SEMI-ANNUAL REPORT
DATED
MAY 31, 1995
JULY 31, 1995
BILTMORE SOUTH CAROLINA
MUNICIPAL BOND FUND
WACHOVIA INVESTMENTS
MAKE YOURSELF COMFORTABLE
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Semi-Annual Report to Shareholders of the South
Carolina Municipal Bond Fund for the six-month period ended May 31, 1995. As
always, the report begins with a brief commentary on the municipal bond market
from the Fund's portfolio manager. Following the commentary are a complete
listing of the Fund's portfolio of investments and its financial statements.
South Carolina Municipal Bond Fund continues to pursue monthly, double-tax-free
income through a portfolio of South Carolina municipal bonds. Income earned by
the Fund is exempt from federal regular income tax and South Carolina state
personal income taxes.*
The Fund rewarded shareholders with double-tax-free dividends totaling $0.29 per
share over the six-month reporting period. The Fund also paid capital gains of
$0.10 per share, for total distributions of $0.39 per share. I am pleased to
report that the Fund's net asset value increased from $10.05 on the first day of
the period to $10.83 on the last day of the period, which helped it deliver
total return figures based on net asset value and maximum offering price of
11.78% and 6.79%, respectively.** Total assets stood at $87 million on the last
day of the reporting period.
Thank you for selecting the Fund to help you keep more of what you earn. We look
forward to keeping you informed about your investment in the South Carolina
Municipal Bond Fund. We welcome your comments and suggestions.
Sincerely,
John W. McGonigle
President
July 14, 1995
* Income may be subject to the federal alternative minimum tax or other state
and local taxes.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
The municipal bond market rebounded from a difficult year in 1994 with some of
its strongest monthly gains in nine years. The powerful rally was fueled by
widespread signs of a slowing economy, modest inflation reports and the
perception that interest rate hikes were no longer necessary in the near future.
From November 30, 1994 to May 31, 1995, the Fund had total return figures of
11.78% based on net asset value and 6.79% based on the maximum offering price.*
A weaker economy helped push the yield on 10-year AAA general obligation
municipal bonds down, from 6% on November 30, 1994 to 4.95% on May 31, 1995.
Municipal bond prices continued to gain additional support from a sharp decline
in volume. The Fund's portfolio manager adopted a less defensive posture, moving
to a duration that was more in line with the municipal bond market. The
portfolio manager also reduced overweighted positions in long- and short-term
bonds as the yield curve steepened.
On May 31, 1995, net assets of the Fund totaled $87.0 million and the net asset
value was $10.83 per share. The 30-day SEC yield was 4.96% based on net asset
value and 4.74% based on the maximum offering price.* The Fund had an average
duration of 6.07 years on May 31, 1995.
*Performance quoted represents past performance. Investment return and principal
value will fluctuate, so that an investor's shares, when redeemed, may be worth
more or less than their original cost.
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1995 (UNAUDITED)
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------------------------
Long-Term Municipal Securities--96.5%
$ 100,000 Aiken County, SC, 7.00% GO Bonds, 2/1/2002 A $ 105,218
675,000 Beaufort County, SC, 7.125% Lease Certificate of Participation
(Beaufort Memorial Hospital Project)/(AMBAC Insured),
6/1/2012 AAA 739,820
1,000,000 Beaufort County, SC, Planning and Development Corp., 5.00% Lease
Certificate of Participation (Hilton Head Island Airport
Terminal)/(Series 1993)/(Subject to AMT), 7/1/2001 A 1,007,250
150,000 Beaufort County, SC, School District, 7.80% GO Bonds,
12/1/1996 A 157,681
855,000 Beaufort-Jasper County, SC, Water & Sewer Authority, 5.90%
Revenue Bonds (FGIC Insured), 3/1/2016 AAA 868,671
750,000 Berkeley County, SC, 6.50% Pollution Control Revenue Bonds (SCE &
G Project), 10/1/2014 A- 790,350
1,500,000 Berkeley County, SC, Water & Sewer, 5.50% (MBIA Insured),
6/1/2013 AAA 1,499,985
935,000 Berkeley County, SC, Water & Sewer, 6.00% (MBIA Insured),
6/1/2010 AAA 953,831
1,000,000 Berkeley County, SC, Water & Sewer, 6.50% Revenue Bonds (MBIA
Insured), 6/1/2006 AAA 1,087,450
950,000 Berkeley County, SC, Water & Sewer, 7.00% Revenue Bonds (MBIA
Insured), 6/1/2016 AAA 1,080,672
1,000,000 Charleston County, SC, 7.10% Lease Certificate of
Participation (MBIA Insured), 6/1/2011 AAA 1,143,590
1,315,000 Charleston County, SC, 9.00% GO UT Bonds (State Aid
Withholding), 6/1/2001 AA 1,610,743
310,000 Charleston County, SC, 9.00% Resource Recovery Bonds
(Foster Wheeler Project)/(Subject to AMT), 1/1/2005 A 349,485
1,000,000 Charleston County, SC, Waterworks & Sewer, 6.00% Revenue Bonds,
1/1/2012 AA- 1,024,850
1,500,000 Charleston County, SC, Waterworks & Sewer, 7.00% Revenue Bonds
(Series A), 1/1/2015 AA- 1,550,850
400,000 Charleston County, SC, Water Works & Sewer, 7.05% Revenue Bonds,
(Series A), 1/1/2006 AA 414,148
1,125,000 Chester County, SC, School District, 6.85% GO Bonds,
2/1/2009 A 1,198,845
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------------------------
Long-Term Municipal Securities--continued
$ 875,000 Chester County, SC, School District, 6.85% GO Bonds,
2/1/2012 A $ 926,091
250,000 City of Charleston, SC, 6.30% GO Bonds, 9/1/2005 AA 270,627
1,000,000 City of Charleston, SC, 6.50% GO Bonds, 6/1/2012 AA 1,059,380
1,000,000 Columbia, SC, Parking Facilities, 5.875% Revenue Refunding Bonds
(AMBAC Insured), 12/1/2013 AAA 1,020,530
1,500,000 Columbia, SC, Waterworks & Sewer System, 5.70% Revenue Refunding
Bonds, 2/1/2010 AA 1,517,730
355,000 Columbia, SC, Waterworks & Sewer System, 6.30% Revenue Bonds,
2/1/2000 AA 379,673
600,000 Dorchester County, SC, School District Pound2, 6.65% GO Bonds
(MBIA Insured), 7/1/2012 AAA 639,504
870,000 Edgefield County, SC, School District, 6.40% GO Refunding Bonds
(FSA Insured), 2/1/2009 AAA 938,165
2,000,000 Fairfield County, SC, 6.50% Pollution Control Revenue Bonds,
9/1/2014 A 2,107,120
500,000 Florence County, SC, 6.75% Revenue Bonds (McLeod Regional Medical
Center Project)/(FGIC Insured), 11/1/2010 AAA 541,745
1,465,000 Florence County, SC, Waterworks & Sewer, 5.00% Revenue Bonds
(AMBAC Insured), 3/1/2004 AAA 1,466,934
800,000 Grand Strand Water & Sewer Authority, 6.00% Revenue Bonds (MBIA
Insured), 6/1/2019 AAA 810,472
2,805,000 Grand Strand Water & Sewer Authority, 6.375% Revenue Bonds (MBIA
Insured), 6/1/2012 AAA 3,106,734
760,000 Greenville, SC, 7.00% Hospital Revenue Bonds, 5/1/2017 AA- 805,098
500,000 Greenville, SC, 7.60% Revenue Bonds (Airport Project)/ (AMBAC
Insured)/(Subject to AMT), 7/1/2000 AAA 524,130
500,000 Greenville, SC, IDR, 7.10% Revenue Bonds (Lockheed
Aeromod Facility Project)/(Subject to AMT), 1/11/2011 A 535,465
980,000 Horry County, SC, 4.65% GO Bonds (MBIA Insured),
12/1/2005 AAA 932,235
100,000 Horry County, SC, 7.45% GO Bonds, 12/1/2004 A+ 111,598
1,110,000 Horry County, SC, School District, 4.70% GO Refunding Bonds
(Series B), 4/1/2002 AAA 1,097,801
600,000 Horry County, SC, School District, 7.00% GO Bonds, 1/1/2005 A 665,544
450,000 Horry County, SC, School District, 7.00% GO Bonds,
12/1/2003 A 483,498
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------------------------
Long-Term Municipal Securities--continued
$ 1,960,000 Lancaster County, SC, School District, 6.50% GO Bonds (MBIA
Insured), 7/1/2008 AAA $ 2,125,561
175,000 Lexington County, SC, IDR, 8.00% (J.B. White Project)/
(Mercantile Stores Guaranteed)/(Subject to AMT), 1/1/2011 NR 193,011
805,000 Medical University, SC, Hospital Facilities, 5.25% (MBIA
Insured), 7/1/2004 AAA 820,689
200,000 Medical University, SC, Hospital Facilities, 7.125% Revenue Bonds
(Series A), 7/1/2004 A+ 216,430
2,000,000 North Charleston, SC, Sewer District, 6.00% Revenue Bonds (MBIA
Insured), 7/1/2018 AAA 2,028,620
500,000 North Charleston, SC, Sewer District, 6.00% Revenue Bonds (Series
A)/(MBIA Insured), 7/1/2018 AAA 507,155
1,250,000 Pickens & Richland Counties, SC, 7.00% Revenue Bonds (Baptist
Hospital)/(Series A)/(AMBAC Insured), 8/1/2017,
Prerefunded 8/1/2001 @102 AAA 1,425,363
1,000,000 Piedmont Municipal Power Agency, SC, 5.50% Electric
Revenue Bonds, (MBIA Insured), 1/1/2013 AAA 993,270
1,135,000 Piedmont Municipal Power Agency, SC, 6.375% Electric
Revenue Bonds (Series A)/(FGIC Insured), 1/1/2006 AAA 1,253,142
1,000,000 Piedmont Municipal Power Agency, SC, 6.50% Electric
Revenue Bonds (FGIC Insured), 1/1/2011 AAA 1,064,450
590,000 Piedmont Municipal Power Agency, SC, 6.85% Electric
Revenue Bonds (FGIC Insured), 1/1/2007 AAA 648,794
100,000 Piedmont Municipal Power Agency, SC, 7.40% Electric
Revenue Bonds (Series A)/(AMBAC Insured), 1/1/2018 AAA 108,289
1,390,000 Richland County, SC, 6.25% GO Bonds (Series B), 3/1/2001 AA 1,503,869
1,250,000 Richland County, SC, 6.25% GO Bonds, 3/1/2011 AA 1,355,463
1,000,000 Richland County, SC, 6.75% Pollution Control Revenue Bonds (Union
Camp Project)/(Subject to AMT), 5/1/2022 A1 1,035,780
600,000 Richland County, SC, 7.10% Hospital Revenue Bonds (Community
Provider Pool)/(Capital Guaranty Insured), 7/1/2005 AAA 674,574
650,000 Richland County, SC, 7.45% Pollution Control Revenue Bonds
(Series A)/(Subject to AMT), 4/1/2021 A1 698,952
255,000 Richland County, SC, Hospital Facility, 8.125% Revenue Bonds (Sun
Health Network Project)/(Summitomo Bank, Ltd. LOC), 10/1/2011 AA3 284,154
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------------------------
Long-Term Municipal Securities--continued
$ 1,325,000 Richland-Lexington, SC, 6.125% District Airport Revenue Bonds
(Columbia Metropolitan Airport)/(AMBAC insured)/
(Subject to AMT), 1/1/2025 AAA $ 1,343,590
1,000,000 Rock Hill SC, Combined Public Utility Authority, 6.75%
Revenue Bonds (AMBAC Insured), 1/1/2010, Prerefunded
1/1/2000 @102 AAA 1,105,870
175,000 Rock Hill, SC, Housing Development Corp., 7.50% Revenue Bonds
(FNMA Guaranteed), 7/1/2010 AAA 190,148
1,000,000 South Carolina HFA, 6.45% Revenue Bonds (Series A-1),
7/1/2017 Aa 1,023,780
1,200,000 South Carolina HFA, 7.30% Revenue Bonds, 7/1/2011 AA 1,278,132
100,000 South Carolina HFA, 7.50% Revenue Bonds, 7/1/2011 AA 106,782
500,000 South Carolina HFA, 7.70% Revenue Bonds (Series C)/(Subject to
AMT), 7/1/2011 AA 534,595
520,000 South Carolina HFA, 7.75% Revenue Bonds (Series C)/(Subject to
AMT), 7/1/2022 AA 553,831
1,000,000 South Carolina Port Authority, 6.50% Revenue Bonds (AMBAC
Insured)/(Subject to AMT), 7/1/2006 AAA 1,074,570
1,000,000 South Carolina Port Authority, 6.625% Revenue Bonds (AMBAC
Insured)/(Subject to AMT), 7/1/2011 AAA 1,067,180
525,000 South Carolina Port Authority, 6.75% Revenue Bonds (AMBAC
Insured)/(Subject to AMT), 7/1/2021 AAA 556,437
2,500,000 South Carolina Public Service Authority, 5.125% Revenue Refunding
Bonds (Series C)/(MBIA Insured), 1/1/2032 AAA 2,265,800
1,950,000 South Carolina Public Service Authority, 6.50% Revenue Bonds
(Santee Cooper)/(Series D)/(AMBAC Insured), 7/1/2014 AAA 2,069,223
1,000,000 South Carolina Public Service Authority, 6.75% Revenue Bonds
(Series A), 7/1/2005 A+ 1,022,240
125,000 South Carolina Public Service Authority, 6.90% Revenue Bonds
(Series A), 7/1/2021 A+ 127,795
600,000 South Carolina Public Service Authority, 7.00% Revenue Bonds
(Series C), 7/1/2012 A+ 618,948
450,000 South Carolina Public Service Authority, 7.00% Revenue Bonds,
7/1/2022 A+ 460,094
1,125,000 South Carolina Public Service Authority, 7.30% Revenue Bonds,
7/1/2021 A+ 1,177,965
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------------------------
Long-Term Municipal Securities--continued
$ 500,000 South Carolina Resource Authority, 7.00% Revenue Bonds (Series
A), 6/1/2003 AA $ 547,840
1,000,000 South Carolina State Educational Assistance Authority, 5.80%
Revenue Refunding Bonds (Guaranteed Student Loans)/(Subject to
AMT), 9/1/2004 AAA 1,034,610
405,000 South Carolina State Educational Assistance Authority, 6.50%
Revenue Bonds (Subject to AMT), 9/1/2004 AA 428,903
1,035,000 South Carolina State, 4.40% GO UT Refunding Bonds
(Series B)/(State Aid Withholding), 4/1/2001 AAA 1,024,453
4,500,000 South Carolina State, 5.00% GO UT Revenue Bonds
(Series A), 3/1/2008 AAA 4,424,715
1,000,000 South Carolina State, 5.00%, GO Bonds (Series A), 2/1/2009 AAA 972,910
975,000 South Carolina State, 6.15% Housing Authority Revenue Refunding
Bonds (Series A), 7/1/2008 AA 1,024,530
200,000 Spartanburg County, SC, 7.80% Revenue Bonds (Mary Black Hospital
Project), 10/1/2000, Prerefunded 10/1/1998 @102 A- 223,912
100,000 Spartanburg County, SC, 8.25% Revenue Bonds (Mary Black Hospital
Project), 10/1/2008, Prerefunded 10/1/1998 @102 A- 113,402
1,000,000 Spartanburg County, SC, Hospital Facilities, 6.55% Revenue
Refunding Bonds (Spartanburg General Hospital System)/ (Series
A)/(FSA Insured), 4/15/2010 AAA 1,074,890
450,000 Spartanburg County, SC, Leased Housing Corp., 7.50%
Revenue Bonds, 10/1/2011 A 484,124
1,000,000 Sumter County, SC, Hospital Facilities, 6.625% Revenue Refunding
Bonds (Tuomey Regional Medical Center)/(MBIA Insured), 11/15/2004 AAA 1,114,040
1,300,000 Western Carolina Regional Sewer Authority, 5.50% Revenue
Refunding Bonds, (FGIC Insured), 3/1/2010 AAA 1,301,820
1,000,000 York County, SC, 4.90% GO Bonds (AMBAC Insured),
6/1/2010 AAA 927,190
200,000 York County, SC, School District Pound3, 9.00% GO Bonds (MBIA
Insured), 6/1/1997 AAA 217,710
-------------
Total Long-Term Municipal Securities
(identified cost $80,937,347) 83,953,108
-------------
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
-----------------------------------------------------------------------------------------------------------
Regulated Investment Companies--1.7%
$ 1,460,030 Fidelity Tax-Exempt Money Market Fund (at net asset value) $ 1,460,030
-------------
Total Investments (identified cost $82,397,377) $ 85,413,138+
-------------
</TABLE>
+ The cost of investments for federal tax purposes amounts to $82,397,377. The
unrealized appreciation of investments on a federal tax basis amounts to
$3,015,761, which is comprised of $3,450,981 appreciation and $435,220
depreciation at May 31, 1995.
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($87,011,196) at
May 31, 1995.
The following abbreviations are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
AMT--Alternative Minimum Tax
FGIC--Financial Guaranty Insurance Company
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance
GO--General Obligation
HFA--Housing Finance Authority
IDR--Industrial Development Revenue
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance
UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements.)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1995 (UNAUDITED)
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (identified and tax cost $82,397,377) $ 85,413,138
Income receivable 1,822,891
Receivable for shares sold 202,472
Deferred expenses 2,094
-------------
Total assets 87,440,595
Liabilities:
Income distribution payable $ 375,038
Payable for shares redeemed 14,466
Accrued expenses 39,895
----------
Total liabilities 429,399
-------------
Net Assets for 8,031,939 shares outstanding $ 87,011,196
-------------
Net Assets Consist of:
Paid in capital $ 83,792,976
Net unrealized appreciation of investments 3,015,761
Accumulated net realized gain on investments 202,459
-------------
Total Net Assets $ 87,011,196
-------------
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
($87,011,196 / 8,031,939 shares outstanding) $10.83
-------------
Offering Price Per Share: (100/95.50 of $10.83)* $11.34
-------------
</TABLE>
* See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 1995 (UNAUDITED)
<TABLE>
<S> <C> <C>
Investment Income:
Interest $ 2,432,728
------------
Expenses:
Investment advisory fee $ 303,259
Administrative personnel and services fee 36,649
Custodian fees 8,087
Transfer agent and dividend disbursing agent fees and expenses 38,968
Trustees' fees 3,839
Auditing fees 7,454
Legal fees 3,078
Portfolio accounting fees 30,751
Share registration costs 8,638
Printing and postage 7,788
Insurance premiums 2,268
Miscellaneous 6,131
----------
Total expenses 456,910
Deduct--Waiver of investment advisory fee 222,390
----------
Net expenses 234,520
------------
Net investment income 2,198,208
------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 203,287
Net change in unrealized appreciation on investments 6,562,118
------------
Net realized and unrealized gain on investments 6,765,405
------------
Change in net assets resulting from operations $ 8,963,613
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Six Months Ended
May 31, 1995 Year Ended
(unaudited) November 30, 1994
<S> <C> <C>
---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 2,198,208 $ 4,347,034
Net realized gain on investments ($203,287 and $736,173 net
gains, respectively, as computed for federal tax purposes) 203,287 736,173
Net change in unrealized appreciation (depreciation) of
investments 6,562,118 (8,983,137)
------------------- --------------------
Change in net assets resulting from operations 8,963,613 (3,899,930)
------------------- --------------------
Distributions to Shareholders--
Distributions from net investment income (2,198,208) (4,347,034)
Distributions from net realized gains (737,504) (226,365)
------------------- --------------------
Change in net assets resulting from distributions to
shareholders (2,935,712) (4,573,399)
------------------- --------------------
Share Transactions--
Proceeds from sale of shares 9,581,442 22,357,697
Net asset value of shares issued to shareholders in payment of
distributions declared 1,069,608 1,805,778
Cost of shares redeemed (5,663,116) (23,066,099)
------------------- --------------------
Change in net assets resulting from share transactions 4,987,934 1,097,376
------------------- --------------------
Change in net assets 11,015,835 (7,375,953)
Net Assets:
Beginning of period 75,995,361 83,371,314
------------------- --------------------
End of period $ 87,011,196 $ 75,995,361
------------------- --------------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Six Months
Ended
5/31/95 Year Ended
(unaudited) 11/30/94 11/30/93(b) 9/30/93 9/30/92 9/30/91(a)
<S> <C> <C> <C> <C> <C> <C>
-----------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.05 $ 11.12 $ 11.27 $ 10.53 $ 10.17 $ 10.00
Income from investment
operations
Net investment income 0.29 0.56 0.10 0.59 0.60 0.43
Net realized and unrealized
gain (loss) on investments 0.88 (1.04) (0.15) 0.74 0.36 0.17
------------- ----------- ------------- ----------- ----------- -----------
Total from investment
operations 1.17 (0.48) (0.05) 1.33 (0.96) 0.60
Less distributions
Distributions from net
investment income (0.29) (0.56) (0.10) (0.59) (0.60) (0.43)
Distributions from net
realized gain on investment
transactions (0.10) (0.03) -- -- -- --
------------- ----------- ------------- ----------- ----------- -----------
Total distributions (0.39) (0.59) (0.10) (0.59) (0.60) (0.43)
------------- ----------- ------------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.83 $ 10.05 $ 11.12 $ 11.27 $ 10.53 $ 10.17
------------- ----------- ------------- ----------- ----------- -----------
Total return (c) 11.78% (4.52%) (0.48%) 13.03% 9.73% 6.32%
Ratios to average net assets
Expenses 0.58%(d) 0.60% 0.55%(d) 0.55% 0.61% 0.82%(d)
Net investment income 5.44%(d) 5.22% 5.11%(d) 5.46% 5.83% 5.73%(d)
Expense waiver/ reimbursement
(e) 0.55%(d) 0.59% 0.60%(d) 0.62% 0.73% 0.86%(d)
Supplemental data
Net assets, end of period
(000 omitted) $87,011 $75,995 $83,371 $82,674 $63,139 $21,438
Portfolio turnover 12% 23% 2% 4% 0% 0%
</TABLE>
(a) Reflects operations for the period from January 11, 1991 (date of initial
public investment) to September 30, 1991.
(b) Reflects operations for the two months ended November 30, 1993.
(c) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(d) Computed on an annualized basis.
(e) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1995 (UNAUDITED)
(1) ORGANIZATION
The Biltmore Municipal Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust consists of three non-diversified portfolios. The
financial statements included herein present only those of Biltmore South
Carolina Municipal Bond Fund (the "Fund"). The financial statements of the other
portfolios are presented separately. The assets of each portfolio are segregated
and a shareholder's interest is limited to the portfolio in which shares are
held.
(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. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant in determining valuations for normal
institutional size trading units of debt securities. The independent
pricing service does not rely exclusively on quoted prices. Short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value. Investments in other open-end investment companies are valued at net
asset value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method not to exceed a period of five
years from the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Six Months
Ended Year Ended
May 31, 1995 November 30, 1994
<S> <C> <C>
---------------------------------------------------------------------------------------------------------
Shares sold 913,285 2,062,564
Shares issued to shareholders in payment of dividends declared 103,296 169,074
Shares redeemed (542,986) (2,169,631)
--------------- --------------------
Net change resulting from share transactions 473,595 62,007
--------------- --------------------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Wachovia Bank of South Carolina, N.A., the Fund's
investment adviser, (the "Adviser"), is entitled to receive 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 any portion of its fee.
The Adviser can modify or terminate this voluntary waiver at any time at its
sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust and The Biltmore Funds for
the period. FAS may voluntarily choose to waive a portion of its fee.
TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The fee is based on the size, type, and number of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records for which it receives a fee.
The fee is based on the level of the Fund's average net assets for the period,
plus out-of-pocket expenses.
Wachovia Bank of North Carolina, N.A., is the Fund's custodian. The fee is based
on the level of the Fund's average net assets for the period, plus out-of-pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses ($30,060) were initially borne
by FAS. The Fund has agreed to reimburse FAS for the organizational expenses
during the five year period following November 30, 1990 (the date the Fund
became effective). For the period ended May 31, 1995, the Fund paid $1,994
pursuant to this agreement.
GENERAL--Certain of the Officers of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1995, were as follows:
<TABLE>
<S> <C>
Purchases $ 13,646,641
-------------
Sales $ 9,228,225
-------------
</TABLE>
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
(6) CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers located in
one state, it will be more susceptible to factors adversely affecting issuers in
that state than would be a comparable general tax-exempt mutual fund. In order
to reduce the credit risk associated with such factors, at May 31, 1995, 53.2%
of the securities in the portfolio of investments are backed by letters of
credit or bond insurance of various financial institutions and financial
guaranty assurance agencies. The value of investments insured by or supported
(backed) by a letter of credit from any one institution or agency did not exceed
25.1% of total investments.
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
TRUSTEES OFFICERS
<TABLE>
<S> <C>
James A. Hanley John W. McGonigle
Samuel E. Hudgins President and Treasurer
J. Berkley Ingram, Jr. Ronald M. Petnuch
D. Dean Kaylor Vice President and Assistant Treasurer
Peter J. Germain
Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the Federal Deposit
Insurance Corporation, the Federal Reserve Board, or any other governmental
agency.
Investment in mutual funds involves risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded
or accompanied by the Fund's prospectus which contains facts concerning its
objective and policies, management fees, expenses and other information.
Federated Securities Corp.
is the distributor of the fund.
Cusip 090313107
2042410 (7/95)
