ANNUAL REPORT
DATED
NOVEMBER 30, 1995
JANUARY 31, 1996
BILTMORE SOUTH CAROLINA
MUNICIPAL BOND FUND
WACHOVIA INVESTMENTS
MAKE YOURSELF COMFORTABLE
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PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the Annual Report to Shareholders of Biltmore South
Carolina Municipal Bond Fund for the year ended November 30, 1995. This report
begins with a brief commentary on the municipal bond market. Following the
commentary is a complete listing of fund investments and its financial
statements.
Biltmore South Carolina Municipal Bond Fund helps to pursue monthly income
exempt from federal regular income tax and South Carolina state income tax.* The
fund invests in a portfolio of bonds issued by municipalities across South
Carolina that are rated A or higher at the time of purchase by nationally
recognized rating agencies.
Consistent with a highly favorable interest rate environment during the
reporting period, the fund rewarded shareholders with total return figures based
on net asset value and maximum offering price of 16.97% and 11.75%,
respectively,** dividends totaling $0.56 per share, capital gains of $0.10 per
share, and a $1.00 increase in share price. Total net assets reached $94 million
on the last day of the reporting period.
Thank you for selecting Biltmore South Carolina Municipal Bond Fund to help you
keep more of what you earn. We look forward to keeping you informed about your
investment and we welcome your comments and suggestions.
Sincerely,
John W. McGonigle
President
January 15, 1996
* Income may be subject to the federal alternative minimum tax.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
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BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
The municipal bond market enjoyed strong gains during the fiscal year, the
result of a continued sharp decline in new issues, a favorable interest rate
environment and low inflation. Discussions of a flat tax in Washington
restrained the municipal bond market early in 1995. By mid-year, however, the
rhetoric subsided a bit, enabling municipal bonds to participate in an extended
rally. During the fiscal year ended November 30, 1995, the Fund had a total
return of 16.97% based on net asset value and 11.75% based on the maximum
offering price.*
Signs of slower economic growth late in the year helped push the yield of
30-year AAA general obligation municipal bonds down, from 6.75% on November 30,
1994, to 5.35% on November 30, 1995. The Fund's portfolio manager extended
duration during the fiscal year in anticipation of lower interest rates. The
portfolio manager also attempted to take advantage of lower interest rates by
selling premium, callable bonds and buying discounted bonds.
On November 30, 1995, net assets of the Fund totaled $93.7 million. The 30-day
SEC yield was 4.55% based on net asset value and 4.34% based on the maximum
offering price.* The Fund ended the period with an average duration of 6.62
years.
*Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
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BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
GROWTH OF $10,000 INVESTED IN BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Biltmore South Carolina Municipal Bond Fund (the "Fund") from January 11, 1991
(start of performance) to November 30, 1995 compared to the Lehman Brothers
State General Obligation Bond Index.+
[INSERT CHART HERE- SEE APPENDIX]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY INSURED.
*Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales load of 4.50% ($10,000 investment minus $450 sales load =
$9,550). The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman Brothers State General Obligation Bond Index has
been adjusted to reflect reinvestment of dividends on securities in the index.
**Total return quoted reflects all applicable sales loads.
Total return for shareholders purchasing shares of the Fund at net asset value
without a sales load, including accounts purchasing shares through the Trust
Divisions of the Wachovia Banks, is 16.97% for the year ended November 30,
1995, as reflected in the "Financial Highlights" section of the Fund's
prospectus, and 8.14% for the period from January 11, 1991 (start of
performance) through November 30, 1995.
+The Lehman Brothers State General Obligation Bond is not adjusted to reflect
sales loads, expenses, or other fees that the SEC requires to be reflected in
the Fund's performance. The index is unmanaged.
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BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
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(a) Long-Term Municipal Securities--98.3%
SOUTH CAROLINA--98.3%
$ 100,000 Aiken County, SC, 7.00% GO Bonds, 2/1/2002 A $ 104,426
540,000 Barnwell County, SC, School District, 5.60% GO Bonds (Original
Issue Yield: 5.65%)/(Callable 2/1/2005 @ 102)/ (AMBAC Insured),
2/1/2012 AAA 552,793
570,000 Barnwell County, SC, School District, 5.60% GO Bonds (Original
Issue Yield: 5.70%)/(Callable 2/1/2005 @ 102)/ (AMBAC Insured),
2/1/2013 AAA 583,503
675,000 Beaufort County, SC, 7.125% Lease Certificate of Participation
(Beaufort Memorial Hospital Project)/(AMBAC Insured),
6/1/2012 AAA 753,584
1,000,000 Beaufort County, SC, Planning and Development Corp., 5.00% Lease
Certificate of Participation (Hilton Head Island Airport
Terminal)/(Series 1993), 7/1/2001 A 1,017,500
150,000 Beaufort County, SC, School District, 7.80% GO Bonds,
12/1/1996 A 156,165
855,000 Beaufort-Jasper County, SC, Water & Sewer Authority, 5.90%
Revenue Bonds (FGIC Insured), 3/1/2016 AAA 881,514
750,000 Berkeley County, SC, 6.50% Pollution control Revenue Bonds (SCE &
G Project), 10/1/2014 A- 804,593
1,500,000 Berkeley County, SC, Water & Sewer, 5.50% (MBIA Insured),
6/1/2013 AAA 1,518,255
935,000 Berkeley County, SC, Water & Sewer, 6.00% (MBIA Insured),
6/1/2010 AAA 971,072
950,000 Berkeley County, SC, Water & Sewer, 7.00% Revenue Bonds (MBIA
Insured), 6/1/2016 AAA 1,088,529
1,105,000 Charleston County, SC, 4.75% District Airport Revenue Bonds (MBIA
Insured)/(Callable 7/1/2002 @ 100)/(Original Issue Yield:
5.571%), 7/1/2015 AAA 1,009,429
1,000,000 Charleston County, SC, 7.10% Lease Certificate of Participation
(MBIA Insured), 6/1/2011 AAA 1,150,670
1,315,000 Charleston County, SC, 9.00% GO UT Bonds (State Aid Withholding),
6/1/2001 AA 1,611,756
310,000 Charleston County, SC, 9.00% Resource Recovery Bonds (Foster
Wheeler Project), 1/1/2005 A 342,838
</TABLE>
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BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
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(a) Long-Term Municipal Securities--continued
SOUTH CAROLINA--CONTINUED
$ 1,000,000 Charleston County, SC, Water Works & Sewer, 6.00% Revenue Bonds,
1/1/2012 AA- $ 1,046,500
1,500,000 Charleston County, SC, Water Works & Sewer, 7.00% Revenue Bonds
(Series A), 1/1/2015 AA- 1,535,610
400,000 Charleston County, SC, Water Works & Sewer, 7.05% Revenue Bonds,
(Series A), 1/1/2006 AA 409,592
1,125,000 Chester County, SC, School District, 6.85% GO Bonds,
2/1/2009 A 1,251,281
875,000 Chester County, SC, School District, 6.85% GO Bonds,
2/1/2012 A 973,219
250,000 City of Charleston, SC, 6.30% GO Bonds, 9/1/2005 AA 273,300
1,000,000 City of Charleston, SC, 6.50% GO Bonds, 6/1/2012 AA 1,075,350
1,000,000 Columbia, SC, Parking Facilities, 5.875% Revenue Refunding Bonds
(AMBAC Insured), 12/1/2013 AAA 1,048,750
1,500,000 Columbia, SC, Waterworks & Sewer System, 5.70% Revenue Refunding
Bonds, 2/1/2010 AA 1,586,010
355,000 Columbia, SC, Waterworks & Sewer System, 6.30% Revenue Bonds,
2/1/2000 AA 382,161
600,000 Dorchester County, SC, School District Pound2, 6.65% GO Bonds
(MBIA Insured), 7/1/2012 AAA 660,468
870,000 Edgefield County, SC, School District, 6.40% GO Refunding Bonds
(FSA Insured), 2/1/2009 AAA 958,931
2,000,000 Fairfield County, SC, 6.50% Pollution Control Revenue Bonds,
9/1/2014 A 2,136,480
500,000 Florence County, SC, 6.75% Revenue Bonds (McLeod Regional Medical
Center Project)/(FGIC Insured), 11/1/2010 AAA 550,050
1,465,000 Florence County, SC, Water Works & Sewer, 5.00% Revenue Bonds
(AMBAC Insured), 3/1/2004 AAA 1,495,179
800,000 Grand Strand Water & Sewer Authority, 6.00% Revenue Bonds (MBIA
Insured), 6/1/2019 AAA 822,720
2,805,000 Grand Strand Water & Sewer Authority, 6.375% Revenue Bonds (MBIA
Insured), 6/1/2012 AAA 3,165,471
760,000 Greenville, SC, 7.00% Hospital Revenue Bonds, 5/1/2017 AA- 813,937
500,000 Greenville, SC, 7.60% Revenue Bonds (Airport Project)/ (AMBAC
Insured), 7/1/2000 AAA 519,815
500,000 Greenville, SC, IDR, 7.10% Revenue Bonds (Lockheed Aeromod
Facility Project), 11/1/2011 A 541,890
</TABLE>
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BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
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(a) Long-Term Municipal Securities--continued
SOUTH CAROLINA--CONTINUED
$ 1,000,000 Hilton Head, SC, Public Facilities Corporation, 5.4% Certificate
of Participation (Original Issue Yield: 5.60%)/ (Callable
3/1/2005 @ 102)/(AMBAC Insured), 3/1/2009 AAA $ 1,018,070
980,000 Horry County, SC, 4.65% GO Bonds (MBIA Insured),
12/1/2005 AAA 967,280
100,000 Horry County, SC, 7.45% GO Bonds, 12/1/2004 A+ 111,386
1,110,000 Horry County, SC, School District, 4.70% GO Refunding Bonds
(Series B), 4/1/2002 AAA 1,122,365
600,000 Horry County, SC, School District, 7.00% GO Bonds, 1/1/2005 A 672,036
450,000 Horry County, SC, School District, 7.00% GO Bonds,
12/1/2003 A 482,450
1,960,000 Lancaster County, SC, School District, 6.50% GO Bonds (MBIA
Insured), 7/1/2008 AAA 2,155,530
175,000 Lexington County, SC, IDR, 8.00% (J.B. White Project)/
(Mercantile Stores Guaranteed), 1/1/2011 NR 196,910
805,000 Medical University, SC, Hospital Facilities, 5.25% (MBIA
Insured), 7/1/2004 AAA 840,283
200,000 Medical University, SC, Hospital Facilities, 7.125% Revenue Bonds
(Series A), 7/1/2004 A+ 219,384
2,000,000 North Charleston, SC, Sewer District, 6.00% Revenue Bonds (MBIA
Insured), 7/1/2018 AAA 2,059,520
500,000 North Charleston, SC, Sewer District, 6.00% Revenue Bonds (Series
A)/(MBIA Insured), 7/1/2018 AAA 514,880
2,500,000 Oconee County, SC, 5.80% Pollution Control Revenue Bonds
(Callable 4/1/2003 @ 102)/(Original Issue Yield: 5.80%),
4/1/2014 AA- 2,532,125
1,275,000 Oconee County, SC, School District, 5.10% GO Bonds (MBIA
Insured)/(Callable 9/1/2005 @ 102)/(Original Issue Yield: 5.50%),
9/1/2013 AAA 1,240,792
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 1,436,388
1,000,000 Piedmont Municipal Power Agency, SC, 5.50% Electric Revenue
Bonds, (MBIA Insured), 1/1/2013 AAA 1,026,220
1,135,000 Piedmont Municipal Power Agency, SC, 6.375% Electric Revenue
Bonds (Series A)/(FGIC Insured), 1/1/2006 AAA 1,279,940
</TABLE>
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BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
(a) Long-Term Municipal Securities--continued
SOUTH CAROLINA--CONTINUED
$ 1,000,000 Piedmont Municipal Power Agency, SC, 6.50% Electric Revenue Bonds
(FGIC Insured), 1/1/2011 AAA $ 1,083,310
590,000 Piedmont Municipal Power Agency, SC, 6.85% Electric Revenue Bonds
(FGIC Insured), 1/1/2007 AAA 659,638
100,000 Piedmont Municipal Power Agency, SC, 7.40% Electric Revenue Bonds
(Series A)/(AMBAC Insured), 1/1/2018 AAA 107,832
1,390,000 Richland County, SC, 6.25% GO Bonds (Series B), 3/1/2001 AA 1,514,419
1,250,000 Richland County, SC, 6.25% GO Bonds, 3/1/2011 AA 1,363,550
1,000,000 Richland County, SC, 6.75% Pollution Control Revenue Bonds (Union
Camp Project), 5/1/2022 A1 1,054,350
600,000 Richland County, SC, 7.10% Hospital Revenue Bonds (Community
Provider Pool)/(Capital Guaranty Insured),
7/1/2005 AAA 681,318
650,000 Richland County, SC, 7.45% Pollution Control Revenue Bonds
(Series A), 4/1/2021 A1 718,549
255,000 Richland County, SC, Hospital Facility, 8.125% Revenue Bonds (Sun
Health Network Project)/(Summitomo Bank, Ltd. LOC), 10/1/2011 AA3 280,949
1,325,000 Richland-Lexington, SC, 6.125% District Airport Revenue Bonds
(Columbia Metropolitan Airport)/(AMBAC Insured),
1/1/2025 AAA 1,371,547
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 1,110,860
165,000 Rock Hill, SC, Housing Development Corp., 7.50% Revenue Bonds
(FNMA Guaranteed), 7/1/2010 AAA 180,842
1,000,000 South Carolina HFA, 6.45% Revenue Bonds (Series A-1),
7/1/2017 Aa 1,034,820
1,200,000 South Carolina HFA, 7.30% Revenue Bonds, 7/1/2011 AA 1,288,500
100,000 South Carolina HFA, 7.50% Revenue Bonds, 7/1/2011 AA 107,496
500,000 South Carolina HFA, 7.70% Revenue Bonds (Series C),
7/1/2011 AA 537,475
520,000 South Carolina HFA, 7.75% Revenue Bonds (Series C),
7/1/2022 AA 553,561
1,000,000 South Carolina Port Authority, 6.50% Revenue Bonds
(AMBAC Insured), 7/1/2006 AAA 1,089,490
</TABLE>
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BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
(a) Long-Term Municipal Securities--continued
SOUTH CAROLINA--CONTINUED
$ 1,000,000 South Carolina Port Authority, 6.625% Revenue Bonds (AMBAC
Insured), 7/1/2011 AAA $ 1,087,090
525,000 South Carolina Port Authority, 6.75% Revenue Bonds
(AMBAC Insured), 7/1/2021 AAA 568,538
2,500,000 South Carolina Public Service Authority, 5.125% Revenue Refunding
Bonds (Series C)/(MBIA Insured), 1/1/2032 AAA 2,362,825
1,950,000 South Carolina Public Service Authority, 6.50% Revenue Bonds
(Santee Cooper)/(Series D)/(AMBAC Insured), 7/1/2014 AAA 2,120,391
600,000 South Carolina Public Service Authority, 7.00% Revenue Bonds
(Series C), 7/1/2012 A+ 619,866
1,125,000 South Carolina Public Service Authority, 7.30% Revenue Bonds,
7/1/2021 A+ 1,163,846
500,000 South Carolina Resource Authority, 7.00% Revenue Bonds (Series
A), 6/1/2003 AA 551,290
1,000,000 South Carolina State Educational Assistance Authority (Guaranteed
Student Loan Insured)/(Original Issue Yield: 5.75%)/(Sub Lien-B),
5.70% Revenue Bonds, 9/1/2005 A 1,029,300
1,000,000 South Carolina State Educational Assistance Authority, 5.80%
Revenue Refunding Bonds (Guaranteed Student Loans),
9/1/2004 AAA 1,051,500
405,000 South Carolina State Educational Assistance Authority, 6.50%
Revenue Bonds, 9/1/2004 AA 433,755
1,035,000 South Carolina State, 4.40% GO UT Refunding Bonds
(Series B)/(State Aid Withholding), 4/1/2001 AAA 1,043,518
4,500,000 South Carolina State, 5.00% GO UT Revenue Bonds
(Series A), 3/1/2008 AAA 4,532,400
1,000,000 South Carolina State, 5.00%, GO Bonds (Series A), 2/1/2009 AAA 998,500
975,000 South Carolina State, 6.15% Housing Authority Revenue Refunding
Bonds (Series A), 7/1/2008 AA 1,035,752
200,000 Spartanburg County, SC, 7.80% Revenue Bonds (Mary Black Hospital
Project), 10/1/2000, Prerefunded 10/1/98 @ 102 A- 223,058
100,000 Spartanburg County, SC, 8.25% Revenue Bonds (Mary Black Hospital
Project), 10/1/2008, Prerefunded 10/1/98 @ 102 A- 112,123
1,500,000 Spartanburg County, SC, Health Services District, 5.50% Revenue
Bonds (AMBAC Insured)/(Callable 4/15/2005 @ 102)/ (Original Issue
Yield: 5.70%), 4/15/2015 AAA 1,501,785
</TABLE>
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BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Principal
Amount Credit
or Shares Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
(a) Long-Term Municipal Securities--continued
SOUTH CAROLINA--CONTINUED
$ 1,000,000 Spartanburg County, SC, Hospital Facilities, 6.55% Revenue
Refunding Bonds (Spartanburg General Hospital System)/ (Series
A)/(FSA Insured), 4/15/2010 AAA $ 1,095,660
450,000 Spartanburg County, SC, Leased Housing Corp., 7.50% Revenue
Bonds, 10/1/2011 A 490,243
1,000,000 Sumter County, SC, Hospital Facilities, 6.625% Revenue Refunding
Bonds (Tuomey Regional Medical Center)/(MBIA Insured), 11/15/2004 AAA 1,136,660
1,300,000 Western Carolina Regional Sewer Authority, 5.50% Revenue
Refunding Bonds, (FGIC Insured), 3/1/2010 AAA 1,331,602
1,000,000 York County, SC, 4.90% GO Bonds (AMBAC Insured),
6/1/2010 AAA 973,980
200,000 York County, SC, School District Pound3, 9.00% GO Bonds
(MBIA Insured), 6/1/1997 AAA 214,883
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Total Long-Term Municipal Securities
(identified cost $87,325,125) 92,085,971
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Open Ended Investment Companies--1.5%
1,411,212 Fidelity Tax-Exempt Money Market Fund (at net asset value) 1,411,212
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Total Investments (identified cost $88,736,337)(b) $ 93,497,183+
-------------
</TABLE>
(a) At November 30, 1995, 12.96% of the total investments at market value were
subject to alternative minumum tax.
(b) The cost of investments for federal tax purposes amounts to $88,736,337. The
net unrealized appreciation of investments on a federal tax basis amounts to
$4,760,846 which is comprised of $4,869,863 appreciation and $109,017
depreciation at November 30, 1995.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($93,724,847) at November 30, 1995.
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BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
The following acronym(s) are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
FGIC--Financial Guaranty Insurance Company
FNMA--Federal National Mortgage Association
FSA--Financial Security Assurance
GO--General Obligation
GTD--Guaranty
HFA--Housing Finance Authority
IDR--Industrial Development Revenue
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance
UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
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BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995
<TABLE>
<S> <C> <C>
Assets:
Investments at value (identified and tax cost $88,736,337) $ 93,497,183
Income receivable 1,900,011
Receivable for shares sold 167,202
Deferred expenses 1,081
-------------
Total assets 95,565,477
Liabilities:
Payable for investments purchased $ 1,467,600
Payable for shares redeemed 91,350
Income distribution payable 223,783
Payable to Bank 570
Accrued expenses 57,327
------------
Total liabilities 1,840,630
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Net Assets for 8,481,452 shares outstanding $ 93,724,847
-------------
Net Assets Consist of:
Paid in capital $ 88,664,218
Net unrealized appreciation of investments 4,760,846
Accumulated net realized gain on investments 299,783
-------------
Total Net Assets $ 93,724,847
-------------
Net Asset Value and Redemption Proceeds Per Share:
($93,724,847 / 8,481,452 shares outstanding) $11.05
-------------
Offering Price Per Share: (100/95.50 of $11.05)* $11.57
-------------
</TABLE>
* See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
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BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1995
<TABLE>
<S> <C> <C>
Investment Income:
Interest $ 4,959,973
Expenses:
Investment advisory fee $ 639,686
Administrative personnel and services fee 76,587
Custodian fees 17,060
Transfer agent and dividend disbursing agent fees and expenses 78,321
Trustees' fees 7,651
Auditing fees 15,030
Legal fees 5,360
Portfolio accounting fees 61,522
Share registration costs 17,559
Printing and postage 28,652
Insurance premiums 4,526
Miscellaneous 12,189
-----------
Total expenses 964,143
Waiver of investment advisory fee $ (469,407)
-----------
Net expenses 494,736
-------------
Net investment income 4,465,237
-------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 300,614
Net change in unrealized appreciation on investments 8,307,203
-------------
Net realized and unrealized gain on investments 8,607,817
-------------
Change in net assets resulting from operations $ 13,073,054
-------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
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BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended November 30, 1995 1994
<S> <C> <C>
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 4,465,237 $ 4,347,034
Net realized gain on investments ($300,614 and $736,173 net gains,
respectively, as computed for federal tax purposes) 300,614 736,173
Net change in unrealized appreciation (depreciation) 8,307,203 (8,983,137)
-------------- --------------
Change in net assets resulting from operations 13,073,054 (3,899,930)
-------------- --------------
Distributions to Shareholders--
Distributions from net investment income (4,465,237) (4,347,034)
Distributions from net realized gains (737,507) (226,365)
-------------- --------------
Change in net assets resulting from distributions to
shareholders (5,202,744) (4,573,399)
-------------- --------------
Share Transactions--
Proceeds from sale of shares 18,511,981 22,357,697
Net asset value of shares issued to shareholders in payment of distribu-
tions declared 2,122,444 1,805,778
Cost of shares redeemed (10,775,249) (23,066,099)
-------------- --------------
Change in net assets resulting from share transactions 9,859,176 1,097,376
-------------- --------------
Change in net assets 17,729,486 (7,375,953)
Net Assets:
Beginning of period 75,995,361 83,371,314
-------------- --------------
End of period $ 93,724,847 $ 75,995,361
-------------- --------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
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BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended 11/30/95 11/30/94 11/30/93** 9/30/93 9/30/92 9/30/91*
<S> <C> <C> <C> <C> <C> <C>
- -------------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF
PERIOD $ 10.05 $ 11.12 $ 11.27 $ 10.53 $ 10.17 $ 10.00
Income from investment operations
Net investment income 0.56 0.56 0.10 0.59 0.60 0.43
Net realized and unrealized gain
(loss) on investments 1.10 (1.04) (0.15) 0.74 0.36 0.17
----------- ----------- ------------- ----------- ----------- -----------
Total from investment operations 1.66 (0.48) (0.05) 1.33 0.96 0.60
----------- ----------- ------------- ----------- ----------- -----------
Less distributions
Distributions from net investment
income (0.56) (0.56) (0.10) (0.59) (0.60) (0.43)
Distributions from net realized
gain on investment transactions (0.10) (0.03) 0.00 0.00 0.00 0.00
----------- ----------- ------------- ----------- ----------- -----------
Total distributions (0.66) (0.59) (0.10) (0.59) (0.60) (0.43)
----------- ----------- ------------- ----------- ----------- -----------
NET ASSET VALUE, END OF PERIOD $ 11.05 $ 10.05 $ 11.12 $ 11.27 $ 10.53 $ 10.17
----------- ----------- ------------- ----------- ----------- -----------
Total Return (a) 16.97% (4.52%) (0.48%) 13.03% 9.73% 6.32%
Ratios to Average Net Assets
Expenses 0.58% 0.60% 0.55%(c) 0.55% 0.61% 0.82%(c)
Net investment income 5.23% 5.22% 5.11%(c) 5.46% 5.83% 5.73%(c)
Expense waiver/
reimbursement (b) 0.55% 0.59% 0.60%(c) 0.62% 0.73% 0.86%(c)
Supplemental Data
Net assets, end of period (000
omitted) $93,725 $75,995 $83,371 $82,674 $63,139 $21,438
Portfolio turnover 15% 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.
(a) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(c) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1995
(1) ORGANIZATION
The Biltmore Muncipal Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of three portfolios. The financial
statements included herein are only those of Biltmore South Carolina Muncipal
Bond Fund (the "Fund"), a non-diversified portfolio. The financial statements of
the other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. All other securities are valued at
prices provided by an independent pricing service.
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"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight line method not to exceed a period of five
years from the Fund's commencement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Year Ended November 30, 1995 1994
<S> <C> <C>
- --------------------------------------------------------------------------------------------------------
Shares sold 1,737,284 2,062,564
Shares issued to shareholders in payment of
distributions declared 200,360 169,074
Shares redeemed (1,014,536) (2,169,631)
----------- -----------
Net change resulting from share transactions 923,108 62,007
----------- -----------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
(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"), 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 any portion of its fee. The Adviser
can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. This 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 AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund. This
fee is based on the size, type, and number of accounts and transactions made by
shareholders.
PORTFOLIO ACCOUNTING FEES-- FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Wachovia Bank of North Carolina N.A. is the Fund's custodian.
The fee is based on the level of the Fund's average daily net assets for the
period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $30,060 were borne initially
by FAS. The Fund has agreed to reimburse Federated Administrative Services for
the organizational expenses during the five year period following the Fund's
effective date. For the period ended November 30, 1995, the Fund paid $4,253
pursuant to this agreement.
GENERAL--Certain of the Officers of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities for the
period ended
November 30, 1995, were as follows:
<TABLE>
<S> <C>
Purchases $ 22,749,435
-------------
Sales $ 11,944,985
-------------
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers located in
one state, it will be more susceptible to factors adversely affecting issuers 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, 1995, 53.0% 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 value of investments insured by
or supported (backed) by a letter of credit from any one institution or agency
did not exceed 26.4% 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 Biltmore South Carolina Municipal Bond Fund
(one of the portfolios comprising The Biltmore Municipal Funds) as of November
30, 1995, and the related statement of operations for the year then ended, the
statement of changes in net assets and financial highlights for the periods
presented therein. These financial statements and the 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.
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 securities owned as of
November 30, 1995, by correspondence with the custodian and brokers. 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
Biltmore South Carolina Municipal Bond Fund of The Biltmore Municipal Funds at
November 30, 1995, and the results of its operations for the year then ended,
changes in its net assets for each of the two years then ended, and the
financial highlights for the periods presented therein, in conformity with
generally accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 15, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUSTEES OFFICERS
<TABLE>
<S> <C>
James A. Hanley John W. McGonigle
Samuel E. Hudgins President and Treasurer
J. Berkley Ingram, Jr. Ronald M. Petnuch
D. Dean Kaylor Vice President and Assistant Treasurer
Charles S. Way, Jr. Peter J. Germain
Secretary
Gail Cagney
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
Federated Securities Corp.
is the distributor of the fund. Cusip 090313107
831-15 G01512-13(1/96)
ANNUAL REPORT
DATED
NOVEMBER 30, 1995
JANUARY 31, 1996
BILTMORE NORTH CAROLINA
MUNICIPAL BOND FUND
WACHOVIA INVESTMENTS
MAKE YOURSELF COMFORTABLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the first Annual Report to Shareholders of Biltmore
North Carolina Municipal Bond Fund. This report covers the period from December
26, 1994, when the fund began operation, through November 30, 1995. It begins
with a brief commentary on the municipal bond market. Following the commentary
is a complete listing of fund investments and its financial statements.
Biltmore North Carolina Municipal Bond Fund helps you pursue monthly income
exempt from federal regular income tax and North Carolina state income tax.* The
fund invests in a portfolio of bonds issued by municipalities across North
Carolina that are rated A or higher by nationally recognized rating agencies.
Consistent with a highly favorable interest rate environment during the
reporting period, the fund rewarded shareholders with total return figures based
on net asset value and maximum offering price of 14.40% and 9.26%,
respectively,** dividends totaling $0.43 per share, and a $0.99 increase in
share price. Total net assets reached $18.6 million on the last day of the
reporting period.
Thank you for selecting Biltmore North Carolina Municipal Bond Fund to help you
keep more of what you earn. We look forward to keeping you informed about your
investment, and we welcome your comments and suggestions.
Sincerely,
John W. McGonigle
President
January 15, 1996
* Income may be subject to the federal alternative minimum tax.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
The municipal bond market enjoyed strong gains during the fiscal year, the
result of a continued sharp decline in new issues, a favorable interest rate
environment, and low inflation. Discussions of a flat tax in Washington
restrained the municipal bond market early in 1995. By mid-year, however, the
rhetoric subsided a bit, enabling municipal bonds to participate in an extended
rally. For the twelve month period ended November 30, 1995, the Lehman Brothers
State General Obligations Bond Index* had a total return of 17.34%.
Signs of slower economic growth late in the year helped push the yield of
30-year AAA general obligation municipal bonds down, from 6.75% on November 30,
1994, to 5.35% on November 30, 1995. The Fund's portfolio manager extended
duration during the twelve month period in anticipation of lower interest rates.
The portfolio manager also attempted to take advantage of lower interest rates
by selling premium, callable bonds and buying discounted bonds.
On November 30, 1995, net assets of the Fund totaled $18.6 million. The 30-day
SEC yield was 4.27% based on net asset value and 4.07% based on the maximum
offering price.** The Fund ended the period with an average duration of 7.05
years.
*The Lehman Brothers State General Obligations Index is comprised of all state
general obligation debt issues and is compiled without regard to maturities.
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. This index is unmanaged, and investments
may not be made in an index.
**Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
GROWTH OF $10,000 INVESTED IN BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Biltmore North Carolina Municipal Bond Fund (the "Fund") from December 23, 1994
(start of performance) to November 30, 1995 compared to the Lehman Brothers
State General Obligation Bond Index.+
[INSERT CHART HERE-SEE APPENDIX]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY INSURED.
*Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales load of 4.50% ($10,000 investment minus $450 sales load =
$9,550). The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman Brothers State General Obligation Bond Index has
been adjusted to reflect reinvestment of dividends on securities in the index.
**Total return quoted reflects all applicable sales load.
Total return for shareholders purchasing shares of the Fund at net asset value
without a sales load, including accounts purchasing shares through the Trust
Divisions of the Wachovia Banks, is 14.40% for the period December 23, 1994
(start of performance) through November 30, 1995, as reflected in the
"Financial Highlights" section of the Fund's prospectus.
+The Lehman Brothers State General Obligation Bond Index is not adjusted to
reflect sales loads, expenses, or other fees that the SEC requires to be
reflected in the Fund's performance. The index is unmanaged.
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
(a) Long-Term Municipal Securities--94.6%
NORTH CAROLINA--94.6%
$ 190,000 Buncombe County, NC, 5.20% GO UT Bonds (Callable
5/1/2003 @ 102), 5/1/2008 Aa $ 194,271
250,000 Charlotte, NC, 5.0% GO Bonds, 2/1/2009 AAA 252,025
840,000 Charlotte, NC, 5.00% GO UT Refunding Bonds (Original
Issue Yield: 5.15%), 2/1/2012 AAA 833,960
900,000 Charlotte, NC, 5.30% GO Bonds (Series A)/(Callable 4/1/2005 @
101.50)/(Original Issue Yield: 5.05%), 4/1/2008 AAA 935,937
100,000 Charlotte, NC, Water & Sewer, 5.70% GO UT Bonds (Callable
2/1/2004 @ 101.5), 2/1/2007 AAA 107,449
960,000 Charlotte-Mecklenburg, NC, Hospital Authority, 5.75% Health Care
System Revenue Refunding Bonds (Callable 1/1/2002
@ 102)/(Original Issue Yield: 6.498%), 1/1/2012 AA 969,830
100,000 Cumberland County, NC, 5.70% GO UT Bonds (Callable
2/1/2003 @ 101.5)/(MBIA Insured), 2/1/2006 AAA 106,647
100,000 Cumberland County, NC, 6.375% Certificate of Participation (Civic
Center Project)/(Series A)/(Callable 12/1/2004 @ 102)/ (AMBAC
Insured)/(Original Issue Yield: 6.50%), 12/1/2010 AAA 109,736
210,000 Cumberland County, NC, Hospital System, 6.00% Revenue Bonds
(Callable 10/1/2001 @ 100)/(MBIA Insured)/(Original Issue Yield:
6.84%), 10/1/2021 AAA 215,004
615,000 Currituck County, NC, 5.40% GO Bonds (MBIA Insured)/ (Callable
4/1/2005 @ 102)/(Original Issue Yield: 5.35%),
4/1/2009 AAA 632,952
400,000 Currituck County, NC, 5.40% GO Bonds (MBIA Insured)/ (Callable
4/1/2005 @ 102)/(Original Issue Yield: 5.70%),
4/1/2013 AAA 406,972
110,000 Dare County, NC, 5.00% GO UT Refunding Bonds (Callable
5/1/2003 @ 102)/(MBIA Insured), 5/1/2010 AAA 109,270
100,000 Durham County, NC, 5.75% GO UT Bonds (Callable 2/1/2002 @ 102),
2/1/2009 AAA 105,762
50,000 Durham County, NC, Public Improvements 5.80% GO UT Bonds
(Callable 4/1/2004 @ 102)/(Original Issue Yield: 6.00%), 4/1/2010 AAA 53,412
100,000 Durham, NC, 5.80% GO UT Revenue Bonds (Callable
2/1/2005 @ 102)/(Original Issue Yield: 5.95%), 2/1/2012 AAA 106,063
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
(a) Long-Term Municipal Securities--continued
NORTH CAROLINA--CONTINUED
$ 50,000 Durham, NC, Water & Sewer Utility System, 5.80% Revenue Bonds
(Original Issue Yield: 5.85%), 12/1/2003 AA $ 54,101
410,000 East Carolina University, NC, 5.25% Revenue Bonds (Student
Services System)/(Callable 5/1/2003 @ 102), 5/1/2007 A 414,842
100,000 East Carolina University, NC, 5.50% Revenue Bonds (Student
Services System)/(Callable 5/1/2003 @ 102)/(Original Issue Yield:
5.60%), 5/1/2018 A 99,168
500,000 Fayetteville, NC, Public Works Community, 4.75% Revenue Refunding
Bonds (Callable 3/1/2003 @ 100)/(FGIC Insured)/ (Original Issue
Yield: 5.23%), 3/1/2014 AAA 465,555
500,000 Franklin County, NC, 6.10% Certificate of Participation (FGIC
Insured)/(Original Issue Yield: 6.20%), 6/1/2003 AAA 547,965
330,000 Fremont, NC, Housing Development Corp. 6.75% Revenue Refunding
Bonds (Torhunta Apartments)/(Callable 7/15/2003
@ 100)/(FNMA Collateralized)/(FHA Insured), 7/15/2022 Aaa 341,877
500,000 Gastonia, NC, 5.30% GO Bonds (FGIC Insured)/(Callable
6/1/2005 @ 102)/(Original Issue Yield: 5.40%), 6/1/2009 AAA 512,375
100,000 Gastonia, NC, Combined Utilities System, 6.00% Revenue Bonds
(Callable 5/1/2004 @ 102)/(MBIA Insured)/(Original Issue Yield:
6.10%), 5/1/2014 AAA 104,932
105,000 Greensboro, NC, 6.65% Certificate of Participation (Coliseum
Arena Expansion Project)/(Callable 12/1/2001 @ 102)/(Original
Issue Yield: 6.70%), 12/1/2004 AA 117,220
100,000 Greenville, NC, Combined Enterprise System, 5.70% Revenue Bonds
(Callable 9/1/2004 @ 102)/(Original Issue Yield: 5.75%), 9/1/2006 A+ 106,832
75,000 Harnett County, NC, 5.90% Certificate of Participation (AMBAC
Insured), 12/1/2000 AAA 80,542
600,000 High Point, NC, 5.60% GO UT Revenue Bonds (Callable
3/1/2005 @ 101-1/2), 3/1/2008 AA 636,510
100,000 Martin County, NC, Industrial Facilities, 6.80% Pollution
Control Revenue Bonds (Solid Waste Disposal-
Weyerhaeuser)/(Callable 5/1/2004 @ 102), 5/1/2024 A2 108,655
100,000 Mecklenburg County, NC, 5.90% GO UT Refunding Bonds (Callable
3/1/2002 @ 101), 3/1/2004 AAA 108,448
100,000 Mecklenburg County, NC, Public Improvements, 6.25%
GO UT Bonds, 1/1/2010, Prerefunded 1/1/2002 @ 102 AAA 111,884
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
(a) Long-Term Municipal Securities--continued
NORTH CAROLINA--CONTINUED
$ 505,000 Monroe, NC, Combined Enterprise System, 6.00% Revenue Bonds
(Callable 3/1/2004 @ 102)/(Original Issue Yield: 6.20%), 3/1/2019 A $ 522,337
100,000 North Carolina Educational Facilities, 6.00% GO Revenue Refunding
Bonds (Callable 12/1/2002 @ 102)/(Original Issue Yield: 6.20%),
12/1/2012 AA- 104,487
100,000 North Carolina HFA, 6.60% Revenue Bonds (Callable
9/1/2004 @ 102)/(Single Family Revenue-Series Z), 9/1/2026 A+ 103,410
20,000 North Carolina HFA, 6.90% Revenue Refunding Bonds (Series
B)/(Callable 7/1/2002 @ 102)/(FHA Insured), 7/1/2024 Aa 21,138
765,000 North Carolina Medical Care Community Hospital, 5.375% Hospital
Revenue Bonds (Scotland Memorial Hospital)/
(Callable 10/1/2004 @ 102)/(Original Issue Yield: 5.60%)/
(Asset Guaranty Insured), 10/1/2011 AA 749,379
50,000 North Carolina Medical Care Community, 6.125% Revenue Refunding
Bonds (Rex Hospital Project)/(Callable 6/1/2003
@ 102)/(Original Issue Yield: 6.219%), 6/1/2010 A1 53,434
850,000 North Carolina Medical Care Community, 7.375% Revenue Refunding
Bonds (Presbyterian Hospital Project)/(Original Issue Yield:
7.417%), 10/1/2020, Prerefunded 10/1/2000
@ 102 AAA 982,872
115,000 North Carolina Municipal Power Agency, 5.90% Revenue Refunding
Bonds (No. 1 Catawba Electric)/(Original Issue Yield: 5.95%),
1/1/2003 A 120,338
100,000 North Carolina Municipal Power Agency, 7.875% Revenue Refunding
Bonds, 1/1/2019, Prerefunded 1/1/1998 @ 102 AAA 109,730
400,000 North Carolina State, 4.70% GO Bonds (Series A)/(Callable
2/1/2004 @ 100.50), 2/1/2005 AAA 403,388
1,000,000 North Carolina State, 4.80% GO UT Refunding Bonds (Prison
Facilities)/(Series C)/(Callable 3/1/2002 @ 102), 3/1/2009 AAA 981,760
575,000 Onslow County, NC, 5.70% GO Bonds (MBIA Insured)/
(Original Issue Yield: 5.85%)/(Callable 3/1/2005 @ 102),
3/1/2013 AAA 607,758
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Principal
Amount Credit
or Shares Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
(a) Long-Term Municipal Securities--continued
NORTH CAROLINA--CONTINUED
$ 400,000 Raleigh, NC, 6.40% GO Bonds (Underwriter-Merrill Lynch Capital
Markets)/(Original Issue Yield: 6.55%)/(Callable
3/1/2001 @ 102), 3/1/2006 AAA $ 438,836
800,000 Randolph County, NC, 4.875% Certificate of Participation
(Underwriter-Alex Brown & Sons)/(Callable 6/1/2005
@ 102)/(Original Issue Yield: 5.05%), 6/1/2006 AAA 799,344
500,000 Robeson County, NC, 4.90% GO Bonds (AMBAC Insured)/ (Callable
2/1/2004 @ 101.50)/(Original Issue Yield: 4.95%),
2/1/2007 AAA 503,565
250,000 Rutherford County, NC, 5.10% GO UT Refunding Bonds
(Callable 6/1/2003 @ 102)/(MBIA Insured), 6/1/2009 AAA 252,064
1,165,000 Shelby, NC, Housing Development Corp., 6.10% Revenue Bonds
(Hickory Creek Apartments)/(FNMA FHA 221(D)4)/ (Callable 8/1/2005
@ 102)/(Original Issue Yield: 6.099%),
2/1/2023 AAA 1,182,370
50,000 University of North Carolina, Utility System, 7.30% Revenue
Bonds, 8/1/2011, Prerefunded 8/1/2011 @ 103 AAA 52,742
650,000 Wake County, NC, 4.70% GO UT Refunding Bonds
(Callable 4/1/2003 @ 101), 4/1/2005 AAA 655,590
75,000 Wilmington, NC, Water Utilities, 5.60% GO UT Revenue Bonds
(Callable 6/1/2004 @ 102), 6/1/2010 A1 78,629
-------------
Total Long-Term Municipal Securities
(identified cost $16,886,953) 17,673,367
-------------
Short-Term Municipal Securities--2.4%
200,000 Alamance County, NC, Industrial Facilities, Daily VRDNs,
Pollution Control Revenue Bonds (Science Manufacturing, Inc.
Project)/(Credit Lyonnais LOC) A1 200,000
245,000 Halifax County, NC, Industrial Facilities, Daily VRDNs, Pollution
Control Revenue Bonds (LG & E Roanoke)/(Credit Suisse LOC) AA+ 245,000
-------------
Total Short-Term Municipal Securities (at amortized cost) 445,000
-------------
Open-End Investment Company--1.0%
180,791 Fidelity Tax-Exempt Money Market Fund (at net asset value) 180,791
-------------
Total Investments (identified cost $17,512,744)(b) $ 18,299,158
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
(a) At November 30, 1995, 1.2% of the total investments at market value were
subject to alternative minumum tax.
(b) The cost of investments for federal tax purposes amounts to $17,512,744. The
net unrealized appreciation of investments on a federal tax basis amounts to
$786,414 at November 30, 1995.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($18,678,784) at November 30, 1995.
The following acronym(s) are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
FGIC--Financial Guaranty Insurance Company
FHA--Federal Housing Administration
FNMA--Federal National Mortgage Association
GO--General Obligation
HFA--Housing Finance Authority
LOC--Letter of Credit
MBIA--Municipal Bond Investors Assurance
UT--Unlimited Tax
VRDNs--Variable Rate Demand Notes
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995
<TABLE>
<S> <C> <C>
Assets:
Total investments in securities, at value (identified and tax cost $17,512,744) $ 18,299,158
Cash 1,801
Income receivable 270,502
Receivable for shares sold 154,546
-------------
Total assets 18,726,007
Liabilities:
Income distribution payable $ 27,980
Accrued expenses 19,243
---------
Total liabilities 47,223
-------------
Net Assets for 1,698,863 shares outstanding $ 18,678,784
-------------
Net Assets Consist of:
Paid in capital $ 17,800,991
Net unrealized appreciation of investments 786,414
Accumulated net realized gain on investments 91,379
-------------
Total Net Assets $ 18,678,784
-------------
Net Asset Value and Redemption Proceeds Per Share:
($18,678,784 / 1,698,863 shares outstanding) $10.99
-------------
Offering Price Per Share (100/95.50 of $10.99)* $11.51
-------------
</TABLE>
*See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1995*
<TABLE>
<S> <C> <C> <C>
Investment Income:
Interest $ 545,193
Expenses:
Investment advisory fee $ 77,710
Administrative personnel and services fee 50,000
Custodian fees 2,078
Transfer and dividend disbursing agent fees and expenses 13,473
Trustees' fees 301
Legal fees 900
Portfolio accounting fees 47,390
Printing and postage 9,652
Insurance premiums 4,000
Miscellaneous 6,088
----------
Total expenses 211,592
Waivers and reimbursements--
Waiver of investment advisory fee $ (63,053)
Waiver of administrative personnel and services fee (40,720)
Waiver of portfolio accounting fee (19,500)
---------
Total waivers and reimbursements (123,273)
----------
Net expenses 88,319
------------
Net investment income 456,874
------------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 91,379
Net change in unrealized appreciation of investments 786,414
------------
Net realized and unrealized gain on investments 877,793
------------
Change in net assets resulting from operations $ 1,334,667
------------
</TABLE>
*For the period from December 26, 1994 (date of inital public investment) to
November 30, 1995.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period Ended November 30, 1995*
<S> <C>
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 456,874
Net realized gain on investments ($91,379 as computed for federal tax purposes) 91,379
Net change in unrealized appreciation 786,414
-------------
Change in net assets resulting from operations 1,334,667
-------------
Distributions to Shareholders--
Distributions from net investment income (456,874)
-------------
Share Transactions--
Proceeds from sale of shares 17,945,744
Net asset value of shares issued to shareholders in payment of
distributions declared 294,995
Cost of shares redeemed (439,748)
-------------
Change in net assets resulting from share transactions 17,800,991
-------------
Change in net assets 18,678,784
Net Assets:
Beginning of period --
-------------
End of period $ 18,678,784
-------------
</TABLE>
*For the period from December 26, 1994 (date of initial public investment) to
November 30, 1995.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Period Ended November 30, 1995(a)
<S> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
Income from investment operations
Net investment income 0.43
Net realized and unrealized gain (loss) on investments 0.99
-----------
Total from investment operations 1.42
Less distributions
Distributions from net investment income (0.43)
-----------
NET ASSET VALUE, END OF PERIOD $ 10.99
-----------
Total Return (b) 14.40%
Ratios to Average Net Assets
Expenses 0.85%*
Net investment income 4.40%*
Expense waiver/reimbursement (c) 1.19%*
Supplemental Data
Net assets, end of period (000 omitted) $18,679
Portfolio turnover 19%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 26, 1994 (date of initial
public investment) to November 30, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1995
(1) ORGANIZATION
The Biltmore Municipal Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end management
investment company. The Trust consists of three portfolios. The financial
statements included herein are only those of Biltmore North Carolina Municipal
Bond Fund (the "Fund"), a non-diversified portfolio. The financial statements of
the other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. Investments in other open-end
regulated investment companies are valued at net asset value. All other
securities are valued at prices provided by independent pricing services.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Period Ended November 30, 1995*
<S> <C>
- --------------------------------------------------------------------------------------------------------
Shares sold 1,712,554
Shares issued to shareholders in payment of distributions declared 27,599
Shares redeemed (41,290)
----------
Net change resulting from share transactions 1,698,863
----------
</TABLE>
*For the period from December 26, 1994 (date of initial public investment) to
November 30, 1995.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Wachovia Bank of North Carolina, N.A., the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to .75 of 1% of the Fund's
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
average daily net assets. The Adviser may voluntarily choose to waive any
portion of its fee. The Adviser can modify or terminate this voluntary waiver at
any time at its sole discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. This 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 AGENT AND DIVIDEND DISBURSING AGENT--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund for
which it receives a fee. This fee is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ also maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Wachovia Bank of North Carolina N.A. is the Fund's custodian for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Estimated organizational expenses of $30,000 were borne
initially by FAS. The Fund has agreed to reimburse FAS for the organizational
expenses during the five year period following the Fund's effective date. For
the period ended November 30, 1995, the Fund paid $2,000 pursuant to this
agreement.
GENERAL--Certain of the Officers of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended November 30, 1995, were as follows:
<TABLE>
<S> <C>
Purchases $ 18,722,310
-------------
Sales $ 1,919,783
-------------
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers located in
one state, it will be more susceptible to factors adversely affecting issuers of
that state than would be a comparable tax-exempt mutual fund that invests
nationally. In order to reduce the credit risk associated with such factors, at
November 30, 1995, 33.9% of the securities in the portfolio of investments are
backed by letters of credit or bond insurance of various financial institutions
and financial guaranty assurance agencies. The value of investments insured by
or supported (backed) by a letter of credit from any one institution or agency
did not exceed 13.3% 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 Biltmore North Carolina Municipal Bond Fund
(one of the portfolios comprising The Biltmore Municipal Funds) as of November
30, 1995, and the related statement of operations, the statement of changes in
net assets and the financial highlights for the period from December 26, 1994
(date of initial public investment) to November 30, 1995. These financial
statements and financial highlights are the responsibility of the Fund's
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of November 30, 1995, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Biltmore North Carolina Municipal Bond Fund of The Biltmore Municipal Funds at
November 30, 1995, and the results of its operations, changes in its net assets
and the financial highlights for the period from December 26, 1994 (date of
initial public investment) to November 30, 1995, in conformity with generally
accepted accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 15, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUSTEES OFFICERS
<TABLE>
<S> <C>
James A. Hanley John W. McGonigle
Samuel E. Hudgins President and Treasurer
J. Berkley Ingram, Jr. Ronald M. Petnuch
D. Dean Kaylor Vice President and Assistant Treasurer
Charles S. Way, Jr. Peter J. Germain
Secretary
Gail Cagney
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
Federated Securities Corp.
is the distributor of the fund. Cusip 090313305
831-25 G01512-14(1/96)
ANNUAL REPORT
DATED
NOVEMBER 30, 1995
JANUARY 31, 1995
BILTMORE GEORGIA
MUNICIPAL BOND FUND
WACHOVIA INVESTMENTS
MAKE YOURSELF COMFORTABLE
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present the first Annual Report to Shareholders of Biltmore
Georgia Municipal Bond Fund. This report covers the period from December 26,
1994, when the fund began operation, throughNovember 30, 1995. It begins with
a brief commentary on the municipal bondmarket. Following the commentary is
a complete listing of fund investments and its financial statements.
Biltmore Georgia Municipal Bond Fund helps you pursue monthly income exempt from
federal regular income tax and Georgia state income tax.* The fund invests in a
portfolio of bonds issued by municipalities across Georgia that are rated A or
higher by nationally recognized rating agencies.
Consistent with a highly favorable interest rate environment during the
reporting period, the fund rewarded shareholders with total return figures based
on net asset value and maximum offering price of 13.93% and 8.82%,
respectively,** dividends totaling $0.41 per share, and a $0.96 increase in
share price. Total net assets reached $10.2 million on the last day of the
reporting period.
Thank you for selecting Biltmore Georgia Municipal Bond Fund to help you keep
more of what you earn. We look forward to keeping you informed about your
investment, and we welcome your comments and suggestions.
Sincerely,
John W. McGonigle
President
January 15, 1996
* Income may be subject to the federal alternative minimum tax.
** Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
The municipal bond market enjoyed strong gains during the fiscal year, the
result of a continued sharp decline in new issues, a favorable interest rate
environment, and low inflation. Discussions of a flat tax in Washington
restrained the municipal bond market early in 1995. By mid-year, however, the
rhetoric subsided a bit, enabling municipal bonds to participate in an extended
rally. For the twelve month period ended November 30, 1995, the Lehman Brothers
State General Obligations Bond Index* had a total return of 17.34%.
Signs of slower economic growth late in the year helped push the yield of
30-year AAA general obligation municipal bonds down, from 6.75% on November 30,
1994, to 5.35% on November 30, 1995. The Fund's portfolio manager extended
duration during the twelve month period in anticipation of lower interest rates.
The portfolio manager also attempted to take advantage of lower interest rates
by selling premium, callable bonds and buying discounted bonds.
On November 30, 1995, net assets of the Fund totaled $10.2 million. The 30-day
SEC yield was 4.15% based on net asset value and 3.96% based on the maximum
offering price.** The Fund ended the period with an average duration of 7.02
years.
*The Lehman Brothers State General Obligations Index is comprised of all state
general obligation debt issues and is compiled without regard to maturities.
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. This index is unmanaged, and investments
may not be made in an index.
**Performance quoted represents past performance. Investment return and
principal value will fluctuate, so that an investor's shares, when redeemed,
may be worth more or less than their original cost.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
GROWTH OF $10,000 INVESTED IN BILTMORE GEORGIA MUNICIPAL BOND FUND
The graph below illustrates the hypothetical investment of $10,000 in the
Biltmore Georgia Municipal Bond Fund (the "Fund") from December 26, 1994 (start
of performance) to November 30, 1995 compared to the Lehman Brothers State
General Obligation Bond Index.+
[INSERT CHART HERE-SEE APPENDIX]
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF, OR
GUARANTEED BY, ANY BANK AND ARE NOT FEDERALLY INSURED.
*Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales load of 4.50% ($10,000 investment minus $450 sales load =
$9,550). The Fund's performance assumes the reinvestment of all dividends and
distributions. The Lehman Brothers State General Obligation Bond Index has
been adjusted to reflect reinvestment of dividends on securities in the index.
**Total return quoted reflects all applicable sales load.
Total return for shareholders purchasing shares of the fund at net asset value
without a sales load, including accounts purchasing shares through the Trust
Divisions of the Wachovia Banks, is 13.93% for the period from December 26,
1994 (state of performance) through November 30, 1995, as reflected in the
"Financial Highlights" section of the Fund's prospectus.
+The Lehman Brothers State General Obligation Bond Index is not adjusted to
reflect sales loads, expenses, or other fees that the SEC requires to be
reflected in the Fund's performance. The index is unmanaged.
BILTMORE GEORGIA MUNICIPAL BOND FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1995
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
(a) Long-Term Municipal Securities--97.2%
GEORGIA--97.2%
$ 200,000 Atlanta, GA, 6.125% GO UT, (Series A)/(Callable 12/1/2004
@102)/(Original Issue Yield: 6.18%), 12/1/2023 AA $ 209,124
100,000 Atlanta, GA, Downtown Development Authority Refunding Underground
Atlanta Project, 6.25% Revenue Refunding Bonds, (Callable
10/1/2002 @ 102)/(Original Issue Yield: 6.435%), 10/1/2016 AA 105,113
510,000 Atlanta, GA, Urban Residential Financing Authority Dormatory
Facilities Revenue Refunding--Morehouse College Project, 5.70%
(Callable 12/1/2005 @102)/(MBIA Insured)/(Original Issue Yield:
5.80%) 12/1/2010 AAA 532,787
80,000 Brunswick, GA, Water and Sewage Revenue, 6.10% Revenue Refunding
Bonds, (MBIA Insured)/(Original Issue Yield: 6.27%), 10/1/2019 AAA 88,079
90,000 Burke County, GA, Development Authority Pollution Control Revenue
Refunding--Oglethorpe Power Company--Vogtle, 7.50% Revenue
Refunding Bonds, (MBIA Insured), 1/1/2003 AAA 102,924
400,000 Chatham County, GA, School District, 5.50% GO UT, (Series
B)/(Callable 8/1/2004 @101)/(FGIC Insured)/(Original Issue Yield:
5.651%), 8/1/2020 AAA 395,920
50,000 Chatham County, GA, School District, 6.75% GO UT, (Callable
8/1/2003 @102)/(MBIA Insured), 8/1/2018 AAA 58,042
355,000 Cherokee County, GA, School System, 6.20% GO UT Refunding Bonds,
(Callable 6/1/2002 @102), 6/1/2005 A-1 387,802
500,000 Cobb County, GA, School District, 6.65% GO UT, (Callable
2/1/1999 @102), 2/1/2001, Prerefunded 2/1/1999 @102 AA 545,980
100,000 Cobb County, GA, Solid Waste Management Authority
Revenue, 6.35% Revenue Bonds, (Callable 1/1/2005
@102), 1/1/2009 AA+ 109,378
150,000 De Kalb County, GA, Health Facilities, 5.50% GO UT,
(Callable 1/1/2003 @102)/(Original Issue Yield: 5.60%),
1/1/2016 AA+ 149,901
200,000 De Kalb County, GA, School District, 6.25% GO UT,
(Series A), 7/1/2011 AA 224,630
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
(a) Long-Term Municipal Securities--continued
GEORGIA--CONTINUED
$ 1,000,000 De Kalb County, GA, Water and Sewage Revenue, 5.125% Revenue
Refunding Bonds, (Callable 10/1/2003 @102)/
(Original Issue Yield: 5.25%), 10/1/2011 AA $ 989,240
100,000 Decatur, GA, Housing Authority Mortgage Revenue, 6.45% Revenue
Refunding Bonds, (Callable 7/1/2002 @102)/(MBIA Insured),
7/1/2025 AAA 103,046
120,000 Fayette County, GA, School District, 6.125% GO UT, (Callable
3/1/2004 @102)/(Original Issue Yield: 6.30%), 3/1/2015 A+ 127,889
160,000 Fayette County, GA, Water Revenue, 6.20% Revenue Bonds, (Series
B)/(Callable 10/1/2002 @102)/(FGIC Insured)/(Original Issue
Yield: 6.30%), 10/1/2022 AAA 169,637
60,000 Forsyth County, GA, School District, 6.70% GO UT, 7/1/2012 A 69,808
25,000 Fulton County, GA, School District, 5.60% GO UT, (Original Issue
Yield: 5.65%), (Callable 1/1/2004 @102), 1/1/2011 AA 25,766
375,000 Fulton County, GA, Water and Sewage Revenue, 6.25%
Revenue Refunding Bonds, (FGIC Insured)/(Original Issue
Yield: 6.425%) 1/1/2007 AAA 420,450
400,000 Gainesville and Hall County, GA, Hospital Authority Refunding
Anticipation Certificates, Northeast Georgia Healthcare Project,
5.75% Revenue Bonds, (Callable 10/1/2005 @102)/(MBIA
Insured)/(Original Issue Yield: 5.98%),
10/1/2017 AAA 404,932
500,000 Georgia State Housing and Financial Authority Revenue
Amount--Single Family Mortgage--Subsidiary, 6.55% Revenue
Refunding Bonds, (Callable 3/1/2005 @102)/(FHA/VA Insured),
12/1/2027 AA+ 513,554
50,000 Georgia State, 5.95% GO UT, (Series B), 3/1/2003 AA+ 54,683
200,000 Georgia State, 6.50% GO UT, (Series F), 12/1/2007 AA+ 231,046
500,000 Georgia State, 6.80% GO UT, (Series D), 8/1/2000 AA+ 556,244
200,000 Georgia State, 7.20% GO UT, (Series B), 3/1/2006 AA+ 240,490
285,000 Georgia State, Municipal Electric Authority Revenue, 6.125%
Revenue Refunding Bonds, (Series B)/(Callable 1/1/2003
@102)/(FGIC Insured)/(Original Issue Yield: 6.30%), 1/1/2014 AAA 298,939
350,000 Gwinnett County, GA, Recreation Authority Revenue, 7.00%
Revenue Bonds, (Callable 2/1/1997 @102), 2/1/1999,
Prerefunded 2/1/1997 @102 Aaa 370,248
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Principal Credit
Amount Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
(a) Long-Term Municipal Securities--continued
GEORGIA--CONTINUED
$ 400,000 Gwinnett County, GA, School District Refunding Bonds, 5.00%
(Series B)/(Callable 2/1/2004 @102)/(Original Issue Yield:
5.15%), 2/1/2009 AA $ 395,604
100,000 Gwinnett County, GA, Water and Sewage COPs, 8.40%
Revenue Refunding Bonds, 8/1/2001 AA+ 119,963
30,000 Hapeville, GA, Water and Sewage Revenue, 6.20% Revenue Bonds,
(Callable 7/1/2004 @102)/(MBIA Insured), 7/1/2006 AAA 33,404
25,000 Henry County, GA, and Henry County Water and Sewage Authority
Revenue, 5.25% GO LT Revenue Refunding Bonds, (Series
A)/(Callable 2/1/2004 @102)/(AMBAC Insured)/
(Original Issue Yield: 5.40%), 2/1/2018 AAA 24,756
400,000 Marietta, GA, Development Authority Revenue First Mortgage--Life
College, 5.75% Revenue Bonds, (Series B)/(Callable 9/1/2005
@102)/(CGIC Insured)/(Original Issue Yield: 5.91%), 9/1/2014 AAA 405,248
300,000 Medical Center Hospital Authority, GA, Cerificates Of Antici-
pation, Columbus Regional Healthcare Systems Revenue, 5.90%
Revenue Refunding Bonds, (MBIA Insured)/(Original Issue Yield:
5.95%), 8/1/2001 AAA 320,946
500,000 Paulding County, GA, School District, 6.30% GO UT Refunding
Bonds, (Series B)/(Original Issue Yield: 6.35%),
2/1/2003 A 549,610
100,000 Peach County, GA, School District, 6.30% GO UT, (Callable
2/1/2005 @102)/(MBIA Insured)/(Original Issue Yield: 6.35%),
2/1/2014 AAA 108,208
200,000 Rockdale County, GA, School District, 6.30% GO UT,
(Callable 2/1/2005 @102), 1/1/2007 A-1 221,422
150,000 Savannah, GA, Resources Recovery Development Authority Revenue,
5.95% Revenue Refunding Bonds, (Callable
12/1/2001 @101), 12/2/2002 A+ 159,573
110,000 Savannah, GA, Water and Sewage Revenue, 5.10% Revenue Refunding
Bonds, (Callable 12/1/2002 @102)/(Original Issue Yield: 5.55%,
12/1/2010 AA- 109,260
-------------
Total Long-Term Municipal Securities
(identified cost $9,461,591) 9,933,646
-------------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
<TABLE>
<CAPTION>
Credit
Shares Rating* Value
<C> <S> <C> <C>
- -----------------------------------------------------------------------------------------------------------
Open-end Investment Companies--4.9%
69,432 AIM Management Co. $ 69,432
429,257 Fidelity Tax-Exempt Money Market Fund Instruments Portfolio 429,257
-------------
Total Open-end Investment Companies (at net asset value) 498,689
-------------
Total Investments (identified cost $9,960,280)(b) $ 10,432,335
-------------
</TABLE>
(a) At November 30, 1995, 5.97% of the total investments at market value were
subject to alternative minumum tax.
(b) The cost of investments for federal tax purposes amounts to $9,960,280. The
unrealized appreciation of investments on a federal tax basis amounts to
$472,055 at November 30, 1995.
* Please refer to the Appendix of the Statement of Additional Information for
an explanation of the credit ratings. Current credit ratings are unaudited.
Note: The categories of investments are shown as a percentage of net assets
($10,219,974) at November 30, 1995.
The following acronym(s) are used throughout this portfolio:
AMBAC--American Municipal Bond Assurance Corporation
CGIC--Capital Guaranty Insurance Corporation
COPs--Certificates of Participation
FGIC--Financial Guaranty Insurance Company
FHA/VA--Federal Housing Administration/Veterans Administration
GO--General Obligation
LT--Limited Tax
MBIA--Municipal Bond Investors Assurance
UT--Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1995
<TABLE>
<S> <C> <C>
Assets:
Investments in securities, at value (identified and tax cost $9,960,280) $ 10,432,335
Income receivable 203,803
Receivable for shares sold 24,357
-------------
Total assets 10,660,495
Liabilities:
Payable for investments purchased $ 397,017
Payable for shares redeemed 14,200
Income distribution payable 11,718
Accrued expenses 17,586
----------
Total liabilities 440,521
-------------
Net Assets for 932,280 shares outstanding $ 10,219,974
-------------
Net Assets Consist of:
Paid in capital $ 9,736,256
Net unrealized appreciation of investments 472,055
Accumulated net realized gain on investments 11,663
-------------
Total Net Assets $ 10,219,974
-------------
Net Asset Value and Redemption Proceeds Per Share:
($10,219,974 / 932,280 shares outstanding) $10.96
-------------
Offering Price Per Share (100/95.50 of $10.96)* $11.48
-------------
</TABLE>
*See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
STATEMENT OF OPERATIONS
PERIOD ENDED NOVEMBER 30, 1995*
<TABLE>
<S> <C> <C> <C>
Investment Income:
Interest $ 344,815
Expenses:
Investment advisory fee $ 49,436
Administrative personnel and services fee 50,000
Custodian fees 1,318
Transfer and dividend disbursing agent fees and expenses 13,475
Trustees' fees 150
Legal fees 600
Portfolio accounting fees 48,660
Printing and postage 11,423
Insurance premiums 3,000
Miscellaneous 6,333
-----------
Total expenses 184,395
Waivers and reimbursements--
Waiver of investment advisory fees $ (40,609)
Waiver of administrative personnel and services fees (44,142)
Waiver of portfolio accounting fee (39,000)
---------
Total waivers and reimbursements (123,751)
-----------
Net expenses 60,644
----------
Net investment income 284,171
----------
Realized and Unrealized Gain (Loss) on Investments:
Net realized gain on investments 11,663
Net change in unrealized appreciation of investments 472,055
----------
Net realized and unrealized gain on investments 483,718
----------
Change in net assets resulting from operations $ 767,889
----------
</TABLE>
*For the period from December 26, 1994 (date of initial public investment) to
November 30, 1995.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Period Ended November 30, 1995*
<S> <C>
- ---------------------------------------------------------------------------------------------------------
Increase (Decrease) in Net Assets:
Operations--
Net investment income $ 284,171
Net realized gain on investments ($11,663, as computed for federal tax purposes) 11,663
Net change in unrealized appreciation 472,055
--------------
Change in net assets resulting from operations 767,889
--------------
Distributions to Shareholders--
Distributions from net investment income (284,171)
--------------
Share Transactions--
Proceeds from sale of shares 11,484,622
Net asset value of shares issued to shareholders in payment of distributions declared 204,162
Cost of shares redeemed (1,952,528)
--------------
Change in net assets resulting from share transactions 9,736,256
--------------
Change in net assets 10,219,974
Net Assets:
Beginning of period --
--------------
End of period $ 10,219,974
--------------
</TABLE>
*For the period from December 26, 1994 (date of initial public investment) to
November 30, 1995.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
FINANCIAL HIGHLIGHTS
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Period Ended November 30, 1995(a)
<S> <C>
- ------------------------------------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
Income from investment operations
Net investment income 0.41
Net realized and unrealized gain on investments 0.96
-----------
Total from investment operations 1.37
Less distributions
Distributions from net investment income (0.41)
-----------
NET ASSET VALUE, END OF PERIOD $ 10.96
-----------
Total Return (b) 13.93%
Ratios to Average Net Assets
Expenses 0.92%*
Net investment income 4.30%*
Expense waiver/reimbursement (c) 1.88%*
Supplemental Data
Net assets, end of period (000 omitted) $ 10,220
Portfolio turnover 14%
</TABLE>
* Computed on an annualized basis.
(a) Reflects operations for the period from December 26, 1994 (date of initial
public investment) to November 30, 1995.
(b) Based on net asset value, which does not reflect the sales load or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(See Notes which are an integral part of the Financial Statements)
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1995
(1) ORGANIZATION
The Biltmore Municipal Funds (the "Trust") is registered under the Investment
Company Act of 1940, as amended (the "Act"), as an open-end, management
investment company. The Trust consists of three portfolios. The financial
statements included herein are only those of Biltmore Georgia Municipal Bond
Fund (the "Fund"), a non-diversified portfolio. The financial statements of the
other portfolios are presented separately. The assets of each portfolio are
segregated and a shareholder's interest is limited to the portfolio in which
shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Short-term securities with remaining maturities of
sixty days or less at the time of purchase may be valued at amortized cost,
which approximates fair market value. Investments in other open-end
investment companies are valued at net asset value. All other securities
are valued at prices provided by an independent pricing service.
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"). Dividend
income and distributions to shareholders are recorded on the ex-dividend
date.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
Period Ended November 30, 1995*
<S> <C>
- --------------------------------------------------------------------------------------------------------
Shares sold 1,096,122
Shares issued to shareholders in payment of distributions declared 18,994
Shares redeemed (182,836)
----------
Net change resulting from share transactions 932,280
----------
</TABLE>
*For the period from December 26, 1994 (date of initial public investment) to
November 30, 1995.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
BILTMORE GEORGIA MUNICIPAL BOND FUND
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Wachovia Bank of Georgia, N.A., the Fund's investment
adviser (the "Adviser"), 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 waived a portion of its fee to comply with certain state expenses
limitations during the period ended November 30, 1995. 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. This 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 AGENT AND DIVIDEND DISBURSING AGENT FEES--Federated Services Company
("FServ") serves as transfer and dividend disbursing agent for the Fund, for
which it receives a fee. This fee is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
CUSTODIAN FEES--Wachovia Bank of North Carolina N.A., is the Fund's custodian,
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Estimated organizational expenses of $30,000 were borne
initially by FAS. The Fund has agreed to reimburse FAS for the organizational
expenses during the five year period following the Fund's effective date. For
the period ended November 30, 1995, the Fund paid $2,000 pursuant to this
agreement.
GENERAL--Certain of the Officers of the Trust are Officers and Directors or
Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities for the
period ended November 30, 1995, were as follows:
<TABLE>
<S> <C>
Purchases $ 10,321,649
-------------
Sales $ 848,731
-------------
</TABLE>
(6) CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers located in
one state, it will be more susceptible to factors adversely affecting issuers 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, 1995,
39.0% 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 value of investments insured by or supported
(backed) by a letter of credit from any one institution or agency did not exceed
5.2% 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 Biltmore Georgia Municipal Bond Fund (one of
the portfolios comprising The Biltmore Municpal Funds) as of November 30, 1995,
and the related statement of operations, statement of changes in net assets and
financial highlights for the period from December 26, 1994 (date of initial
public investment) to November 30, 1995. These financial statements and
financial highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements and financial highlights are
free of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements. Our
procedures included confirmation of securities owned as of November 30, 1995, by
correspondence with the custodian and brokers. 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
Biltmore Georgia Municipal Bond Fund of The Biltmore Municipal Funds at November
30, 1995, and the results of its operations, changes in its net assets and
financial highlights for the period from December 26, 1994 (date of initial
public investment) to November 30, 1995, in conformity with generally accepted
accounting principles.
ERNST & YOUNG LLP
Pittsburgh, Pennsylvania
January 15, 1996
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
TRUSTEES OFFICERS
<TABLE>
<S> <C>
James A. Hanley John W. McGonigle
Samuel E. Hudgins President and Treasurer
J. Berkley Ingram, Jr. Ronald M. Petnuch
D. Dean Kaylor Vice President and Assistant Treasurer
Charles S. Way, Jr. Peter J. Germain
Secretary
Gail Cagney
Assistant Secretary
</TABLE>
Mutual funds are not bank deposits or obligations, are not guaranteed
by any bank, and are not insured or guaranteed by the U.S. government,
the Federal Deposit Insurance Corporation, the Federal Reserve Board,
or any other government agency. Investment in mutual funds involves
risk, including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the Fund's prospectus which contains facts
concerning its objective and policies, management fees, expenses and other
information.
Federated Securities Corp.
is the distributor of the fund. Cusip 090313206
831-26 G01512-15(1/96)
APPENDIX
A. The graphic presentation here displayed consists of a legend in the
upper left corner indicating the components of the corresponding line
graph. Biltmore South Carolina Municipal Bond Fund (the "Fund") is
represented by a solid line. Lehman Brothers State General Obligation Bond
Index is represented by a broken line. The line graph is a visual
representation of a comparison of a hypothetical investment of $10,000 in
the Fund and the Lehman Brothers State General Obligation Bond Index. The
"x" axis reflects the cost of the investment in $1,000 increments ranging
from $9,000 to $15,0000. The "y" axis reflects computation periods from the
Funds Start of Performance, 1/11/91, through 11/30/95. The right margin
reflects the ending values of the hypothetical investment in the Fund and
the Lehman Brothers State General Obligation Bond Index; the ending values
are $13,980 and $14,805, respectively. There is also a legend appearing
below the graphic presentation which indicates the Average Annual Total
Return for the period ended November 30, 1995. The annual returns for the
one-year period and the start of performance (1/11/91) are 11.75% and
7.12%, respectively.
B. The graphic presentation here displayed consists of a legend in the
upper left corner indicating the components of the corresponding line
graph. Biltmore North Carolina Municipal Bond Fund (the "Fund") is
represented by a solid line. Lehman Brothers State General Obligation Bond
Index is represented by a broken line. The line graph is a visual
representation of a hypothetical $10,000 investment in the Fund and in The
Lehman Brothers State General Obligation Bond Index. The "x" axis reflects
the cost of the investment in $1,000 increments ranging from $9,000 to
$12,000. The "y" axis reflects the computation period beginning on the
Funds start of performance, 12/23/94, to 11/30/95. The right margin
reflects the ending values of the hypothetical investments in the Fund and
in the Lehman brothers State General Obligation Bond Index; the ending
values are $10,925 and $11,532, respectively. There is also a legend
appearing below the graphic presentation which indicates the Cumulative
Total Return for the period ended November 30, 1995. The Cumulative Total
Return for the start of performance (12/23/94) is 9.26%.
C. The graphic presentation here displayed consists of a legend in the
upper left corner indicating the components of the corresponding line
graph. Biltmore Georgia Municipal Bond Fund (the "Fund") is represented by
a solid line. Lehman Brothers State General Obligation Bond Index is
represented by a broken line. The line graph is a visual representation of
a comparison of a hypothetical investment of $10,000 in the Fund and in the
Lehman Brothers State General Obligation Bond Index. The "x" axis reflects
the cost of the investment in $1,000 increments ranging from $9,000 to
$12,000. The "y" axis reflects the computation period from the Funds start
of performance, 12/26/94, to 11/30/95. The right margin reflects the ending
values of the hypothetical investments in the Fund and the Lehman Brothers
State General Obligation Bond Index; the ending values are $10,880 and
$11,532, respectively. There is also a legend appearing below the graphic
presentation which indicates the Cumulative Total Return for the period
ended November 30, 1995. The Cumulative Total Return for the start of
