* Represents the period from March 28, 1994 (date of initial public
investment) to November 30, 1994.
**Represents the period from December 26, 1994 (date of initial public
investment) to November 30, 1995.
In addition, for the fiscal years ended November 30, 1996, 1995, and
1994, FAS reimbursed the Equity Fund $0, $0, and $40,467, respectively, in
other Fund operating expenses; for the fiscal years ended November 30,
1996, 1995, and 1994, FAS reimbursed the Equity Index Fund $0, $0, and
$50,455, respectively, in other Fund operating expenses; for the fiscal
years ended November 30, 1996, 1995, and 1994, FAS reimbursed the Balanced
Fund $0, $0, and $46,191, respectively, in other Fund operating expenses;
for the fiscal years ended November 30, 1996, 1995, and 1994, FAS
reimbursed the Fixed Income Fund $0, $0, and $48,849, respectively, in
other Fund operating expenses; for the fiscal years ended November 30,
1996, 1995, and 1994, FAS reimbursed the Short-Term Fixed Income Fund $0,
$0, and $39,787, respectively, in other Fund operating expenses.
CUSTODIAN
Wachovia Bank of North Carolina, N.A., Winston-Salem, North Carolina, is
custodian (the "Custodian") for the securities and cash of the Funds. Under
the Custodian Agreement, the Custodian holds the Funds' portfolio
securities in safekeeping and keeps all necessary records and documents
relating to its duties. For the services to be provided to the Trusts
pursuant to the Custodian Agreement, the Trusts pay the Custodian an annual
fee based upon the average daily net assets of the Funds and which is
payable monthly. The Custodian will also charge transaction fees and out-
of-pocket expenses.
TRANSFER AGENT
Federated Services Company, Pittsburgh, Pennsylvania a subsidiary of
Federated Investors, is transfer agent (the "Transfer Agent") for the
shares of the Funds, and dividend disbursing agent for the Funds. Federated
Services Company also provides certain accounting and recordkeeping
services with respect to the Funds' portfolio investments.
LEGAL SERVICES
Legal services for the Funds are provided by Kirkpatrick & Lockhart LLP,
Washington, D.C. Piper & Marbury L.L.P., Washington, D.C., serves as
counsel to the independent Trustees.
INDEPENDENT AUDITORS
The independent auditors are Ernst & Young LLP, Pittsburgh,
Pennsylvania.
DISTRIBUTION PLAN (CLASS B SHARES ONLY) AND SHAREHOLDER SERVICES PLAN
(CLASS A SHARES AND CLASS B SHARES ONLY)
These arrangements permit the payment of fees to financial institutions,
the distributor, and Federated Shareholder Services Company, to stimulate
distribution activities and to cause services to be provided to
shareholders by a representative who has knowledge of the shareholder's
particular circumstances and goals. These activities and services may
include, but are not limited to: marketing efforts; providing office space,
equipment, telephone facilities, and various clerical, supervisory,
computer, and other personnel as necessary or beneficial to establish and
maintain shareholder accounts and records; processing purchase and
redemption transactions and automatic investments of client account cash
balances; answering routine client inquiries; and assisting clients in
changing dividend options, account designations, and addresses.
By adopting Distribution Plans, the Trustees expect that the Funds will
be able to achieve a more predictable flow of cash for investment purposes
and to meet redemptions. This will facilitate more efficient portfolio
management and assist a Fund in pursuing its investment objective. By
identifying potential investors whose needs are served by a Fund's
objectives, and properly servicing these accounts, it may be possible to
curb sharp fluctuations in rates of redemptions and sales.
Other benefits, which may be realized under either arrangement, may
include: (1) providing personal services to shareholders; (2) investing
shareholder assets with a minimum of delay and administrative detail; (3)
enhancing shareholder recordkeeping systems; and (4) responding promptly to
shareholders' requests and inquiries concerning their accounts.
For the fiscal year ended November 30, 1996, payments in the amount of $979
were made pursuant to the Plan on behalf of Equity Fund. In addition, for
the fiscal year the Equity Fund Class A Shares paid shareholder service
fees in the amount of $112,041, all of which was waived, and Class B Shares
paid $326.
For the fiscal year ended November 30, 1996, payments in the amount of
$1,652 were made pursuant to the Plan on behalf of Quantitative Equity
Fund. In addition, for the fiscal year the Quanitative Equity Fund Class A
Shares paid shareholder service fees in the amount of $101,106, all of
which was waived, and Class B Shares paid $551.
For the fiscal year ended November 30, 1996, the Equity Index Fund Class
A Shares paid shareholder service fees in the amount of $146,700, all of
which was waived.
For the fiscal year ended November 30, 1996, the Special Values Fund
Class A Shares paid shareholder service fees in the amount of $36,749, all
of which was waived.
For the fiscal year ended November 30, 1996, the Emerging Markets Fund
Class A Shares paid shareholder service fees in the amount of $82,304, all
of which was waived.
For the fiscal year ended November 30, 1996, payments in the amount of
$1,822 were made pursuant to the Plan on behalf of Balanced Fund. In
addition, for the fiscal year the Balanced Fund Class A Shares paid
shareholder service fees in the amount of $163,749, all of which was
waived, and Class B Shares paid $607.
For the fiscal year ended November 30, 1996, payments in the amount of
$195 were made pursuant to the Plan on behalf of Fixed Income Fund. In
addition, for the fiscal year the Fixed Income Fund Class A Shares paid
shareholder service fees in the amount of $132,440, all of which was
waived, and Class B Shares paid $65.
For the fiscal year ended November 30, 1996, the Short-Term Fixed Income
Fund Class A Shares paid shareholder service fees in the amount of $85,662,
all of which was waived.
For the fiscal year ended November 30, 1996, Georgia Municipal Bond Fund
Class A Shares paid shareholder service fees in the amount of $9,722 all of
which was waived.
For the fiscal year ended November 30, 1996, North Carolina Municipal
Bond Fund Class A Shares paid shareholder service fees in the amount of
$24,077, all of which was waived.
For the fiscal year ended November 30, 1996, South Carolina Municipal
Bond Fund Class A Shares paid shareholder service fees in the amount of
$86,827, all of which was waived.
PURCHASING FUND SHARES
Shares of a Fund are sold at net asset value plus an applicable sales
charge on days on which the Wachovia Banks, the New York Stock Exchange and
the Federal Reserve Wire System are open for business.
CONVERSION TO FEDERAL FUNDS
It is each Fund's policy to be as fully invested as possible so that
maximum interest may be earned. To this end, all payments from shareholders
must be in federal funds or be converted into federal funds. The Wachovia
Banks act as the shareholders' agent in depositing checks and converting
them to federal funds.
EXCHANGING SECURITIES FOR FUND SHARES
A Fund may accept securities in exchange for Fund shares. A Fund will
allow such exchanges only upon the prior approval of the Fund and a
determination by the Fund and the investment adviser that the securities to
be exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies
of a Fund, must have a readily ascertainable market value, must be liquid,
and must not be subject to restrictions on resale. The market value of any
securities exchanged in any initial investment, plus any cash, must be at
least equal to the minimum investment in the Fund.
Securities accepted by a Fund will be valued in the same manner as the
Fund values its assets. The basis of the exchange will depend on the net
asset value of Fund shares on the day the securities are valued. One share
of the Fund will be issued for each equivalent amount of securities
accepted.
Any interest earned on the securities prior to the exchange will be
considered in valuing the securities. All interest, dividends,
subscription or other rights attached to the securities become the property
of the Fund, along with the securities.
If an exchange is permitted, it will be treated as a sale for federal
income tax purposes. Depending upon the cost basis of the securities
exchanged for Fund shares, a gain or loss may be realized by the investor.
DETERMINING NET ASSET VALUE
Net asset value generally changes each day. The days on which net asset
value is calculated by a Fund are described in the prospectuses.
Dividend income is recorded on the ex-dividend date, except certain
dividends from foreign securities where the ex-dividend date may have
passed, are recorded as soon as a Fund is informed of the ex-dividend date.
DETERMINING MARKET VALUE OF SECURITIES
The market values of a Fund's portfolio securities are determined as
follows:
ofor equity securities, according to the last sale price on a
national securities exchange, if available;
oin the absence of recorded sales for listed equity securities,
according to the mean between the last closing bid and asked prices;
ofor unlisted equity securities, the latest bid prices;
ofor bonds and other fixed income securities, as determined by an
independent pricing service;
ofor short-term obligations, according to the mean between bid and
asked prices as furnished by an independent pricing service; or
ofor all other securities, at fair value as determined in good faith
by the Trustees.
Prices provided by independent pricing services may be determined
without relying exclusively on quoted prices and may reflect: institutional
trading in similar groups of securities, yield, quality, coupon rate,
maturity, type of issue, trading characteristics, and other market data.
The Fund will value futures contracts, options and put options on
financial futures at their market values established by the exchanges at
the close of option trading on such exchanges, unless the Trustees
determine in good faith that another method of valuing option positions is
necessary.
REDEEMING FUND SHARES
A Fund redeems shares at the next computed net asset value after the
Fund receives the redemption request. Redemption procedures are explained
in the prospectuses under "Redeeming Shares."
REDEMPTION IN KIND
Although eah Fund intends to redeem shares in cash, it reserves the
right under certain circumstances to pay the redemption price in whole or
in part by a distribution of securities from the Fund's portfolio. To the
extent available, such securities will be readily marketable.
Redemption in kind will be made in conformity with applicable Securities
and Exchange Commission rules, taking such securities at the same value
employed in determining net asset value and selecting the securities in a
manner the Trustees determine to be fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption
is made in kind, shareholders receiving their securities and selling them
before their maturity could receive less than the redemption value of their
securities and could incur transaction costs.
The Trusts have elected to be governed by Rule 18f-1 under the
Investment Company Act of 1940, which obligates a Fund to redeem shares for
any one shareholder in cash only up to the lesser of $250,000 or 1% of the
Fund's net asset value during any 90-day period.
MASSACHUSETTS BUSINESS TRUSTS
Under certain circumstances, shareholders may be held personally liable
under Massachusetts law for acts or obligations of the Trusts. To protect
shareholders, the Trusts have filed legal documents with Massachusetts that
expressly disclaim the liability of shareholders for such acts or
obligations of the Trusts. These documents require notice of this
disclaimer to be given in each agreement, obligation, or instrument the
Trusts or the Trustees enter into or sign on behalf of a Fund.
In the unlikely event a shareholder is held personally liable for a
Trust's obligations on behalf of a Fund, the Trust is required by its
Declaration of Trust to use the property of the Fund to protect or
compensate the shareholder. On request, a Trust will defend any claim made
and pay any judgment against a shareholder of a Fund for any act or
obligation of the Trust on behalf of the Fund. Therefore, financial loss
resulting from liability as a shareholder of a Fund will occur only if the
Trust cannot meet its obligations to indemnify shareholders and pay
judgments against them from the assets of the Fund.
TAX STATUS
THE FUNDS' TAX STATUS
Each Fund expects to pay no federal income tax because it intends to
meet the requirements of Subchapter M of the Internal Revenue Code
applicable to regulated investment companies and to receive the special tax
treatment afforded to such companies. To qualify for this treatment, each
Fund must, among other requirements:
oderive at least 90% of its gross income from dividends, interest,
and gains from the sale of securities;
oderive less than 30% of its gross income from the sale of securities
held less than three months;
oinvest in securities within certain statutory limits; and
odistribute to its shareholders at least 90% of its net income earned
during the year.
Federal income tax law requires the holder of a zero coupon convertible
security to recognize income with respect to the security prior to the
receipt of cash payments. To maintain its qualification as a regulated
investment company and to avoid liability of federal income taxes, a Fund
will be required to distribute income accrued with respect to zero coupon
convertible securities which it owns, and may have to sell portfolio
securities (perhaps at disadvantageous times) in order to generate cash to
satisfy these distribution requirements.
SHAREHOLDERS' TAX STATUS
Shareholders of the Equity Fund, Quantitative Equity Fund, Equity Index
Fund, Special Values Fund, Emerging Markets Fund, Balanced Fund, Fixed
Income Fund, and Short-Term Fixed Income Fund are subject to federal income
tax on dividends received as cash or additional shares. The dividends
received deduction for corporations will apply to ordinary income
distributions to the extent the distribution represents amounts that would
qualify for the dividends received deduction to a Fund if the Fund were a
regular corporation, and to the extent designated by the Fund as so
qualifying. These dividends, and any short-term capital gains, are taxable
as ordinary income.
No portion of any income dividend income paid by the Georgia Municipal
Bond Fund, North Carolina Municipal Bond Fund, and South Carolina Municipal
Bond Fund is eligible for the dividends received deductions available to
corporations.
CAPITAL GAINS
Long-term capital gains distributed to shareholders will be treated as
long-term capital gains regardless of how long shareholders have held
shares.
Capital gains or losses may be realized by the Georgia Municipal Bond
Fund, North Carolina Municipal Bond Fund, and South Carolina Municipal Bond
Fund on the sale of portfolio securities and as a result of discounts from
par value on securities held to maturity. Sales would generally be made
because of:
othe availability of higher relative yields;
odifferentials in market values;
onew investment opportunities;
ochanges in creditworthiness of an issuer; or
oan attempt to preserve gains or limit losses.
Distribution of long-term capital gains are taxed as such, whether they
are taken in cash or reinvested, and regardless of the length of time the
shareholder has owned the shares.
TOTAL RETURN
The average annual total return is the average compounded rate of return
for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period
by the net asset value per share at the end of the period. The number of
shares owned at the end of the period is based on the number of shares
purchased at the beginning of the period with $1,000, less any applicable
sales load, adjusted over the period by any additional shares, assuming the
reinvestment of all dividends and distributions.
Cumulative total return reflects a Fund's total performance over a specific
period of time. This total return assumes and is reduced by the payment of
the maximum sales charge. The Funds' cumulative total returns are
representative of investment activity since a Fund's effective date.
FUND NAME CLASS A CLASS A CLASS A CLASS B CLASS Y SHARES
SHARES SHARES SHARES SHARES CUMULATIVE
AVERAGE AVERAGE AVERAGE CUMULATIVE TOTAL RETURN
ANNUAL ANNUAL ANNUAL TOTAL SINCE INCEPTION
TOTAL TOTAL RETURN TOTAL RETURN RETURN
RETURN 5-YEAR SINCE SINCE
1-YEAR PERIOD* INCEPTION** INCEPTION
PERIOD*
Equity Fund 19.90% 15.08%+ 14.25%++ 19.57%++
Quantitative 18.15% 19.04%# 14.92%++ 20.19%++
Equity Fund
Equity Index 21.48% 17.17%+ 20.14++
Fund
Special 33.53% 15.90%+ 15.05%++
Values Fund
Emerging 7.39% 5.92## (2.10%)++
Markets Fund
Balanced Fund 13.23% 11.93%+ 9.47%++ 14.69%++
Fixed Income 0.72% 4.36%+ 0.77%++ 6.12%++
Fund
Short-Term 2.70% 4.00%+ 3.00%++
Fixed Income
Fund
Georgia 0.21% 7.09%## 4.31%++
Municipal
Bond Fund
North 0.42% 7.43%## 4.55%++
Carolina
Municipal
Bond Fund
South 0.80% 6.63% 6.85%### 4.86%++
Carolina
Municipal
Bond Fund
* For the fiscal year ended November 30, 1996.
** Start of performance
+ May 7, 1993 through November 30, 1996
++ July 23, 1996 through November 30, 1996
# March 25, 1994 through November 30, 1996
## December 23, 1994 through November 30, 1996
### January 11, 1991 through November 30, 1996
YIELD
The yield for a Fund is determined each day by dividing the net
investment income per share (as defined by the Securities and Exchange
Commission) earned by the Fund over a thirty-day period by the maximum
offering price per share of the Fund on the last day of the period. This
value is then annualized using semi-annual compounding. This means that the
amount of income generated during the thirty-day period is assumed to be
generated each month over a 12-month period and is reinvested every six
months. The yield does not necessarily reflect income actually earned by a
Fund because of certain adjustments required by the Securities and Exchange
Commission and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees
in connection with services provided in conjunction with an investment in a
Fund, the performance will be reduced for those shareholders paying those
fees.
The Funds' yield for the thirty-day period ended November 30, 1996, is
as follows:
FUND NAME CLASS A SHARES CLASS B SHARES CLASS Y SHARES
Equity Fund 0.77% (0.15%) 0.81%
Quantitative 1.11% 0.21% 1.17%
Equity Fund
Equity Index Fund 1.50% 1.57% 1.57%
Special Values 0.40% 0.40%
Fund
Emerging Markets 0.00% 0.00%
Fund
Balanced Fund 2.52% 1.68% 2.65%
Fixed Income Fund 5.21% 4.46% 5.47%
Short-Term Fixed 5.11% 5.24%
Income Fund
Georgia Municipal 3.96% 4.16%
Bind Fund
North Carolina 3.88% 4.09%
Municipal Bond
Fund
South Carolina 4.40% 4.63%
Municipal Bond
Fund
TAX-EQUIVALENT YIELD
The tax-equivalent yield of a Fund is calculated similarly to the yield,
but is adjusted to reflect the taxable yield that a Fund would have had to
earn to equal its actual yield, assuming that income is 100% tax-exempt.
The Funds may also use a tax-equivalency table in advertising and sales
literature. The interest earned by the municipal bonds in a Fund's
portfolio generally remain free from federal regular income tax*, and is
often free from state and local taxes as well. As the tables below
indicate, a "tax-free" investment is an attractive choice for investors,
particularly in times of narrow spreads between tax-free and taxable
yields.
Georgia Municipal Bond Fund Class A Shares' tax-equivalent yield for the
thirty-day period ended November 30, 1996 was 5.74%, assuming a 31% tax
bracket.
Georgia Municipal Bond Fund Class Y Shares' tax-equivalent yield for the
thirty-day period ended November 30, 1996 was 6.03%, assuming a 31% tax
bracket.
TAXABLE YIELD EQUIVALENT FOR 1996
STATE OF GEORGIA
TAX BRACKET:
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED
FEDERAL
AND STATE:21.00% 34.00% 37.00% 42.00% 45.60%
JOINT $1- $40,101- $96,901- $147,701- OVER
RETURN 40,100 96,900 147,700 263,750 $263,750
SINGLE $1- $24,001- $58,151- $121,301- OVER
RETURN 24,000 58,150 121,300 263,750 $263,750
Tax-Exempt
Yield Taxable Yield Equivalent
1.50% 1.90% 2.27% 2.38% 2.59% 2.76%
2.00% 2.53% 3.03% 3.17% 3.45% 3.68%
2.50% 3.16% 3.79% 3.97% 4.31% 4.60%
3.00% 3.80% 4.55% 4.76% 5.17% 5.51%
3.50% 4.43% 5.30% 5.56% 6.03% 6.43%
4.00% 5.06% 6.06% 6.35% 6.90% 7.35%
4.50% 5.70% 6.82% 7.14% 7.76% 8.27%
5.00% 6.33% 7.58% 7.94% 8.62% 9.19%
5.50% 6.96% 8.33% 8.73% 9.48% 10.11%
6.00% 7.59% 9.09% 9.52% 10.34% 11.03%
6.50% 8.23% 9.85% 10.32% 11.21% 11.95%
7.00% 8.86% 10.61% 11.11% 12.07% 12.87%
North Carolina Municipal Bond Fund Class A Shares' tax-equivalent yield for
the thirty-day period ended November 30, 1996 was 5.62%, assuming a 31% tax
bracket.
North Carolina Municipal Bond Fund Class Y Shares' tax-equivalent yield
for the thirty-day period ended November 30, 1996 was 5.93%, assuming a 31%
tax bracket.
TAXABLE YIELD EQUIVALENT FOR 1996
STATE OF NORTH CAROLINA
TAX BRACKET:
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED
FEDERAL
AND STATE 22.00% 35.00% 38.75% 43.75% 47.35%
JOINT $1- $40,101- $96,901- $147,701- OVER
RETURN 40,100 96,900 147,700 263,750 $263,750
SINGLE $1- $24,001- $58,151- $121,301- OVER
RETURN 24,000 58,150 121,300 263,750 $263,750
Tax-Exempt
Yield Taxable Yield Equivalent
3.50% 4.49% 5.38% 5.71% 6.22% 6.65%
4.00% 5.13% 6.15% 6.53% 7.11% 7.60%
4.50% 5.77% 6.92% 7.35% 8.00% 8.55%
5.00% 6.41% 7.69% 8.16% 8.89% 9.50%
5.50% 7.05% 8.46% 9.98% 9.78% 10.45%
6.00% 7.69% 9.23% 9.80% 10.67% 11.40%
6.50% 8.33% 10.00% 10.61% 11.56% 12.35%
7.00% 8.97% 10.77% 11.43% 12.44% 13.30%
7.50% 9.62% 11.54% 12.24% 13.33% 14.25%
8.00% 10.26% 12.31% 13.06% 14.22% 15.19%
South Carolina Municipal Bond Fund Class A Shares' tax-equivalent yield
for the thirty-day period ended November 30, 1996 was 6.38%, assuming a 31%
tax bracket.
South Carolina Municipal Bond Fund Class Y Shares' tax-equivalent yield
for the thirty-day period ended November 30, 1996 was 6.71%, assuming a 31%
tax bracket.
TAXABLE YIELD EQUIVALENT FOR 1996
STATE OF SOUTH CAROLINA
TAX BRACKET:
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED
FEDERAL
AND STATE 22.00% 35.00% 38.00% 43.00% 46.60%
JOINT $1- $40,401- $96,901- $147,701- OVER
RETURN 40,100 96,900 147,700 263,750 $263,750
SINGLE $1- $24,001- $58,151- $121,301- OVER
RETURN 24,000 58,150 121,300 263,750 $263,750
Tax-Exempt
Yield Taxable Yield Equivalent
2.50% 3.21% 3.85% 4.03% 4.39% 4.68%
3.00% 3.85% 4.62% 4.84% 5.26% 5.62%
3.50% 4.49% 5.38% 5.65% 6.14% 6.55%
4.00% 5.13% 6.15% 6.45% 7.02% 7.49%
4.50% 5.77% 6.92% 7.26% 7.89% 8.43%
5.00% 6.41% 7.69% 8.06% 8.77% 9.36%
5.50% 7.05% 8.46% 8.87% 9.65% 10.30%
6.00% 7.69% 9.23% 9.68% 10.53% 11.24%
6.50% 8.33% 10.00% 10.48% 11.40% 12.17%
7.00% 8.97% 10.77% 11.29% 12.28% 13.11%
Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. Furthermore, additional state and
local taxes paid on comparable taxable investments were not used to
increase federal deductions.
The charts above are for illustrative purposes only. They are not
indicators of past or future performance of the Funds.
* Some portion of a Fund's income may be subject to the federal
alternative minimum tax and state and local taxes.
PERFORMANCE COMPARISONS
A Fund's performance depends upon such variables as:
oportfolio quality;
oaverage portfolio maturity;
otype of instruments in which the portfolio is invested;
ochanges in interest rates and market value of portfolio securities;
ochanges in the Fund's expenses;
othe relative amount of Fund cash flow; and
ovarious other factors.
A Fund's performance fluctuates on a daily basis largely because net
earnings and the maximum offering price (i.e., net asset value plus any
sales charge) per share fluctuate daily. Both net earnings and offering
price per share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance,
investors should consider all relevant factors, such as the composition of
any index used, prevailing market conditions, portfolio compositions of
other funds, and methods used to value portfolio securities and compute
offering price. The financial publications and/or indices which the Fund
uses in advertising may include:
oLIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund
categories by making comparative calculations using total return.
Total return assumes the reinvestment of all capital gains
distributions and income dividends and takes into account any change
in maximum offering price over a specific period of time. From time
to time, a Fund will quote its Lipper ranking in advertising and
sales literature.
oDOW JONES INDUSTRIAL AVERAGE ("DJIA") represents share prices of
selected blue-chip industrial corporations. The DJIA indicates daily
changes in the average price of stock of these corporations. Because
it represents the top corporations of America, the DJIA index is a
leading economic indicator for the stock market as a whole.
oSTANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS (THE
"S&P INDEX"), is a composite index of common stocks in industry,
transportation, and financial and public utility companies. In
addition, the S&P Index assumes reinvestment of all dividends paid
by stocks listed on the S&P Index. Taxes due on any of these
distributions are not included, nor are brokerage or other fees
calculated in the S&P Index figures.
oRUSSELL 2000 INDEX is a broadly diversfied index consisting of
approximately 2,000 small capitalization common stocks that can be
ised to compare the total returns of funds whose portfolios are
invested primarily in small capitalization common stocks.
oEUROPE, AUSTRALIA, AND FAR EAST ("EAFE") is a market capitalization
weighted foreign securities index, which is widely used to measure
the performance of European, Australian, New Zealand and Far
Eastern stock markets. The index covers approximately 1,020
companies drawn from 18 countries in the above regions. The index
values its securities daily in both U.S. dollars and local currency
and calculates total returns monthly. EAFE U.S. dollar total return
is a net dividend figure less Luxembourg withholding tax. The EAFE
is monitored by Capital International, S.A., Geneva, Switzerland.
oINTERNATIONAL FINANCE CORPORATION ("IFC") EMERGING MARKET INDICES
are market capitalization-weighted foreign securities indices,
which are used to measure the performance of emerging markets (as
defined by the World Bank) in Europe, Asia, Latin America, and the
Middle East/Africa. The IFC calculates both a "Global" and an
"Investable" version of its index. The "Global" version includes
companies and countries with regard to their access to foreign
investors. The "Investable" Index adjusts company and market weights
to reflect their accessibility to foreign investors. The IFC Global
Index currently covers approximately 1,200 securities in 25
markets; the IFC Investable Index currently covers approximately
900 securities in 24 markets. Both indices are presently calculated
in local currency and in US dollars, without dividends and with
gross dividends reinvested (e.g., before withholding taxes). The IFC
is a subsidiary of the World Bank, and has been collecting data on
emerging markets since 1975.
oMORGAN STANLEY CAPITAL INTERNATIONAL ("MSCI") EMERGING MARKETS
INDICES are market capitalization-weighted foreign securities
indices, which are used to measure the performance of emerging
markets (as defined by the World Bank) in Europe, Asia, Latin
America, and the Middle East/Africa. MSCI calculates a "Global" and
a "Free" version of its index. The "Global" version includes
companies and countries without regards to their access to foreign
investors. The "Free" Index adjusts company and market weights to
reflect their assessibility to foreign investors. The MSCI Global
Index currently covers approximately 630 securities in 20 markets;
the MSCI Free Index currently covers approximately 560 securities in
19 markets. Both indices are presently calculated in local currency
and in US dollars, without dividends and with gross dividends
reinvested (e.g., before withholding taxes).
oMERRILL LYNCH COMPOSITE 1-3 YEAR TREASURY INDEX is an unmanaged
index tracking short-term U.S. government securities with maturities
between 1 and 2.99 years. The index is produced by Merrill Lynch,
Pierce, Fenner & Smith.
oMERRILL LYNCH COMPOSITE 1-5 YEAR TREASURY INDEX is comprised of
approximately 66 issues of U.S. Treasury securities maturing between
1 and 4.99 years, with coupon rates of 4.25% or more. These total
return figures are calculated for one, three, six, and twelve month
periods and year-to-date and include the value of the bond plus
income and any price appreciation or depreciation.
oSALOMON BROTHERS 3-5 YEAR GOVERNMENT INDEX quotes total returns for
U.S. Treasury issues (excluding flower bonds) which have maturities
of three to five years. These total returns are year-to-date figures
which are calculated each month following January 1.
oMERRILL LYNCH 3-5 YEAR TREASURY INDEX is comprised of approximately
24 issues of intermediate-term U.S. government and U.S. Treasury
securities with maturities between 3 and 4.99 years and coupon rates
above 4.25%. Index returns are calculated as total returns for
periods of one, three, six and twelve months as well as year-to-
date.
oMERRILL LYNCH 3-YEAR TREASURY YIELD CURVE INDEX is an unmanaged
index comprised of the most recently issued 3-year U.S. Treasury
notes. Index returns are calculated as total returns for periods of
one, three, six, and twelve months as well as year-to-date.
oLEHMAN BROTHERS GOVERNMENT INDEX is an unmanaged index comprised of
all publicly issued, non-convertible domestic debt of the U.S.
government, or any agency thereof, or any quasi-federal corporation
and of corporate debt guaranteed by the U.S. government. Only notes
and bonds with a minimum outstanding principal of $1 million and a
minimum maturity of one year are included.
oLEHMAN BROTHERS AGGREGATE BOND INDEX is a total return index
measuring both the capital price changes and income provided by the
underlying universe of securities, weighted by market value
outstanding. The Aggregate Bond Index is comprised of the Lehman
Brothers Government Bond Index, Corporate Bond Index, Mortgage-
Backed Securities Index and the Yankee Bond Index. These indices
include: U.S. Treasury obligations, including bonds and notes; U.S.
agency obligations, including those of the Farm Credit System,
including the National Bank for Cooperatives, Farm Credit Banks,
and Banks for Cooperatives; Farmers Home Administration; Federal
Home Loan Banks; Federal Home Loan Mortgage Corporation; Fannie
Mae; Government National Mortgage Association; and Student Loan
Marketing Association; foreign obligations; and U.S. investment-
grade corporate debt and mortgage-backed obligations. All corporate
debt included in the Aggregate Bond Index has a minimum S&P rating
of BBB or a minimum Moody's rating of Baa.
oMERRILL LYNCH CORPORATE AND GOVERNMENT INDEX includes issues which
must be in the form of publicly placed, nonconvertible, coupon-
bearing domestic debt and must carry a term of maturity of at least
one year. Par amounts outstanding must be no less than $10 million
at the start and at the close of the performance measurement period.
Corporate instruments must be rated by S&P or by Moody's as
investment grade issues (i.e., BBB/Baa or better).
oMERRILL LYNCH DOMESTIC MASTER INDEX includes issues which must be in
the form of publicly placed, nonconvertible, coupon-bearing domestic
debt and must carry a term to maturity of at least one year. Par
amounts outstanding must be no less than $10 million at the start
and at the close of the performance measurement period. The Domestic
Master Index is a broader index than the Merrill Lynch Corporate and
Government Index and includes, for example, mortgage-related
securities. The mortgage market is divided by agency, type of
mortgage and coupon and the amount outstanding in each
agency/type/coupon subdivision must be no less than $200 million at
the start and at the close of the performance measurement period.
Corporate instruments must be rated by S&P or by Moody's as
investment-grade issues (i.e. BBB/Baa or better).
oS&P 500/LEHMAN BROTHERS GOVERNMENT/CORPORATE (WEIGHTED INDEX) and
the S&P 500/Lehman Brothers Government (Weighted Index) combine the
components of a stock-oriented index and a bond-oriented index to
obtain results which can be compared to the performance of a managed
fund. The indices' total returns will be assigned various weights
depending upon the Fund's current asset allocation.
oSALOMON BROTHERS AAA-AA CORPORATE index calculates total returns of
approximately 775 issues which include long-term, high grade
domestic corporate taxable bonds, rated AAA-AA with maturities of
twelve years or more and companies in industry, public utilities,
and finance.
oLEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX is an
unmanaged index comprised of all the bonds issued by the Lehman
Brothers Government/Corporate Bond Index with maturities between 1
and 9.99 years. Total return is based on price
appreciation/depreciation and income as a percentage of the original
investment. Indices are rebalanced monthly by market capitalization.
oSEI BALANCED UNIVERSE is composed of 916 portfolios managed by 390
managers representing $86 billion in assets. To be included in the
universe, a portfolio must contain a 5% minimum commitment in both
equity and fixed-income securities. Consulting universes may be
composed of pension, profit-sharing, commingled,
endowment/foundation and mutual funds.
oLEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) index is comprised of
approximately 5,000 issues which include: non-convertible bonds
publicly issued by the U.S. government or its agencies; corporate
bonds guaranteed by the U.S. government and quasi-federal
corporations; and publicly issued, fixed rate, non-convertible
domestic bonds of companies in industry, public utilities, and
finance. The average maturity of these bonds approximates nine
years. Tracked by Lehman Brothers, the index calculates total
returns for one-month, three-month, twelve-month, and ten-year
periods and year-to-date.
oMERRILL LYNCH CORPORATE MASTER is an unmanaged index comprised of
approximately 4,356 corporate debt obligations rated BBB or better.
These quality parameters are based in composites pf ratings assigned
by S&P and Moody's. Only bonds with a minimum maturity of ine year
are included.
OLEHMAN BROTHERS STATE GENERAL OBLIGATIONS INDEX is an index
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.
oLEHMAN BROTHERS FIVE-YEAR STATE GENERAL OBLIGATIONS BONDS is an
index comprised of all state general obligation debt issues with
maturities between four and six years. These bonds are rated A or
better and represent a variety of coupon ranges. Index figures are
total returns calculated for one, three, and twelve month periods as
well as year-to-date. Total returns are also calculated as of the
index inception, December 31, 1979.
oLEHMAN BROTHERS THREE-YEAR STATE GENERAL OBLIGATIONS BONDS is an
index comprised of the same issues noted above except that the
maturities range between two and four years. Index figures are total
returns calculated for the same periods as listed above.
oMORNINGSTAR, INC., an independent rating service, is the publisher
of the bi-weekly Mutual Fund Values. Mutual Fund Values rates more
than 1,000 NASDAQ-listed mutual funds of all types, according to
their risk-adjusted returns. The maximum rating is five stars, and
ratings are effective for two weeks.
Advertisements and other sales literature for the Fund may quote total
returns which are calculated on non-standardized base periods. These total
returns also represent the historic change in the value of an investment in
the Fund based on monthly reinvestment of dividends over a specified period
of time.
Advertisements may quote performance information which does not reflect
the effect of the sales load.
FINANCIAL STATEMENTS
The financial statements for the fiscal period ended November 30, 1996,
are incorporated herein by reference from the Funds' Annual Reports dated
November 30, 1996 (File Nos. 33-44590 and 811-6504). A copy of an Annual
Report may be obtained without charge by contacting The Biltmore Service
Center at the address located on the back cover of the prospectus or by
calling The Biltmore Service Center at 1-800-994-4414.
STANDARD & POOR'S CORPORATION
Standard & Poor's Corporation ("S&P") makes no representation or
warranty, express or implied, to the owners of a Fund or any member of the
public regarding the advisability of investing in securities generally or
in a Fund particularly or the ability of the S&P 500 Index (as defined in
the prospectuses) to track general stock market performance. S&P's only
relationship to Federated Securities Corp., the Funds' distributor (the
"Licensee") is the licensing of certain trademarks and trade names of S&P
and of the S&P 500 Index which is determined, composed and calculated by
S&P without regard to the Licensee or a Fund. S&P has no obligation to take
the needs of the Licensee or the owners of a Fund into consideration in
determining, composing or calculating the S&P 500 Index. S&P is not
responsible for and has not participated in the determination of, the
timing of, prices at, or quantities of a Fund to be issued or in the
determination or calculation of the equation by which a Fund is to be
converted into cash. S&P has no obligation or liability in connection with
the administration, marketing or trading of a Fund.
S&P does not guarantee the accuracy and/or the completeness of the S&P
500 Index or any data included therein. S&P makes no warranty, express or
implied, as to results to be obtained by the Licensee, owners of a Fund, or
any other person or entity from the use of the S&P 500 Index or any data
included therein in connection with the rights licensed hereunder or for
any other use. S&P makes no express or implied warranties, and expressly
disclaims all warranties or merchantability or fitness for a particular
purpose or use with respect to the S&P 500 Index or any data included
therein. Without limiting any of the foregoing, in no event shall S&P have
any liability for any special, punitive, indirect or consequential damages
(including lost profits), even if notified of the possibility of such
damages.
APPENDIX
STANDARD & POOR'S RATINGS GROUP CORPORATE BOND RATINGS
AAA--Debt rated ``AAA'' has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA--Debt rated ``AA'' has a very strong capacity to pay interest and
repay principal and differs from the higher rated issues only in small
degree.
A--Debt rated ``A'' has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effects
of changes in circumstances and economic conditions than debt in higher
rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
BB, B, CCC, CC -- Debt rated ``BB'', `B'', ``CCC'', and `CC'' is
regarded, on balance, as predominantly speculative with respect to capacity
to pay interest and repay principal in accordance with the terms of the
obligation. `BB'' indicates the lowest degree of speculation and ``CC''
the highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these are outweighed by large
uncertainties of major risk exposure to adverse conditions.
C -- The rating ``C'' is reserved for income bonds on which no interest
is being paid.
D -- Debt rated ``D'' is in default, and payment of interest and/or
repayment of principal is in arrears.
NR--NR indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not
rate a particular type of obligation as a matter of policy.
S&P may apply a plus (+) sign or minus (-) sign to the above rating
classifications to show relative standing within the classifications.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATING
AAA--Bonds which are rated ``AAA'' are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
AA--Bonds which are rated ``AA'' are judged to be of high quality by all
standards. Together with the `AAA'' group they comprise what are
generally known as high grade bonds. They are rated lower than the best
bonds because margins of protection may not be as large as in `AAA
`securities or fluctuation of protective elements may be of greater
amplitude or there may be other elements present which make the long-term
risks appear somewhat larger than in `AAA' securities.
A--Bonds which are rated ``A'' possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to impairment
some time in the future.
BAA--Bonds which are rated ``BAA'' are considered as medium-grade
obligations, (i.e., they are neither highly protected nor poorly secured).
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
BA--Bonds which are ``BA'' are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated ``B'' generally lack characteristics of a
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
CAA -- Bonds which are rated ``CAA'' are of poor standing. Such issues
may be in default or there may be present elements of danger with respect
to principal or interest.
CA--Bonds which are rated ``CA'' represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C--Bonds which are rated ``C'' are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects or ever
attaining any real investment standing.
NR--Not rated by Moody's. Moody's applies numerical modifiers, 1, 2 and
3 in each generic rating classification from `AA'' through ``B'' in its
corporate bond rating system. The modifier 1 indicates that the security
ranks in the higher end of its generic rating category; the modifier 2
indicates a mid-range ranking; and the modifier 3 indicates that the issue
ranks in the lower end of its generic rating category.
STANDARD & POOR'S RATINGS GROUP COMMERCIAL PAPER RATINGS
A-1--This highest category indicates that the degree of safety regarding
timely payment is strong. Those issues determined to possess extremely
strong safety characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3--Issues carrying this designation have adequate capacity for timely
payment. They are, however, more vulnerable to the adverse effects of
changes in circumstances than obligations carrying the higher designations.
B--Issues rated "B" are regarded as having only speculative capacity for
timely payment.
C--This rating is assigned to short-term debt obligations with a
doubtful capacity for payment.
D--Debt rated "D" is in payment default. The "D" rating category is used
when interest payments or principal payments are not made on the date due,
even if the applicable grace period has not expired, unless S&P believes
that such payments will be made during such grace period.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1--Issuers rated ``PRIME-1'' (or related supporting institutions)
have a superior capacity for repayment of short-term promissory
obligations. `PRIME-1'' repayment capacity will normally be evidenced by
many of the following characteristics:
oLeading market positions in well-established industries;
oHigh rates of return on funds employed;
oConservative capitalization structure with moderate reliance on debt
and ample asset protection;
oBroad margins in earnings coverage of fixed financial charges and
high internal cash generation; or
oWell-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2- Issuers rated ``PRIME-2'' (or related supporting institutions)
have a strong capacity for repayment of short-term promissory obligations.
This will normally be evidenced by many of the characteristics cited above,
but to a lesser degree. Earnings trends and coverage ratios, while sound,
will be more subject to variation. Capitalization characteristics, while
still appropriate, may be more affected by external conditions. Ample
alternate liquidity is maintained.
STANDARD & POOR'S RATINGS GROUP MUNICIPAL BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity
to pay interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay
principal although it is somewhat more susceptible to the adverse effect of
changes in circumstances and economic conditions than debt in higher rated
categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay
interest and repay principal. Whereas it normally exhibits adequate
protection parameters, adverse economic conditions or changing
circumstances are more likely to lead to a weakened capacity to pay
interest and repay principal for debt in this category than in higher rated
categories.
BB, B, CCC, CC--Debt rated "BB," "B," "CCC" and "CC" is regarded, on
balance, as predominantly speculative with respect to capacity to pay
interest and repay principal in accordance with the terms of the
obligation. "BB" indicates the lowest degree of speculation and "CC" the
highest degree of speculation. While such debt will likely have some
quality and protective characteristics, these outweighed by large
uncertainties of major risk exposure to adverse conditions.
C--The rating "C" is reversed for income bonds on which no interest is
being paid.
D--Debt rated "D" is in default, and payment of interest and/or
repayment of principal is in arrears.
STANDARD & POOR'S RATINGS GROUP MUNICIPAL NOTE RATINGS
SP-1--Very strong or strong capacity to pay principal and interest.
Those issues determined to possess overwhelming safety characteristics will
be given a plus sign (+) designation.
SP-2--Satisfactory capacity to pay principal and interest.
SP-3--Speculative capacity to pay principal and interest.
MOODY'S INVESTORS SERVICE, INC. MUNICIPAL BOND RATINGS
AAA--Bonds which are rated "Aaa" are judged to be of the best quality.
They carry the smallest degree of investment risk and are generally
referred to as "gilt edged." Interest payments are protected by a large or
by an exceptionally stable margin and principal is secure. While the
various protective elements are likely to change, such changes as can be
visualized are most unlikely to impair the fundamentally strong position of
such issues.
AA--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally
known as high grade bonds. They are rated lower than the best bonds because
margins of protection may not be as large as in "Aaa" securities or
fluctuation of protective elements may be of greater amplitude or there may
be other elements present which make the long term risks appear somewhat
larger than in "Aaa" securities.
A--Bonds which are rated "A" possess many favorable investment
attributes and are to be considered as upper medium grade obligations.
Factors giving security to principal and interest are considered adequate
but elements may be present which suggest a susceptibility to impairment
some time in the future.
BAA--Bonds which are rated "Baa" are considered as medium grade
obligations, i.e., they are neither highly protected nor poorly secured.
Interest payments and principal security appear adequate for the present
but certain protective elements may be lacking or may be characteristically
unreliable over any great length of time. Such bonds lack outstanding
investment characteristics and in fact have speculative characteristics as
well.
BA--Bonds which are ``Ba'' are judged to have speculative elements; their
future cannot be considered as well assured. Often the protection of
interest and principal payments may be very moderate and thereby not well
safeguarded during both good and bad times over the future. Uncertainty of
position characterizes bonds in this class.
B--Bonds which are rated ``B'' generally lack characteristics of the
desirable investment. Assurance of interest and principal payments or of
maintenance of other terms of the contract over any long period of time may
be small.
CAA--Bonds which are rated ``Caa'' are of poor standing. Such issues may
be in default or there may be present elements of danger with respect to
principal or interest.
CA--Bonds which are rated ``Ca'' represent obligations which are
speculative in a high degree. Such issues are often in default or have
other marked shortcomings.
C--Bonds which are rated ``C'' are the lowest rated class of bonds and
issues so rated can be regarded as having extremely poor prospects of ever
attaining any real investment standing.
MOODY'S INVESTORS SERVICE, INC. SHORT-TERM DEBT RATINGS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have
a superior capacity for repayment of short-term promissory obligations.
PRIME-1 repayment capacity will normally be evidenced by the following
characteristics:
oLeading market positions in well established industries;
oHigh rates of return on funds employed;
oConservative capitalization structure with moderate reliance on debt
and ample asset protection;
oBroad margins in earning coverage of fixed financial charges and
high internal cash generation; and
oWell-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have
a strong capacity for repayment of short-term promissory obligations. This
will normally be evidenced by many of the characteristics cited above, but
to a lesser degree. Earnings trends and coverage ratios, while sound, will
be more subject to variation. Capitalization characteristics, while still
appropriate, may be more affected by external conditions. Ample alternate
liquidity is maintained.
PRIME-3--Issuers rated PRIME-3 (or related supporting institutions) have
an acceptable ability for repayment of senior short-term obligations. The
effect of industry characteristics and market compositions may be more
pronounced. Variability in earnings and profitability may result in changes
in the level of debt protection measurements and may require relatively
high financial leverage. Adequate alternate liquidity is maintained.
NOT PRIME--Issuers rated NOT PRIME do not fall within any of the Prime
rating categories.
MOODY'S INVESTORS SERVICE, INC. SHORT TERM LOAN RATINGS
MIG 1/VMIG 1--This designation denotes best quality. There is present
strong protection by established cash flows, superior liquidity support or
demonstrated broad based access to the market for refinancing.
MIG 2/VMIG 2--This designation denotes high quality. Margins of
protection are ample although not so large as in the preceding group.
MIG 3/VMIG 3--This designation denotes favorable quality. All security
elements are accounted for but there is lacking the undeniable strength of
the preceding grades. Liquidity and cash flow protection may be narrow and
market access for refinancing is likely to be less well established.
3012917B (1/97)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) The Financial Statements for the fiscal year ended November
30, 1996 are incorporated herein by reference to each Fund's
Annual Report dated November 30, 1996. (File Nos. 33-37525
and 811-6201)
(1) Conformed Copy of Declaration of Trust of the Registrant
(1.);
(i) Conformed copies of Amendment Nos. 1 through 4 to the
Declaration of Trust dated August 15, 1990 (8.);
(ii) Conformed Copy of Amendment No. 6 to the Declaration of
Trust dated August 15, 1990 (9.);
(2) Copy of By-Laws of the Registrant (1.);
(3) Not applicable;
(4) Copy of Specimen Certificate for Shares of Beneficial
Interest of the Registrant (2.);
(i) Biltmore Georgia Municipal Bond Fund Class Y Shares;+
(ii) Biltmore North Carolina Municipal Bond Fund;+
(iii)...............Biltmore South Carolina Municipal Bond;+
(5) (i) Conformed Copy of Investment Advisory Contract of the
Registrant and Exhibit A thereto (to file the executed
version of the Investment advisory Contract between the
Trust and Wachovia Bank of South Carolina, N.A. on
behalf of South Carolina Municipal Bond Fund) (8.);
(ii) Conformed copy of Investment Advisory Contract of the
Registrant between the Trust and Wachovia Bank of
Georgia, N.A. on behalf of Biltmore Georgia Municipal
Bond Fund (9.);
(iii) Conformed copy of Investment Advisory
Contract of the Registrant between the Trust and
Wachovia Bank of North Carolina, N.A. on behalf of
Biltmore North Carolina Municipal Bond Fund (9.);
(6) (i) Conformed Copy of Distributor's Contract of the
Registrant and Exhibit A thereto (8.);
(ii) Conformed Copy of Exhibit B to the Distributor's
Contract (9.);
(7) Not applicable;
(8) (i) ...............Conformed copy of new Custodian
Agreement of the
Registrant and Exhibits A-C thereto (8.);
+ All exhibits have been filed electronically.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed October 29, 1990. (File
Nos. 33-37525 and 811-6201)
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed November 30, 1990. (File Nos. 33-
37525 and 811-6201)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed October 6, 1994. (File Nos. 33-
37525 and 811-6201)
9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on Form N-1A filed January 27, 1995. (File Nos. 33-
37525 and 811-6201)
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No.11 filed June 21, 1996. (File Nos. 33-37525 and 811-
6201)
(9) Conformed copy of Transfer Agency and Service Agreement of
the Registrant (5);
(i) Conformed copy of new Portfolio Accounting and
Shareholder Recordkeeping Agreement of Registrant and
Schedule F thereto (8.);
(ii) Copy of Schedule G to new Portfolio Accounting and
Recordkeeping Agreement (8.);
(iii) Conformed Copy of Administrative Services
Agreement(8.);
(iv) Conformed copy of Amendment No. 1 to the Administrative
Services Agreemtnt(11);
(v) Conformed copy of Portfolio Accounting and Shareholder
Recordkeeping Agreement Amendment No. 1 to Schedule B;+
(vi) Conformed copy of Shareholder Services;+
(vii) ..............Conformed copy of Shareholder Services
Plan;+
(10) Conformed copy of Opinion and Consent of Counsel as to
legality of shares being registered (2.);
(11) (i) Conformed Copy of Consent of Independent Auditors;+
(ii) Conformed copy of Opinion and Consent of Special
Tax
Counsel for South Carolina Municipal Bond Fund (4.);
(12) Not Applicable;
(13) Conformed copy of Initial Capital Understanding (2.);
(14) Not Applicable;
(15) Not Applicable;
(16) (i) Schedule for Computation of Fund Performance Data,
Biltmore South Carolina Municipal Bond Fund (3.);
(ii) Schedule for Computation of Fund Performance Data,
Biltmore Georgia Municipal Bond Fund (10.);
(iii) Schedule for Computation of Fund Performance Data,
Biltmore North Carolina Municipal Bond Fund (10.);
(17) Copy of Financial Data Schedules; +
(18) Not Applicable;
(19) Conformed Copy of Power of Attorney;(11)
Item 25. Persons Controlled by or Under Common Control with Registrant
None
+ All exhibits have been filed electronically.
2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed November 30, 1990. (File Nos. 33-
37525 and 811-6201)
3. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 1 on Form N-1A filed May 28, 1991. (File Nos. 33-37525
and 811-6201)
4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed November 27, 1991. (File Nos. 33-
37525 and 811-6201)
5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 on Form N-1A filed November 23, 1992. (File Nos. 33-
37525 and 811-6201)
8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed October 6, 1994. (File Nos. 33-
37525 and 811-6201)
10. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 9 on Form N-1A filed June 30, 1995. (File Nos. 33-37525
and 811-6201)
11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No.11 filed June 21, 1996. (File Nos. 33-37525 and 811-
6201)
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of January 3, 1997
Shares of beneficial interest
no par value
Biltmore South Carolina Municipal Bond Fund
(Class A Shares) 2,221
(Class Y Shares) 238
Biltmore North Carolina Municipal Bond Fund
(Class A Shares) 590
(Class Y Shares) 232
Biltmore Georgia Municipal Bond Fund
(Class A Shares) 341
(Class Y Shares) 42
Item 27. Indemnification: (1.)
Item 28. Business and Other Connections of Investment Adviser:
(a)For a description of the other business of the investment
advisers, see the section entitled "The Biltmore Municipal
Funds Information - Management of The Biltmore Municipal
Funds" in Part A for each of the Funds.
The Officers of Wachovia Bank of South Carolina, N.A. are:
Will B. Spence, President and Chief Executive Officer;
Charles T. Cole, Jr., Executive Vice President; David Q.
Soutter, Executive Vice President; David H. Parker, Regional
Executive Officer; and G. Joseph Prendergast, Chairman. The
business address of each of the Officers of Wachovia Bank of
South Carolina, N.A. is 1401 Main Street, Columbia, South
Carolina, 29226.
The Officers of Wachovia Bank of North Carolina, N.A. are:
Chairman of the Board, L. M. Baker, Jr.; President and Chief
Executive Officer, J. Walter McDowell; Executive Vice
President, Robert S. McCoy, Jr.; Executive Vice President,
Robert L. Alphin; Executive Vice President, Robert G.
Brookby; Executive Vice President, Hugh M. Durden; Executive
Vice President, Mickey W. Dry; Executive Vice President,
Walter E. Leonard, Jr.; Executive Vice President, Richard B.
Roberts; and Executive Vice President, Robert G. Brookly. The
business address of each of the Officers of Wachovia Bank of
North Carolina, N.A. is 100 North Main Street, Winston-Salem,
N.C. 27101.
1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed October 29, 1990. (File
Nos. 33-37525 and 811-6201)
The Officers of Wachovia Bank of Georgia, N.A. are: Chairman,
G. Joseph Prendergast; President and Chief Executive
Officer, D. Gary Thompson; and Executive Vice Presidents:
George W.P. Atkins; Donald P. Carson; John M. Chalk; William
T. Deyo, Jr.; Thomas D. Hills; Eric L. Stone; and David C.
Swann. The business address of each of the Officers of
Wachovia Bank of Georgia, N.A. is 191 Peachtree Street, NE,
Atlanta, Georgia, 30303.
The Directors of Wachovia Bank of South Carolina, N.A. are:
L.M. Baker, Jr, President and Chief Executive Officer,
Wachovia Corporation; Charles J. Bradshaw, President,
Bradshaw Investments, Inc.; Frank W. Brumley, President, The
Brumley Company; W.T. Cassels, Jr, Chairman, Southeastern
Freight Lines Inc.; Thomas C. Coxe, III, Executive Vice
President, Sonoco Products Company; Frederick B. Dent, Jr.,
President, Mayfair Mills, Inc.; James G. Lindley, Chairman
Emeritus, South Carolina National Corporation; Joe A.
Padgett; G. Joseph Prendergast, Chairman, Wachovia Bank of
South Carolina, N.A.; W.M. Self, President and Chief
Executive Officer, Greenwood Mills, Inc.; Robert S. Small,
Jr., President, AVTEX Commercial Properties, Inc.; Will B.
Spence, President and Chief Executive Officer, Wachovia Bank
of South Carolina, N.A.; J. Guy Steenrod, President, Roche
Carolina Inc.; William G. Taylor, President, The Springs
Company; and Beatrice R. Thompson, Coordinator of
Psychological Services, Anderson County School District.
The Directors of Wachovia Bank of North Carolina, N.A. are:
L.M. Baker, Jr., Chairman of the Board, Wachovia Bank of NC,
N.A.; Thomas M. Belk, Jr., Senior Vice-President, Belk Stores
Services, Inc.; Howard C. Bissell, Chairman of the Board, The
Bissell Companies, Inc.; Felton J. Capel, Chairman and
President, Century Associates of North Carolina; William
Cavanaugh, III, President and Chief Operating Officer; Bert
Collins, President and Chief Executive Officer, N.C. Mutual
Life Insurance Company; Richard L. Daugherty, Retired Vice
President and Consultant, IBM Corporation; George W.
Henderson, President and Chief Executive Officer, Burlington
Industries, Inc.; Estell C. Lee, Chairman and President, The
Lee Company; J. Walter McDowell, III, President and Chief
Executive Officer, Wachovia Bank of NC, N.A.; G. Joseph
Prendergast, Executive Vice President, Wachovia Corporation;
Andrew J. Schindler, President and Chief Executive Officer,
R.J. Reynolds Tobacco Company; Robert L. Tillman, Chief
Operating Officer, Lowe's Companies, Inc.; John F. Ward,
Senior Vice President, Sara Lee Corporation; Anderson D.
Warlick, President and Chief Operating Officer, Parkdale
Mills, Inc.; David J. Whihard, II, The Daily Reflector; and
John C. Whitaker, Jr., Chairman of the Board and Chief
Executive Officer, Inmar Enterprises, Inc.
The Directors of Wachovia Bank of Georgia, N.A. are:
F. Duane Ackerman, Vice Chairman and Chief Operating
Officer,BellSouth Corporation; L.M. Baker, Jr., President
and Chief Executive Officer, Wachovia Corporation; Carl E.
Bolch, Jr., Chairman and Chief Executive Officer, Race Track
Petroleum, Inc.; James E. Bostic, Jr., Senior Vice President,
Environmental, Government Affairs and Communiciaton, Georgia-
Pacific Corporation; Dan T. Cathy, President, Chick-Fil-A
International; Michael C. Carlos, Chairman and Chief
Executive Officer, National Distributing Co., Inc.; G.
Stephen Felker, Chairman and Chief Executive Officer,
Avondale Mills, Inc.; Bryan D. Langton, Chairman and Chief
Executive Officer, Holiday Inn Worldwide; Bernard Marcus,
Chairman and Chief Executive Officer, The Home Depot, Inc.;
James F. McDonald, President and Chief Executive Officer,
Scientific-Atlanta, Inc.; Daniel W. McGlaughlin, President
and Chief Operating Officer, Equifax Inc.; G. Joseph
Prendergast, Chairman of the Board, Wachovia Bank of Georgia,
N.A.; D. Raymond Riddle, Chairman of the Board and Chief
Executive Officer, National Service Industries, Inc.; S.
Stephen Selig, III, Chairman of the Board and President,
Selig Enterprises, Inc.; Alana S. Shepherd, Secretary of the
Board, Shepherd Spinal Center; and D. Gary Thompson,
President and Chief Executive Officer, Wachovia Bank of
Georgia, N.A..
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor for shares of the
Registrant, also acts as principal underwriter for the following open-end
investment companies: 111 Corcoran Funds; Arrow Funds; Automated Government
Money Trust; BayFunds; Blanchard Funds; Blanchard Precious Metals Fund,
Inc.; Cash Trust Series II; Cash Trust Series, Inc.; DG Investor Series;
Edward D. Jones & Co. Daily Passport Cash Trust; Federated Adjustable Rate
U.S. Government Fund, Inc.; Federated American Leaders Fund, Inc.;
Federated ARMs Fund; Federated Equity Funds; Federated Equity Income Fund,
Inc.; Federated Fund for U.S. Government Securities, Inc.; Federated GNMA
Trust; Federated Government Income Securities, Inc.; Federated Government
Trust; Federated High Income Bond Fund, Inc.; Federated High Yield Trust;
Federated Income Securities Trust; Federated Income Trust; Federated Index
Trust; Federated Institutional Trust; Federated Insurance Series; Federated
Investment Portfolios; Federated Investment Trust; Federated Master Trust;
Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated
Stock and Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust;
Federated Total Return Series, Inc.; Federated U.S. Government Bond Fund;
Federated U.S. Government Securities Fund: 1-3 Years; Federated U.S.
Government Securities Fund: 2-5 Years; Federated U.S. Government Securities
Fund: 5-10 Years; Federated Utility Fund, Inc.; First Priority Funds; Fixed
Income Securities, Inc.; High Yield Cash Trust; Independence One Mutual
Funds; Intermediate Municipal Trust; International Series, Inc.; Investment
Series Funds, Inc.; Investment Series Trust; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Marshall Funds,
Inc.; Money Market Management, Inc.; Money Market Obligations Trust; Money
Market Trust; Municipal Securities Income Trust; Newpoint Funds; Peachtree
Funds; RIMCO Monument Funds; SouthTrust Vulcan Funds; Star Funds; Targeted
Duration Trust; Tax-Free Instruments Trust; The Monitor Funds; The Planters
Funds; The Starburst Funds; The Starburst Funds II; The Virtus Funds; Tower
Mutual Funds; Trust for Financial Institutions; Trust for Government Cash
Reserves; Trust for Short-Term U.S. Government Securities; Trust for U.S.
Treasury Obligations; Vision Group of Funds, Inc.; andWorld Investment
Series, Inc.
Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief Federated
Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, Asst.
Secretary, and Asst.
Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice
Federated Investors Tower President, Federated,
Pittsburgh, PA 15222-3779 Securities Corp.
Thomas R. Donahue Director, Assistant Secretary,
Federated Investors Tower Assistant Treasurer
Pittsburgh, PA 15222-3779 Federated Securities Corp
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust, Federated
Pittsburgh, PA 15222-3779 Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Byron F. Bowman Vice President, Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dale R. Browne Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securites Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Steven A. La Versa Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert D. Oehlschlager Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas A. Peters III Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard Suder Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jamie M. Teschner Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charlene H. Jennings Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Timothy Radcliff Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Leslie K. Platt Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Item 30. Location of Accounts and Records:
The Biltmore Municipal Funds Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors Tower
("Transfer Agent, Dividend Pittsburgh, PA 15222-
3779
Disbursing Agent and Portfolio
Recordkeeper")
Federated Administrative Services Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-
3779
Wachovia Bank of North Carolina, N.A. 301 North Main Street
("Investment Adviser" to North Winston-Salem, NC 21750
Carolina Municipal Bond Fund)
Wachovia Bank of Georgia, N.A. 191 Peachtree Street, N.E.
(`Investment Adviser'' to Atlanta, Georgia 30303
Georgia Municipal Bond Fund)
Wachovia Bank of South Carolina, N.A. 1426 Main Street
(`Investment Adviser'' to South Columbia, South Carolina 29226
Carolina Municipal Bond Fund)
Wachovia Bank of North Carolina, N.A. Wachovia Trust Operations
("Custodian") 301 North Main Street
Winston-Salem, NC 21750
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the l940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders on behalf of each of its portfolios.
Registrant hereby undertakes to furnish each person to whom a
prospectus is delivered with a copy of the Registrant's latest
annual report to shareholders upon request and without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, THE BILTMORE MUNICIPAL
FUNDS, certifies that it meets all of the requirements for effectiveness of
this Amendment to its Registration Statement pursuant to Rule 485(b) of the
Securities Act of 1933 and has duly caused this Amendment to its
Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, all in the City of Pittsburgh and Commonwealth
of Pennsylvania, on the 29th day of January, 1997.
THE BILTMORE MUNICIPAL FUNDS
BY: /s/Peter J. Germain
Peter J. Germain, Secretary
Attorney in Fact for John W. McGonigle
January 29, 1997
Pursuant to the requirements of the Securities Act of 1933, this
Amendment to its Registration Statement has been signed below by the
following person in the capacity and on the date indicated:
NAME TITLE DATE
By:/s/Peter J. Germain Attorney In Fact January 29, 1997
Peter J. Germain For the Persons
SECRETARY Listed Below
NAME TITLE
John W. McGonigle* President and Treasurer
(Chief Executive Officer
and Principal Financial and
Accounting Officer)
James A. Hanley* Trustee
Samuel E. Hudgins* Trustee
J. Berkley Ingram, Jr.* Trustee
D. Dean Kaylor* Trustee
Charles S. Way, Jr.* Trustee
* By Power of Attorney
Exhibit 11 under Form N-1A
Exhibit EX 23 under Item 601/ Reg. S-K
CONSENT OF ERNST & YOUNG LLP, INDEPENDENT AUDITORS
We consent to the references to our firm under the captions `Financial
Highlights'' and ``Independent Auditors'' in Post-Effective Amendment
Number 13 to the Registration Statement (Form N-1A No. 33-37525) and the
related Prospectuses and to the incorporation therein of our reports dated
January 17, 1997 with respect to the financial statements included in the
Annual Reports of The Biltmore Municipal Funds (Biltmore Georgia Municipal
Bond Fund, North Carolina Municipal Bond Fund and South Carolina Municipal
Bond Fund).
/s/ Ernst & Young LLP
Pittsburgh, Pennsylvania
January 27, 1997
Exhibit 4(i) under Form N-1A
Exhibit 4(i) under Item 601/Reg. S-K
THE BILTMORE MUNICIPAL FUNDS
BILTMORE SOUTH CAROLINA MUNICIPAL BOND FUND
(CLASS Y SHARES)
Number Shares
Account No. Alpha Code See Reverse Side For
Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP 090313883
Fully Paid and Non-Assessable Shares of Beneficial Interest of BILTMORE
SOUTH CAROLINA MUNICIPAL BOND FUND CLASS Y SHARES Portfolio of THE BILTMORE
MUNICIPAL FUNDS hereafter called the Trust, transferable on the books of
the Trust by the owner in person or by duly authorized attorney upon
surrender of this certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its seal.
Dated: THE BILTMORE MUNICIPAL FUNDS
Corporate Seal
1990
Massachusetts
/s/John McGonigle /s/ Peter J. Germain
President & Treasurer Secretary
Countersigned:
Federated Shareholder Services
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in
full according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN
ACT-...Custodian...
TEN ENT - as tenants by the entireties (Cust)
(Minors)
JT TEN - as joint tenants with right of under
Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)
Additional abbreviations may also be used though not in the above
list.
For value received hereby sell, assign, and transfer unto
----------
Please insert social security or other
identifying number of assignee
===========================================================================
(Please print or typewrite name and address, including zip code, of
assignee)
==
- --
shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
===========================================================================
to transfer the said shares on the books of the within named Trust with
full power of substitution in the premises.
Dated
----------------------
NOTICE:
------------------------------
The signature to this assignment must
correspond with the name as written upon the
face of the certificate in every particular,
without alteration or enlargement or any
change whatever.
All persons dealing with THE BILTMORE MUNICIPAL FUNDS, a Massachusetts
business trust, must look solely to the Trust property for the enforcement
of any claim against the Trust, as the Trustees, officers, agents or
shareholders of the Trust assume no personal liability whatsoever for
obligations entered into on behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by a black one-half inch border.
B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit 4(ii) under Form N-1A
Exhibit 4(ii) under Item 601/Reg. S-K
THE BILTMORE MUNICIPAL FUNDS
BILTMORE NORTH CAROLINA MUNICIPAL BOND FUND
(CLASS Y SHARES)
Number Shares
Account No. Alpha Code See Reverse Side For
Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP 090297701
Fully Paid and Non-Assessable Shares of Beneficial Interest of BILTMORE
NORTH CAROLINA MUNICIPAL BOND FUND CLASS Y SHARES Portfolio of THE BILTMORE
MUNICIPAL FUNDS hereafter called the Trust, transferable on the books of
the Trust by the owner in person or by duly authorized attorney upon
surrender of this certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its seal.
Dated: THE BILTMORE MUNICIPAL FUNDS
Corporate Seal
1990
Massachusetts
/s/John McGonigle /s/ Peter J. Germain
President & Treasurer Secretary
Countersigned:
Federated Shareholder Services
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in
full according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN
ACT-...Custodian...
TEN ENT - as tenants by the entireties (Cust)
(Minors)
JT TEN - as joint tenants with right of under
Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)
Additional abbreviations may also be used though not in the above
list.
For value received hereby sell, assign, and transfer unto
----------
Please insert social security or other
identifying number of assignee
===========================================================================
(Please print or typewrite name and address, including zip code, of
assignee)
==
==
shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
===========================================================================
to transfer the said shares on the books of the within named Trust with
full power of substitution in the premises.
Dated
----------------------
NOTICE:
------------------------------
The signature to this assignment must
correspond with the name as written upon the
face of the certificate in every particular,
without alteration or enlargement or any
change whatever.
All persons dealing with THE BILTMORE FUNDS, a Massachusetts business
trust, must look solely to the Trust property for the enforcement of any
claim against the Trust, as the Trustees, officers, agents or shareholders
of the Trust assume no personal liability whatsoever for obligations
entered into on behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by a black one-half inch border.
B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit 4(iii) under Form N-1A
Exhibit 4(iii) under Item 601/Reg. S-K
THE BILTMORE MUNICIPAL FUNDS
BILTMORE GEORGIA MUNICIPAL BOND FUND
(CLASS Y SHARES)
Number Shares
Account No. Alpha Code See Reverse Side For
Certain Definitions
THIS IS TO CERTIFY THAT is the owner of
CUSIP 090297503
Fully Paid and Non-Assessable Shares of Beneficial Interest of BILTMORE
GEEORGIA MUNICIPAL BOND FUND CLASS Y SHARES Portfolio of THE BILTMORE
MUNICIPAL FUNDS hereafter called the Trust, transferable on the books of
the Trust by the owner in person or by duly authorized attorney upon
surrender of this certificate properly endorsed.
The shares represented hereby are issued and shall be held subject to
the provisions of the Declaration of Trust and By-Laws of the Trust and all
amendments thereto, all of which the holder by acceptance hereof assents.
This Certificate is not valid unless countersigned by the Transfer
Agent.
IN WITNESS WHEREOF, the Trust has caused this Certificate to be signed
in its name by its proper officers and to be sealed with its seal.
Dated: THE BILTMORE MUNICIPAL FUNDS
Corporate Seal
1990
Massachusetts
/s/John McGonigle /s/ Peter J. Germain
President & Treasurer Secretary
Countersigned:
Federated Shareholder Services
(Pittsburgh)
Transfer Agent
By:
Authorized Signature
The following abbreviations, when used in the inscription on the face of
this Certificate, shall be construed as though they were written out in
full according to applicable laws or regulations;
TEN COM - as tenants in common UNIF GIFT MIN
ACT-...Custodian...
TEN ENT - as tenants by the entireties (Cust)
(Minors)
JT TEN - as joint tenants with right of under
Uniform Gifts to Minors
survivorship and not as tenants Act.............................
in common (State)
Additional abbreviations may also be used though not in the above
list.
For value received hereby sell, assign, and transfer unto
----------
Please insert social security or other
identifying number of assignee
===========================================================================
(Please print or typewrite name and address, including zip code, of
assignee)
==
==
shares
of beneficial interest represented by the within Certificate, and do hereby
irrevocably constitute and appoint
===========================================================================
to transfer the said shares on the books of the within named Trust with
full power of substitution in the premises.
Dated
----------------------
NOTICE:
------------------------------
The signature to this assignment must
correspond with the name as written upon the
face of the certificate in every particular,
without alteration or enlargement or any
change whatever.
All persons dealing with THE BILTMORE MUNICIPAL FUNDS, a Massachusetts
business trust, must look solely to the Trust property for the enforcement
of any claim against the Trust, as the Trustees, officers, agents or
shareholders of the Trust assume no personal liability whatsoever for
obligations entered into on behalf of the Trust.
THIS SPACE MUST NOT BE COVERED IN ANY WAY
DOCUMENT DESCRIPTION - SPECIMEN STOCK CERTIFICATE
Page One
A. The Certificate is outlined by a black one-half inch border.
B. The number in the upper left-hand corner and the number of shares in
the upper right-hand corner are outlined by octagonal boxes.
C. The cusip number in the middle right-hand area of the page is boxed.
D. The Massachusetts corporate seal appears in the bottom middle of the
page.
Page Two
The social security or other identifying number of the assignee
appears in a box in the top-third upper-left area of the page.
Exhibit 9(v) under Form N-1A
Exhibit 10(v) under Item 601/Reg. S-K
AMENDMENT NO. 1
dated September 12, 1996
to
Schedule B
Portfolio Accounting
and
Shareholder Recordkeeping Agreement
between
The Biltmore Municipal Funds
and
FEDERATED SERVICES COMPANY
Compensation for Portfolio Accounting
Annual Fees per Portfolio
First $100 Million 3.0 Basis Points
$100 Million - $300 Million 2.0 Basis Points
$300 Million - $500 Million 1.0 Basis Points
Over $500 Million 0.5 Basis Points
Fund Minimum $39,000
Each Additional Class of Shares $12,000
(Plus pricing charges and other out-of-pocket expenses)
Fees will be charged according to the above, on a calendar month basis.
For those Portfolios with multiple investment managers, there is no
additional charge to maintain separate portfolio records by manager. There
is no additional charge for determining a fully accrued, trade debt
adjusted market value for each manager's portion of the fund's portfolio
and for reporting portfolio activity by manager.
For fluctuating price funds, the Trust must establish a contract directly
with one or more pricing sources to supply the daily prices which Services
will receive. The above fees do not include any charges for the Portfolio
to obtain such daily prices.
The monthly fee will be $1,000 per Portfolio with no asset charge for those
months where Federated is the only shareholder, due to its seeding of the
Portfolio. With regard to this, the charge to the Portfolio for the entire
month will be determined, without proration, based on whether Federated is
the sole shareholder on the last day the Portfolio is open for business in
that month.
ATTEST: THE BILTMORE MUNICIPAL FUNDS
/s/ Peter J. Germain /s/ Charles L. Davis, Jr.
Secretary Vice President
ATTEST: FEDERATED ADMINISTRATIVE SERVICES
(Assignee of Federated Services
Company)
/s/ S. Elliott Cohan /s/ Douglas L. Hein
Assistant Secretary Senior Vice President
Exhibit 9(iv) under form N-1A
Exhibit 10(iv) under Item 601 /Reg.S-K
SHAREHOLDER SERVICES AGREEMENT
This Agreement is made between the Financial Institution executing this
Agreement ("Provider") and Federated Administrative Services ("FAS") for
The Biltmore Funds and The Biltmore Municipal Funds (the "Trusts"), on
behalf of the portfolios listed in Exhibit A hereto (the "Funds"), who have
approved this form of Agreement. In consideration of the mutual covenants
hereinafter contained, it is hereby agreed by and between the parties
hereto as follows:
1. FAS hereby appoints Provider to render or cause to be rendered
personal services to shareholders of the Funds and/or the maintenance of
accounts of shareholders of the Funds ("Services"). Provider agrees to
provide Services which, in its best judgment, are necessary or desirable
for its customers who are investors in the Funds. Provider further agrees
to provide FAS, upon request, a written description of the Services which
Provider is providing hereunder.
2. The Services to be provided under Paragraph 1 may include, but are
not limited to, the following:
(a) communicating account openings through computer terminals
located on the Provider's premises ("computer terminals"), through a
toll-free telephone number or otherwise;
(b) communicating account closings via the computer terminals,
through a toll-free telephone number or otherwise;
(c) entering purchase transactions through the computer terminals,
through a toll-free telephone number or otherwise;
(d) entering redemption transactions through the computer
terminals, through a toll-free telephone number or otherwise;
(e) electronically transferring and receiving funds for Fund Share
purchases and redemptions, and confirming and reconciling all such
transactions;
(f) reviewing the activity in Fund accounts;
(g) providing training and supervision of its personnel; and
(h) responding to customers' and potential customers' questions
about the Funds.
The Services listed above are illustrative. The Provider is not required
to perform each Service and may at any time perform either more or fewer
Services than described above.
3. During the term of this Agreement, the Funds will pay the Provider
fees as set forth in a written schedule delivered to the Provider pursuant
to this Agreement. The fee schedule for Provider may be changed by FAS
sending a new fee schedule to Provider pursuant to Paragraph 10 of this
Agreement. For the payment period in which this Agreement becomes
effective or terminates, there shall be an appropriate proration of the fee
on the basis of the number of days that this Agreement is in effect during
the quarter.
4. The Provider understands that the Department of Labor views ERISA
as prohibiting fiduciaries of discretionary ERISA assets from receiving
administrative service fees or other compensation from funds in which the
fiduciary's discretionary ERISA assets are invested. To date, the
Department of Labor has not issued any exemptive order or advisory opinion
that would exempt fiduciaries from this interpretation. Without specific
authorization from the Department of Labor, fiduciaries should carefully
avoid investing discretionary assets in any fund pursuant to an arrangement
where the fiduciary is to be compensated by the fund for such investment.
Receipt of such compensation could violate ERISA provisions against
fiduciary self-dealing and conflict of interest and could subject the
fiduciary to substantial penalties.
5. The Provider agrees not to solicit or cause to be solicited
directly, or indirectly at any time in the future, any proxies from the
shareholders of a Fund in opposition to proxies solicited by management of
the Trusts, unless a court of competent jurisdiction shall have determined
that the conduct of a majority of the Board of Trustees of the Trusts
constitutes willful misfeasance, bad faith, gross negligence or reckless
disregard of their duties. This Paragraph 5 will survive the term of this
Agreement.
6. This Agreement shall continue in effect for one year from the date
of its execution, and thereafter for successive periods of one year if the
form of this Agreement is approved at least annually by the Board of the
Trust, including a majority of the members of the Board of the Trusts who
are not interested persons of the Funds and have no direct or indirect
financial interest in the operation of this Agreement or in any related
documents to this Agreement ("Disinterested Board Members") cast in person
at a meeting called for that purpose.
7. Notwithstanding Paragraph 6, this Agreement may be terminated as
follows:
(a) at any time, without the payment of any penalty, by the vote
of a majority of the Disinterested Board Members of the Trusts or by
a vote of a majority of the outstanding voting securities of a Fund
as defined in the Investment Company Act of 1940 on not more than
sixty (60) days' written notice to the parties to this Agreement;
(b) automatically in the event of the Agreement's assignment as
defined in the Investment Company Act of 1940; and
(c) by either party to the Agreement without cause by giving the
other party at least sixty (60) days' written notice of its
intention to terminate.
8. The Provider agrees to obtain any taxpayer identification number
certification from its customers required under Section 3406 of the
Internal Revenue Code, and any applicable Treasury regulations, and to
provide the Funds or their designee with timely written notice of any
failure to obtain such taxpayer identification number certification in
order to enable the implementation of any required backup withholding.
9. This Agreement supersedes any prior service agreements between the
parties for the Funds.
10. This Agreement may be amended by FAS from time to time by the
following procedure. FAS will mail a copy of the amendment to the
Provider's address, as shown below. If the Provider does not object to the
amendment within thirty (30) days after its receipt, the amendment will
become part of this Agreement. The Provider's objection must be in writing
and be received by FAS within such thirty days.
11. The Provider acknowledges and agrees that FAS has entered into
this Agreement solely in the capacity of agent for the Funds. The Provider
agrees not to claim that FAS is liable for any responsibilities or amounts
due by the Funds hereunder.
12. This Agreement shall be construed in accordance with the laws of
the Commonwealth of Pennsylvania.
PROVIDER
Address
City, State, Zip Code
Date
Authorized Signature
Title
Print Name of Authorized Signature
FEDERATED ADMINISTRATIVE SERVICES
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By:/s/ Charles L. Davis Jr.
Vice President
EXHIBIT A
TO THE
SHAREHOLDER SERVICES AGREEMENT
CLASS A SHARES
CLASS B SHARES
Biltmore Balanced Fund
Biltmore Emerging Markets Fund
Biltmore Equity Fund
Biltmore Equity Index Fund
Biltmore Fixed Income Fund
Biltmore Georgia Municipal Bond Fund
Biltmore North Carolina Municipal Bond Fund
Biltmore Quantitative Equity Fund
Biltmore Short-Term Fixed Income Fund
Biltmore South Carolina Municipal Bond Fund
Biltmore Special Values Fund
Shareholder Service Fees
1. During the term of this Agreement, the Funds will pay Provider a
quarterly fee. This fee will be computed at the annual rate of .25 of 1%
of the average net asset value of shares of the Funds held during the
quarter in accounts for which the Provider provides Services under this
Agreement, so long as the average net asset value of Shares in the Funds
during the quarter equals or exceeds such minimum amount as the Funds shall
from time to time determine and communicate in writing to the Provider.
2. For the quarterly period in which the Shareholder Services
Agreement becomes effective or terminates, there shall be an appropriate
proration of any fee payable on the basis of the number of days that this
is in effect during the quarter.
Exhibit 9(vii) under form N-1A
Exhibit 10(vii) under Item 601 /Reg. S-K
THE BILTMORE FUNDS
THE BILTMORE MUNICIPAL FUNDS
SHAREHOLDER SERVICES PLAN
This Shareholder Services Plan ("Plan") is adopted as of June 6, 1996
by the Board of Trustees of The Biltmore Funds and The Biltmore Municipal
Funds (the "Trusts"), both Massachusetts business Trusts and those
portfolios (the "Funds") of the Trusts listed on Exhibit A hereto.
1. This Plan is adopted to allow the Funds to make payments as
contemplated herein to obtain certain personal services for shareholders
and/or the maintenance of shareholder accounts ("Services").
2. This Plan is designed to compensate broker/dealers and other
participating financial institutions and other persons ("Providers") for
providing services to the Funds and their shareholders. The Plan will be
administered by Federated Administrative Services ("FAS"). In compensation
for the Services provided pursuant to this Plan, Providers will be paid a
quarterly fee computed at the annual rate not to exceed 0.25 of 1% of the
average aggregate net asset value of the shares of the respective Funds
held during the quarter.
3. Any payments made by the Funds to any Provider pursuant to this
Plan will be made pursuant to the "Shareholder Services Agreement" entered
into by FAS on behalf of the respective Fund and the Provider.
4. The Trusts has the right (i) to select, in its sole discretion,
the Providers to participate in the Plan and (ii) to terminate without
cause and in its sole discretion any Shareholder Services Agreement.
5. Quarterly in each year that this Plan remains in effect, FAS shall
prepare and furnish to the Board of Trustees of the Trusts, and the Board
of Trustees shall review, a written report of the amounts expended under
the Plan.
6. This Plan shall become effective (i) after approval by majority
votes of: (a) the Trusts' Board of Trustees; and (b) the Disinterested
Trustees of the Trusts, cast in person at a meeting called for the purpose
of voting on the Plan; and (ii) upon execution of an exhibit adopting this
Plan.
7. This Plan shall remain in effect for the period of one year from
the date set forth above and may be continued thereafter if this Plan is
approved at least annually by a majority of the Trusts' Board of Trustees
and a majority of the Disinterested Trustees, cast in person at a meeting
called for the purpose of voting on such Plan.
8. All material amendments to this Plan must be approved by a vote of
the Board of Trustees of the Trusts and of the Disinterested Trustees, cast
in person at a meeting called for the purpose of voting on it.
9. This Plan may be terminated at any time by: (a) a majority vote of
the Disinterested Trustees; or (b) a vote of a majority of the outstanding
voting securities of the Funds as defined in Section 2(a)(42) of the
Investment Company Act of 1940, as amended.
10. While this Plan shall be in effect, the selection and nomination
of Disinterested Trustees of the Trusts shall be committed to the
discretion of the Disinterested Trustees then in office.
11. All agreements with any person relating to the implementation of
this Plan shall be in writing and any agreement related to this Plan shall
be subject to termination, without penalty, pursuant to the provisions of
Paragraph 9 herein.
12. This Plan shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
Witness the due execution hereof this 6th day of June, 1996.
THE BILTMORE FUNDS
THE BILTMORE MUNICIPAL FUNDS
By: /s/ John W. McGonigle
President
EXHIBIT A
TO THE
SHAREHOLDER SERVICES PLAN
CLASS A SHARES
CLASS B SHARES
Biltmore Balanced Fund
Biltmore Emerging Markets Fund
Biltmore Equity Fund
Biltmore Equity Index Fund
Biltmore Fixed Income Fund
Biltmore Georgia Municipal Bond Fund
Biltmore North Carolina Municipal Bond Fund
Biltmore Quantitative Equity Fund
Biltmore Short-Term Fixed Income Fund
Biltmore South Carolina Municipal Bond Fund
Biltmore Special Values Fund
This Plan is adopted by The Biltmore Funds and The Biltmore Municipal
Funds with respect to the Funds of the Trusts set forth above.
In compensation for the services provided pursuant to this Plan,
Providers will be paid a monthly fee computed at the annual rate not to
exceed 0.25 of 1% of the average aggregate net asset value of the shares of
each of the Funds listed above and held during the month.
Witness the due execution hereof this 6th day of June, 1996.
THE BILTMORE FUNDS
THE BILTMORE
MUNICIPAL FUNDS
By:/s/ John W. McGonigle
President
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<NUMBER> 031
<NAME> The Biltmore Municipal Funds
Biltmore Georgia Municipal Bond Fund
Class A
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> Nov-30-1996
<INVESTMENTS-AT-COST> 14,086,847
<INVESTMENTS-AT-VALUE> 14,638,229
<RECEIVABLES> 252,991
<ASSETS-OTHER> 14,366
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14,905,586
<PAYABLE-FOR-SECURITIES> 494,358
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 77,706
<TOTAL-LIABILITIES> 572,064
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,750,931
<SHARES-COMMON-STOCK> 684,798
<SHARES-COMMON-PRIOR> 932,280
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<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 31,209
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 551,382
<NET-ASSETS> 7,530,797
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 595,433
<OTHER-INCOME> 0
<EXPENSES-NET> 100,403
<NET-INVESTMENT-INCOME> 495,030
<REALIZED-GAINS-CURRENT> 31,331
<APPREC-INCREASE-CURRENT> 79,327
<NET-CHANGE-FROM-OPS> 605,688
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 484,412
<DISTRIBUTIONS-OF-GAINS> 11,785
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 560,134
<NUMBER-OF-SHARES-REDEEMED> 835,094
<SHARES-REINVESTED> 27,478
<NET-CHANGE-IN-ASSETS> 4,113,548
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 11,663
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 84,212
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 281,373
<AVERAGE-NET-ASSETS> 11,327,713
<PER-SHARE-NAV-BEGIN> 10.960
<PER-SHARE-NII> 0.470
<PER-SHARE-GAIN-APPREC> 0.050
<PER-SHARE-DIVIDEND> 0.470
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<PER-SHARE-NAV-END> 11.000
<EXPENSE-RATIO> 0.89
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<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
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<ARTICLE> 6
<SERIES>
<NUMBER> 032
<NAME> The Biltmore Municipal Funds
Biltmore Georgia Municipal Bond Fund
Class Y
<PERIOD-TYPE> 12-Mos
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> Nov-30-1996
<INVESTMENTS-AT-COST> 14,086,847
<INVESTMENTS-AT-VALUE> 14,638,229
<RECEIVABLES> 252,991
<ASSETS-OTHER> 14,366
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14,905,586
<PAYABLE-FOR-SECURITIES> 494,358
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 77,706
<TOTAL-LIABILITIES> 572,064
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 13,750,931
<SHARES-COMMON-STOCK> 618,581
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 31,209
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 551,382
<NET-ASSETS> 6,802,725
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 595,433
<OTHER-INCOME> 0
<EXPENSES-NET> 100,403
<NET-INVESTMENT-INCOME> 495,030
<REALIZED-GAINS-CURRENT> 31,331
<APPREC-INCREASE-CURRENT> 79,327
<NET-CHANGE-FROM-OPS> 605,688
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 10,618
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 618,468
<NUMBER-OF-SHARES-REDEEMED> 0
<SHARES-REINVESTED> 113
<NET-CHANGE-IN-ASSETS> 4,113,548
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 11,663
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 84,212
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 281,373
<AVERAGE-NET-ASSETS> 11,327,713
<PER-SHARE-NAV-BEGIN> 10.710
<PER-SHARE-NII> 0.170
<PER-SHARE-GAIN-APPREC> 0.290
<PER-SHARE-DIVIDEND> 0.170
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.000
<EXPENSE-RATIO> 0.89
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 021
<NAME> The Biltmore Municipal Funds
Biltmore North Carolina Municipal Bond Fund
Class A Shares
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> Nov-30-1996
<INVESTMENTS-AT-COST> 40,014,550
<INVESTMENTS-AT-VALUE> 41,408,652
<RECEIVABLES> 701,261
<ASSETS-OTHER> 18,824
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42,128,737
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,513
<TOTAL-LIABILITIES> 93,513
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40,554,517
<SHARES-COMMON-STOCK> 1,247,114
<SHARES-COMMON-PRIOR> 1,698,863
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 86,605
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,394,102
<NET-ASSETS> 13,751,919
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,422,721
<OTHER-INCOME> 0
<EXPENSES-NET> 234,359
<NET-INVESTMENT-INCOME> 1,188,362
<REALIZED-GAINS-CURRENT> 86,649
<APPREC-INCREASE-CURRENT> 607,688
<NET-CHANGE-FROM-OPS> 1,882,699
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 1,149,617
<DISTRIBUTIONS-OF-GAINS> 91,423
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,169,547
<NUMBER-OF-SHARES-REDEEMED> 2,674,655
<SHARES-REINVESTED> 53,359
<NET-CHANGE-IN-ASSETS> 23,356,440
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 91,379
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 210,288
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 450,418
<AVERAGE-NET-ASSETS> 28,357,770
<PER-SHARE-NAV-BEGIN> 10.990
<PER-SHARE-NII> 0.450
<PER-SHARE-GAIN-APPREC> 0.090
<PER-SHARE-DIVIDEND> 0.450
<PER-SHARE-DISTRIBUTIONS> 0.050
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.030
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 022
<NAME> The Biltmore Municipal Funds
Biltmore North Carolina Municipal Bond Fund
Class Y Shares
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> Nov-30-1996
<INVESTMENTS-AT-COST> 40,014,550
<INVESTMENTS-AT-VALUE> 41,408,652
<RECEIVABLES> 701,261
<ASSETS-OTHER> 18,824
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 42,128,737
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 93,513
<TOTAL-LIABILITIES> 93,513
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 40,554,517
<SHARES-COMMON-STOCK> 2,564,829
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 86,605
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,394,102
<NET-ASSETS> 28,283,305
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,422,721
<OTHER-INCOME> 0
<EXPENSES-NET> 234,359
<NET-INVESTMENT-INCOME> 1,188,362
<REALIZED-GAINS-CURRENT> 86,649
<APPREC-INCREASE-CURRENT> 607,688
<NET-CHANGE-FROM-OPS> 1,882,699
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 38,745
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 2,567,467
<NUMBER-OF-SHARES-REDEEMED> 2,814
<SHARES-REINVESTED> 176
<NET-CHANGE-IN-ASSETS> 23,356,440
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 91,379
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 210,288
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 450,418
<AVERAGE-NET-ASSETS> 28,357,770
<PER-SHARE-NAV-BEGIN> 10.710
<PER-SHARE-NII> 0.160
<PER-SHARE-GAIN-APPREC> 0.320
<PER-SHARE-DIVIDEND> 0.160
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.030
<EXPENSE-RATIO> 0.84
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000
</TABLE>
<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 011
<NAME> The Biltmore Municipal Funds
Biltmore South Carolina Municipal Bond Fund
Class A Shares
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> Nov-30-1996
<PERIOD-END> Nov-30-1996
<INVESTMENTS-AT-COST> 96,521,234
<INVESTMENTS-AT-VALUE> 101,163,320
<RECEIVABLES> 2,139,363
<ASSETS-OTHER> 7,086
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 103,309,769
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 818,483
<TOTAL-LIABILITIES> 818,483
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 97,445,759
<SHARES-COMMON-STOCK> 5,973,985
<SHARES-COMMON-PRIOR> 8,481,452
<ACCUMULATED-NII-CURRENT> 0
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<TABLE> <S> <C>
<S> <C>
<ARTICLE> 6
<SERIES>
<NUMBER> 012
<NAME> The Biltmore Municipal Funds
Biltmore South Carolina Municipal Bond Fund
Class Y Shares
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