PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present your first Semi-Annual Report for the Biltmore Georgia
Municipal Bond Fund. This report covers the period from December 26, 1994, when
the Fund began operation, through May 31, 1995.
The report begins with a commentary on the municipal bond market by the Fund's
portfolio manager. Following the commentary are a complete listing of the Fund's
investments and its financial statements.
On your behalf, the Biltmore Georgia Municipal Bond Fund pursues monthly,
double-tax-free income through a portfolio of high-quality Georgia municipal
bonds. Income earned by the Fund is exempt from federal regular income tax and
the Georgia state personal income taxes.*
I am also pleased to report that the Fund rewarded shareholders with strong
performance over the period. Its net asset value increased from $10.00, on the
first day of the period, to $10.72 on May 31, 1995, the last day of the period.
The Fund paid $0.18 per share in dividends, and its total return figures based
on net asset value and offering price were 9.02% and 4.13%, respectively.**
Total assets at the end of the period reached $8.6 million.
Thank you for choosing the Biltmore Georgia Municipal Bond Fund to pursue
double-tax-free income. We look forward to keeping you informed about your
investment as we provide you with the highest quality service. Of course, we
welcome your comments and suggestions.
Sincerely,
John W. McGonigle
President
June 15, 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 GEORGIA 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 would no longer be necessary in the near
future. From November 30, 1994 to May 31, 1995, the Lehman Brothers State
General Obligations Bonds Index* had a total return of 10.04%.
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 $8.6 million. Since inception on
Dec. 26, 1994 the net asset value of the Fund increased from $10.00 to $10.72,
and the 30-day SEC yield was 4.22%.** The Fund had an average duration of 6.77
years on May 31, 1995.
*This index is unmanaged.
**Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed, may
be worth more or less than their original cost.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
(A PORTFOLIO OF THE BILTMORE MUNICIPAL FUNDS)
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT AND SUPPLEMENT TO PROSPECTUS DATED DECEMBER 10, 1994
The following information is a supplement to your Prospectus. It is being
furnished to update certain information presently contained in the Prospectus,
and to comply with regulations that require mutual fund companies to provide
their shareholders with current information.
We suggest that you keep this information for your records.
A. Please delete the "Summary of Fund Expenses" table on page 1 of the
Prospectus and replace it with the following table:
SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price) 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase price
or redemption proceeds, as applicable) None
Redemption Fees (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
<CAPTION>
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
<S> <C> <C>
Management Fee (after waiver) (1) 0.15%
12b-1 Fees None
Other Expenses (after waiver) (2) 0.77%
Shareholder Servicing Agent Fee (3) 0.00%
Total Fund Operating Expenses (after waiver) (4) 0.92%
</TABLE>
(1)The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.75%.
(2)Other expenses are 1.20% absent the voluntary waiver by the administrator.
The administrator can terminate the voluntary waiver at any time at its sole
discretion.
(3)The Fund has no present intention of paying or accruing the shareholder
servicing agent fee during the fiscal year ending November 30, 1995. If the
Fund were paying or accruing the shareholder servicing agent fee, the Fund
would be able to pay up to 0.25 of 1% of the Fund's average daily net assets
for the shareholder servicing agent fee. See "The Biltmore Municipal Funds
Information."
(4)The Total Fund Operating Expenses are estimated to be 1.95%, absent the
anticipated voluntary waivers by the Fund's adviser and administrator.
* Total Fund Operating Expenses in the table above are estimated based on
average expenses expected to be incurred during the fiscal year ending
November 30, 1995. During the course of this period, expenses may be more or
less than the average amount shown.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Fund will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "The Biltmore Municipal Funds Information" and "Investing in the Fund."
<TABLE>
<CAPTION>
Example 1 Year 3 Years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual
return; (2) redemption at the end of each time period; and (3) payment of the
maximum sales load. As noted in the table above, the Fund charges no redemption
fees. $54 $73
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE IS BASED
ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER 30, 1995.
B. Please insert the following "Financial Highlights" table as page 2 of the
Prospectus, following the "Summary of Fund Expenses" table and before the
section entitled "General Information." In addition, please add the
heading "Financial Highlights" to the Table of Contents on page I after
the heading "Summary of Fund Expenses."
BILTMORE GEORGIA MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
Period Ended
May 31, 1995(a)
(unaudited)
<S> <C>
- ---------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
Income from investment operations
Net investment income 0.18
Net realized and unrealized gain (loss) on investments 0.72
-------
Total from investment operations 0.90
-------
Less distributions
Distributions from net investment income (0.18)
-------
NET ASSET VALUE, END OF PERIOD $ 10.72
-------
Total return (b) 9.02%
Ratios to average net assets
Expenses 0.92%(c)
Net investment income 4.12%(c)
Expense waiver/reimbursement (d) 1.20%(c)
Supplemental data
Net assets, end of period (000 omitted) $8,599
Portfolio turnover 22%
</TABLE>
(a) Reflects operations for the period from December 26, 1994 (date of initial
public investment) to May 31, 1995.
(b) Based on net asset value, which does not reflect sales charges, if
applicable.
(c) Computed on an annualized basis.
(d) 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)
C. Please insert the following financial statements at the end of the
Prospectus, beginning on page 19. In addition, please add the heading
"Financial Statements" to the Table of Contents on page I of the
Prospectus, immediately before "Addresses."
BILTMORE GEORGIA 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--89.1%
$ 200,000 Atlanta, GA, 6.125% GO UT, (Series A)/(Callable 12/1/2004
@102)/(Original Issue Yield: 6.18%), 12/1/2023 AA $ 204,388
100,000 Atlanta, GA, Downtown Development Authority Refunding--
Underground Atlanta Project, 6.25% Revenue Refunding Bonds,
(Callable 10/1/2002 @102)/(Original Issue Yield: 6.435%),
10/1/2016 AA 103,709
80,000 Brunswick, GA, Water and Sewage Revenue, 6.10% Revenue Refunding
Bonds, (MBIA Insured)/(Original Issue Yield: 6.27%), 10/1/2019 AAA 85,605
90,000 Burke County, GA, Development Authority Pollution Control Revenue
Refunding--Oglethorpe Power Company--Vogtle, 7.50% Revenue
Refunding Bonds, (MBIA Insured), 1/1/2003 AAA 101,448
50,000 Chatham County, GA, School District, 6.75% GO UT, (Callable
8/1/2003 @102)/(MBIA Insured), 8/1/2018 AAA 54,463
355,000 Cherokee County, GA, School System, 6.20% GO UT Refunding Bonds,
(Callable 6/1/2002 @102), 6/1/2005 A1 382,193
500,000 Cobb County, GA, School District, 6.65% GO UT, (Callable
2/1/1999 @102), 2/1/2001, Prerefunded 2/1/1999 @102 AA 544,595
100,000 Cobb County, GA, Solid Waste Management Authority Revenue, 6.35%
Revenue Bonds, (Callable 1/1/2005 @102)/(Subject to AMT), 1/1/2009 AA+ 106,323
150,000 De Kalb County, GA , Health Facilities, 5.50% GO UT, (Callable
1/1/2003 @102)/(Original Issue Yield: 5.60%), 1/1/2016 AA+ 147,095
200,000 De Kalb County, GA, School District, 6.25% GO UT, (Series A),
7/1/2011 AA 215,420
1,000,00 De Kalb County, GA, Water and Sewage Revenue, 5.125%
Revenue Refunding Bonds, (Callable 10/1/2003 @102)/(Original Issue
Yield: 5.25%), 10/1/2011 AA 957,760
100,000 Decatur, GA, Housing Authority Mortgage Revenue, 6.45%
Revenue Refunding Bonds, (Callable 7/1/2002 @102)/(MBIA Insured),
7/1/2025 AAA 102,616
120,000 Fayette County, GA, School District, 6.125% GO UT, (Callable
3/1/2004 @102)/(Original Issue Yield: 6.30%), 3/1/2015 A+ 124,141
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Long-Term Municipal Securities--continued
$ 160,000 Fayette County, GA, Water Revenue, 6.20% Revenue Bonds, (Series
B)/(Callable 10/1/2002 @102)/(FGIC Insured)/(Original Issue Yield:
6.30%), 10/1/2022 AAA $ 164,779
60,000 Forsyth County, GA, School District, 6.70% GO UT, 7/1/2012 A 69,066
25,000 Fulton County, GA, School District, 5.60% GO UT, (Original Issue
Yield: 5.65%), (Callable 1/1/2004 @102), 1/1/2011 AA 25,137
375,000 Fulton County, GA, Water and Sewage Revenue, 6.25% Revenue
Refunding Bonds, (FGIC Insured)/(Original Issue Yield: 6.425%)
1/1/2007 AAA 410,628
200,000 Georgia State, 7.20% GO UT, (Series B), 3/1/2006 AA+ 236,042
200,000 Georgia State, 6.50% GO UT, (Series F), 12/1/2007 AA+ 225,844
50,000 Georgia State, 5.95% GO UT, (Series B), 3/1/2003 AA+ 54,050
500,000 Georgia State, 6.80% GO UT, (Series D), 8/1/2000 AA+ 554,389
500,000 Georgia State Housing and Financial Authority Revenue
Amount--Single Family Mortgage--Subsidiary, 6.55% Revenue
Refunding Bonds, (Callable 3/1/2005 @102)/(FHA/VA Insured)/
(Subject to AMT), 12/1/2027 AA+ 511,035
285,000 Georgia State, Municipal Electric Authority Revenue, 6.125%
Revenue Refunding Bonds, (Series B)/(Callable 1/1/2003 @102)/
(FGIC Insured)/(Original Issue Yield: 6.30%), 1/1/2014 AAA 291,928
100,000 Gwinnett County, GA, Water and Sewage COPs, 8.40% Revenue
Refunding Bonds, 8/1/2001 AA+ 119,421
350,000 Gwinnett County, GA, Recreation Authority Revenue, 7.00% Revenue
Bonds, (Callable 2/1/1997 @102), 2/1/1999,
Prerefunded 2/1/1997 @102 Aaa 371,942
30,000 Hapeville, GA, Water and Sewage Revenue, 6.20% Revenue Bonds,
(Callable 7/1/2004)/(MBIA Insured), 7/1/2006 AAA 32,776
25,000 Henry County, GA, and Henry County Water and Sewage Authority
Revenue, 5.25% GO LT Revenue Refunding Bonds, (Series A)/(Callable
2/1/2004 @102)/(AMBAC Insured)/(Original Issue Yield: 5.40%),
2/1/2018 AAA 23,759
300,000 Medical Center Hospital Authority, GA, Certificates Of Antici-
pation Columbus Regional Healthcare Systems Revenue, 5.90% Revenue
Refunding Bonds, (MBIA Insured)/(Original Issue Yield: 5.95%),
8/1/2001 AAA 316,593
500,000 Paulding County, GA, School District, 6.30% GO UT Refunding Bonds,
(Series B)/(Original Issue Yield: 6.35%), 2/1/2003 A 540,930
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Long-Term Municipal Securities--continued
$ 100,000 Peach County, GA, School District, 6.30% GO UT, (Callable
2/1/2005 @102)/(MBIA Insured)/(Original Issue Yield: 6.35%),
2/1/2014 AAA $ 105,576
200,000 Rockdale County, GA, School District, 6.30% GO UT, (Callable
2/1/2005 @102), 1/1/2007 A1 215,518
150,000 Savannah, GA, Resources Recovery Development Authority Revenue,
5.95% Revenue Refunding Bonds, (Callable 12/1/2001 @101),
12/2/2002 A+ 155,033
110,000 Savannah, GA, Water and Sewage Revenue, 5.10% Revenue Refunding
Bonds, (Callable 12/1/2002 @102)/(Original Issue Yield: 5.55%,
12/1/2010 AA- 105,672
------------
Total Long-Term Municipal Securities
(identified cost $7,406,481) 7,659,874
------------
Short-Term Municipals--1.2%
100,000 Burke County, GA, Development Authority Pollution
(at amortized cost) A+ 100,000
------------
Open-end Investment Companies--9.0%
390,000 Dreyfus Tax-Exempt Money Market Fund NR 390,000
383,747 Fidelity Tax-Exempt Money Market Fund NR 383,747
------------
Total Open-end Investment Companies (at net asset value) 773,747
------------
Total Investments (identified cost $8,280,228) $ 8,533,621
------------
</TABLE>
+ The cost of investments for federal tax purposes amounts to $8,280,228. The
unrealized appreciation of investments on a federal tax basis amounts to
$253,393 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
($8,599,119) at May 31, 1995.
The following abbreviations are used in this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
AMT--Alternative Minimum Tax
COPs--Certificates of Participation
FGIC--Financial Guaranty Insurance Company
FHA/VA--Federal Housing Authority/Veterans Administration
GO--General Obligation
LT--Limited Tax
MBIA--Municipal Bond Investors Assurance
UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA 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 $8,280,228) $ 8,533,621
Cash 729
Income receivable 159,983
Receivable for shares sold 28,661
------------
Total assets 8,722,994
Liabilities:
Payable for shares redeemed $ 108,749
Income distribution payable 7,381
Accrued expenses 7,745
----------
Total liabilities 123,875
------------
Net Assets for 802,221 shares outstanding $ 8,599,119
------------
Net Assets Consists of:
Paid-in capital $ 8,333,916
Net unrealized appreciation of investments 253,393
Accumulated net realized gain on investments 11,810
------------
Total Net Assets $ 8,599,119
------------
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
Net Asset Value Per Share ($8,599,119 / 802,221 shares outstanding) $10.72
------------
Offering Price Per Share (100/95.50 of $10.72)* $11.23
------------
</TABLE>
*See 'What Shares Cost' in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND STATEMENT OF OPERATIONS
PERIOD ENDED MAY 31, 1995 (UNAUDITED)*
<TABLE>
<S> <C> <C> <C>
Investment Income:
Interest $ 102,149
Expenses:
Investment advisory fee $ 15,204
Administrative personnel and services fee 1,794
Custodian fees 405
Transfer agent and dividend disbursing agent fees and expenses 4,079
Trustees' fees 91
Legal fees 254
Portfolio accounting fees 13,820
Printing and postage 4,440
Insurance premiums 1,318
Miscellaneous 1,496
---------
Total expenses 42,901
Deduct--
Waiver of investment advisory fee $ 12,162
Reimbursement of other operating expenses 12,090
---------
Total waivers/reimbursements 24,252
---------
Net expenses 18,649
----------
Net investment income 83,500
----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 11,810
Net change in unrealized appreciation of investments 253,393
----------
Net realized and unrealized gain on investments 265,203
----------
Change in net assets resulting from operations $ 348,703
----------
</TABLE>
*For the period from December 26, 1994 (date of initial public investment) to
May 31, 1995.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period Ended
May 31, 1995*
(unaudited)
<S> <C>
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 83,500
Net realized gain on investments ($11,810 net gain as computed for federal tax
purposes) 11,810
Net change in unrealized appreciation of investments 253,393
----------------
Change in net assets resulting from operations 348,703
----------------
Distributions to Shareholders--
Distributions from net investment income (83,500)
----------------
Share Transactions--
Proceeds from sale of shares 8,762,802
Net asset value of shares issued to shareholders in payment of distributions declared 65,177
Cost of shares redeemed (494,063)
----------------
Change in net assets resulting from share transactions 8,333,916
----------------
Change in net assets 8,599,119
Net Assets:
Beginning of period --
End of period $ 8,599,119
----------------
</TABLE>
*For the period from December 26, 1994 (date of initial public investment) to
May 31, 1995.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA 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 Georgia
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.
A. INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data 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.
B. 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.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its tax-exempt income.
Accordingly, no provisions for federal tax are necessary.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
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.
E. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Board of Trustees (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>
Period Ended
May 31, 1995*
<S> <C>
- ---------------------------------------------------------------------------------------------------------
Shares sold 842,992
Shares issued to shareholders in payment of distributions declared 6,157
Shares redeemed (46,928)
------------------
Net change resulting from share transactions 802,221
------------------
</TABLE>
*For the period from December 26, 1994 (date of initial public investment) to
May 31, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Wachovia Bank of Georgia, N.A., the Fund's investment
adviser (the "Adviser"), is entitled to receive for its services an annual
investment advisory fee equal to 0.75 of 1% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive a portion of its fee and
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and reimbursement 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.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with FAS, the Fund will pay FAS up to 0.25 of 1% of average net assets of the
Fund for the period. This fee is to obtain certain services for shareholders and
to maintain shareholder accounts. For the period ended May 31, 1995, the Fund
did not incur a shareholder services fee.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT, PORTFOLIO ACCOUNTING AND CUSTODIAN
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 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.
ORGANIZATIONAL EXPENSES--Organizational expenses incurred by the Fund will be
borne initially by FAS and are estimated to be $30,000. The Fund has agreed to
reimburse FAS for such organizational expenses during the five year period
following December 10, 1994 ( the date the Fund became effective).
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 $ 8,249,196
------------
Sales $ 848,731
------------
</TABLE>
(6) INVESTMENT TRANSACTIONS
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, 25.8%
of the securities in the Fund's portfolio of investments were 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
10.2% of total investments.
D. Please replace the references to Kirkpatrick & Lockhart on page 8 and the
outside back cover with Kirkpatrick & Lockhart LLP.
E. Please replace the references to Piper & Marbury on page 8 and the outside
back cover with Piper & Marbury L.L.P.
BILTMORE GEORGIA MUNICIPAL BOND FUND
(A Portfolio of The Biltmore Municipal Funds)
Supplement to Statement of Additional Information dated December 10,
1994
A. Please delete Malcolm T. Hopkins from the "Officers and Trustees"
table on page 5 of the Statement of Additional Information.
B. Please delete Joseph M. Huber from the "Officers and Trustees"
table on page 6 of the Statement of Additional Information and
replace with the following information:
"Peter J. Germain
Secretary
Senior Corporate Counsel, Federated Investors"
C. Please insert the following information as a second paragraph
under the section entitled "Fund Ownership" on page 6 of the
Statement of Additional Information:
"As of June 6, 1995, there were no shareholders of record who
owned 5% or more of the outstanding shares of the Fund."
D. Please insert the following "Trustees' Compensation" table after
the section entitled "Fund Ownership" on page 6 of the Statement of
Additional Information. In addition, please add the heading "Trustees'
Compensation" to the Table of Contents on page I after the heading "Fund
Ownership":
"TRUSTEES' COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
James A. Hanley, $ 1,089 $ 22,275 for the Trust
and
Trustee 1 other investment company
in the Fund Complex
Samuel E. Hudgins, $ 1,134 $ 23,400 for the Trust
and
Trustee 1 other investment company
in the Fund Complex
J. Berkley Ingram, Jr., $ 900 $ 18,000 for
the Trust and
Trustee 1 other investment company
in the Fund Complex
D. Dean Kaylor, $ 900 $ 18,000 for the Trust
and
Trustee 1 other investment company
in the Fund Complex
*Information is furnished for the fiscal year ended November 30, 1994.
#The aggregate compensation is provided for the Trust, which is
comprised of 3 portfolios.
+The information is provided for the last calendar year."
E. Please insert the following as the last paragraph in the sub-
section entitled "Advisory Fees" under the main section entitled
"Investment Advisory Services" on page 7 of the Statement of
Additional Information:
"From the date of initial public investment, December 26, 1994, to
May 31, 1995, the Adviser earned $15,204, of which $12,162 was
voluntarily waived. "
F. Please insert the following information as the second sentence
under the section entitled "Administrative Services" on page 7 of the
Statement of Additional Information:
"From the date of initial public investment, December 26, 1994, to
May 31, 1995, the Fund incurred costs for administrative services of
$1,794."
G. Please add the following information as the final paragraph under
the section entitled "Brokerage Transactions" on page 7 of the
Statement of Additional Information:
"From the date of initial public investment, December 26, 1994, to
May 31, 1995, no brokerage commissions were paid by the Fund."
H. Please replace the section entitled "Total Return" on page 8 of
the Statement of Additional Information with the following
information:
"From the date of initial public investment, December 26, 1994, to
May 31, 1995, the Fund's cumulative total return was 4.13%.
Cumulative total return reflects the Fund's total performance over
a specific period of time. This total return assumes and is reduced
by the payment of the maximum sales load. The Fund's total return
is representative of only five months of investment activity since the
Fund's effective date."
I. Please insert the following information as a final paragraph under
the section entitled "Yield" on page 9 of the Statement of
Additional Information:
"The Fund's yield for the thirty-day period ended May 31, 1995,
was 4.22%."
J. Please insert the following information as a final paragraph under
the section entitled "Tax- Equivalent Yield" on page 9 of the
Statement of Additional Information:
"The Fund's tax-equivalent yield for the seven-day period ended
May 31, 1995, was 6.39%. "
June 30, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated
Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 090313206
G00807-04 (6/95)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present your first Semi-Annual Report for the Biltmore North
Carolina Municipal Bond Fund. This report covers the period from December 26,
1994, when the Fund began operation, through May 31, 1995.
The report begins with a commentary on the municipal bond market by the Fund's
portfolio manager. Following the commentary are a complete listing of the Fund's
investments and its financial statements.
On your behalf, the Biltmore North Carolina Municipal Bond Fund pursues monthly,
double-tax-free income through a portfolio of high-quality North Carolina
municipal bonds. Income earned by the Fund is exempt from federal regular income
tax and the North Carolina state personal income taxes.* In addition, the Fund
is operated to qualify as an investment exempt from the North Carolina
Intangibles Personal Property Tax.
I am also pleased to report that the Fund rewarded shareholders with strong
performance over the period. Its net asset value increased from $10.00, on the
first day of the period, to $10.72 on May 31, 1995, the last day of the period.
The Fund paid $0.19 per share in dividends, and its total return figures based
on net asset value and offering price were 9.14% and 4.24%, respectively.**
Total assets at the end of the period reached $11.9 million.
Thank you for choosing the Biltmore North Carolina Municipal Bond Fund to pursue
double-tax-free income. We look forward to keeping you informed about your
investment as we provide you with the highest quality service. Of course, we
welcome your comments and suggestions.
Sincerely,
John W. McGonigle
President
June 15, 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 NORTH CAROLINA MUNICIPAL BOND FUND
The municipal bond market rebounded form 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 would no longer be necessary in the near
future. From November 30, 1994 to May 31, 1995, the Lehman Brothers State
General Obligations Bonds Index* had a total return of 10.04%.
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 share 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 $11.9 million. Since inception
on December 26, 1994, the net asset value of the Fund increased from $10.00 to
$10.72, and the 30-day SEC yield was 4.17%.** The Fund had an average duration
of 7.73 years on May 31, 1995.
*This index is unmanaged.
**Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
(A PORTFOLIO OF THE BILTMORE MUNICIPAL FUNDS)
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT AND SUPPLEMENT TO PROSPECTUS DATED DECEMBER 10, 1994
The following information is a supplement to your Prospectus. It is being
furnished to update certain information presently contained in the Prospectus,
and to comply with regulations that require mutual fund companies to provide
their shareholders with current information.
We suggest that you keep this information for your records.
A. Please delete the "Summary of Fund Expenses" table on page 1 of the
Prospectus and replace it with the following table:
SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price) 4.50%
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price) None
Contingent Deferred Sales Charge (as a percentage of original purchase price or
redemption proceeds, as applicable) None
Redemption Fees (as a percentage of amount redeemed, if applicable) None
Exchange Fee None
</TABLE>
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
<TABLE>
<S> <C> <C>
Management Fee (after waiver) (1) 0.15%
12b-1 Fees None
Other Expenses (after waiver) (2) 0.70%
Shareholder Servicing Agent Fee (3) 0.00%
Total Fund Operating Expenses (after waiver) (4) 0.85%
</TABLE>
(1)The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser can terminate this
voluntary waiver at anytime at its sole discretion. The maximum management
fee is 0.75%.
(2)Other expenses are 0.84% absent the voluntary waiver by the administrator.
The administrator can terminate the voluntary waiver at any time at its sole
discretion.
(3)The Fund has no present intention of paying or accruing the shareholder
servicing agent fee during the fiscal year ending November 30, 1995. If the
Fund were paying or accruing the shareholder servicing agent fee, the Fund
would be able to pay up to 0.25 of 1% of the Fund's average daily net assets
for the shareholder servicing agent fee. See "The Biltmore Municipal Funds
Information."
(4)The Total Fund Operating Expenses are estimated to be 1.59%, absent the
anticipated voluntary waivers by the Fund's adviser and administrator.
* Total Fund Operating Expenses in the table above are estimated based on
average expenses expected to be incurred during the fiscal year ending
November 30, 1995. During the course of this period, expenses may be more or
less than the average amount shown.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Fund will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "The Biltmore Municipal Funds Information" and "Investing in the Fund."
<TABLE>
<CAPTION>
Example 1 Year 3 Years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual
return; (2) redemption at the end of each time period; and (3) payment of the
maximum sales load. As noted in the table above, the Fund charges no redemption
fees. $53 $71
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE EXPENSES.
ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS EXAMPLE IS BASED
ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER 30, 1995.
B. Please insert the following "Financial Highlights" table as page 2 of the
Prospectus, following the "Summary of Fund Expenses" table and before the
section entitled "General Information." In addition, please add the
heading "Financial Highlights" to the Table of Contents on page I after
the heading "Summary of Fund Expenses."
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
Period Ended
May 31, 1995(a)
(unaudited)
<S> <C>
- --------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
Income from investment operations
Net investment income 0.19
Net realized and unrealized gain (loss) on investments 0.72
-------
Total from investment operations 0.91
Less distributions
Distributions from net investment income (0.19)
-------
NET ASSET VALUE, END OF PERIOD $ 10.72
-------
Total Return (b) 9.14%
Ratios to Average Net Assets
Expenses 0.85%(c)
Net investment income 4.31%(c)
Expense waiver/reimbursement (d) 0.84%(c)
Supplemental Data
Net assets, end of period (000 omitted)
$11,852
Portfolio turnover rate 3%
</TABLE>
(a) Reflects operations for the period from December 26, 1994 (date of initial
public investment) to May 31, 1995.
(b) Based on net asset value, which does not reflect the sales charges, if
applicable.
(c) Computed on an annualized basis.
(d) 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)
C. Please insert the following financial statements at the end of the
Prospectus, beginning on page 18. In addition, please add the heading
"Financial Statements" to the Table of Contents on page I of the
Prospectus, immediately before "Addresses."
BILTMORE NORTH 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--89.9%
$ 190,000 Buncombe County, NC, 5.20% GO UT Bonds (Callable
5/1/2003 @102), 5/1/2008 Aa $ 189,460
500,000 Cabarrus County, NC, 4.60% GO UT Refunding Bonds (Callable
3/1/2003 @102)/(FGIC Insured), 3/1/2007 AAA 466,315
800,000 Cabarrus County, NC, 4.60% GO UT Refunding Bonds (Callable
3/1/2003 @102)/(FGIC Insured), 3/1/2008 AAA 733,880
840,000 Charlotte, NC, 5.00% GO UT Refunding Bonds (Original Issue Yield:
5.15%), 2/1/2012 AAA 805,543
100,000 Charlotte, NC, Water & Sewer, 5.70% GO UT Bonds (Callable
2/1/2004 @101 1/2), 2/1/2007 AAA 105,699
460,000 Charlotte-Mecklenburg, NC, Hospital Authority, 5.75% Health Care
System Revenue Refunding Bonds (Callable 1/1/2002 @102)/(Original
Issue Yield: 6.498%), 1/1/2012 AA 456,578
100,000 Cumberland County, NC, 5.70% GO UT Bonds (Callable
2/1/2003 @101 1/2)/(MBIA Insured), 2/1/2006 AAA 104,974
100,000 Cumberland County, NC, 6.375% Certificate of Participation (Civic
Center Project)/(Series A)/(Callable 12/1/2004 @102)/ (AMBAC
Insured)/(Original Issue Yield: 6.50%), 12/1/2010 AAA 106,506
210,000 Cumberland County, NC, Hospital System, 6.00% Revenue Bonds
(Callable 10/1/2001 @100)/(MBIA Insured)/(Original Issue Yield:
6.84%), 10/1/2021 AAA 212,734
110,000 Dare County, NC, 5.00% GO UT Refunding Bonds (Callable
5/1/2003 @102)/(MBIA Insured), 5/1/2010 AAA 105,744
100,000 Durham County, NC, 5.75% GO UT Bonds (Callable 2/1/2002 @102),
2/1/2009 AAA 104,362
50,000 Durham County, NC, Public Improvements, 5.80% GO UT Bonds
(Callable 4/1/2004 @102)/(Original Issue Yield: 6.00%), 4/1/2010 AAA 52,298
100,000 Durham, NC, 5.80% GO UT Revenue Bonds (Callable
2/1/2005 @102)/(Original Issue Yield: 5.95%), 2/1/2012 AAA 103,860
50,000 Durham, NC, Water & Sewer Utility System, 5.80% Revenue Bonds
(Original Issue Yield: 5.85%), 12/1/2003 AA 53,187
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Long-Term Municipal Securities--continued
$ 410,000 East Carolina University, NC, 5.25% Revenue Bonds (Student
Services System)/(Callable 5/1/2003 @102), 5/1/2007 A $ 404,625
100,000 East Carolina University, NC, 5.50% Revenue Bonds (Student
Services System)/(Callable 5/1/2003 @102)/(Original Issue Yield:
5.60%), 5/1/2018 A 94,285
500,000 Fayetteville, NC, Public Works Community, 4.75% Revenue Refunding
Bonds (Callable 3/1/2003 @100)/(FGIC Insured)/ (Original Issue
Yield: 5.23%), 3/1/2014 AAA 449,400
340,000 Fremont, NC, Housing Development Corp., 6.75% Revenue Refunding
Bonds (Torhunta Apartments)/(Callable 7/15/2003 @100)/(FNMA
Guaranteed)/(FHA Insured), 7/15/2022 Aaa 350,013
100,000 Gastonia, NC, Combined Utilities System, 6.00% Revenue Bonds
(Callable 5/1/2004 @102)/(MBIA Insured)/(Original Issue Yield:
6.10%), 5/1/2014 AAA 103,228
105,000 Greensboro, NC, 6.65% Certificate of Participation (Coliseum
Arena Expansion Project)/(Callable 12/1/2001 @102)/(Original
Issue Yield: 6.70%), 12/1/2004 AA 115,852
100,000 Greenville, NC, Combined Enterprise System, 5.70% Revenue Bonds
(Callable 9/1/2004 @102)/(Original Issue Yield: 5.75%), 9/1/2006 A+ 103,863
75,000 Harnett County, NC, 5.90% Certificate of Participation (AMBAC
Insured), 12/1/2000 AAA 79,877
600,000 High Point, NC, 5.60% GO UT Revenue Bonds (Callable
3/1/2005 @101 1/2), 3/1/2008 AA 626,382
100,000 Martin County, NC, Industrial Facilities, 6.80% Pollution Control
Revenue Bonds (Solid Waste Disposal-Weyerhaeuser)/ (Callable
5/1/2004 @102)/(Subject to AMT), 5/1/2024 A2 105,309
100,000 Mecklenburg County, NC, 5.90% GO UT Refunding Bonds (Callable
3/1/2002 @101), 3/1/2004 AAA 107,474
100,000 Mecklenburg County, NC, Public Improvements, 6.25% GO UT Bonds,
1/1/2010, Prerefunded 1/1/2002 @102 AAA 110,457
505,000 Monroe, NC, Combined Enterprise System, 6.00% Revenue Bonds
(Callable 3/1/2004 @102)/(Original Issue Yield: 6.20%), 3/1/2019 A 512,939
100,000 North Carolina Educational Facilities, 6.00% GO Revenue Refunding
Bonds (Davidson College Project)/(Callable
12/1/2002 @102)/(Original Issue Yield: 6.20%), 12/1/2012 AA- 102,841
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Long-Term Municipal Securities--continued
$ 100,000 North Carolina HFA, 6.60% Revenue Bonds (Series Z)/ (Callable
9/1/2004 @102)/(Subject to AMT), 9/1/2026 Aa $ 102,217
20,000 North Carolina HFA, 6.90% Revenue Refunding Bonds (Series
B)/(Callable 7/1/2002 @102)/(FHA Insured), 7/1/2024 Aa 20,931
50,000 North Carolina Medical Care Community, 6.125% Revenue Refunding
Bonds (Rex Hospital Project)/(Callable 6/1/2003 @102)/(Original
Issue Yield: 6.219%), 6/1/2010 A1 51,220
850,000 North Carolina Medical Care Community, 7.375% Revenue Refunding
Bonds (Presbyterian Hospital Project)/(Original Issue Yield:
7.417%), 10/1/2020, Prerefunded 10/1/2000 @102 AAA 976,752
115,000 North Carolina Municipal Power Agency, 5.90% Revenue Refunding
Bonds (No. 1 Catawba Electric)/(Original Issue Yield: 5.95%),
1/1/2003 A 119,621
100,000 North Carolina Municipal Power Agency, 7.875% Revenue Refunding
Bonds, 1/1/2019, Prerefunded 1/1/1998 @102 AAA 110,465
1,000,000 North Carolina State, 4.80% GO UT Refunding Bonds (Prison
Facilities)/(Series C)/(Callable 3/1/2002 @102), 3/1/2009 AAA 954,350
400,000 Raleigh, NC, 6.40% GO UT Refunding Bonds (Callable
3/1/2001 @102), 3/1/2006 AAA 435,348
250,000 Rutherford County, NC, 5.10% GO UT Refunding Bonds (Callable
6/1/2003 @102)/(MBIA Insured), 6/1/2009 AAA 245,343
50,000 University of North Carolina, Utility System, 7.30% Revenue
Bonds, 8/1/2011, Prerefunded 8/1/1996 @103 AAA 53,314
650,000 Wake County, NC, 4.70% GO UT Refunding Bonds (Callable 4/1/2003
@101), 4/1/2005 AAA 637,917
75,000 Wilmington, NC, Water Utilities, 5.60% GO UT Revenue Bonds
(Callable 6/1/2004 @102), 6/1/2010 A1 76,374
-------------
Total Long-Term Municipal Securities
(identified cost $10,235,544) 10,651,537
-------------
Short-Term Municipal Securities--5.4%
400,000 Alamance County, NC, Industrial Facilities, Daily VRDNs Pollution
Control Revenue Bonds (Science Manufacturing, Inc.
Project)/(Credit Lyonnais LOC) A1 400,000
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Short-Term Municipal Securities--continued
$ 245,000 Halifax County, NC, Industrial Facilities, Daily VRDNs Pollution
Control Revenue Bonds (LG & E Roanoke)/(Credit Suisse LOC) AA+ $ 245,000
-------------
Total Short-Term Municipal Securities
(at amortized cost) 645,000
-------------
Open-end Investment Company--2.3%
266,099 Fidelity Tax-Exempt Money Market Fund (at net asset value) 266,099
-------------
Total Investments (identified cost $11,146,643) $ 11,562,636+
-------------
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for an
explanation of the credit ratings.
+ The cost of investments for federal tax purposes amounts to $11,146,643. The
unrealized appreciation of investments on a federal tax basis amounts to
$415,993 at May 31, 1995.
Note: The categories of investments are shown as a percentage of net assets
($11,851,700) 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
FHA--Federal Housing Administration
FNMA--Federal National Mortgage Association
GO--General Obligation
HFA--Housing Finance Agency
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance
UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH 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 $11,146,643) $ 11,562,636
Cash 903
Income receivable 157,998
Receivable for shares sold 153,589
-------------
Total assets 11,875,126
Liabilities:
Income distribution payable $ 12,105
Accrued expenses 11,321
---------
Total liabilities 23,426
-------------
Net Assets for 1,105,303 shares outstanding $ 11,851,700
-------------
Net Assets Consists of:
Paid-in capital $ 11,432,034
Net unrealized appreciation of investments 415,993
Accumulated net realized gain on investments 3,673
-------------
Total Net Assets $ 11,851,700
-------------
Net Asset Value, Offering Price and Redemption Proceeds Per Share:
Net Asset Value Per Share ($11,851,700 / 1,105,303 shares outstanding) $10.72
-------------
Offering Price Per Share (100/95.50 of $10.72)* $11.23
-------------
</TABLE>
*See 'What Shares Cost' in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS
PERIOD ENDED MAY 31, 1995 (UNAUDITED)*
<TABLE>
<S> <C> <C> <C>
Investment Income:
Interest $ 148,136
Expenses:
Investment advisory fee $ 21,542
Administrative personnel and services fee 2,588
Custodian fees 574
Transfer agent and dividend disbursing agent fees and expenses 3,762
Trustees' fees 126
Legal fees 280
Portfolio accounting fees 12,624
Printing and postage 4,085
Insurance premiums 1,214
Miscellaneous 1,462
---------
Total expenses 48,257
Deduct--
Waiver of investment advisory fee $ 17,234
Reimbursement of other operating expenses 6,608
---------
Total waivers/reimbursements 23,842
---------
Net expenses 24,415
----------
Net investment income 123,721
----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 3,673
Net change in unrealized appreciation of investments 415,993
----------
Net realized and unrealized gain on investments 419,666
----------
Change in net assets resulting from operations $ 543,387
----------
</TABLE>
*For the period from December 26, 1994 (date of initial public investment) to
May 31, 1995.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period Ended
May 31, 1995*
(unaudited)
<S> <C>
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 123,721
Net realized gain on investments ($3,673 net gain as computed for federal tax
purposes) 3,673
Net change in unrealized appreciation of investments 415,993
-------------------
Change in net assets resulting from operations 543,387
-------------------
Distributions to Shareholders--
Distributions from net investment income (123,721)
-------------------
Share Transactions--
Proceeds from sale of shares 11,463,716
Net asset value of shares issued to shareholders in payment of distributions
declared 90,050
Cost of shares redeemed (121,732)
-------------------
Change in net assets resulting from share transactions 11,432,034
-------------------
Change in net assets 11,851,700
Net Assets:
Beginning of period --
End of period $ 11,851,700
-------------------
</TABLE>
*For the period from December 26, 1994 (date of initial public investment) to
May 31, 1995.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH 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 North
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.
A. INVESTMENT VALUATIONS--Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data 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.
B. 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.
C. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its tax-exempt income.
Accordingly, no provisions for federal tax are necessary.
D. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
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.
E. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Board of Trustees ("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>
Period Ended
May 31, 1995*
<S> <C>
- ---------------------------------------------------------------------------------------------------------
Shares sold 1,108,368
Shares issued to shareholders in payment of distributions declared 8,541
Shares redeemed (11,606)
-------------------
Net change resulting from share transactions 1,105,303
-------------------
</TABLE>
*For the period from December 26, 1994 (date of initial public investment) to
May 31, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Wachovia Bank of North Carolina, N.A., the Fund's
investment adviser (the "Adviser"), is entitled to receive for its services an
annual investment advisory fee equal to 0.75 of 1% of the Fund's average daily
net assets. The Adviser may voluntarily choose to waive a portion of its fee and
reimburse certain operating expenses of the Fund. The Adviser can modify or
terminate this voluntary waiver and reimbursement 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.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with FAS, the Fund will pay FAS up to 0.25 of 1% of average daily net assets of
the Fund for the period. This fee is to obtain certain services for shareholders
and to maintain shareholder accounts. For the period ended May 31, 1995, the
Fund did not incur a shareholder services fee.
TRANSFER AND DIVIDEND DISBURSING AGENT, PORTFOLIO ACCOUNTING AND CUSTODIAN
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 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.
ORGANIZATIONAL EXPENSES--Organizational expenses incurred by the Fund will be
borne initially by FAS and are estimated to be $30,000. The Fund has agreed to
reimburse FAS for such organizational expenses during the five year period
following December 10, 1994 (the date the Fund became effective).
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 $ 10,395,614
-------------
Sales $ 163,253
-------------
</TABLE>
(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, 31.3%
of the securities in the Fund's portfolio of investments were 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
15.2% of total investments.
D. Please replace the references to Kirkpatrick & Lockhart on page 8 and the
outside back cover with Kirkpatrick & Lockhart LLP.
E. Please replace the references to Piper & Marbury on page 8 and the outside
back cover with Piper & Marbury L.L.P.
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
(A Portfolio of The Biltmore Municipal Funds)
Supplement to Statement of Additional Information dated December 10,
1994
A. Please delete Malcolm T. Hopkins from the "Officers and Trustees"
table on page 6 of the Statement of Additional Information.
B. Please delete Joseph M. Huber from the "Officers and Trustees"
table on page 6 of the Statement of Additional Information and
replace with the following information:
"Peter J. Germain
Secretary
Senior Corporate Counsel, Federated Investors"
C. Please insert the following information as a second paragraph
under the section entitled "Fund Ownership" on page 6 of the
Statement of Additional Information:
"As of June 6, 1995, the following shareholder of record owned 5%
or more of the outstanding
shares of the Fund: Wachovia Securities, Inc., Winston-Salem,
North Carolina, on behalf of certain underlying accounts, owned
approximately 98,156 shares (8.74%)."
D. Please insert the following "Trustees' Compensation" table after
the section entitled "Fund Ownership" on page 6 of the Statement of
Additional Information. In addition, please add the heading "Trustees'
Compensation" to the Table of Contents" on page I after the heading
"Fund Ownership":
"TRUSTEES' COMPENSATION
AGGREGATE
NAME , COMPENSATION
POSITION WITH FROM TOTAL COMPENSATION PAID
TRUST TRUST*# FROM FUND COMPLEX +
James A. Hanley, $ 1,089 $ 22,275 for the Trust
and
Trustee 1 other investment company
in the Fund Complex
Samuel E. Hudgins, $ 1,134 $ 23,400 for the Trust
and
Trustee 1 other investment company
in the Fund Complex
J. Berkley Ingram, Jr., $ 900 $ 18,000 for
the Trust and
Trustee 1 other investment company
in the Fund Complex
D. Dean Kaylor, $ 900 $ 18,000 for the Trust
and
Trustee 1 other investment company
in the Fund Complex
*Information is furnished for the fiscal year ended November 30, 1994.
#The aggregate compensation is provided for the Trust, which is
comprised of 3 portfolios.
+The information is provided for the last calendar year."
E. Please insert the following as the last paragraph in the sub-
section entitled "Advisory Fees" under the main section entitled
"Investment Advisory Services" on page 7 of the Statement of
Additional Information:
"From the date of initial public investment, December 26, 1994, to
May 31, 1995, the Adviser earned $21,542 , of which $17,234 was
voluntarily waived. "
F. Please insert the following information as the second sentence
under the section entitled "Administrative Services" on page 7 of the
Statement of Additional Information:
"From the date of initial public investment, December 26, 1994, to
May 31, 1995, the Fund incurred costs for administrative services of
$2,588."
G. Please add the following information as the final paragraph under
the section entitled "Brokerage Transactions" on page 7 of the
Statement of Additional Information:
"From the date of initial public investment, December 26, 1994, to
May 31, 1995, no brokerage commissions were paid by the Fund."
H. Please replace the section entitled "Total Return" on page 8 of
the Statement of Additional Information with the following
information:
"From the date of initial public investment, December 26, 1994, to
May 31, 1995, the Fund's cumulative total return was 4.24%.
Cumulative total return reflects the Fund's total performance
over a specific period of time. This total return assumes and is
reduced by the payment of the maximum sales load. The Fund's total
return is representative of only five months investment activity since
the Fund's effective date."
I. Please insert the following information as a final paragraph under
the section entitled "Yield" on page 9 of the Statement of
Additional Information:
"The Fund's yield for the thirty-day period ended May 31, 1995,
was 4.17%."
J. Please insert the following information as a final paragraph under
the section entitled "Tax- Equivalent Yield" on page 9 of the
Statement of Additional Information:
"The Fund's tax-equivalent yield for the seven-day period ended
May 31, 1995, was 6.42%. "
June 30, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of Federated
Investors
Federated Investors Tower
Pittsburgh, PA 15222-3779
Cusip 090313305
G00807-05 (6/95)
