SOUTH CAROLINA
MUNICIPAL
BOND FUND
Semi-Annual Report
dated
May 31, 1994
July 31, 1994
BILTMORE
FUNDS
Federated Securities Corp.,
is the distributor of the fund.
2042410 (7/94)
President's Message
- --------------------------------------------------------------------------------
Dear Shareholder:
I'm pleased to present the Semi-Annual Report to Shareholders of the South
Carolina Municipal Bond Fund (the "Fund") for the six-month period ended May
31, 1994. The Report begins with a brief commentary on the municipal bond
market from the Fund's portfolio manager. Following the commentary are a
complete listing of the Fund's portfolio of investments and its financial
statements.
On your behalf, the Fund pursues monthly, double-tax-free income through a
portfolio of South Carolina municipal bonds. Income earned by the Fund is
exempt from federal regular income tax and South Carolina state income tax.*
Dividends paid to Fund's shareholders totaled $0.28 per share for the six-month
reporting period. Capital gains totaled $0.03 per share.
While the Fund's net asset value began the period at $11.12, it ended the
period at $10.64, due to increased volatility in the financial markets early in
the year brought on by rising interest rates. Total Fund assets stood at $82.5
million on the last day of the period.
We're pleased to help you keep more of what you earn, and we look forward to
keeping you informed about your investment in the Fund. As always, we welcome
your comments and suggestions.
Sincerely,
John W. McGonigle President July 15, 1994
* Income may be subject to the federal alternative minimum tax, and state and
local taxes.
Investment Review
- --------------------------------------------------------------------------------
The municipal bond market has been hampered by rising interest rates, a
strengthening economy and fears of higher inflation. As rates have moved
higher, municipal bond refundings and the steady inflow of new cash into mutual
funds also abruptly declined, further weakening the bond market. From November
30, 1993 to May 31, 1994, the Lehman Brothers State General Obligations Bonds
Index* had a total return that fell 1.53%.
The rising interest rates and expanding economy helped push the yield on 10-
year AAA general obligation municipal bonds up, from 4.70% on November 30,
1993, to 5.30% on May 31, 1994. Ten-year Treasury notes followed the same
trend, increasing from 5.81% to 7.14% during the same period. In anticipation
of higher interest rates, the Fund's portfolio manager adopted a defensive
investment strategy by shortening maturities, boosting the Fund's portfolio
quality, moving into high coupon bonds and increasing the cash position of the
Fund.
On May 31, 1994, net assets of the Fund totalled $82.5 million, down slightly
from $83.4 million on November 30, 1993. Reflecting market activity, the net
asset value of the Fund decreased during the six-month period, from $11.12 to
$10.64. The 30-day SEC yield increased during the six-month period, from 4.33%
to 4.99%.** The Fund had an average duration of 6.88 years on May 31, 1994.
*This index is unmanaged.
**Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
South Carolina Municipal Bond Fund
Portfolio of Investments
May 31, 1994 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Credit
Principal Rating:
Amount Moody's
or Shares Issue or S&P* Value
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
Regulated Investment Companies--0.7%
- -------------------------------------------------------------------------------
550,686 Fidelity Tax-Exempt Money Market Fund (at net
asset value)
(Note 2A) NR $ 550,686
--------------------------------------------- -----------
Long-Term Municipal Securities--97.4%
- -------------------------------------------------------------------------------
$ 100,000 Aiken County, SC, 7.00% GO Bonds, 2/1/2002 A 105,564
---------------------------------------------
150,000 Beaufort County, SC, School District, 7.80%
GO Bonds, 12/1/96 A 162,393
---------------------------------------------
50,000 Beaufort County, SC, 7.125% Lease Certificate
of Participation (AMBAC Issuer Insured),
6/1/2006 AAA 54,345
---------------------------------------------
675,000 Beaufort County, SC, 7.125% Lease Certificate
of Participation (Beaufort Memorial Hospital
Project)/(AMBAC Issuer Insured), 6/1/2012 AAA 727,218
---------------------------------------------
1,000,000 Beaufort County, SC, Planning and Development
Corp., 5.00% Lease Certificate of
Participation (Hilton Head Island Airport
Terminal) (Series 1993), 7/1/2001 A 990,560
---------------------------------------------
750,000 Berkeley County, SC, 6.50% Pollution Control
Revenue Bonds (SCE & G. Project), 10/1/2014 A- 758,280
---------------------------------------------
1,000,000 Berkeley County, SC, Water & Sewer, 6.50%
Revenue Bonds (MBIA Issuer Insured), 6/1/2006 AAA 1,059,320
---------------------------------------------
950,000 Berkeley County, SC, Water & Sewer, 7.00%
Revenue Bonds (MBIA Issuer Insured), 6/1/2016 AAA 1,064,912
---------------------------------------------
1,500,000 Berkeley County, SC, Water & Sewer, 5.50%
(MBIA Insured), 6/1/2013 AAA 1,399,560
---------------------------------------------
935,000 Berkeley County, SC, Water & Sewer, 6.00%
(MBIA Insured), 6/1/2010 AAA 940,292
---------------------------------------------
1,000,000 Cayce, SC, Water & Sewer, 7.15% Revenue Bonds
(AMBAC Issuer Insured), 7/1/2015 AAA 1,110,960
---------------------------------------------
1,315,000 Charleston County, SC, 9.00% GO Bonds,
6/1/2001 AA 1,611,138
---------------------------------------------
</TABLE>
South Carolina Municipal Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Credit
Rating:
Principal Moody's
Amount Issue or S&P* Value
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
Long-Term Municipal Securities--continued
- -------------------------------------------------------------------------------
$1,000,000 Charleston County, SC, 7.10% Lease
Certificate of Participation, (MBIA Issuer
Insured), 6/1/2011 AAA $ 1,126,140
---------------------------------------------
310,000 Charleston County, SC, 9.00% Resource
Recovery Bonds (Foster Wheeler
Project)/(Subject to AMT), 1/1/2005 A 348,803
---------------------------------------------
400,000 Charleston County, SC, Water Works & Sewer,
7.05% Revenue Bonds, 1/1/2006 AA 416,904
---------------------------------------------
1,000,000 Charleston County, SC, Water Works & Sewer,
6.00% Revenue Bonds, 1/1/2012 AA- 975,570
---------------------------------------------
1,500,000 Charleston County, SC, Water Works & Sewer,
7.00% Revenue Bonds, 1/1/2015 AA- 1,566,450
---------------------------------------------
1,100,000 Charleston County, SC, Water Works & Sewer,
5.40% Revenue Bonds, 1/1/2001 AA- 1,113,904
---------------------------------------------
1,125,000 Chester County, SC, School District, 6.85% GO
Bonds, 2/1/2009 A 1,158,548
---------------------------------------------
875,000 Chester County, SC, School District, 6.85% GO
Bonds, 2/1/2012 A 898,170
---------------------------------------------
250,000 City of Charleston, SC, 6.30% GO Bonds,
9/1/2005 AA 267,503
---------------------------------------------
1,000,000 City of Charleston, SC, 6.50% GO Bonds,
6/1/2012 AA 1,036,490
---------------------------------------------
250,000 Clemson University, SC, 7.00% Revenue Bonds,
5/1/2009 A1 263,675
---------------------------------------------
355,000 Columbia, SC, Waterworks & Sewer System,
6.30% Revenue Bonds, 2/1/2000 AA 377,858
---------------------------------------------
1,500,000 Columbia, SC, Waterworks & Sewer System,
5.70% Revenue Bonds, 2/1/2010 AA 1,470,960
---------------------------------------------
1,000,000 Columbia, SC, Waterworks & Sewer System,
7.10% Revenue Bonds, 2/1/2012, Prerefunded
2/1/2001 @ 102 AAA 1,121,800
---------------------------------------------
600,000 Dorchester County, SC, School District #2,
6.65% GO Bonds (MBIA Issuer Insured),
7/1/2012 AAA 626,586
---------------------------------------------
870,000 Edgefield County, SC, School District, 6.40%
GO Bonds (FSA Issuer Insured), 2/1/2009 AAA 910,298
---------------------------------------------
2,000,000 Fairfield County, SC, 6.50% Pollution Control
Revenue Bonds, 9/1/2014 A 2,044,560
---------------------------------------------
</TABLE>
South Carolina Municipal Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Credit
Rating:
Principal Moody's
Amount Issue or S&P* Value
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
Long-Term Municipal Securities--continued
- -------------------------------------------------------------------------------
$ 500,000 Florence County, SC, 6.75% Revenue Bonds
(McLeod Hospital Project)/(FGIC Issuer
Insured), 11/1/2010 AAA $ 526,485
---------------------------------------------
1,465,000 Florence County, SC, Water Works & Sewer,
5.00% Revenue Bonds (AMBAC Insured), 3/1/2004 AAA 1,410,150
---------------------------------------------
1,360,000 Georgetown County, SC, 6.25% Pollution
Control Revenue Bonds (International Paper
Co. Project), 6/15/2005 A- 1,378,156
---------------------------------------------
2,500,000 Grand Strand Water & Sewer Authority, 6.375%
Revenue Bonds (MBIA Issuer Insured), 6/1/2012 AAA 2,636,300
---------------------------------------------
500,000 Greenville, SC, IDR, 7.10% Revenue Bonds
(Lockheed Aeromod Facility Project)/(Subject
to AMT), 11/1/2011 A 532,080
---------------------------------------------
760,000 Greenville, SC, 7.00% Hospital Revenue Bonds,
5/1/2017 AA- 789,055
---------------------------------------------
500,000 Greenville, SC, 5.50% Hospital Facilities,
5/1/2016 AA- 445,925
---------------------------------------------
500,000 Greenville, SC, 7.60% Revenue Bonds (Airport
Project)/
(AMBAC Issuer Insured)/(Subject to AMT),
7/1/2000 AAA 532,460
---------------------------------------------
100,000 Horry County, SC, 7.45% GO Bonds, 12/1/2004 A+ 112,183
---------------------------------------------
980,000 Horry County, SC, 4.65% GO Bonds (MBIA
Insured), 12/1/2005 AAA 896,386
---------------------------------------------
1,110,000 Horry County, SC, School District, 4.70% GO
Bonds 4/1/2002 AAA 1,067,676
---------------------------------------------
450,000 Horry County, SC, School District, 7.00% GO
Bonds, 12/1/2003 A 484,785
---------------------------------------------
600,000 Horry County, SC, School District, 7.00% GO
Bonds, 1/1/2005 A 659,238
---------------------------------------------
1,960,000 Lancaster County, SC, School District, 6.50%
GO Bonds (MBIA Issuer Insured), 7/1/2008 AAA 2,063,508
---------------------------------------------
2,000,000 Lancaster County, SC, Water & Sewer
Authority, 5.20% GO Bonds, 5/1/2015 AAA 1,780,120
---------------------------------------------
175,000 Lexington County, SC, IDR, 8.00% (J.B. White
Project)/
(Mercantile Stores Guaranteed)/(Subject to
AMT), 1/1/2011 NR 185,008
---------------------------------------------
200,000 Medical University, SC, Hospital Facilities,
7.125% Revenue Bonds, 7/1/2004 A+ 215,698
---------------------------------------------
805,000 Medical University, SC, Hospital Facilities,
5.25%,
(MBIA Insured) 7/1/2004 AAA 790,760
---------------------------------------------
</TABLE>
South Carolina Municipal Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Credit
Rating:
Principal Moody's
Amount Issue or S&P* Value
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
Long-Term Municipal Securities--continued
- -------------------------------------------------------------------------------
$ 500,000 North Charleston, SC, 5.875% GO Bonds,
8/1/2009 A $ 498,710
---------------------------------------------
1,000,000 North Charleston, SC, Sewer District, 6.00%
Revenue Bonds (MBIA Issuer Insured), 7/1/2018 AAA 981,210
---------------------------------------------
500,000 North Charleston, SC, Sewer District, 6.00%
Revenue Bonds (MBIA Issuer Insured), 7/1/2018 AAA 492,150
---------------------------------------------
1,250,000 Pickens & Richland Counties, SC, 7.00%
Revenue Bonds (Baptist Hospital)/(AMBAC
Issuer Insured), 8/1/2017, Prerefunded
8/1/2001 @ 102 AAA 1,398,763
---------------------------------------------
1,135,000 Piedmont Municipal Power Agency, SC, 6.375%
Electric Revenue Bonds (FGIC Issuer Insured),
1/1/2006 AAA 1,205,177
---------------------------------------------
590,000 Piedmont Municipal Power Agency, SC, 6.85%
Electric Revenue Bonds (FGIC Issuer Insured),
1/1/2007 AAA 636,274
---------------------------------------------
175,000 Piedmont Municipal Power Agency, SC, 7.00%
Electric Revenue Bonds (FGIC Issuer Insured),
1/1/2013, Prerefunded 1/1/95
@ 100 AAA 178,477
---------------------------------------------
100,000 Piedmont Municipal Power Agency, SC, 7.40%
Electric Revenue Bonds (AMBAC Issuer
Insured), 1/1/2018 AAA 109,075
---------------------------------------------
1,000,000 Piedmont Municipal Power Agency, SC, 6.50%
Electric Revenue Bonds (FGIC Issuer Insured),
1/1/2011 AAA 1,031,060
---------------------------------------------
255,000 Richland County, SC, Hospital Facility,
8.125% Revenue Bonds (Sun Health Network
Project)/(Sumitomo Bank, Ltd. LOC), 10/1/2011 AA3 282,104
---------------------------------------------
600,000 Richland County, SC, 7.10% Hospital Revenue
Bonds (Community Provider Pool)/(Capital
Guaranty Insured), 7/1/2005 AAA 655,674
---------------------------------------------
1,250,000 Richland County, SC, 6.25% GO Bonds, 3/1/2011 AA 1,347,813
---------------------------------------------
1,390,000 Richland County, SC, 6.50% GO Bonds (Series
B), 3/1/2001 AA 1,491,665
---------------------------------------------
650,000 Richland County, SC, 7.45% Pollution Control
Revenue Bonds (Subject to AMT), 4/1/2021 A1 700,921
---------------------------------------------
</TABLE>
South Carolina Municipal Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Credit
Rating:
Principal Moody's
Amount Issue or S&P* Value
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
Long-Term Municipal Securities--continued
- -------------------------------------------------------------------------------
$1,000,000 Richland County, SC, 6.75% Pollution Control
Revenue Bonds (Union Camp Project), 5/1/2022 A1 $ 1,028,280
---------------------------------------------
195,000 Rock Hill, SC, Housing Development Corp.,
7.50% Revenue Bonds (FNMA Guaranteed),
7/1/2010 AAA 209,865
---------------------------------------------
1,000,000 Rock Hill, SC, Combined Public Utility
Authority, 6.75% Revenue Bonds (AMBAC Issuer
Insured), 1/1/2010, Prerefunded 1/1/2000 @
102 AAA 1,097,920
---------------------------------------------
700,000 South Carolina State, 5.75% GO Bonds,
5/1/2007 AAA 742,511
---------------------------------------------
1,000,000 South Carolina State, 5.00% GO Bonds,
2/1/2009 AAA 928,150
---------------------------------------------
1,035,000 South Carolina State, 4.40% GO Bonds,
4/1/2001 995,877
---------------------------------------------
405,000 South Carolina State Educational Assistance
Authority, 6.50% Revenue Bonds (Subject to
AMT), 9/1/2004 AA 414,356
---------------------------------------------
270,000 South Carolina HFA, 8.00% Revenue Bonds,
7/1/95 AA 276,186
---------------------------------------------
100,000 South Carolina HFA, 7.50% Revenue Bonds,
7/1/2011 AA 103,100
---------------------------------------------
500,000 South Carolina HFA, 7.70% Revenue Bonds
(Subject to AMT), 7/1/2010 AA 521,595
---------------------------------------------
520,000 South Carolina HFA, 7.75% Revenue Bonds
(Subject to AMT), 7/1/2022 AA 537,243
---------------------------------------------
1,200,000 South Carolina HFA, 7.30% Revenue Bonds,
7/1/2011 AA 1,233,924
---------------------------------------------
1,000,000 South Carolina Port Authority, 6.50% Revenue
Bonds (AMBAC Issuer Insured)/(Subject to
AMT), 7/1/2006 AAA 1,056,050
---------------------------------------------
1,000,000 South Carolina Port Authority, 6.625% Revenue
Bonds (AMBAC Issuer Insured)/(Subject to
AMT), 7/1/2011 AAA 1,041,080
---------------------------------------------
525,000 South Carolina Port Authority, 6.75% Revenue
Bonds (AMBAC Issuer Insured)/(Subject to
AMT), 7/1/2021 AAA 544,787
---------------------------------------------
400,000 South Carolina Public Service Authority,
8.10% Revenue Bonds, 7/1/2007, Prerefunded
7/1/96 @ 103 A+ 440,428
---------------------------------------------
600,000 South Carolina Public Service Authority,
7.00% Revenue Bonds (Series C), 7/1/2012 A+ 625,752
---------------------------------------------
</TABLE>
South Carolina Municipal Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Credit
Rating:
Principal Moody's
Amount Issue or S&P* Value
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
Long-Term Municipal Securities--continued
- -------------------------------------------------------------------------------
$1,125,000 South Carolina Public Service Authority,
7.30% Revenue Bonds, 7/1/2021 A+ $ 1,188,473
---------------------------------------------
1,000,000 South Carolina Public Service Authority,
6.75% Revenue Bonds, 7/1/2005 A+ 1,029,840
---------------------------------------------
125,000 South Carolina Public Service Authority,
6.90% Revenue Bonds (Series A), 7/1/2021 A+ 127,846
---------------------------------------------
250,000 South Carolina Public Service Authority,
7.00% Revenue Bonds (Series B), 7/1/2009,
Prerefunded 7/1/2001 @ 102 A+ 279,525
---------------------------------------------
1,400,000 South Carolina Public Service Authority,
7.00% Revenue Bonds (Series B), 7/1/2012,
Prerefunded 7/1/2001 @ 102 A+ 1,565,340
---------------------------------------------
600,000 South Carolina Public Service Authority,
7.10% Revenue Bonds (Series B), 7/1/2021,
Prerefunded 7/1/2001 @ 102 A+ 676,656
---------------------------------------------
450,000 South Carolina Public Service Authority,
7.00% Revenue Bonds, 7/1/2022 A+ 463,905
---------------------------------------------
1,950,000 South Carolina Public Service Authority,
6.50% Revenue Bonds
(Series B)/(AMBAC Issuer Insured), 7/1/2014 AAA 2,002,046
---------------------------------------------
2,500,000 South Carolina Public Service Authority,
5.125% Revenue Bonds (Series C), 1/1/2032 AAA 2,088,176
---------------------------------------------
500,000 South Carolina Resource Authority, 7.00%,
6/1/2003 AA 541,325
---------------------------------------------
200,000 Spartanburg County, SC, 7.80% Revenue Bonds
(Mary Black Hospital Project), 10/1/2000,
Prerefunded 10/1/98 @ 102 A- 226,508
---------------------------------------------
100,000 Spartanburg County, SC, 8.25% Revenue Bonds
(Mary Black Hospital Project), 10/1/2008,
Prerefunded 10/1/98 @ 102 A- 115,099
---------------------------------------------
450,000 Spartanburg County, SC, Leased Housing Corp.,
7.50% Revenue Bonds, 10/1/2011 A 454,199
---------------------------------------------
400,000 Western Carolina Regional Sewer Authority,
6.05% Revenue Bonds (AMBAC Issuer Insured),
3/1/2006 AAA 411,160
---------------------------------------------
1,000,000 York County, SC, 4.80% GO Bonds, 6/1/2008 AAA 882,210
---------------------------------------------
1,000,000 York County, SC, 4.90% GO Bonds, 6/1/2010 AAA 874,780
---------------------------------------------
</TABLE>
South Carolina Municipal Bond Fund
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Credit
Rating:
Principal Moody's
Amount Issue or S&P* Value
---------- ------------------------------------------ ------- -----------
<C> <S> <C> <C>
Long-Term Municipal Securities--continued
- -----------------------------------------------------------------------------
$ 400,000 York County, SC, Public Facilities Corp.,
7.10% Lease Certificate of Participation,
6/1/2001 AAA $ 443,376
------------------------------------------
1,500,000 York County, SC, Public Facilities Corp.,
7.50% Lease Certificate of Participation,
6/1/2011 BAA1 1,718,355
------------------------------------------
200,000 York County, SC, School District #3, 9.00%
GO Bonds (MBIA Issuer Insured), 6/1/97 AAA 224,040
------------------------------------------ -----------
Total Long-Term Municipal Securities
(identified cost, $79,394,762) 80,333,770
------------------------------------------ -----------
Total Investments (identified cost,
$79,945,448) $80,884,456+
------------------------------------------ -----------
</TABLE>
*Please refer to the Appendix of the Statement of Additional Information for an
explanation of credit ratings.
+The cost of investments for federal tax purposes amounts to $79,945,448. The
net unrealized appreciation of investments on a federal tax basis amounts to
$939,008 which is comprised of $2,477,329 appreciation and $1,538,321
depreciation at May 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($82,507,569) at May 31, 1994.
The following abbreviations are used in this portfolio:
AMT--Alternative Minimum Tax
AMBAC--American Municipal Bond Assurance Corporation
FGIC--Financial Guaranty Insurance Co.
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance
GO--General Obligation
HFA--Housing Finance and Development Authority
IDR--Industrial Development Revenue
LOC--Letter(s) of Credit
MBIA--Municipal Bond Investors Assurance
NR--Not Rated
(See Notes which are an integral part of the Financial Statements)
South Carolina Municipal Bond Fund
Statement of Assets and Liabilities
May 31, 1994
(unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Assets:
- --------------------------------------------------------------
Investments, at value (Note 2A) (identified and tax cost,
$79,945,448) $80,884,456
- --------------------------------------------------------------
Cash 1,246
- --------------------------------------------------------------
Interest receivable 1,860,294
- --------------------------------------------------------------
Receivable for investments sold 1,611,345
- --------------------------------------------------------------
Receivable for Fund shares sold 9,494
- --------------------------------------------------------------
Deferred expenses (Note 2E) 4,122
- -------------------------------------------------------------- -----------
Total assets 84,370,957
- --------------------------------------------------------------
Liabilities:
- --------------------------------------------------------------
Payable for investments purchased $1,610,625
- --------------------------------------------------
Dividends payable 218,367
- --------------------------------------------------
Payable for Fund shares redeemed 31,230
- --------------------------------------------------
Accrued expenses 3,166
- -------------------------------------------------- ----------
Total liabilities 1,863,388
- -------------------------------------------------------------- -----------
Net Assets for 7,757,386 shares of beneficial interest
outstanding $82,507,569
- -------------------------------------------------------------- -----------
Net Assets Consist of:
- --------------------------------------------------------------
Paid-in capital $80,715,232
- --------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments 939,008
- --------------------------------------------------------------
Accumulated net realized gain (loss) on investments 853,329
- -------------------------------------------------------------- -----------
Total Net Assets $82,507,569
- -------------------------------------------------------------- -----------
Net Asset Value and Redemption Proceeds Per Share:
(net assets of $82,507,569 / 7,757,386 shares of beneficial
interest outstanding) $10.64
- -------------------------------------------------------------- -----------
Computation of Offering Price:
Offering Price Per Share (100/95.5 of $10.64*) $11.14
- -------------------------------------------------------------- -----------
</TABLE>
*See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
South Carolina Municipal Bond Fund
Statement of Operations
Six months ended May 31, 1994 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
Investment Income:
- -----------------------------------------------------------------
Interest income (Note 2B) $ 2,416,296
- -----------------------------------------------------------------
Expenses:
- ---------------------------------------------------------
Investment advisory fee (Note 4) $316,890
- ---------------------------------------------------------
Trustees' fees 638
- ---------------------------------------------------------
Administrative personnel and services fees (Note 4) 63,378
- ---------------------------------------------------------
Custodian fees (Note 4) 8,455
- ---------------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses (Note 4) 30,677
- ---------------------------------------------------------
Fund share registration costs 7,385
- ---------------------------------------------------------
Auditing fees 8,016
- ---------------------------------------------------------
Legal fees 3,687
- ---------------------------------------------------------
Printing and postage 18,139
- ---------------------------------------------------------
Portfolio accounting fees (Note 4) 26,657
- ---------------------------------------------------------
Insurance premiums 3,055
- ---------------------------------------------------------
Miscellaneous 3,890
- --------------------------------------------------------- --------
Total expenses 490,867
- ---------------------------------------------------------
Deduct--
- ---------------------------------------------------------
Waiver of investment advisory fee (Note 4) $253,512
- -----------------------------------------------
Waiver of administrative personnel and services
fees (Note 4) 3,488 257,000
- ---------------------------------------------- --------- --------
Net expenses 233,867
- ------------------------------------------------------------------ -----------
Net investment income 2,182,429
- ------------------------------------------------------------------ -----------
Realized and Unrealized Gain (Loss) on Investments:
- ------------------------------------------------------------------
Net realized gain (loss) on investment
transactions (identified cost basis) 852,827
- ------------------------------------------------------------------
Net change in unrealized appreciation
(depreciation) of investments (4,497,772)
- ---------------------------------------------------------------- -----------
Net realized and unrealized gain (loss) on investments (3,644,945)
- ------------------------------------------------------------------ -----------
Change in net assets resulting from operations $(1,462,516)
- ------------------------------------------------------------------ -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
South Carolina Municipal Bond Fund
Statement of Changes in Net Assets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended
---------------------------------------
11/30/94** 11/30/93* 9/30/93
------------ ----------- ------------
<S> <C> <C> <C>
Increase (Decrease) in Net Assets:
- -------------------------------------
Operations--
- -------------------------------------
Net investment income $ 2,182,429 $ 707,729 $ 3,872,810
- -------------------------------------
Net realized gain (loss) on
investment transactions
($852,827 net gain, $147,642 net
gain, and $79,226 net gain,
respectively, as computed for federal
income tax purposes) 852,827 147,642 83,172
- -------------------------------------
Change in unrealized appreciation
(depreciation) of investments (4,497,772) (1,272,466) 4,888,206
- ------------------------------------- ------------ ----------- ------------
Change in net assets resulting from
operations (1,462,516) (417,095) 8,844,188
- ------------------------------------- ------------ ----------- ------------
Distributions to Shareholders
(Note 2B)--
- -------------------------------------
Dividends to shareholders from net
investment income (2,182,429) (707,729) (3,872,810)
- -------------------------------------
Distributions to shareholders from
net realized gain on investment
transactions (226,365) -- --
- ------------------------------------- ------------ ----------- ------------
Change in net assets from
distributions to shareholders (2,408,794) (707,729) (3,872,810)
- ------------------------------------- ------------ ----------- ------------
Fund Share (Principal) Transactions
(Note 3)--
- -------------------------------------
Proceeds from sale of shares 15,232,805 4,720,992 28,079,747
- -------------------------------------
Net asset value of shares issued to
shareholders
in payment of dividends declared 951,542 277,901 1,537,258
- -------------------------------------
Cost of shares redeemed (13,176,782) (3,176,759) (15,053,586)
- ------------------------------------- ------------ ----------- ------------
Change in net assets from Fund
share transactions 3,007,565 1,822,134 14,563,419
- ------------------------------------- ------------ ----------- ------------
Change in net assets (863,745) 697,310 19,534,797
- -------------------------------------
Net Assets:
- -------------------------------------
Beginning of period 83,371,314 82,674,004 63,139,207
- ------------------------------------- ------------ ----------- ------------
End of period $ 82,507,569 $83,371,314 $ 82,674,004
- ------------------------------------- ------------ ----------- ------------
</TABLE>
*For the two months ended November 30, 1993 (Note 6).
**Six months ended May 31, 1994 (unaudited).
(See Notes which are an integral part of the Financial Statements)
South Carolina Municipal Bond Fund
Financial Highlights
- --------------------------------------------------------------------------------
(For a share outstanding throughout each period)
<TABLE>
<CAPTION>
Year Ended
-----------------------------------------------------
11/30/94*** 11/30/93** 9/30/93 9/30/92 9/30/91*
- ------------------------ ----------- ---------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
Net Asset Value, begin-
ning of period $11.12 $11.27 $10.53 $10.17 $10.00
- ------------------------
Income from investment
operations
- ------------------------
Net investment income 0.28 0.10 0.59 0.60 0.43
- ------------------------
Net realized and
unrealized gain (loss)
on investments (0.45) (0.15) 0.74 0.36 0.17
- ----------------------- ------- ------ ------ ------ ------
Total from investment
operations (0.17) (0.05) 1.33 0.96 0.60
- ------------------------
Less distributions
- ------------------------
Dividends to sharehold-
ers from net
investment income (0.28) (0.10) (0.59) (0.60) (0.43)
- ------------------------
Distributions to share-
holders from
net realized gain on
investment
transactions (0.03) -- -- -- --
- ------------------------ ------ ------ ------ ------ ------
Total distributions (0.31) (0.10) (0.59) (0.60) (0.43)
- ------------------------ ------ ------ ------ ------ ------
Net Asset Value, end of $10.64 $11.12 $11.27 $10.53 $10.17
period ------ ------ ------ ------ ------
- ------------------------
Total Return+ (1.56%) (0.48%) 13.03% 9.73% 6.32%
- ------------------------
Ratios to Average Net
Assets
- ------------------------
Expenses 0.55%(a) 0.55%(a) 0.55% 0.61% 0.82%(a)
- ------------------------
Net investment income 5.17%(a) 5.11%(a) 5.46% 5.83% 5.73%(a)
- ------------------------
Expense
waiver/reimbursement
(b) 0.61%(a) 0.60%(a) 0.62% 0.73% 0.86%(a)
- ------------------------
Supplemental Data
- ------------------------
<CAPTION>
Net assets, end of
period (000 omitted)
- ------------------------ $82,508 $83,371 $82,674 $63,139 $21,438
Portfolio turnover rate 16% 2% 4% 0% 0%
- ------------------------
</TABLE>
* For the period from January 11, 1991 (date of initial public investment) to
September 30, 1991.
** For the two months ended November 30, 1993 (Note 6).
*** Six months ended May 31, 1994 (unaudited).
+ Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(See Notes which are an integral part of the Financial Statements)
South Carolina Municipal Bond Fund
Notes to Financial Statements
May 31, 1994 (unaudited)
- -------------------------------------------------------------------------------
(1) Organization
The Biltmore Municipal Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of one, non-diversified portfolio.
Effective June 3, 1993, the Trust changed its name from "The Passageway Funds"
to "The Biltmore Municipal Funds."
(2) Significant Accounting Policies
The following is a summary of significant accounting policies consistently
followed by the South Carolina Municipal Bond Fund (the "Fund") in the
preparation of its financial statements. These policies are in conformity with
generally accepted accounting principles (GAAP).
A. Investment Valuations--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit, quality,
coupon, maturity, type of issue, and any other factors or market data it
deems relevant in determining valuations for normal institutional-size
trading units of debt securities. The independent pricing service does not
rely exclusively on quoted prices. Short-term securities with remaining ma-
turities of sixty days or less at the time of purchase may be stated at am-
ortized cost, which approximates value. Investments in other regulated in-
vestment companies are valued at net asset value.
B. Investment Income, Expenses and Distributions--Interest income and expenses
are accrued daily. Bond premium and discounts, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code"). Distri-
butions to shareholders are recorded on the ex-dividend date.
C. Federal Taxes--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year all of its tax-exempt income. Accordingly, no provi-
sions for federal tax are necessary.
D. When-Issued and Delayed Delivery Transactions--The Fund may engage in when-
issued or delayed delivery transactions. The Fund records when-issued secu-
rities on the trade date and maintains security positions such that suffi-
cient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis
are marked to market daily and begin earning interest on the settlement
date.
E. Deferred Expenses--The costs incurred by the Fund with respect to registra-
tion of its shares in its first fiscal year, excluding the initial expense
of registering the shares, have been deferred and are being amortized using
the straight-line method over a period of five years from the Fund's com-
mencement date.
F. Other--Investment transactions are accounted for on the trade date.
South Carolina Municipal Bond Fund
- -------------------------------------------------------------------------------
(3) Shares of Beneficial Interest
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value). Trans-
actions in Fund shares were as follows:
<TABLE>
<CAPTION>
Year Ended Year Ended
November 30, September 30,
-------------------- -------------
1994** 1993* 1993
- ---------------------------------------- ---------- -------- -------------
<S> <C> <C> <C>
Shares sold 1,386,628 420,846 2,589,410
- ----------------------------------------
Shares issued to shareholders in payment
of dividends declared 87,194 24,836 141,549
- ----------------------------------------
Shares redeemed (1,212,773) (282,074) (1,395,818)
- ---------------------------------------- ---------- -------- ----------
Net change resulting from fund share
transactions 261,049 163,608 1,335,141
- ---------------------------------------- ---------- -------- ----------
</TABLE>
* For the two months ended November 30, 1993 (Note 6).
** Six months ended May 31, 1994.
(4) Investment Advisory Fee and Other Transactions with Affiliates
Investment Advisory Fee--The South Carolina National Bank, the Fund's invest-
ment adviser (the "Adviser") receives for its services an annual investment
advisory fee equal to .75 of 1% of the Fund's average daily net assets. The
Adviser may voluntarily choose to waive a portion of its fee. The Adviser can
modify or terminate this voluntary waiver at any time at its sole discretion.
Effective June 1, 1994, The South Carolina National Bank changed its name to
Wachovia Bank of South Carolina, N.A.
Administrative Fee--Federated Administrative Services ("FAS") provides the
Fund with certain administrative personnel and services. The FAS fee is based
on the level of average aggregate net assets of the Fund for the period. FAS
may voluntarily choose to waive a portion of its fee. FAS can modify or
terminate this voluntary waiver at any time at its sole discretion.
Transfer and Dividend Disbursing Agent, Accounting and Custody Fees--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent
for the Fund. The FServ fee is based on the size, type and number of accounts
and transactions made by shareholders.
FServ also maintains the Fund'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.
Wachovia Bank of North Carolina, N.A. is the Fund's custodian. The fee is
based on the level of the Fund's average net assets for the period plus out-
of-pocket expenses.
South Carolina Municipal Bond Fund
- -------------------------------------------------------------------------------
Organizational Expenses--Organizational expenses ($30,060) were borne
initially by FAS. The Fund has agreed to reimburse FAS for the organizational
expenses during the five year period following November 30, 1990 (date the
Fund first became effective). For the six months ended May 31, 1994, the Fund
paid $2,131 pursuant to this agreement.
Certain of the Officers of the Trust are Officers and Trustees of FAS and
FServ.
(5) Investment Transactions
Purchases and sales of investments, excluding short-term investments, for the
six months endedMay 31, 1994, were as follows:
<TABLE>
<S> <C>
- ------------------------------------------------------------
Purchases $17,463,903
- ------------------------------------------------------------ -----------
Sales $12,695,765
- ------------------------------------------------------------ -----------
</TABLE>
(6) Change in Fiscal Year
Effective October 1, 1993, the Fund changed its fiscal year from September 30
to November 30.
Trustees Officers
- --------------------------------------------------------------------------------
James A. Hanley
Malcolm T. Hopkins John W. McGonigle
Samuel E. Hudgins President and Treasurer
J. Berkley Ingram, Jr. Ronald M. Petnuch
D. Dean Kaylor Vice President and Assistant Treasurer
Joseph M. Huber
Secretary
Mark A. Sheehan
Assistant Secretary
Mutual funds are not obligations of or insured by any bank nor are they insured
by the federal government or any of its agencies. Investments in these shares
involves risk, including the possible loss of principal.
This report is authorized for distribution to prospective investors only when
precededor accompanied by the Fund's prospectus which contains facts concerning
itsobjective and policies, management fees and other information.
