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
Pre-Effective Amendment No.
Post-Effective Amendment No. 4 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 5 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:
x immediately upon filing pursuant to paragraph (b)
on _________________ pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on 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 18, 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 19th 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 one portfolio; South Carolina Municipal Bond Fund, is
comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page Cover Page.
Item 2. Synopsis Summary of Fund Expenses.
Item 3. Condensed Financial
Information Financial Highlights.
Item 4. General Description of
Registrant Performance Information; General
Information; Investment Information;
Investment Objective; Investment
Policies; South Carolina Municipal
Bonds; Municipal Bond Insurance;
Investment Risks; Non-
Diversification;
Investment Limitations.
Item 5. Management of the Fund The Biltmore Municipal Funds
Information; Management of The
Biltmore Municipal Funds;
Distribution
of Fund Shares; Administration of
the
Fund; Expenses of the Fund.
Item 6. Capital Stock and Other
Securities Dividends; Capital Gains;
Shareholder
Information; Voting Rights;
Massachusetts Business Trusts;
Effect
of Banking Laws; Tax Information;
Federal Income Tax; South Carolina
Taxes; Other State and Local Taxes.
Item 7. Purchase of Securities Being
Offered Net Asset Value; Investing in the
Fund; Share Purchases; 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 Redeeming Shares; Systematic
Withdrawal Program; Accounts with
Low
Balances; Redemption in Kind.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page Cover Page.
Item 11. Table of Contents Table of Contents.
Item 12. General Information and
History General Information About the Fund.
Item 13. Investment Objectives and
Policies Investment Objective and Policies;
Investment Limitations.
Item 14. Management of the Fund The Biltmore Municipal Funds
Management.
Item 15. Control Persons and Principal
Holders of Securities Not applicable.
Item 16. Investment Advisory and Other
Services Investment Advisory Services;
Administrative Services.
Item 17. Brokerage Allocation Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered Purchasing Shares; Determining Net
Asset Value; Redeeming Shares.
Item 20. Tax Status Tax Status.
Item 21. Underwriters Not Applicable.
Item 22. Calculation of Performance
Data Total Return; Yield; Tax-Equivalent
Yield Performance Comparisons.
Item 23. Financial Statements (Filed in Part A.)
SOUTH CAROLINA MUNICIPAL BOND FUND
(A PORTFOLIO OF THE BILTMORE MUNICIPAL FUNDS)
PROSPECTUS
The shares of South 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 South Carolina state income taxes. The Fund invests
primarily in South Carolina municipal securities.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF THE
SOUTH CAROLINA NATIONAL BANK OR ITS AFFILIATES, ARE NOT ENDORSED OR GUARANTEED
BY THE SOUTH CAROLINA NATIONAL BANK 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 January 31,
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 Wachovia Brokerage Service or SCN Brokerage Service
(collectively, "Wachovia Brokerage Service"), divisions of Wachovia Securities,
Inc., 1-800-462-7538, P.O. Box 110, MC 32022, Winston-Salem, NC 27102, or by
writing or calling the Fund at 1-800-763-7277 (in Columbia call 765-3222) or
contact The South Carolina National Bank or one of the Wachovia Banks (as
defined herein) account representative.
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 January 31, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1 Through The South Carolina
- ------------------------------------- National Bank 12
Through the Wachovia Banks 13
FINANCIAL HIGHLIGHTS___________2 Through Wachovia Brokerage
- ------------------------------------- Service 13
By Mail 13
GENERAL INFORMATION 3 By Wire 13
- ------------------------------------- Through Authorized
Broker/Dealers 13
INVESTMENT INFORMATION 3 Minimum Investment Required 14
- ------------------------------------- What Shares Cost 14
Purchases at Net Asset Value 14
Investment Objective 3 Sales Charge Reallowance 14
Investment Policies 3 Reducing the Sales Charge 15
Acceptable Investments 4 Quantity Discounts and Accumulated
Municipal Securities 4 Purchases 15
Characteristics 4 Letter of Intent 15
Participation Interests 4 Concurrent Purchases 15
Variable Rate Municipal Reinvestment Privilege 16
Securities 5 Systematic Investment Program 16
Municipal Leases 5 Certificates and Confirmations 16
Investing in Securities of Other Dividends 16
Investment Companies 5 Capital Gains 16
Restricted Securities 5 Exchange Privilege 16
When-Issued and Delayed Delivery Exchange by Telephone 17
Transactions 5
Lending of Portfolio Securities 5
Temporary Investments 6
South Carolina Municipal Bonds 6 REDEEMING SHARES 18
Municipal Bond Insurance 6 -------------------------------------
Investment Risks 9 By Telephone 18
Non-Diversification 9
Investment Limitations 10 By Mail 18
Systematic Withdrawal Program 19
THE BILTMORE MUNICIPAL FUNDS Accounts with Low Balances 19
INFORMATION 10 Redemption in Kind 20
- ------------------------------------- SHAREHOLDER INFORMATION 20
-------------------------------------
Management of The Biltmore
Municipal Funds 10 Voting Rights 20
Board of Trustees 10
Investment Adviser 10 Massachusetts Business Trusts 20
Advisory Fees 10
EFFECT OF BANKING LAWS 21
Adviser's Background 11 -------------------------------------
Distribution of Fund Shares 11
Administration of the Fund 11
TAX INFORMATION 21
Administrative Services 11 -------------------------------------
Custodian 11
Federal Income Tax 21
Dividend Disbursing Agent and
Transfer Agent 11 South Carolina Taxes 22
Other State and Local Taxes 23
Legal Services 12 PERFORMANCE INFORMATION 23
Independent Auditor 12 -------------------------------------
Expenses of the Fund 12
FINANCIAL STATEMENTS 24
NET ASSET VALUE 12 -------------------------------------
- -------------------------------------
INVESTING IN THE FUND 12 REPORT OF ERNST & YOUNG,
INDEPENDENT AUDITORS 39
- ------------------------------------- -------------------------------------
ADDRESSES 40
Share Purchases 12 -------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <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
Deferred Sales Load (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 average net assets)
<S> <C>
Management Fee (after waiver) (1)................................... 0.15%
12b-1 Fees.......................................................... None
Other Expenses...................................................... 0.46%
Total Fund Operating Expenses (after waiver) (2)................ 0.61%
</TABLE>
(1) The management fee has been reduced to reflect the 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) Total Fund Operating Expenses were 0.55% for the period ended November 30,
1993. Total Fund Operating Expenses in the table above are based on
expenses expected during the fiscal year ending November 30, 1994. Total
Fund Operating Expenses are estimated to be 1.21% absent the voluntary
waiver described above in note 1.
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."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
- ------- ------ ------- ------- --------
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of each
time period. The Fund charges no redemption
fees........................................... $51 $64 $77 $118
</TABLE>
THE ABOVE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
SOUTH CAROLINA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst and Young, Independent Auditors, on
page 39.
<TABLE>
<CAPTION>
YEAR ENDED
--------------------------------------
11/30/93** 9/30/93 9/30/92 9/30/91*
- ------------------------------------ ---------- ------- ------- --------
<S> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $11.27 $10.53 $10.17 $10.00
- ------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- ------------------------------------
Net investment income 0.10 0.59 0.60 0.43
- ------------------------------------
Net realized and unrealized gain (0.15) 0.74 0.36 0.17
(loss) on investments -------- ------ ------ ------
- ------------------------------------
Total from investment operations (0.05) 1.33 0.96 0.60
- ------------------------------------
LESS DISTRIBUTIONS
- ------------------------------------
Dividends to shareholders from net
investment income (0.10) (0.59) (0.60) (0.43)
- ------------------------------------ -------- ------ ------ ------
NET ASSET VALUE, END OF PERIOD $11.12 $11.27 $10.53 $10.17
- ------------------------------------ -------- ------ ------ ------
TOTAL RETURN*** (0.48%) 13.03% 9.73% 6.32%
- ------------------------------------
RATIOS TO AVERAGE NET ASSETS
- ------------------------------------
Expenses 0.55%(a) 0.55% 0.61% 0.82%(a)
- ------------------------------------
Net investment income 5.11%(a) 5.46% 5.83% 5.73%(a)
- ------------------------------------
Expense waiver/reimbursement (b) 0.60%(a) 0.62% 0.73% 0.86%(a)
- ------------------------------------
SUPPLEMENTAL DATA
- ------------------------------------
Net assets, end of period (000
omitted) $83,371 $82,674 $63,139 $21,438
- ------------------------------------
Portfolio turnover rate 2% 4% 0% 0%
- ------------------------------------
</TABLE>
* Reflects operations for the period from January 11, 1991 (date of initial
public investment) to September 30, 1991. For the period from November 19,
1990 (start of business) to January 10, 1991, net investment income
aggregating $0.01 per share ($103) was distributed to Federated
Administrative Services.
** Reflects operations for the two months ended November 30, 1993 (Note 8).
*** Based on net asset value, which does not reflect the sales load or
redemption fee, if applicable.
(a) Computed on an annualized basis.
(b) This expense decrease is reflected in both the expenses and net investment
income ratios shown above (Note 5).
Further information about the Fund's performance is contained in the Fund's
Annual Report for the fiscal year ended November 30, 1993, which can be
obtained free of charge.
(See Notes which are an integral part of the Financial Statements)
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Biltmore Municipal Funds (formerly, "The Passageway Funds") 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' South Carolina municipal securities portfolio, known as South
Carolina Municipal Bond Fund (the "Fund"). The Fund is primarily for customers
of The South Carolina National Bank 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
South Carolina National Bank 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-South Carolina taxpayers or for retirement plans since it intends to
invest primarily in South Carolina municipal securities.
Fund shares are sold at net asset value plus an applicable sales charge and are
redeemed at net asset value.
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and South Carolina state income taxes.
(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 federal regular income tax and South
Carolina state 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 South 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 Board of Trustees (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 South 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 annual interest income is exempt from
federal regular income tax and South Carolina state income tax or that at least
80% of its total assets are invested in obligations, the interest income from
which is exempt from federal regular income tax and South Carolina state income
taxes.
ACCEPTABLE INVESTMENTS
MUNICIPAL SECURITIES. The municipal securities in which the Fund invests
are:
. obligations, including industrial development bonds, issued on behalf of
the state of South 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 investment adviser to
the Fund, exempt from both federal regular income tax and the personal
income tax imposed by the state of South Carolina. 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.
CHARACTERISTICS. The municipal securities which the Fund buys are subject
to the following quality standards:
. rated Baa or above by Moody's Investors Service, Inc. ("Moody's") or BBB
or above by Standard & Poor's Corporation ("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.
Bonds rated BBB by Standard & Poor's or Baa by Moody's have speculative
characteristics. Changes in economic conditions or other circumstances are
more likely to lead to weakened capacity to make principal and interest
payments than higher rated bonds. 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 obtain comparable ratings as substitute 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 South 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 determine that participation interests meet the
prescribed quality standards for the Fund.
VARIABLE RATE MUNICIPAL SECURITIES. Some of the South Carolina municipal
securities which the Fund purchases may have variable interest rates.
Variable interest rates are ordinarily stated as a percentage of the prime
rate of a bank 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 investment adviser has been instructed by the
Trustees to monitor 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.
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 adviser will waive its investment advisory fee on assets
invested in securities of open-end investment companies.
RESTRICTED SECURITIES. The Fund may invest up to 10% of its net assets 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 deemed to be illiquid, the Fund will limit
its purchase together with other securities considered to be illiquid to 15%
of its net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase South
Carolina municipal securities on a when-issued or delayed delivery basis. In
when-issued and delayed delivery transactions, the Fund relies on the seller
to complete the transaction. The seller's failure to complete these
transactions may cause the Fund to miss a price or yield considered to be
advantageous.
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 up to
one-third of the value of its total assets 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
investment 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. The
Fund will not loan securities with a value in excess of one-third of the
Fund's total assets.
TEMPORARY INVESTMENTS. The Fund normally invests its assets so that at least
80% of its annual interest income is exempt from federal regular income tax
and South Carolina state income tax. However, from time to time on a temporary
basis, or when the investment 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 investment adviser will limit temporary investments to those it considers
to be of good quality.
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 South Carolina state income tax.
SOUTH CAROLINA MUNICIPAL BONDS
South Carolina municipal bonds 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. South Carolina municipal bonds 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.
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 investment adviser, such insurance would benefit
the Fund (for example, through improvement of portfolio quality or increased
liquidity of certain securities). The Fund's investment adviser anti- cipates
that between 30% and 60% 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 investment 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.
Under the Policies, 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 Standard & Poor's 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.
INVESTMENT RISKS
Yields on South 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 South Carolina or its municipalities could impact the Fund's
portfolio. The Fund's concentration in securities issued by the state of South
Carolina and its political subdivisions provides a greater level of risk than a
fund which is diversified across numerous states and municipal entities. South
Carolina's dependence on agriculture, manufacturing and tourism 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 South 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 South Carolina
municipal securities which meet the Fund's quality standards may not be
possible if the state of South Carolina or its municipalities do not maintain
their current credit ratings. In addition, the issuance, tax exemption and
liquidity of South 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.
The Fund intends to comply with Subchapter M of the Internal Revenue Code. This
undertaking requires that at the end of each quarter of the taxable year, the
aggregate value of all investments in any one issuer (except U.S. government
obligations, cash, and cash items) which exceed 5% of the Fund's total assets
shall not exceed 50% of the value of its total assets.
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 up to 10% of the value of those assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder
approval. The following limitations, however, can be changed by the Trustees
without shareholder approval. Shareholders will be notified before any
material change in these limitations becomes effective.
The Fund will not:
. invest more than 5% of its total assets in industrial development bonds
when the payment of principal and interest is the responsibility of
companies (or guarantors, where applicable) with less than three years of
continuous operations, including the operation of any predecessor; or
. own securities of open-end or closed-end investment companies, except
under certain circumstances and subject to certain limitations described
in this prospectus, and, not exceeding 10% of its net assets.
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 The
South Carolina National Bank, the Fund's investment 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 .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 Bank may engage, for its own account or for other
accounts managed by the Bank, in other transactions involving South Carolina
municipal securities which may have adverse effects on the market for
securities in the Fund's portfolio.
ADVISER'S BACKGROUND. The South Carolina National Bank is a national banking
association headquartered in Columbia, South Carolina. It is the primary
subsidiary of South Carolina National Corporation ("SCNC"), a bank holding
company with a commercial bank subsidiary and a federal savings bank subsidiary
in South Carolina. Both The South Carolina National Bank and SCNC are wholly-
owned subsidiaries of Wachovia Corporation. SCNC was incorporated in South
Carolina in 1971. The Bank was originally incorporated in 1834 in Charleston,
South Carolina. The principal executive offices of the Bank are located at 1426
Main Street, Columbia, South Carolina 29226. The activities of the Bank
encompass a full range of commercial banking services, including trust
services.
The Adviser has managed the Fund since its inception on November 19, 1990. As
of September 30, 1993, the Trust Division of The South Carolina National Bank
managed assets in excess of $2.27 billion on a discretionary basis and provided
advisory and/or custody services for additional assets in excess of $4.91
billion. The Adviser has been a trustee of collective investment funds since
1955.
Michael Peters has been the Fund's portfolio manager since 1993. Mr. Peters
joined The South Carolina National Bank as Assistant Vice President in 1993,
and also serves as an officer of SCNC. 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 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.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, a subsidiary of
Federated Investors, provides the Fund with the administrative personnel and
services necessary to operate the Fund. Such services include shareholder
servicing and certain legal and accounting services. Federated Administrative
Services provides these at an annual rate as specified below.
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
------------------ -----------------------------------
<S> <C>
.15 of 1% on the first $250 million
.125 of 1% on the next $250 million
.10 of 1% on the next $250 million
.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall be at least
$50,000 per Fund. Federated Administrative Services may choose voluntarily to
waive a portion of its fee.
CUSTODIAN. Wachovia Bank of North Carolina, N.A., is custodian for the
securities of the Fund.
DIVIDEND DISBURSING AGENT AND TRANSFER AGENT. Federated Services Company,
Pittsburgh, Pennsylvania, is disbursing agent for the Fund and transfer agent
for the shares of the Fund.
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. Special South Carolina tax counsel to the
Fund is Sinkler & Boyd, P.A., Columbia, South Carolina.
INDEPENDENT AUDITOR. The independent auditor for the Fund is Ernst & Young,
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 investment 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 South Carolina National Bank, the Wachovia Banks (as
defined herein) or through brokers or dealers which have a sales agreement
with the distributor. 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 reserves the right to reject any purchase request.
THROUGH THE SOUTH CAROLINA NATIONAL BANK. An investor may call The South
Carolina National Bank to place an order to purchase shares of the Fund. (Call
toll-free 1-800-763-7277; in Columbia call 765-3222.) Orders through The South
Carolina National Bank are considered received when the Fund is notified of
the purchase order. Purchase orders must be received by The South Carolina
National Bank before 3:00 p.m. (Eastern time) and must be transmitted by The
South Carolina National Bank to the Fund before 4:00 p.m. (Eastern time) in
order for shares to be purchased at that day's price. It is the responsibility
of The South Carolina National Bank to transmit orders promptly to the Fund.
THROUGH THE WACHOVIA BANKS. To place an order to purchase shares of the Fund,
customers of Wachovia Bank of North Carolina, N.A., Wachovia Bank of Georgia,
N.A., and their affiliates (the "Wachovia Banks") may telephone, send written
instructions, or place 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, federal funds, or by
debiting a customer's account with the Wachovia Banks. Orders are considered
received after payment by check is converted into federal funds and received
by the Wachovia Banks, normally the next business day. When payment is made
with federal funds, the order is considered received when federal funds are
received by the Wachovia Banks or available in the customer's account.
Purchase orders must be communicated to the Wachovia Banks and payment by
federal funds must be received by the Wachovia Banks before4:00 p.m. (Eastern
time). Shares cannot be purchased on days on which the New York Stock Exchange
is closed or on federal holidays restricting wire transfers.
THROUGH WACHOVIA BROKERAGE SERVICE. Customers of Wachovia Brokerage Service
may place an order to purchase shares by telephoning 1-800-462-7538, 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 Brokerage Service. Purchase orders must be communicated to
Wachovia Brokerage Service before 4:00 p.m. (Eastern time).
BY MAIL. To purchase shares of the Fund through Wachovia Brokerage Service
by mail, send a check made payable to South Carolina Municipal Bond Fund
to Wachovia Securities, Inc., P.O. Box 110, MC 32022, Winston-Salem, N.C.
27102. Orders by mail are considered received after payment by check is
converted by Wachovia Brokerage Service into federal funds. This is
normally the next business day after Wachovia Brokerage Service receives
the check.
BY WIRE. To purchase shares of the Fund through Wachovia Brokerage Service
by wire, wire funds as follows:
Wachovia Securities, Inc.
ABA Number 0531-00494
Credit: 8735-001342
Further credit to: South 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 South
Carolina National Bank, Wachovia Bank of North Carolina, N.A., 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
be received by the broker/dealer and transmitted by the broker/dealer to The
South Carolina National Bank before 4:00 p.m. (Eastern time) and then
transmitted by The South Carolina National Bank to the Fund by 5:00 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 Division of The South Carolina National Bank for its
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>
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 Trust Divisions of The South Carolina National Bank and 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 South Carolina
National Bank and 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 South Carolina National Bank, the
Wachovia Banks, 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
South Carolina National Bank, the Wachovia Banks or such broker or dealer.
The sales charge for shares sold other than through The South Carolina National
Bank, 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 above,
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 South Carolina National Bank, the
Wachovia Banks, Wachovia Brokerage Service, 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 South Carolina National Bank, the
Wachovia Banks, Wachovia Brokerage Service 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 30 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge. The
South Carolina National Bank, the Wachovia Banks, Wachovia Brokerage Service,
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 South Carolina National Bank or
one of 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 South Carolina National Bank, the Wachovia Banks, Wachovia Brokerage
Service 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 South Carolina National
Bank, 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 portfolios of The Biltmore Funds and 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 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
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 and Investment Shares).
(The International Equity Fund and the portfolios of 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.
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 with a sales charge at net
asset value plus the applicable sales charge.
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
Brokerage Service or, in the case of customers of the Wachovia Banks or The
South Carolina National Bank, 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 Biltmore Municipal Funds may be given by telephone to Wachovia Brokerage
Service, and in the case of customers of The South Carolina National Bank or
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 South
Carolina National Bank, the Wachovia Banks, Wachovia Brokerage Service, or
directly to the Fund.
BY TELEPHONE. A shareholder may redeem shares of the Fund by calling The South
Carolina National Bank (Call toll-free 1-800-763-7277; in Columbia call 765-
3222) 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 South Carolina National
Bank. Redemption requests made through The South Carolina National Bank must
be received by The South Carolina National Bank before 3:00 p.m. (Eastern
time) and must be transmitted by The South Carolina National Bank to the Fund
before 4:00 p.m. (Eastern time) in order for shares to be redeemed at that
day's net asset value. The South Carolina National Bank is 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 Brokerage Service and who has
completed a telephone redemption authorization form, may redeem shares of the
Fund by phone by calling Wachovia Brokerage Service at 1-800-462-7538. 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 South Carolina National Bank or 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 South
Carolina National Bank for assistance in redeeming by mail.
A shareholder who is a customer of Wachovia Brokerage Service may redeem shares
by sending a written request to Wachovia Brokerage Service. 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 Brokerage Service for assistance in redeeming by mail. 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.
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.
REDEMPTION IN KIND
The Trust is obligated to redeem shares solely in cash up to $250,000, or 1% of
the Fund's net asset value, whichever is less, for any one shareholder within a
90-day period.
Any redemption beyond this amount will also be in cash unless the Trustees
determine that payments should be in kind. In such a case, the Trust will pay
all or a portion of the remainder of the redemption in portfolio instruments,
valued in the same way that net asset value is determined. The portfolio
instruments will be selected in a manner that the Trustees deem fair and
equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur certain transaction costs.
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 a 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 South Carolina National Bank and Wachovia Bank of North Carolina, N.A. are
subject to such banking laws and regulations.
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.
The South Carolina National Bank believes that it may perform the services for
the Fund contemplated by its advisory 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 South Carolina National Bank 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 The South Carolina
National Bank. It is not expected that existing shareholders would suffer any
adverse financial consequences (if another adviser with equivalent abilities to
The South Carolina National Bank is found) as a result of any of these
occurrences.
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.
SOUTH CAROLINA TAXES
In the opinion of Sinkler & Boyd, P.A., special South Carolina tax counsel to
the Fund, shareholders of the Fund who are subject to South Carolina individual
or corporate income taxes will not be subject to such taxes on Fund dividends
to the extent that such dividends qualify as either (1) exempt-interest
dividends of a regulated investment company under Section 852(b)(5) of the
Internal Revenue Code of 1986, which are derived from interest on tax-exempt
obligations of the state of South Carolina or any of its political subdivisions
or on obligations of the Government of Puerto Rico that are exempt from federal
income tax; or (2) dividends derived from interest or dividends on obligations
of the United
States and its possessions or on obligations or securities of any authority or
commission exempt from state income taxes under the laws of the United States
(items described in clause (1) and this clause (2) are referred to
collectively, as "South Carolina Obligations") and at least 50% of the value of
the Fund consists of South Carolina Obligations at the close of each quarter.
To the extent that Fund distributions are attributable to other sources, such
as long- or short-term capital gains, such distributions will not be exempt
from South Carolina taxes.
OTHER STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from state income taxes in states
other than South 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, and 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 net asset value 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.
SOUTH CAROLINA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE
OR SHARES 7) VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
REGULATED INVESTMENT COMPANIES--3.2%
- -------------------------------------------------------------------------------
2,611,325 Keystone Master Reserve Tax-Free Trust $ 2,611,325
---------------------------------------------
53,352 Nuveen Tax-Exempt Money Market Fund 53,352
--------------------------------------------- -----------
TOTAL REGULATED INVESTMENT COMPANIES (NOTE
2A) 2,664,677
--------------------------------------------- -----------
LONG-TERM MUNICIPAL SECURITIES--95.1%
- -------------------------------------------------------------------------------
$ 100,000 Aiken County, SC, 7.00% GO Bonds, 2/1/2002 A 107,746
---------------------------------------------
400,000 Barnwell County, SC, School District, 7.25%
GO Bonds, 2/1/2011 A 436,952
---------------------------------------------
450,000 Barnwell County, SC, School District, 7.25%
GO Bonds, 2/1/2013 A 489,609
---------------------------------------------
150,000 Beaufort County, SC, School District, 7.80%
GO Bonds, 12/1/96 A 166,605
---------------------------------------------
50,000 Beaufort County, SC, 7.125% Lease Certificate
of Participation (AMBAC Issuer Insured),
6/1/2006 AAA 57,223
---------------------------------------------
675,000 Beaufort County, SC, 7.125% Lease Certificate
of Participation (Beaufort Memorial Hospital
Project)/(AMBAC Issuer Insured), 6/1/2012 AAA 771,282
---------------------------------------------
60,000 Berkeley County, SC, 7.25% Pollution Control
Revenue Bonds (Alumax, Inc. Project),
12/1/2008 BBB- 60,953
---------------------------------------------
750,000 Berkeley County, SC, 6.50% Pollution Control
Revenue Bonds (SCE & G. Project), 10/1/2014 A- 804,262
---------------------------------------------
1,000,000 Berkeley County, SC, Water & Sewer, 6.50%
Revenue Bonds (MBIA Issuer Insured), 6/1/2006 AAA 1,096,790
---------------------------------------------
950,000 Berkeley County, SC, Water & Sewer, 7.00%
Revenue Bonds (MBIA Issuer Insured), 6/1/2016 AAA 1,099,549
---------------------------------------------
1,500,000 Berkeley County, SC, Water & Sewer, 5.50%
(MBIA Issuer Insured) 6/1/2013 AAA 1,502,505
---------------------------------------------
</TABLE>
SOUTH CAROLINA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
OR S&P*
PRINCIPAL (NOTE
AMOUNT ISSUE 7) VALUE
---------- ---------------------------------------------- ------- ----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
$ 65,000 Berkeley County, SC, Water & Sewer, 6.00%,
(MBIA Issuer Insured), Prerefunded 6/1/2001
@100 AAA $ 70,333
----------------------------------------------
935,000 Berkeley County, SC, Water & Sewer, 6.00%,
6/1/2010 (MBIA Insured) AAA 975,083
----------------------------------------------
760,000 Cayce, SC, Water & Sewer, 7.10% Revenue Bonds
(AMBAC Issuer Insured), 7/1/2009, Prerefunded
7/1/99 @102 AAA 877,443
----------------------------------------------
1,000,000 Cayce, SC, Water & Sewer, 7.15% Revenue Bonds
(AMBAC Issuer Insured), 7/1/2015, Prerefunded
7/1/99 @102 AAA 1,156,990
----------------------------------------------
1,000,000 Charleston County, SC, 7.10% Lease Certificate
of Participation, (MBIA Issuer Insured),
6/1/2011 AAA 1,153,370
----------------------------------------------
310,000 Charleston County, SC, 9.00% Resource Recovery
Bonds (Foster Wheeler Project)/(Subject to
AMT), 1/1/2005 A 358,754
----------------------------------------------
400,000 Charleston County, SC, Water Works & Sewer,
7.05% Revenue Bonds, 1/1/2006 AA- 430,776
----------------------------------------------
1,000,000 Charleston County, SC, Water Works & Sewer,
6.00% Revenue Bonds, 1/1/2012 AA- 1,034,340
----------------------------------------------
1,500,000 Charleston County, SC, Water Works & Sewer,
7.00% Revenue Bonds, 1/1/2015 AA- 1,607,985
----------------------------------------------
1,125,000 Chester County, SC, School District, 6.85% GO
Bonds, 2/1/2009 A 1,213,234
----------------------------------------------
875,000 Chester County, SC, School District, 6.85% GO
Bonds, 2/1/2012 A 937,011
----------------------------------------------
250,000 City of Charleston, SC, 6.30% GO Bonds,
9/1/2005 AA 275,250
----------------------------------------------
1,000,000 City of Charleston, SC, 6.50% GO Bonds,
6/1/2012 AA 1,081,820
----------------------------------------------
250,000 Clemson University, SC, 7.00% Revenue Bonds,
5/1/2009 A1 275,778
----------------------------------------------
355,000 Columbia, SC, Waterworks & Sewer System, 6.30%
Revenue Bonds, 2/1/2000 AA 389,261
----------------------------------------------
1,000,000 Columbia, SC, Waterworks & Sewer System, 7.10%
Revenue Bonds, 2/1/2012, Prerefunded 2/1/2001
@102 AAA 1,166,210
----------------------------------------------
350,000 Dorchester County, SC, School District #2,
6.70% GO Bonds (MBIA Issuer Insured), 7/1/2004 AAA 384,699
----------------------------------------------
</TABLE>
SOUTH CAROLINA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
OR S&P*
PRINCIPAL (NOTE
AMOUNT ISSUE 7) VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
$ 600,000 Dorchester County, SC, School District #2,
6.65% GO Bonds (MBIA Issuer Insured),
7/1/2012 AAA $ 655,260
---------------------------------------------
870,000 Edgefield County, SC, School District, 6.40%
GO Bonds (FSA Issuer Insured), 2/1/2009 AAA 953,477
---------------------------------------------
2,000,000 Fairfield County, SC, 6.50% Pollution Control
Revenue Bonds, 9/1/2014 A 2,162,860
---------------------------------------------
500,000 Florence County, SC, 6.75% Revenue Bonds
(McLeod Hospital Project)/(FGIC Issuer
Insured), 11/1/2010 AAA 552,460
---------------------------------------------
700,000 Gaffney, SC, Combined Utility System, 6.85%
Revenue Bonds, 3/1/2012 A 762,580
---------------------------------------------
1,360,000 Georgetown County, SC, 6.25% Pollution
Control Revenue Bonds (International Paper
Co. Project), 6/15/2005 A- 1,451,950
---------------------------------------------
445,000 Goose Creek, SC, Public Facilities Corp.,
6.875% Lease Certificate of Participation
(MBIA Issuer Insured), 2/1/2010 AAA 483,586
---------------------------------------------
2,500,000 Grand Strand Water & Sewer Authority, 6.375%
Revenue Bonds (MBIA Issuer Insured), 6/1/2012 AAA 2,795,475
---------------------------------------------
500,000 Greenville, SC, IDR, 7.10% Revenue Bonds
(Lockheed Aeromod Facility Project)/(Subject
to AMT), 11/1/2011 A 535,585
---------------------------------------------
760,000 Greenville, SC, 7.00% Hospital Revenue Bonds,
5/1/2017 AA- 834,070
---------------------------------------------
500,000 Greenville, SC, 5.50% Hospital Facilities,
5/1/2016 AA- 485,070
---------------------------------------------
500,000 Greenville, SC, 7.60% Revenue Bonds (Airport
Project)/
(AMBAC Issuer Insured)/(Subject to AMT),
7/1/2000 AAA 543,755
---------------------------------------------
100,000 Horry County, SC, 7.45% GO Bonds, 12/1/2004 A 115,856
---------------------------------------------
980,000 Horry County, SC, 4.65% GO Bonds (MBIA Issuer
Insured), 12/1/2005 AAA 954,491
---------------------------------------------
1,110,000 Horry County, SC, School District, 4.70% GO
Bonds (FSA Insured), 4/1/2002 AAA 1,115,250
---------------------------------------------
350,000 Horry County, SC, School District, 7.00% GO
Bonds, 12/1/2003 A 385,410
---------------------------------------------
600,000 Horry County, SC, School District, 7.00% GO
Bonds, 1/1/2005 A 682,350
---------------------------------------------
</TABLE>
SOUTH CAROLINA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
OR S&P*
PRINCIPAL (NOTE
AMOUNT ISSUE 7) VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
$1,960,000 Lancaster County, SC, School District, 6.50%
GO Bonds (MBIA Issuer Insured), 7/1/2008 AAA $ 2,166,956
---------------------------------------------
175,000 Lexington County, SC, IDR, 8.00% (J.B. White
Project)/
(Mercantile Stores Guaranteed)/(Subject to
AMT), 1/1/2011 NR 190,873
---------------------------------------------
600,000 Marlboro County, SC, School District, 7.00%
GO Bonds (MBIA Issuer Insured), 6/1/2007,
Prerefunded 6/1/97 @102 AAA 670,824
---------------------------------------------
200,000 Medical University, SC, Hospital Facilities,
7.125% Revenue Bonds, 7/1/2004 A+ 223,364
---------------------------------------------
805,000 Medical University, SC, Hospital Facilities,
5.25% Revenue Bonds, 7/1/2004 (MBIA Issuer
Insured) AAA 824,674
---------------------------------------------
500,000 North Charleston, SC, 5.875% GO Bonds,
8/1/2009 A 526,070
---------------------------------------------
1,000,000 North Charleston, SC, Sewer District, 6.00%
Revenue Bonds (MBIA Issuer Insured), 7/1/2018 AAA 1,033,090
---------------------------------------------
500,000 North Charleston, SC, Sewer District, 6.00%
Revenue Bonds (MBIA Issuer Insured), 7/1/2018 AAA 516,545
---------------------------------------------
370,000 Pickens & Richland Counties, SC, 6.90%
Revenue Bonds (Baptist Hospital)/(AMBAC
Issuer Insured), 8/1/2005, Prerefunded
8/1/2001 @102 AAA 430,710
---------------------------------------------
350,000 Pickens & Richland Counties, SC, 7.00%
Revenue Bonds (Baptist Hospital)/(AMBAC
Issuer Insured), 8/1/2006, Prerefunded
8/1/2001 @102 AAA 409,668
---------------------------------------------
1,250,000 Pickens & Richland Counties, SC, 7.00%
Revenue Bonds (Baptist Hospital)/(AMBAC
Insured), 8/1/2017, Prerefunded 8/1/2001 @102 AAA 1,454,263
---------------------------------------------
1,135,000 Piedmont Municipal Power Agency, SC, 6.375%
Electric Revenue Bonds (FGIC Issuer Insured),
1/1/2006 AAA 1,267,557
---------------------------------------------
590,000 Piedmont Municipal Power Agency, SC, 6.85%
Electric Revenue Bonds (FGIC Issuer Insured),
1/1/2007 AAA 659,732
---------------------------------------------
</TABLE>
SOUTH CAROLINA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
OR S&P*
PRINCIPAL (NOTE
AMOUNT ISSUE 7) VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
$ 175,000 Piedmont Municipal Power Agency, SC, 7.00%
Electric Revenue Bonds (FGIC Issuer Insured),
1/1/2013, Prerefunded 1/1/95 @100 AAA $ 182,495
---------------------------------------------
100,000 Piedmont Municipal Power Agency, SC, 7.40%
Electric Revenue Bonds (AMBAC Issuer
Insured), 1/1/2018 AAA 112,376
---------------------------------------------
1,000,000 Piedmont Municipal Power Agency, SC, 6.50%
Electric Revenue Bonds (FGIC Issuer Insured),
1/1/2011 AAA 1,080,160
---------------------------------------------
255,000 Richland County, SC, Hospital Facility,
8.125% Revenue Bonds (Sun Health Network
Project)/(Sumitomo Bank, Ltd. LOC), 10/1/2011 A1 290,009
---------------------------------------------
600,000 Richland County, SC, 7.10% Hospital Revenue
Bonds (Community Provider Pool)/(Capital
Guaranty Insured), 7/1/2005 AAA 694,386
---------------------------------------------
1,250,000 Richland County, SC, 6.25% GO Bonds, 3/1/2011 AA 1,341,463
---------------------------------------------
650,000 Richland County, SC, 7.45% Pollution Control
Revenue Bonds (Subject to AMT), 4/1/2021 A1 733,063
---------------------------------------------
1,000,000 Richland County, SC, 6.75% Pollution Control
Revenue Bonds (Union Camp Project), 5/1/2022 A1 1,086,750
---------------------------------------------
210,000 Rock Hill, SC, Housing Development Corp.,
7.50% Revenue Bonds (FNMA Guaranteed),
7/1/2010 AAA 235,462
---------------------------------------------
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 1,140,140
---------------------------------------------
350,000 Rock Hill, SC, Utilities Systems, 7.00%
Revenue Bonds (AMBAC Issuer Insured),
1/1/2020, Prerefunded 1/1/2000, @102 AAA 403,679
---------------------------------------------
450,000 St. Andrews, SC, Public Service District,
7.625% Sewer System Revenue Bonds (FGIC
Issuer Insured), 1/1/2009 AAA 509,431
---------------------------------------------
700,000 South Carolina State, 5.75% GO Bonds,
5/1/2007 AAA 763,728
---------------------------------------------
1,000,000 South Carolina State, 5.00% GO Bonds,
2/1/2009 AAA 990,480
---------------------------------------------
</TABLE>
SOUTH CAROLINA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
OR S&P*
PRINCIPAL (NOTE
AMOUNT ISSUE 7) VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
$ 405,000 South Carolina State Educational Assistance
Authority, 6.50% Revenue Bonds (Subject to
AMT), 9/1/2004 AA $ 424,517
---------------------------------------------
270,000 South Carolina HFA, 8.00% Revenue Bonds,
7/1/95 AA 276,634
---------------------------------------------
100,000 South Carolina HFA, 7.50% Revenue Bonds,
7/1/2011 AA 107,595
---------------------------------------------
500,000 South Carolina HFA, 7.70% Revenue Bonds
(Subject to AMT), 7/1/2010 AA 541,330
---------------------------------------------
520,000 South Carolina HFA, 7.75% Revenue Bonds
(Subject to AMT), 7/1/2022 AA 552,032
---------------------------------------------
1,200,000 South Carolina HFA, 7.30% Revenue Bonds
(Subject to AMT), 7/1/2011 AA 1,295,436
---------------------------------------------
1,000,000 South Carolina Port Authority, 6.50% Revenue
Bonds (AMBAC Issuer Insured)/(Subject to
AMT), 7/1/2006 AAA 1,093,450
---------------------------------------------
1,000,000 South Carolina Port Authority, 6.625% Revenue
Bonds (AMBAC Issuer Insured)/(Subject to
AMT), 7/1/2011 AAA 1,092,640
---------------------------------------------
525,000 South Carolina Port Authority, 6.75% Revenue
Bonds (AMBAC Issuer Insured)/(Subject to
AMT), 7/1/2021 AAA 575,951
---------------------------------------------
400,000 South Carolina Public Service Authority,
8.10% Revenue Bonds, 7/1/2007, Prerefunded
7/1/96 @103 AAA 455,632
---------------------------------------------
600,000 South Carolina Public Service Authority,
7.00% Revenue Bonds (Series C), 7/1/2012 A+ 649,506
---------------------------------------------
1,125,000 South Carolina Public Service Authority,
7.30% Revenue Bonds, 7/1/2021 A+ 1,222,526
---------------------------------------------
1,000,000 South Carolina Public Service Authority,
6.75% Revenue Bonds, 7/1/2005 A+ 1,047,830
---------------------------------------------
125,000 South Carolina Public Service Authority,
6.90% Revenue Bonds (Series A), 7/1/2021 A+ 130,902
---------------------------------------------
250,000 South Carolina Public Service Authority,
7.00% Revenue Bonds (Series B), 7/1/2009,
Prerefunded 7/1/2001 @102 A+ 290,185
---------------------------------------------
</TABLE>
SOUTH CAROLINA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
OR S&P*
PRINCIPAL (NOTE
AMOUNT ISSUE 7) VALUE
---------- --------------------------------------------- ------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -------------------------------------------------------------------------------
$1,400,000 South Carolina Public Service Authority,
7.00% Revenue Bonds (Series B), 7/1/2012,
Prerefunded 7/1/2001 @102 A+ $ 1,625,036
---------------------------------------------
600,000 South Carolina Public Service Authority,
7.10% Revenue Bonds (Series B), 7/1/2021,
Prerefunded 7/1/2001 @102 A+ 701,136
---------------------------------------------
450,000 South Carolina Public Service Authority,
7.00% Revenue Bonds, 7/1/2022 A+ 472,307
---------------------------------------------
1,950,000 South Carolina Public Service Authority,
6.50% Revenue Bonds
(Series B)/(AMBAC Issuer Insured), 7/1/2014 AAA 2,128,835
---------------------------------------------
500,000 South Carolina Resource Authority, 7.00%,
6/1/2003 AA 560,565
---------------------------------------------
1,000,000 South Carolina Public Service Authority,
5.00% (Series C), 1/1/2014, (AMBAC Issuer
Insured) AAA 940,760
---------------------------------------------
200,000 Spartanburg County, SC, 7.80% Revenue Bonds
(Mary Black Hospital Project), 10/1/2000,
Prerefunded 10/1/98 @102 A- 234,384
---------------------------------------------
100,000 Spartanburg County, SC, 8.25% Revenue Bonds
(Mary Black Hospital Project), 10/1/2008,
Prerefunded 10/1/98 @102 A- 119,233
---------------------------------------------
450,000 Spartanburg County, SC, Leased Housing Corp.,
7.50% Revenue Bonds, 10/1/2011 A 478,660
---------------------------------------------
400,000 Sumter County, SC, School District #1, 7.125%
Lease Certificate of Participation (Capital
Guaranty Insured), 1/1/2011 AAA 459,952
---------------------------------------------
400,000 Western Carolina Regional Sewer Authority,
6.05% Revenue Bonds (AMBAC Issuer Insured),
3/1/2006 AAA 431,580
---------------------------------------------
1,000,000 York County, SC, 4.80% GO Bonds (AMBAC
Insured), 6/1/2008 AAA 941,150
---------------------------------------------
1,000,000 York County, SC, 4.90% GO Bonds (AMBAC
Insured), 6/1/2010 AAA 940,630
---------------------------------------------
675,000 York County, SC, Natural Gas Authority, 7.00%
Revenue Bonds, 2/1/2012 A- 750,620
---------------------------------------------
810,000 York County, SC, 7.40% Pollution Control
Revenue Bonds (Bowater, Inc. Project),
1/1/2010 BBB- 884,844
---------------------------------------------
400,000 York County, SC, Public Facilities Corp.,
7.10% Lease Certificate of Participation
(Escrowed to Maturity), 6/1/2001 AAA 459,832
---------------------------------------------
</TABLE>
SOUTH CAROLINA MUNICIPAL BOND FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
OR S&P*
PRINCIPAL (NOTE
AMOUNT ISSUE 7) VALUE
---------- ------------------------------------------ ------- -----------
<C> <S> <C> <C>
LONG-TERM MUNICIPAL SECURITIES--CONTINUED
- -----------------------------------------------------------------------------
$1,500,000 York County, SC, Public Facilities Corp.,
7.50% Lease Certificate of Participation,
6/1/2011, Prerefunded 6/1/2001 @102 AAA $ 1,783,095
------------------------------------------
200,000 York County, SC, School District #3, 9.00%
GO Bonds (MBIA Issuer Insured), 6/1/97 AAA 231,496
------------------------------------------ -----------
TOTAL LONG-TERM MUNICIPAL SECURITIES
(IDENTIFIED COST, $73,852,747) 79,289,527
------------------------------------------ -----------
TOTAL INVESTMENTS (IDENTIFIED COST,
$76,517,424) $81,954,204+
------------------------------------------ -----------
</TABLE>
*See Notes to Portfolio of Investments on page 32.
+The cost of investment for federal tax purposes amount to $76,517,424. The net
unrealized appreciation of investments on a federal tax basis amounts to
$5,436,780 which is comprised of $5,582,673 appreciation and $145,893
depreciation at November 30, 1993.
Note: The categories of investments are shown as a percentage of net assets
($83,371,314) at November 30, 1993.
The following abbreviations are used throughout 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
- --------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
The four highest ratings of Moody's Investors Service, Inc. ("Moody's") for
municipal bonds are Aaa, Aa, A, and Baa. Municipal bonds rated Aaa are judged
to be of the "best quality". The rating of Aa is assigned to municipal bonds
which are of "high quality by all standards," but as to which margins of
protection or other elements make long-term risks appear somewhat larger than
Aaa- rated municipal bonds. The Aaa and Aa rated municipal bonds comprise what
are generally known as "high grade bonds". Municipal bonds which are rated A by
Moody's possess many favorable investment attributes and are considered "upper
medium grade obligations". Factors giving security to principal and interest of
A rated municipal bonds are considered adequate, but elements may be present
which suggest a susceptibility to impairment sometime in the future. Bonds
which are rated Baa are considered as "medium grade obligations," i.e., they
are neither highly protected nor poorly secured. The letter ratings carry
numerical modifiers, with 1 indicating the higher end of the rating category, 2
indicating the mid-range and 3 indicating the lower end of the rating category.
Moody's highest rating for state and municipal short-term securities is
MIG1/VMIG1. Short-term municipal securities rated MIG1/VMIG1 are of the best
quality. They have strong protection from established cash flows of funds for
their servicing or have established a broad-based access to the market for
refinancing or both. The VMIG1 rating denotes that the security has a demand
feature.
The four highest ratings of Standard & Poor's Corporation ("Standard & Poor's")
for municipal bonds are AAA (Prime), AA (High Grade), A (Good Grade), and BBB
(Medium Grade). Municipal bonds rated AAA are "obligations of the highest
quality". The rating of AA is accorded issues with investment characteristics
"only slightly less marked than those of the prime quality issues". The
category of A describes "the third strongest capacity for payment of debt
service". Principal and interest payments on bonds in this category are
regarded as safe. It differs from the two higher ratings because with respect
to general obligation bonds there is some weakness, either in the local
economic base, in debt burden, in the balance between revenues and
expenditures, or in quality of management. Under certain adverse circumstances,
any one such weakness might impair the ability of the issuer to meet debt
obligations at some future date. With respect to revenue bonds, debt service
coverage is good, but not exceptional. Stability of the pledged revenues could
show some variations because of increased competition or economic influences on
revenues. Basic security provisions, while satisfactory, are less stringent.
Bonds which are rated BBB (Medium Grade) are considered as medium grade
obligations, i.e., the lowest investment grade security rating. The ratings
from AA to B may be modified by the addition of a plus or minus sign to show
relative standing within the major rating categories.
NR indicates that the bonds are not currently rated by Moody's or Standard &
Poor's; however, management considers them to be of investment quality.
Bonds for which the security depends upon the completion of some act or the
fulfillment of some condition are rated conditionally.
SOUTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ------------------------------------------------ ---------
Investments, at value (Note 2A) (identified and tax cost
$76,517,424) $81,954,204
- ----------------------------------------------------------
Interest receivable 1,787,501
- ----------------------------------------------------------
Receivable for Fund shares sold 109,599
- ----------------------------------------------------------
Deferred expenses (Note 2E) 5,135
- ---------------------------------------------------------- -----------
Total assets 83,856,439
- ----------------------------------------------------------
LIABILITIES:
- ------------------------------------------------ ---------
Payable for Fund shares redeemed $220,298
- ------------------------------------------------
Dividends payable 214,658
- ------------------------------------------------
Accrued expenses and other liabilities 50,169
- ------------------------------------------------ ---------
Total liabilities 485,125
- ---------------------------------------------------------- -----------
NET ASSETS for 7,496,337 shares of beneficial interest
outstanding $83,371,314
- ------------------------------------------------ --------- -----------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------
Paid-in capital $77,707,666
- ----------------------------------------------------------
Accumulated net realized gain on investments 226,868
- ----------------------------------------------------------
Net unrealized appreciation of investments 5,436,780
- ---------------------------------------------------------- -----------
Total $83,371,314
- ---------------------------------------------------------- -----------
NET ASSET VALUE and Redemption Price Per Share:
(net assets of $83,371,314 / 7,496,337 shares of
beneficial interest outstanding) $11.12
- ---------------------------------------------------------- -----------
COMPUTATION OF OFFERING PRICE:
Offering Price Per Share (100/95.5 of $11.12*) $11.64
- ---------------------------------------------------------- -----------
</TABLE>
*On sales of $100,000 or more, the offering price is reduced as stated under
"What Shares Cost."
(See Notes which are an integral part of the Financial Statements)
SOUTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED
-----------------------
11/30/93* 9/30/93
- ---------------------------------------------------- ----------- ----------
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------
Interest income (Note 2B) $ 783,850 $4,260,952
- ----------------------------------------------------
EXPENSES:
- ----------------------------------------------------
Investment advisory fee (Note 5) 103,802 531,849
- ----------------------------------------------------
Trustees' fees -- 8,004
- ----------------------------------------------------
Administrative personnel and services fee (Note 5) 20,760 106,370
- ----------------------------------------------------
Custodian fees 10,229 64,445
- ----------------------------------------------------
Transfer and dividend disbursing agent fees and
expenses (Note 5) 11,211 17,180
- ----------------------------------------------------
Fund share registration costs 7,105 28,427
- ----------------------------------------------------
Legal fees 31 7,380
- ----------------------------------------------------
Printing and postage 77 34,137
- ----------------------------------------------------
Insurance premiums -- 5,654
- ----------------------------------------------------
Auditing fees 5,000 15,787
- ----------------------------------------------------
Miscellaneous 947 7,869
- ---------------------------------------------------- ----------- ----------
Total expenses 159,162 827,102
- ----------------------------------------------------
Waiver of investment advisory fee (Note 5) 83,041 438,960
- ---------------------------------------------------- ----------- ----------
Net expenses 76,121 388,142
- ---------------------------------------------------- ----------- ----------
Net investment income 707,729 3,872,810
- ---------------------------------------------------- ----------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------
Net realized gain on investment transactions
(identified cost basis) 147,642 83,172
- ----------------------------------------------------
Net change in unrealized appreciation (depreciation) (1,272,466) 4,888,206
on investments ----------- ----------
- ----------------------------------------------------
Net realized and unrealized gain (loss) on (1,124,824) 4,971,378
investments ----------- ----------
- ----------------------------------------------------
Change in net assets resulting from operations $ (417,095) $8,844,188
- ---------------------------------------------------- ----------- ----------
</TABLE>
*For the two months ended November 30, 1993 (Note 8).
(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
--------------------------------------
11/30/93* 9/30/93 9/30/92
----------- ------------ -----------
<S> <C> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- --------------------------------------
OPERATIONS--
- --------------------------------------
Net investment income $ 707,729 $ 3,872,810 $ 2,377,040
- --------------------------------------
Net realized gain (loss) on investment
transactions
($147,642 gain, $79,226 gain and $0,
respectively, as computed for federal
tax purposes) 147,642 83,172 (3,946)
- --------------------------------------
Net change in unrealized appreciation
(depreciation) on investments (1,272,466) 4,888,206 1,506,855
- ------------------------------------------------------------------------------
Change in net assets resulting from
operations (417,095) 8,844,188 3,879,949
- -----------------------------------------------------------------------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
- --------------------------------------
Dividends to shareholders from net
investment income (707,729) (3,872,810) (2,377,040)
- -----------------------------------------------------------------------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
- --------------------------------------
Net proceeds from sale of shares 4,720,992 28,079,747 42,371,792
- --------------------------------------
Net asset value of shares issued to
shareholders
electing to receive payment of
dividends in Fund shares 277,901 1,537,258 923,350
- --------------------------------------
Cost of shares redeemed (3,176,759) (15,053,586) (3,096,593)
- -----------------------------------------------------------------------------
Change in net assets from Fund share
transactions 1,822,134 14,563,419 40,198,549
- -----------------------------------------------------------------------------
Change in net assets 697,310 19,534,797 41,701,458
- --------------------------------------
NET ASSETS:
- --------------------------------------
Beginning of period 82,674,004 63,139,207 21,437,749
- -----------------------------------------------------------------------------
End of period $83,371,314 $ 82,674,004 $63,139,207
- -----------------------------------------------------------------------------
</TABLE>
*For the two months ended November 30, 1993 (Note 8).
(See Notes which are on integral part of the financial statements)
SOUTH CAROLINA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1993
- --------------------------------------------------------------------------------
(1) ORGANIZATION
South Carolina Municipal Bond Fund (the "Fund") is a non-diversified portfolio
of The Biltmore Municipal Funds (the "Trust"), which is registered under the
Investment Company Act of 1940, as amended, as an open-end, management
investment company. The Trust was established as a Massachusetts business trust
under a Declaration of Trust dated August 15, 1990. 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 Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Municipal bonds are valued at fair value. An indepen-
dent pricing service values the Fund's municipal bonds, taking into consid-
eration yield, stability, risk, quality, coupon, maturity, type of issue,
trading characteristics, special circumstances of a security or trading mar-
ket, and any other factors or market data it deems relevant in determining
valuations for normal institutional-size trading units of debt securities
and does not rely exclusively on quoted prices. The Board of Trustees (the
"Trustees") has determined that the fair value of debt securities with re-
maining maturities of 60 days or less shall be their amortized cost value
unless the particular circumstances of the security indicate otherwise. In-
vestments in other regulated investment companies are valued at net asset
value.
Since the Fund may invest a substantial portion of its assets in issuers lo-
cated in one state, it will be more susceptible to factors adversely affect-
ing issuers of that state, than would be a comparable general tax-exempt mu-
tual fund. In order to reduce the risk associated with such factors, at Nov-
ember 30, 1993, 47.8% of the securities in the portfolio of investments were
backed by letters of credit or bond insurance of various financial institu-
tions and financial guaranty assurance agencies. The aggregate percentage by
financial institution ranged from 0.3% to 20.3% of total investments.
B. INCOME--Interest income is recorded on the accrual basis. Interest income
includes interest earned net of premium, and original issue discount as re-
quired by the Internal Revenue Code.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Internal Revenue Code applicable to regulated investment companies and dis-
tribute to shareholders each year all of its net income, including any net
realized gain on investments. Accordingly, no provision for federal tax is
necessary. Dividends paid by the Fund from net interest earned on tax-exempt
municipal bonds are not includable by shareholders as gross income for fed-
eral income tax purposes because the Fund intends to meet certain require-
ments of the Internal Revenue Code applicable to regulated
investment companies which will enable the Fund to pay exempt-interest divi-
dends. The portion of such interest, if any, earned on private activity
bonds issued after August 7, 1986, may be considered a tax preference item
for shareholders.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in when-
issued or delayed delivery transactions. To the extent the Fund engages in
such transactions, it will do so for the purpose of acquiring portfolio se-
curities consistent with its investment objective and policies and not for
the purpose of investment leverage. The Fund will record a when-issued secu-
rity and the related liability on the trade date. Until the securities are
received and paid for, the Fund will maintain security positions such that
sufficient liquid assets will be available to make payment for the securi-
ties purchased. Securities purchased on a when-issued or delayed delivery
basis are marked to market daily and begin earning interest on the settle-
ment date.
E. DEFERRED EXPENSES--Costs incurred by the Fund in connection with its initial
share registration, other than organization expenses, have been deferred and
will be amortized on a straight-line basis over a period of five years from
the Fund's commencement date.
F. OTHER--Investment transactions are accounted for as of the trade date of the
transaction.
(3) DIVIDENDS
The Fund computes its net income daily and, immediately prior to its calcula-
tion of its net asset value at the close of business, declares and records div-
idends, excluding capital gains, to shareholders of record with respect to
shares for which payment in federal funds has been received. Payment of divi-
dends is made monthly in cash, or in additional shares at the net asset value
on the payable date. Capital gains realized by the Fund are distributed at
least once every twelve months and are recorded on the ex-dividend date.
(4) 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). Transac-
tions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED YEAR ENDED YEAR ENDED
11/30/93* 9/30/93 9/30/92
- ----------------------------------------- ------------ ---------- ----------
<S> <C> <C> <C>
Shares outstanding, beginning of period 7,332,729 5,997,588 2,108,045
- -----------------------------------------
Shares sold 420,846 2,589,410 4,100,387
- -----------------------------------------
Shares issued to shareholders electing to
receive payment
of dividends in Fund shares 24,836 141,549 88,975
- -----------------------------------------
Shares redeemed (282,074) (1,395,818) (299,819)
- ----------------------------------------- --------- ---------- ---------
Shares outstanding, end of period 7,496,337 7,332,729 5,997,588
- ----------------------------------------- --------- ---------- ---------
</TABLE>
*Two months ended November 30, 1993 (Note 8).
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The South Carolina National Bank, the Fund's investment adviser ("Adviser") re-
ceives 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 or reimburse certain expenses of the Fund. The Ad-
viser may modify or terminate this voluntary waiver at any time at its sole
discretion. For the period ended November 30, 1993, the Adviser earned an in-
vestment advisory fee of $103,802, of which $83,041 was voluntarily waived.
Federated Administrative Services ("FAS") provides the Fund with certain
administrative personnel and services, and receives an annual administrative
services fee equal to .15 of 1% of the first $250 million of average aggregate
daily net assets of the Trust; .125 of 1% of the next $250 million; .10 of 1%
of the next $250 million and .075 of 1% on average aggregate daily net assets
in excess of $750 million. For the period ended November 30, 1993, FAS earned
administrative services fees of $20,760.
Organization expenses of the Fund ($30,060) were borne initially by FAS. The
Fund has agreed to pay FAS, at an annual rate of .005 of 1% of average daily
net assets, until the organization expenses initially borne by FAS are
reimbursed or five years from November 19, 1990, the date the Fund commenced
operations. During the two months ended November 30, 1993, the Fund paid FAS
$683 for organization expenses, pursuant to this agreement.
Federated Services Company ("FSC") is the Fund's transfer and dividend
disbursing agent. For the period ended November 30, 1993, FSC received $11,211
in transfer and dividend disbursing agent fees.
Certain of the Officers of the Trust are Officers and Trustees of FAS and FSC.
(6) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term investments, for the
period ended November 30, 1993, were as follows:
- ---------------------------------------------------------------------
<TABLE>
<S> <C>
PURCHASES $3,046,380
- ---------------------------------------------------------------------
SALES $1,729,271
- ----- ----------
</TABLE>
(7) CURRENT CREDIT RATINGS
Current credit ratings and the related notes are unaudited.
(8) CHANGE IN FISCAL YEAR
Effective October 1, 1993, the Fund changed its fiscal year end from September
30 to November 30.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
- --------------------------------------------------------------------------------
To the Trustees and Shareholders of
THE BILTMORE MUNICIPAL FUNDS
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of South Carolina Municipal Bond Fund (the
"Fund," a portfolio of The Biltmore Municipal Funds) as of November 30, 1993,
and the related statement of operations, statement of changes in net assets and
financial highlights (see page 2 of this Prospectus) for the two-month period
ended November 30, 1993. These financial statements and financial highlights
are the responsibility of the Fund's management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audit. The statement of operations for the year ended September 30,
1993, the statement of changes in net assets for the years ended September 30,
1993 and 1992, and financial highlights for the three fiscal years in the
period ended September 30, 1993, were audited by other auditors whose report
dated November 12, 1993, expressed an unqualified opinion on those statements.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
November 30, 1993, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the November 30, 1993 financial statements and financial
highlights referred to above present fairly, in all material respects, the
financial position of South Carolina Municipal Bond Fund of The Biltmore
Municipal Funds at November 30, 1993, the results of its operations, the
changes in its net assets, and financial highlights for the two-month period
ended November 30, 1993, in conformity with generally accepted accounting
principles.
ERNST & YOUNG
Pittsburgh, Pennsylvania
January 14, 1994
ADDRESSES
- --------------------------------------------------------------------------------
South Carolina Municipal Bond Fund Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania
15222-3779
- --------------------------------------------------------------------------------
Investment Adviser
The South Carolina National Bank 1401 Main Street
Columbia, South Carolina
29226
- --------------------------------------------------------------------------------
Custodian
Wachovia Bank of North Carolina, N.A.
Wachovia Trust Operations
301 North Main Street
Winston-Salem, North
Carolina 27150
- --------------------------------------------------------------------------------
Dividend Disbursing Agent and Transfer Agent
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 19th Street, N.W.
Washington, D.C. 20036-2430
- --------------------------------------------------------------------------------
Special South Carolina Tax Counsel
Sinkler & Boyd, P.A. 1426 Main Street
Columbia, South Carolina
29201
- --------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania
15219
- --------------------------------------------------------------------------------
South Carolina Municipal Bond Fund
A Non-diversified Portfolio of The
Biltmore Municipal Funds
An Open-End, Management Investment
Company
Prospectus
January 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
DISTRIBUTOR
A SUBSIDIARY OF FEDERATED INVESTORS
FEDERATED INVESTORS TOWER
PITTSBURGH, PA 15222-3779
0120501A (1/94)
SOUTH 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 South Carolina Municipal Bond Fund (the "Fund") dated January 31,
1994. This Statement is not a prospectus itself. To receive a copy of the
prospectus write the Fund or call toll-free 1-800-763-7277 (in Columbia
call 765-3222).
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated January 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
DISTRIBUTOR
A SUBSIDIARY OF FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- --------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- --------------------------------------
Acceptable Investments 1
When-Issued and Delayed Delivery
Transactions 1
Temporary Investments 1
Lending of Portfolio Securities 2
Portfolio Turnover 2
Municipal Bond Insurers 2
INVESTMENT LIMITATIONS 3
- --------------------------------------
THE BILTMORE MUNICIPAL FUNDS
MANAGEMENT 4
- --------------------------------------
Officers and Trustees 4
Fund Ownership 5
Trustee Liability 5
INVESTMENT ADVISORY SERVICES 5
- --------------------------------------
Adviser to the Fund 5
Advisory Fees 6
ADMINISTRATIVE SERVICES 6
- --------------------------------------
BROKERAGE TRANSACTIONS 6
- --------------------------------------
PURCHASING SHARES 6
- --------------------------------------
Distribution of Shares 6
Conversion to Federal Funds 6
DETERMINING NET ASSET VALUE 7
- --------------------------------------
Valuing Municipal Bonds 7
REDEEMING SHARES 7
- --------------------------------------
Redemption in Kind 7
TAX STATUS 7
- --------------------------------------
The Fund's Tax Status 7
Shareholders' Tax Status 7
TOTAL RETURN 8
- --------------------------------------
YIELD 8
- --------------------------------------
TAX-EQUIVALENT YIELD 8
- --------------------------------------
Tax-Equivalency Table 8
PERFORMANCE COMPARISONS 9
- --------------------------------------
APPENDIX 10
- --------------------------------------
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. The Trust was formerly 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 South Carolina state
income taxes. 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 Corporation
("Standard & Poor's") 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 arrangements in which the Fund purchases securities with
payment and delivery scheduled for a future time. The Fund engages in when
issued and delayed delivery transactions only for the purpose of acquiring
portfolio securities consistent with the Fund's investment objective and
policies, not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. 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.
No fees or expenses, other than normal transaction costs, are incurred.
However, 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 and maintained
until the transaction is settled.
The Fund may engage in these transactions to an extent that would cause the
segregation of an amount up to 20% of the total value of its assets.
TEMPORARY INVESTMENTS
The Fund may also invest in temporary investments from time to time for
defensive purposes.
The Fund might invest in temporary investments:
. as a reaction to market conditions;
. while waiting to invest proceeds of sales of shares or portfolio securities,
although generally proceeds from sales of shares will be invested in municipal
bonds as quickly as possible; or
. in anticipation of redemption requests.
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.
From time to time, such as when suitable South Carolina municipal securities
are not available, the Fund may invest a portion of its assets in cash. Any
portion of the Fund's assets maintained in cash will reduce the amount of
assets in South Carolina municipal securities and thereby reduce the Fund's
yield.
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
The Fund will not attempt to set or meet a portfolio turnover rate, since any
turnover would be incidental to transactions undertaken in an attempt to
achieve the Fund's investment objectives. For the two months ended November 30,
1993, and fiscal years ended September 30, 1993 and September 30, 1992, the
portfolio turnover rates were 2%, 4% and 0%,respectively.
MUNICIPAL BOND INSURERS
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 Standard & Poor's.
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 Life and Casualty, Credit Local DeFrance CAECL, S.A., The Fund
American Companies, 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.
Standard & Poor's 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. Standard & Poor's 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 wholly-owned by General Electric Capital Corporation. 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. Standard & Poor's 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. In those cases, it may mortgage, pledge, or
hypothecate assets having a market value not exceeding 10% of the value
of its total assets at the time of the pledge.
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.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 10% of the value of its net assets in
securities subject to restrictions on resale, under the Securities Act of
1933.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities up
to one-third of the value of its total assets. 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 or its Declaration of
Trust.
DEALING IN PUTS AND CALLS
The Fund will not buy or sell puts, calls, straddles, spreads, or any
combination of these.
CONCENTRATION OF INVESTMENTS
The Fund will not purchase securities if, as a result of such purchase,
25% or more of the value of its total assets would be invested in any one
industry, or in industrial development bonds or other securities, the
interest upon which is paid from revenues of similar types of projects.
However, the Fund may invest as temporary investments more than 25% of
the value of its assets in cash or cash items (including instruments
issued by a U.S. branch of a domestic bank or savings and loan having
capital, surplus, and undivided profits in excess of $100,000,000 at the
time of investment), securities issued or guaranteed by the U.S.
government, its agencies, or instrumentalities, or instruments secured by
these money market instruments, such as repurchase agreements.
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 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 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.
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 and has no present intent to do so in the coming
fiscal year.
THE BILTMORE MUNICIPAL FUNDS MANAGEMENT
- --------------------------------------------------------------------------------
OFFICERS AND TRUSTEES
Officers and Trustees are listed with their addresses, principal occupations,
and present positions. Each of the Trustees and officers listed below holds an
identical position with The Biltmore Funds, another investment company. Except
as listed below, none of the Trustees or officers are affiliated with The South
Carolina National Bank, Federated Investors, Federated Securities Corp.,
Federated Services Company or Federated Administrative Services.
<TABLE>
<CAPTION>
POSITIONS WITH PRINCIPAL OCCUPATIONS
NAME THE TRUST DURING PAST FIVE YEARS
- ------------------------------------------------------------------------------------------------------
<C> <C> <S>
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. (investment company); Director, Kinder-Care
Learning Centers, Inc. (child care); and Director,
Wangner Systems Corporation (manufacturer of fabrics for
paper production).
- ------------------------------------------------------------------------------------------------------
Samuel E. Hudgins Trustee Principal, Lally, Percival & Company, Inc.; 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. Berkely 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 Vice President, Secretary, General Counsel, and Trustee,
Treasurer 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 Vice President, Federated Administrative Services;
President formerly, Associate Corporate Counsel, Federated
and Assistant Investors; Vice President and Assistant Treasurer of
Treasurer certain investment companies for which Federated
Securities Corp. is the principal distributor.
- ------------------------------------------------------------------------------------------------------
Joseph M. Huber Secretary Corporate Counsel, Federated Investors.
- ------------------------------------------------------------------------------------------------------
</TABLE>
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.
As of January 6, 1994, the following shareholders of record owned 5% or more of
the outstanding shares of the Fund:
WACCO-UCB, Trust Operations, Whiteville, North Carolina, owned approximately
1,115,855 shares (14.3%).
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 investment adviser is The South Carolina National Bank.
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, The South Carolina National Bank receives an annual
investment advisory fee as described in the prospectus. During the two months
ended November 30, 1993 and fiscal years ended September 30, 1993 and September
30, 1992, the Fund's adviser earned $103,802, $531,849 and $305,883,
respectively, of which $83,041, $438,960 and $287,633, respectively, were
voluntarily waived.
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. During the two months ended November 30, 1993 and
fiscal years ended September 30, 1993 and September 30, 1992, the Fund's
administrator earned $20,760, $106,370 and $61,169, respectively, of which $0,
$0 and $61,169, respectively, were voluntarily waived.
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 Board of 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 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.
For the two months ended November 30, 1993 and fiscal years ended September 30,
1993 and September 30, 1992, the distributor was paid $78,279, $358,406, and
$661,178, respectively. During the same periods, the distributor retained
$11,508, $52,529, and $98,874, respectively.
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 South Carolina National Bank acts as the shareholder's
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. Net asset value will
not be calculated on the following holidays: New Year's Day, Martin Luther King
Day, Presidents' Day, Good Friday, Memorial Day, Independence Day, Labor Day,
Thanksgiving Day, and Christmas Day.
VALUING MUNICIPAL BONDS
The Board of Trustees uses 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 Fund's average annual total returns for the two months ended November 30,
1993 and fiscal years ended September 30, 1993 and September 30, 1992 were
(4.96%), 7.90% and 4.78%, respectively.
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 Fund's yield for the thirty-day periods ended November 30 and September 30,
1993 were 4.33% and 4.31%, respectively.
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 Fund's tax-equivalent yield for the thirty-day periods ended November 30
and September 30, 1993 were 6.66% and 6.63%, respectively, assuming a 28% tax
bracket.
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.
TAXABLE YIELD EQUIVALENT FOR 1994 STATE OF SOUTH CAROLINA
<TABLE>
<CAPTION>
COMBINED FEDERAL AND STATE
INCOME TAX BRACKET:
-------------------------------------
<S> <C> <C> <C>
22.00% 35.00% 38.00%
------ ------ ------
JOINT RETURN: $1-36,900 $36,901-89,150 OVER $89,150
SINGLE RETURN: $1-22,100 $22,101-53,500 OVER $53,500
---------------------------------------------------
TAX-EXEMPT YIELD TAXABLE YIELD EQUIVALENT
---------------- -------------------------------------
2.50% 3.21% 3.85% 4.03%
3.00 3.85 4.62 4.84
3.50 4.49 5.38 5.65
4.00 5.13 6.15 6.45
4.50 5.77 6.92 7.26
5.00 6.41 7.69 8.06
5.50 7.05 8.46 8.87
6.00 7.69 9.23 9.68
6.50 8.33 10.00 10.48
7.00 8.97 10.77 11.29
</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.
The chart above is for illustrative purposes only. It is not an indicator of
past or future performance of the Fund.
* Some portion of the Fund's income may be subject to the federal alternative
minimum tax and state and local taxes.
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 net asset value 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 net asset value. 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 FIVE-YEAR STATE GENERAL OBLIGATIONS BONDS is an index
comprised of all state general obligation debt issues with maturities between
four and six years. 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.
.LEHMAN BROTHERS THREE-YEAR STATE GENERAL OBLIGATIONS BONDS is an index
comprised of the same issues noted above except that the maturities range
between two and four years. Index figures are total returns calculated for the
same periods as listed above.
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 CORPORATION MUNICIPAL BOND RATING DEFINITIONS
AAA--Debt rated AAA has the highest rating assigned by Standard & Poor's.
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.
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
edge." 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.
0120501B (1/94)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a)Financial Statements (filed in Part A)
(b)Exhibits:
(1) Copy of Declaration of Trust of the Registrant (1.);
(i) Amendment No. 1 to the Declaration of Trust dated
August 15, 1990 (2.);
(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.);
(5) Copy of Investment Advisory Contract of the Registrant (1.);
(6) (i) Copy of Distributor's Contract of the Registrant (1.);
(7) Not applicable;
(8) Copy of Custodian Agreement of the Registrant (5.);
(9) Copy of Transfer Agency and Service Agreement of the
Registrant (5.);
(i) Conformed copy of Portfolio Accounting and Shareholder
Recordkeeping Agreement of Registrant;+
(10) Copy of Opinion and Consent of Counsel as to legality of
shares being registered (2.);
(11) (i) Copy of Consent of Independent Auditors;+
(ii) Opinion and Consent of Special Counsel (4.);
(12) Not applicable;
(13) Copy of Initial Capital Understanding (2.);
(14) Not Applicable
(15) Not Applicable
(16) Schedule for Computation of Fund Performance Data;(3.)
(17) 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 December 31, l993
Shares of beneficial interest 1691
no par value
+ 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)
Item 27. Indemnification: (1.)
Item 28. Business and Other Connections of Investment Adviser:
(a) The South Carolina National Bank (the "Bank") is a national
banking association headquartered in Columbia, South
Carolina. It is the principal subsidiary of South Carolina
National Corporation ("SCNC") a bank holding company with a
commercial bank subsidiary and a federal savings bank
subsidiary in South Carolina. SCNC was incorporated in South
Carolina in 1971. The Bank was originally organized in 1834
in Charleston, South Carolina. The principal executive
offices of the Bank are located at 1426 Main Street,
Columbia, South Carolina 29226. The activities of the Bank
encompass a full range of commercial banking services,
including trust services.
As of December 6, 1991, SCNC, Wachovia Merger Corporation,
and Wachovia Corporation ("Wachovia") consummated an
Agreement and Plan of Merger which caused the Bank to become
an indirect wholly-owned subsidiary of Wachovia. Wachovia,
whose dual principal executive offices are located at 301
North Main Street, Winston-Salem, NC 27101 and at 2 Peachtree
Street, N.W., Atlanta, GA 30383, is a regional interstate
bank holding company.
The Adviser has managed the Fund since its inception on
November 30, 1990. As of September 30, 1993, the Trust
Division of The South Carolina National Bank managed assets
in excess of $2.27 billion on a discretionary basis and
provided advisory and/or custody services for additional
assets in excess of $4.91 billion. The South Carolina
National Bank is also trustee of a municipal bond common
trust fund and certain collective investment funds. The South
Carolina National Bank established its first collective
investment fund in 1958.
The executive officers and directors of the Adviser and any
other business, profession, vocation or employment of a
substantial nature in which each such officer and director is
or has been engaged during the past two years is set forth
below. Unless otherwise noted,the position listed under
Other Substantial Business, Profession, Vocation or
Employment is with The South Carolina National Bank.
1. 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).
Executive Officers
(1) (2) (3)
Other Substantial
(b) Position with Business, Profession,
Name the Adviser Vocation or Employment
Anthony L. Furr Chairman, President and
Chief Executive Officer
Charles T. Cole, Jr. Executive Vice President
Joe A. Padgett Executive Vice President
David Q. Soutter Executive Vice President
Donald K. Truslow Executive Vice President
Directors
(1) (2) (3)
Other Substantial
(b) Position with Business, Profession,
Name the Adviser Vocation or Employment
Mr. L.M. Baker, Jr. Director President and Chief
Executive Officer, Wachovia
Corporation, Chairman,
Wachovia Bank of North
Carolina,
Winston-Salem, NC 27150
Mr. Charles J. Bradshaw Director President
Bradshaw Investments, Inc.
705 Front Street
Georgetown, S.C. 29440
Mr. W.T. Cassels, Jr. Director Chairman
Southeastern Freight
Lines, Inc.
P.O. Box 1691
Columbia, S.C. 29202
Mr. Thomas C. Coxe, III Director Executive Vice President
Sonoco Products Company
P.O. Drawer 160
Hartsville, S.C. 29550
Mr. Frederick B. Dent, Jr. Director President
Mayfair Mills, Inc.
1885 Hayne Street
Arcadia, S.C. 29320-9999
(1) (2) (3)
Other Substantial
(b) Position with Business, Profession,
Name the Adviser Vocation or Employment
Dr. James B. Edwards Director President
Medical University of S.C.
171 Ashley Avenue
Charleston, S.C. 29425
Mr. Anthony L. Furr Director Chairman, President and
Chief Operating Officer
South Carolina National
Corporation
1426 Main Street,18th Floor
Columbia, SC 29226
Mr. Robert M. Gallant Director Owner
Gallant Development Company
P.O. Box 2505
Anderson, S.C. 29622
Mr. James G. Lindley Director Chairman Emeritus
South Carolina National
Corporation
1426 Main Street, 18th
Floor
Columbia, S.C. 29226
Mr. John G. Medlin, Jr. Director Chairman and CEO
Wachovia Corporation
301 North Main Street
Winston-Salem, NC 27150
Mr. Joe A. Padgett Director Executive Vice President
The South Carolina
National Bank
1426 Main Street, 18th
Floor
Columbia, S.C. 29226
Mr. Richard H. Pennell Director President
Metromont Materials
Corporation
P.O. Box 1292
Spartanburg, S.C. 29301
Mr. W.M. Self Director President and CEO
Greenwood Mills, Inc.
P.O. Box 1017
Greenwood, S.C. 29648
Mr. Robert S. Small, Jr. Director President
AVTEX Commercial
Properties, Inc.
P.O. Drawer 10287
Greenville, S.C. 29603
Mr. William G. Taylor Director President, The Springs
Company, Lancaster,
SC 29721
Dr. Beatrice R. Thompson Director Psychologist, Anderson
County School District
No. 5, P.O. Drawer
439, Anderson, SC
29622
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: A.T. Ohio Tax-Free
Money Fund; American Leaders Fund, Inc.; Annuity Management
Series; Automated Cash Management Trust; Automated Government
Money Trust; BankSouth Select Funds; BayFunds; The Biltmore
Funds; The Biltmore Municipal Funds; The Boulevard Funds;
California Municipal Cash Trust; Cambridge Series Trust; Cash
Trust Series, Inc.; Cash Trust Series II; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; FT Series,
Inc.; 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 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; Financial Reserves
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; 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; Mark
Twain Funds; Marshall Funds, Inc.; Money Market Management,
Inc.; Money Market Obligations Trust; Money Market Trust; The
Monitor Funds; Municipal Securities Income Trust; New York
Municipal Cash Trust; 111 Corcoran Funds; The Planters Funds;
Portage Funds; RIMCO Monument Funds; The Shawmut Funds;
Short-Term Municipal Trust; Signet Select Funds; 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.; and Vision Group of Funds, Inc.
Federated Securities Corp. also acts as principal underwriter
for the following closed-end investment company: Liberty Term
Trust, Inc.- 1999.
(b)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.
James S. Hamilton 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
Mark W. Bloss 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
Mary J. Combs 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
Theodore Fadool, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher 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
Christopher T. Fives 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
James M. Heaton 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
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
Keith Nixon 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
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
Timothy C. Pillion 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
Thomas E. Territ 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
R. Edmond Connell, Jr. Assistant 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
H. Joseph Kennedy 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 lates annual
report to shareholders upon request and without charge.
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 Post-Effective
Amendment No. 1 on Form N-1A filed May 28, 1991. (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,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and 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 28th day of January, 1994.
THE BILTMORE MUNICIPAL FUNDS
BY: /s/Joseph M. Huber
Joseph M. Huber, Secretary
Attorney in Fact for John F. Donahue
January 28, 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/Joseph M. Huber
Joseph M. Huber Attorney In Fact January 28, 1994
SECRETARY For the Persons
Listed Below
NAME TITLE
John W. McGonigle* President and Treasurer
James A. Hanley* Trustee
Malcolm T. Hopkins* Trustee
Lawrence D. Ellis, M.D.* Trustee
Samuel E. Hudgins* Trustee
J. Berkley Ingram, Jr.* Trustee
D. Dean Kaylor* Trustee
* By Power of Attorney
Exhibit (11) under N-1A
Exhibit 23 under Item 601/Reg SK
Consent of Ernst & Young, Independent Auditors
We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditors" and to the use of our report dated
January 14, 1994, in Post-Effective Amendment Number 4 to the Registration
Statement (Form N-1A Number 33-37525) and the related Prospectus of South
Carolina Municipal Bond Fund.
/s/Ernst & Young
Pittsburgh, Pennsylvania
January 24, 1994
Exhibit (9) (i) on From N-1A
Exhibit (10) under Item 601-Reg. S-K
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 outstanding 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 paym
(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 A
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 on December 1 of each year:
Name
Date
South Carolina Municipal Bond Fund
December 1, 1993
Schedule B
Portfolio Accounting
and
Shareholder Recordkeeping Agreement
between
THE BILTMORE MUNICIPAL FUNDS
and
FEDERATED SERVICES COMPANY
Compensation for Portfolio Accounting
Annual Fees per Portfolio
$39,000 minimum
or 3.0 basis points on average net assets of the Portfolio up to $100
million.
plus 2.0 basis points on average net assets of the Portfolio above $100
million, but less than $300 million.
plus 1.0 basis points on average net assets of the Portfolio above
$300 million, but less than $500 million.
plus .5 basis points on average net assets of the Portfolio from and over
$500 million.
Fees will be charged according to the above, on a calendar month basis.
For those Portfolios with multiple investment managers, there is no additional
charge to maintain separate portfolio records by manager. There is no
additional charge for determining a fully accrued, trade date adjusted market
value for each manager's portion of the fund's portfolio and for reporting
portfolio activity by manager.
For fluctuating price funds, the Trust must establish a contract directly with
one or more pricing sources to supply the daily prices which services will
receive. The above fees do not include any charges for the Portfolio to
obtain such daily prices.
The monthly fee will be $1,000.00 per Portfolio with no asset charge for those
months where Federated is the only shareholder, due to its seeding of the
Portfolio. With regard to this, the charge to the Portfolio for the entire
month will be determined, without proration, based on whether Federated is the
sole shareholder on the last day the Portfolio is open for business in that
month.
Schedule C
Portfolio Accounting
and
Shareholder Recordkeeping Agreement
between
THE BILTMORE MUNICIPAL FUNDS
and
FEDERATED SERVICES COMPANY
Out-of-Pocket Expenses
Portfolio Accounting
I. Out-of-pocket expense include, but are not limited to, the following:
- Postage (including overnight courier service)
- Telephone
- Telecommunications charges (including FAX)
- Duplicating
- Travel (including all expenses incurred in meeting with representatives
or Trustees of the Trust outside the City of Pittsburgh
Schedule D
Portfolio Accounting
and
Shareholder Recordkeeping Agreement
between
THE BILTMORE MUNICIPAL FUNDS
and
FEDERATED SERVICES COMPANY
Fee Schedule
Pursuant to Section Two: Shareholder Recordkeeping
Annual Fee Per Shareholder Account
$14.50*
Minimum Monthly Fee
$1,000.00 per Portfolio
THE BILTMORE MUNICIPAL FUNDS
Attest: /s/ Joseph M. Huber By: /s/ John W. McGonigle
Title: Secretary Title: President
FEDERATED SERVICES COMPANY
Attest: /s/ Jeannette Fisher-Garber By:
/s/ James J. Dolan
Title: Secretary Title: President
* The annual account fee is prorated on a monthly basis for billing purposes.
Schedule E
Portfolio Accounting
and
Shareholder Recordkeeping Agreement
between
THE BILTMORE MUNICIPAL FUNDS
and
FEDERATED SERVICES COMPANY
Out-of-Pocket Expenses Schedule
Pursuant to Section Two: Shareholder Recordkeeping
Out-of-Pocket expenses include, but are not limited to the following:
- Postage (including overnight courier service)
- Statement Stock
- Envelopes
- Telephones
- Telecommunication Charges (including FAX)
- Travel
- Duplicating
- Forms
- Supplies
- Microfiche
- Computer Access Charges
- Client Specific System Enhancements
- Access to the Shareholder Recordkeeping System
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 on December 1 of each year:
Name
Date
South Carolina Municipal Bond Fund December 1, 1993
