1933 Act File No. 33-37525
1940 Act File No. 811-6201
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
Pre-Effective Amendment No.
Post-Effective Amendment No. 7 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
Amendment No. 8 X
THE BILTMORE MUNICIPAL FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on January 31, 1995, pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i)
on pursuant to paragraph (a) (i).
75 days after filing pursuant to paragraph (a)(ii)
on _________________ pursuant to paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
Registrant has filed with the Securities and Exchange Commission a
declaration pursuant to Rule 24f-2 under the Investment Company Act of
1940, and:
X filed the Notice required by that Rule on January 13, 1995; or
intends to file the Notice required by that Rule on or about
____________; or
during the most recent fiscal year did not sell any securities
pursuant to Rule 24f-2 under the Investment Company Act of 1940, and,
pursuant to Rule 24f-2(b)(2), need not file the Notice.
Copies to:
Donald W. Smith, Esquire Alan C. Porter, Esquire
Kirkpatrick & Lockhart Piper & Marbury
1800 M. Street, N.W. 1200 Nineteenth Street, N.W.
Washington, D.C. 20036-5891 Washington, D.C. 20036-2430
CROSS-REFERENCE SHEET
This Amendment to the Registration Statement of The Biltmore Municipal
Funds, which consists of three portfolios: (1) Biltmore Georgia Municipal Bond
Fund, (2) Biltmore North Carolina Municipal Bond Fund, and (3) Biltmore South
Carolina Municipal Bond Fund, relates only to one of the portfolios, Biltmore
South Carolina Municipal Bond Fund, and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-3) Cover Page.
Item 2. Synopsis (1-3) Summary of Fund Expenses.
Item 3. Condensed Financial
Information (3) Financial Highlights.
Item 4. General Description of
Registrant (1-3) Performance Information;
General Information; Investment
Information; Investment Objective;
Investment Policies; (1) Georgia
Municipal Securities; (2) North
Carolina Municipal Securities; (3)
South Carolina Municipal Bonds; (1-
3) Municipal Bond Insurance;
Investment Risks; Non-
Diversification; Investment
Limitation(s).
Item 5. Management of the Fund (1-3) The Biltmore Municipal Funds
Information; Management of The
Biltmore Municipal Funds;
Distribution of Fund Shares; (1-2)
Shareholder Servicing Arrangements;
(1-3) Administration of the Fund;
Expenses of the Fund.
Item 6. Capital Stock and Other
Securities (1-3) Dividends; Capital Gains;
Shareholder Information; Voting
Rights; Massachusetts Business
Trusts; Effect of Banking Laws; Tax
Information; Federal Income Tax; (1)
Georgia Taxes; (2) North Carolina
Taxes; (3) South Carolina Taxes; (1-
3) Other State and Local Taxes.
Item 7. Purchase of Securities Being
Offered (1-3) Net Asset Value; Investing in
the Fund; Share Purchases; (1-2)
Through the Trust Divisions of the
Wachovia Banks; Through Wachovia
Investments, Inc.; (3) Through
Wachovia Bank of South Carolina,
N.A.; Through the Other Wachovia
Banks; Through Wachovia Brokerage
Service; (1-3) Through Authorized
Broker Dealers; Minimum Investment
Required; What Shares Cost;
Purchases at Net Asset Value; Sales
Charge Reallowance; Reducing the
Sales Charge; Certificates and
Confirmations; Exchange Privilege.
Item 8. Redemption or Repurchase (1-3) Redeeming Shares; Systematic
Withdrawal Program; Accounts with
Low Balances; (3) Redemption in
Kind.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL INFORMATION.
Item 10. Cover Page (1-3) Cover Page.
Item 11. Table of Contents (1-3) Table of Contents.
Item 12. General Information and
History (1-3) General Information About the
Fund.
Item 13. Investment Objectives and
Policies (1-3) Investment Objective and
Policies; Investment Limitations.
Item 14. Management of the Fund (1-3) The Biltmore Municipal Funds
Management.
Item 15. Control Persons and Principal
Holders of Securities Not applicable.
Item 16. Investment Advisory and Other
Services (1-3) Investment Advisory Services;
Administrative Services.
Item 17. Brokerage Allocation (1-3) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not applicable.
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered (1-3) Purchasing Shares; Determining
Net Asset Value; Redeeming Shares.
Item 20. Tax Status (1-3) Tax Status.
Item 21. Underwriters Not Applicable.
Item 22. Calculation of Performance
Data (1-3) Total Return; Yield; Tax-
Equivalent; Yield Performance
Comparisons.
Item 23. Financial Statements (3) Filed in Part A.; (1-2) to be
filed by Amendment.
PROSPECTUS
JANUARY 31, 1995
The shares of Biltmore South Carolina Municipal Bond Fund (the ``Fund'') offered
by this prospectus represent interests in a non-diversified portfolio of
securities which is an investment portfolio of The Biltmore Municipal Funds (the
``Trust''), an open-end management investment company (a mutual fund). The
investment objective of the Fund is to provide current income which is exempt
from federal regular income tax and South Carolina state income taxes. The Fund
invests primarily in South Carolina municipal securities.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF
WACHOVIA BANK OF SOUTH CAROLINA, N.A. OR ITS AFFILIATES, ARE NOT ENDORSED OR
GUARANTEED BY WACHOVIA BANK OF SOUTH CAROLINA, N.A. OR ITS AFFILIATES, AND ARE
NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE
BOARD, OR ANY OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES
INVESTMENT RISKS, INCLUDING THE POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
BILTMORE SOUTH CAROLINA
MUNICIPAL BOND FUND
(A PORTFOLIO OF THE BILTMORE MUNICIPAL FUNDS)
The Fund has also filed a Statement of Additional Information dated January 31,
1995 with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. You may request a copy of the Statement of Additional Information
free of charge, obtain other information, or make inquiries about the Fund by
calling 1-800-994-4414 or writing The Biltmore Service Center, 101 Greystone
Boulevard, SC-9215, Columbia, South Carolina 29226.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
- ---------------------------------------------------
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TABLE OF CONTENTS
- ---------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ---------------------------------------------------
FINANCIAL HIGHLIGHTS 2
- ---------------------------------------------------
GENERAL INFORMATION 3
- ---------------------------------------------------
INVESTMENT INFORMATION 3
Investment Objective 3
Investment Policies 3
Acceptable Investments 3
Municipal Securities 3
Characteristics 4
Participation Interests 4
Variable Rate Municipal Securities 4
Municipal Leases 4
Investing in Securities of Other Investment
Companies 4
Restricted Securities 4
When-Issued and Delayed Delivery
Transactions 4
Lending of Portfolio Securities 5
Temporary Investments 5
South Carolina Municipal Securities 5
Municipal Bond Insurance 6
Investment Risks 6
Non-Diversification 7
Investment Limitations 7
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THE BILTMORE MUNICIPAL FUNDS INFORMATION 7
Management of The Biltmore Municipal Funds 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 8
Adviser's Background 8
Distribution of Fund Shares 8
Administration of the Fund 8
Administrative Services 8
Custodian 9
Transfer Agent, Dividend Disbursing Agent
and Portfolio Recordkeeper 9
Legal Services 9
Independent Auditors 9
Expenses of the Fund 9
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NET ASSET VALUE 9
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INVESTING IN THE FUND 9
Share Purchases 9
Through the Trust Divisions
of the Wachovia Banks 10
Through Wachovia Investments, Inc. 10
By Mail 10
By Wire 10
Through Authorized Broker/Dealers 10
Minimum Investment Required 10
What Shares Cost 10
Purchases at Net Asset Value 11
Sales Charge Reallowance 11
Reducing the Sales Charge 11
Quantity Discounts and Accumulated
Purchases 11
Letter of Intent 12
Concurrent Purchases 12
Reinvestment Privilege 12
Systematic Investment Program 12
Certificates and Confirmations 12
Dividends 12
Capital Gains 12
Exchange Privilege 13
Exchange by Telephone 13
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REDEEMING SHARES 14
By Telephone 14
By Mail 14
Systematic Withdrawal Program 15
Accounts with Low Balances 15
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SHAREHOLDER INFORMATION 15
Voting Rights 15
Massachusetts Business Trusts 15
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EFFECT OF BANKING LAWS 15
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TAX INFORMATION 16
Federal Income Tax 16
South Carolina Taxes 17
Other State and Local Taxes 17
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PERFORMANCE INFORMATION 17
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FINANCIAL STATEMENTS 19
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REPORT OF ERNST & YOUNG LLP,
INDEPENDENT AUDITORS 31
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ADDRESSES BACK COVER
- --------------------------------------------------------------------------------
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SUMMARY OF FUND EXPENSES
SHAREHOLDER TRANSACTION EXPENSES
<TABLE>
<S> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price) 4.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price) None
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 average net assets)
<TABLE>
<S> <C>
Management Fee (after waiver) (1) 0.16%
12b-1 Fees None
Other Expenses 0.44%
Total Fund Operating Expenses (after waiver) (2) 0.60%
</TABLE>
(1) The management fee was reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary waiver at any
time at its sole discretion. The maximum management fee is 0.75%.
(2) Total Fund Operating Expenses would have been 1.19% absent the voluntary
waiver described above in Note 1.
The purpose of this table is to assist an investor in understanding the various
costs and expenses that a shareholder of the Fund will bear, either directly or
indirectly. For more complete descriptions of the various costs and expenses,
see "The Biltmore Municipal Funds Information."
<TABLE>
<CAPTION>
Example 1 Year 3 Years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000
investment, assuming (1) 5% annual return; (2)
redemption at the end of each time period; and (3)
payment of the maximum sales load. The Fund charges
no redemption fees. $51 $63 $77 $117
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR FUTURE
EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
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SOUTH CAROLINA MUNICIPAL BOND FUND FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst and Young LLP, Independent Auditors, on
page 31.
<TABLE>
<CAPTION>
Year Ended 11/30/94 11/30/93** 9/30/93 9/30/92 9/30/91*
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 11.12 $ 11.27 $ 10.53 $ 10.17 $ 10.00
Income from investment operations
Net investment income 0.56 0.10 0.59 0.60 0.43
Net realized and unrealized gain
(loss) on investments (1.04) (0.15) 0.74 0.36 0.17
----------- ------------- ----------- ----------- -----------
Total from investment operations (0.48) (0.05) 1.33 0.96 0.60
Less distributions
Dividends to shareholders from net
investment income (0.56) (0.10) (0.59) (0.60) (0.43)
Distributions to shareholders from
net realized gain on investment
transactions (0.03) -- -- -- --
----------- ------------- ----------- ----------- -----------
Total distributions (0.59) (0.10) (0.59) (0.60) (0.43)
----------- ------------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 10.05 $ 11.12 $ 11.27 $ 10.53 $ 10.17
----------- ------------- ----------- ----------- -----------
Total Return*** (4.52%) (0.48%) 13.03% 9.73% 6.32%
----------- ------------- ----------- ----------- -----------
Ratios to Average Net Assets
Expenses 0.60% 0.55%(a) 0.55% 0.61% 0.82%(a)
Net investment income 5.22% 5.11%(a) 5.46% 5.83% 5.73%(a)
Expense waiver/reimbursement (b) 0.59% 0.60%(a) 0.62% 0.73% 0.86%(a)
Supplemental Data
Net assets, end of period
(000 omitted) $75,995 $83,371 $82,674 $63,139 $21,438
Portfolio turnover rate 23% 2% 4% 0% 0%
</TABLE>
* Reflects operations for the period from January 11, 1991 (date of initial
public investment) to September 30, 1991.
** Reflects operations for the two months ended November 30, 1993.
*** Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(a) Computed on an annualized basis.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
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- --------------------------------------------------------------------------------
GENERAL INFORMATION
The Biltmore Municipal Funds was established as a Massachusetts business trust
under a Declaration of Trust dated August 15, 1990. The Declaration of Trust
permits The Biltmore Municipal Funds to offer separate series of shares of
beneficial interest representing interests in separate portfolios of securities.
This prospectus relates only to The Biltmore Municipal Funds' South Carolina
municipal securities portfolio, known as Biltmore South Carolina Municipal Bond
Fund (the "Fund"). Prior to December 30, 1994, the Fund was known as South
Carolina Municipal Bond Fund. The Fund is designed primarily for customers of
Wachovia Bank of South Carolina, N.A. and its correspondents or affiliates who
desire a convenient means of accumulating an interest in a professionally
managed, non-diversified portfolio investing primarily in municipal bonds.
Wachovia Bank of South Carolina, N.A. is the investment adviser to the Fund. A
minimum initial investment of $500 is required. Subsequent investments must be
in amounts of at least $100. The Fund is not likely to be a suitable investment
for non-South Carolina taxpayers or for retirement plans since it intends to
invest primarily in South Carolina municipal securities.
Fund shares are sold at net asset value plus an applicable sales charge and are
redeemed at net asset value.
The other portfolios in the Trust are Biltmore Georgia Municipal Bond Fund and
Biltmore North Carolina Municipal Bond Fund (collectively, hereinafter referred
to as the "Funds.")
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
INVESTMENT INFORMATION
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide current income which is
exempt from federal regular income tax and South Carolina state income taxes.
(Federal regular income tax does not include the federal individual alternative
minimum tax or the federal alternative minimum tax for corporations.) Interest
income of the Fund that is exempt from federal regular income tax and South
Carolina state income taxes described above retains its tax-exempt status when
distributed to the Fund's shareholders. However, income distributed by the Fund
may not necessarily be exempt from state or municipal taxes in states other than
South Carolina. While there is no assurance that the Fund will achieve its
investment objective, it endeavors to do so by following the investment policies
described in this prospectus. The investment objective cannot be changed without
approval of shareholders. Unless indicated otherwise, the investment policies
may be changed by the Board of Trustees (the "Trustees") without the approval of
shareholders. Shareholders will be notified before any material changes in these
policies become effective.
INVESTMENT POLICIES
The Fund attempts to achieve its investment objective by investing in a
professionally-managed portfolio consisting primarily of municipal securities
exempt from federal regular income tax and South Carolina state income taxes. As
a matter of fundamental investment policy which may not be changed without
shareholder approval, the Fund will invest its assets so that, under normal
circumstances, at least 80% of its annual interest income is exempt from federal
regular income tax and South Carolina state income tax or that at least 80% of
its total assets are invested in obligations, the interest income from which is
exempt from federal regular income tax and South Carolina state income taxes.
While not a fundamental investment policy, the Fund's investment adviser may
consider the potential for capital appreciation in the selection of portfolios
investments.
ACCEPTABLE INVESTMENTS
Municipal Securities. The municipal securities in which the Fund invests are:
obligations, including industrial development bonds, issued on behalf of the
state of South Carolina, its political subdivisions or agencies;
obligations issued by or on behalf of any state, territory or possession of the
United States, including the District of Columbia, or any political subdivision
or agency of any of these; and
participation interests, as described below, in any of the above obligations,
the interest from which is, in the opinion of bond counsel for the issuers or in
the opinion of officers of the Fund and/or the investment adviser to the Fund,
exempt from both federal regular income tax and the personal income tax imposed
by the state of South Carolina. It is likely that shareholders who are subject
to alternative minimum tax will be required to include interest from a portion
of the municipal securities owned by the Fund in calculating the federal
individual alternative minimum tax or the federal alternative minimum tax for
corporations.
Characteristics. The municipal securities which the Fund buys are subject to the
following quality standards:
rated A or above by Moody's Investors Service, Inc. ("Moody's") or A or above
by Standard & Poor's Ratings Group ("S&P"). A description of the rating
categories is contained in the Appendix to the Statement of Additional
Information;
insured by a municipal bond insurance company which is rated AAA by S&P or Aaa
by Moody's;
guaranteed at the time of purchase by the U.S. government as to the payment of
principal and interest;
fully collateralized by an escrow of U.S. government securities; or
unrated if determined to be of comparable quality to one of the foregoing
rating categories by the Fund's adviser.
Participation Interests. The Fund may purchase participation interests from
financial institutions such as commercial banks, savings and loan associations,
and insurance companies. These participation interests would give the Fund
undivided interests in South Carolina municipal securities. The financial
institutions from which the Fund purchases participation interests frequently
provide or secure irrevocable letters of credit or guarantees to assure that the
participation interests are of high quality. The Trustees will determine that
participation interests meet the prescribed quality standards for the Fund.
Variable Rate Municipal Securities. Some of the South Carolina municipal
securities which the Fund purchases may have variable interest rates. Variable
interest rates are normally based on a published interest rate or interest rate
index or a similar standard, such as the 91-day U.S. Treasury bill rate. Many
variable rate municipal securities are subject to payment of principal on demand
by the Fund usually in not more than seven days. All variable rate municipal
securities will meet the quality standards for the Fund. The Fund's investment
adviser has been instructed by the Trustees to monitor the pricing, quality, and
liquidity of the variable rate municipal securities, including participation
interests held by the Fund, on the basis of published financial information and
reports of the rating agencies and other analytical services.
Municipal Leases. Municipal leases are obligations issued by state and local
governments or authorities to finance the acquisition of equipment and
facilities and may be considered to be illiquid. They may take the form of a
lease, an installment purchase contract, or a conditional sales contract.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Fund may invest in
the securities of other investment companies, but it will not own more than 3%
of the total outstanding voting stock of any investment company, invest more
than 5% of its total assets in any one investment company, or invest more than
10% of its total assets in investment companies in general. The Fund will invest
in other investment companies primarily for the purpose of investing short-term
cash which has not yet been invested in other portfolio instruments. The adviser
will waive its investment advisory fee on assets invested in securities of
open-end investment companies.
RESTRICTED SECURITIES. The Fund may invest up to 10% of its net assets in
restricted securities. Restricted securities are any securities in which the
Fund may otherwise invest pursuant to its investment objective and policies but
which are subject to restrictions on resale under federal securities laws. To
the extent these securities are deemed to be illiquid, the Fund will limit its
purchase together with other securities considered to be illiquid to 15% of its
net assets.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which the Fund purchases securities with payment and delivery
scheduled for a future time. The seller's failure to complete these transactions
may cause the Fund to miss a price or yield considered to be advantageous.
Settlement dates may be a month or more after entering into these transactions,
and the market values of the securities purchased may vary from the purchase
prices. Accordingly, the Fund may pay more or less than the market value of the
securities on the settlement date.
The Fund may dispose of a commitment prior to settlement if the Fund's
investment adviser deems it appropriate to do so. In addition, the Fund may
enter into transactions to sell purchase commitments to third parties at current
market values and simultaneously acquire other commitments to purchase similar
securities at later dates. The Fund may realize short-term profits or losses
upon the sale such commitments.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or a long-term basis up to
one-third of the value of its total assets to broker/dealers, banks, or other
institutional borrowers of securities. The Fund will only enter into loan
arrangements with broker/dealers, banks, or other institutions which the
investment adviser has determined are creditworthy under guidelines established
by the Trustees and will receive collateral in the form of cash or U.S.
government securities equal to at least 100% of the value of the securities
loaned at all times. It is not anticipated that the Fund will engage in
securities lending if such lending generates taxable income. The Fund will not
loan securities with a value in excess of one-third of the Fund's total assets.
There is the risk that when lending portfolio securities, the securities may not
be available to the Fund on a timely basis and the Fund may, therefore, lose the
opportunity to sell the securities at a desirable price. In addition, in the
event that a borrower of securities would file for bankruptcy or become
insolvent, disposition of the securities may be delayed pending court action.
TEMPORARY INVESTMENTS. The Fund normally invests its assets so that at least 80%
of its annual interest income is exempt from federal regular income tax and
South Carolina state income tax or that at least 80% of its total assets are
invested in obligations, the interest income from which is exempt from federal
regular income tax and South Carolina state income taxes. However, from time to
time on a temporary basis, or when the investment adviser determines that market
conditions call for a temporary defensive posture, the Fund may invest in
short-term tax-exempt or taxable temporary investments. These temporary
investments include: notes issued by or on behalf of municipal or corporate
issuers; obligations issued or guaranteed by the U.S. government, its agencies,
or instrumentalities; other debt securities; commercial paper; certificates of
deposit of banks; shares of other investment companies; and repurchase
agreements (arrangements in which the organization selling the Fund a bond or
temporary investment agrees at the time of sale to repurchase it at a mutually
agreed upon time and price).
There are no rating requirements applicable to temporary investments. However,
the investment adviser will limit temporary investments to those it considers to
be of good quality.
Although the Fund is permitted to make taxable, temporary investments, there is
no current intention of generating income subject to federal regular income tax.
However, it is anticipated that certain temporary investments will generate
income which is subject to South Carolina state income tax.
SOUTH CAROLINA MUNICIPAL SECURITIES
South Carolina municipal securities are generally issued to finance public
works, such as airports, bridges, highways, housing, hospitals, schools,
streets, and water and sewer works. They are also issued to repay outstanding
obligations, to raise funds for general operating expenses, and to make loans to
other public institutions and facilities. South Carolina municipal securities
include industrial development bonds issued by or on behalf of public
authorities to provide financing aid to acquire sites or construct or equip
facilities for privately or publicly owned corporations. The availability of
this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.
The two principal classifications of municipal securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. However, interest on and principal of revenue bonds, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds; the industry which is the beneficiary of such bonds
is generally the only source of payment for the bonds.
MUNICIPAL BOND INSURANCE
The Fund may purchase municipal securities covered by insurance which guarantees
the timely payment of principal at maturity and interest on such securities.
These insured municipal securities are either (1) covered by an insurance policy
applicable to a particular security, whether obtained by the issuer of the
security or by a third party ("Issuer-Obtained Insurance") or (2) insured under
master insurance policies issued by municipal bond insurers, which may be
purchased by the Fund (the "Policies").
The Fund will require or obtain municipal bond insurance when purchasing
municipal securities which would not otherwise meet the Fund's quality
standards. The Fund may also require or obtain municipal bond insurance when
purchasing or holding specific municipal securities when, in the opinion of the
Fund's investment adviser, such insurance would benefit the Fund (for example,
through improvement of portfolio quality or increased liquidity of certain
securities). The Fund's investment adviser anticipates that between 30% and 60%
of the Fund's net assets will be invested in municipal securities which are
insured.
Issuer-Obtained Insurance policies are noncancellable and continue in force as
long as the municipal securities are outstanding and their respective insurers
remain in business. If a municipal security is covered by Issuer-Obtained
Insurance, then such security need not be insured by the Policies purchased by
the Fund.
The Fund may purchase two types of Policies issued by municipal bond insurers.
One type of Policy covers certain municipal securities only during the period in
which they are in the Fund's portfolio. In the event that a municipal security
covered by such a Policy is sold from the Fund, the insurer of the relevant
Policy will be liable only for those payments of interest and principal which
are due and owing at the time of sale.
The other type of Policy covers municipal securities not only while they remain
in the Fund's portfolio but also until their final maturity even if they are
sold out of the Fund's portfolio, so that the coverage may benefit all
subsequent holders of those municipal securities. The Fund will obtain insurance
which covers municipal securities until final maturity even after they are sold
out of the Fund's portfolio only if, in the judgment of the investment adviser,
the Fund would receive net proceeds from the sale of those securities, after
deducting the cost of such permanent insurance and related fees, significantly
in excess of the proceeds it would receive if such municipal securities were
sold without insurance. Payments received from municipal bond issuers may not be
tax-exempt income to shareholders of the Fund.
The premiums for the Policies are paid by the Fund and the yield on the Fund's
portfolio is reduced thereby. Premiums for the Policies are paid by the Fund
monthly, and are adjusted for purchases and sales of municipal securities during
the month. The Fund may purchase Policies from MBIA Corp. ("MBIA"), AMBAC
Indemnity Corporation ("AMBAC"), Financial Guaranty Insurance Company ("FGIC"),
or any other municipal bond insurer which is rated AAA by S&P or Aaa by Moody's.
Each Policy guarantees the payment of principal and interest on those municipal
securities it insures. The Policies will have the same general characteristics
and features. A municipal security will be eligible for coverage if it meets
certain requirements set forth in a Policy. In the event interest or principal
on an insured municipal security is not paid when due, the insurer covering the
security will be obligated under its Policy to make such payment not later than
30 days after it has been notified by the Fund that such non-payment has
occurred.
MBIA, AMBAC, and FGIC will not have the right to withdraw coverage on securities
insured by their Policies so long as such securities remain in the Fund's
portfolio, nor may MBIA, AMBAC, or FGIC cancel their Policies for any reason
except failure to pay premiums when due. MBIA, AMBAC, and FGIC will reserve the
right at any time upon 90 days' written notice to the Fund to refuse to insure
any additional municipal securities purchased by the Fund after the effective
date of such notice. The Trustees will reserve the right to terminate any of the
Policies if they determine that the benefits to the Fund of having its portfolio
insured under such Policy are not justified by the expense involved.
Additionally, the Trustees reserve the right to enter into contracts with
insurance carriers other than MBIA, AMBAC, or FGIC if such carriers are rated
AAA by S&P or Aaa by Moody's.
INVESTMENT RISKS
Yields on South Carolina municipal securities depend on a variety of factors,
including: the general conditions of the municipal bond market; the size of the
particular offering; the maturity of the obligations; and the rating of the
issue. Further, any adverse economic conditions or developments affecting the
state of South Carolina or its municipalities could impact the Fund's portfolio.
The Fund's concentration in securities issued by the state of South Carolina and
its political subdivisions provides a greater level of risk
than a fund which is diversified across numerous states and municipal entities.
South Carolina's dependence on agriculture, manufacturing and tourism leaves it
vulnerable to both the business cycle and long term national economic trends.
The ability of the Fund to achieve its investment objective also depends on the
continuing ability of the issuers of South Carolina municipal securities and
participation interests, or the guarantors of either, to meet their obligations
for the payment of interest and principal when due. Investing in South Carolina
municipal securities which meet the Fund's quality standards may not be possible
if the state of South Carolina or its municipalities do not maintain their
current credit ratings. In addition, the issuance, tax exemption and liquidity
of South Carolina municipal securities may be adversely affected by judicial,
legislative or executive action, including, but not limited to, rulings of state
and federal courts, amendments to the state and federal constitutions, changes
in statutory law, and changes in administrative regulations, as well as voter
initiatives.
NON-DIVERSIFICATION
The Fund is a non-diversified investment company. As such, there is no limit on
the percentage of assets which can be invested in any single issuer. An
investment in the Fund, therefore, will entail greater risk than would exist in
a diversified investment company because the higher percentage of investments
among fewer issuers may result in greater fluctuation in the total market value
of the Fund's portfolio. Any economic, political, or regulatory developments
affecting the value of the securities in the Fund's portfolio will have a
greater impact on the total value of the portfolio than would be the case if the
portfolio were diversified among more issuers. The Fund may purchase an issue of
municipal securities in its entirety.
The Fund intends to comply with Subchapter M of the Internal Revenue Code. This
undertaking requires that at the end of each quarter of the taxable year, the
aggregate value of all investments in any one issuer (except U.S. government
obligations, cash, and cash items) which exceed 5% of the Fund's total assets
shall not exceed 50% of the value of its total assets.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up to
10% of the value of those assets to secure such borrowings.
The above investment limitation cannot be changed without shareholder approval.
The following limitations, however, can be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
The Fund will not:
invest more than 5% of its total assets in industrial development bonds when
the payment of principal and interest is the responsibility of companies (or
guarantors, where applicable) with less than three years of continuous
operations, including the operation of any predecessor; or
own securities of open-end or closed-end investment companies, except under
certain circumstances and subject to certain limitations described in this
prospectus, and, not exceeding 10% of its net assets.
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THE BILTMORE MUNICIPAL FUNDS INFORMATION
MANAGEMENT OF THE BILTMORE MUNICIPAL FUNDS
BOARD OF TRUSTEES. The Biltmore Municipal Funds are managed by a Board of
Trustees. The Board of Trustees is responsible for managing the business affairs
of The Biltmore Municipal Funds and for exercising all of the powers of The
Biltmore Municipal Funds except those reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with The
Biltmore Municipal Funds, investment decisions for the Fund are made by Wachovia
Bank of South Carolina, N.A. (formerly known as The South Carolina National
Bank), the Fund's investment adviser (the "Bank" or the "Adviser"), subject to
direction by the Trustees. The Adviser continually conducts investment research
and supervision for the Fund and is responsible for the purchase or sale of
portfolio instruments, for which it receives an annual fee from the Fund.
ADVISORY FEES. The Adviser is entitled to receive an annual investment advisory
fee equal to 0.75 of 1% of the Fund's average daily net assets. The investment
advisory contract allows the voluntary waiver of the investment advisory fee or
the reimbursement of expenses by the Adviser from time to time. The Adviser can
terminate any voluntary waiver of its fee or reimbursement of expenses at any
time in its sole discretion.
Investment decisions for the Fund will be made independently from those of any
fiduciary or other accounts that may be managed by the Bank or its affiliates.
If, however, such accounts, the Fund, or the Bank for its own account are
simultaneously engaged in transactions involving the same securities, the
transactions may be combined and allocated to each account. This system may
adversely affect the price the Fund pays or receives, or the size of the
position it obtains. The Bank may engage, for its own account or for other
accounts managed by the Bank, in other transactions involving South Carolina
municipal securities which may have adverse effects on the market for securities
in the Fund's portfolio.
ADVISER'S BACKGROUND. Wachovia Bank of South Carolina, N.A. is a national
banking association headquartered in Columbia, South Carolina. It is the primary
subsidiary of South Carolina National Corporation ("SCNC"), a bank holding
company with a commercial bank subsidiary and a federal savings bank subsidiary
in South Carolina. SCNC is a wholly-owned subsidiary of Wachovia Corporation.
SCNC was incorporated in South Carolina in 1971. The Bank was originally
incorporated in 1834 in Charleston, South Carolina. The principal executive
offices of the Bank are located at 1426 Main Street, Columbia, South Carolina
29226. The activities of the Bank encompass a full range of commercial banking
services, including trust services. Wachovia Corporation, a registered bank
holding company, is headquartered in Winston-Salem, North Carolina and Atlanta,
Georgia. Through offices in eight states, Wachovia Corporation and its
subsidiaries provide a broad range of financial services to individuals and
businesses.
The Adviser employes an experienced staff of professional investment analysts,
portfolio managers and traders. The Adviser uses fundamental analysis and other
investment management disciplines to identify investment opportunities. The
Adviser, Wachovia Bank of North Carolina, N.A., and Wachovia Bank of Georgia,
N.A. (collectively the "Wachovia Banks") have been managing trust assets for
over 100 years, with approximately $17.3 billion in managed assets as of
September 30, 1994. Wachovia Investment Management Group, a business unit of the
Adviser, has served as investment adviser to another investment company, The
Biltmore Funds, since March 9, 1992. The Adviser's affiliates, Wachovia Bank of
North Carolina, N.A. and Wachovia Bank of Georgia, N.A., have served as
investment advisers to the Trust's North Carolina Municipal Bond and Georgia
Municipal Bond Portfolios, respectively, since their inception in December,
1994. As part of its regular banking operations, the Adviser may make loans to
public companies. Thus, it may be possible, from time to time, for the Fund to
hold or acquire the securities of issuers which are also lending clients of the
Adviser. The lending relationship will not be a factor in the selection of
securities.
Michael Peters has been the Fund's portfolio manager since 1993. Mr. Peters
joined Wachovia Bank of South Carolina N.A., as Assistant Vice President in
1993, and also serves as an officer of both Wachovia Bank of North Carolina,
N.A. and Wachovia Bank of Georgia, N.A. Mr. Peters was employed with NationsBank
from 1990 to 1993, and from 1986 to 1990 was employed with First Bank of
Whiting. Mr. Peters received his M.B.A. from Indiana University and is a member
of the Institute of Chartered Financial Analysts.
DISTRIBUTION OF FUND SHARES
Federated Securities Corp. is the distributor (the "Distributor") for shares of
the Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the principal distributor for a number of investment companies. Federated
Securities Corp. is a subsidiary of Federated Investors.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides the Fund with the
administrative personnel and services necessary to operate the Fund. Such
services include the preparation of filings with the Securities and Exchange
Commission and other regulatory authorities, assistance with respect to meetings
of the Trustees, shareholder servicing and accounting services, and other
administrative services. Federated Administrative Services provides these at an
annual rate, computed and payable daily, as specified below:
<TABLE>
<CAPTION>
Average Aggregate Daily
Maximum Net Assets of the Trust
Administrative Fee and The Biltmore Funds
<S> <C>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall aggregate at least
$50,000 for the Fund. Federated Administrative Services may choose voluntarily
to waive or reimburse a portion of its fee at any time.
CUSTODIAN. Wachovia Bank of North Carolina, N.A., is custodian (the "Custodian")
for the securities and cash of the Fund. Under the Custodian Agreement, the
Custodian holds the Fund's portfolio securities in safekeeping and keeps all
necessary records and documents relating to its duties. For the services to be
provided to the Trust pursuant to the Custodian Agreement, the Trust pays the
Custodian an annual fee based upon the average daily net assets of the Fund and
which is payable monthly.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT AND PORTFOLIO RECORDKEEPER. Federated
Services Company, Pittsburgh, Pennsylvania, a subsidiary of Federated Investors,
is disbursing agent for the Fund and transfer agent for the shares of the Fund.
Federated Services Company also provides certain accounting and recordkeeping
services with respect to the Fund's portfolio investments.
LEGAL SERVICES. Legal services for the Fund are provided by Kirkpatrick &
Lockhart, Washington, D.C. Piper & Marbury, Washington, D.C., serves as counsel
to the independent Trustees. Special South Carolina tax counsel to the Fund is
Sinkler & Boyd, P.A., Columbia, South Carolina.
INDEPENDENT AUDITORS. The independent auditors are Ernst & Young LLP,
Pittsburgh, Pennsylvania.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of The Biltmore
Municipal Funds' expenses. These expenses include, but are not limited to, the
cost of: organizing The Biltmore Municipal Funds and continuing its existence;
Trustees' fees; investment advisory and administrative services; printing
prospectuses and other Fund documents for shareholders; registering The Biltmore
Municipal Funds, the Fund and shares of the Fund; taxes and commissions;
issuing, purchasing, repurchasing, and redeeming shares; fees for custodians,
transfer agents, dividend disbursing agents, shareholder servicing agents, and
registrars; printing, mailing, auditing, accounting, and legal expenses; reports
to shareholders and government agencies; meetings of Trustees and shareholders
and proxy solicitations therefor; insurance premiums; association membership
dues; and such nonrecurring and extraordinary items as may arise. However, the
investment adviser may voluntarily waive and/or reimburse some expenses.
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NET ASSET VALUE
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
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INVESTING IN THE FUND
SHARE PURCHASES
Fund shares are sold on days on which the New York Stock Exchange and the
Federal Reserve Wire System are open for business. Shares of the Fund may be
purchased through the Trust Divisions of the Wachovia Banks, Wachovia
Investments, Inc. or authorized broker/dealers which have a sales agreement with
the Distributor. All purchase orders must be transmitted to the Fund by 5:00
p.m. (Eastern time). Texas residents must purchase shares through an authorized
registered broker/dealer or through Federated Securities Corp. at
1-800-618-8573. In connection with the sale of Fund shares, the Distributor may
from time to time offer certain items of nominal value to any shareholder or
investor. The Fund and the Distributor reserve the right to reject any purchase
request.
THROUGH THE TRUST DIVISIONS OF THE WACHOVIA BANKS. Trust customers of the
Wachovia Banks may place an order to purchase shares of the Fund by telephoning,
sending written instructions, or placing the order in person with their account
officer in accordance with the procedures established by the Wachovia Banks and
as set forth in the relevant account agreement.
Payment may be made to the Wachovia Banks by check, by wire of federal funds, or
by debiting a customer's account with the Wachovia Banks. Purchase orders must
normally be received by the Wachovia Banks by 3:00 p.m. (Eastern time), in order
for shares to be purchased at that day's price. It is the responsibility of the
Wachovia Banks to transmit orders promptly to the Fund. Shares of the Fund
cannot be purchased by wire on any day on which the Wachovia Banks, the New York
Stock Exchange and the Federal Reserve Wire System are not open for business.
THROUGH WACHOVIA INVESTMENTS, INC. Customers of Wachovia Investments, Inc. or
Wachovia Brokerage Service may place an order to purchase shares by telephoning
The Biltmore Service Center at 1-800-994-4414, sending written instructions, or
placing an order in person. Payment may be made by check, by wire of federal
funds (the customer's bank sends money to the Fund's bank through the Federal
Reserve Wire System) or by debiting a customer's account at Wachovia
Investments, Inc. Purchase orders must normally be received by Wachovia
Investments, Inc. before 3:30 p.m. (Eastern time). Wachovia Investments, Inc., a
wholly-owned subsidiary of Wachovia Corporation, is a registered broker/dealer
and a member of the National Association of Securities Dealers, Inc. Wachovia
Brokerage Service is a business unit of Wachovia Investments, Inc.
By Mail. To purchase shares of the Fund through Wachovia Investments, Inc. by
mail, send a check made payable to Biltmore South Carolina Municipal Bond Fund
to The Biltmore Service Center, 101 Greystone Boulevard, SC-9215, Columbia,
South Carolina, 29226. Orders by mail are considered received after payment by
check is converted by Wachovia Investments, Inc. into federal funds. This is
normally the next business day after Wachovia Investments, Inc. receives the
check.
By Wire. To purchase shares of the Fund through Wachovia Investments, Inc. by
wire, wire funds as follows:
Wachovia Investments, Inc.
ABA Number 0531-00494
Credit: 8735-001342
Further credit to: Biltmore South Carolina Municipal Bond Fund
Re: (Customer name and brokerage account number)
Shares of the Fund cannot be purchased by wire on any day on which the Wachovia
Banks, the New York Stock Exchange and the Federal Reserve Wire System are not
open for business.
THROUGH AUTHORIZED BROKER/DEALERS. An investor may place an order through
authorized brokers and dealers to purchase shares of the Fund. Shares will be
purchased at the public offering price next determined after the Fund receives
the purchase request. Purchase requests through registered broker/dealers must
normally be received by the broker/dealer and transmitted to the Fund before
3:30 p.m. (Eastern time) in order for shares to be purchased at that day's
public offering price.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in the Fund by an investor is $500. Subsequent
investments must be in amounts of at least $100. These minimums may be waived
for purchases by the Trust Divisions of the Wachovia Banks for their fiduciary
or custodial accounts. An institutional investor's minimum investment will be
calculated by combining all accounts it maintains with the Fund.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:
<TABLE>
<CAPTION>
Sales Charge as a Sales Charge as a
Percentage of Percentage of Net
Amount of Transaction Public Offering Price Amount Invested
<S> <C> <C>
Less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $750,000 2.00% 2.04%
$750,000 but less than $1 million 1.00% 1.01%
$1 million or more 0.25% 0.25%
</TABLE>
The net asset value is determined at or after the close of the New York Stock
Exchange, Monday through Friday, except on: (i) days on which there are not
sufficient changes in the value of the Fund's portfolio securities that its net
asset value might be materially affected; (ii) days during which no shares are
tendered for redemption and no orders to purchase shares are received; or (iii)
the following holidays: New Year's Day, Martin Luther King Day, Presidents' Day,
Good Friday, Memorial Day, Independence Day, Labor Day, Columbus Day, Veterans'
Day, Thanksgiving Day and Christmas Day.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at net asset
value, without a sales charge, by investment advisers registered under the
Investment Advisers Act of 1940 purchasing on behalf of their clients, and by
the Wachovia Banks for funds which are held in a fiduciary, advisory, agency,
custodial, or similar capacity. Trustees, officers, directors and emeritus
directors, advisory board members, employees and retired employees of the Fund,
the Wachovia Banks, the spouses and children under the age of 21 of such
persons, and any trusts, pension profit-sharing plans and individual retirement
accounts operated for such persons, may purchase shares of the Fund at net asset
value. In addition, trustees, officers, directors and employees of the
Distributor and its affiliates, and any bank or investment dealer who has a
sales agreement with the Distributor relating to the Fund, may also purchase
shares at their net asset value.
SALES CHARGE REALLOWANCE
For shares sold with a sales charge, the Wachovia Banks or an affiliated broker
or a dealer will receive up to 100% of the applicable sales charge for purchases
of Fund shares made directly through the Wachovia Banks or such broker or
dealer.
The sales charge for shares sold other than through the Wachovia Banks or
registered broker/dealers will be retained by the Distributor. However, the
Distributor, at its sole discretion, may uniformly offer to pay cash, or
promotional incentives in the form of trips to sales seminars at luxury resorts,
tickets or other items, to all dealers selling shares of the Fund. If accepted
by the dealer, such additional payments will be predicated upon the amount of
Fund shares sold by the dealers.
REDUCING THE SALES CHARGE
The sales charge can be reduced on the purchase of Fund shares through:
quantity discounts and accumulated purchases;
signing a 13-month letter of intent; or
using the reinvestment privilege.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table in this
prospectus under the section entitled "What Shares Cost," larger purchases
reduce the sales charge paid. The Fund will combine purchases made on the same
day by the investor, his spouse, and his children under age 21 when it
calculates the sales charge.
If an additional purchase of Fund shares is made, the Fund will consider the
previous purchases still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$90,000 and he purchases $10,000 more at the current public offering price, the
sales charge on the additional purchase according to the schedule now in effect
would be 3.75%, not 4.50%.
To receive the sales charge reduction, the Wachovia Banks, Wachovia Investments,
Inc., or the Distributor must be notified by the shareholder or by his financial
institution at the time the purchase is made that Fund shares are already owned
or that purchases are being combined. The Fund will reduce the sales charge
after it confirms the purchases.
LETTER OF INTENT. If a shareholder intends to purchase at least $100,000 of
shares in the Fund over the next 13 months, the sales charge may be reduced by
signing a letter of intent to that effect. This letter of intent includes a
provision for a sales charge adjustment depending on the amount actually
purchased within the 13-month period and a provision for the custodian to hold
4.50% of the total amount intended to be purchased in escrow (in shares) until
such purchase is completed.
The 4.50% held in escrow will be applied to the shareholder's account at the end
of the 13-month period unless the amount specified in the letter of intent is
not purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase shares, but
if the shareholder does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. This letter may
be dated as of a prior date to include any purchases made within the past 90
days.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction, a
shareholder has the privilege of combining concurrent purchases of shares in
portfolios in The Biltmore Funds and in The Biltmore Municipal Funds (such as
the Fund), the purchase price of which includes a sales charge. For example, if
a shareholder concurrently invested $70,000 in one of the portfolios of The
Biltmore Funds with a sales charge, and $40,000 in a portfolio of The Biltmore
Municipal Funds with a sales charge, the sales charge would be reduced.
To receive this sales charge reduction, the Wachovia Banks, Wachovia
Investments, Inc. or the Distributor must be notified by the agent placing the
order at the time the concurrent purchases are made. The sales charge will be
reduced after the purchase is confirmed.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 90 days, to reinvest the redemption
proceeds at the next-determined net asset value without any sales charge. The
Wachovia Banks, Wachovia Investments, Inc., or the Distributor must be notified
by the shareholder in writing or by his financial institution of the
reinvestment in order to eliminate a sales charge. If the shareholder redeems
his shares in the Fund, there may be tax consequences.
SYSTEMATIC INVESTMENT PROGRAM. Once a Fund account has been opened, shareholders
may add to their investment on a regular basis in a minimum amount of $100.
Under this program, funds may be automatically withdrawn periodically from the
shareholder's checking account at the Wachovia Banks, and invested in Fund
shares at the net asset value next determined after an order is received by the
Fund, plus the applicable sales charge. A shareholder may apply for
participation in this program through the Wachovia Banks, Wachovia Investments,
Inc. or through the Distributor.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Fund, Federated Services Company maintains a share
account for each shareholder. Share certificates are not issued unless requested
in writing to the Fund.
Detailed confirmations of each purchase and redemption are sent to each
shareholder. Monthly confirmations are sent to report dividends paid during that
month.
DIVIDENDS
Dividends are declared daily and are paid monthly. Dividends are declared just
prior to determining net asset value. If an order for shares is placed on the
preceding business day, shares purchased by wire begin earning dividends on the
business day wire payment is received by the Custodian. If the order for shares
and payment by wire are received on the same day, shares begin earning dividends
on the next business day. Shares purchased by check begin earning dividends on
the business day after the check is converted into federal funds. Unless cash
payments are requested by contacting the Fund, dividends are automatically
reinvested on payment dates in additional shares of the Fund at the payment
date's net asset value without a sales charge.
CAPITAL GAINS
Distributions of any net realized long-term capital gains realized by the Fund,
if any, will be made at least annually.
EXCHANGE PRIVILEGE
Shareholders of the Fund may exchange all or some of their Fund shares for:
shares in other portfolios of the Trust, shares in portfolios of The Biltmore
Funds or shares of the International Equity Fund. The Biltmore Funds are advised
by Wachovia Bank of North Carolina, N.A., and distributed by Federated
Securities Corp. The Trust consists of the Fund, Biltmore Georgia Municipal Bond
Fund and Biltmore North Carolina Municipal Bond Fund. The Biltmore Georgia
Municipal Bond Fund is advised by Wachovia Bank of Georgia, N.A. The Biltmore
North Carolina Municipal Bond Fund is advised by Wachovia Bank of North
Carolina, N.A. The Biltmore Georgia and North Carolina Municipal Bond Funds are
distributed by Federated Securities Corp. The International Equity Fund is
advised by Fiduciary International, Inc. and distributed by Federated Securities
Corp. The Biltmore Funds consist of the following portfolios: Biltmore Balanced
Fund, Biltmore Emerging Markets Fund, Biltmore Equity Fund, Biltmore Equity
Index Fund, Biltmore Fixed Income Fund, Biltmore Money Market Fund
(Institutional Shares and Investment Shares), Biltmore Prime Cash Management
Fund (Institutional Shares only), Biltmore Quantitative Equity Fund, Biltmore
Short-Term Fixed Income Fund, Biltmore Special Values Fund, Biltmore Tax-Free
Money Market Fund (Institutional Shares and Investment Shares), and Biltmore
U.S. Treasury Money Market Fund (Institutional Shares and Investment Shares).
(The International Equity Fund, the portfolios of the Trust, and The Biltmore
Funds are referred to in this section as the "Portfolios.")
Shareholders of the Fund have easy access to the Portfolios through a telephone
exchange program. The exchange privilege is available to shareholders residing
in any state in which the shares being acquired may be legally sold. Prior to
any exchange, the shareholder should review a copy of the current prospectus of
the Portfolio into which an exchange is to be effected. Shareholders
contemplating exchanges between the Fund and the Trust's other portfolios should
consult their tax advisers, since the tax advantages of each Fund may vary.
Shares of the Portfolios may be exchanged for shares of the Fund at net asset
value without a sales charge (if previously paid). Shares of Portfolios with a
sales charge may be exchanged at net asset value for shares of other Portfolios
with an equal sales charge or no sales charge. Shares of Portfolios with no
sales charge acquired by direct purchase or reinvestment of dividends on such
shares may be exchanged for shares of Portfolios at net asset value.
Shareholders using this privilege must exchange shares having a net asset value
at least equal to the minimum investment of the Portfolio into which they are
exchanging. An exchange order must comply with the requirements for a redemption
and purchase order and must specify the dollar value or number of shares to be
exchanged. Shareholders who desire to automatically exchange shares of a
predetermined amount on a monthly, quarterly, or annual basis may take advantage
of a systematic exchange privilege. A shareholder may obtain further information
on these exchange privileges by calling the Fund, Wachovia Investments, Inc. or,
in the case of customers of the Wachovia Banks, the shareholder's account
officer.
Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange will be redeemed at the next-determined net asset
value. Written exchange instructions may require a signature guarantee. Exercise
of this privilege is treated as a sale for federal income tax purposes and,
depending on the circumstances, a short or long-term capital gain or loss may be
realized. The exchange privilege may be modified or terminated at any time.
Shareholders will be notified of the modification or termination of the exchange
privilege.
EXCHANGE BY TELEPHONE. Instructions for exchanges between the Portfolios and the
Fund may be given by telephone to Wachovia Investments, Inc., and in the case of
customers of the Wachovia Banks, the customer's account officer. Shares may be
exchanged by telephone only between fund accounts having identical shareholder
registrations. Exchange instructions given by telephone may be electronically
recorded. If reasonable procedures are not followed by the Fund, it may be
liable for losses due to unauthorized or fraudulent telephone instructions.
Telephone exchange instructions must be received before 4:00 p.m. (Eastern time)
for shares to be exchanged the same day. The telephone exchange privilege may be
modified or terminated at any time. Shareholders will be notified of such
modification or termination. Shareholders may have difficulty in making
exchanges by telephone through banks, brokers, and other financial institutions
during times of drastic economic or market changes. If a shareholder cannot
contact his bank, broker, or financial institution by telephone, it is
recommended that an exchange request be made in writing and sent by overnight
mail.
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REDEEMING SHARES
The Fund redeems shares at their net asset value next determined after the Fund
receives the redemption request. Redemptions will be made on days on which the
Fund computes its net asset value. Telephone or written requests for redemptions
must be received in proper form and can be made through the Wachovia Banks,
Wachovia Investments, Inc., or directly to the Fund.
BY TELEPHONE. A shareholder may redeem shares of the Fund by calling the
Wachovia Banks (call toll-free 1-800-994-4414) to request the redemption.
Telephone redemption instructions may be recorded. Shares will be redeemed at
the net asset value next determined after the Fund receives the redemption
request from the Wachovia Banks. Redemption requests made through the Wachovia
Banks must be received by the Wachovia Banks before 3:00 p.m. (Eastern time) in
order for shares to be redeemed at that day's net asset value. The Wachovia
Banks are responsible for promptly submitting redemption requests and providing
proper written redemption instructions to the Fund. Registered broker/dealers
may charge customary fees and commissions for this service. If reasonable
procedures are not followed by the Fund, it may be liable for unauthorized or
fraudulent telephone instructions.
A shareholder who is a customer of Wachovia Investments, Inc. may redeem shares
of the Fund by phone by calling The Biltmore Service Center at 1-800-994-4414. A
shareholder who is a customer of the Wachovia Banks and whose account agreement
with the Wachovia Banks permits telephone redemption may redeem shares of the
Fund by telephoning his account officer. Shares will be redeemed at the net
asset value next determined after the Fund receives the redemption request.
Redemption requests must be received by 4:00 p.m. (Eastern time) in order for
shares to be redeemed at that day's net asset value. In no event will proceeds
be credited more than seven days after a proper request for redemption has been
received. In the event of drastic economic or market changes, a shareholder may
experience difficulty in redeeming by telephone. If such a case should occur,
another method of redemption should be considered.
BY MAIL. A shareholder may redeem Fund shares by sending a written request to
the Wachovia Banks. The written request should include the shareholder's name,
the Fund name, the account number, and the share or dollar amount requested. If
share certificates have been issued, they must be properly endorsed and should
be sent by registered or certified mail with the written request to the Fund.
Shareholders should call the Wachovia Banks for assistance in redeeming by mail.
A shareholder who is a customer of Wachovia Investments, Inc. may redeem shares
by sending a written request to Wachovia Investments, Inc. The written request
should include the shareholder's name and address, the Fund name, the brokerage
account number, and the share or dollar amount requested. Shareholders should
call Wachovia Investments, Inc. for assistance in redeeming by mail. Normally, a
check for the proceeds is mailed within five business days, but in no event more
than seven days, after receipt of a proper written redemption request.
Shareholders requesting a redemption of $50,000 or more, a redemption of any
amount to be sent to an address other than that on record with the Fund, or a
redemption payable other than to the shareholder of record must have signatures
on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the Bank
Insurance Fund ("BIF"), which is administered by the Federal Deposit Insurance
Corporation ("FDIC");
a member firm of the New York, American, Boston, Midwest, or Pacific Stock
Exchanges;
a savings bank or savings and loan association whose deposits are insured by
the Savings Association Insurance Fund ("SAIF"), which is administered by the
FDIC; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the Transfer Agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and the Transfer Agent reserve the right
to amend these standards at any time without notice.
Normally, a check for the proceeds is mailed within one business day, but in no
event more than seven days, after receipt of a proper written redemption
request.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, Fund shares
are redeemed to provide for periodic withdrawal payments in an amount directed
by the shareholder. Shareholders may redeem by periodic withdrawal payments in a
minimum amount of $100. Depending upon the amount of the withdrawal payments,
the amount of dividends paid and capital gains distributions with respect to
Fund shares, and the fluctuation of the net asset value of Fund shares redeemed
under this program, redemptions may reduce, and eventually deplete, the
shareholder's investment in the Fund. For this reason, payments under this
program should not be considered as yield or income on the shareholder's
investment in the Fund. To be eligible to participate in this program, a
shareholder must have an account value of at least $10,000. A shareholder may
apply for participation in this program through his financial institution. For
shares sold with a sales charge, it is not advisable for shareholders to be
purchasing shares while participating in this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $500. This requirement
does not apply, however, if the balance falls below $500 because of changes in
the Fund's net asset value. Before shares are redeemed to close an account, the
shareholder is notified in writing and allowed 30 days to purchase additional
shares to meet the minimum requirement.
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SHAREHOLDER INFORMATION
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of a portfolio in
The Biltmore Municipal Funds have equal voting rights except that only shares of
the Fund are entitled to vote on matters affecting only the Fund. As a
Massachusetts business trust, The Biltmore Municipal Funds are not required to
hold annual shareholder meetings.
Shareholder approval will be sought only for certain changes in the Trust's or
the Fund's operation and for the election of Trustees under certain
circumstances. Trustees may be removed by the Trustees or by shareholders at a
special meeting. A special meeting of the shareholders shall be called by the
Trustees upon the written request of shareholders owning at least 10% of the
outstanding shares of The Biltmore Municipal Funds.
MASSACHUSETTS BUSINESS TRUSTS
Under certain circumstances, shareholders may be held personally liable under
Massachusetts law for acts or obligations of the Trust on behalf of the Fund. To
protect shareholders, the Trust has filed legal documents with Massachusetts
that expressly disclaim the liability of shareholders for such acts or
obligations of the Trust. These documents require notice of this disclaimer to
be given in each agreement, obligation, or instrument the Trust or its Trustees
enter into or sign on behalf of the Fund.
In the unlikely event a shareholder is held personally liable for the Trust's
obligations on behalf of the Fund, the Trust is required by its Declaration of
Trust to use the property of the Fund to protect or compensate the shareholder.
On request, the Trust will defend any claim made and pay any judgment against a
shareholder for any act or obligation of the Trust on behalf of the Fund.
Therefore, financial loss resulting from liability as a shareholder of the Fund
will occur only if the Trust cannot meet its obligations to indemnify
shareholders and pay judgments against them from assets of the Fund.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
EFFECT OF BANKING LAWS
Banking laws and regulations presently prohibit a bank holding company
registered under the Federal Bank Holding Company Act of 1956 or any bank or
non-bank affiliate thereof from sponsoring, organizing,
controlling or distributing the shares of a registered, open-end investment
company continuously engaged in the issuance of its shares, and prohibit banks
generally from issuing, underwriting, selling or distributing most securities.
However, such banking laws and regulations do not prohibit such a holding
company affiliate or banks generally from acting as investment adviser, transfer
agent or custodian to such an investment company or from purchasing shares of
such a company as agent for and upon the order of such a customer. Wachovia Bank
of South Carolina, N.A. and Wachovia Bank of North Carolina, N.A. are subject to
such banking laws and regulations.
The Adviser believes, based on the advice of its counsel, that it may perform
the services for the Fund contemplated by its advisory agreement with The
Biltmore Municipal Funds without violation of the Glass-Steagall Act or other
applicable banking laws or regulations. Changes in either federal or state
statutes and regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, as well as further judicial or administrative
decisions or interpretations of such or future statutes and regulations, could
prevent Wachovia Bank of South Carolina, N.A. from continuing to perform all or
a part of the above services for its customers and/or the Fund. If it were
prohibited from engaging in these customer-related activities, the Trustees
would consider alternative advisers and means of continuing available investment
services. In such event, changes in the operation of the Fund may occur,
including possible termination of any automatic or other Fund share investment
and redemption services then being provided by Wachovia Bank of South Carolina,
N.A. It is not expected that existing shareholders would suffer any adverse
financial consequences (if another adviser with equivalent abilities to Wachovia
Bank of South Carolina, N.A. is found) as a result of any of these occurrences.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above, or should Congress relax current restrictions on depository institutions,
the Trustees will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
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TAX INFORMATION
FEDERAL INCOME TAX
The Fund expects to pay no federal regular income tax because it intends to meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by The
Biltmore Municipal Funds portfolios will not be combined for tax purposes with
those realized by the Fund.
Shareholders are not required to pay federal regular income tax on any dividends
received from the Fund that represent net interest on tax-exempt municipal
bonds. However, under the Tax Reform Act of 1986, dividends representing net
interest income earned on some municipal bonds may be included in calculating
the federal individual alternative minimum tax or the federal alternative
minimum tax for corporations.
The alternative minimum tax, equal to up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is equal to
the regular taxable income of the taxpayer increased by certain "tax preference"
items not included in regular taxable income and increased or reduced by certain
alternative minimum tax adjustments.
The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons, and other public facilities, private
activity bonds provide benefits to private parties. The Fund may purchase all
types of municipal bonds, including private activity bonds. Thus, should it
purchase any such bonds, a portion of the Fund's dividends may be treated as a
tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Fund which
represent interest on municipal bonds may become subject to the 20% corporate
alternative minimum tax because the dividends are included in a corporations's
"adjusted current earnings." The corporate alternative minimum tax treats 75% of
the excess of the taxpayer's "adjusted current earnings" over the taxpayer's
preadjustment alternative minimum taxable income as an alternative minimum tax
adjustment. "Adjusted current earnings" is based upon the concept of a
corporation's "earnings and profits". Since "earnings and profits" generally
includes the full amount of any Fund dividend, and preadjustment alternative
minimum taxable income does not include the portion of the Fund's dividend
attributable to municipal bonds which are not private activity bonds, 75% of the
difference will be included in the calculation of the corporation's alternative
minimum tax.
Shareholders should consult with their tax advisers to determine whether they
are subject to the alternative minimum tax or the corporate alternative minimum
tax and, if so, the tax treatment of dividends paid by the Fund.
Dividends of the Fund representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
Distributions representing net long-term capital gains realized by the Fund, if
any, will be taxable as long-term capital gains regardless of the length of time
shareholders have held their shares.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
SOUTH CAROLINA TAXES
In the opinion of Sinkler & Boyd, P.A., special South Carolina tax counsel to
the Fund, shareholders of the Fund who are subject to South Carolina individual
or corporate income taxes will not be subject to such taxes on Fund dividends to
the extent that such dividends qualify as either (1) exempt-interest dividends
of a regulated investment company under Section 852(b)(5) of the Internal
Revenue Code of 1986, which are derived from interest on tax-exempt obligations
of the state of South Carolina or any of its political subdivisions or on
obligations of the Government of Puerto Rico that are exempt from federal income
tax; or (2) dividends derived from interest or dividends on obligations of the
United States and its possessions or on obligations or securities of any
authority or commission exempt from state income taxes under the laws of the
United States (items described in clause (1) and this clause (2) are referred to
collectively, as "South Carolina Obligations") and at least 50% of the value of
the Fund consists of South Carolina Obligations at the close of each quarter. To
the extent that Fund distributions are attributable to other sources, such as
long or short-term capital gains, such distributions will not be exempt from
South Carolina taxes.
OTHER STATE AND LOCAL TAXES
Income from the Fund is not necessarily free from state income taxes in states
other than South Carolina or from personal property taxes. State laws differ on
this issue, and shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
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PERFORMANCE INFORMATION
From time to time, the Fund advertises its total return, and yield, and
tax-equivalent yield.
Total return represents the change, over a specific period of time, in the value
of an investment in the Fund after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the net asset value per share of the Fund on the
last day of the period. This number is then annualized using semi-annual
compounding. The tax-equivalent yield of the Fund is calculated similarly to the
yield, but is adjusted to reflect the taxable yield that the Fund would have had
to earn to equal its actual yield, assuming a specific tax rate. The yield and
the tax-equivalent yield do not necessarily reflect income actually earned by
the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of the maximum sales load which,
if excluded, would increase the total return, yield, and tax-equivalent yield.
From time to time, the Fund may advertise its performance using certain
financial publications and/or compare its performance to certain indices.
SOUTH CAROLINA MUNICIPAL BOND FUND PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1994
<TABLE>
<CAPTION>
Credit
Rating:
Principal Moody's
Amount Issue or S&P* Value
<C> <S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Long-Term Municipal Securities--95.8%
$ 100,000 Aiken County, SC, 7.00% GO Bonds, 2/1/2002 A $ 103,335
150,000 Beaufort County, SC, School District, 7.80% GO Bonds,
12/1/96 A 157,414
675,000 Beaufort County, SC, 7.125% Lease Certificate of Participation
(Beaufort Memorial Hospital Project)/(AMBAC Insured),
6/1/2012 AAA 686,138
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 939,460
750,000 Berkeley County, SC, 6.50% Pollution Control Revenue Bonds
(SCE & G Project), 10/1/2014 A- 696,397
1,000,000 Berkeley County, SC, Water & Sewer, 6.50% Revenue Bonds
(MBIA Insured), 6/1/2006 AAA 1,014,970
950,000 Berkeley County, SC, Water & Sewer, 7.00% Revenue Bonds
(MBIA Insured), 6/1/2016 AAA 1,022,514
1,500,000 Berkeley County, SC, Water & Sewer, 5.50% (MBIA Insured)
6/1/2013 AAA 1,279,605
935,000 Berkeley County, SC, Water & Sewer, 6.00% (MBIA Insured),
6/1/2010 AAA 880,190
1,000,000 Cayce, SC, Water & Sewer, 7.15% Revenue Bonds (AMBAC
Insured), 7/1/2015 AAA 1,074,860
1,315,000 Charleston County, SC, 9.00% GO UT Bonds (State Aid
Withholding), 6/1/2001 AA 1,532,527
1,000,000 Charleston County, SC, 7.10% Lease Certificate of
Participation (MBIA Insured), 6/1/2011 AAA 1,078,860
310,000 Charleston County, SC, 9.00% Resource Recovery Bonds
(Foster Wheeler Project)/(Subject to AMT), 1/1/2005 A 338,322
400,000 Charleston County, SC, Water Works & Sewer, 7.05%
Revenue Bonds, (Series A), 1/1/2006 AA 408,844
1,000,000 Charleston County, SC, Water Works & Sewer, 6.00%
Revenue Bonds, 1/1/2012 AA- 907,620
1,500,000 Charleston County, SC, Water Works & Sewer, 7.00%
Revenue Bonds (Series A), 1/1/2015 AA- 1,506,210
1,100,000 Charleston County, SC, Water Works & Sewer, 5.40%
Refunding & Improvement Bonds, 1/1/2001 AA- 1,059,916
1,125,000 Chester County, SC, School District, 6.85% GO Bonds,
2/1/2009 A 1,117,811
875,000 Chester County, SC, School District, 6.85% GO Bonds,
2/1/2012 A 857,614
Long-Term Municipal Securities--continued
$ 250,000 City of Charleston, SC, 6.30% GO Bonds, 9/1/2005 AA $ 252,647
1,000,000 City of Charleston, SC, 6.50% GO Bonds, 6/1/2012 AA 966,590
1,000,000 Columbia, SC, Parking Facilities, 5.875% Revenue Refunding
Bonds (AMBAC Insured), 12/1/2013 AAA 902,140
355,000 Columbia, SC, Waterworks & Sewer System, 6.30% Revenue
Bonds, 2/1/2000 AA 364,226
1,500,000 Columbia, SC, Waterworks & Sewer System, 5.70% Revenue
Refunding Bonds, 2/1/2010 AA 1,338,660
1,000,000 Columbia, SC, Waterworks & Sewer System, 7.10% Revenue
Bonds, 2/1/2012, Prerefunded 2/1/2001 @ 102 AAA 1,076,510
600,000 Dorchester County, SC, School District Pound2, 6.65% GO Bonds
(MBIA Insured), 7/1/2012 AAA 589,590
870,000 Edgefield County, SC, School District, 6.40% GO Refunding
Bonds (FSA Insured), 2/1/2009 AAA 857,968
2,000,000 Fairfield County, SC, 6.50% Pollution Control Revenue Bonds,
9/1/2014 A 1,879,340
500,000 Florence County, SC, 6.75% Revenue Bonds (McLeod
Regional Medical Center Project)/(FGIC Insured), 11/1/2010 AAA 500,565
1,465,000 Florence County, SC, Water Works & Sewer, 5.00% Revenue
Bonds (AMBAC Insured), 3/1/2004 AAA 1,293,287
1,360,000 Georgetown County, SC, 6.25% Pollution Control Revenue
Bonds (International Paper Co. Project), 6/15/2005 A- 1,310,224
2,500,000 Grand Strand Water & Sewer Authority, 6.375% Revenue
Bonds (MBIA Insured), 6/1/2012 AAA 2,404,550
500,000 Greenville, SC, IDR, 7.10% Revenue Bonds (Lockheed
Aeromod Facility Project)/(Subject to AMT), 11/1/2011 A 503,230
760,000 Greenville, SC, 7.00% Hospital Revenue Bonds, 5/1/2017 AA- 742,322
500,000 Greenville, SC, 5.50% Hospital Facilities, 5/1/2016 AA- 403,680
500,000 Greenville, SC, 7.60% Revenue Bonds (Airport Project)/
(AMBAC Insured)/(Subject to AMT), 7/1/2000 AAA 521,925
100,000 Horry County, SC, 7.45% GO Bonds, 12/1/2004 A+ 108,455
980,000 Horry County, SC, 4.65% GO Bonds (MBIA Insured),
12/1/2005 AAA 818,604
1,110,000 Horry County, SC, School District, 4.70% GO Refunding
Bonds (Series B), 4/1/2002 AAA 995,970
450,000 Horry County, SC, School District, 7.00% GO Bonds,
12/1/2003 A 470,331
600,000 Horry County, SC, School District, 7.00% GO Bonds, 1/1/2005 A 627,828
1,960,000 Lancaster County, SC, School District, 6.50% GO Bonds
(MBIA Insured), 7/1/2008 AAA 1,959,843
Long-Term Municipal Securities--continued
$ 175,000 Lexington County, SC, IDR, 8.00% (J.B. White Project)/
(Mercantile Stores Guaranteed)/(Subject to AMT), 1/1/2011 NR $ 172,650
200,000 Medical University, SC, Hospital Facilities, 7.125% Revenue
Bonds (Series A), 7/1/2004 A+ 207,256
805,000 Medical University, SC, Hospital Facilities, 5.25% (MBIA
Insured), 7/1/2004 AAA 738,298
1,000,000 North Charleston, SC, Sewer District, 6.00% Revenue Bonds
(Series A)/(MBIA Insured), 7/1/2018 AAA 902,250
500,000 North Charleston, SC, Sewer District, 6.00% Revenue Bonds
(MBIA Insured), 7/1/2018 AAA 448,445
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 1,342,450
1,135,000 Piedmont Municipal Power Agency, SC, 6.375% Electric
Revenue Bonds (Series A)/(FGIC Insured), 1/1/2006 AAA 1,137,145
590,000 Piedmont Municipal Power Agency, SC, 6.85% Electric
Revenue Bonds (FGIC Insured), 1/1/2007 AAA 602,036
100,000 Piedmont Municipal Power Agency, SC, 7.40% Electric
Revenue Bonds (Series A)/(AMBAC Insured), 1/1/2018 AAA 101,934
1,000,000 Piedmont Municipal Power Agency, SC, 6.50% Electric
Revenue Bonds (FGIC Insured), 1/1/2011 AAA 966,110
255,000 Richland County, SC, Hospital Facility, 8.125% Revenue
Bonds (Sun Health Network Project)/(Sumitomo Bank, Ltd. LOC),
10/1/2011 AA3 271,929
600,000 Richland County, SC, 7.10% Hospital Revenue Bonds
(Community Provider Pool)/(Capital Guaranty Insured),
7/1/2005 AAA 637,950
1,250,000 Richland County, SC, 6.25% GO Bonds, 3/1/2011 AA 1,295,838
1,390,000 Richland County, SC, 6.25% GO Bonds (Serie B), 3/1/2001 AA 1,428,851
650,000 Richland County, SC, 7.45% Pollution Control Revenue Bonds
(Series A)/(Subject to AMT), 4/1/2021 A1 659,958
1,000,000 Richland County, SC, 6.75% Pollution Control Revenue Bonds
(Union Camp Project)/(Subject to AMT), 5/1/2022 A1 925,150
185,000 Rock Hill, SC, Housing Development Corp., 7.50% Revenue
Bonds (FNMA Guaranteed), 7/1/2010 AAA 189,799
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 1,058,930
900,000 South Carolina State, 5.00%, GO Bonds (Series A), 2/1/2009 AAA 839,430
Long-Term Municipal Securities--continued
$ 1,035,000 South Carolina State, 4.40% GO UT Refunding Bonds
(Series B)/(State Aid Withholding), 4/1/2001 AAA $ 937,503
405,000 South Carolina State Educational Assistance Authority, 6.50%
Revenue Bonds (Subject to AMT), 9/1/2004 AA 399,213
1,000,000 South Carolina State Educational Assistance Authority, 5.80%
Revenue Refunding Bonds (Guaranteed Student Loans)/ (Subject to
AMT), 9/1/2004 AAA 949,210
100,000 South Carolina HFA, 7.50% Revenue Bonds, 7/1/2011 AA 98,042
500,000 South Carolina HFA, 7.70% Revenue Bonds (Series C)/
(Subject to AMT), 7/1/2010 AA 511,735
520,000 South Carolina HFA, 7.75% Revenue Bonds (Series C)/
(Subject to AMT), 7/1/2022 AA 530,067
1,200,000 South Carolina HFA, 7.30% Revenue Bonds, 7/1/2011 AA 1,167,360
1,000,000 South Carolina Port Authority, 6.50% Revenue Bonds
(AMBAC Insured)/(Subject to AMT), 7/1/2006 AAA 1,001,220
1,000,000 South Carolina Port Authority, 6.625% Revenue Bonds
(AMBAC Insured)/(Subject to AMT), 7/1/2011 AAA 971,080
525,000 South Carolina Port Authority, 6.75% Revenue Bonds
(AMBAC Insured)/(Subject to AMT), 7/1/2021 AAA 499,522
600,000 South Carolina Public Service Authority, 7.00% Revenue
Bonds (Series C), 7/1/2012 A+ 599,346
1,125,000 South Carolina Public Service Authority, 7.30% Revenue
Bonds, 7/1/2021 A+ 1,127,948
1,000,000 South Carolina Public Service Authority, 6.75% Revenue
Bonds (Series A), 7/1/2005 A+ 1,004,330
125,000 South Carolina Public Service Authority, 6.90% Revenue
Bonds (Series A), 7/1/2021 A+ 119,297
1,400,000 South Carolina Public Service Authority, 7.00% Revenue
Bonds (Series B), 7/1/2012, Prerefunded 7/1/2001 @ 102 AAA 1,502,816
450,000 South Carolina Public Service Authority, 7.00% Revenue
Bonds, 7/1/2022 A+ 437,661
1,950,000 South Carolina Public Service Authority, 6.50% Revenue
Bonds (Santee Cooper)/(Series D)(AMBAC Insured), 7/1/2014 AAA 1,878,864
2,500,000 South Carolina Public Service Authority, 5.125% Revenue
Refunding Bonds (Series C)/(MBIA Insured), 1/1/2032 AAA 1,864,350
500,000 South Carolina Resource Authority, 7.00% Revenue Bonds
(Series A), 6/1/2003 AA 524,600
200,000 Spartanburg County, SC, 7.80% Revenue Bonds (Mary Black
Hospital Project), 10/1/2000, Prerefunded 10/1/98 @ 102 A- 218,648
</TABLE>
<TABLE>
<CAPTION>
Credit
Principal Rating:
Amount Moody's
or Shares Issue or S&P* Value
<C> <S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Long-Term Municipal Securities--continued
$ 100,000 Spartanburg County, SC, 8.25% Revenue Bonds (Mary Black
Hospital Project), 10/1/2008, Prerefunded 10/1/98 @ 102 A- $ 110,933
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 986,580
450,000 Spartanburg County, SC, Leased Housing Corp., 7.50%
Revenue Bonds, 10/1/2011 A 451,251
1,000,000 York County, SC, 4.80% GO Bonds (AMBAC Insured),
6/1/2008 AAA 801,580
1,000,000 York County, SC, 4.90% GO Bonds (AMBAC Insured),
6/1/2010 AAA 790,410
1,500,000 York County, SC, Public Facilities Corp., 7.50% Lease
Certificate of Participation, 6/1/2011, Prerefunded 6/1/2001
@102 AAA 1,647,765
200,000 York County, SC, School District Pound3, 9.00% GO Bonds
(MBIA Insured), 6/1/97 AAA 217,082
-------------
Total Long-Term Municipal Securities
(identified cost, $76,372,271) 72,825,914
-------------
Regulated Investment Companies--1.6%
1,174,769 Fidelity Tax-Exempt Money Market Fund (at net asset value) NR 1,174,769
-------------
Total Investments (identified cost, $77,547,040) $ 74,000,683+
-------------
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Credit ratings are unaudited.
+ The cost of investments for federal tax purposes amounts to $77,547,040. The
net unrealized depreciation of investments on a federal tax basis amounts to
$3,546,357, which is comprised of $632,832 appreciation and $4,179,189
depreciation at November 30, 1994.
Note: The categories of investments are shown as a percentage of net assets
($75,995,361) at November 30, 1994.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SOUTH CAROLINA MUNICIPAL BOND FUND
The following abbreviations are used in this portfolio:
AMT--Alternative Minimum Tax
AMBAC--American Municipal Bond Assurance Corporation
FGIC--Financial Guaranty Insurance Co.
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance
GO--General Obligation
HFA--Housing Finance and Development Authority
IDR--Industrial Development Revenue
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance
NR--Not Rated
UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
SOUTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1994
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value
(identified and tax cost $77,547,040) $ 74,000,683
Cash 2,171
Interest receivable 1,838,828
Receivable for investments sold 458,768
Receivable for Fund shares sold 50,560
Deferred expenses 3,108
-------------
Total assets 76,354,118
Liabilities:
Income distribution payable $ 213,705
Payable for Fund shares redeemed 105,038
Accrued expenses 40,014
----------
Total liabilities 358,757
-------------
Net Assets for 7,558,344 shares of beneficial interest outstanding $ 75,995,361
-------------
Net Assets Consist of:
Paid-in capital $ 78,805,042
Net unrealized appreciation (depreciation) of investments (3,546,357)
Accumulated net realized gain (loss) on investments 736,676
-------------
Total Net Assets $ 75,995,361
-------------
Net Asset Value and Redemption Proceeds Per Share:
($75,995,361 / 7,558,344 shares of beneficial interest outstanding) $10.05
-------------
Computation of Offering Price:
Offering Price Per Share: (100/95.5 of $10.05)* $10.52
-------------
</TABLE>
*See "What Shares Cost."
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SOUTH CAROLINA MUNICIPAL BOND FUND STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1994
<TABLE>
<S> <C> <C> <C>
Investment Income:
Interest income $4,850,212
Expenses:
Investment advisory fee $ 624,986
Trustees' fees 1,510
Administrative personnel and services fees 101,152
Custodian fees 19,268
Transfer and dividend disbursing agent fees and expenses 85,479
Fund share registration costs 17,477
Auditing fees 19,031
Legal fees 13,240
Printing and postage 30,017
Portfolio accounting fees 65,937
Insurance premiums 7,228
Miscellaneous 9,556
----------
Total expenses 994,881
Deduct--
Waiver of investment advisory fee $ 488,215
Waiver of administrative personnel and services fees 3,488 491,703
---------- ----------
Net expenses 503,178
------------
Net investment income 4,347,034
------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain (loss) on investments (identified cost basis) 736,173
Net change in unrealized appreciation (depreciation) on investments (8,983,137)
------------
Net realized and unrealized gain (loss) on investments (8,246,964)
------------
Change in net assets resulting from operations ($ 3,899,930)
------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
SOUTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended 11/30/94 11/30/93* 9/30/93
<S> <C> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 4,347,034 $ 707,729 $ 3,872,810
Net realized gain (loss) on investments ($736,173,
$147,642, and $79,226 net gains, respectively,
as computed for federal income tax purposes) 736,173 147,642 83,172
Net change in unrealized appreciation (depreciation) on
investments (8,983,137) (1,272,466) 4,888,206
-------------- ------------- --------------
Change in net assets resulting from operations (3,899,930) (417,095) 8,844,188
-------------- ------------- --------------
Distributions to Shareholders--
Dividends to shareholders from net investment income (4,347,034) (707,729) (3,872,810)
Distributions to shareholders from net realized gain on
investment transactions (226,365) -- --
-------------- ------------- --------------
Change in net assets from distributions to
shareholders (4,573,399) (707,729) (3,872,810)
-------------- ------------- --------------
Fund Share (Principal) Transactions--
Proceeds from sale of shares 22,357,697 4,720,992 28,079,747
Net asset value of shares issued to shareholders in
payment of dividends declared 1,805,778 277,901 1,537,258
Cost of shares redeemed (23,066,099) (3,176,759) (15,053,586)
-------------- ------------- --------------
Change in net assets from Fund share transactions 1,097,376 1,822,134 14,563,419
-------------- ------------- --------------
Change in net assets (7,375,953) 697,310 19,534,797
Net Assets:
Beginning of period 83,371,314 82,674,004 63,139,207
-------------- ------------- --------------
End of period $ 75,995,361 $ 83,371,314 $ 82,674,004
-------------- ------------- --------------
</TABLE>
*For the two months ended November 30, 1993.
(See Notes which are on integral part of the financial statements)
- --------------------------------------------------------------------------------
SOUTH CAROLINA MUNICIPAL BOND FUND NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1994
(1) ORGANIZATION
The Biltmore Municipal Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of one non-diversified portfolio, South
Carolina Municipal Bond Fund (the "Fund"). Effective December 30, 1994, the Fund
will change it's name to Biltmore South Carolina Municipal Bond Fund.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--Municipal bonds are valued 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 may be valued at
amortized cost, which approximates fair market value. Investments in other
regulated 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. 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.
F. 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 Fund shares were as follows:
<TABLE>
<CAPTION>
Year Ended November 30, September 30,
1994 1993* 1993
<S> <C> <C> <C>
--------------------------------------
Shares sold 2,062,564 420,846 2,589,410
Shares issued to shareholders in payment of
dividends declared 169,074 24,836 141,549
Shares redeemed (2,169,631) (282,074) (1,395,818)
----------- --------- --------------
Net change resulting from Fund share transactions 62,007 163,608 1,335,141
----------- --------- --------------
</TABLE>
*For the two months ended November 30, 1993 (Note 6).
(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", formerly known as "The South Carolina
National Bank"), receives 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. 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 for which it is paid a fee. The FServ fee is based on the size, type
and number of accounts and transactions made by shareholders.
FServ also maintains the Fund's accounting records for which it is paid a fee.
The FServ 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 borne initially
be 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 fiscal year ended November 30, 1994, the Fund paid
$3,975 pursuant to this agreement.
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 investments, for the
fiscal year ended
November 30, 1994, were as follows:
<TABLE>
<S> <C>
Purchases $ 20,461,313
-------------
Sales $ 18,511,448
-------------
</TABLE>
(6) CHANGE IN FISCAL YEAR
Effective October 1, 1993, the Fund changed its fiscal year end from September
30 to November 30.
(7) 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 of
that state than would be a comparable general tax-exempt mutual fund. In order
to reduce the credit risk associated with such factors, at November 30, 1994,
46.0% 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 aggregate percentages by financial institutions
and agencies ranged from 0.3% to 20.6% of total investments.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
REPORT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
To the Trustees and Shareholders of
THE BILTMORE MUNICIPAL FUNDS
We have audited the accompanying statement of assets and liabilities, including
the portfolio of investments, of South Carolina Municipal Bond Fund (the "Fund,"
a portfolio of The Biltmore Municipal Fund') as of November 30, 1994, and the
related statement of operations for the year then ended and the statements of
changes in net assets and financial highlights (see page 2 of this Prospectus)
for the year ended November 30, 1994 and for the two months ended November 30,
1993. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits. The statement
of changes in net assets for the year ended September 30, 1993, and financial
highlights for the three fiscal years in the period ended September 30, 1993,
were audited by other auditors whose report, dated November 12, 1993, expressed
an unqualified opinion on those statements.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
November 30, 1994, by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of South
Carolina Municipal Bond Fund of The Biltmore Municipal Funds at November 30,
1994, the results of its operations for the year then ended, the changes in its
net assets and financial highlights for the year ended November 30, 1994 and for
the two months ended November 30, 1993, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 12, 1995
Addresses
- ------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------
DISTRIBUTOR Federated Securities Corp.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ------------------------------------------------------------------------------
INVESTMENT ADVISER Wachovia Investment Management Group
301 North Main Street
Winston-Salem, North Carolina 27150
- -------------------------------------------------------------------------------
CUSTODIAN Wachovia Bank of North Carolina, N.A.
Wachovia Trust Operations
301 North Main Street
Winston-Salem, North Carolina 27150
- -------------------------------------------------------------------------------
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, Federated Services Company
AND PORTFOLIO RECORDKEEPER Federated Investors Tower
PITTSBURGH, PENNSYLVANIA 15222-3779
- -------------------------------------------------------------------------------
COUNSEL TO THE BILTMORE MUNICIPAL FUNDS Kirkpatrick & Lockhart
1800 M Street, N.W.
Washington, D.C. 20036-5891
- -------------------------------------------------------------------------------
COUNSEL TO THE INDEPENDENT TRUSTEES Piper & Marbury
1200 Nineteenth Street, N.W.
Washington, D.C. 20036-2430
- --------------------------------------------------------------------------------
SPECIAL SOUTH CAROLINA TAX Counsel Sinkler & Boyd, PA
1426 Main Street
Columbia, South Carolina 29201
- --------------------------------------------------------------------------------
INDEPENDENT AUDITORS Ernst & Young LLP
One Oxford Centre
Pittsburgh, Pennsylvania 15219
- --------------------------------------------------------------------------------
THE BILTMORE SERVICE CENTER 101 Greystone Boulevard
SC-9215
Columbia, South Carolina 29226
- --------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND PROSPECTUS
A NON-DIVERSIFIED PORTFOLIO OF THE BILTMORE MUNICIPAL FUNDS
An Open-End, Management Investment Company
090313-10-7
January 31, 1995 0120501A
(1/95)
Biltmore South Carolina Municipal Bond Fund
(A Portfolio of The Biltmore Municipal Funds)
Statement of Additional Information
This Statement of Additional Information should be read with the
prospectus of Biltmore South Carolina Municipal Bond Fund (the
"Fund"), a portfolio in The Biltmore Municipal Funds (the
"Trust"), dated January 31, 1995. This Statement is not a
prospectus itself. To receive a copy of the prospectus, write the
Fund or call The Biltmore Service Center toll-free at 1800-994-
4414.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
Statement dated January 31, 1995
FEDERATED SECURITIES CORP.
Distributor
A subsidiary of FEDERATED
INVESTORS
General Information About the
Fund 1
Investment Objective and Policies 1
Acceptable Investments 1
Investment Limitations 4
The Biltmore Municipal Funds
Management 5
Officers and Trustees 5
Fund Ownership 6
Trustees Compensation 7
Trustee Liability 7
Investment Advisory Services 7
Adviser to the Fund 7
Advisory Fees 7
Administrative Services 8
Brokerage Transactions 8
Purchasing Shares 8
Conversion to Federal Funds 8
Valuing Municipal Bonds 9
Redeeming Shares 9
Redemption in Kind 9
Tax Status 9
The Fund's Tax Status 9
Shareholders' Tax Status 9
Total Return 10
Yield 10
Tax-Equivalent Yield 10
Tax-Equivalency Table 10
Performance Comparisons 11
Appendix 13
General Information About the Fund
The Fund is a portfolio in the Trust. The Trust was established as a
Massachusetts business trust under a Declaration of Trust dated August
15, 1990. Prior to June 3, 1993, the Trust was known as "The Passageway
Funds." Prior to December 30, 1994, the Fund was known as "South
Carolina Municipal Bond Fund." Capitalized terms not otherwise defined
in this Statement have the same meaning assigned in the prospectus.
Investment Objective and Policies
The Fund's investment objective is to provide for its shareholders
current income which is exempt from federal regular income tax and South
Carolina state income taxes. The objective cannot be changed without
approval of shareholders.
Acceptable Investments
If a high-rated security loses its rating or has its rating
reduced after the Fund has purchased it, the Fund is not required
to drop the security from its portfolio, but may consider doing
so. If ratings made by Moody's Investors Service, Inc. ("Moody's")
or Standard & Poor's Ratings Group ("Standard & Poor's") change
because of changes in those organizations or in their rating
systems, the Fund will try to use comparable ratings as standards
in accordance with the investment policies described in the Fund's
prospectus.
Participation Interests
The financial institutions from which the Fund purchases
participation interests frequently provide or secure from another
financial institution irrevocable letters of credit or guarantees
and give the Fund the right to demand payment of the principal
amounts of the participation interests plus accrued interest on
short notice (usually within seven days).
Variable Rate Municipal Securities
Variable interest rates generally reduce changes in the market
value of municipal securities from their original purchase prices.
Accordingly, as interest rates decrease or increase, the potential
for capital appreciation or depreciation is less for variable rate
municipal securities than for fixed income obligations.
Many municipal securities with variable interest rates purchased
by the Fund are subject to repayment of principal (usually within
seven days) on the Fund's demand. The terms of these variable rate
demand instruments require payment of principal obligations, the
issuer of the participation interests, or a guarantor of either
issuer.
Municipal Leases
The Fund may purchase municipal securities in the form of
participation interests which represent undivided proportional
interests in lease payments by a governmental or non-profit
entity. The lease payments and other rights under the lease
provide for and secure the payments on the certificates. Lease
obligations may be limited by municipal charter or the nature of
the appropriation for the lease. In particular, lease obligations
may be subject to periodic appropriation. If the entity does not
appropriate funds for future lease payments, the entity cannot be
compelled to make such payments. Furthermore, a lease may provide
that the certificate trustee cannot accelerate lease obligations
upon default. The trustee would only be able to enforce lease
payments as they become due. In the event of a default or failure
of appropriation, it is unlikely that the trustee would be able to
obtain an acceptable substitute source of payment or that the
substitute source of payment will generate tax-exempt income.
When-Issued and Delayed Delivery Transactions
These transactions are made to secure what is considered to be an
advantageous price or yield for the Fund. No fees or other
expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for
the securities to be purchased are segregated on the Fund's
records at the trade date. These assets are marked to market
daily and are maintained until the transaction has been settled.
The Fund does not intend to engage in when-issued and delayed
delivery transactions to an extent that would cause the
segregation of more than 20% of the total value of its assets.
Temporary Investments
The Fund may also invest in temporary investments from time to time for
defensive purposes.
The Fund might invest in temporary investments:
o as a reaction to market conditions;
o while waiting to invest proceeds of sales of shares or portfolio
securities, although generally proceeds from sales of shares will
be invested in municipal bonds as quickly as possible; or
o in anticipation of redemption requests.
Repurchase Agreements
Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell
U.S. government securities or certificates of deposit to the Fund
and agree at the time of sale to repurchase them at a mutually
agreed upon time and price within one year from the date of
acquisition. The Fund or its custodian will take possession of the
securities subject to repurchase agreements. To the extent that
the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any
sale of such securities. In the event that such a defaulting
seller filed for bankruptcy or became insolvent, disposition of
such securities by the Fund might be delayed pending court action.
The Fund believes that under the regular procedures normally in
effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would
rule in favor of the Fund and allow retention or disposition of
such securities. The Fund may only enter into repurchase
agreements with banks and other recognized financial institutions,
such as broker/dealers, which are found by the Fund's adviser to
be creditworthy.
From time to time, such as when suitable South Carolina municipal
securities are not available, the Fund may invest a portion of its
assets in cash. Any portion of the Fund's assets maintained in cash will
reduce the amount of assets in South Carolina municipal securities and
thereby reduce the Fund's yield.
Lending of Portfolio Securities
The collateral received when the Fund lends portfolio securities must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Fund.
During the time portfolio securities are on loan, the borrower pays the
Fund any dividends or interest paid on such securities. Loans are
subject to termination at the option of the Fund or the borrower. The
Fund may pay reasonable administrative and custodial fees in connection
with a loan and may pay a negotiated portion of the interest earned on
the cash or equivalent collateral to the borrower or placing broker.
Portfolio Turnover
The Fund will not attempt to set or meet a portfolio turnover rate,
since any turnover would be incidental to transactions undertaken in an
attempt to achieve the Fund's investment objectives. For the fiscal
year ended November 30, 1994, for the two months ended November 30,
1993, and for the fiscal year ended September 30, 1993, the portfolio
turnover rates were 23%, 2%, and 4%, respectively.
Municipal Bond Insurance
Under the Policies, municipal bond insurers unconditionally guarantee to
the Fund the timely payment of principal and interest on the insured
municipal securities when and as such payments shall become due but
shall not be paid by the issuer, except that in the event of any
acceleration of the due date of the principal by reason of mandatory or
optional redemption (other than acceleration by reason of mandatory
sinking fund payments), default or otherwise, the payments guaranteed
will be made in such amounts and at such times as payments of principal
would have been due had there not been such acceleration. The municipal
bond insurers will be responsible for such payments less any amounts
received by the Fund from any trustee for the municipal bond issuers or
from any other source. The Policies do not guarantee payment on an
accelerated basis, the payment of any redemption premium, the value for
the shares of the Fund, or payments of any tender purchase price upon
the tender of the municipal securities. The Policies also do not insure
against nonpayment of principal of or interest on the securities
resulting from the insolvency, negligence or any other act or omission
of the trustee or other paying agent for the securities. However, with
respect to small issue industrial development municipal bonds and
pollution control revenue municipal bonds covered by the Policies, the
municipal bond insurers guarantee the full and complete payments
required to be made by or on behalf of an issuer of such municipal
securities if there occurs any change in the tax-exempt status of
interest on such municipal securities, including principal, interest or
premium payments, if any, as and when required to be made by or on
behalf of the issuer pursuant to the terms of such municipal securities.
A when-issued municipal security will be covered under the Policies upon
the settlement date of the issuer of such when-issued municipal
securities. In determining to insure municipal securities held by the
Fund, each municipal bond insurer has applied its own standard, which
corresponds generally to the standards it has established for
determining the insurability of new issues of municipal securities. This
insurance is intended to reduce financial risk, but the cost thereof and
compliance with investment restrictions imposed under the Policies will
reduce the yield to shareholders of the Fund.
If a Policy terminates as to municipal securities sold by the Fund on
the date of sale, in which event municipal bond insurers will be liable
only for those payments of principal and interest that are then due and
owing, the provision for insurance will not enhance the marketability of
securities held by the Fund, whether or not the securities are in
default or subject to significant risk of default, unless the option to
obtain permanent insurance is exercised. On the other hand, since issuer-
obtained insurance will remain in effect as long as the insured
municipal securities are outstanding, such insurance may enhance the
marketability of municipal securities covered thereby, but the exact
effect, if any, on marketability cannot be estimated. The Fund generally
intends to retain any securities that are in default or subject to
significant risk of default and to place a value on the insurance, which
ordinarily will be the difference between the market value of the
defaulted security and the market value of similar securities of minimum
investment grade (i.e., rated BBB by S&P or Baa by Moody's) that are not
in default. To the extent that the Fund holds defaulted securities, it
may be limited in its ability to manage its investment and to purchase
other municipal securities. Except as described above with respect to
securities that are in default or subject to significant risk of
default, the Fund will not place any value on the insurance in valuing
the municipal securities that it holds.
Municipal bond insurance may be provided by one or more of the following
insurers or any other municipal bond insurer which is rated Aaa by
Moody's or AAA by Standard & Poor's.
Municipal Bond Investors Assurance Corp.
Municipal Bond Investors Assurance Corp. ("MBIA") is a wholly-
owned subsidiary of MBIA, Inc., a Connecticut insurance company,
which is owned by AEtna Life and Casualty, Credit Local DeFrance
CAECL, S.A., The Fund American Companies, and the public. The
investors of MBIA, Inc., are not obligated to pay the obligations
of MBIA. MBIA, domiciled in New York, is regulated by the New York
State Insurance Department and licensed to do business in various
states. The address of MBIA is 113 King Street, Armonk, New York,
10504, and its telephone number is (914) 273-4345. Standard &
Poor's has rated the claims-paying ability of MBIA "AAA."
AMBAC Indemnity Corporation
AMBAC Indemnity Corporation ("AMBAC") is a Wisconsin-domiciled
stock insurance company, regulated by the Insurance Department of
Wisconsin, and licensed to do business in various states. AMBAC is
a wholly-owned subsidiary of AMBAC, Inc., a financial holding
company which is owned by the public. Copies of certain
statutorily required filings of AMBAC can be obtained from AMBAC.
The address of AMBAC's administrative offices is One State Street
Plaza, 17th Floor, New York, New York 10004, and its telephone
number is (212) 668-0340. Standard & Poor's has rated the claims-
paying ability of AMBAC "AAA."
Financial Guaranty Insurance Company
Financial Guaranty Insurance Company ("Financial Guaranty") is a
whollyowned subsidiary of FGIC Corporation, a Delaware holding
company. FGIC Corporation is wholly-owned by General Electric
Capital Corporation. The investors of FGIC Corporation are not
obligated to pay the debts of or the claims against Financial
Guaranty. Financial Guaranty is subject to regulation by the New
York State Insurance Department and is licensed to do business in
various states. The address of Financial Guaranty is 115 Broadway,
New York, New York 10006, and its telephone number is (212) 312-
3000. Standard & Poor's has rated the claims-paying ability of
Financial Guaranty "AAA."
Investment Limitations
Selling Short and Buying on Margin
The Fund will not sell any securities short or purchase any
securities on margin but may obtain such short-term credits as may
be necessary for clearance of purchases and sales of securities.
Issuing Senior Securities and Borrowing Money
The Fund will not issue senior securities except that the Fund may
borrow money in amounts up to one-third of the value of its total
assets, including the amounts borrowed.
The Fund will not borrow money for investment leverage, but rather
as a temporary, extraordinary, or emergency measure or to
facilitate management of the portfolio by enabling the Fund to
meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. The
Fund will not purchase any securities while borrowings in excess
of 5% of its total assets are outstanding.
Pledging Assets
The Fund will not mortgage, pledge, or hypothecate its assets
except to secure permitted borrowings. In those cases, it may
mortgage, pledge, or hypothecate assets having a market value not
exceeding 10% of the value of its total assets at the time of the
pledge.
Underwriting
The Fund will not underwrite any issue of securities except as it
may be deemed to be an underwriter under the Securities Act of
1933 in connection with the sale of securities in accordance with
its investment objective, policies, and limitations.
Investing in Real Estate
The Fund will not buy or sell real estate, although it may invest
in municipal bonds secured by real estate or interests in real
estate.
Investing in Commodities
The Fund will not buy or sell commodities, commodity contracts, or
commodities futures contracts.
Investing in Restricted Securities
The Fund will not invest more than 10% of the value of its net
assets in securities subject to restrictions on resale, under the
Securities Act of 1933.
Lending Cash or Securities
The Fund will not lend any of its assets except portfolio
securities up to one-third of the value of its total assets. The
Fund may, however, acquire publicly or non-publicly issued
municipal bonds or temporary investments or enter into repurchase
agreements in accordance with its investment objective, policies,
and limitations or the Trust's Declaration of Trust.
Dealing in Puts and Calls
The Fund will not buy or sell puts, calls, straddles, spreads, or
any combination of these.
Concentration of Investments
The Fund will not purchase securities if, as a result of such
purchase, 25% or more of the value of its total assets would be
invested in any one industry, or in industrial development bonds
or other securities, the interest upon which is paid from revenues
of similar types of projects. However, the Fund may invest as
temporary investments more than 25% of the value of its assets in
cash or cash items, securities issued or guaranteed by the U.S.
government, its agencies, or instrumentalities, or instruments
secured by these money market instruments, such as repurchase
agreements.
The above investment limitations cannot be changed without shareholder
approval. The following limitations, however, may be changed by the
Trustees without shareholder approval. Shareholders will be notified
before any material change in these limitations becomes effective.
Investing in Illiquid Securities
The Fund will not invest more than 15% of its net assets in
illiquid obligations, including repurchase agreements providing
for settlement in more than seven days after notice, and certain
restricted securities.
Investing in New Issuers
The Fund will not invest more than 5% of the value of its total
assets in industrial development bonds where the principal and
interest are the responsibility of companies (or guarantors, where
applicable) with less than three years of continuous operations,
including the operation of any predecessor.
Investing in Minerals
The Fund will not purchase or sell, oil, gas, or other mineral
exploration or development programs, or leases.
Investing in Securities of Other Investment Companies
The Fund will not own more than 3% of the total outstanding voting
stock of any investment company, invest more than 5% of its total
assets in any investment company, or invest more than 10% of its
total assets in investment companies in general. The Fund will
purchase securities of investment companies only in open-market
transactions involving only customary broker's commissions.
However, these limitations are not applicable if the securities
are acquired in a merger, consolidation, or acquisition of assets.
Except with respect to borrowing money, if a percentage limitation is
adhered to at the time of investment, a later increase or decrease in
percentage resulting from any change in value or net assets will not
result in a violation of such restriction.
For purposes of its policies and limitations, the Fund considers
certificates of deposit and demand and time deposits issued by a U.S.
branch of a domestic bank or savings and loan, having capital, surplus,
and undivided profits in excess of $100,000,000 at the time of
investment, to be "cash items."
The Fund does not expect to borrow money or pledge securities in excess
of 5% of the value of its net assets and has no present intent to do so
in the coming fiscal year.
The Biltmore Municipal Funds Management
Officers and Trustees
Officers and Trustees are listed with their addresses, principal
occupations, and present positions. Each of the Trustees and officers
listed below holds an identical position with The Biltmore Funds,
another investment company. Except as listed below, none of the Trustees
or officers are affiliated with Wachovia Bank of South Carolina, N.A.,
Wachovia Bank of North Carolina, N.A., Federated Investors, Federated
Securities Corp., Federated Services Company or Federated Administrative
Services.
James A. Hanley
Trustee
Retired; Vice President and Treasurer, Abbott Laboratories (health care
products) (until 1992).
Malcolm T. Hopkins
Trustee
Private investor and consultant; Director, the Columbia Gas System, Inc.
(integrated natural gas production, transmission and distribution);
Director MAPCO, Inc. (diversified energy); Director, Metropolitan Series
Funds, Inc. and MetLife Portfolios, Inc. (investment companies);
Director, Kinder-Care Learning Centers, Inc. (child care); Director, U.S.
Home Corporation (residential builder and land development); and
Director, EMCOR Group, Inc. (engineering and construction).
Samuel E. Hudgins
Trustee
President, Percival Hudgins & Company, Inc. (investment
bankers/financial consultants); Director, Atlantic American Corporation
(insurance holding company); Director, Bankers Fidelity Life Insurance
Company; Director and Vice Chairman, Leath Furniture, Inc. (retail
furniture); President, Atlantic American Corporation (until 1988);
Director, Vice Chairman and Chief Executive Officer, Rhodes, Inc. (retail
furniture) (until 1988); Chairman and Director, Atlantic American Life
Insurance Co., Georgia Casualty & Surety Company, and Bankers Fidelity
Life Insurance (until 1988).
J. Berkley Ingram, Jr.
Trustee
Real estate investor and partner; Director, VF Corporation (apparel
company); formerly, Vice Chairman, Massachusetts Mutual Life Insurance
Company.
D. Dean Kaylor
Trustee
Retired; Executive Vice President and Chief Financial Officer, NBD Bank,
N.A. and NBD Bancorp, Inc. (bank and bank holding company) (until 1990).
John W. McGonigle
President and Secretary
Vice President, Secretary, General Counsel, and Trustee, Federated
Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Trustee, Federated
Services Company; Executive Vice President, Secretary and Trustee,
Federated Administrative Services; Executive Vice President and Director,
Federated Securities Corp.
Ronald M. Petnuch
Vice President and Assistant Treasurer
Vice President, Federated Administrative Services; formerly, Associate
Corporate Counsel, Federated Investors; Vice President and Assistant
Treasurer for certain investment companies for which Federated Securities
Corp. is the principal distributor.
Joseph M. Huber
Secretary
Corporate Counsel, Federated Investors.
Fund Ownership
Officers and Trustees own less than 1% of the Fund's outstanding shares.
Trustees Compensation
NAME AND AGGREGATE TOTAL COMPENSATION
POSITION WITH THE COMPENSATION FROM PAID TO THE TRUSTEES
FROM THE
TRUST THE TRUST+ TRUST AND FUND
COMPLEX #
James A. Hanley,
Trustee $1,314 $23,400 for the
Trust and
one other
investment company
Malcolm T. Hopkins,
Trustee $1,080 $18,000 for the
Trust and
one other
investment company
Samuel E. Hudgins,
Trustee $1,314 $23,400 for the
Trust and
one other
investment company
J. Berkley Ingram, Jr.
Trustee $1,080 $18,000 for the
Trust and
one other
investment company
D. Dean Kaylor,
Trustee $1,024 $16,875 for the
Trust and
one other
investment company
+The aggregate compensation is paid by the Trust, which is comprised of
three portfolios.
# The Fund Complex is comprised of 15 portfolios.
Trustee Liability
The Biltmore Municipal Funds' Declaration of Trust provides that the
Trustees are not liable for errors of judgment or mistakes of fact or
law. However, they are not protected against any liability to which they
would otherwise be subject by reason of willful misfeasance, bad faith,
gross negligence, or reckless disregard of the duties involved in the
conduct of their office.
Investment Advisory Services
Adviser to the Fund
The Fund's investment adviser is Wachovia Bank of South Carolina, N.A.
(the "Adviser") (formerly known as The South Carolina National Bank).
The Adviser shall not be liable to the Fund or any shareholder for any
losses that may be sustained in the purchase, holding, lending, or sale
of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with
the Fund.
Because of the internal controls maintained by Wachovia Banks to
restrict the flow of non-public information, Fund investments are
typically made without any knowledge of Wachovia Banks' or their
affiliates' lending relationship with an issuer.
Advisory Fees
For its advisory services, the Adviser receives an annual investment
advisory fee as described in the prospectus. During the fiscal year
ended November 30, 1994, the two months ended November 30, 1993 and the
fiscal year ended September 30, 1993, the Adviser earned $624,986,
$103,802 and $531,849, respectively, of which $488,215 $83,041 and
$438,960, respectively, were voluntarily waived.
State Expense Limitations
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose
shares are registered for sale in those states. If the Fund's
normal operating expenses (including the investment advisory fee,
but not including brokerage commissions, interest, taxes, and
extraordinary expenses) exceed 2-1/2% per year of the first $30
million of average net assets, 2% per year of the next $70 million
of average net assets, and 1-1/2% per year of the remaining
average net assets, the Adviser will waive its fee or reimburse
the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by
the amount of the excess, subject to an annual adjustment. If the
expense limitation is exceeded, the amount to be reimbursed by the
Adviser will be limited, in any single fiscal year, by the amount
of the investment advisory fee.
Administrative Services
Federated Administrative Services, a subsidiary of Federated Investors,
provides administrative personnel and services to the Fund for the fees
set forth in the prospectus. During the fiscal year ended November 30,
1994, the two months ended November 30, 1993 and the fiscal year ended
September 30, 1993, the Fund's administrator earned $101,152, $20,760
and $106,370 respectively, of which $3,488 was voluntarily waived
during the fiscal year ended November 30, 1994.
Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of
portfolio instruments, the Adviser looks for prompt execution of the
order at a favorable price. In working with dealers, the Adviser will
generally use those who are recognized dealers in specific portfolio
instruments, except when a better price and execution of the order can
be obtained elsewhere. The Adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to review by the
Trustees. The Adviser may select brokers and dealers who offer brokerage
and research services. These services may be furnished directly to the
Fund or to the Adviser and may include:
o advice as to the advisability of investing in securities;
o security analysis and reports;
o economic studies;
o industry studies;
o receipt of quotations for portfolio evaluations; and
o similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of
the brokerage and research services provided.
Research services provided by brokers may be used by the Adviser or by
its affiliates in advising other accounts. To the extent that receipt of
these services may supplant services for which the Adviser or its
affiliates might otherwise have paid, it would tend to reduce their
expenses.
Purchasing Shares
Except under certain circumstances described in the prospectus, shares
are sold at their net asset value plus a sales charge on days the New
York Stock Exchange, the Wachovia Banks, and the Federal Reserve Wire
System are open for business. The procedure for purchasing shares of the
Fund is explained in the prospectus under "Investing in the Fund."
Conversion to Federal Funds
It is the Fund's policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from
shareholders must be in federal funds or be converted into federal funds
before shareholders begin to earn dividends. The Wachovia Banks act as
the shareholders' agent in depositing checks and converting them to
federal funds.
Determining Net Asset Value
Net asset value generally changes each day. The days on which net asset
value is calculated by the Fund are described in the prospectus.
Valuing Municipal Bonds
The Trustees use an independent pricing service to value municipal
bonds. The independent pricing service takes into consideration yield,
stability, risk, quality, coupon rate, maturity, type of issue, trading
characteristics, special circumstances of a security or trading market,
and any other factors or market data it considers relevant in
determining valuations for normal institutional size trading units of
debt securities, and does not rely exclusively on quoted prices.
Redeeming Shares
The Fund redeems shares at the next computed net asset value after the
Fund receives the redemption request. Redemption procedures are
explained in the prospectus under "Redeeming Shares."
Redemption in Kind
Although the Trust intends to redeem shares in cash, it reserves the
right under certain circumstances to pay the redemption price in whole
or in part by a distribution of securities from the Fund's portfolio.
To the extent available, such securities will be readily marketable.
Redemption in kind will be made in conformity with applicable Securities
and Exchange Commission rules, taking such securities at the same value
employed in determining net asset value and selecting the securities in
a manner the Trustees determine to be fair and equitable.
Redemption in kind is not as liquid as cash redemption. If redemption
is made in kind, shareholders receiving their securities and selling
them before their maturity could receive less than the redemption value
of their securities and could incur transaction costs.
The Trust has elected to be governed by Rule 18f-1 of the Investment
Company Act of 1940, which obligates the Fund to redeem shares for any
one shareholder in cash only up to the lesser of $250,000 or 1% of the
Fund's net asset value during any 90-day period. Any redemption beyond
this amount will also be in cash unless the Trustees determine that
payments should be in kind.
Tax Status
The Fund's Tax Status
The Fund expects to pay no federal income tax because it intends to meet
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment
afforded to such companies. To qualify for this treatment, the Fund
must, among other requirements:
o derive at least 90% of its gross income from dividends, interest, and
gains from the sale of securities;
o derive less than 30% of its gross income from the sale of securities
held less than three months;
o invest in securities within certain statutory limits; and
o distribute to its shareholders at least 90% of its net income earned
during the year.
Shareholders' Tax Status
No portion of any income dividend paid by the Fund is eligible for the
dividends received deductions available to corporations.
Capital Gains
Capital gains or losses may be realized by the Fund on the sale of
portfolio securities and as a result of discounts from par value
on securities held to maturity. Sales would generally be made
because of:
o the availability of higher relative yields;
o differentials in market values;
o new investment opportunities;
o changes in creditworthiness of an issuer; or
o an attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether
they are taken in cash or reinvested, and regardless of the length
of time the shareholder has owned the shares.
Total Return
The Fund's average annual total returns for the one-year period ended
November 30, 1994, and for the period from January 11, 1991 (start of
performance) to November 30, 1994, were (8.79%) and 4.73 %,
respectively.
The average annual total return for the Fund is the average compounded
rate of return for a given period that would equate a $1,000 initial
investment to the ending redeemable value of that investment. The ending
redeemable value is computed by multiplying the number of shares owned
at the end of the period by the net asset value per share at the end of
the period. The number of shares owned at the end of the period is based
on the number of shares purchased at the beginning of the period with
$1,000, less any applicable sales load, adjusted over the period by any
additional shares, assuming the monthly reinvestment of all dividends
and distributions.
Yield
The Fund's yield for the thirty-day period ended November 30, 1994 ,was
5.68%.
The yield for the Fund is determined by dividing the net investment
income per share (as defined by the Securities and Exchange Commission)
earned by the Fund over a thirty-day period by the maximum offering
price per share on the last day of the period. This value is then
annualized using semi-annual compounding. This means that the amount of
income generated during the thirty-day period is assumed to be generated
each month over a twelve-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by
the Fund because of certain adjustments required by the Securities and
Exchange Commission and, therefore, may not correlate to the dividends
or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees
in connection with services provided in conjunction with an investment
in the Fund, performance will be reduced for those shareholders paying
those fees.
Tax-Equivalent Yield
The Fund's tax-equivalent yield for the thirty-day period ended November
30, 1994 was 8.74%, assuming a 31% tax bracket.
The tax-equivalent yield of the Fund is calculated similarly to the
yield, but is adjusted to reflect the taxable yield that the Fund would
have had to earn to equal its actual yield, assuming that income is 100%
tax-exempt.
Tax-Equivalency Table
The Fund may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in the Fund's
portfolio generally remains free from federal regular income tax,* and
is often free from state and local taxes as well. As the table below
indicates, a "tax-free" investment is an attractive choice for
investors, particularly in times of narrow spreads between tax-free and
taxable yields.
TAXABLE YIELD EQUIVALENT FOR 1995
STATE OF SOUTH CAROLINA
COMBINED FEDERAL AND STATE INCOME TAX BRACKET:
22.00% 35.00% 38.00% 43.00%
46.60%
JOINT $1 - $39,001 - $94,251 - $143601 - OVER
RETURN: 39,000 94,250 143,600 256,500 $256,500
SINGLE $1 - $23,351 - $556,551 - $117,951 - OVER
RETURN: 23,350 56,550 117,950 256,500 $256,500
TAX-EXEMPT
YIELD TAXABLE YIELD EQUIVALENT
2.50% 3.21% 3.85% 4.03% 4.39%
4.68%
3.00% 3.85% 4.62% 4.84% 5.26%
5.62%
3.50% 4.49% 5.38% 5.65% 6.14%
6.55%
4.00% 5.13% 6.15% 6.45% 7.02%
7.49%
4.50% 5.77% 6.92% 7.26% 7.89%
8.43%
5.00% 6.41% 7.69% 8.06% 8.77%
9.36%
5.50% 7.05% 8.46% 8.87% 9.65%
10.30%
6.00% 7.69% 9.23% 9.68% 10.53%
11.24%
6.50% 8.33% 10.00% 10.48% 11.40%
12.17%
7.00% 8.97% 10.77% 11.29% 12.28%
13.11%
NOTE: THE MAXIMUM MARGINAL TAX RATE FOR EACH BRACKET WAS USED IN
CALCULATING THE TAXABLE YIELD EQUIVALENT.
FURTHERMORE, ADDITIONAL STATE AND LOCAL TAXES PAID ON COMPARABLE TAXABLE
INVESTMENTS WERE NOT USED TO INCREASE FEDERAL DEDUCTIONS.
The chart above is for illustrative purposes only. It is not an
indicator of past or future performance of the Fund.
*Some portion of the Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
Performance Comparisons
The Fund's performance depends upon such variables as:
o portfolio quality;
o average portfolio maturity;
o type of instruments in which the portfolio is invested;
o changes in interest rates and market value of portfolio securities;
o changes in the Fund's expenses; and
o various other factors.
The Fund's performance fluctuates on a daily basis largely because net
earnings and the maximum offering price (i.e., net asset value plus
any sales charge) per share fluctuate daily. Both net earnings and
offering price per share are factors in the computation of yield and
total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors, such as the composition
of any index used, prevailing market conditions, portfolio compositions
of other funds, and methods used to value portfolio securities and
compute offering price. The financial publications and/or indices which
the Fund uses in advertising may include:
o Lipper Analytical Services, Inc. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in net asset value over a specific period of time. From time to time,
the Fund will quote its Lipper ranking in the "general municipal bond
funds" category in advertising and sales literature.
o Morningstar Inc., an independent rating service, is the publisher of
the bi- weekly Mutual Fund Values. Mutual Fund Values rates more than
1,000 NASDAQ- listed mutual funds of all types, according to their
risk-adjusted returns. The maximum rating is five stars, and ratings
are effective for two weeks.
o Lehman Brothers Five-Year State General Obligations Bonds is an index
comprised of all state general obligation debt issues with maturities
between four and six years. These bonds are rated A or better and
represent a variety of coupon ranges. Index figures are total returns
calculated for one, three, and twelve month periods as well as year-to-
date. Total returns are also calculated as of the index inception,
December 31, 1979.
o Lehman Brothers Three-Year State General Obligations Bonds is an index
comprised of the same issues noted above except that the maturities
range between two and four years. Index figures are total returns
calculated for the same periods as listed above.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on non-standardized base periods. The total
returns represent the historic change in the value of an investment in
the Fund based on monthly reinvestment of dividends over a specified
period of time.
Advertisements may quote performance information which does not reflect
the effect of the sales load.
Appendix
Standard & Poor's Ratings Group Municipal Bond Rating Definitions
AAA--Debt rated AAA has the highest rating assigned by Standard &
Poor's. Capacity to pay interest and repay principal is extremely
strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effect
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher
rated categories.
BB, B, CCC, CC--Debt rated BB, B, CCC and CC is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and
repay principal in accordance with the terms of the obligation. BB
indicates the lowest degree of speculation and CC the highest degree of
speculation. While such debt will likely have some quality and
protective characteristics, these outweighed by large uncertainties of
major risk exposure to adverse conditions.
C--The rating C is reversed for income bonds on which no interest is
being paid.
D--Debt rated D is in default, and payment of interest and/or repayment
of principal is in arrears.
Plus (+) or minus (-): The ratings from "AA" to "CCC" may be modified
by the addition of a plus or minus sign to show relative standing within
the major rating categories.
Moody's Investors Service, Inc. Municipal Bond Rating Definitions
Aaa--Bonds which are rated Aaa are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large
or by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position
of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all
standards. Together with the Aaa group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds
because margins of protection may not be as large as in Aaa securities
or fluctuation of protective elements may be of greater amplitude or
there may be other elements present which make the long term risks
appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes
and are to be considered as upper medium grade obligations. Factors
giving security to principal and interest are considered adequate but
elements may be present which suggest a susceptibility to impairment
some time in the future.
Baa--Bonds which are rated Baa are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be
characteristically unreliable over any great length of time. Such bonds
lack outstanding investment characteristics and in fact have speculative
characteristics as well.
Ba--Bonds which are Ba are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not
well safeguarded during both good and bad times over the future.
Uncertainty of position characterizes bonds in this class.
B--Bonds which are rated B generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time
may be small.
Caa--Bonds which are rated Caa are of poor standing. Such issues may be
in default or there may be present elements of danger with respect to
principal or interest.
Ca--Bonds which are rated Ca represent obligations which are speculative
in a high degree. Such issues are often in default or have other marked
shortcomings.
C--Bonds which are rated C are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of
ever attaining any real investment standing.
Moody's applies numerical modifiers 1, 2 and 3 in each generic rating
classification from Aa through B in its corporate or municipal bond
rating system. The modifier 1 indicates that the security ranks in the
higher end of its generic rating category; the modifier 2 indicates a
mid-range ranking; and the modifier 3 indicates that the issue ranks in
the lower end of its generic rating category.
090313-10-7
0120501B (1/95)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a)Financial Statements: (3.) Filed in Part A; (1-2.) to be filed
by Amendment.
(b)Exhibits:
(1) Conformed Copy of Declaration of Trust of the Registrant
(1.);
(i) Conformed copies of Amendment Nos. 1 through 4 to the
Declaration of Trust dated August 15, 1990(8.);
(ii) Conformed Copy of Amendment No. 6 to the Declaration
of Trust dated August 15, 1990;+
(2) Copy of By-Laws of the Registrant(1.);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant(2.);
(5) (i) Conformed Copy of Investment Advisory Contract of the
Registrant and Exhibit A thereto (to file the executed
version of the Investment advisory Contract between the Trust
and Wachovia Bank of South Carolina, N.A. on behalf of South
Carolina Municipal Bond Fund)(8.);
(ii) Conformed copy of Investment Advisory Contract of the
Registrant between the Trust and Wachovia Bank of
Georgia, N.A. on behalf of Biltmore Georgia Municipal
Bond Fund;+
(iii) Conformed copy of Investment Advisory Contract of the
Registrant between the Trust and Wachovia Bank of
North Carolina, N.A. on behalf of Biltmore North
Carolina Municipal Bond Fund;+
(6) (i) Conformed Copy of
Distributor's Contract of the
Registrant and Exhibit A
thereto(8.);
(ii) Conformed Copy of Exhibit B to the Distributor's
Contract; +
(7) Not applicable;
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed October 29, 1990. (File Nos.
33-37525 and 811-6201)
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed November 30, 1990. (File Nos. 33-
37525 and 811-6201)
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed May 28, 1991. (File Nos. 33-37525
and 811-6201)
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed November 27, 1991. (File Nos. 33-
37525 and 811-6201)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 on Form N-lA filed November 23, 1992. (File Nos. 33-
37525 and 811-6201)
6. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 4 on Form N-1A filed January 28, 1994. (File Nos. 33-
37525 and 811-6201)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed October 6, 1994. (File Nos. 33-
37525 and 811-6201)
(8) (i) Conformed copy of previous Custodian Agreement of the
Registrant;+
(ii) Conformed copy of new Custodian Agreement of the
Registrant and Exhibits A-C thereto(8.);
(9) Conformed copy of Transfer Agency and Service Agreement of
the Registrant(5);
(i) Conformed copy of new Portfolio Accounting and
Shareholder Recordkeeping Agreement of Registrant and
Schedule F thereto(8.);
(ii) Copy of Schedule G to new Portfolio Accounting and
Recordkeeping Agreement(8.);
(iii) Conformed Copy of Administrative Services Agreement(8.);
(10) Paper copy of Opinion and Consent of Counsel as to legality
of shares being registered(2.);
(11) (i) Conformed copy of Conset of Independent Auditors; +
(ii) Paper Copy of Opinion and Consent of Special Tax
Counsel for South Carolina Municipal Bond Fund(4.);
(12) Not Applicable;
(13) Conformed copy of Initial Capital Understanding(2.);
(14) Not Applicable;
(15) Not Applicable;
(16) Schedule for Computation of Fund Performance Data(3.);
(17) Copy of Financial Data Schedule (Biltmore South Carolina
Municipal Bond Fund only)+
(18) Conformed Copy of Power of Attorney;+
Item 25. Persons Controlled by or Under Common Control with Registrant
None
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of January 6, 1995
Shares of beneficial interest
no par value
Biltmore South Carolina Municipal Bond Fund 2,440
Biltmore North Carolina Municipal Bond Fund 20
Biltmore George Municpal Bond Fund 17
Item 27. Indemnification: (1.)
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed October 29, 1990. (File Nos.
33-37525 and 811-6201)
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed November 30, 1990. (File Nos. 33-
37525 and 811-6201)
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed May 28, 1991. (File Nos. 33-37525
and 811-6201)
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed November 27, 1991. (File Nos. 33-
37525 and 811-6201)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 on Form N-lA filed November 23, 1992. (File Nos. 33-
37525 and 811-6201)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed October 6, 1994. (File Nos. 33-
37525 and 811-6201)
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of the investment
advisers, see the section entitled "The Biltmore Municipal
Funds Information - Management of The Biltmore Municipal
Funds" in Part A for each of the Funds.
The Officers of Wachovia Bank of South Carolina, N.A. are:
Anthony L. Furr, Chairman, President and Chief Executive
Officer; Charles T. Cole, Jr., Executive Vice President;
David Q. Soutter, Executive Vice President; and Donald K.
Truslow, Executive Vice President. The business address of
each of the Officers of Wachovia Bank of South Carolina, N.A.
is 1401 Main Street, Columbia, South Carolina, 29226.
The Officers of Wachovia Bank of North Carolina, N.A. are:
Chairman of the Board, L. M. Baker, Jr.; President and Chief
Executive Officer, J. Walter McDowell; Chief Financial
Officer and Executive Vice President, Robert F. McCoy; Chief
Loan Administration Officer and Executive Vice President,
Robert L. Alphin; Executive Vice President, Hugh M. Durden;
Executive Vice President, Mickey W. Dry; Executive Vice
President, Walter E. Leonard, Jr.; and Executive Vice
President, Richard B. Roberts. The business address of each
of the Officers of Wachovia Bank of North Carolina, N.A. is
301 North Main Street, Winston-Salem, N.C. 27150.
The Officers of Wachovia Bank of Georgia, N.A. are: President
and Chief Executive Officer, G. Joseph Prendergast; and
Executive Vice Presidents: George W.P. Atkins; Donald P.
Carson; John M. Chalk; William T. Deyo, Jr.; Thomas D. Hills;
Eric L. Stone; David C. Swann; and D. Gary Thompson. The
business address of each of the Officers of Wachovia Bank of
Georgia, N.A. is 191 Peachtree Street, NE, Atlanta, Georgia,
30303.
The Directors of Wachovia Bank of South Carolina, N.A. are:
Mr. L.M. Baker, Jr, President and Chief Executive Officer,
Wachovia Corporation, and Chairman, Wachovia Bank of North
Carolina, N.A., Winston-Salem, NC 27150; Mr. Charles J.
Bradshaw, President, Bradshaw Investments, Inc., 705 Front
Street, Georgetown, S.C. 29440; Mr. Frank W. Brumley,
President, The Brumley Company, P.O. Box Y, Charleston, S.C.
29402; Mr. W.T. Cassels, Jr, Chairman, Southeastern Freight
Lines, Inc., P.O. Box 1691, Columbia, S.C. 29202; Mr. Thomas
C. Coxe, III, Executive Vice President, Sonoco Products
Company, P.O. Drawer 160, Hartsville, S.C. 29550; Mr.
Frederick B. Dent, Jr., President, Mayfair Mills, Inc., 1885
Hayne Street, Arcadia, S.C. 29320-9999; Dr. James B. Edwards,
President, Medical University of S.C., 171 Ashley Avenue,
Charleston, S.C. 29425; Mr. Anthony L. Furr, Chairman,
President and Chief Operating Officer, South Carolina National
Corporation, 1426 Main Street,18th Floor, Columbia, S.C.
29226; Mr. James G. Lindley, Chairman Emeritus, South Carolina
National Corporation, 1426 Main Street, 18th Floor, Columbia,
S.C. 29226; Mr. Joe A. Padgett, 1426 Main Street, 18th Floor,
Columbia, S.C. 29226; Mr. W.M. Self, President and Chief
Executive officer, Greenwood Mills, Inc., P.O. Box 1017,
Greenwood, S.C. 29648; Mr. Robert S. Small, Jr., President,
AVTEX Commercial Properties, Inc., P.O. Drawer 10287,
Greenville, S.C. 29603; Mr. William G. Taylor, President, The
Springs Company, P.O. Drawer 460, Lancaster, S.C., 29721; and
Dr. Beatrice R. Thompson, Psychologist, Anderson County School
District, No. 5, P.O. Drawer 439, Anderson, S.C. 29622.
The Directors of Wachovia Bank of North Carolina, N.A. are:
L.M. Baker, Jr., President and Chief Executive Officer,
Wachovia Corporation, and Chairman, Wachovia Bank of North
Carolina, N.A.; H.C. Bissell, Chairman of the Board and Chief
Executive Officer, The Bissell Companies, Inc.; Bert Collins,
President and Chief Executive Officer, North Carolina Mutual
Life Insurance Company; Felton J. Capel, Chairman of the
Board and President, Century Associates of North Carolina;
Richard L. Daugherty, North Carolina Senior Executive and
Vice President, IBM Corporation; Estell C. Lee, Chairman of
the Board and President, The Lee Company; John G. Medlin,
Jr., Chairman of the Board, Wachovia Corporation; David J.
Whichard II, Chairman, The Daily Reflector; John C. Whitaker,
Jr., Chairman of the Board and Chief Executive Officer, Inmar
Enterprises, Inc.; Herbert Brenner, President, Brenner
Companies, Inc.; William Cavanaugh, III, President and Chief
Operating Officer, Carolina Power and Light Company; J.
Walter McDowell, President and Chief Executive Officer,
Wachovia Bank of North Carolina, N.A.; John F. Ward, Senior
Vice President, Sara Lee Corporation; Anderson D. Warlick,
President and Chief Operating Officer, Parkdale Mills, Inc.;
and Wyndham Robertson, Vice President for Communications,
University of North Carolina. The business address for each
of the Directors of Wachovia Bank of North Carolina, N.A. is
310 North Main Street, Winston-Salem, North Carolina, 27150.
The Directors of Wachovia Bank of Georgia, N.A. are:
F. Duane Ackerman, President and Chief Executive Officer,
BellSouth Telecommunications, Inc., 4507 Southern Bell
Center, Atlanta, GA 30375; Edward L. Addison, Chairman and
Chief Executive Officer, The Southern Company, 64 Perimeter
Center East, Atlanta, GA 30346; L.M. Baker, Jr., President
and Chief Executive Officer, Wachovia Corporation, 301 North
Main Street, Winston-Salem, NC 27150; Thomas E. Boland,
Wachovia Bank of Georgia, N.A., 191 Peachtree Street, N.E.,
Mail Code 1101, Atlanta, GA 30303; Carl Bolch, Jr., Chairman
and Chief Executive Officer, Racetrac Petroleum, Inc., 300
Technology Court, Smyrna, GA 30082; James E. Bostic, Jr.,
Group Vice President, Communication Papers Divsision, Georgia-
Pacific Corporation, 55 Park Place, 14th Floor, Atlanta, GA
30374-0075; Michael C. Carlos, Chairman and Chief Executive
Officer, National Distributing Co., Inc., 1 National Drive,
S.W., Atlanta, GA 30336; G. Stephen Felker, Chairman and
Chief Executive Officer, Avondale Mills, Inc., 506 South
Broad Street, Monroe, GA 30655; Bryan D. Langton, Chairman
and Chief Executive Officer, Holiday Inn Worldwide, Three
Ravinia Drive, Suite 2000, Atlanta GA 30346; Bernard Marcus,
Chairman and Chief Executive Officer, The Home Depot, Inc.
2727 Paces Ferry Road, Atlanta, GA 30339; Daniel W.
McGlaughlin, President and Chief Operating Officer, Equifax
Inc., 1600 Peachtree Street, N.W., Atlanta, GA 30309; G.
Joseph Prendergast, Chairman, President and Chief Executive
Officer, Wachovia Bank of Georgia, N.A., 191 Peachtree
Street, N.E., Mail Code 503, Atlanta, GA 30303; D. Raymond
Riddle, President and Chief Executive Officer, National
Service Industries, Inc. 1420 Peachtree Street, N.E.,
Atlanta, GA 30309; S. Stephen Selig, III, Chairman of the
Board and President, Selig Enterprises, Inc., 1100 Spring
Street, N.W., Suite 550, Atlanta, GA 30367; Alana S.
Shepherd, Secretary of the Board, Shepherd Spinal Center,
2020 Peachtree Road, N.W., Atlanta, GA 30309; and J.V. White,
Chairman of the Executive Committee, Equifax Inc. P.O. Box
4081, Atlanta, GA 30302.
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the
following open-end investment companies: Alexander Hamilton
Funds; American Leaders Fund, Inc.; Annuity Management
Series; Arrow Funds; Automated Cash Management Trust;
Automated Government Money Trust; BayFunds; The Biltmore
Funds; The Biltmore Municipal Funds; California Municipal
Cash Trust; Cash Trust Series, Inc.; Cash Trust Series II; DG
Investor Series; Edward D. Jones & Co. Daily Passport Cash
Trust; Federated ARMs Fund; Federated Exchange Fund, Ltd.;
Federated GNMA Trust; Federated Government Trust; Federated
Growth Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Intermediate
Government Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Intermediate Government Trust;
Federated Short-Term U.S. Government Trust; Federated Stock
Trust; Federated Tax-Free Trust; Federated U.S. Government
Bond Fund; First Priority Funds; First Union Funds; Fixed
Income Securities, Inc.; Fortress Adjustable Rate U.S.
Government Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress Utility Fund, Inc.; Fountain Square Funds; Fund for
U.S. Government Securities, Inc.; Government Income
Securities, Inc.; High Yield Cash Trust; Independence One
Mutual Funds; Insight Institutional Series, Inc.; Insurance
Management Series; Intermediate Municipal Trust;
International Series Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income Fund, Inc.;
Liberty High Income Bond Fund, Inc.; Liberty Municipal
Securities Fund, Inc.; Liberty U.S. Government Money Market
Trust; Liberty Utility Fund, Inc.; Liquid Cash Trust; Managed
Series Trust; Marshall Funds, Inc.; Money Market Management,
Inc.; The Medalist Funds; Money Market Obligations Trust;
Money Market Trust; The Monitor Funds; Municipal Securities
Income Trust; New York Municipal Cash Trust; 111 Corcoran
Funds; Peachtree Funds; The Planters Funds; Portage Funds;
RIMCO Monument Funds; The Shawmut Funds; Short-Term Municipal
Trust; SouthTrust Vulcan Funds; Star Funds; The Starburst
Funds; The Starburst Funds II; Stock and Bond Fund, Inc.;
Sunburst Funds; Targeted Duration Trust; Tax-Free Instruments
Trust; Tower Mutual Funds; Trademark Funds; Trust for
Financial Institutions; Trust for Government Cash Reserves;
Trust for Short-Term U.S. Government Securities; Trust for
U.S. Treasury Obligations; Vision Fiduciary Funds, Inc.;
Vision Group of Funds, Inc.; and World Investment Series,
Inc.
Federated Securities Corp. also acts as principal underwriter
for the following closed-end investment company: Liberty
Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief --
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice --
Federated Investors Tower President, and Treasurer,
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice President and
Federated Investors Tower President, and Assistant Treasurer
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael D. Fitzgerald Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
Item 30. Location of Accounts and Records:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors Tower
("Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and Portfolio
Recordkeeper")
Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779
Wachovia Investment Management Group 301 North Main Street
("Adviser") Winston-Salem, NC 21750
Wachovia Bank of North Carolina Wachovia Trust Operations
("Custodian") 301 North Main Street
Winston-Salem, NC 21750
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the l940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders on behalf of each of its portfolios.
Registrant hereby undertkes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
Registrant hereby undertakes to file a post-effective amendment on
behalf of Biltmore Georgia Municipal Bond Fund and Biltmore North
Carolina Municipal Bond Fund, portfolios of The Biltmore Municipal
Funds, using financial statements for Biltmore Georgia Municipal
Bond Fund and Biltmore North Carolina Municipal Bond Fund, which
need not be certified, within four to six months from the effective
date of Post-Effective Amendment No. 5.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, THE BILTMORE MUNICIPAL
FUNDS, certifies that it meets all of the requirements for effectiveness
of this Amendment to its Registration Statement pursuant to Rule 485(b)
of the Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Pittsburgh and
Commonwealth of Pennsylvania, on the 27th day of January, 1995.
THE BILTMORE MUNICIPAL FUNDS
BY: /s/Mark A. Sheehan
Mark A. Sheehan, Assistant Secretary
Attorney in Fact for John W. McGonigle
January 27, 1995
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By: /s/Mark A. Sheehan
Mark A. Sheehan Attorney In Fact January 27, 1995
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John W. McGonigle* President and Treasurer
James A. Hanley* Trustee
Malcolm T. Hopkins* Trustee
Samuel E. Hudgins* Trustee
J. Berkley Ingram, Jr.* Trustee
D. Dean Kaylor* Trustee
* By Power of Attorney
Exhibit (11) under N-1A
Exhibit 23 under Item 601/Reg SK
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the reference to our firm under the captions "Financial
Hightlights" and "Independent Auditors" and to the use of our report dated
January 12, 1995, in Post-Effective Amendment Number 7 to the Registration
Statement (Form N-1A Number 33-37525) and the related Prospectus of South
Carolina Municipal Bond Fund dated January 31, 1995.
/s/Ernst & Young LLP
Pittsburgh, Pennsylvania
January 25, 1995
Exhibit 19 under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and
appoints the Secretary and Assistant Secretary of THE BILTMORE
MUNICIPAL FUNDS and the Assistant General Counsel of Federated
Investors, and each of them, their true and lawful attorneys-in-fact and
agents, with full power of substitution and resubstitution for them and
in their names, place and stead, in any and all capacities, to sign any
and all documents to be filed with the Securities and Exchange
Commission pursuant to the Securities Act of 1933, the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, by means of
the Securities and Exchange Commission's electronic disclosure system
known as EDGAR; and to file the same, with all exhibits thereto and
other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents,
and each of them, full power and authority to sign and perform each and
every act and thing requisite and necessary to be done in connection
therewith, as fully to all intents and purposes as each of them might or
could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute
or substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
/s/ John W. McGonigle President
and Treasurer June 3, 1992
John W. McGonigle (Chief Executive Officer,
Principal Financial and
Accounting Officer)
/s/ James A. Hanley Trustee June 3, 1992
James A. Hanley
/s/ Malcolm T. Hopkins Trustee June
3, 1992
Malcolm T. Hopkins
/s/ Samuel E. Hudgins Trustee June
3, 1992
Samuel E. Hudgins
/s/ J. Berkley Ingram, Jr. Trustee
June 3, 1992
J. Berkley Ingram, Jr.
/s/ D. Dean Kaylor. Trustee June 3, 1992
D. Dean Kaylor
Sworn to and subscribed before me this 3rd day of June, 1992.
(SEAL)
/s/ Mary Jo Wagner ___________________________________
Notary Public
Notarial Seal
Mary Jo Wagner, Notary Public
Pittsburgh, Allegheny County
My Commission Expires February 21,
1998
Member, Pennsylvania Association of
Notaries
Exhibit 1 (ii) under Form N-1A
Exhibit 3(a) under Item 601/Reg. S-K
THE BILTMORE MUNICIPAL FUNDS
Amendment No. 6
to the
DECLARATION OF TRUST
dated August 15, 1990
Effective upon the filing with the Securities and Exchange Commission
of each funds' prospectus or next prospectus update, this Declaration of
Trust is amended as follows:
Strike the first paragraph of Section 5 of Article III from the
Declaration of Trust and substitute in its place the following:
"Section 5. Establishment and Designation of Series or Class.
Without limiting the authority of the Trustees set forth in
Article XII, Section 8, inter alia, to establish and designate any
additional Series or Class, or to modify the rights and
preferences of any existing Series or Class, the Series and Classes
of the Trust are established and designated as:
Biltmore Georgia Municipal Bond Fund
Biltmore North Carolina Municipal Bond Fund
Biltmore South Carolina Municipal Bond Fund"
The undersigned Assistant Secretary of The Biltmore Municipal Funds
hereby certifies that the above-stated amendment is a true and correct
Amendment to the Declaration of Trust, as adopted by the Board of Trustees
on the 8th day of December, 1994.
WITNESS the due execution hereof this 8th day of December, 1994.
/s/ Mark A Sheehan
Mark A. Sheehan
Assistant Secretary
-1-
Exhibit 5 (ii) under Form N-1A
Exhibit 10 (ii) under Item 601/Reg. S-K
THE BILTMORE MUNICIPAL FUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made as of the 8th day of December, 1994, between
Wachovia Bank of Georgia, N.A., a national banking association having its
principal place of business in Atlanta, Georgia (the "Adviser"), and The
Biltmore Municipal Funds, a Massachusetts business trust having its principal
place of business in Pittsburgh, Pennsylvania (the "Trust").
WHEREAS, the Trust is an open-end management investment company as that
term is defined in the Investment Company Act of 1940 (the "Act") and is
registered as such with the Securities and Exchange Commission; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. The Trust hereby appoints Adviser as Investment Adviser for each of
the portfolios ("Funds") of the Trust, which may be offered in one or more
classes of shares ("Classes"), on whose behalf the Trust executes an exhibit
to this Contract, and Adviser, by its execution of each such exhibit, accepts
the appointments. Subject to the direction of the Trustees of the Trust,
Adviser shall provide investment research and supervision of the investments
of each of the Funds and conduct a continuous program of investment
evaluation and of appropriate sale or other disposition and reinvestment of
each Fund's assets. The investment management services furnished by the
Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to others so
long as its services under this Contract are not impaired.
2. Subject to the supervision of the Trust's Board of Trustees (the
"Board"), the Adviser will provide a continuous investment program for the
Funds, including investment research and management with respect to all
securities and investments and cash-equivalents in the Funds. The Adviser
will determine from time to time what securities and other investments will
be purchased, retained or sold by the Trust with respect to the Funds. The
Adviser will provide services under this Contract in accordance with each of
the Fund's investment objectives, policies, and restrictions as stated in the
Prospectus, Declaration of Trust, the By-Laws of the Trust, resolutions of
the Board, and Registration Statements and exhibits on file with respect to
the Funds with the Securities and Exchange Commission, and in any amendments
to any of the preceding.
3. The Trust shall pay or cause to be paid, on behalf of each Fund or
Class, all of the Fund's or Classes' expenses and the Fund's or Classes'
allocable share of Trust expenses, as determined by the Board.
4. The Trust, on behalf of each of the Funds shall pay to Adviser, for
all services rendered to such Fund by Adviser hereunder, the fees set forth
in the exhibits attached hereto.
5. The Adviser, may from time to time and for such periods as it deems
appropriate, reduce its compensation with regard to any Fund to the extent
that such Fund's expenses exceed such lower expense limitation as the Adviser
may, by notice to the Trust, voluntarily declare to be effective.
Furthermore, the Adviser may, if it deems appropriate, assume expenses of one
or more Fund or Class to the extent that any Fund's or Classes' expenses
exceed such lower expense limitation as the Adviser may, by notice to the
Trust, voluntarily declare to be effective.
6. This Contract shall begin for each Fund as of the date of execution
of the applicable exhibit and shall continue in effect with respect to each
Fund presently set forth on an exhibit (and any subsequent Funds added
pursuant to an exhibit during the initial term of this Contract) for two
years from the date of this Contract set forth above and thereafter for
successive periods of one year, subject to the provisions for termination and
all of the other terms and conditions hereof if: (a) such continuation shall
be specifically approved at least annually by the vote of a majority of the
Trustees of the Trust, including a majority of the Trustees who are not
parties to this Contract or interested persons of any such party (other than
as Trustees of the Trust), cast in person at a meeting called for that
purpose; and (b) Adviser shall not have notified the Trust with respect to a
Fund in writing at least sixty (60) days prior to the anniversary date of
this Contract in any year thereafter that it does not desire such
continuation with respect to that Fund. If a Fund is added after the first
approval by the Trustees as described above, this Contract will be effective
as to that Fund upon execution of the applicable exhibit and will continue in
effect until the next annual approval of this Contract by the Trustees and
thereafter for successive periods of one year, subject to approval as
described above.
7. Notwithstanding any provision in this Contract, it may be
terminated at any time with respect to any Fund, without the payment of any
penalty, by the Trustees of the Trust or by a vote of a majority of the
outstanding voting securities of that Fund, as defined in Section 2(a)(42) of
the Act, on sixty (60) days' written notice to Adviser.
8. This Contract may not be assigned by Adviser and shall
automatically terminate in the event of any assignment. Adviser may employ
or contract with such other person, persons, corporation, or corporations at
its own cost and expense as it shall determine in order to assist it in
carrying out this Contract.
9. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties under this Contract on the
part of Adviser, Adviser shall not be liable to the Trust or to any of the
Funds or to any shareholder for any act or omission in the course of or
connected in any way with rendering services or for any losses that may be
sustained in the purchase, holding, or sale of any security.
10. This Contract may be amended at any time by agreement of the
parties provided that the amendment shall be approved both by the vote of a
majority of the Trustees of the Trust, including a majority of Trustees who
are not parties to this Contract or interested persons of any such party to
this Contract (other than as Trustees of the Trust), cast in person at a
meeting called for that purpose, and on behalf of a Fund by a majority of the
outstanding voting securities of such Fund as defined in Section 2(a)(42) of
the Act.
11. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees
that the obligations pursuant to this Contract of a particular Fund and of
the Trust with respect to that particular Fund be limited solely to the
assets of that particular Fund, and Adviser shall not seek satisfaction of
any such obligation from the assets of any other Fund, the shareholders of
any Fund, the Trustees, officers, employees or agents of the Trust, or any of
them.
12. This Contract shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
13. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
EXHIBIT A
GEORGIA MUNICIPAL BOND FUND
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to .75 of 1% of
the average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of .75 of 1%
applied to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution as of the 8th day of December, 1994.
Attest: WACHOVIA BANK OF GEORGIA, N.A.
/s/ James G. Vanderberry By:/s/ Michael J. Tierney
Secretary Senior Vice President
Attest: THE BILTMORE MUNICIPAL FUNDS
/s/ S. Elliott Cohan By:/s/ John W. McGonigle
Assistant Secretary President
-1-
Exhibit 5(iii) under Form N-1A
Exhibit 10 (iii) under Item 601/Reg S-K
THE BILTMORE MUNICIPAL FUNDS
INVESTMENT ADVISORY CONTRACT
This Contract is made as of the 8th day of December, 1994, between
Wachovia Bank of North Carolina, N.A., a national banking association having
its principal place of business in Winston-Salem, North Carolina (the
"Adviser"), and The Biltmore Municipal Funds, a Massachusetts business trust
having its principal place of business in Pittsburgh, Pennsylvania (the
"Trust").
WHEREAS, the Trust is an open-end management investment company as that
term is defined in the Investment Company Act of 1940 (the "Act") and is
registered as such with the Securities and Exchange Commission; and
WHEREAS, the Adviser is engaged in the business of rendering investment
advisory and management services.
NOW, THEREFORE, the parties hereto, intending to be legally bound,
agree as follows:
1. The Trust hereby appoints Adviser as Investment Adviser for each of
the portfolios ("Funds") of the Trust, which may be offered in one or more
classes of shares ("Classes"), on whose behalf the Trust executes an exhibit
to this Contract, and Adviser, by its execution of each such exhibit, accepts
the appointments. Subject to the direction of the Trustees of the Trust,
Adviser shall provide investment research and supervision of the investments
of each of the Funds and conduct a continuous program of investment
evaluation and of appropriate sale or other disposition and reinvestment of
each Fund's assets. The investment management services furnished by the
Investment Adviser hereunder are not to be deemed exclusive, and the
Investment Adviser shall be free to furnish similar services to others so
long as its services under this Contract are not impaired.
2. Subject to the supervision of the Trust's Board of Trustees (the
"Board"), the Adviser will provide a continuous investment program for the
Funds, including investment research and management with respect to all
securities and investments and cash-equivalents in the Funds. The Adviser
will determine from time to time what securities and other investments will
be purchased, retained or sold by the Trust with respect to the Funds. The
Adviser will provide services under this Contract in accordance with each of
the Fund's investment objectives, policies, and restrictions as stated in the
Prospectus, Declaration of Trust, the By-Laws of the Trust, resolutions of
the Board, and Registration Statements and exhibits on file with respect to
the Funds with the Securities and Exchange Commission, and in any amendments
to any of the preceding.
3. The Trust shall pay or cause to be paid, on behalf of each Fund or
Class, all of the Fund's or Classes' expenses and the Fund's or Classes'
allocable share of Trust expenses, as determined by the Board.
4. The Trust, on behalf of each of the Funds shall pay to Adviser, for
all services rendered to such Fund by Adviser hereunder, the fees set forth
in the exhibits attached hereto.
5. The Adviser may, from time to time and for such periods as it deems
appropriate, reduce its compensation with regard to any Fund to the extent
that such Fund's expenses exceed such lower expense limitation as the Adviser
may, by notice to the Trust, voluntarily declare to be effective.
Furthermore, the Adviser may, if it deems appropriate, assume expenses of one
or more Fund or Class to the extent that any Fund's or Classes' expenses
exceed such lower expense limitation as the Adviser may, by notice to the
Trust, voluntarily declare to be effective.
6. This Contract shall begin for each Fund as of the date of execution
of the applicable exhibit and shall continue in effect with respect to each
Fund presently set forth on an exhibit (and any subsequent Funds added
pursuant to an exhibit during the initial term of this Contract) for two
years from the date of this Contract set forth above and thereafter for
successive periods of one year, subject to the provisions for termination and
all of the other terms and conditions hereof if: (a) such continuation shall
be specifically approved at least annually by the vote of a majority of the
Trustees of the Trust, including a majority of the Trustees who are not
parties to this Contract or interested persons of any such party (other than
as Trustees of the Trust), cast in person at a meeting called for that
purpose; and (b) Adviser shall not have notified the Trust with respect to a
Fund in writing at least sixty (60) days prior to the anniversary date of
this Contract in any year thereafter that it does not desire such
continuation with respect to that Fund. If a Fund is added after the first
approval by the Trustees as described above, this Contract will be effective
as to that Fund upon execution of the applicable exhibit and will continue in
effect until the next annual approval of this Contract by the Trustees and
thereafter for successive periods of one year, subject to approval as
described above.
7. Notwithstanding any provision in this Contract, it may be
terminated at any time with respect to any Fund, without the payment of any
penalty, by the Trustees of the Trust or by a vote of a majority of the
outstanding voting securities of that Fund, as defined in Section 2(a)(42) of
the Act, on sixty (60) days' written notice to Adviser.
8. This Contract may not be assigned by Adviser and shall
automatically terminate in the event of any assignment. Adviser may employ
or contract with such other person, persons, corporation, or corporations at
its own cost and expense as it shall determine in order to assist it in
carrying out this Contract.
9. In the absence of willful misfeasance, bad faith, gross negligence
or reckless disregard of obligations or duties under this Contract on the
part of Adviser, Adviser shall not be liable to the Trust or to any of the
Funds or to any shareholder for any act or omission in the course of or
connected in any way with rendering services or for any losses that may be
sustained in the purchase, holding, or sale of any security.
10. This Contract may be amended at any time by agreement of the
parties provided that the amendment shall be approved both by the vote of a
majority of the Trustees of the Trust, including a majority of Trustees who
are not parties to this Contract or interested persons of any such party to
this Contract (other than as Trustees of the Trust), cast in person at a
meeting called for that purpose, and on behalf of a Fund by a majority of the
outstanding voting securities of such Fund as defined in Section 2(a)(42) of
the Act.
11. Adviser is hereby expressly put on notice of the limitation of
liability as set forth in Article XI of the Declaration of Trust and agrees
that the obligations pursuant to this Contract of a particular Fund and of
the Trust with respect to that particular Fund be limited solely to the
assets of that particular Fund, and Adviser shall not seek satisfaction of
any such obligation from the assets of any other Fund, the shareholders of
any Fund, the Trustees, officers, employees or agents of the Trust, or any of
them.
12. This Contract shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
13. This Contract will become binding on the parties hereto upon their
execution of the attached exhibits to this Contract.
EXHIBIT A
NORTH CAROLINA MUNICIPAL BOND FUND
For all services rendered by Adviser hereunder, the Trust shall pay to
Adviser and Adviser agrees to accept as full compensation for all services
rendered hereunder, an annual investment advisory fee equal to .75 of 1% of
the average daily net assets of the Fund.
The fee shall be accrued daily at the rate of 1/365th of.75 of 1%
applied to the daily net assets of the Fund.
The advisory fee so accrued shall be paid to Adviser daily.
Witness the due execution as of the 8th day of December, 1994.
Attest: WACHOVIA BANK OF NORTH CAROLINA, N.A.
/s/ James G. Vanderberry By:/s/ Michael J. Tierney
Secretary Senior Vice President
Attest: THE BILTMORE MUNICIPAL FUNDS
/s/ S. Elliott Cohan By:/s/ John W. McGonigle
Assistant Secretary President
1
Exhibit 8 under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODY AGREEMENT
THIS AGREEMENT, is made effective as of December 1, 1993, by and between
The
Biltmore Municipal Funds (the "Trust"), a business trust organized under the
laws
of the Commonwealth of Massachusetts and Wachovia Bank of North Carolina, N.A. a
banking company organized under the laws of the State of North Carolina (the
"Custodian").
WITNESSETH:
WHEREAS, the Trust is an open-end management series investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act");
and
WHEREAS, the Trust desires to retain the Custodian to serve as the Trust's
custodian to its existing series: South Carolina Municipal Bond Fund (such
series,
together with all other series subsequently established by the Trust and made
subject to this Agreement in accordance with Section 3.22 being herein
referred to
as the "Funds") and the Custodian is willing to furnish such services;
NOW THEREFORE, in consideration of the mutual agreements herein made, the
Trust and the Custodian hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Whenever used in this Agreement, the following words and phrases,
unless the
context otherwise requires, shall have the following meanings:
1.1 "Authorized Person" means any Officer or other person duly
authorized by
resolution of the Board of Trustees to give Proper Instructions on behalf of the
Funds and named in Exhibit B hereto or in such resolutions of the Board of
Trustees, certified by an Officer, as may be received by the Custodian from
time to
time. The Trust will provide the Custodian with authenticated specimen
signatures
of each Authorized Person.
1.2 "Board of Trustees" means the Trustees from time to time serving
under the
Trust's Declaration of Trust, dated August 15, 1990, as from time to time
amended.
1.3 "Securities System" means a federal book-entry system as provided in
Subpart O of Treasury Circular No. 300, CFR 306, in Subpart B of 31 CFR Part
350,
or in such book-entry regulations of federal agencies as are substantially in
the
form of such Subpart O, the Depository Trust Company ("DTC"), Participants Trust
Company and (provided that Custodian shall have received a copy of a
resolution of
the Board of Trustees, certified by an Officer, specifically approving the
use of
such clearing agency as a depository for the Funds) any other clearing agency
registered with the Securities and Exchange Commission ("SEC") under Section
17A of
the Securities Exchange Act of 1934 ("1934 Act"), which acts as a system for the
central handling of Securities where all securities of any particular class or
series of an issuer deposited within the system are treated as fungible and
may be
transferred or pledged by bookkeeping entry without physical delivery of the
Securities.
1.4 "Business Day" means any day recognized as a settlement day by The New
York Stock Exchange, Inc. and any other day for which the Trust computes the net
asset value of a Fund.
1.5 "NASD" means The National Association of Securities Dealers, Inc.
1.6 "Officer" means the Chairman, President, any Vice President, the
Secretary, any Assistant Secretary, the Treasurer, or any Assistant Treasurer of
the Trust.
1.7 "Fund Custody Account" means any of the accounts in the name of the
Trust,
which are provided for in Section 3.2 below.
1.8 "Proper Instructions" means:
(i) a writing (including, without limitation, a facsimile
transmission
or tested telex) constituting a request, direction, instruction or
certification signed or initiated by or on behalf of a Fund by
one or
more Authorized Persons or reasonably believed by the Custodian
to have
been signed by such Authorized Persons;
(ii) a telephonic or other oral communication by one or more
Authorized
Persons or reasonably believed by the Custodian to have been
communicated by such Authorized Persons; or
(iii) communications transmitted electronically through the
Institutional
Delivery System (IDS), or any other similar electronic instruction
system acceptable to Custodian and approved by resolutions of the
Board
of Trustees, a copy of which, certified by an Officer, shall have
been
delivered to the Custodian.
The Trust shall cause all Proper Instructions in the form of oral
communications to
be promptly confirmed in writing, as specified in clause (i) of this
paragraph. In
the event that an oral communication is not so confirmed, or in the event that a
written confirmation differs from the related oral communication, the Trust will
hold the Custodian harmless and without liability for any claims or losses in
connection with such oral communication. Proper Instructions may be in the
form of
standing instructions. In respect of trades reported on the Trust's behalf
through
DTC, instructions from DTC (whether in a DTC report or otherwise), shall be
Proper
Instructions.
1.9 "Securities" include, without limitation, common and preferred stocks,
bonds, call options, put options, debentures, notes, bank certificates of
deposit,
bankers' acceptances, mortgage-backed securities, other money market
instruments or
other obligations, and any certificates, receipts, warrants or other
instruments or
documents representing rights to receive, purchase or subscribe for the same, or
evidencing or representing any other rights or interests therein, or any similar
property or assets that the Custodian has the facilities to clear and to
service.
1.10 "Shares" means, with respect to a Fund, the units of beneficial
interest
issued by the Trust on account of such Fund.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 Appointment. The Trust hereby constitutes and appoints the Custodian as
custodian for the term and subject to the provisions of this Agreement.
2.2 Acceptance. The Custodian hereby accepts appointment as such
custodian and
agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 Segregation. All Securities and non-cash property held by the Custodian
for the account of a Fund, except Securities maintained in a Securities System
pursuant to Section 3.6 herein, shall be physically segregated from other
Securities and non-cash property in the possession of the Custodian
(including the
Securities and non-cash property of another Fund) and shall be identified as
subject to this Agreement.
3.2 Fund Custody Accounts. As to each Fund, the Custodian shall open and
maintain in its trust department a custody account or accounts in the name of
the
Trust coupled with the name of such Fund, subject only to draft or order of the
Custodian, in which the Custodian shall enter and carry all Securities, cash and
other assets of such Fund which are delivered to it.
3.3 Appointment of Sub-custodians. In its discretion, the Custodian may
appoint, and at any time remove, any domestic bank or trust company, which
has been
approved by the Board of Trustees and is qualified to act as a custodian
under the
1940 Act, as sub-custodian to hold Securities and cash of the Funds and to carry
out such other provisions of this Agreement as it may determine, and may also
open
and maintain one or more banking accounts with such a bank or trust company (any
such accounts to be in the name of the Custodian on behalf of its customers and
subject only to its draft or order pursuant to the terms of this Agreement),
provided, however, that the Custodian shall have no more or less
responsibility or
liability to the Trust on account of any actions or omissions of such sub-
custodian
so employed than any such sub-custodian has to the Custodian.
3.4 Appointment of Agents. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the 1940 Act, as amended, to act as a
custodian, as
its agent to carry out such of the provisions of this Article III as the
Custodian
may from time to time direct; provided, however, that the appointment of any
agent
shall not relieve the Custodian of its responsibilities or liabilities
hereunder.
3.5 Delivery of Assets to Custodian. The Trust shall deliver, or cause
to be
delivered, to the Custodian all of the Funds' Securities, cash and other assets,
including (a) all payment of income, payments of principal and capital
distributions received by the Funds with respect to such Securities, cash or
other
assets owned by the Funds at any time during the period of this Agreement,
and (b)
all cash received by the Funds for the issuance, at any time during such
period, of
Shares. The Custodian shall not be responsible for such Securities, cash or
other
assets until actually received by it.
3.6 Securities Systems. The Custodian may deposit and/or maintain
Securities
of the Funds in a Securities System, subject to the following provisions:
(a) Prior to a deposit of Securities of the Funds in any Securities
System,
the Trust shall deliver to the Custodian a resolution of the Board
of
Trustees, certified by an Officer, authorizing and instructing the
Custodian on an on-going basis to deposit in such Securities System
all
Securities eligible for deposit therein and to make use of such
Securities System to the extent possible and practical in connection
with its performance hereunder, including, without limitation, in
connection with settlements of purchases and sales of Securities,
loans
of Securities, and deliveries and returns of collateral
consisting of
Securities. So long as such Securities System shall continue to be
employed for the deposit of Securities of the Funds, the Trust shall
annually re-adopt such resolution and deliver a copy thereof,
certified
by an Officer, to the Custodian.
(b) Securities of the Funds kept in a Securities System shall be kept
in an
account ("Depository Account") of the Custodian in such Securities
System which includes only assets held by the Custodian as a
fiduciary,
custodian or otherwise for customers.
(c) The records of the Custodian with respect to Securities of a Fund
maintained in a Securities System shall, by book-entry, identify
such
Securities as belonging to such Fund.
(d) If Securities purchased by a Fund are to be held in a Securities
System, the Custodian shall pay for such Securities upon (i)
receipt of
advice from the Securities System that such Securities have been
transferred to the Depository Account, and (ii) the making of
any entry
on the records of the Custodian to reflect such payment and transfer
for the account of such Fund. If Securities sold by a Fund are
held in
a Securities System, the Custodian shall transfer such
Securities upon
(i) receipt of advice from the Securities System that payment
for such
Securities has been transferred to the Depository Account, and
(ii) the
making of an entry on the records of the Custodian to reflect such
transfer and payment for the account of such Fund.
(e) Upon request, the Custodian shall provide the Trust with copies
of any
report (obtained by the Custodian from a Securities System in which
Securities of the Funds are kept) on the internal accounting
controls
and procedures for safeguarding Securities deposited in such
Securities
System.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall not be liable to the Trust for any loss or
damage to a
Fund resulting from the use by the Custodian of a Securities System,
unless such loss or damage is caused by or results from the
negligence
or willful misconduct on the part of Custodian or its agents or
any of
its (or their) employees, provided, however, that in the event of
any
such loss or damage, the Custodian shall take reasonable steps to
enforce effectively such rights as it may have against the
Securities
System. At its election, the Trust shall be subrogated to the
rights of
the Custodian with respect to any claim against a Securities
System or
any other person for any loss or damage to the Funds arising from
the
use of such Securities System, if and to the extent that the Funds
have
not been made whole for any such loss or damage.
3.7 Collection of Income. Subject to the provisions of Section 3.15, the
Custodian shall collect on a timely basis all income and other payments with
respect to registered securities held hereunder to which each Fund shall be
entitled either by law or pursuant to custom in the securities business, and
shall
collect on a timely basis all income and other payments with respect to bearer
securities if, on the date of payment by the issuer, such securities are held by
the Custodian or its agent thereof and shall credit some income, as
collected, to
each Fund's custodian account. Without limiting the generality of the foregoing,
the Custodian shall detach and present for payment all coupons and other income
items requiring presentation as and when they become due and shall collect
interest
when due on securities held hereunder. The collection of income due the Funds on
Securities loaned pursuant to the provisions of Section 3.9(j) shall be the
responsibility of the Trust. The Custodian will have no duty or
responsibility in
connection therewith, other than to provide the Trust with such information
or data
as may be necessary to assist the Trust in arranging for the timely delivery
to the
Custodian of the income of which each Fund is properly entitled.
The Custodian shall promptly notify the Trust whenever income due on
Securities is not collected in due course and will provide the Trust with
monthly
reports of the status of past due income. Except as set forth herein, the
Custodian
shall not be required to enforce collection, by legal means or otherwise, of any
money or property due and payable with respect to Securities held for a Fund if
such Securities are in default or payment is not made after due demand or
presentation.
3.8 Disbursement of Moneys from Fund Custody Accounts. Upon receipt of
Proper
Instructions, the Custodian shall disburse moneys from a Fund Custody
Account but
only in the following cases:
(a) For the purchase of Securities for the Fund but only (i) in the
case of
Securities (other than options on Securities, futures contracts and
options on future contracts), against the delivery to the Custodian
(or
any sub-custodian or agent appointed pursuant to Sections 3.3 and 3.4,
respectively, above) of such Securities to be registered as
provided in
Section 3.15 below in proper form for transfer, or if the purchase of
such Securities is effected through a Securities System, in accordance
with the conditions set forth in Section 3.6 above; (ii) in the
case of
options on Securities, against delivery to the Custodian (or such sub-
custodian) of such receipts as are required by the customs prevailing
among dealers in such options; (iii) in the case of futures
contracts and
options on futures contracts, against delivery to the Custodian
(or such
sub-custodian) of evidence of title thereto in favor of the Fund
or any
nominee referred to in Section 3.15 below; and (iv) in the case of
repurchase or reverse repurchase agreements entered into between the
Trust and any other party, against delivery of the purchased
Securities
either in certificate form or through an entry crediting the
Custodian's
account at a Securities System with such Securities;
(b) In connection with the conversion, exchange or surrender, as set
forth in
Section 3.9(f) below, of Securities owned by the Fund;
(c) For the payment of any dividends or capital gain distributions
declared
by the Fund;
(d) In payment of the redemption price of Shares as provided in Section
5.1
below;
(e) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest; taxes; administration, investment management,
investment advisory, accounting, auditing, transfer agent, custodian,
trustee and legal fees; and other operating expenses of the Fund;
in all
cases, whether or not such expenses are to be in whole or in part
capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement
among the
Trust, the Custodian and a broker-dealer registered under the 1934 Act
and a member of the NASD, relating to compliance with rules of The
Options Clearing Corporation and of any registered national securities
exchange (or of any similar organization or organizations) regarding
escrow or other arrangements in connection with transactions by the
Fund;
(g) For transfer in accordance with the provisions of any agreement
among the
Trust, the Custodian, and a futures commission merchant registered
under
the Commodity Exchange Act, relating to compliance with the rules of
the
Commodity Futures Trading Commission and/or any contract market
(or any
similar organization or organizations) regarding account deposits in
connection with transactions by the Fund;
(h) For the funding of any uncertificated time deposit or other interest-
bearing account with any banking institution (including the
Custodian),
which deposit or account has a term of one year or less; and
(i) For any other proper purposes, but only upon receipt, in addition to
Proper Instructions, of a copy of a resolution of the Board of
Trustees,
certified by an Officer, specifying the amount and purpose of such
payment, declaring such purpose to be a proper corporate purpose, and
naming the person or persons to whom such payment is to be made.
3.9 Delivery of Securities from Fund Custody Accounts. Upon receipt of
Proper
Instructions, the Custodian shall release and deliver Securities from a Fund
Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of the Fund but only
against
receipt of payment therefor;
(b) In the case of a sale effected through a Securities System, in
accordance
with the provisions of Section 3.6 above;
(c) To an Offeror's depository agent in connection with tender or other
similar offers for Securities of the Fund;
(d) To the issuer thereof or its agent when such securities are called,
redeemed, retired, or otherwise become payable; provided that, in any
such case, the cash or other consideration is to be delivered to the
Custodian;
(e) To the issuer thereof or its agent (i) for transfer into the name
of the
Fund, the Custodian or any sub- custodian or agent appointed
pursuant to
Sections 3.3 and 3.4, respectively, above, or of any nominee or
nominees
of any of the foregoing, or (ii) for exchange for a different
number of
certificates or other evidence representing the same aggregate face
amount or number of units; provided that, in any such case, the new
Securities are to be delivered to the Custodian;
(f) To the broker selling Securities or its clearing agent, for
examination
in accordance with the "street delivery" custom; provided that in any
such case, the Custodian shall have no responsibility or liability for
any loss arising from the delivery of such securities prior to
receiving
payment for such securities except as may arise from the Custodian's
own
negligence or willful misconduct;
(g) For exchange or conversion pursuant to any plan of merger,
consolidation,
recapitalization, readjustment of the securities, reorganization or
readjustment of the issuer of such Securities, or pursuant to any
deposit
agreement, including surrender or receipt of underlying Securities in
connection with the issuance or cancellation of depository receipts;
provided that, in any such case, the new Securities and cash, if
any, are
to be delivered to the Custodian;
(h) Upon receipt of payment therefor pursuant to any repurchase or reverse
repurchase agreement entered into by a Fund;
(i) In the case of warrants, rights or similar Securities, upon the
exercise
thereof, the surrender thereof in the exercise of such warrants,
rights
or similar securities or the surrender of interim receipts or
temporary
securities; provided that, in any such case, the new Securities
and cash,
if any, are to be delivered to the Custodian;
(j) For delivery in connection with any loans of Securities of the
Fund, but
only against receipt of such collateral as the Trust shall have
specified
to the Custodian in Proper Instructions; except that in connection
with
any loans for which collateral is to be credited to the Custodian's
account in the book-entry system authorized by the U.S. Department
of the
Treasury, the Custodian will not be held liable or responsible for the
delivery of securities owned by the Fund prior to the receipt of such
collateral;
(k) For delivery as security in connection with any borrowings by the Fund
requiring a pledge of assets by such Fund, but only against receipt by
the Custodian of the amounts borrowed;
(l) Pursuant to any authorized plan of liquidation, reorganization,
merger,
consolidation or recapitalization of the Trust or a Fund;
(m) For delivery in accordance with the provisions of any agreement
among the
Trust on behalf of a Fund, the Custodian and a broker-dealer
registered
under the 1934 Act and a member of the NASD, relating to
compliance with
the rules of The Options Clearing Corporation and of any registered
national securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in
connection with
transactions by the Fund;
(n) For delivery in accordance with the provisions of any agreement
among the
Trust on behalf of a Fund, the Custodian, and a futures commission
merchant registered under the Commodity Exchange Act, relating to
compliance with the rules of the Commodity Futures Trading Commission
and/or any contract market (or any similar organization or
organizations)
regarding account deposits in connection with transactions by the
Fund;
(o) Upon receipt of instructions from the transfer agent for a Fund, for
delivery to such transfer agent or to the holders of Shares in
connection
with distributions in kind, in satisfaction of requests by holders of
Shares for repurchase or redemption; or
(p) For any other proper corporate purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board
of Trustees, certified by an Officer, specifying the Securities to be
delivered, setting forth the purpose for which such delivery is to be
made, declaring such purpose to be a proper corporate purpose, and
naming
the person or persons to whom delivery of such Securities shall be
made.
3.10 Bank Accounts. The Custodian may open and maintain a separate bank
account or accounts in the name of each Fund, subject only to draft or order
by the
Custodian acting pursuant to the terms of this Agreement, and shall hold in such
account or accounts, subject to the provisions hereof, all cash received by it
from
or for the account of each Fund, other than cash maintained in a joint
repurchase
account with other affiliated funds or by a particular Fund in a bank account
established and used in accordance with Rule 17f-3 under the 1940 Act. Funds
held
by the Custodian for a Fund may be deposited by it to its credit as Custodian in
the Banking Department of the Custodian or in such other banks or trust
companies
as it may in its discretion deem necessary or desirable; provided, however, that
every such bank or trust company shall be qualified to act as a custodian
under the
1940 Act and that each such bank or trust company and the funds to be deposited
with each such bank or trust company shall be approved by the vote of a
majority of
the Board of Trustees of the Trust. Such funds shall be deposited by the
Custodian
in its capacity as Custodian for the Fund and shall be withdrawable by the
Custodian only in that capacity. If requested by the Trust, the Custodian shall
furnish the Trust, not later than twenty (20) days after the last Business
Day of
each month, an internal reconciliation of the closing balance as of that day
in all
accounts described in this section to the balance shown on the daily cash report
for that day rendered to the Trust.
3.11 Payments for Shares. The Custodian shall make such arrangements with
the
transfer agent of each Fund, as will enable the Custodian to receive the cash
consideration due to each Fund and will deposit into each Fund's Custody Account
such payments as are received from the transfer agent. The Custodian will
provide
timely notification to the Trust and the transfer agent of any receipt by it of
payments for Shares of the respective Fund.
3.12 Availability of Federal Funds. Upon mutual agreement between the Trust
and the Custodian, the Custodian shall make federal funds available to the
Funds as
of specified times agreed upon from time to time by the Trust and the
Custodian in
the amount of checks, clearing house funds, and other non-federal funds
received in
payment for Shares of the Funds which are deposited into the Funds' Custody
Accounts.
3.13 Actions Not Requiring Proper Instructions. The Custodian may, in its
discretion and without express authority from the Trust or any Fund:
(a) Make payments to itself or others for minor expenses of handling
Securities or other similar items relating to its duties under this
Agreement, provided that all such payments shall be accounted for to
the Fund;
(b) Endorse for collection, in the name of the Fund, checks, drafts and
other negotiable instruments;
(c) Surrender interim receipts or Securities in temporary form for
Securities in definitive form; and
(d) In general, and except as otherwise directed in Proper Instructions,
attend to all non-discretionary details in connection with sale,
exchange, substitution, purchase, transfer and other dealings with
Securities and assets of the Fund.
3.14 Ownership Certificates for Tax Purposes. The Custodian shall execute
any
necessary declarations and certificates of ownership under the federal income
tax
laws or the laws or regulations of any other taxing authority now or hereafter
in
effect, and prepare and submit reports to the Internal Revenue Service ("IRS")
and
to the Trust at such time, in such manner and containing such information as is
prescribed by the IRS.
3.15 Registration and Transfer of Securities. All Securities held for a
Fund
that are issued or issuable only in bearer form shall be held by the
Custodian in
that form, provided that any such Securities shall be held in a Securities
System
if eligible therefor. All other Securities held for a Fund may be registered
in the
name of such Fund, the Custodian, or any sub- custodian or agent appointed
pursuant
to Sections 3.3 and 3.4, respectively, above, or in the name of any nominee
of any
of them, or in the name of a Securities System or any nominee thereof. All
securities accepted by the Custodian on behalf of the Fund under the terms of
this
Agreement shall be in "street name" or other good delivery form. If, however,
the
Fund directs the Custodian to maintain securities in "street name", the
Custodian
shall utilize its best efforts only to timely collect income due the Fund on
such
securities and to notify the Fund on a best efforts basis only of relevant
corporate actions including, without limitation, pendency of calls, maturities,
tender or exchange offers. The Trust shall furnish to the Custodian appropriate
instruments to enable the Custodian to hold or deliver in proper form for
transfer,
or to register in the name of any of the nominees hereinabove referred to or
in the
name of a Securities System, any Securities registered in the name of a Fund.
3.16 Records. The Custodian shall create and maintain all records
relating to
its activities and obligations under this Agreement in such manner as will
meet the
obligations of the Fund under the 1940 Act, with particular attention to
Section 31
thereof and Rules 31a-1 and 31a-2 thereunder. All such records shall be the
property of the Fund and shall at all times during the regular business hours of
the Custodian be open for inspection by duly authorized officers, employees or
agents of the Fund and employees and agents of the SEC. The Custodian shall,
at the
Fund's request, supply the Fund with a tabulation of Securities owned by the
Fund
and held by the Custodian and shall, when requested to do so by the Fund and for
such compensation as shall be agreed upon between the Fund and the Custodian,
include certificate numbers in such tabulations.
3.17 Fund Reports by Custodian. The Custodian shall furnish the Trust
with a
daily activity statement by Fund and a summary of all transfers to or from each
Fund Custody Account on the day following such transfers. At least monthly and
from
time to time, the Custodian shall furnish the Trust with a detailed statement,
by
Fund, of the Securities and moneys held for the Funds under this Agreement.
3.18 Other Reports by Custodian. The Custodian shall provide the Trust, at
such times as the Trust may reasonably require, with reports by independent
public
accountants for each Fund on the accounting system, internal accounting
control and
procedures for safeguarding securities, future contracts and options on future
contracts including securities deposited and/or maintained in a Securities
System,
relating to the services provided by the Custodian for the Fund under this
Agreement; such reports shall be of sufficient scope and in sufficient detail as
may reasonably be required by the Trust to provide reasonable assurance that any
material inadequacies would be disclosed by such examination, and, if there
are no
such inadequacies, the reports shall so state.
3.19 Proxies and Other Materials. The Custodian shall cause all proxies
relating to Securities which are not registered in the name of a Fund, to be
promptly executed by the registered holder of such Securities, without
indication
of the manner in which such proxies are to be voted, and shall promptly
deliver to
the Trust such proxies, all proxy soliciting materials and all notices to such
Securities.
3.20 Information on Corporate Actions. Subject to the provisions of Section
3.15, the Custodian shall transmit promptly to the Trust all written information
(including, without limitation, pendency of calls and maturities of securities
and
expirations of rights in connection therewith and notices of exercise of
call and
put options written by the Trust, on behalf of a Fund and the maturity of
futures
contracts purchased or sold by the Trust on behalf of a Fund) received by the
Custodian from issuers of the Securities being held for the Funds. With
respect to
tender or exchange offers, the Custodian shall transmit promptly to the Trust
all
written information received by the Custodian from the issuers of the Securities
whose tender or exchange offer is sought from the party (or his agents)
making the
tender offer. If the Trust on behalf of a Fund desires to take action with
respect
to any tender offer, exchange offer, or any other similar transaction, the Trust
shall notify the Custodian at least three Business Days prior to the date on
which
the Custodian is to take such action.
3.22 Additional Series. In the event that the Trust establishes one or more
series in addition to and with respect to which it desires to have the Custodian
render services as Custodian under the terms set forth in this Agreement,
it shall
so notify the Custodian in writing, and if the Custodian shall agree in
writing to
provide such services, such series shall become a Fund hereunder, subject to
such
fees as the parties may agree.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 Purchase of Securities. Promptly upon each purchase of Securities for a
Fund, Proper Instructions shall be delivered to the Custodian, specifying
(a) the
Fund for which the purchase was made, (b) the name of the issuer or writer of
such
Securities, and the title or other description thereof, (c) the number of
shares,
principal amount (and accrued interest, if any) or other units purchased,
(d) the
date of purchase and settlement, (e) the purchase price per unit, (f) the total
amount payable upon such purchase, and (g) the name of the person to whom such
amount is payable. The Custodian shall, upon receipt of such Securities
purchased
by a Fund, pay out of the moneys held for the Fund in the relevant Fund Custody
Account the total amount specified in such Proper Instructions to the person
named
therein. The Custodian shall not be under any obligation to pay out moneys to
cover
the cost of a purchase of Securities for a Fund, if in the relevant Fund Custody
Account there is insufficient cash available to the Fund for which such purchase
was made.
4.2 Liability for Payment in Advance of Receipt of Securities Purchased.
Except as provided in this Agreement, in any and every case where payment
for the
purchase of Securities for a Fund is made by the Custodian in advance of
receipt of
the Securities purchased but in the absence of Proper Instructions to so pay in
advance, the Custodian shall be liable to the Trust, on behalf of the Fund, for
such Securities to the same extent as if the Securities had been received by the
Custodian.
4.3 Sale of Securities. Promptly upon each sale of Securities by a Fund,
Proper Instructions shall be delivered to the Custodian, specifying (a) the Fund
for which the sale was made, (b) the name of the issuer or writer of such
Securities, and the title or other description thereof, (c) the number of
shares,
principal amount (and accrued interest, if any), or other units sold, (d) the
date
of sale and settlement, (e) the sale price per unit, (f) the total amount
payable
upon such sale, and (g) the person to whom such Securities are to be delivered.
Upon receipt of the total amount payable to the Fund as specified in such Proper
Instructions, the Custodian shall deliver such Securities to the person
specified
in such Proper Instructions. Subject to the foregoing, the Custodian may accept
payment in such form as shall be satisfactory to it, and may deliver
Securities and
arrange for payment in accordance with the customs prevailing among dealers in
Securities.
4.4 Payment for Securities Sold. In its sole discretion and from time to
time,
the Custodian may credit the relevant Fund Custody Account, prior to actual
receipt
of final payment thereof, with (i) proceeds from the sale of Securities which it
has been instructed to deliver against payment, (ii) proceeds from the
redemption
of Securities or other assets of the Fund, and (iii) income from cash,
Securities
or other assets of the Fund. Any such credit shall be conditional upon actual
receipt by Custodian of final payment and may be reversed if final payment is
not
actually received in full. The Custodian may, in its sole discretion and from
time
to time, permit a Fund to use funds so credited to its Fund Custody Account in
anticipation of actual receipt of final payment. Any such funds shall be
repayable
immediately upon demand made by the Custodian at any time prior to the actual
receipt of all final payments in anticipation of which funds were credited to
the
Fund Custody Account.
4.5 Advances by Custodian for Settlement. The Custodian may, in its sole
discretion and from time to time, advance funds to the Trust to facilitate the
settlement of a Fund's transactions in its Fund Custody Account. Any such
advance
shall be repayable immediately upon demand made by Custodian.
ARTICLE V
REDEMPTION OF FUND SHARES
5.1 Transfer of Funds. From such funds as may be available for the
purpose in
the relevant Fund Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of a Fund, the Custodian
shall wire each amount specified in such Proper Instructions to or through such
bank as the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 No Duty Regarding Paying Banks. The Custodian shall not be under any
obligation to effect payment or distribution by any bank designated in Proper
Instructions given pursuant to Section 5.1 above of any amount paid by the
Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of a Fund, into
which
account or accounts may be transferred cash and/or Securities, including
Securities
maintained in a Depository Account,
(a) In accordance with the provisions of any agreement among the Trust on
behalf of a Fund, the Custodian and a broker-dealer registered
under the
1934 Act and a member of the NASD (or any futures commission merchant
registered under the Commodity Exchange Act), relating to compliance
with
the rules of The Options Clearing Corporation and of any registered
national securities exchange (or the Commodity Futures Trading
Commission
or any registered contract market), or of any similar organization or
organizations, regarding escrow or other arrangements in connection
with
transactions by a Fund,
(b) For purposes of segregating cash or Securities in connection with
securities options purchased or written by the Trust, on behalf of
a Fund
or in connection with financial futures contracts (or options thereon)
purchased or sold by a Fund,
(c) Which constitute collateral for loans of Securities made by a Fund,
(d) For purposes of compliance by the Funds with requirements under
the 1940
Act for the maintenance of segregated accounts by registered
investment
companies in connection with reverse repurchase agreements, and when-
issued, delayed delivery and firm commitment transactions, and other
similar transactions, and
(e) For other proper corporate purposes, but only upon receipt of, in
addition to Proper Instructions, a certified copy of a resolution
of the
Board of Trustees, certified by an Officer, setting forth the
purpose of
purposes of such segregated account and declaring such purposes to be
proper corporate purposes.
Each segregated account established under this Article VI shall be
established
and maintained for a single Fund only. All Proper Instructions relating to a
segregated account shall specify the Fund involved.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 Standard of Care. The Custodian shall be held to a standard of
reasonable
care in carrying out the provisions of this Agreement. The Custodian shall be
entitled to rely on and may act upon advice of counsel (who may be counsel
for the
Trust) on all matters, and shall be without liability for any action reasonably
taken or omitted pursuant to such advice. Subject to the limitations set
forth in
this Agreement, the Custodian shall be kept indemnified by the Trust and be
without
liability for any action taken or omitted to be taken by it in carrying out the
terms and provisions of this Agreement in accordance with the above standards.
7.2 No Responsibility for Title. So long as and to the extent that it is in
the exercise of reasonable care, the Custodian shall not be responsible for the
title, validity or genuineness of any property or evidence of title thereto
received or delivered by it pursuant to this Agreement.
7.3 Reliance Upon Documents and Instructions. The Custodian shall be
entitled
to rely upon any certificate, notice or other instrument in writing received
by it
and reasonably believed by it to be genuine. The Custodian shall be entitled to
rely upon any Proper Instructions actually received by it pursuant to this
Agreement.
7.4 Express Duties Only. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth
in this
Agreement, and no covenant or obligation shall be implied in this Agreement
against
the Custodian.
7.5 Co-operation. The Custodian shall cooperate with and supply necessary
information, by Fund, to the entity or entities appointed by the Trust to
keep the
books of account of the Funds and/or compute the value of the assets of the
Funds.
The Custodian shall take all such reasonable actions as the Trust may from
time to
time request to enable the Trust to obtain, from year to year, favorable
opinions
from the Trust's independent accountants with respect to the Custodian's
activities
hereunder in connection with (a) the preparation of the Trust's report on
Form N-1A
and Form N-SAR and any other reports required by the SEC, and (b) the
fulfillment
by the Trust of any other requirements of the SEC.
ARTICLE VIII
INDEMNIFICATION
8.1 Indemnification. The Trust shall indemnify and hold harmless the
Custodian, any sub-custodian appointed pursuant to Section 3.3 above, or any
agent,
and any nominee of the Custodian or of such sub-custodian from and against any
loss, damage, cost, expense (including attorneys' fees and disbursements),
liability (including, without limitation, liability arising under the Securities
Act of 1933, the 1934 Act, the 1940 Act, and any state securities and/or banking
laws) or claim arising directly or indirectly (a) from the fact that
Securities are
registered in the name of any such nominee, or (b) from any action or
inaction by
the Custodian or such sub-custodian (i) at the request or direction of or in
reliance on the advice of the Trust, or (ii) upon Proper Instructions, or (c)
generally, from the performance of its obligations under this Agreement or
any sub-
custody agreement with a sub-custodian appointed pursuant to Section 3.3
above or,
in the case of any such sub-custodian, from the performance of its obligations
under such sub-custody agreement, provided that neither the Custodian nor any
such
sub-custodian shall be indemnified and held harmless from and against any such
loss, damage, cost, expense, liability or claim arising from the Custodian's or
such sub-custodian's failure to act in accordance with the standard of
reasonable
care set forth in Section 7.1.
8.2 Indemnity to be Provided. If the Trust requests the Custodian to
take any
action with respect to Securities, which action involves the payment of money or
which action may, in the opinion of the Custodian, result in the Custodian or
its
nominee becoming liable for the payment of money or incurring liability of some
other form, the Custodian shall not be required to take such action until the
Trust
shall have provided indemnity therefor to the Custodian in an amount and form
satisfactory to the Custodian.
8.3 Security. If the Custodian advances cash or Securities to a Fund
for any
purpose, either at the Trust's request or as otherwise contemplated in this
Agreement, or in the event that the Custodian or its nominee incurs, in
connection
with its performance under this Agreement, any loss, damage, cost expense
(including attorneys' fees and disbursements), liability or claim (except
such as
may arise from its or its nominee's negligence, bad faith and willful
misconduct),
then, in any such event, any property at any time held for the account of such
Fund
shall be security therefor, and should such Fund fail promptly to repay or
indemnify the Custodian, the Custodian shall be entitled to utilize available
cash of such Fund and to dispose of other assets of such Fund to the extent
necessary to obtain reimbursement or indemnification.
ARTICLE IX
EFFECTIVE PERIOD; TERMINATION
9.1 Effective Period. This Agreement shall become effective as of its
execution and shall continue in full force and effect until terminated as
hereinafter provided.
9.2 Termination. Either party hereto may terminate this Agreement, with
respect to one or more Funds, by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than ninety
(90)
days after the date of the giving of such notice. The notice shall specify the
Funds to which the termination relates ("Terminated Funds"). If a successor
custodian for one or more Terminated Funds shall have been appointed by the
Board
of Trustees, the Custodian shall, upon receipt of a notice of acceptance by the
successor custodian, on such specified date of termination (a) deliver directly
to
the successor custodian all Securities (other than Securities held in a
Securities
System) and cash then owned by the Terminated Funds and held by the Custodian as
custodian, and (b) transfer any Securities held in a Securities System to an
account of or for the benefit of the Funds at the successor custodian, provided
that the Trust on behalf of the Terminated Funds shall have paid to the
Custodian
all fees, expenses and other amounts to the payment or reimbursement of which it
shall then be entitled. Upon such delivery and transfer, the Custodian shall be
relieved of all obligations under this Agreement with respect to the Terminated
Funds. The Trust may at any time immediately terminate this Agreement in the
event
of the appointment of a conservator or receiver for the Custodian by regulatory
authorities in the State of North Carolina or upon the happening of a like
event at
the direction of an appropriate regulatory agency or court of competent
jurisdiction.
9.3 Failure to Appoint Successor Custodian. If a successor custodian is not
designated by the Trust on or before the date of termination specified
pursuant to
Section 9.2 above, then the Custodian shall have the right to deliver to a
bank or
trust company of its own selection, which (a) is a "Bank" as defined in the 1940
Act, (b) has aggregate capital, surplus and undivided profits as shown on its
then
most recent published report of not less than $25 million, and (c) is doing
business in New York, New York, all Securities, cash and other property held by
Custodian under this Agreement and to transfer to an account of or for the
identified Funds at such bank or trust company all Securities of the Funds
held in
a Securities System. Upon such delivery and transfer, such bank or trust company
shall be the successor custodian for the Terminated Funds under this Agreement
and
the Custodian shall be relieved of all obligations with respect to such Funds
under
this Agreement. If, after reasonable inquiry, Custodian cannot find a successor
custodian as contemplated in this Section 9.3, then Custodian shall have the
right
to deliver to the Trust all Securities and cash of the Terminated Funds and to
transfer any Securities held in a Securities System to an account of or for the
Trust. Thereafter, the Trust shall be deemed to be its own custodian with
respect
to the Securities, cash and other assets of the Terminated Funds and the
Custodian
shall be relieved of all obligations under this Agreement.
9.4 Continuing Obligations. Nothing contained in this Article IX shall be
construed to excuse the Trust from payment of all charges due and payable to the
Custodian. The provisions of Section 13.2, "References to Custodian", Article
VII,
"Concerning the Custodian" and Article VIII, "Indemnification" shall survive the
termination or expiration of this Agreement for any reason.
ARTICLE X
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from time to
time by the Trust and the Custodian. The fees and other charges in effect on the
date hereof and applicable to the Funds are set forth in Exhibit C attached
hereto.
ARTICLE XI
LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Trust hereunder shall
not
be binding upon any of the Trustees, shareholders, nominees, officers, agents or
employees of the Trust personally, but shall bind only the trust property of the
Trust as provided in the Trust's Declaration of Trust, dated August 15, 1990, as
from time to time amended. The execution and delivery of this Agreement have
been
authorized by the Trustees, and this Agreement has been signed and delivered
by an
authorized officer of the Trust, acting as such, and neither such
authorization by
the Trustees nor such execution and delivery by such officer shall be deemed to
have been made by any of them individually or to impose any liability on any of
them personally, but shall bind only the trust property of the Trust as
provided in the above-mentioned Agreement and Declaration of Trust.
ARTICLE XII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be
sent or delivered to the address set forth after its name herein below:
To the Trust:
The Biltmore Municipal Funds
Federated Investors Tower
Pittsburgh, PA 15222-3779
Attention: Secretary
Telephone: 412/288-1229
Facsimile: 412/288-8141
To the Custodian:
Wachovia Bank of North Carolina, N.A.
301 North Main Street
Winston-Salem, NC 27150
Attn: Robert S. Kniejski
Telephone: 919/770-6172
Facsimile: 919/770-5758
or at such other address as either party shall have provided to the other by
notice
given in accordance with this Article XII. Writing shall include transmission
by or
through teletype, facsimile, central processing unit connection, on-line
terminal
and magnetic tape.
ARTICLE XIII
MISCELLANEOUS
13.1 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of North Carolina.
13.2 References to Custodian. The Trust shall not circulate any printed
matter
which contains any reference to Custodian without the prior written approval of
Custodian, excepting printed matter contained in the prospectus or statement of
additional information for a Fund and such other printed matter as merely
identifies Custodian as custodian for a Fund. The Trust shall submit printed
matter
requiring approval to Custodian in draft form, allowing sufficient time for
review
by Custodian and its counsel prior to any deadline for printing.
13.3 No Waiver. No failure by either party hereto to exercise, and no
delay by
such party in exercising, any right hereunder shall operate as a waiver thereof.
The exercise by either party hereto of any right hereunder shall not preclude
the
exercise of any other right, and the remedies provided herein are cumulative and
not exclusive of any remedies provided at law or in equity.
13.4 Amendments. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
13.5 Counterparts. This Agreement may be executed in one or more
counterparts,
and by the parties hereto on separate counterparts, each of which shall be
deemed an original but all of which together shall constitute but one and the
same instrument.
13.6 Severability. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
13.7 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
13.8 Headings. The headings of sections in this Agreement are for
convenience
of reference only and shall not affect the meaning or construction of any
provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed and delivered in its name and on its behalf by its
representatives thereunto duly authorized, all as of the day and year first
above written.
ATTEST: The Biltmore Municipal Funds
/s/ Mark A. Sheehan By: /s/ Ronald M. Petnuch
Assistant Secretary Vice President
ATTEST: Wachovia Bank of
North Carolina, N.A.
/s/ James G. Vanderberry By:/s/ Ricky B. Nicks
Secretary Senior Vice President
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<NAME> South Carolina Municipal Bond Fund
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