Funds.
1. Response is incorporated by reference to Registrant's
Initial Registration Statement on Form N-1A filed October
29, 1990. (File Nos. 33-37525 and 811-6201)
2. Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on Form N-1A filed November 30,
1990. (File Nos. 33-37525 and 811-6201)
3. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 1 on Form N-1A filed May 28, 1991.
(File Nos. 33-37525 and 811-6201)
4. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 2 on Form N-1A filed November 27,
1991. (File Nos. 33-37525 and 811-6201)
5. Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 3 on Form N-lA filed November 23,
1992. (File Nos. 33-37525 and 811-6201)
The Officers of Wachovia Bank of South Carolina,
N.A. are: Anthony L. Furr, Chairman, President and
Chief Executive Officer; Charles T. Cole, Jr.,
Executive Vice President; David Q. Soutter,
Executive Vice President; Donald K. Truslow,
Executive Vice President. The business address of
each of the Officers of Wachovia Bank of South
Carolina, N.A. is 1401 Main Street, Columbia, South
Carolina, 29226.
The Officers of Wachovia Bank of North Carolina,
N.A. are: Chairman of the Board, L. M. Baker, Jr.;
President and Chief Executive Officer, J. Walter
McDowell; Chief Financial Officer and Executive Vice
President, Robert F. McCoy; Chief Loan
Administration Officer and Executive Vice President,
Robert L. Alphin; Executive Vice President, Hugh M.
Durden; Executive Vice President, Mickey W. Dry;
Executive Vice President, Walter E. Leonard, Jr.;
and Executive Vice President, Richard B. Roberts.
The business address of each of the Officers of
Wachovia Bank of North Carolina, N.A. is Wachovia
Bank of North Carolina, N.A., 310 North Main Street,
Winston-Salem, N.C. 27150.
The Officers of Wachovia Bank of Georgia, N.A. are:
President, and Chief Executive Officer, G. Joseph
Prendergast; Executive Vice Presidents: George W.P.
Atkins; Donald P. Carson; John M. Chalk; William T.
Deyo, Jr.; Thomas D. Hills; Eric L. Stone; David C.
Swann; D. Gary Thompson.
The business address of each of the Officers of
Wachovia Bank of Georgia, N.A. is 191 Peachtree
Street, NE, Atlanta, Georgia, 30303.
The Directors of Wachovia Bank of North Carolina,
N.A. are: L.M. Baker, Jr., President and Chief
Executive Officer, Wachovia Corporation, Chairman,
Wachovia Bank of North Carolina, N.A.; H.C. Bissell,
Chairman of the Board and Chief Executive Officer,
The Bissell Companies, Inc.; Bert Collins, President
and Chief Executive Officer, North Carolina Mutual
Life Insurance Company; Felton J. Capel, Chairman of
the Board and President, Century Associates of North
Carolina; Richard L. Daugherty, North Carolina
Senior Executive and Vice President, IBM
Corporation; Estell C. Lee, Chairman of the Board
and President, The Lee Company; John G. Medlin, Jr.,
Chairman of the Board, Wachovia Corporation; David
J. Whichard II, Chairman, The Daily Reflector; John
C. Whitaker, Jr., Chairman of the Board and Chief
Executive Officer, Inmar Enterprises, Inc.; Herbert
Brenner, President, Brenner Companies, Inc.; William
Cavanaugh, III, President and Chief Operating
Officer, Carolina Power and Light Company; J. Walter
McDowell, President and Chief Executive Officer,
Wachovia Bank of North Carolina, N.A.; John F. Ward,
Senior Vice President, Sara Lee Corporation;
Anderson D. Warlick; President and Chief Operating
Officer, Parkdale Mills, Inc.; Wyndham Robertson,
Vice President for Communications, University of
North Carolina. The business address for each of
the Directors of Wachovia Bank of North Carolina,
N.A. is 310 North Main Street, Winston-Salem, North
Carolina, 27150.
The Directors of Wachovia Bank of South Carolina,
N.A. are: Mr. L.M. Baker, Jr, President and Chief
Executive Officer, Wachovia Corporation, Chairman,
Wachovia Bank of North Carolina, Winston-Salem, NC
27150; Mr. Charles J. Bradshaw, President, Bradshaw
Investments, Inc., 705 Front Street, Georgetown,
S.C. 29440; Mr. Frank W. Brumley, President, The
Brumley Company, P.O. Box Y Charleston, S.C. 29402;
Mr. W.T. Cassels, Jr, Chairman, Southeastern Freight
Lines, Inc., P.O. Box 1691, Columbia, S.C. 29202;
Mr. Thomas C. Coxe, III, Executive Vice President,
Sonoco Products Company, P.O. Drawer 160,
Hartsville, S.C. 29550; Mr. Frederick B. Dent, Jr.,
President, Mayfair Mills, Inc., 1885 Hayne Street,
Arcadia, S.C. 29320-9999; Dr. James B. Edwards,
President, Medical University of S.C., 171 Ashley
Avenue, Charleston, S.C. 29425; Mr. Anthony L.
Furr, Chairman, President and Chief Operating
Officer, South Carolina National Corporation, 1426
Main Street,18th Floor, Columbia, SC 29226; Mr.
James G. Lindley, Chairman Emeritus, South Carolina
National Corporation, 1426 Main Street, 18th Floor,
Columbia, S.C. 29226; Mr. Joe A. Padgett, 1426 Main
Street, 18th Floor, Columbia, S.C. 29226; Mr. W.M.
Self, President and CEO, Greenwood Mills, Inc., P.O.
Box 1017, Greenwood, S.C. 29648; Mr. Robert S.
Small, Jr., President, AVTEX Commercial Properties,
Inc., P.O. Drawer 10287; Greenville, S.C. 29603;
Mr. William G. Taylor, President, The Springs
Company, P.O. Drawer 460, Lancaster, S.C., SC
29721; Dr. Beatrice R. Thompson, Psychologist,
Anderson County School District, No. 5, P.O. Drawer
439, Anderson, SC 29622.
The Directors of Wachovia Bank of Georgia, N.A. are:
F. Duane Ackerman, President and Chief Executive
Officer, BellSouth Telecommunications, Inc., 4507
Southern Bell Center, Atlanta, GA 30375, Edward L.
Addison, Chairman and Chief Executive Officer, The
Southern Company, 64 Perimeter Center East, Atlanta,
GA 30346; L.M. Baker, Jr., President and Chief
Executive Officer, Wachovia Corporation, P.O. Box
3099, Winston-Salem, NC 27150; Thomas E. Boland,
Wachovia Bank of Georgia, N.A., 191 Peachtree
Street, N.E., Mail Code 1101, Atlanta, GA 30303;
Carl Bolch, Jr., Chairman and Chief Executive
Officer, Racetrac Petroleum, Inc. 300 Technology
Court, Smyrna, GA 30082; James E. Bostic, Jr., Group
Vice President, Communication Papers Divsision,
Georgia-Pacific Corporation, 55 Park Place 14th
Floor, Atlanta, GA 30374-0075; Michael C. Carlos,
Chairman and Chief Executive Officer, National
Distributing Co., Inc., 1 National Drive, S.W.,
Atlanta, GA 30336; G. Stephen Felker, Chairman and
Chief Executive Officer, Avondale Mills, Inc., 506
South Broad Street, Monroe, GA 30655; Bryan D.
Langton, Chairman and Chief Executive Officer,
Holiday Inn Worldwide, Three Ravinia Drive, Suite
2000, Atlanta GA 30346; Bernard Marcus, Chairman and
Chief Executive Officer, The Home Depot, Inc. 2727
Paces Ferry Road, Atlanta, GA 30339; Daniel W.
McGlaughlin, President and Chief Operating Officer,
Equifax Inc., 1600 Peachtree Street, N.W., Atlanta,
GA 30309; G. Joseph Prendergast, Chairman, President
and Chief Executive Officer, Wachovia Bank of
Georgia, N.A., 191 Peachtree Street, N.E., Mail Code
503, Atlanta, GA 30303; D. Raymond Riddle, President
and Chief Executive Officer, National Service
Industries, Inc. 1420 Peachtree Street, N.E.,
Atlanta, GA 30309; S. Stephen Selig, III, Chairman
of the Board and President, Selig Enterprises, Inc.,
1100 Spring Street, N.W., Suite 550, Atlanta, GA
30367; Alana S. Shepherd, Secretary of the Board,
Shepherd Spinal Center, 2020 Peachtree Road, N.W.,
Atlanta, GA 30309; J.V. White, Chairman of the
Executive Committee, Equifax Inc. P.O. Box 4081,
Atlanta, GA 30302.
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor
for shares of the Registrant, also acts as principal
underwriter for the following open-end investment
companies: Alexander Hamilton Funds; American
Leaders Fund, Inc.; Annuity Management Series;
Automated Cash Management Trust; Automated
Government Money Trust; BayFunds; The Biltmore
Funds; The Biltmore Municipal Funds; California
Municipal Cash Trust; Cash Trust Series, Inc.; Cash
Trust Series II; DG Investor Series; Edward D. Jones
& Co. Daily Passport Cash Trust; Federated ARMs
Fund; Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated Growth
Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust;
Federated Intermediate Government Trust; Federated
Master Trust; Federated Municipal Trust; Federated
Short-Intermediate Government Trust; Federated Short-
Term U.S. Government Trust; Federated Stock Trust;
Federated Tax-Free Trust; Federated U.S. Government
Bond Fund; First Priority Funds; First Union Funds;
Fixed Income Securities, Inc.; Fortress Adjustable
Rate U.S. Government Fund, Inc.; Fortress Municipal
Income Fund, Inc.; Fortress Utility Fund, Inc.;
Fountain Square Funds; Fund for U.S. Government
Securities, Inc.; Government Income Securities,
Inc.; High Yield Cash Trust; Independence One Mutual
Funds; Insight Institutional Series, Inc.; Insurance
Management Series; Intermediate Municipal Trust;
International Series Inc.; Investment Series Funds,
Inc.; Investment Series Trust; Liberty Equity Income
Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Utility
Fund, Inc.; Liquid Cash Trust; Managed Series Trust;
Mark Twain Funds; Marshall Funds, Inc.; Money Market
Management, Inc.; The Medalist Funds; Money Market
Obligations Trust; Money Market Trust; The Monitor
Funds; Municipal Securities Income Trust; New York
Municipal Cash Trust; 111 Corcoran Funds; Peachtree
Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term
Municipal Trust; SouthTrust Vulcan Funds; Star
Funds; The Starburst Funds; The Starburst Funds II;
Stock and Bond Fund, Inc.; Sunburst Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; Tower
Mutual Funds; Trademark Funds; Trust for Financial
Institutions; Trust for Government Cash Reserves;
Trust for Short-Term U.S. Government Securities;
Trust for U.S. Treasury Obligations; Vision
Fiduciary Funds, Inc.; Vision Group of Funds, Inc.;
and World Investment Series, Inc.
Federated Securities Corp. also acts as principal
underwriter for the following closed-end investment
company: Liberty Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief --
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice --
Federated Investors Tower President, and Treasurer,
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice President and
Federated Investors Tower President, and Assistant Treasurer
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John A. Staley, IV Executive Vice President --
Federated Investors Tower and Assistant Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James R. Ball Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President,
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records: (1.)
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the
provisions of Section 16(c) of the l940 Act with respect
to the removal of Trustees and the calling of special
shareholder meetings by shareholders on behalf of each of
its portfolios.
Registrant hereby undertkes to furnish each person to
whom a prospectus is delivered with a copy of the
Registrant's latest annual report to shareholders upon
request and without charge.
Registrant hereby undertakes to file a post-effective
amendment on behalf of Georgia Municipal Bond fund and
North Carolina Municipal Bond Fund, portfolios of The
Biltmore Municipal Funds, using financial statements for
Georgia Municipal Bond Fund and North Carolina Municipal
Bond Fund, which need not be certified, within four to
six months from the date of this Post-Effective Amendment
No. 5.
1. Response is incorporated by reference to Registrant's
Initial Registration Statement on Form N-1A filed October
29, 1990. (File Nos. 33-37525 and 811-6201)
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and
the Investment Company Act of 1940, the Registrant, THE BILTMORE
MUNICIPAL FUNDS,
has duly caused this Amendment to its Registration Statement to
be signed on its behalf by the undersigned, thereunto duly
authorized, all in the City of Pittsburgh and Commonwealth of
Pennsylvania, on the 6th day of October, 1994.
THE BILTMORE MUNICIPAL FUNDS
BY: /s/Mark A. Sheehan
Mark A. Sheehan, Assistant Secretary
Attorney in Fact for John W. McGonigle
October 6, 1994
Pursuant to the requirements of the Securities Act of 1933,
this Amendment to its Registration Statement has been signed
below by the following person in the capacity and on the date
indicated:
NAME TITLE DATE
By: /s/Mark A. Sheehan
Mark A. Sheehan Attorney In Fact October 6, 1994
ASSISTANT SECRETARY For the Persons
Listed Below
TITLE
John W. McGonigle* President and Treasurer
James A. Hanley* Trustee
Malcolm T. Hopkins* Trustee
Samuel E. Hudgins* Trustee
J. Berkley Ingram, Jr.* Trustee
D. Dean Kaylor* Trustee
* By Power of Attorney
Form N-1A Exhibit 1(i)
Regulation S-K Exhibit No. 3(a)
SCNB PRIVATE LABEL TRUST
Amendment No. 1
to
DECLARATION OF TRUST
Dated August 15, 1990
THIS Declaration of Trust is amended as follows:
A. Strike Section 1 of Article 1 in its entirety from the
Declaration of Trust and substitute in its place the following:
Section 1. Name.
This Trust shall be known as The Passageway Funds.
B. Strike Section 2(b) of Article 1 in its entirety from the
Declaration of Trust and substitute in its place the following:
Section 2. Definitions.
(b) The "Trust" refers to The Passageway Funds;
C. Strike Section 9 of Article XII in its entirety from the
Declaration of Trust and substitute in its place the following:
"Section 9. Use of Name.
The Trust acknowledges that South Carolina National
Bank has reserved the right to grant the non-
exclusive use of the name "Passageway" or any
derivative thereof to any other investment company,
investment company portfolio, investment adviser,
distributor, or other business enterprise, and to
withdraw from the Trust or one or more Series or
Classes any right to the use of the name
"Passageway".
The undersigned Assistant Secretary of SCNB Private Label
Trust hereby certifies that the above stated amendment is a true
and correct Amendment to the Declaration of Trust, as adopted by
the Trustees of the Trust by unanimous consent on the 11th day
of October, 1990.
WITNESS the due execution hereof this 11th day of October,
1990.
/s/ Byron F. Bowman
Byron F. Bowman
Assistant Secretary
THE PASSAGEWAY FUNDS
Amendment No. 2
to
DECLARATION OF TRUST
Dated August 15, 1990
THIS Declaration of Trust is amended as follows:
A. Strike the first paragraph of Section 1 of Article IV
in its entirety from the Declaration of Trust and substitute in
its place the following:
SECTION 1. MANAGEMENT OF THE TRUST
The business and affairs of the Trust
shall be managed by the Trustees, and they
shall have all powers necessary and
desirable to carry out that
responsibility. The Trustees who shall
serve until the election of Trustees at
the Meeting of Shareholders subsequent to
the initial public offering of Shares
shall be John F. Donahue, William J.
Copeland, J. Christopher Donahue, James E.
Dowd, Lawrence D. Ellis, M.D., Edward L.
Flaherty, Jr., Edward C. Gonzales, J.
Joseph Maloney, Jr., Gregor F. Meyer,
Wesley W. Posvar, and Marjorie P. Smuts.
The undersigned Assistant Secretary of The Passageway
Funds hereby certifies that the above stated amendments are true
and correct Amendments to the Declaration of Trust, as adopted
by the Trustees of the Trust by unanimous consent on the 15th
day of November, 1990.
WITNESS the due execution hereof this 13th day of December,
1990.
/s/ Byron F. Bowman
Byron F. Bowman
Assistant Secretary
THE PASSAGEWAY FUNDS
Amendment No. 3
to
DECLARATION OF TRUST
Dated August 15, 1990
THIS Declaration of Trust is amended as follows:
Delete Section 1 in Article I in its entirety and
substitute in its place the following:
Section 1. Name.
This Trust shall be know as The Biltmore Municipal
Funds.
Delete Section 2(b) in Article I in its entirety and
substitute in its place the following:
Section 2. Name.
(b) The "Trust" refers to The Biltmore Municipal
Funds;
Delete Section 3 of Article IV in its entirety and
substitute in its place the following:
Section 3. Term of Office of Trustees.
The Trustees shall hold office during the lifetime of
this Trust, and until its termination as hereinafter
provided; except (a) that no Trustee shall serve
beyond the age of seventy-two (72); (b) that any
Trustee may resign his office at any time by written
instrument signed by him and delivered to the other
Trustees, which shall take effect upon such delivery
or upon such later date as is specified therein; (c)
that any Trustee may be removed at any time by written
instrument signed by at least two-thirds of the number
of Trustees prior to such removal, specifying the date
when such removal shall become effective; (d) that any
Trustee who requests in writing to be retired or who
has become mentally or physically incapacitated may be
retired by written instrument signed by a majority of
the other Trustees, specifying the date of his
retirement; and (e) that a Trustee may be removed at
any special meeting of Shareholders of the Trust by a
vote of two-thirds of the outstanding Shares.
Delete Section 9 of Article XII in its entirety and
substitute in its place the following:
Section 9. Use of Name
The Trust acknowledges that South Carolina National
Bank has reserved the right to grant the non-exclusive
use of the name "The Biltmore Municipal Funds" or any
derivative thereof to any other investment company,
investment company portfolio, investment adviser,
distributor, or other business enterprise, and to
withdraw from the Trust or one or more Series or
Classes any right to the use of the name "The Biltmore
Municipal Funds".
The undersigned Assistant Secretary of The Passageway Funds
hereby certifies that the above stated Amendments to Sections 1,
2 and 9 are true and correct Amendments to the Declaration of
Trust, as adopted by the Trustees of the Trust by unanimous
consent on the 8th day of February, 1993, and also certifies
that the above stated Amendment to Section 3 is a true and
correct Amendment to the Declaration of Trust, as adopted by the
Trustees of the Trust by unanimous consent on the 19th day of
March, 1993.
WITNESS the due execution hereof this 2nd day of June,
1993.
/s/ C. Grant Anderson
C. Grant Anderson
Assistant Secretary
THE BILTMORE MUNICIPAL FUNDS
Amendment No. 4
to the
DECLARATION OF TRUST
dated August 15, 1990
THIS Declaration of Trust is amended as follows:
A. Strike the first paragraph of Section 5 of Article III
from the
Declaration of Trust and substitute in its place the
following:
"Section 5. Establishment and Designation of Series
or Class.
Without limiting the authority of the Trustees set forth in
Article XII, Section 8, inter alia, to establish and
designate any
additional Series or Class, or to modify the rights and
preferences of any existing Series or Class, the Series and
Classes
of the Trust are established and designated as:
Georgia Municipal Bond Fund
North Carolina Municipal Bond Fund
South Carolina Municipal Bond Fund"
The undersigned Assistant Secretary of The Biltmore Municipal
Funds hereby certifies that the above-stated amendment is a true
and correct Amendment to the Declaration of Trust, as adopted by
the Board of Trustees on the 23rd day of September, 1994.
WITNESS the due execution hereof this 23rd day of September,
1994.
/s/ Mark A. Sheehan
Mark A. Sheehan
Assistant Secretary
Form N-1A Exhibit 5(i)
Regulation S-K Exhibit No. 10(i)
THE PASSAGEWAY FUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made this 6th day of December, 1991,
between South Carolina National Bank, a national banking
association having its principal place of business in Columbia,
South Carolina (the "Adviser"), and The Passageway Funds, a
Massachusetts business trust having its principal place of
business in Pittsburgh, Pennsylvania (the "Trust").
WHEREAS, the Trust is an open-end management investment
company as that term is defined in the Investment Company
Act of 1940 (the "Act") and is registered as such with the
Securities and Exchange Commission; and
WHEREAS, the Adviser is engaged in the business of rendering
investment advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, agree as follows:
1. The Trust hereby appoints Adviser as Investment Adviser
for each of the portfolios ("Funds") of the Trust, which may be
offered in one or more classes of shares ("Classes"), on whose
behalf the Trust executes an exhibit to this Contract, and
Adviser, by its execution of each such exhibit, accepts the
appointments. Subject to the direction of the Trustees of the
Trust, Adviser shall provide investment research and supervision
of the investments of each of the Funds and conduct a continuous
program of investment evaluation and of appropriate sale or
other disposition and reinvestment of each Fund's assets. The
investment management services furnished by the Investment
Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to
others so long as its services under this Contract are not
impaired.
2. Subject to the supervision of the Trust's Board of
Trustees (the "Board"), the Adviser will provide a continuous
investment program for the Funds, including investment research
and management with respect to all securities and investments
and cash-equivalents in the Funds. The Adviser will determine
from time to time what securities and other investments will be
purchased, retained or sold by the Trust with respect to the
Funds. The Adviser will provide services under this Contract in
accordance with each of the Fund's investment objectives,
policies, and restrictions as stated in the Prospectus,
Declaration of Trust, the By-Laws of the Trust, resolutions of
the Board, and Registration Statements and exhibits on file with
respect to the Funds with the Securities and Exchange
Commission, and in any amendments to any of the preceding.
3. The Trust shall pay or cause to be paid, on behalf of
each Fund or Class, all of the Fund's or Classes' expenses and
the Fund's or Classes' allocable share of Trust expenses, as
determined by the Board.
4. The Trust, on behalf of each of the Funds shall pay to
Adviser, for all services rendered to such Fund by Adviser
hereunder, the fees set forth in the exhibits attached hereto.
5. The Adviser may from time to time and for such periods
as it deems appropriate reduce its compensation with regard to
any Fund to the extent that such Fund's expenses exceed such
lower expense limitation as the Adviser may, by notice to the
Trust, voluntarily declare to be effective. Furthermore, the
Adviser may, if it deems appropriate, assume expenses of one or
more Fund or Class to the extent that any Fund's or Classes'
expenses exceed such lower expense limitation as the Adviser
may, by notice to the Trust, voluntarily declare to be
effective.
6. This Contract shall begin for each Fund as of the date
of execution of the applicable exhibit and shall continue in
effect with respect to each Fund presently set forth on an
exhibit (and any subsequent Funds added pursuant to an exhibit
during the initial term of this Contract) for two years from the
date of this Contract set forth above and thereafter for
successive periods of one year, subject to the provisions for
termination and all of the other terms and conditions hereof if:
(a) such continuation shall be specifically approved at least
annually by the vote of a majority of the Trustees of the Trust,
including a majority of the Trustees who are not parties to this
Contract or interested persons of any such party (other than as
Trustees of the Trust), cast in person at a meeting called for
that purpose; and (b) Adviser shall not have notified the Trust
with respect to a Fund in writing at least sixty (60) days prior
to the anniversary date of this Contract in any year thereafter
that it does not desire such continuation with respect to that
Fund. If a Fund is added after the first approval by the
Trustees as described above, this Contract will be effective as
to that Fund upon execution of the applicable exhibit and will
continue in effect until the next annual approval of this
Contract by the Trustees and thereafter for successive periods
of one year, subject to approval as described above.
7. Notwithstanding any provision in this Contract, it may
be terminated at any time with respect to any Fund, without the
payment of any penalty, by the Trustees of the Trust or by a
vote of a majority of the outstanding voting securities of that
Fund, as defined in Section 2(a)(42) of the Act on sixty (60)
days' written notice to Adviser.
8. This Contract may not be assigned by Adviser and shall
automatically terminate in the event of any assignment. Adviser
may employ or contract with such other person, persons,
corporation, or corporations at its own cost and expense as it
shall determine in order to assist it in carrying out this
Contract.
9. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties under
this Contract on the part of Adviser, Adviser shall not be
liable to the Trust or to any of the Funds or to any shareholder
for any act or omission in the course of or connected in any way
with rendering services or for any losses that may be sustained
in the purchase, holding, or sale of any security.
10. This Contract may be amended at any time by agreement
of the parties provided that the amendment shall be approved
both by the vote of a majority of the Trustees of the Trust,
including a majority of Trustees who are not parties to this
Contract or interested persons of any such party to this
Contract (other than as Trustees of the Trust), cast in person
at a meeting called for that purpose, and on behalf of a Fund by
a majority of the outstanding voting securities of such Fund as
defined in Section 2(a)(42) of the Act.
11. Adviser is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the
Declaration of Trust and agrees that the obligations pursuant to
this Contract of a particular Fund and of the Trust with respect
to that particular Fund be limited solely to the assets of that
particular Fund, and Adviser shall not seek satisfaction of any
such obligation from the assets of any other Fund, the
shareholders of any Fund, the Trustees, officers, employees or
agents of the Trust, or any of them.
12. This Contract shall be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
13. This Contract will become binding on the parties hereto
upon their execution of the attached exhibits to this Contract.
EXHIBIT A
SOUTH CAROLINA MUNICIPAL BOND FUND
For all services rendered by Adviser hereunder, the Trust
shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual
investment advisory fee equal to .75 of 1% of the average daily
net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of
.75 of 1% applied to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this 6th day of December,
1991.
Attest: SOUTH CAROLINA NATIONAL BANK
/s/ Katherine B. Barroll By:/s/ Julian W. Walker, Jr.
Assistant Secretary Senior Vice President
Attest: THE PASSAGEWAY FUNDS
/s/ John W. McGonigle By:/s/ Edward C. Gonzales
Secretary President
Form N-1A Exhibit 5(ii)
Regulation S-K Exhibit No. 10(ii)
THE BILTMORE MUNICIPAL FUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made this ___ day of ________, 1994,
between Wachovia Bank of Georgia, N.A., a national banking
association having its principal place of business in Atlanta,
Georgia (the "Adviser"), and The Biltmore Municipal Funds, a
Massachusetts business trust having its principal place of
business in Pittsburgh, Pennsylvania (the "Trust").
WHEREAS, the Trust is an open-end management investment
company as that term is defined in the Investment Company
Act of 1940 (the "Act") and is registered as such with the
Securities and Exchange Commission; and
WHEREAS, the Adviser is engaged in the business of rendering
investment advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, agree as follows:
1. The Trust hereby appoints Adviser as Investment Adviser
for each of the portfolios ("Funds") of the Trust, which may be
offered in one or more classes of shares ("Classes"), on whose
behalf the Trust executes an exhibit to this Contract, and
Adviser, by its execution of each such exhibit, accepts the
appointments. Subject to the direction of the Trustees of the
Trust, Adviser shall provide investment research and supervision
of the investments of each of the Funds and conduct a continuous
program of investment evaluation and of appropriate sale or
other disposition and reinvestment of each Fund's assets. The
investment management services furnished by the Investment
Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to
others so long as its services under this Contract are not
impaired.
2. Subject to the supervision of the Trust's Board of
Trustees (the "Board"), the Adviser will provide a continuous
investment program for the Funds, including investment research
and management with respect to all securities and investments
and cash-equivalents in the Funds. The Adviser will determine
from time to time what securities and other investments will be
purchased, retained or sold by the Trust with respect to the
Funds. The Adviser will provide services under this Contract in
accordance with each of the Fund's investment objectives,
policies, and restrictions as stated in the Prospectus,
Declaration of Trust, the By-Laws of the Trust, resolutions of
the Board, and Registration Statements and exhibits on file with
respect to the Funds with the Securities and Exchange
Commission, and in any amendments to any of the preceding.
3. The Trust shall pay or cause to be paid, on behalf of
each Fund or Class, all of the Fund's or Classes' expenses and
the Fund's or Classes' allocable share of Trust expenses, as
determined by the Board.
4. The Trust, on behalf of each of the Funds shall pay to
Adviser, for all services rendered to such Fund by Adviser
hereunder, the fees set forth in the exhibits attached hereto.
5. The Adviser, may from time to time and for such periods
as it deems appropriate, reduce its compensation with regard to
any Fund to the extent that such Fund's expenses exceed such
lower expense limitation as the Adviser may, by notice to the
Trust, voluntarily declare to be effective. Furthermore, the
Adviser may, if it deems appropriate, assume expenses of one or
more Fund or Class to the extent that any Fund's or Classes'
expenses exceed such lower expense limitation as the Adviser
may, by notice to the Trust, voluntarily declare to be
effective.
6. This Contract shall begin for each Fund as of the date
of execution of the applicable exhibit and shall continue in
effect with respect to each Fund presently set forth on an
exhibit (and any subsequent Funds added pursuant to an exhibit
during the initial term of this Contract) for two years from the
date of this Contract set forth above and thereafter for
successive periods of one year, subject to the provisions for
termination and all of the other terms and conditions hereof if:
(a) such continuation shall be specifically approved at least
annually by the vote of a majority of the Trustees of the Trust,
including a majority of the Trustees who are not parties to this
Contract or interested persons of any such party (other than as
Trustees of the Trust), cast in person at a meeting called for
that purpose; and (b) Adviser shall not have notified the Trust
with respect to a Fund in writing at least sixty (60) days prior
to the anniversary date of this Contract in any year thereafter
that it does not desire such continuation with respect to that
Fund. If a Fund is added after the first approval by the
Trustees as described above, this Contract will be effective as
to that Fund upon execution of the applicable exhibit and will
continue in effect until the next annual approval of this
Contract by the Trustees and thereafter for successive periods
of one year, subject to approval as described above.
7. Notwithstanding any provision in this Contract, it may
be terminated at any time with respect to any Fund, without the
payment of any penalty, by the Trustees of the Trust or by a
vote of a majority of the outstanding voting securities of that
Fund, as defined in Section 2(a)(42) of the Act, on sixty (60)
days' written notice to Adviser.
8. This Contract may not be assigned by Adviser and shall
automatically terminate in the event of any assignment. Adviser
may employ or contract with such other person, persons,
corporation, or corporations at its own cost and expense as it
shall determine in order to assist it in carrying out this
Contract.
9. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties under
this Contract on the part of Adviser, Adviser shall not be
liable to the Trust or to any of the Funds or to any shareholder
for any act or omission in the course of or connected in any way
with rendering services or for any losses that may be sustained
in the purchase, holding, or sale of any security.
10. This Contract may be amended at any time by agreement
of the parties provided that the amendment shall be approved
both by the vote of a majority of the Trustees of the Trust,
including a majority of Trustees who are not parties to this
Contract or interested persons of any such party to this
Contract (other than as Trustees of the Trust), cast in person
at a meeting called for that purpose, and on behalf of a Fund by
a majority of the outstanding voting securities of such Fund as
defined in Section 2(a)(42) of the Act.
11. Adviser is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the
Declaration of Trust and agrees that the obligations pursuant to
this Contract of a particular Fund and of the Trust with respect
to that particular Fund be limited solely to the assets of that
particular Fund, and Adviser shall not seek satisfaction of any
such obligation from the assets of any other Fund, the
shareholders of any Fund, the Trustees, officers, employees or
agents of the Trust, or any of them.
12. This Contract shall be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
13. This Contract will become binding on the parties hereto
upon their execution of the attached exhibits to this Contract.
EXHIBIT A
GEORGIA MUNICIPAL BOND FUND
For all services rendered by Adviser hereunder, the Trust
shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual
investment advisory fee equal to __ of __% of the average daily
net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of __
of __% applied to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this ___ day of ________,
1994.
Attest: WACHOVIA BANK OF GEORGIA, N.A.
By:
Assistant Secretary Senior Vice President
Attest: THE BILTMORE MUNICIPAL FUNDS
By:
Secretary
President
Form N-1A Exhibit 5(iii)
Regulation S-K Exhibit No. 10(iii)
THE BILTMORE MUNICIPAL FUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made this ___ day of ________, 1994,
between Wachovia Bank of North Carolina, N.A., a national
banking association having its principal place of business in
Winston-Salem, North Carolina (the "Adviser"), and The Biltmore
Municipal Funds, a Massachusetts business trust having its
principal place of business in Pittsburgh, Pennsylvania (the
"Trust").
WHEREAS, the Trust is an open-end management investment
company as that term is defined in the Investment Company
Act of 1940 (the "Act") and is registered as such with the
Securities and Exchange Commission; and
WHEREAS, the Adviser is engaged in the business of rendering
investment advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally
bound, agree as follows:
1. The Trust hereby appoints Adviser as Investment Adviser
for each of the portfolios ("Funds") of the Trust, which may be
offered in one or more classes of shares ("Classes"), on whose
behalf the Trust executes an exhibit to this Contract, and
Adviser, by its execution of each such exhibit, accepts the
appointments. Subject to the direction of the Trustees of the
Trust, Adviser shall provide investment research and supervision
of the investments of each of the Funds and conduct a continuous
program of investment evaluation and of appropriate sale or
other disposition and reinvestment of each Fund's assets. The
investment management services furnished by the Investment
Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to
others so long as its services under this Contract are not
impaired.
2. Subject to the supervision of the Trust's Board of
Trustees (the "Board"), the Adviser will provide a continuous
investment program for the Funds, including investment research
and management with respect to all securities and investments
and cash-equivalents in the Funds. The Adviser will determine
from time to time what securities and other investments will be
purchased, retained or sold by the Trust with respect to the
Funds. The Adviser will provide services under this Contract in
accordance with each of the Fund's investment objectives,
policies, and restrictions as stated in the Prospectus,
Declaration of Trust, the By-Laws of the Trust, resolutions of
the Board, and Registration Statements and exhibits on file with
respect to the Funds with the Securities and Exchange
Commission, and in any amendments to any of the preceding.
3. The Trust shall pay or cause to be paid, on behalf of
each Fund or Class, all of the Fund's or Classes' expenses and
the Fund's or Classes' allocable share of Trust expenses, as
determined by the Board.
4. The Trust, on behalf of each of the Funds shall pay to
Adviser, for all services rendered to such Fund by Adviser
hereunder, the fees set forth in the exhibits attached hereto.
5. The Adviser may, from time to time and for such periods
as it deems appropriate, reduce its compensation with regard to
any Fund to the extent that such Fund's expenses exceed such
lower expense limitation as the Adviser may, by notice to the
Trust, voluntarily declare to be effective. Furthermore, the
Adviser may, if it deems appropriate, assume expenses of one or
more Fund or Class to the extent that any Fund's or Classes'
expenses exceed such lower expense limitation as the Adviser
may, by notice to the Trust, voluntarily declare to be
effective.
6. This Contract shall begin for each Fund as of the date
of execution of the applicable exhibit and shall continue in
effect with respect to each Fund presently set forth on an
exhibit (and any subsequent Funds added pursuant to an exhibit
during the initial term of this Contract) for two years from the
date of this Contract set forth above and thereafter for
successive periods of one year, subject to the provisions for
termination and all of the other terms and conditions hereof if:
(a) such continuation shall be specifically approved at least
annually by the vote of a majority of the Trustees of the Trust,
including a majority of the Trustees who are not parties to this
Contract or interested persons of any such party (other than as
Trustees of the Trust), cast in person at a meeting called for
that purpose; and (b) Adviser shall not have notified the Trust
with respect to a Fund in writing at least sixty (60) days prior
to the anniversary date of this Contract in any year thereafter
that it does not desire such continuation with respect to that
Fund. If a Fund is added after the first approval by the
Trustees as described above, this Contract will be effective as
to that Fund upon execution of the applicable exhibit and will
continue in effect until the next annual approval of this
Contract by the Trustees and thereafter for successive periods
of one year, subject to approval as described above.
7. Notwithstanding any provision in this Contract, it may
be terminated at any time with respect to any Fund, without the
payment of any penalty, by the Trustees of the Trust or by a
vote of a majority of the outstanding voting securities of that
Fund, as defined in Section 2(a)(42) of the Act, on sixty (60)
days' written notice to Adviser.
8. This Contract may not be assigned by Adviser and shall
automatically terminate in the event of any assignment. Adviser
may employ or contract with such other person, persons,
corporation, or corporations at its own cost and expense as it
shall determine in order to assist it in carrying out this
Contract.
9. In the absence of willful misfeasance, bad faith, gross
negligence or reckless disregard of obligations or duties under
this Contract on the part of Adviser, Adviser shall not be
liable to the Trust or to any of the Funds or to any shareholder
for any act or omission in the course of or connected in any way
with rendering services or for any losses that may be sustained
in the purchase, holding, or sale of any security.
10. This Contract may be amended at any time by agreement
of the parties provided that the amendment shall be approved
both by the vote of a majority of the Trustees of the Trust,
including a majority of Trustees who are not parties to this
Contract or interested persons of any such party to this
Contract (other than as Trustees of the Trust), cast in person
at a meeting called for that purpose, and on behalf of a Fund by
a majority of the outstanding voting securities of such Fund as
defined in Section 2(a)(42) of the Act.
11. Adviser is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the
Declaration of Trust and agrees that the obligations pursuant to
this Contract of a particular Fund and of the Trust with respect
to that particular Fund be limited solely to the assets of that
particular Fund, and Adviser shall not seek satisfaction of any
such obligation from the assets of any other Fund, the
shareholders of any Fund, the Trustees, officers, employees or
agents of the Trust, or any of them.
12. This Contract shall be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
13. This Contract will become binding on the parties hereto
upon their execution of the attached exhibits to this Contract.
EXHIBIT A
NORTH CAROLINA MUNICIPAL BOND FUND
For all services rendered by Adviser hereunder, the Trust
shall pay to Adviser and Adviser agrees to accept as full
compensation for all services rendered hereunder, an annual
investment advisory fee equal to __ of __% of the average daily
net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of __
of __% applied to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution hereof this ___ day of ________,
1994.
Attest: WACHOVIA BANK OF NORTH
CAROLINA, N.A.
By:
Assistant Secretary Senior Vice President
Attest: THE PASSAGEWAY FUNDS
By:
Secretary President
Form N-1A Exhibit 6(i)
Regulation S-K Exhibit No. 1(i)
THE PASSAGEWAY FUNDS
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 30th day of November, 1990, by and
between THE PASSAGEWAY FUNDS (the "Trust"), a Massachusetts
business trust, and FEDERATED SECURITIES CORP. ("FSC"), a
Pennsylvania Corporation.
In consideration of the mutual covenants hereinafter
contained, it is hereby agreed by and between the parties hereto
as follows:
1. The Trust hereby appoints FSC as its agent to sell and
distribute shares of the Trust which may be offered in one or
more series (the "Funds") or classes (the "Classes") of shares
(the "Shares") as described and set forth on one or more
exhibits to this Agreement at the current offering price thereof
as described and set forth in the current prospectuses of the
Trust. FSC hereby accepts such appointment and agrees to
provide such other services for the Trust, if any, and accept
such compensation from the Trust, if any, as set forth in the
applicable exhibit to this Agreement.
2. The sale of any Shares may be suspended without prior
notice whenever in the judgment of the Trust it is in its best
interest to do so.
3. Neither FSC nor any other person is authorized by the
Trust to give any information or to make any representation
relative to any Shares other than those contained in the
Registration Statement or Prospectuses filed with the Securities
and Exchange Commission, as the same may be amended from time to
time, or in any supplemental information to said Prospectuses
approved by the Trust. FSC agrees that any other information or
representations other than those specified above which it or any
dealer or other person who purchases Shares through FSC may make
in connection with the offer or sale of Shares, shall be made
entirely without liability on the part of the Trust. No person
or dealer, other than FSC, is authorized to act as agent for the
Trust for any purpose. FSC agrees that in offering or selling
Shares as agent of the Trust, it will, in all respects, duly
conform to all applicable state and federal laws and the rules
and regulations of the National Association of Securities
Dealers, Inc., including its Rules of Fair Practice. FSC will
submit to the Trust copies of all sales literature before using
the same and will not use such sales literature if disapproved
by the Trust.
4. This Agreement shall continue in effect for one year
from the date of its execution (or in the case of a Fund or
Class that is added to the Trust following the date of such
execution, the date that the applicable exhibit with respect to
such Fund or Class is added hereto) and thereafter for
successive periods of one year if such continuance is approved
at least annually by the Trustees of the Trust including a
majority of the members of the Board of Trustees of the Trust
who are not interested persons of the Trust and have no direct
or indirect financial interest in the operation of any
Distribution Plan relating to the Trust or in any related
documents to such Plan ("Disinterested Trustees") cast in person
at a meeting for that purpose.
5. This Agreement may be terminated with regard to a
particular Fund or Class at any time, without the payment of any
penalty, by the vote of a
majority of the Disinterested Trustees or by a majority of the
outstanding voting securities of the particular Fund or Class on
not more than sixty (60) days' written notice to any other party
to this Agreement. This Agreement may be terminated with regard
to a particular Fund or Class by FSC on sixty (60) days' written
notice to the Trust.
6. This Agreement may not be assigned by FSC and shall
automatically terminate in the event of an assignment by FSC as
defined in the Investment Company Act of 1940, provided,
however, that FSC may employ such other person, persons,
corporation or corporations as it shall determine in order to
assist it in carrying out its duties under this Agreement.
7. FSC shall not be liable to the Trust for anything done
or omitted by it, except acts or omissions involving willful
misfeasance, bad faith, gross negligence, or reckless disregard
of the duties imposed by this Agreement.
8. This Agreement may be amended at any time by mutual
agreement in writing of all the parties hereto, provided that
such amendment is approved by the Trustees of the Trust
including a majority of the Disinterested Trustees of the Trust
cast in person at a meeting called for that purpose.
9. This Agreement shall be construed in accordance with
and governed by the laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the
Trust agrees to indemnify and hold harmless FSC and each person,
if any, who controls FSC within the meaning of Section 15 of the
Securities Act of 1933 and Section 20 of the Securities Act of
1934, as amended, against any and all loss, liability, claim,
damage and expense whatsoever (including but not limited to any
and all expenses whatsoever reasonably incurred in
investigating, preparing or defending against any litigation,
commenced or threatened, or any claim whatsoever) arising out of
or based upon any untrue statement or alleged untrue statement
of a material fact contained in the Registration Statement or
any Prospectuses (as from time to time amended and supplemented)
or the omission or alleged omission therefrom of a material fact
required to be stated therein or necessary to make the
statements therein not misleading, unless such statement or
omission was made in reliance upon and in conformity with
written information furnished to the Trust about FSC by or on
behalf of FSC expressly for use in the Registration Statement or
any Prospectuses, or any amendment or supplement thereof.
If any action is brought against FSC or any controlling
person thereof with respect to which indemnity may be sought
against the Trust pursuant to the foregoing paragraph, FSC shall
promptly notify the Trust in writing of the institution of such
action and the Trust shall assume the defense of such action,
including the employment of counsel selected by the Trust and
payment of expenses. FSC or any such controlling person thereof
shall have the right to employ separate counsel in any such
case, but the fees and expenses of such counsel shall be at the
expense of FSC or such controlling person unless the employment
of such counsel shall have been authorized in writing by the
Trust in connection with the defense of such action or the Trust
shall not have employed counsel to have charge of the defense of
such action, in any of which events such fees and expenses shall
be borne by the Trust. Anything in this paragraph to the
contrary notwithstanding, the Trust shall not be liable for any
settlement of any such claim of action effected without its
written consent. The Trust agrees promptly to notify FSC of the
commencement of any litigation or proceedings against the Trust
or any of its officers or Trustees or controlling persons in
connection with the issue and sale of Shares or in connection
with the Registration Statement or any Prospectus.
(b) FSC agrees to indemnify and hold harmless the Trust,
each of its Trustees, each of its officers who have signed the
Registration Statement and each other person, if any, who
controls the Trust within the meaning of Section 15 of the
Securities Act of 1933, but only with respect to statements or
omissions, if any, made in the Registration Statement or any
Prospectus or any amendment or supplement thereof in reliance
upon, and in conformity with, information furnished to the Trust
about FSC by or on behalf of FSC expressly for use in the
Registration Statement or any Prospectus or any amendment or
supplement thereof. In case any action shall be brought against
the Trust or any other person so indemnified based on the
Registration Statement or any Prospectus, or any amendment or
supplement thereof, and with respect to which indemnity may be
sought against FSC, FSC shall have the rights and duties given
to the Trust, and the Trust and each other person so indemnified
shall have the rights and duties given to FSC by the provisions
of subsection (a) above.
(c) Nothing herein contained shall be deemed to protect
any person against liability to the Trust or its shareholders to
which such person would otherwise be subject by reason of
willful misfeasance, bad faith or gross negligence in the
performance of the duties of such person or by reason of the
reckless disregard by such person of the obligations and duties
of such person under this Agreement.
(d) Insofar as indemnification for liabilities may be
permitted pursuant to Section 17 of the Investment Company Act
of 1940 for Trustees, officers, FSC and controlling persons of
the Trust by the Trust pursuant to this Agreement, the Trust is
aware of the position of the Securities and Exchange Commission
as set forth in the Investment Company Act Release No. IC-11330.
Therefore, the Trust undertakes that in addition to complying
with the applicable provisions of this Agreement, 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
Disinterested Trustees, 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 Trust 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, FSC or controlling person of the Trust 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 Trust is insured against losses
arising by reason of any lawful advances; or (iii) a majority of
a quorum of non-party Disinterested 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.
11. FSC is hereby expressly put on notice of the
limitation of liability as set forth in Article XI of the
Declaration of Trust and agrees that the obligations assumed by
the Trust pursuant to this agreement shall be limited in any
case to the Trust and its assets and FSC shall not seek
satisfaction of any such obligation from the shareholders of the
Trust, the Trustees, officers, employees or agents of the Trust,
or any of them.
12. This Agreement will become binding on the parties
hereto upon the execution of the attached exhibits to the
Agreement.
Exhibit A
THE PASSAGEWAY FUNDS
South Carolina Municipal Bond Fund
In consideration of the mutual covenants set forth in the
Distributor's Contract dated November 30, 1990 between The
Passageway Funds and Federated Securities Corp., The Passageway
Funds executes and delivers this Exhibit on behalf of the
separate classes of shares of the Funds first set forth in this
Exhibit.
Witness the due execution hereof this 30th day of November,
1990.
ATTEST: THE PASSAGEWAY FUNDS
/s/ Byron F. Bowman By:/s/ Edward C. Gonzales
Secretary President
(SEAL)
ATTEST: FEDERATED SECURITIES CORP.
/s/ S. Elliott Cohan By:/s/ Richard B. Fisher
Secretary President
(SEAL)
Form N-1A Exhibit 6(ii)
Regulation S-K Exhibit No. 1(ii)
EXHIBIT B
THE BILTMORE MUNICIPAL FUNDS
(formerly, The Passageway Funds)
Georgia Municipal Bond Fund
North Carolina Municipal Bond Fund
In consideration of the mutual covenants set forth in the
Distribution Agreement dated November 30, 1990 between The
Biltmore Municipal Funds and Federated Securities Corp., The
Biltmore Municipal Funds executes and delivers this Exhibit on
behalf of the Portfolios first set forth in this Exhibit.
Witness the due execution hereof this ___ day of _______,
1994.
THE BILTMORE MUNICIPAL FUNDS
Attest:
By:
Its: Its:
FEDERATED SECURITIES CORP.
Attest:
By:
Its: Its:
Form N-1A Exhibit 8(ii)
Regulation S-K Exhibit No. 10(iv)
CUSTODY AGREEMENT
THIS AGREEMENT, is made effective as of December 1, 1993, by and
between The Biltmore Municipal Funds (the "Trust"), a business trust
organized under the laws of the Commonwealth of Massachusetts and
Wachovia Bank of North Carolina, N.A. a banking company organized
under the laws of the State of North Carolina (the "Custodian").
WITNESSETH:
WHEREAS, the Trust is an open-end management series investment
company registered under the Investment Company Act of 1940, as
amended (the "1940 Act"); and
WHEREAS, the Trust desires to retain the Custodian to serve as
the Trust's custodian to its existing series: South Carolina
Municipal Bond Fund (such series, together with all other series
subsequently established by the Trust and made subject to this
Agreement in accordance with Section 3.22 being herein referred to as
the "Funds") and the Custodian is willing to furnish such services;
NOW THEREFORE, in consideration of the mutual agreements herein
made, the Trust and the Custodian hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the context otherwise requires, shall have the following
meanings:
1.1 "Authorized Person" means any Officer or other person duly
authorized by resolution of the Board of Trustees to give Proper
Instructions on behalf of the Funds and named in Exhibit B hereto or
in such resolutions of the Board of Trustees, certified by an
Officer, as may be received by the Custodian from time to time. The
Trust will provide the Custodian with authenticated specimen
signatures of each Authorized Person.
1.2 "Board of Trustees" means the Trustees from time to time
serving under the Trust's Declaration of Trust, dated August 15,
1990, as from time to time amended.
1.3 "Securities System" means a federal book-entry system as
provided in Subpart O of Treasury Circular No. 300, CFR 306, in
Subpart B of 31 CFR Part 350, or in such book-entry regulations of
federal agencies as are substantially in the form of such Subpart O,
the Depository Trust Company ("DTC"), Participants Trust Company and
(provided that Custodian shall have received a copy of a resolution
of the Board of Trustees, certified by an Officer, specifically
approving the use of such clearing agency as a depository for the
Funds) any other clearing agency registered with the Securities and
Exchange Commission ("SEC") under Section 17A of the Securities
Exchange Act of 1934 ("1934 Act"), which acts as a system for the
central handling of Securities where all securities of any particular
class or series of an issuer deposited within the system are treated
as fungible and may be transferred or pledged by bookkeeping entry
without physical delivery of the Securities.
1.4 "Business Day" means any day recognized as a settlement day
by The New York Stock Exchange, Inc. and any other day for which the
Trust computes the net asset value of a Fund.
1.5 "NASD" means The National Association of Securities Dealers,
Inc.
1.6 "Officer" means the Chairman, President, any Vice President,
the Secretary, any Assistant Secretary, the Treasurer, or any
Assistant Treasurer of the Trust.
1.7 "Fund Custody Account" means any of the accounts in the name
of the Trust, which are provided for in Section 3.2 below.
1.8 "Proper Instructions" means:
(i) a writing (including, without limitation, a facsimile
transmission or tested telex) constituting a request,
direction, instruction or certification signed or initiated
by or on behalf of a Fund by one or more Authorized Persons
or reasonably believed by the Custodian to have been signed
by such Authorized Persons;
(ii) a telephonic or other oral communication by one or more
Authorized Persons or reasonably believed by the Custodian
to have been communicated by such Authorized Persons; or
(iii) communications transmitted electronically through the
Institutional Delivery System (IDS), or any other similar
electronic instruction system acceptable to Custodian and
approved by resolutions of the Board of Trustees, a copy of
which, certified by an Officer, shall have been delivered
to the Custodian.
The Trust shall cause all Proper Instructions in the form of oral
communications to be promptly confirmed in writing, as specified in
clause (i) of this paragraph. In the event that an oral
communication is not so confirmed, or in the event that a written
confirmation differs from the related oral communication, the Trust
will hold the Custodian harmless and without liability for any claims
or losses in connection with such oral communication. Proper
Instructions may be in the form of standing instructions. In respect
of trades reported on the Trust's behalf through DTC, instructions
from DTC (whether in a DTC report or otherwise), shall be Proper
Instructions.
1.9 "Securities" include, without limitation, common and
preferred stocks, bonds, call options, put options, debentures,
notes, bank certificates of deposit, bankers' acceptances, mortgage-
backed securities, other money market instruments or other
obligations, and any certificates, receipts, warrants or other
instruments or documents representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other
rights or interests therein, or any similar property or assets that
the Custodian has the facilities to clear and to service.
1.10 "Shares" means, with respect to a Fund, the units of
beneficial interest issued by the Trust on account of such Fund.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust hereby constitutes and appoints the
Custodian as custodian for the term and subject to the provisions of
this Agreement.
2.2 Acceptance. The Custodian hereby accepts appointment as
such custodian and agrees to perform the duties thereof as
hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held by
the Custodian for the account of a Fund, except Securities maintained
in a Securities System pursuant to Section 3.6 herein, shall be
physically segregated from other Securities and non-cash property in
the possession of the Custodian (including the Securities and non-
cash property of another Fund) and shall be identified as subject to
this Agreement.
3.2 Fund Custody Accounts. As to each Fund, the Custodian shall
open and maintain in its trust department a custody account or
accounts in the name of the Trust coupled with the name of such Fund,
subject only to draft or order of the Custodian, in which the
Custodian shall enter and carry all Securities, cash and other assets
of such Fund which are delivered to it.
3.3 Appointment of Sub-custodians. In its discretion, the
Custodian may appoint, and at any time remove, any domestic bank or
trust company, which has been approved by the Board of Trustees and
is qualified to act as a custodian under the 1940 Act, as sub-
custodian to hold Securities and cash of the Funds and to carry out
such other provisions of this Agreement as it may determine, and may
also open and maintain one or more banking accounts with such a bank
or trust company (any such accounts to be in the name of the
Custodian on behalf of its customers and subject only to its draft or
order pursuant to the terms of this Agreement), provided, however,
that the Custodian shall have no more or less responsibility or
liability to the Trust on account of any actions or omissions of such
sub-custodian so employed than any such sub-custodian has to the
Custodian.
3.4 Appointment of Agents. The Custodian may at any time or
times in its discretion appoint (and may at any time remove) any
other bank or trust company which is itself qualified under the 1940
Act, as amended, to act as a custodian, as its agent to carry out
such of the provisions of this Article III as the Custodian may from
time to time direct; provided, however, that the appointment of any
agent shall not relieve the Custodian of its responsibilities or
liabilities hereunder.
3.5 Delivery of Assets to Custodian. The Trust shall deliver,
or cause to be delivered, to the Custodian all of the Funds'
Securities, cash and other assets, including (a) all payment of
income, payments of principal and capital distributions received by
the Funds with respect to such Securities, cash or other assets owned
by the Funds at any time during the period of this Agreement, and (b)
all cash received by the Funds for the issuance, at any time during
such period, of Shares. The Custodian shall not be responsible for
such Securities, cash or other assets until actually received by it.
3.6 Securities Systems. The Custodian may deposit and/or
maintain Securities of the Funds in a Securities System, subject to
the following provisions:
(a) Prior to a deposit of Securities of the Funds in any
Securities System, the Trust shall deliver to the Custodian
a resolution of the Board of Trustees, certified by an
Officer, authorizing and instructing the Custodian on an on-
going basis to deposit in such Securities System all
Securities eligible for deposit therein and to make use of
such Securities System to the extent possible and practical
in connection with its performance hereunder, including,
without limitation, in connection with settlements of
purchases and sales of Securities, loans of Securities, and
deliveries and returns of collateral consisting of
Securities. So long as such Securities System shall
continue to be employed for the deposit of Securities of
the Funds, the Trust shall annually re-adopt such
resolution and deliver a copy thereof, certified by an
Officer, to the Custodian.
(b) Securities of the Funds kept in a Securities System shall
be kept in an account ("Depository Account") of the
Custodian in such Securities System which includes only
assets held by the Custodian as a fiduciary, custodian or
otherwise for customers.
(c) The records of the Custodian with respect to Securities of
a Fund maintained in a Securities System shall, by book-
entry, identify such Securities as belonging to such Fund.
(d) If Securities purchased by a Fund are to be held in a
Securities System, the Custodian shall pay for such
Securities upon (i) receipt of advice from the Securities
System that such Securities have been transferred to the
Depository Account, and (ii) the making of any entry on the
records of the Custodian to reflect such payment and
transfer for the account of such Fund. If Securities sold
by a Fund are held in a Securities System, the Custodian
shall transfer such Securities upon (i) receipt of advice
from the Securities System that payment for such Securities
has been transferred to the Depository Account, and (ii)
the making of an entry on the records of the Custodian to
reflect such transfer and payment for the account of such
Fund.
(e) Upon request, the Custodian shall provide the Trust with
copies of any report (obtained by the Custodian from a
Securities System in which Securities of the Funds are
kept) on the internal accounting controls and procedures
for safeguarding Securities deposited in such Securities
System.
(f) Anything to the contrary in this Agreement notwithstanding,
the Custodian shall not be liable to the Trust for any loss
or damage to a Fund resulting from the use by the Custodian
of a Securities System, unless such loss or damage is
caused by or results from the negligence or willful
misconduct on the part of Custodian or its agents or any of
its (or their) employees, provided, however, that in the
event of any such loss or damage, the Custodian shall take
reasonable steps to enforce effectively such rights as it
may have against the Securities System. At its election,
the Trust shall be subrogated to the rights of the
Custodian with respect to any claim against a Securities
System or any other person for any loss or damage to the
Funds arising from the use of such Securities System, if
and to the extent that the Funds have not been made whole
for any such loss or damage.
3.7 Collection of Income. Subject to the provisions of Section
3.15, the Custodian shall collect on a timely basis all income and
other payments with respect to registered securities held hereunder
to which each Fund shall be entitled either by law or pursuant to
custom in the securities business, and shall collect on a timely
basis all income and other payments with respect to bearer securities
if, on the date of payment by the issuer, such securities are held by
the Custodian or its agent thereof and shall credit some income, as
collected, to each Fund's custodian account. Without limiting the
generality of the foregoing, the Custodian shall detach and present
for payment all coupons and other income items requiring presentation
as and when they become due and shall collect interest when due on
securities held hereunder. The collection of income due the Funds on
Securities loaned pursuant to the provisions of Section 3.9(j) shall
be the responsibility of the Trust. The Custodian will have no duty
or responsibility in connection therewith, other than to provide the
Trust with such information or data as may be necessary to assist the
Trust in arranging for the timely delivery to the Custodian of the
income of which each Fund is properly entitled.
The Custodian shall promptly notify the Trust whenever income due
on Securities is not collected in due course and will provide the
Trust with monthly reports of the status of past due income. Except
as set forth herein, the Custodian shall not be required to enforce
collection, by legal means or otherwise, of any money or property due
and payable with respect to Securities held for a Fund if such
Securities are in default or payment is not made after due demand or
presentation.
3.8 Disbursement of Moneys from Fund Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall disburse moneys
from a Fund Custody Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only (i) in
the case of Securities (other than options on Securities,
futures contracts and options on future contracts), against
the delivery to the Custodian (or any sub-custodian or agent
appointed pursuant to Sections 3.3 and 3.4, respectively,
above) of such Securities to be registered as provided in
Section 3.15 below in proper form for transfer, or if the
purchase of such Securities is effected through a Securities
System, in accordance with the conditions set forth in
Section 3.6 above; (ii) in the case of options on
Securities, against delivery to the Custodian (or such sub-
custodian) of such receipts as are required by the customs
prevailing among dealers in such options; (iii) in the case
of futures contracts and options on futures contracts,
against delivery to the Custodian (or such sub-custodian) of
evidence of title thereto in favor of the Fund or any
nominee referred to in Section 3.15 below; and (iv) in the
case of repurchase or reverse repurchase agreements entered
into between the Trust and any other party, against delivery
of the purchased Securities either in certificate form or
through an entry crediting the Custodian's account at a
Securities System with such Securities;
(b) In connection with the conversion, exchange or surrender, as
set forth in Section 3.9(f) below, of Securities owned by
the Fund;
(c) For the payment of any dividends or capital gain
distributions declared by the Fund;
(d) In payment of the redemption price of Shares as provided in
Section 5.1 below;
(e) For the payment of any expense or liability incurred by the
Fund, including but not limited to the following payments
for the account of the Fund: interest; taxes;
administration, investment management, investment advisory,
accounting, auditing, transfer agent, custodian, trustee and
legal fees; and other operating expenses of the Fund; in all
cases, whether or not such expenses are to be in whole or in
part capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD,
relating to compliance with rules of The Options Clearing
Corporation and of any registered national securities
exchange (or of any similar organization or organizations)
regarding escrow or other arrangements in connection with
transactions by the Fund;
(g) For transfer in accordance with the provisions of any
agreement among the Trust, the Custodian, and a futures
commission merchant registered under the Commodity Exchange
Act, relating to compliance with the rules of the Commodity
Futures Trading Commission and/or any contract market (or
any similar organization or organizations) regarding account
deposits in connection with transactions by the Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution
(including the Custodian), which deposit or account has a
term of one year or less; and
(i) For any other proper purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution
of the Board of Trustees, certified by an Officer,
specifying the amount and purpose of such payment, declaring
such purpose to be a proper corporate purpose, and naming
the person or persons to whom such payment is to be made.
3.9 Delivery of Securities from Fund Custody Accounts. Upon
receipt of Proper Instructions, the Custodian shall release and
deliver Securities from a Fund Custody Account but only in the
following cases:
(a) Upon the sale of Securities for the account of the Fund but
only against receipt of payment therefor;
(b) In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 3.6 above;
(c) To an Offeror's depository agent in connection with tender or
other similar offers for Securities of the Fund;
(d) To the issuer thereof or its agent when such securities are
called, redeemed, retired, or otherwise become payable;
provided that, in any such case, the cash or other
consideration is to be delivered to the Custodian;
(e) To the issuer thereof or its agent (i) for transfer into the
name of the Fund, the Custodian or any sub- custodian or
agent appointed pursuant to Sections 3.3 and 3.4,
respectively, above, or of any nominee or nominees of any of
the foregoing, or (ii) for exchange for a different number
of certificates or other evidence representing the same
aggregate face amount or number of units; provided that, in
any such case, the new Securities are to be delivered to the
Custodian;
(f) To the broker selling Securities or its clearing agent, for
examination in accordance with the "street delivery" custom;
provided that in any such case, the Custodian shall have no
responsibility or liability for any loss arising from the
delivery of such securities prior to receiving payment for
such securities except as may arise from the Custodian's own
negligence or willful misconduct;
(g) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, readjustment of the
securities, reorganization or readjustment of the issuer of
such Securities, or pursuant to any deposit agreement,
including surrender or receipt of underlying Securities in
connection with the issuance or cancellation of depository
receipts; provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the
Custodian;
(h) Upon receipt of payment therefor pursuant to any repurchase
or reverse repurchase agreement entered into by a Fund;
(i) In the case of warrants, rights or similar Securities, upon
the exercise thereof, the surrender thereof in the exercise
of such warrants, rights or similar securities or the
surrender of interim receipts or temporary securities;
provided that, in any such case, the new Securities and
cash, if any, are to be delivered to the Custodian;
(j) For delivery in connection with any loans of Securities of
the Fund, but only against receipt of such collateral as the
Trust shall have specified to the Custodian in Proper
Instructions; except that in connection with any loans for
which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S.
Department of the Treasury, the Custodian will not be held
liable or responsible for the delivery of securities owned
by the Fund prior to the receipt of such collateral;
(k) For delivery as security in connection with any borrowings by
the Fund requiring a pledge of assets by such Fund, but only
against receipt by the Custodian of the amounts borrowed;
(l) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of
the Trust or a Fund;
(m) For delivery in accordance with the provisions of any
agreement among the Trust on behalf of a Fund, the Custodian
and a broker-dealer registered under the 1934 Act and a
member of the NASD, relating to compliance with the rules of
The Options Clearing Corporation and of any registered
national securities exchange (or of any similar organization
or organizations) regarding escrow or other arrangements in
connection with transactions by the Fund;
(n) For delivery in accordance with the provisions of any
agreement among the Trust on behalf of a Fund, the
Custodian, and a futures commission merchant registered
under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission
and/or any contract market (or any similar organization or
organizations) regarding account deposits in connection with
transactions by the Fund;
(o) Upon receipt of instructions from the transfer agent for a
Fund, for delivery to such transfer agent or to the holders
of Shares in connection with distributions in kind, in
satisfaction of requests by holders of Shares for repurchase
or redemption; or
(p) For any other proper corporate purposes, but only upon
receipt, in addition to Proper Instructions, of a copy of a
resolution of the Board of Trustees, certified by an
Officer, specifying the Securities to be delivered, setting
forth the purpose for which such delivery is to be made,
declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom delivery of such
Securities shall be made.
3.10 Bank Accounts. The Custodian may open and maintain a
separate bank account or accounts in the name of each Fund, subject
only to draft or order by the Custodian acting pursuant to the terms
of this Agreement, and shall hold in such account or accounts,
subject to the provisions hereof, all cash received by it from or for
the account of each Fund, other than cash maintained in a joint
repurchase account with other affiliated funds or by a particular
Fund in a bank account established and used in accordance with Rule
17f-3 under the 1940 Act. Funds held by the Custodian for a Fund may
be deposited by it to its credit as Custodian in the Banking
Department of the Custodian or in such other banks or trust companies
as it may in its discretion deem necessary or desirable; provided,
however, that every such bank or trust company shall be qualified to
act as a custodian under the 1940 Act and that each such bank or
trust company and the funds to be deposited with each such bank or
trust company shall be approved by the vote of a majority of the
Board of Trustees of the Trust. Such funds shall be deposited by the
Custodian in its capacity as Custodian for the Fund and shall be
withdrawable by the Custodian only in that capacity. If requested by
the Trust, the Custodian shall furnish the Trust, not later than
twenty (20) days after the last Business Day of each month, an
internal reconciliation of the closing balance as of that day in all
accounts described in this section to the balance shown on the daily
cash report for that day rendered to the Trust.
3.11 Payments for Shares. The Custodian shall make such
arrangements with the transfer agent of each Fund, as will enable the
Custodian to receive the cash consideration due to each Fund and will
deposit into each Fund's Custody Account such payments as are
received from the transfer agent. The Custodian will provide timely
notification to the Trust and the transfer agent of any receipt by it
of payments for Shares of the respective Fund.
3.12 Availability of Federal Funds. Upon mutual agreement
between the Trust and the Custodian, the Custodian shall make federal
funds available to the Funds as of specified times agreed upon from
time to time by the Trust and the Custodian in the amount of checks,
clearing house funds, and other non-federal funds received in payment
for Shares of the Funds which are deposited into the Funds' Custody
Accounts.
3.13 Actions Not Requiring Proper Instructions. The Custodian
may, in its discretion and without express authority from the Trust
or any Fund:
(a) Make payments to itself or others for minor expenses of
handling Securities or other similar items relating to its
duties under this Agreement, provided that all such payments
shall be accounted for to the Fund;
(b) Endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments;
(c) Surrender interim receipts or Securities in temporary form
for Securities in definitive form; and
(d) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in
connection with sale, exchange, substitution, purchase,
transfer and other dealings with Securities and assets of
the Fund.
3.14 Ownership Certificates for Tax Purposes. The Custodian
shall execute any necessary declarations and certificates of
ownership under the federal income tax laws or the laws or
regulations of any other taxing authority now or hereafter in effect,
and prepare and submit reports to the Internal Revenue Service
("IRS") and to the Trust at such time, in such manner and containing
such information as is prescribed by the IRS.
3.15 Registration and Transfer of Securities. All Securities
held for a Fund that are issued or issuable only in bearer form shall
be held by the Custodian in that form, provided that any such
Securities shall be held in a Securities System if eligible therefor.
All other Securities held for a Fund may be registered in the name of
such Fund, the Custodian, or any sub- custodian or agent appointed
pursuant to Sections 3.3 and 3.4, respectively, above, or in the name
of any nominee of any of them, or in the name of a Securities System
or any nominee thereof. All securities accepted by the Custodian on
behalf of the Fund under the terms of this Agreement shall be in
"street name" or other good delivery form. If, however, the Fund
directs the Custodian to maintain securities in "street name", the
Custodian shall utilize its best efforts only to timely collect
income due the Fund on such securities and to notify the Fund on a
best efforts basis only of relevant corporate actions including,
without limitation, pendency of calls, maturities, tender or exchange
offers. The Trust shall furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form
for transfer, or to register in the name of any of the nominees
hereinabove referred to or in the name of a Securities System, any
Securities registered in the name of a Fund.
3.16 Records. The Custodian shall create and maintain all
records relating to its activities and obligations under this
Agreement in such manner as will meet the obligations of the Fund
under the 1940 Act, with particular attention to Section 31 thereof
and Rules 31a-1 and 31a-2 thereunder. All such records shall be the
property of the Fund and shall at all times during the regular
business hours of the Custodian be open for inspection by duly
authorized officers, employees or agents of the Fund and employees
and agents of the SEC. The Custodian shall, at the Fund's request,
supply the Fund with a tabulation of Securities owned by the Fund and
held by the Custodian and shall, when requested to do so by the Fund
and for such compensation as shall be agreed upon between the Fund
and the Custodian, include certificate numbers in such tabulations.
3.17 Fund Reports by Custodian. The Custodian shall furnish the
Trust with a daily activity statement by Fund and a summary of all
transfers to or from each Fund Custody Account on the day following
such transfers. At least monthly and from time to time, the
Custodian shall furnish the Trust with a detailed statement, by Fund,
of the Securities and moneys held for the Funds under this Agreement.
3.18 Other Reports by Custodian. The Custodian shall provide the
Trust, at such times as the Trust may reasonably require, with
reports by independent public accountants for each Fund on the
accounting system, internal accounting control and procedures for
safeguarding securities, future contracts and options on future
contracts including securities deposited and/or maintained in a
Securities System, relating to the services provided by the Custodian
for the Fund under this Agreement; such reports shall be of
sufficient scope and in sufficient detail as may reasonably be
required by the Trust to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if
there are no such inadequacies, the reports shall so state.
3.19 Proxies and Other Materials. The Custodian shall cause all
proxies relating to Securities which are not registered in the name
of a Fund, to be promptly executed by the registered holder of such
Securities, without indication of the manner in which such proxies
are to be voted, and shall promptly deliver to the Trust such
proxies, all proxy soliciting materials and all notices to such
Securities.
3.20 Information on Corporate Actions. Subject to the provisions
of Section 3.15, the Custodian shall transmit promptly to the Trust
all written information (including, without limitation, pendency of
calls and maturities of securities and expirations of rights in
connection therewith and notices of exercise of call and put options
written by the Trust, on behalf of a Fund and the maturity of futures
contracts purchased or sold by the Trust on behalf of a Fund)
received by the Custodian from issuers of the Securities being held
for the Funds. With respect to tender or exchange offers, the
Custodian shall transmit promptly to the Trust all written
information received by the Custodian from the issuers of the
Securities whose tender or exchange offer is sought from the party
(or his agents) making the tender offer. If the Trust on behalf of a
Fund desires to take action with respect to any tender offer,
exchange offer, or any other similar transaction, the Trust shall
notify the Custodian at least three Business Days prior to the date
on which the Custodian is to take such action.
3.22 Additional Series. In the event that the Trust establishes
one or more series in addition to and with respect to which it
desires to have the Custodian render services as Custodian under the
terms set forth in this Agreement, it shall so notify the Custodian
in writing, and if the Custodian shall agree in writing to provide
such services, such series shall become a Fund hereunder, subject to
such fees as the parties may agree.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of
Securities for a Fund, Proper Instructions shall be delivered to the
Custodian, specifying (a) the Fund for which the purchase was made,
(b) the name of the issuer or writer of such Securities, and the
title or other description thereof, (c) the number of shares,
principal amount (and accrued interest, if any) or other units
purchased, (d) the date of purchase and settlement, (e) the purchase
price per unit, (f) the total amount payable upon such purchase, and
(g) the name of the person to whom such amount is payable. The
Custodian shall, upon receipt of such Securities purchased by a Fund,
pay out of the moneys held for the Fund in the relevant Fund Custody
Account the total amount specified in such Proper Instructions to the
person named therein. The Custodian shall not be under any
obligation to pay out moneys to cover the cost of a purchase of
Securities for a Fund, if in the relevant Fund Custody Account there
is insufficient cash available to the Fund for which such purchase
was made.
4.2 Liability for Payment in Advance of Receipt of
Securities Purchased. Except as provided in this Agreement, in any
and every case where payment for the purchase of Securities for a
Fund is made by the Custodian in advance of receipt of the Securities
purchased but in the absence of Proper Instructions to so pay in
advance, the Custodian shall be liable to the Trust, on behalf of the
Fund, for such Securities to the same extent as if the Securities had
been received by the Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities
by a Fund, Proper Instructions shall be delivered to the Custodian,
specifying (a) the Fund for which the sale was made, (b) the name of
the issuer or writer of such Securities, and the title or other
description thereof, (c) the number of shares, principal amount (and
accrued interest, if any), or other units sold, (d) the date of sale
and settlement, (e) the sale price per unit, (f) the total amount
payable upon such sale, and (g) the person to whom such Securities
are to be delivered. Upon receipt of the total amount payable to the
Fund as specified in such Proper Instructions, the Custodian shall
deliver such Securities to the person specified in such Proper
Instructions. Subject to the foregoing, the Custodian may accept
payment in such form as shall be satisfactory to it, and may deliver
Securities and arrange for payment in accordance with the customs
prevailing among dealers in Securities.
4.4 Payment for Securities Sold. In its sole discretion and
from time to time, the Custodian may credit the relevant Fund Custody
Account, prior to actual receipt of final payment thereof, with (i)
proceeds from the sale of Securities which it has been instructed to
deliver against payment, (ii) proceeds from the redemption of
Securities or other assets of the Fund, and (iii) income from cash,
Securities or other assets of the Fund. Any such credit shall be
conditional upon actual receipt by Custodian of final payment and may
be reversed if final payment is not actually received in full. The
Custodian may, in its sole discretion and from time to time, permit a
Fund to use funds so credited to its Fund Custody Account in
anticipation of actual receipt of final payment. Any such funds
shall be repayable immediately upon demand made by the Custodian at
any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Fund Custody
Account.
4.5 Advances by Custodian for Settlement. The Custodian may, in
its sole discretion and from time to time, advance funds to the Trust
to facilitate the settlement of a Fund's transactions in its Fund
Custody Account. Any such advance shall be repayable immediately
upon demand made by Custodian.
ARTICLE V
REDEMPTION OF FUND SHARES
5.1 Transfer of Funds. From such funds as may be available for
the purpose in the relevant Fund Custody Account, and upon receipt of
Proper Instructions specifying that the funds are required to redeem
Shares of a Fund, the Custodian shall wire each amount specified in
such Proper Instructions to or through such bank as the Trust may
designate with respect to such amount in such Proper Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not be
under any obligation to effect payment or distribution by any bank
designated in Proper Instructions given pursuant to Section 5.1 above
of any amount paid by the Custodian to such bank in accordance with
such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall
establish and maintain a segregated account or accounts for and on
behalf of a Fund, into which account or accounts may be transferred
cash and/or Securities, including Securities maintained in a
Depository Account,
(a) In accordance with the provisions of any agreement among the
Trust on behalf of a Fund, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD (or
any futures commission merchant registered under the
Commodity Exchange Act), relating to compliance with the
rules of The Options Clearing Corporation and of any
registered national securities exchange (or the Commodity
Futures Trading Commission or any registered contract
market), or of any similar organization or organizations,
regarding escrow or other arrangements in connection with
transactions by a Fund,
(b) For purposes of segregating cash or Securities in connection
with securities options purchased or written by the Trust,
on behalf of a Fund or in connection with financial futures
contracts (or options thereon) purchased or sold by a Fund,
(c) Which constitute collateral for loans of Securities made by a
Fund,
(d) For purposes of compliance by the Funds with requirements
under the 1940 Act for the maintenance of segregated
accounts by registered investment companies in connection
with reverse repurchase agreements, and when-issued, delayed
delivery and firm commitment transactions, and other similar
transactions, and
(e) For other proper corporate purposes, but only upon receipt
of, in addition to Proper Instructions, a certified copy of
a resolution of the Board of Trustees, certified by an
Officer, setting forth the purpose of purposes of such
segregated account and declaring such purposes to be proper
corporate purposes.
Each segregated account established under this Article VI shall
be established and maintained for a single Fund only. All Proper
Instructions relating to a segregated account shall specify the Fund
involved.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to a standard
of reasonable care in carrying out the provisions of this Agreement.
The Custodian shall be entitled to rely on and may act upon advice of
counsel (who may be counsel for the Trust) on all matters, and shall
be without liability for any action reasonably taken or omitted
pursuant to such advice. Subject to the limitations set forth in
this Agreement, the Custodian shall be kept indemnified by the Trust
and be without liability for any action taken or omitted to be taken
by it in carrying out the terms and provisions of this Agreement in
accordance with the above standards.
7.2 No Responsibility for Title. So long as and to the extent
that it is in the exercise of reasonable care, the Custodian shall
not be responsible for the title, validity or genuineness of any
property or evidence of title thereto received or delivered by it
pursuant to this Agreement.
7.3 Reliance Upon Documents and Instructions. The Custodian
shall be entitled to rely upon any certificate, notice or other
instrument in writing received by it and reasonably believed by it to
be genuine. The Custodian shall be entitled to rely upon any Proper
Instructions actually received by it pursuant to this Agreement.
7.4 Express Duties Only. The Custodian shall have no duties or
obligations whatsoever except such duties and obligations as are
specifically set forth in this Agreement, and no covenant or
obligation shall be implied in this Agreement against the Custodian.
7.5 Co-operation. The Custodian shall cooperate with and supply
necessary information, by Fund, to the entity or entities appointed
by the Trust to keep the books of account of the Funds and/or compute
the value of the assets of the Funds. The Custodian shall take all
such reasonable actions as the Trust may from time to time request to
enable the Trust to obtain, from year to year, favorable opinions
from the Trust's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the
preparation of the Trust's report on Form N-1A and Form N-SAR and any
other reports required by the SEC, and (b) the fulfillment by the
Trust of any other requirements of the SEC.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Trust shall indemnify and hold
harmless the Custodian, any sub-custodian appointed pursuant to
Section 3.3 above, or any agent, and any nominee of the Custodian or
of such sub-custodian from and against any loss, damage, cost,
expense (including attorneys' fees and disbursements), liability
(including, without limitation, liability arising under the
Securities Act of 1933, the 1934 Act, the 1940 Act, and any state
securities and/or banking laws) or claim arising directly or
indirectly (a) from the fact that Securities are registered in the
name of any such nominee, or (b) from any action or inaction by the
Custodian or such sub-custodian (i) at the request or direction of or
in reliance on the advice of the Trust, or (ii) upon Proper
Instructions, or (c) generally, from the performance of its
obligations under this Agreement or any sub-custody agreement with a
sub-custodian appointed pursuant to Section 3.3 above or, in the case
of any such sub-custodian, from the performance of its obligations
under such sub-custody agreement, provided that neither the Custodian
nor any such sub-custodian shall be indemnified and held harmless
from and against any such loss, damage, cost, expense, liability or
claim arising from the Custodian's or such sub-custodian's failure to
act in accordance with the standard of reasonable care set forth in
Section 7.1.
8.2 Indemnity to be Provided. If the Trust requests the
Custodian to take any action with respect to Securities, which action
involves the payment of money or which action may, in the opinion of
the Custodian, result in the Custodian or its nominee becoming liable
for the payment of money or incurring liability of some other form,
the Custodian shall not be required to take such action until the
Trust shall have provided indemnity therefor to the Custodian in an
amount and form satisfactory to the Custodian.
8.3 Security. If the Custodian advances cash or Securities to a
Fund for any purpose, either at the Trust's request or as otherwise
contemplated in this Agreement, or in the event that the Custodian or
its nominee incurs, in connection with its performance under this
Agreement, any loss, damage, cost expense (including attorneys' fees
and disbursements), liability or claim (except such as may arise from
its or its nominee's negligence, bad faith and willful misconduct),
then, in any such event, any property at any time held for the
account of such Fund shall be security therefor, and should such Fund
fail promptly to repay or indemnify the Custodian, the Custodian
shall be entitled to utilize available cash of such Fund and to
dispose of other assets of such Fund to the extent necessary to
obtain reimbursement or indemnification.
ARTICLE IX
EFFECTIVE PERIOD; TERMINATION
9.1 Effective Period. This Agreement shall become effective as
of its execution and shall continue in full force and effect until
terminated as hereinafter provided.
9.2 Termination. Either party hereto may terminate this
Agreement, with respect to one or more Funds, by giving to the other
party a notice in writing specifying the date of such termination,
which shall be not less than ninety (90) days after the date of the
giving of such notice. The notice shall specify the Funds to which
the termination relates ("Terminated Funds"). If a successor
custodian for one or more Terminated Funds shall have been appointed
by the Board of Trustees, the Custodian shall, upon receipt of a
notice of acceptance by the successor custodian, on such specified
date of termination (a) deliver directly to the successor custodian
all Securities (other than Securities held in a Securities System)
and cash then owned by the Terminated Funds and held by the Custodian
as custodian, and (b) transfer any Securities held in a Securities
System to an account of or for the benefit of the Funds at the
successor custodian, provided that the Trust on behalf of the
Terminated Funds shall have paid to the Custodian all fees, expenses
and other amounts to the payment or reimbursement of which it shall
then be entitled. Upon such delivery and transfer, the Custodian
shall be relieved of all obligations under this Agreement with
respect to the Terminated Funds. The Trust may at any time
immediately terminate this Agreement in the event of the appointment
of a conservator or receiver for the Custodian by regulatory
authorities in the State of North Carolina or upon the happening of a
like event at the direction of an appropriate regulatory agency or
court of competent jurisdiction.
9.3 Failure to Appoint Successor Custodian. If a successor
custodian is not designated by the Trust on or before the date of
termination specified pursuant to Section 9.2 above, then the
Custodian shall have the right to deliver to a bank or trust company
of its own selection, which (a) is a "Bank" as defined in the 1940
Act, (b) has aggregate capital, surplus and undivided profits as
shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all
Securities, cash and other property held by Custodian under this
Agreement and to transfer to an account of or for the identified
Funds at such bank or trust company all Securities of the Funds held
in a Securities System. Upon such delivery and transfer, such bank
or trust company shall be the successor custodian for the Terminated
Funds under this Agreement and the Custodian shall be relieved of all
obligations with respect to such Funds under this Agreement. If,
after reasonable inquiry, Custodian cannot find a successor custodian
as contemplated in this Section 9.3, then Custodian shall have the
right to deliver to the Trust all Securities and cash of the
Terminated Funds and to transfer any Securities held in a Securities
System to an account of or for the Trust. Thereafter, the Trust
shall be deemed to be its own custodian with respect to the
Securities, cash and other assets of the Terminated Funds and the
Custodian shall be relieved of all obligations under this Agreement.
9.4 Continuing Obligations. Nothing contained in this Article
IX shall be construed to excuse the Trust from payment of all charges
due and payable to the Custodian. The provisions of Section 13.2,
"References to Custodian", Article VII, "Concerning the Custodian"
and Article VIII, "Indemnification" shall survive the termination or
expiration of this Agreement for any reason.
ARTICLE X
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon
from time to time by the Trust and the Custodian. The fees and other
charges in effect on the date hereof and applicable to the Funds are
set forth in Exhibit C attached hereto.
ARTICLE XI
LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Trust
hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents or employees of the Trust
personally, but shall bind only the trust property of the Trust as
provided in the Trust's Declaration of Trust, dated August 15, 1990,
as from time to time amended. The execution and delivery of this
Agreement have been authorized by the Trustees, and this Agreement
has been signed and delivered by an authorized officer of the Trust,
acting as such, and neither such authorization by the Trustees nor
such execution and delivery by such officer 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
Trust as provided in the above-mentioned Agreement and Declaration of
Trust.
ARTICLE XII
NOTICES
Unless otherwise specified herein, all demands, notices,
instructions, and other communications to be given hereunder shall be
in writing and shall be sent or delivered to the address set forth
after its name herein below:
To the Trust:
The Biltmore Municipal Funds
Federated Investors Tower
Pittsburgh, PA 15222-3779
Attention: Secretary
Telephone: 412/288-1229
Facsimile: 412/288-8141
To the Custodian:
Wachovia Bank of North Carolina, N.A.
301 North Main Street
Winston-Salem, NC 27150
Attn: Robert S. Kniejski
Telephone: 919/770-6172
Facsimile: 919/770-5758
or at such other address as either party shall have provided to the
other by notice given in accordance with this Article XII. Writing
shall include transmission by or through teletype, facsimile, central
processing unit connection, on-line terminal and magnetic tape.
ARTICLE XIII
MISCELLANEOUS
13.1 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of North Carolina.
13.2 References to Custodian. The Trust shall not circulate any
printed matter which contains any reference to Custodian without the
prior written approval of Custodian, excepting printed matter
contained in the prospectus or statement of additional information
for a Fund and such other printed matter as merely identifies
Custodian as custodian for a Fund. The Trust shall submit printed
matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any
deadline for printing.
13.3 No Waiver. No failure by either party hereto to exercise,
and no delay by such party in exercising, any right hereunder shall
operate as a waiver thereof. The exercise by either party hereto of
any right hereunder shall not preclude the exercise of any other
right, and the remedies provided herein are cumulative and not
exclusive of any remedies provided at law or in equity.
13.4 Amendments. This Agreement cannot be changed orally and no
amendment to this Agreement shall be effective unless evidenced by an
instrument in writing executed by the parties hereto.
13.5 Counterparts. This Agreement may be executed in one or
more counterparts, and by the parties hereto on separate
counterparts, each of which shall be deemed an original but all of
which together shall constitute but one and the same instrument.
13.6 Severability. If any provision of this Agreement shall be
invalid, illegal or unenforceable in any respect under any applicable
law, the validity, legality and enforceability of the remaining
provisions shall not be affected or impaired thereby.
13.7 Successors and Assigns. This Agreement shall be binding
upon and shall inure to the benefit of the parties hereto and their
respective successors and assigns; provided, however, that this
Agreement shall not be assignable by either party hereto without the
written consent of the other party hereto.
13.8 Headings. The headings of sections in this Agreement are
for convenience of reference only and shall not affect the meaning or
construction of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed and delivered in its name and on its behalf
by its representatives thereunto duly authorized, all as of the day
and year first above written.
ATTEST: The Biltmore Municipal
Funds
/s/ Mark A. Sheehan By: /s/ Ronald M. Petnuch
Assistant Secretary Vice President
ATTEST: Wachovia Bank of
North Carolina, N.A.
/s/ James G. Vanderberry By:/s/ Ricky B. Nicks
Secretary Senior Vice President
EXHIBIT A
to the
Custody Agreement
The Biltmore Municipal Funds
FUNDS
The Biltmore Municipal Funds (the "Trust") consists of the following
portfolio(s) (the "Funds") effective as of the dates set forth below:
South Carolina Municipal Bond Fund December 1, 1993
EXHIBIT B
to the
Custody Agreement
The Biltmore Municipal Funds
AUTHORIZED PERSONS
Set forth below are the names and specimen signatures of the
persons authorized by the Trust to Administer each Fund Custody
Account.
Name Signatures
Michael J. Peters /s/ Michael J. Peters
Doris M. Styron /s/ Doris M. Styron
Anthony C. Montione* /s/ Anthony C. Montione
J. Joseph Muster /s/ J. Joseph Muster
* Effective December 1, 1993.
EXHIBIT C
to the
Custody Agreement
The Biltmore Municipal Funds
COMPENSATION
For the services to be provided to the Trust pursuant to the Custody
Agreement, the Trust shall pay the Custodian an annual fee calculated
based upon the average daily net assets of each Fund and payable
monthly as follows:
$0 to $250 million - 2.0 b.p.
$250 million to 500 million - 1.5 b.p.
Over $500 million - 1.0 b.p.
Transaction Fees
$12.00 DTC Transaction
12.00 Federal Reserve Book Entry Transaction
25.00 Physical Transaction, Non-Fed/Non-DTC Transaction
10.00 Wire Transfers
Out-of-pocket expenses, including telephone, legal, postage and
insurance, telex, telecopier, supplies, stationery and forms.
Form N-1A Exhibit 9(i)
Regulation S-K Exhibit No. 10(v)
PORTFOLIO ACCOUNTING
AND
SHAREHOLDER RECORDKEEPING AGREEMENT
This Portfolio Accounting and Shareholder Recordkeeping
Agreement is made as of this 1st day of December, 1993, by and
between THE BILTMORE MUNICIPAL FUNDS, a Massachusetts business
trust (herein called the "Trust"), and FEDERATED SERVICES
COMPANY, a Delaware business trust (herein called "Services").
WHEREAS, the Trust is a Massachusetts business trust,
consisting of one or more series which are or hereafter may be
established ("Portfolios"), which operates as an open-end
management investment company and is registered under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the Trust intends to authorize and issue shares of
beneficial interest of each Portfolio ("Shares");
WHEREAS, the Trust wishes to retain Services to provide
certain portfolio accounting and recordkeeping services for the
Portfolios, including any classes of shares issued by any
Portfolio ("Classes") and Services desires to accept such
retention;
WHEREAS, the Trust desires to appoint Services as its
transfer agent, dividend disbursing agent, and agent in
connection with certain other activities with respect to the
Portfolios, and Services desires to accept such appointment;
NOW THEREFORE, in consideration of the premises and mutual
covenants herein contained, the parties hereto agree as follows:
SECTION ONE: Portfolio Accounting.
1.1. Appointment. The Trust hereby appoints Services, and
Services agrees, to provide certain pricing and bookkeeping
services to the Portfolios for the period and on the terms set
forth in this Agreement.
1.2. Services and Duties. Subject to the supervision and control
of the Trust's Board of Trustees, Services will assist the Trust,
the Portfolios, and/or the Classes with regard to portfolio
accounting and in connection therewith undertakes to do the
following specific services:
A. Valuing the assets of each Portfolio and determining
the net asset value per share of the outstanding Shares of each
Portfolio and its Classes, at the time and in the manner from
time to time determined by the Board of Trustees of the Trust and
as set forth in each Portfolio's prospectus and statement of
additional information ("Prospectus");
B. Calculating the net income of each Portfolio, if any;
C. Calculating capital gains or losses for each Portfolio
from the sale or disposition of assets, if any;
D. Maintaining the general ledger and other accounts,
books and financial records of the Trust, including for each
Portfolio and Class, as required under Section 31(a) of the 1940
Act and the rules thereunder in connection with the services
provided by Services;
E. Performing the following accounting functions on a
daily basis:
(1) Journalizing each Portfolio's investment, capital
share and income and expense activities;
(2) Reconciling cash and investment balances of each
Portfolio with the Custodian;
(3) Maintaining individual ledgers for investment
securities;
(4) Maintaining historical tax lots for each
investment security;
(5) Calculating various contractual expenses (e.g.,
advisory and custody fees).
(6) Obtaining security market quotes from services
approved by the Adviser, or if such quotes are
unavailable, then obtaining such prices from the
Adviser, and in either case calculating the market
value of each Portfolio's investments, and
transmitting a copy of the portfolio valuation to
the Adviser;
F. Preparing quarterly financial statements, to include
the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses
G. Preparing monthly security transactions listings;
H. Preparing quarterly broker security transactions
summaries;
I. At the request of the Trust, preparing or assisting
with the preparation of various reports or other financial
documents required by federal, state and other applicable laws
and regulations, including but not limited to providing financial
data required in connection with the Trust's semi-annual reports
on Form N-SAR, annual and semi-annual shareholder reports, proxy
statements and registration statements; and
J. Such other similar services as may be reasonably
requested by the Trust.
1.3. Compensation and Allocation of Expenses.
A. For the performance by Services pursuant to Section One
of this Agreement and in consideration of the additional duties
described in Section Three of this Agreement, the Trust agrees to
compensate Services in accordance with the fees set forth in
Schedule B hereto.
B. In addition to the fee paid pursuant to Schedule C, the
Trust agrees to reimburse Services for out-of-pocket expenses
incurred by Services for the items set out in Schedule B hereto.
C. Services will bill each Portfolio separately as soon as
practicable after the end of each calendar month, and said
billings will be detailed in accordance with Schedule B and
Schedule C. The Trust will promptly pay to Services the amount
of such billing.
D. Any compensation agreed to hereunder may be adjusted
from time to time by attaching hereto a revised Schedule B or
Schedule C dated and signed by a duly authorized officer of the
Trust and a duly authorized officer of Services.
E. The fee for the period from the effective date of
application of this Agreement with respect to a Portfolio to the
end of the initial month shall be prorated according to the
proportion that such period bears to the full month period. Upon
any termination of this Agreement before the end of any month,
the fee for such period shall be prorated according to the
proportion which such period bears to the full month period. For
purposes of determining fees payable to Services, the value of
the Portfolio's net assets shall be computed at the time and in
the manner specified in each Portfolio's Prospectus.
SECTION TWO: Shareholder Recordkeeping.
2.1. Terms of Appointment. Subject to the terms and conditions
set forth in this Agreement, the Trust hereby employs and
appoints Services to act as, and Services agrees to act as,
transfer agent for each Portfolio's Shares, dividend disbursing
agent, and agent in connection with any accumulation, open-
account or similar plans provided to the shareholders of any
Portfolio ("Shareholders"), including without limitation any
periodic investment plan or periodic withdrawal program.
Proper Instructions as used throughout Section Two of this
Agreement means a writing signed or initialed by one or more
person or persons as the Board of Trustees shall have from time
to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved. Oral
instructions will be considered Proper Instructions if Services
reasonably believes them to have been given by a person
previously authorized in Proper Instructions with respect to the
transaction involved. The Trust and Services shall cause all
oral instructions to be confirmed in writing. Proper
Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Trust
and Services are satisfied that such procedures afford adequate
safeguards for a Portfolio's assets. Proper Instructions may
only be amended in writing.
2.2. Duties of Services. Services agrees that it will perform
the following services in accordance with Proper Instructions as
may be provided from time to time by the Trust as to any
Portfolio:
A. General.
Services will establish one or more accounts with
the Custodian for the deposit of funds received or
disbursed in connection with its activities hereunder.
B. Purchases.
(1) Services shall receive orders and payment for the
purchase of shares and, if such purchase orders
comply with the procedures as may be described in
the appropriate Portfolio's Prospectus or set
forth in Proper Instructions, promptly deliver
payment and appropriate documentation therefor to
the Custodian. Services shall notify the Trust and
the Custodian on a daily basis of the total amount
of orders and payments so delivered.
(2) Pursuant to purchase orders and in accordance with
the Portfolio's current Prospectus, Services shall
compute and issue the appropriate number of shares
and hold such shares in the appropriate
Shareholder accounts.
(3) If a Shareholder or its agent requests a
certificate and if it is the practice of the Trust
to issue certificates, Services, as Transfer
Agent, shall countersign and mail by first class
mail, a certificate to the Shareholder at his
address as set forth on the transfer books of the
Portfolio, subject to any Proper Instructions
regarding the delivery of certificates.
(4) In the event that any check or other order for the
purchase of Shares of the Portfolio is returned
unpaid for any reason, Services shall debit the
Share account of the Shareholder by the number of
Shares that had been credited to his account upon
receipt of the check or other order, promptly mail
a debit advice to the Shareholder, and notify the
Trust of its action. In the event that the amount
paid for such Shares exceeds proceeds of the
redemption of such Shares plus the amount of any
dividends paid with respect to such Shares,
Services will receive reimbursement of such excess
from the Portfolio or its distributor.
C. Distribution.
(1) Upon notification by the Trust of the declaration
of any distribution to Shareholders, Services
shall act as Dividend Disbursing Agent for each
Portfolio in accordance with the provisions of the
Trust's Declaration of Trust, the then current
Prospectus of the applicable Portfolio and
instructions in proper form by Shareholders, and
as such shall prepare and mail or credit income,
capital gain, or any other payments to
Shareholders. With respect to distributions
payable in cash, on or before the payment date of
any such distribution, Services shall notify the
Custodian of the estimated amount required and
request the Custodian to make available sufficient
funds for the cash amount to be paid out.
Services shall reconcile the amounts so requested
and the amounts actually received with the
Custodian on a daily basis. With respect to
distributions payable in additional shares,
Services shall make appropriate credits to the
Shareholder's account and deliver certificates
where requested and applicable; and
(2) Services shall maintain records of account for
each Portfolio and advise the Trust and its
Shareholders as to the foregoing.
D. Redemptions and Transfers.
(1) Services shall receive redemption requests and
redemption directions and, if such redemption
requests comply with the procedures as may be
described in the appropriate Portfolio's
Prospectus or set forth in Proper Instructions,
deliver the appropriate instructions therefor to
the Custodian.
(2) At the appropriate time as and when it receives
monies paid to it by the Custodian with respect to
any redemption, Services shall pay over or cause
to be paid over in the appropriate manner such
monies as instructed by the redeeming
Shareholders, pursuant to procedures described in
the then current Prospectus of the Portfolio.
(3) If any such certificate or request for redemption
does not comply with the procedures for redemption
approved by the Trust, Services shall promptly
notify the Shareholder and the Trust of such fact,
together with the reason therefor, and shall
effect such redemption at the price applicable to
the date and time of receipt of documents
complying with said procedures.
(4) Services shall effect transfers of Shares by the
registered owners thereof.
(5) Services shall identify and process abandoned
accounts and uncashed checks for state escheat
requirements on an annual basis and report such
actions to the Trust.
E. Recordkeeping.
(1) Services shall record the issuance of shares of
the Portfolio and maintain pursuant to applicable
Rules of the Securities and Exchange Commission a
record of the total number of shares of the
Portfolio which are authorized, based upon data
provided to it by the Trust, and issued and
outstanding. Services shall also provide the Trust
on a regular basis or upon reasonable request with
the total number of Shares which are authorized
and issued and outstanding, but shall have no
obligation when recording the issuance of Shares,
except as otherwise set forth herein, to monitor
the issuance of such shares or to take cognizance
of any laws relating to the issuer or sale of such
Shares, which functions shall be the sole
responsibility of the Trust.
(2) Services shall establish and maintain records
pursuant to applicable Rules of the Securities and
Exchange Commission relating to the services to be
performed hereunder in the form and manner as
agreed to by the Trust to include a record for
each Shareholder's account of the following:
(a) Name, address and tax identifying number (and
whether such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account,
including dividends paid and date and price
for all transactions;
(d) Any stop or restraining order placed against
the account;
(e) Information with respect to withholdings in
the case of a foreign account or an account
for which withholding is required by the
Internal Revenue Code;
(f) Any dividend reinvestment order, plan
application, dividend address and
correspondence relating to the current
maintenance of the account;
(g) Certificate numbers and denominations for any
Shareholder holding certificates;
(h) Any information required in order for
Services to perform the calculations
contemplated or required by this Agreement.
F. Confirmations/Reports.
(1) Services shall furnish periodically to the Trust,
as well as to the appropriate agent of the Trust
designated by the Trust for the receipt of such
information, the following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outs
tanding in each state for "blue sky" purposes
as determined according to Proper
Instructions delivered from time to time by
the Trust to Services;
(d) Shareholder lists and statistical
information;
(e) Payments to third parties relating to
distribution agreements, allocations of sales
loads, redemption fees, or other transaction-
or sales-related payments;
(f) Such other information as may be agreed upon
from time to time.
(2) Services shall prepare in the appropriate form,
file with the Internal Revenue Service and
appropriate state agencies, and, if required, mail
to Shareholders, such notices for reporting
dividends and distributions paid as are required
to be so filed and mailed and shall withhold such
sums as are required to be withheld under
applicable federal and state income tax laws,
rules and regulations.
(3) In addition to and not in lieu of the services set
forth above, Services shall:
(a) Perform all of the customary services of a
transfer agent, dividend disbursing agent
and, as relevant, agent in connection with
accumulation, open- account or similar plans
(including without limitation any periodic
investment plan or periodic withdrawal
program), including but not limited to:
maintaining all Shareholder accounts,
preparing Shareholder meeting lists, mailing
proxies, receiving and tabulating proxies,
mailing Shareholder reports and prospectuses
to current Shareholders, withholding taxes on
accounts subject to back-up or other
withholding (including non-resident alien
accounts), preparing and filing reports on
U.S. Treasury Department Form 1099 and other
appropriate forms required with respect to
dividends and distributions by federal
authorities for all Shareholders, preparing
and mailing confirmation forms and statements
of account to Shareholders for all purchases
and redemptions of Shares and other
confirmable transactions in Shareholder
accounts, preparing and mailing activity
statements for Shareholders, and providing
Shareholder account information; and
(b) provide a system which will enable the Trust
to monitor to total number of Shares of each
Portfolio sold in each state ("blue sky
reporting"). The Trust shall by Proper
Instructions (i) identify to Services those
transactions and assets to be treated as
exempt from the blue sky reporting for each
state and (ii) verify the classification of
transactions for each state on the system
prior to activation and thereafter monitoring
the daily activity for each state. The
responsibility of Services for each
Portfolio's blue sky state registration
status is solely limited to the recording of
the initial classification of transactions or
accounts with regard to blue sky compliance
and the reporting of such transactions and
accounts to the Trust as provided above.
G. Other Duties.
(1) Services shall answer correspondence from
Shareholders relating to their Share accounts and
such other correspondence as may from time to time
be addressed to Services;
(2) Services shall mail proxy cards and other material
supplied to it by the Trust in connection with
Shareholder Meetings of each Portfolio; receive,
examine and tabulate returned proxies; and certify
the vote of the Shareholders;
(3) Services shall establish and maintain facilities
and procedures for safekeeping of stock
certificates, check forms and facsimile signature
imprinting devices, if any; and for the
preparation or use, and for keeping account of,
such certificates, forms and services.
(4) In case of the loss or destruction of any
certificate representing Shares, no new
certificate shall be issued in lieu thereof,
unless there shall first have been furnished an
appropriate bond of indemnity issued by a surety
company approved by the Trust and Services.
2.3. Duties of the Trust.
A. Compliance. The Trust assumes full responsibility for
the preparation, contents and distribution of each Prospectus of
the Portfolio and for complying with all applicable requirements
of the Securities Act of 1933, as amended (the "1933 Act"), the
1940 Act, and any laws, rules and regulations of government
authorities having jurisdiction.
B. Share Certificates. The Trust shall supply Services
with a sufficient supply of blank Share certificates and from
time to time shall renew such supply upon request of Services.
Such blank Share certificates shall be properly signed, manually
or by facsimile, if authorized by the Trust and shall bear the
seal of the Trust or facsimile thereof; and notwithstanding the
death, resignation or removal of any officer of the Trust
authorized to sign certificates, Services may continue to
countersign certificates which bear the manual or facsimile
signature of such officer until otherwise directed by the Trust.
C. Distributions. The Trust shall promptly inform
Services of the declaration of any dividend or distribution on
account of any Portfolio's shares.
2.4. Fees and Expenses.
A. For performance by Services pursuant to Section Two of
this Agreement and in consideration of the additional duties
described in Section Three of this Agreement, the Trust agrees to
pay Services an annual maintenance fee for each Shareholder
account as set out in Schedule D hereto.
B. In addition to the fee paid pursuant to Schedule D, the
Trust agrees to reimburse Services for out-of-pocket expenses or
advances incurred by Services for the items set out in Schedule E
hereto.
C. Services will bill each Portfolio separately with
respect to fees and reimbursable expenses on a timely basis,
generally within 15 days following the end of the month in which
the fees and expenses have been incurred. Classes of Portfolios
are treated as separate portfolios for purposes of determining
out-of-pocket costs. The Trust will promptly pay to Services the
amount of such billing.
D. Any compensation agreed to hereunder may be adjusted
from time to time by attaching hereto a revised Schedule D or
Schedule E dated and signed by a duly authorized officer of the
Trust and a duly authorized officer of Services.
SECTION THREE: Additional Duties.
3.1. Records.
A. Services shall create and maintain all necessary books
and records in accordance with all applicable laws, rules and
regulations, including but not limited to records required by
Section 31(a) of the 1940 Act and the rules thereunder, as the
same may be amended from time to time, pertaining to the services
performed by it and not otherwise created and maintained by
another party pursuant to contract with the Trust. The Trust, or
the Trust's authorized representatives, shall have access to such
books and records at all times during Services' normal business
hours. Upon the reasonable request of the Trust, copies of any
such books and records shall be provided by Services to the Trust
or the Trust's authorized representatives.
B. The books and records pertaining to the Trust which are
in the possession of Services and which are either (1) required
to be maintained by Rule 31a-1 of the 1940 Act or (2) created in
connection with the services described in Section One of this
Agreement shall be the property of the Trust.
C. Where applicable, the books and records pertaining to
the Trust which are in the possession of Services shall be
maintained by Services for the periods and in the places required
by Rule 31a-2 under the 1940 Act.
D. In the case of records not within the scope of Section
above, Services may, at its option at any time, and shall
forthwith upon the Trust's demand, turn over to the Trust and
cease to retain in Service's files, records and documents created
and maintained by Services pursuant to this Agreement, which are
no longer needed by Services in performance of its services or
for its protection. If not so turned over to the Trust, such
records and documents will be retained by Services for six years
from the year of creation, during the first two of which such
documents will be in readily accessible form. At the end of the
six year period, such records and documents will either be turned
over to the Trust or destroyed in accordance with Proper
Instructions as described in Section Two of this Agreement.
E. Services agrees, on behalf of itself and its employees,
to treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust
(other than Records or material produced in connection with an
Examination or inspection by the Securities and Exchange
Commission or other Regulatory body, or material produced in
compliance with an order by a court of competent jurisdiction)
and its prior, present or potential Shareholders, and not to use
such records and information for any purpose other than
performance of its responsibilities and duties hereunder, except,
after prior notification to and approval in writing by the Trust,
which approval shall not be unreasonably withheld and may not be
withheld by the Trust where Services may be exposed to civil or
criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted
authorities, or when so requested by the Trust.
3.2. Cooperation with Accountants. Services shall cooperate with
the Fund's independent public accountants and shall take all
reasonable action in the performance of its obligations under
this Agreement to assure that the necessary information is made
available to such accountants for the expression of their opinion
as such may be required by the Trust from time to time.
3.3. Equipment Failures. In the event of equipment failures
beyond Services' control, Services shall, at no additional
expense to the Trust, take reasonable steps to minimize service
interruptions. Services shall as soon as is practicable after
the date of this Agreement enter into and shall maintain in
effect with appropriate parties one or more agreements making
reasonable provision for emergency use of electronic data
processing equipment to the extent appropriate equipment is
available.
SECTION FOUR: General Provisions.
4.1. Documents.
A. In connection with the appointment of Services under
this Agreement, the Trust shall file with Services the following
documents:
(1) A copy of the Declaration of Trust and By- Laws of
the Trust and all amendments thereto;
(2) A copy of the resolution of the Board of Trustees
of the Trust authorizing this Agreement;
(3) Specimens of all forms of outstanding Share
certificates of the Portfolios in the forms
approved by the Board of the Trustees of the Trust
with a certificate of the Secretary of the Trust
as to such approval;
(4) All account application forms and other documents
relating to Shareholders' accounts; and
(5) A copy of each Portfolio's current Prospectus.
B. The Trust will also furnish from time to time the
following documents:
(1) Each resolution of the Board of Trustees of the
Trust authorizing the original issuance of each
Portfolio's Shares;
(2) Each Registration Statement filed with the
Securities and Exchange Commission and amendments
thereof and orders relating thereto in effect with
respect to the sale of Shares of any Portfolio;
(3) A certified copy of each amendment to the governing
document and the By-Laws of the Trust;
(4) Certified copies of each vote of the Board
authorizing officers to give Proper Instructions
to the Transfer Agent;
(5) Specimens of all new Share certificates
representing Shares of any Portfolio, accompanied
by Board resolutions approving such forms;
(6) Such other certificates, documents or opinions
which Services may, in its discretion, deem
necessary or appropriate in the proper performance
of its duties; and
(7) Revisions to the Prospectus of any Portfolio.
4.2. Representations and Warranties.
A. Representations and Warranties of Services. Services
represents and warrants to the Trust that:
(1) It is a business trust duly organized and existing
and in good standing under the laws of the
Commonwealth of Massachusetts.
(2) It is duly qualified to carry on its business in
the State of Delaware.
(3) It is empowered under applicable laws and by its
charter and by-laws to enter into and perform this
Agreement.
(4) All requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement.
(5) It has and will continue to have access to the
necessary facilities, equipment and personnel to
perform its duties and obligations under this
Agreement.
(6) It is in compliance with federal securities law
requirements and in good standing as a transfer
agent.
B. Representations and Warranties of the Trust. The Trust
represents and warrants to Services that:
(1) It is a business trust duly organized and existing
and in good standing under the laws of the
Commonwealth of Massachusetts.
(2) It is empowered under applicable laws and by its
Declaration of Trust and By-Laws to enter into and
perform this Agreement.
(3) All requisite corporate proceedings have been taken
to authorize it to enter into and perform this
Agreement.
(4) It is an open-end investment company registered
under the 1940 Act.
(5) A registration statement under the 1933 Act will be
effective, and appropriate state securities law
filings have been made and will continue to be
made, with respect to all Shares of each Portfolio
being offered for sale.
4.3. Expenses of the Trust and of Services.
A. Services shall not be required to pay any of the
following expenses incurred by the Trust, the Portfolios, or the
Classes: custodial expenses; membership dues in the Investment
Company Institute or any similar organization; investment
advisory expenses; costs of printing and mailing stock
certificates, Prospectuses, reports and notices; interest on
borrowed money; brokerage commissions; taxes and fees payable to
Federal, state and other governmental agencies; fees of Trustees
of the Trust who are not affiliated with Services; outside
auditing expenses; outside legal expenses; cost of pricing
services; or other expenses not specified in this Section which
may be properly payable by the Trust.
B. Services in its sole discretion may from time to time
employ or associate with itself such person or persons as
Services may believe to be particularly suited to assist it in
performing services under this Agreement. Such person or persons
may be officers and employees who are employed by both Services
and the Trust. The compensation of such person or persons shall
be paid by Services and no obligation shall be incurred on behalf
of the Trust, the Portfolios, or the Classes in such respect.
4.4. Standard of Care/Indemnification.
A. Standard of Care. Services shall be held to a standard
of reasonable care in carrying out the provisions of this
Agreement; provided, however that Services shall be held to any
higher standard of care which would be imposed upon Services by
any applicable law or regulation even though such stated standard
of care was not part of this Agreement.
B. Indemnification by Trust. Services shall not be
responsible for and the Trust shall indemnify and hold Services
harmless against any and all losses, damages, costs, charges,
counsel fees, payments, expenses and liability arising out of or
attributable to:
(1) The Trust's refusal or failure to comply with the
terms of this Agreement, or which arise out of the
Trust's lack of good faith, gross negligence or
willful misconduct or which arise out of the
breach of any representation or warranty of the
Trust hereunder.
(2) The reliance on or use by Services or its agents or
subcontractors of information, records and
documents in proper form which
(a) are received by Services or its agents or
subcontractors and furnished to it by or on
behalf of the Trust, its Shareholders or
investors regarding the purchase, redemption
or transfer of shares and Shareholder account
information, or
(b) have been prepared and/or maintained by the
Trust or its affiliates or any other person or
firm on behalf of the Trust.
(3) The reliance on, or the carrying out by Services or
its agents or subcontractors of Proper
Instructions of the Trust.
(4) The offer or sale of Shares in violation of any
requirement under the federal securities laws or
regulations or the securities laws or regulations
of any state that such Shares by registered in
such state or in violation of any stop order or
other determination or ruling by any federal
agency or any state with respect to the offer or
sale of such Shares in such state.
Provided, however, that Services shall not be protected by
this Section from liability for any act or omission resulting
from Services' lack of good faith, negligence, willful
misconduct, or failure to meet the standard of care set forth in
Section above.
C. Indemnification by Services. Services shall indemnify
and hold each Portfolio harmless from and against any and all
losses, damages, costs, charges, counsel fees, payments, expenses
and liability arising out of or attributed to any action or
failure or omission to act by Services as a result of Services'
lack of good faith, negligence, willful misconduct, or failure to
meet the standard of care set forth in Section above.
D. Reliance. At any time Services may apply to any
officer of the Trust for instructions, and may consult with legal
counsel with respect to any matter arising in connection with the
services to be performed by Services under this Agreement, and
Services and its agents or subcontractors shall not be liable and
shall be indemnified by the appropriate Portfolio for any action
reasonably taken or omitted by it in reliance upon such
instructions or upon the opinion of such counsel provided such
action is not in violation of applicable Federal or state laws or
regulations. Services, its agents and subcontractors shall be
protected and indemnified in recognizing stock certificates which
are reasonably believed to bear the proper manual or facsimile
signatures of the officer of the Trust, and the proper
countersignature of any former transfer agent or registrar, or of
a co-transfer agent or co-registrar.
E. Notification. In order that the indemnification
provisions contained in this Section shall apply, upon the
assertion of a claim for which either party may be required to
indemnify the other, the party seeking indemnification shall
promptly notify the other party of such assertion in writing, and
shall keep the other party advised with respect to all
developments concerning such claims. Provided such notice has
been given, the indemnitor shall assume the defense of such
action, including the employment of counsel selected by the
indemnitor and payment of expenses. The indemnitee shall have
the right to employ separate counsel in any such case, but the
fees and expenses of such counsel shall be at the expense of the
indemnitee unless the employment of such counsel shall have been
authorized in writing by the indemnitor in connection with the
defense of such action or the indemnitor shall not have employed
counsel to have charge of the defense of such action, in any of
which events such fees and expenses shall be borne by the
indemnitor. Anything in this Section to the contrary
notwithstanding, the indemnitor shall not be liable for any
settlement of any such claim or action effected without its
written consent. The Trust and Services each agrees promptly to
notify the other party of the commencement of any litigation or
proceedings against them or any of their officers or Trustees in
connection with the services that are the subject of this
Agreement.
4.5. Termination of Agreement. This Agreement may be terminated
by either party upon sixty (60) days written notice to the other.
Should the Trust exercise its rights to terminate, all out-of-
pocket expenses associated with the movement of records and
materials will be borne by the appropriate Portfolio.
Additionally, the Trust and Services each reserves the right to
charge for any other reasonable expenses associated with such
termination.
4.6. Amendment. This Agreement may be amended or modified by a
written agreement executed by both parties and authorized or
approved by a resolution of the Trustees of the Trust.
4.7. Interpretive and Additional Provisions. In connection with
the operation of this Agreement, Services and the Trust may from
time to time agree on such provisions interpretive of or in
addition to the provisions of this Agreement as may in their
joint opinion by consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions shall
be in a writing signed by both parties and shall be annexed
hereto, provided that no such interpretive or additional
provisions shall contravene any applicable Federal or state
regulations or any provision of the Trust's Declaration of Trust.
No interpretive or additional provisions made as provided in the
preceding sentence shall be deemed to be an amendment of this
Agreement.
4.8. Notice to the Trust or Services. Notices of any kind to be
given to the Trust hereunder by Services shall be in writing and
shall be duly given if delivered to the Trust at the following
address: The Biltmore Municipal Funds, Federated Investors
Tower, Pittsburgh, PA 15222, Attention: Jeannette Fisher-Garber.
Notices of any kind to be given to Services hereunder by the
Trust shall be in writing and shall be duly given if delivered to
Services at Federated Investors Tower, Pittsburgh, PA 15222-
3779, Attention: President.
4.9. Notice to Adviser
4.10. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but
all of which together shall constitute one and the same
instrument.
4.11. Limitation of Liability. Services is expressly put on
notice of the limitation of liability as set forth in the Trust's
Declaration of Trust and agrees that the obligations assumed by
the Trust pursuant to this Agreement shall be limited in any case
to the Trust and its assets and that Services shall not seek
satisfaction of any such obligations from the Shareholders of the
Trust, the Trustees, officers, employees or agents of the Trust,
or any of them.
4.12. Assignment. Except as provided below, neither this
Agreement nor any rights or obligations hereunder may be assigned
by either party without the written consent of the other party.
A. This Agreement shall inure to the benefit of and be
binding upon the parties and their respective permitted
successors and assigns.
B. Services may without further consent on the part of the
Trust subcontract for the performance of the services described
in Section Two of this Agreement with (A) Boston Financial Data
Services, Inc., a Massachusetts Trust ("BFDS"), which is fully
registered as a transfer agent pursuant to Section 17A(c)(1) of
the Securities Exchange Act of 1934, or any succeeding statute
("Section 17A(c)(1)"), or (B) a BFDS subsidiary duly registered
as a transfer agent pursuant to Section 17A(c)(1), or (C) a BFDS
affiliate; provided, however, that Services shall be as fully
responsible to the Trust for the acts and omissions of any
subcontractor as it is for its own acts and omissions.
4.13. Miscellaneous. This Agreement constitutes the entire
agreement between the parties hereto and supersedes any prior
agreement with respect to the subject hereof whether oral or
written. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any
of the provisions hereof or otherwise affect their construction
or effect. If any provision of this Agreement shall be held or
made invalid by a court or regulatory agency decision, statute,
rule or otherwise, the remainder of this Agreement shall not be
affected thereby. This Agreement shall be governed by
Pennsylvania law; provided, however, that nothing herein shall be
construed in a manner inconsistent with the 1940 Act or any rule
or regulation promulgated by the Securities and Exchange
Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as
of the day and year first above written.
THE BILTMORE MUNICIPAL
FUNDS
Attest: /s/ Joseph M. Huber By: /s/ John W. McGonigle
Secretary President
FEDERATED SERVICES COMPANY
Attest: /s/ Jeanette Fisher-Garber By: /s/ James J. Dolan
Secretary President
Schedule F
Portfolio Accounting
and
Shareholder Recordkeeping Agreement
between
THE BILTMORE MUNICIPAL FUNDS
and
FEDERATED SERVICES COMPANY
The Biltmore Municipal Funds (the "Trust") consists of the
following portfolios (the "Portfolios") which are subject to this
Agreement initially effective as of the dates set forth below and
to be subsequently renewed annually by March 9th of each year:
Name Date
South Carolina Municipal Bond Fund December 1, 1993
Form N-1A Exhibit 9(ii)
Regulation S-K Exhibit No. 10(vi)
Schedule G
Portfolio Accounting
and
Shareholder Recordkeeping Agreement
between
THE BILTMORE MUNICIPAL FUNDS
and
FEDERATED SERVICES COMPANY
The Biltmore Municipal Funds (the "Trust") consists of the
following portfolios (the "Portfolios") which are subject to this
Agreement initially effective as of the dates set forth below and
to be subsequently renewed annually by March 9th of each year:
Name Date
South Carolina Municipal Bond Fund December 1, 1993
Georgia Municipal Bond Fund _________, 1994
North Carolina Municipal Bond Fund _________, 1994
Form N-1A Exhibit 9(iii)
Regulation S-K Exhibit No. 10(vii)
The Biltmore Municipal Funds
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of this
1st day of April, 1994, between The Biltmore Municipal Funds, a
Massachusetts business trust (herein called the "Fund"), and
Federated Administrative Services, a Delaware business trust
(herein called "FAS").
WHEREAS, the Fund is a Massachusetts business trust
consisting of one or more portfolios, which operates as an open-
end management investment company and will so register under
the Investment Company Act of 1940; and
WHEREAS, the Fund desires to retain FAS as its
Administrator to provide it with Administrative Services (as
herein defined), and FAS is willing to render such services;
NOW, THEREFORE, in consideration of the premises and
mutual covenants set forth herein, the parties hereto agree as
follows:
1. Appointment of Administrator. The Fund hereby
appoints FAS as Administrator of the Fund on the terms and
conditions set forth in this Agreement; and FAS hereby accepts
such appointment and agrees to perform the services and duties
set forth in Section 2 of this Agreement in consideration of
the compensation provided for in Section 4 hereof.
2. Services and Duties. As Administrator, and subject
to the supervision and control of the Fund's Board of Trustees,
FAS will provide facilities, equipment, and personnel to carry
out the following administrative services for operation of the
business and affairs of the Fund and each of its portfolios:
(a) prepare, file, and maintain the
Fund's governing documents and any amendments
thereto, including the Declaration of Trust (which
has already been prepared and filed), the By-laws
and minutes of meetings of Trustees and
shareholders;
(b) prepare and file with the
Securities and Exchange Commission and the
appropriate state securities authorities the
registration statements for the Fund and the Fund's
shares and all amendments thereto, reports to
regulatory authorities and shareholders,
prospectuses, proxy statements, and such other
documents all as may be necessary to enable the
Fund to make a continuous offering of its shares;
(c) prepare, negotiate, and
administer contracts on behalf of the Fund with,
among others, the Fund's investment adviser,
distributor, custodian, and transfer agent;
(d) supervise the Fund's custodian
in the maintenance of the Fund's general ledger and
in the preparation of the Fund's financial
statements, including oversight of expense accruals
and payments, of the determination of the net asset
value of the Fund and of the declaration and
payment of dividends and other distributions to
shareholders;
(e) calculate performance data of
the Fund for dissemination to information services
covering the investment company industry;
(f) prepare and file the Fund's tax
returns;
(g) examine and review the
operations of the Fund's custodian and transfer
agent;
(h) coordinate the layout and
printing of publicly disseminated prospectuses and
reports;
(i) perform internal audit
examinations in accordance with a charter to be
adopted by FAS and the Fund;
(j) assist with the design,
development, and operation of the Fund;
(k) provide individuals reasonably
acceptable to the Fund's Board of Trustees for
nomination, appointment, or election as officers of
the Fund, who will be responsible for the
management of certain of the Fund's affairs as
determined by the Fund's Board of Trustees; and
(l) consult with the Fund and its
Board of Trustees on matters concerning the Fund
and its affairs.
The foregoing, along with any additional services that FAS
shall agree in writing to perform for the Fund hereunder, shall
hereafter be referred to as "Administrative Services."
Administrative Services shall not include any duties,
functions, or services to be performed for the Fund by the
Fund's investment adviser, distributor, custodian, or transfer
agent pursuant to their respective agreements with the Fund.
3. Expenses. FAS shall be responsible for expenses
incurred in providing office space, equipment, and personnel as
may be necessary or convenient to provide the Administrative
Services to the Fund, including the compensation of FAS
employees who serve as Trustees or officers of the Fund. The
Fund shall be responsible for all other expenses incurred by
FAS on behalf of the Fund, including without limitation postage
and courier expenses, printing expenses, travel expenses,
registration fees, filing fees, fees of outside counsel and
independent auditors, insurance premiums, fees payable to
Trustees who are not FAS employees, and trade association dues.
4. Compensation. For the Administrative Services
provided, the Fund hereby agrees to pay and FAS hereby agrees
to accept as full compensation for its services rendered
hereunder an administrative fee at an annual rate per portfolio
of the Fund's shares, payable daily, as specified below:
Average Aggregate Daily Net
Maximum Administrative Assets of The Biltmore Funds
Fee and The Biltmore Municipal Funds
.15% on the first $250 million
.125% on the next $250 million
.100% on the next $250 million
.075% on assets in excess of
$750 million
However, in no event shall the administrative fee received
during any year of this Agreement be less than, or be paid at a
rate less than would aggregate, $50,000, per portfolio.
5. Responsibility of
Administrator.
(a) FAS shall not be liable for any
error of judgment or mistake of law or for any loss
suffered by the Fund in connection with the matters
to which this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or
gross negligence on its part in the performance of
its duties or from reckless disregard by it of its
obligations and duties under this Agreement. FAS
shall be entitled to rely on and may act upon
advice of counsel (who may be counsel for the Fund)
on all matters, and shall be without liability for
any action reasonably taken or omitted pursuant to
such advice. Any person, even though also an
officer, trustee, partner, employee or agent of
FAS, who may be or become an officer,
Trustee,employee or agent of the Fund, shall be
deemed, when rendering services to the Fund or
acting on any business of the Fund (other than
services or business in connection with the duties
of FAS hereunder) to be rendering such services to
or acting solely for the Fund and not as an
officer, trustee, partner, employee or agent or one
under the control or direction of FAS even though
paid by FAS.
(b) FAS shall be kept indemnified
by the Fund and be without liability for any action
taken or thing done by it in performing the
Administrative Services in accordance with the
above standards. In order that the indemnification
provisions contained in this Section 5 shall apply,
however, it is understood that if in any case the
Fund may be asked to indemnify or save FAS
harmless, the Fund shall be fully and promptly
advised of all pertinent facts concerning the
situation in question, and it is further understood
that FAS will use all reasonable care to identify
and notify the Fund promptly concerning any
situation which presents or appears likely to
present the probability of such a claim for
indemnification against the Fund. The Fund shall
have the option to defend FAS against any claim
which may be the subject of this indemnification.
In the event that the Fund so elects, it will so
notify FAS and thereupon the Fund shall take over
complete defense of the claim, and FAS shall in
such situation initiate no further legal or other
expenses for which it shall seek indemnification
under this Section. FAS shall in no case confess
any claim or make any compromise in any case in
which the Fund will be asked to indemnify FAS
except with the Fund's written consent.
6. Duration and Termination.
(a) The initial term of this
Agreement shall commence on the date hereof, and
extend until November 30, 1995.
(b) Thereafter, this Agreement
shall be automatically renewed each year for an
additional term of one year, provided that either
party may terminate this Agreement at any time
after the initial term by at least six months
written notice to the other without regard to such
one-year term.
7. Amendment. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by
an instrument in writing signed by the party against which an
enforcement of the change, waiver, discharge or termination is
sought.
8. Limitations of Liability of Trustees or Officers,
Employees, Agents and Shareholders of the Fund. FAS is
expressly put on notice of the limitation of liability as set
forth in the Fund's Declaration of Trust and agrees that the
obligations assumed by the Fund pursuant to this Agreement
shall be limited in any case to the Fund and its assets and
that FAS shall not seek satisfaction of any such obligations
from the shareholders of the Fund, the Trustees, Officers,
Employees or Agents of the Fund, or any of them.
9. Limitations of Liability of Trustees and
Shareholders of FAS. The execution and delivery of this
Agreement have been authorized by the Trustees of FAS and
signed by an authorized officer of FAS, acting as such, and
neither such authorization by such Trustees nor such execution
and delivery by such officer shall be deemed to have been made
by any of them individually or to impose any liability on any
of them personally, and the obligations of this Agreement are
not binding upon any of the Trustees or shareholders of FAS,
but bind only the trust property of FAS as provided in the
Declaration of Trust of FAS.
10. Notices. Notices of any kind to be given
hereunder shall be in writing (including facsimile
communication) and shall be duly given if delivered to the Fund
and to its investment adviser at the following address:
Wachovia Bank of North Carolina, N.A., Attention: Robert J.
Kniejski, 301 North Main Street, Winston-Salem, NC 27150 and
if delivered to FAS at Federated Investors Tower, Pittsburgh,
PA 15222-3779, Attention: President.
11. Miscellaneous. The captions in this Agreement are
included for convenience of reference only and in no way define
or delimit any of the provisions hereof or otherwise affect
their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court or
regulatory agency decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Section 5, hereof, this Agreement
shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be
governed by Pennsylvania law; provided, however, that nothing
herein shall be construed in a manner inconsistent with the
Investment Company Act of 1940 or any rule or regulation
promulgated by the Securities and Exchange Commission
thereunder.
12. Counterparts. This Agreement may be executed by
different parties on separate counterparts, each of which, when
so executed and delivered, shall be an original, and all such
counterparts shall together constitute one and the same
instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
instrument to be executed by their officers designated below as
of the day and year first above written.
The Biltmore Municipal Funds
By: /s/ Ronald M. Petnuch
Title: Vice President
Attest: /s/ Joseph M. Huber
Secretary
Federated Administrative Services
By: /s/ James J. Dolan
Title: President
Attest: /s/ John W. McGonigle
Secretary
