BILTMORE MONEY MARKET FUND
(A Portfolio of The Biltmore Funds)
Institutional Shares
--------------------------------------------------------------------------------
SUPPLEMENT TO THE PROSPECTUS DATED JANUARY 31, 1994
1. Please delete the "Summary of Fund Expenses" on page 1 of the
prospectus and replace it with the following:
"SUMMARY OF FUND EXPENSES
<TABLE>
<S> <C>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price)...................................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)...................................................... None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable).................................... None
Redemption Fees (as a percentage of amount
redeemed, if applicable)................................................................. None
Exchange Fee............................................................................... None
ANNUAL INSTITUTIONAL SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1).......................................................... 0.15%
12b-1 Fees................................................................................. None
Other Expenses (after waiver & reimbursement) (2).......................................... 0.24%
Total Institutional Shares Operating Expenses
(after waiver & reimbursement) (3).................................................. 0.39%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary
waiver at any time at its sole discretion. The maximum management fee is
0.50%.
(2) Other expenses are estimated to be 0.32% absent the voluntary waiver and
the reimbursement by the administrator. The administrator may terminate the
voluntary waiver at any time at its sole discretion.
(3) The Annual Institutional Shares Operating Expenses were 0.25% for the
fiscal year ended November 30, 1993. The Annual Institutional Shares
Operating Expenses in the table above reflect a reduction in the voluntary
waivers of the administrative fee and the custodian fee, and a reduction in
the reimbursement by the administrator for the fiscal year ending November
30, 1994. The Annual Institutional Shares Operating Expenses are expected
to be 0.82% absent the voluntary waivers and reimbursement described above
in notes 1 and 2.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING
THE VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INSTITUTIONAL
SHARES OF THE FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE
COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE "THE
BILTMORE FUNDS INFORMATION" AND "INVESTING IN INSTITUTIONAL SHARES."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment assuming (1) 5% annual
return and (2) redemption at the end of
each time period. The Fund charges no
redemption fees for Institutional
Shares................................... $4 $13 $22 $49
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example relates
only to Institutional Shares of the Fund. The Fund also offers
another class of shares called Investment Shares. Investment Shares
are subject to certain of the same expenses with the addition of a
maximum 12b-1 fee of 0.40% of the Investment Shares' average net
assets. See 'Other Classes of Shares'."
2. In the section entitled "General Information" on page 3 of the
prospectus, please delete the first sentence of the second paragraph
and replace it with the following:
"Institutional Shares are offered only for purchase through the bank
subsidiaries of Wachovia Corporation: Wachovia Bank of North
Carolina, N.A., Wachovia Bank of Georgia, N.A., Wachovia Bank of
South Carolina, N.A. (formerly known as The South Carolina National
Bank), and their affiliates (collectively, the "Wachovia Banks")."
3. In the section entitled "Adviser's Background" which begins on page
8 of the prospectus, please delete the third sentence of the final
paragraph of page 9 and replace it with the following:
"Wachovia Bank of North Carolina, N.A., together with its
affiliates, Wachovia Bank of Georgia, N.A. and Wachovia Bank of
South Carolina, N.A. (formerly known as The South Carolina National
Bank), have been managing trust assets for over 100 years with
approximately $18 billion in managed assets as of September 30,
1993."
4. Please delete the section entitled "Administrative Services" which
appears on page 9 of the prospectus and replace it with the
following:
"ADMINISTRATIVE SERVICES. Federated Administrative Services,
Pittsburgh, Pennsylvania, a subsidiary of Federated Investors,
provides the Fund with the administrative personnel and services
necessary to operate the Fund. Such services include the
preparation of filings with the Securities and Exchange Commission
and other regulatory authorities, assistance with respect to
meetings of the Trustees, shareholder servicing and accounting
services, and other administrative services. Federated
Administrative Services provides these at an annual rate, computed
and payable daily, as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET
MAXIMUM ASSETS OF THE BILTMORE FUNDS
ADMINISTRATIVE FEE AND THE BILTMORE MUNICIPAL FUNDS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall aggregate at
least $75,000 for the Fund and for each of the portfolios of The Biltmore
Funds. Federated Administrative Services may choose voluntarily to waive or
reimburse a portion of its fee at any time."
June 1, 1994
[LOGO] FEDERATED SECURITIES CORP.
-----------------------------------------------------------------------
Distributor
G00234-01-IS (5/94)
BILTMORE TAX-FREE MONEY MARKET FUND
(A Portfolio of The Biltmore Funds)
Institutional Shares
--------------------------------------------------------------------------------
SUPPLEMENT TO PROSPECTUS DATED JANUARY 31, 1994
1. Please delete the "Summary of Fund Expenses" on page 1 of the
prospectus and replace it with the following:
"SUMMARY OF FUND EXPENSES
<TABLE>
<CAPTION>
INSTITUTIONAL SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C>
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price).......................................................... None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price).......................................................... None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable)........................................ None
Redemption Fees (as a percentage
of amount redeemed, if applicable)........................................................... None
Exchange Fee................................................................................. None
<CAPTION>
ANNUAL INSTITUTIONAL SHARES OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C>
Management Fee (after waiver) (1)............................................................ 0.15%
12b-1 Fees................................................................................... None
Other Expenses (after waiver & reimbursement) (2)............................................ 0.26%
Total Institutional Shares Operating Expenses
(after waiver & reimbursement) (3)........................................................... 0.41%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver by
the investment adviser. The adviser can terminate the voluntary waiver at
any time at its sole discretion. The maximum management fee is 0.50%.
(2) Other Expenses are estimated to be 0.33% absent the voluntary waiver and
the reimbursement by the administrator. The administrator may terminate
the voluntary waiver at any time at its sole discretion.
(3) The Annual Institutional Shares Operating Expenses were 0.29% for the
fiscal year ended November 30, 1993. The Annual Institutional Shares
Operating Expenses in the table above reflect a reduction in the voluntary
waivers of the administrative fee and the custodian fee, and a reduction
in the reimbursement by the administrator, for the fiscal year ending
November 30, 1994. The Annual Institutional Shares Operating Expenses are
expected to be 0.83% absent the voluntary waivers and reimbursement
described above in notes 1 and 2.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING
THE VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE
INSTITUTIONAL SHARES WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR
MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE
"THE BILTMORE FUNDS INFORMATION" AND "INVESTING IN INSTITUTIONAL
SHARES."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a
$1,000 investment, assuming (1) 5% annual
return and (2) redemption at the end of
each time period. The Fund charges no
redemption fees for Institutional
Shares................................... $4 $13 $23 $52
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST
OR FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE
SHOWN.
The information set forth in the foregoing table and example relates
only to Institutional Shares of the Fund. The Fund also offers
another class of shares called Investment Shares. Investment Shares
are subject to certain of the same expenses with the addition of a
maximum 12b-1 of 0.40% of the Investment Shares' average net assets.
See 'Other Classes of Shares'."
2. In the section entitled "General Information" on page 3 of the
prospectus, please delete the first sentence of the second paragraph
and replace it with the following:
"Institutional Shares are offered only for purchase through the bank
subsidiaries of Wachovia Corporation: Wachovia Bank of North
Carolina, N.A., Wachovia Bank of Georgia, N.A., Wachovia Bank of
South Carolina, N.A. (formerly known as The South Carolina National
Bank), and their affiliates (collectively, the "Wachovia Banks")."
3. In the section entitled "Adviser's Background" on page 8 of the
prospectus, please delete the third sentence of the final paragraph
and replace it with the following:
"Wachovia Bank of North Carolina, N.A., together with its
affiliates, Wachovia Bank of Georgia, N.A. and Wachovia Bank of
South Carolina, N.A. (formerly known as The South Carolina National
Bank), have been managing trust assets for over 100 years with
approximately $18 billion in managed assets as of September 30,
1993."
4. Please delete the section entitled "Administrative Services" which
appears on page 9 of the prospectus and replace it with the
following:
"ADMINISTRATIVE SERVICES. Federated Administrative Services,
Pittsburgh, Pennsylvania, a subsidiary of Federated Investors,
provides the Fund with the administrative personnel and services
necessary to operate the Fund. Such services include the preparation
of filings with the Securities and Exchange Commission and other
regulatory authorities, assistance with respect to meetings of the
Trustees, shareholder servicing and
accounting services, and other administrative services. Federated
Administrative Services provides these at an annual rate, computed
and payable daily, as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY
MAXIMUM NET ASSETS OF THE BILTMORE FUNDS AND
ADMINISTRATIVE FEE THE BILTMORE MUNICIPAL FUNDS
<C> <S>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall
aggregate at least $75,000 for the Fund and for each of the
portfolios of The Biltmore Funds. Federated Administrative Services
may choose voluntarily to waive or reimburse a portion of its fee at
any time."
June 1, 1994
[LOGO] FEDERATED SECURITIES CORP.
-------------------------------------------------------------------------
Distributor
G00235-01--IS (5/94)
BILTMORE MONEY MARKET FUND
BILTMORE TAX-FREE MONEY MARKET FUND
BILTMORE U.S. TREASURY MONEY MARKET FUND
(PORTFOLIOS OF THE BILTMORE FUNDS)
INVESTMENT SHARES
COMBINED PROSPECTUS
The Investment Shares of Biltmore Money Market Fund (the "Money Market Fund"),
Biltmore Tax-Free Money Market Fund (the "Tax-Free Fund"), and Biltmore U.S.
Treasury Money Market Fund (the "U.S. Treasury Fund") (individually referred to
as a "Fund" and collectively as the "Funds") offered by this Prospectus
represent interests in three separate diversified portfolios of securities with
distinct investment objectives and policies. The Funds are three of a series of
investment portfolios comprising The Biltmore Funds (the "Trust"), an open-end
management investment company (a mutual fund).
AN INVESTMENT IN THE FUNDS IS NEITHER INSURED NOR GUARANTEED BY THE U.S.
GOVERNMENT. THE FUNDS ATTEMPT TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE; THERE CAN BE NO ASSURANCE THAT THE FUNDS WILL BE ABLE TO DO SO.
The investment objective of the Money Market Fund is to provide current income
consistent with stability of principal and liquidity. The Money Market Fund
pursues this investment objective by investing exclusively in money market
instruments maturing in 397 days or less.
The investment objective of the Tax-Free Fund is to provide current income
exempt from federal regular income tax consistent with stability of principal
and liquidity. The Tax-Free Fund pursues this investment objective by investing
in a diversified portfolio of short-term municipal securities.
The investment objective of the U.S. Treasury Fund is to provide current income
consistent with stability of principal and liquidity. The U.S. Treasury Fund
seeks to achieve its objective by investing in a portfolio of short-term U.S.
government securities with an average maturity of 90 days or less.
THE SHARES OFFERED BY THIS PROSPECTUS ARE NOT DEPOSITS OR OBLIGATIONS OF, OR
ENDORSED OR GUARANTEED BY, WACHOVIA BANK OF NORTH CAROLINA, N.A. OR ITS
AFFILIATES OR SUBSIDIARIES, AND ARE NOT INSURED BY THE FEDERAL DEPOSIT INSURANCE
CORPORATION ("FDIC"), THE FEDERAL RESERVE BOARD, OR ANY OTHER GOVERNMENT AGENCY.
This Prospectus contains the information you should read and know before you
invest in Investment Shares of the Funds. Keep this Prospectus for future
reference.
Each Fund has also filed a Combined Statement of Additional Information for
Investment Shares and Institutional Shares, dated January 31, 1994, with the
Securities and Exchange Commission. The information contained in the Combined
Statements of Additional Information is incorporated by reference into this
Prospectus. You may request a copy of any of the Combined Statements of
Additional Information free of charge by calling 1-800-358-2801. To obtain other
information, or make inquiries about the Funds, call or write Wachovia Brokerage
Service, a division of Wachovia Securities, Inc., 1-800-462-7538, P.O. Box 110,
MC 32022, Winston-Salem, N.C. 27102, or contact your Wachovia Bank (as defined
herein) account representative.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
Prospectus dated January 31, 1994
(Revised June 1, 1994)
TABLE OF CONTENTS
--------------------------------------------------------------------------------
BILTMORE MONEY MARKET FUND
SUMMARY OF FUND EXPENSES 1
------------------------------------------------------
BILTMORE TAX-FREE MONEY MARKET FUND
SUMMARY OF FUND EXPENSES 2
------------------------------------------------------
BILTMORE U.S. TREASURY MONEY MARKET FUND
SUMMARY OF FUND EXPENSES 3
------------------------------------------------------
BILTMORE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--
INVESTMENT SHARES 4
------------------------------------------------------
BILTMORE TAX-FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--
INVESTMENT SHARES 5
------------------------------------------------------
BILTMORE U.S. TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--
INVESTMENT SHARES 6
------------------------------------------------------
GENERAL INFORMATION 7
------------------------------------------------------
INVESTMENT INFORMATION 7
------------------------------------------------------
Money Market Fund 7
Investment Objective 7
Investment Policies 8
Acceptable Investments 8
U.S. Government Obligations 8
Variable Rate Demand Notes 9
Bank Instruments 9
Short-Term Credit Facilities 9
Ratings 9
Restricted and Illiquid Securities 9
Investment Risks 10
Tax-Free Fund 10
Investment Objective 10
Investment Policies 10
Acceptable Investments 11
Municipal Securities 11
Variable Rate Demand Notes 11
Participation Interests 12
Municipal Leases 12
Ratings 12
Restricted and Illiquid Securities 12
Temporary Investments 12
Investment Risks 13
U.S. Treasury Fund 13
Investment Objective 13
Investment Policies 13
Acceptable Investments 13
All Funds 13
Investing in Securities of Other
Investment Companies 13
When-Issued and Delayed Delivery Transactions 14
Repurchase Agreements 14
Money Market and Tax-Free Funds 14
Concentration of Investments 14
Demand Features 14
Credit Enhancement 15
Money Market and U.S. Treasury Funds 15
Lending of Portfolio Securities 15
Money Market Fund 15
Investment Limitations 15
Tax-Free Fund 16
Investment Limitations 16
U.S. Treasury Fund 16
Investment Limitations 16
Regulatory Compliance (All Funds) 16
THE BILTMORE FUNDS INFORMATION 17
------------------------------------------------------
Management of the Trust 17
Board of Trustees 17
Investment Adviser 17
Advisory Fees 17
Adviser's Background 17
Distribution of Investment Shares 17
Distribution Plan 18
Administrative Arrangements 18
Administration of the Funds 19
Administrative Services 19
Custodian 19
Transfer Agent, Dividend Disbursing Agent,
and Portfolio Accounting Services 19
Legal Services 19
Independent Auditors 20
Expenses of the Funds and Investment Shares 20
NET ASSET VALUE 20
------------------------------------------------------
INVESTING IN INVESTMENT SHARES 20
------------------------------------------------------
Share Purchases 20
Through Wachovia Brokerage Service 21
By Mail 21
By Wire 21
Through the Wachovia Banks or
Other Service Organizations 21
Minimum Investment Required 22
What Shares Cost 22
Certificates and Confirmations 22
Dividends 23
Capital Gains 23
EXCHANGES 23
------------------------------------------------------
REDEEMING INVESTMENT SHARES 24
------------------------------------------------------
Through Wachovia Brokerage Service 24
By Telephone 24
By Mail 24
Through the Wachovia Banks 25
By Telephone 25
Via Sweep Agreement 25
Through Service Organizations 25
By Telephone 25
Accounts with Low Balances 26
SHAREHOLDER INFORMATION 26
------------------------------------------------------
Voting Rights 26
Massachusetts Business Trusts 26
EFFECT OF BANKING LAWS 27
------------------------------------------------------
TAX INFORMATION 27
------------------------------------------------------
Money Market and U.S. Treasury Funds 28
Tax-Free Fund 28
State and Local Taxes 29
PERFORMANCE INFORMATION 29
------------------------------------------------------
OTHER CLASSES OF SHARES 29
------------------------------------------------------
BILTMORE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 31
------------------------------------------------------
BILTMORE TAX-FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 32
------------------------------------------------------
BILTMORE U.S. TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS--
INSTITUTIONAL SHARES 33
------------------------------------------------------
FINANCIAL STATEMENTS--BILTMORE MONEY MARKET FUND 34
------------------------------------------------------
BILTMORE TAX-FREE MONEY MARKET FUND 39
------------------------------------------------------
BILTMORE U.S. TREASURY MONEY MARKET FUND 51
------------------------------------------------------
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS 60
------------------------------------------------------
ADDRESSES 61
------------------------------------------------------
BILTMORE MONEY MARKET FUND
SUMMARY OF FUND EXPENSES
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INVESTMENT SHARES
SHAREHOLDER TRANSACTION EXPENSES
<S> <C> <C>
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)............................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................................................... None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable)................................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable)..................................... None
Exchange Fee............................................................................................ None
<CAPTION>
ANNUAL INVESTMENT SHARES OPERATING EXPENSES
(As a percentage of average net assets)
<S> <C> <C>
Management Fee (after waiver) (1)....................................................................... 0.15%
12b-1 Fees (after waiver) (2)........................................................................... 0.30%
Other Expenses (after waiver & reimbursement) (3)....................................................... 0.24%
Total Investment Shares Operating Expenses (after waiver & reimbursement) (4)....................... 0.69%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary waiver at any
time at its sole discretion. The maximum management fee is 0.50%.
(2) The Fund can pay up to 0.40% of average daily net assets of Investment
Shares as a 12b-1 fee. For the foreseeable future, the Fund plans to incur
12b-1 payments of 0.30% of average daily net assets.
(3) Other Expenses are estimated to be 0.32% absent the voluntary waiver and
reimbursement by the administrator. The administrator may terminate the
voluntary waiver at any time at its sole discretion.
(4) The Annual Investment Shares Operating Expenses were 0.55% for the fiscal
year ended November 30, 1993. The Annual Investment Shares Operating
Expenses in the table above reflect a reduction in the voluntary waiver of
the administrative fee and the custodian fee, and a reduction in the
reimbursement by the administrator for the fiscal year ending November 30,
1994. The Annual Investment Shares Operating Expenses are expected to be
1.22% absent the voluntary waivers and reimbursement described above in
notes 1, 2, and 3.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INVESTMENT SHARES OF THE MONEY
MARKET FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE
DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE "THE BILTMORE FUNDS
INFORMATION" AND "INVESTING IN INVESTMENT SHARES."
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc. However, in order for a Fund investor to
exceed the NASD's maximum front-end sales charge of 6.25%, a continuous
investment in the Fund for 125 years would be required.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period. The
Fund charges no redemption fees for Investment Shares.................... $7 $22 $38 $86
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Investment Shares of the Money Market Fund. The Fund also offers another class
of shares called Institutional Shares. Investment Shares and Institutional
Shares are subject to certain of the same expenses, however, Institutional
Shares are not subject to a 12b-1 fee. See "Other Classes of Shares."
BILTMORE TAX-FREE MONEY MARKET FUND
SUMMARY OF FUND EXPENSES
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)............................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................................................... None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable)................................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable)..................................... None
Exchange
Fee..................................................................................................... None
ANNUAL INVESTMENT SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)....................................................................... 0.15%
12b-1 Fees (after waiver) (2)........................................................................... 0.30%
Other Expenses (after waiver & reimbursement) (3)....................................................... 0.26%
Total Investment Shares Operating Expenses (after waiver & reimbursement) (4)....................... 0.71%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary waiver at any
time at its sole discretion. The maximum management fee is 0.50%.
(2) The Fund can pay up to 0.40% of average daily net assets of Investment
Shares as a 12b-1 fee. For the foreseeable future, the Fund plans to incur
12b-1 payments of 0.30% of average daily net assets.
(3) Other Expenses are estimated to be 0.33% absent the voluntary waiver and the
reimbursement by the administrator. The administrator may terminate the
voluntary waiver at any time at its sole discretion.
(4) The Annual Investment Shares Operating Expenses were 0.59% for the fiscal
year ended November 30, 1993. The Annual Investment Shares Operating
Expenses in the table above reflect a reduction in the voluntary waiver of
the administrative fee and the custodian fee, and a reduction in the
reimbursement by the administrator for the fiscal year ending November 30,
1994. The Annual Investment Shares Operating Expenses are expected to be
1.23% absent the voluntary waivers and reimbursement described above in
notes 1, 2, and 3.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE INVESTMENT SHARES OF THE
TAX-FREE FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE
DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE "THE BILTMORE FUNDS
INFORMATION" AND "INVESTING IN INVESTMENT SHARES."
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc. However, in order for a Fund investor to
exceed the NASD's maximum front-end sales charge of 6.25%, a continuous
investment in the Fund for 125 years would be required.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years 5 years 10 years
<S> <C> <C> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) redemption at the end of each time period. The
Fund charges no redemption fees for Investment Shares.................... $7 $23 $40 $88
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Investment Shares of the Tax-Free Fund. The Fund also offers another class of
shares called Institutional Shares. Investment Shares and Institutional Shares
are subject to certain of the same expenses, however, Institutional Shares are
not subject to a 12b-1 fee. See "Other Classes of Shares."
BILTMORE U.S. TREASURY MONEY MARKET FUND
SUMMARY OF FUND EXPENSES
--------------------------------------------------------------------------------
<TABLE>
<S> <C>
INVESTMENT SHARES
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)............................. None
Maximum Sales Load Imposed on Reinvested Dividends
(as a percentage of offering price)................................................................... None
Deferred Sales Load (as a percentage of original
purchase price or redemption proceeds, as applicable)................................................. None
Redemption Fees (as a percentage of amount redeemed, if applicable)..................................... None
Exchange Fee............................................................................................ None
ANNUAL INVESTMENT SHARES OPERATING EXPENSES
(As a percentage of average net assets)
Management Fee (after waiver) (1)....................................................................... 0.05%
12b-1 Fees (after waiver) (2)........................................................................... 0.30%
Other Expenses (after waiver & reimbursement) (3)....................................................... 0.32%
Total Investment Shares Operating Expenses (after waiver & reimbursement) (4)....................... 0.67%
</TABLE>
(1) The management fee has been reduced to reflect the voluntary waiver by the
investment adviser. The adviser can terminate this voluntary waiver at any
time at its sole discretion. The maximum management fee is 0.50%.
(2) The Fund can pay up to 0.40% of average daily net assets of Investment
Shares as a 12b-1 fee. For the foreseeable future, the Fund plans to incur
12b-1 payments of 0.30% of average daily net assets.
(3) Other Expenses are estimated to be 0.41% absent the voluntary waiver by the
administrator and the voluntary reimbursement by the investment adviser. The
administrator and adviser may terminate the voluntary waiver and
reimbursement, respectively, at any time at their sole discretion.
(4) The Annual Investment Shares Operating Expenses were 0.65% for the fiscal
year ended November 30, 1993. The Annual Investment Shares Operating
Expenses in the table above reflect a reduction in the voluntary waivers of
the administrative fee and the custodian fee for the fiscal year ending
November 30, 1994. The Annual Investment Shares Operating Expenses are
expected to be 1.31% absent the voluntary waivers described above in notes
1, 2, and 3.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF INVESTMENT SHARES OF THE U.S.
TREASURY FUND WILL BEAR, EITHER DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE
DESCRIPTIONS OF THE VARIOUS COSTS AND EXPENSES, SEE "THE BILTMORE FUNDS
INFORMATION" AND "INVESTING IN INVESTMENT SHARES".
Long-term shareholders may pay more than the economic equivalent of the
maximum front-end sales charge permitted under the rules of the National
Association of Securities Dealers, Inc. However, in order for a Fund investor to
exceed the NASD's maximum front-end sales charge of 6.25%, a continuous
investment in the Fund for 125 years would be required.
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period. The Fund charges no redemption fees for
Investment Shares.............................................................................. $7 $21
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN.
The information set forth in the foregoing table and example relates only to
Investment Shares of the U.S. Treasury Fund. The Fund also offers another class
of shares called Institutional Shares. Investment Shares and Institutional
Shares are subject to certain of the same expenses, however, Institutional
Shares are not subject to a 12b-1 fee. See "Other Classes of Shares."
BILTMORE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young, Independent Auditors, on page
60.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
<S> <C> <C>
1993 1992*
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
---------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
---------------------------------------------------------------------------------------------
Net investment income 0.03 0.01
---------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
---------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.01)
--------------------------------------------------------------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
--------------------------------------------------------------------------------------------- --------- ---------
TOTAL RETURN** 2.74% 1.48%
---------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
---------------------------------------------------------------------------------------------
Expenses 0.55% 0.48%(a)
---------------------------------------------------------------------------------------------
Net investment income 2.70% 3.44%(a)
---------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.66% 0.75%(a)
---------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
---------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $ 9,842 $ 3,106
---------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from June 9, 1992 (date of initial public
investment) to
November 30, 1992.
** Based on net asset value, which does not reflect the sales load or
redemption fee, if applicable.
(a) Computed on an annualized basis.
(b) This expense decrease is reflected in both the expenses and net investment
income ratios shown above (Note 5).
(See Notes, which are an integral part of the Financial Statements)
BILTMORE TAX-FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young, Independent Auditors, on page
60.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
<S> <C> <C>
1993 1992*
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
-------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------------------------------------------------------------
Net investment income 0.02 0.01
-------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
-------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.02) (0.01)
------------------------------------------------------------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
------------------------------------------------------------------------------------------- --------- ---------
TOTAL RETURN** 1.99% 1.29%
-------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-------------------------------------------------------------------------------------------
Expenses 0.59% 0.50%(a)
-------------------------------------------------------------------------------------------
Net investment income 1.98% 2.37%(a)
-------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.70% 0.88%(a)
-------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted)
$23,976
$5,338
-------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 20, 1992 (date of initial public
investment) to November 30, 1992.
** Based on net asset value, which does not reflect the sales load or
redemption fee, if applicable.
(a) Computed on an annualized basis.
(b) This expense decrease is reflected in both the expense and net investment
income ratios shown above (Note 5).
(See Notes, which are an integral part of the Financial Statements)
BILTMORE U.S. TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
INVESTMENT SHARES
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
Reference is made to the Report of Ernst & Young, Independent Auditors, on page
60.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
1993*
<S> <C>
NET ASSET VALUE, BEGINNING OF PERIOD $1.00
-----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-----------------------------------------------------------------------------------------------
Net investment income 0.01
-----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
-----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.01)
----------------------------------------------------------------------------------------------- ---------
NET ASSET VALUE, END OF PERIOD $1.00
----------------------------------------------------------------------------------------------- ---------
TOTAL RETURN** 1.42%
-----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-----------------------------------------------------------------------------------------------
Expenses 0.65%(a)
-----------------------------------------------------------------------------------------------
Net investment income 2.50%(a)
-----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.73%(a)
-----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
-----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted)
$16,941
-----------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 12, 1993 (date of initial public
investment) to November 30, 1993.
** Based on net asset value, which does not reflect the sales load or redemption
fee, if applicable.
(a) Computed on an annualized basis.
(b) The expense decrease is reflected in both the expenses and net investment
income ratios shown above (Note 5).
(See Notes, which are an integral part of the Financial Statements)
GENERAL INFORMATION
--------------------------------------------------------------------------------
The Biltmore Funds (the "Trust") was established as a Massachusetts business
trust under a Declaration of Trust dated November 19, 1991. The Declaration of
Trust permits the Trust to offer separate series of shares of beneficial
interest representing interests in separate portfolios of securities. The shares
in any one portfolio may be offered in separate classes. As of the date of this
Prospectus, the Board of Trustees (the "Trustees") has established two classes
of shares of the Money Market Fund, the Tax-Free Fund and the U.S. Treasury
Fund: Investment Shares and Institutional Shares. This Prospectus relates only
to Investment Shares of the Funds.
Investment Shares of the Money Market and the U.S. Treasury Funds are designed
primarily for individual investors, corporations, or partnerships as a
convenient means of participating in a professionally-managed, diversified
portfolio limited to money market instruments maturing in 397 days or less.
Investment Shares of the Tax-Free Fund are designed primarily for individual
investors, corporations, or partnerships as a convenient means of participating
in a professionally-managed, diversified portfolio limited to short-term
municipal securities.
Investment Shares of each of the Funds may be purchased through Wachovia
Brokerage Service, through Wachovia Bank of North Carolina, N.A., Wachovia Bank
of Georgia, N.A., Wachovia Bank of South Carolina, N.A. (formerly known as The
South Carolina National Bank), and their affiliates (collectively, the "Wachovia
Banks"), or through other Service Organizations (as hereinafter defined). A
minimum initial investment of $1,000 in Investment Shares of any of the Funds is
required, except that for investors purchasing Investment Shares in any of the
Funds via a sweep account program, initial investment minimums may be modified
under the applicable account agreement.
Each Fund attempts to stabilize the value of its shares at $1.00. Investment
Shares are currently sold and redeemed at that price.
The other portfolios in the Trust are Biltmore Balanced Fund, Biltmore Equity
Fund, Biltmore Equity Index Fund, Biltmore Fixed Income Fund, Biltmore Prime
Cash Management Fund (Institutional Shares), Biltmore Quantitative Equity Fund,
Biltmore Short-Term Fixed Income Fund, and Biltmore Special Values Fund.
INVESTMENT INFORMATION
--------------------------------------------------------------------------------
MONEY MARKET FUND
INVESTMENT OBJECTIVE
The investment objective of the Money Market Fund is to provide current income
consistent with stability of principal and liquidity. The investment objective
cannot be changed without approval of shareholders. While there is no assurance
that the Money Market Fund will achieve its investment objective, it endeavors
to do so by following the investment policies described in this Prospectus.
INVESTMENT POLICIES
The Money Market Fund pursues its investment objective by investing exclusively
in a portfolio of money market instruments maturing in 397 days or less. The
average maturity of money market instruments in the Money Market Fund's
portfolio, computed on a dollar-weighted basis, will be 90 days or less.
Unless indicated otherwise, the investment policies of the Money Market Fund may
be changed by the Trustees without the approval of shareholders. Shareholders
will be notified before any material changes in these policies become effective.
ACCEPTABLE INVESTMENTS. The Money Market Fund invests in high quality money
market instruments that are rated in the highest short-term rating categories by
one or more nationally recognized statistical rating organizations ("NRSROs") or
are of comparable quality to securities having such ratings. Examples of these
instruments include, but are not limited to:
commercial paper (including Canadian Commercial Paper and Europaper);
certificates of deposit, demand and time deposits, saving shares, bankers'
acceptances, and other instruments of domestic and foreign banks and other
deposit institutions;
corporate debt obligations, including variable rate demand notes;
obligations of the U.S. government, its agencies and instrumentalities;
and
repurchase agreements.
The Money Market Fund invests only in instruments denominated and payable in
U.S. dollars.
For further discussion of the instruments described above and rating categories,
consult the Money Market Fund's Combined Statement of Additional Information.
U.S. GOVERNMENT OBLIGATIONS. The types of U.S. government obligations in
which the Money Market Fund may invest generally include direct obligations
of the U.S. Treasury (such as U.S. Treasury bills, notes, and bonds) and
obligations issued or guaranteed by U.S. government agencies or
instrumentalities. These securities are backed by:
the full faith and credit of the U.S. Treasury;
the issuer's right to borrow from the U.S. Treasury;
the discretionary authority of the U.S. government to purchase certain
obligations of agencies or instrumentalities; or
the credit of the agency or instrumentality issuing the obligations.
Examples of agencies and instrumentalities which may not always receive
financial support from the U.S. government are:
Federal Farm Credit Banks;
Federal Home Loan Banks;
Federal National Mortgage Association;
Student Loan Marketing Association; and
Federal Home Loan Mortgage Corporation.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
corporate debt instruments that have variable or floating interest rates
and provide the Money Market Fund with the right to tender the security for
repurchase at its stated principal amount plus accrued interest. Such
securities typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted at
regular intervals (ranging from daily to annually), and is normally based
on an interest rate index or a published interest rate. Most variable rate
demand notes allow the Money Market Fund to demand the repurchase of the
security on not more than seven days prior notice. Other notes only permit
the Money Market Fund to tender the security at the time of each interest
rate adjustment or at other fixed intervals. See "Demand Features" in this
Prospectus. The Money Market Fund treats variable rate demand notes as
maturing on the later of the date of the next interest rate adjustment or
the date on which the Money Market Fund may next tender the security for
repurchase.
BANK INSTRUMENTS. The Money Market Fund only invests in U.S. and foreign
bank instruments either issued by an institution having capital, surplus
and undivided profits over $100 million, or insured by the Bank Insurance
Fund ("BIF"), which is administered by the FDIC. Bank instruments may
include Eurodollar Certificates of Deposit ("ECDs"), Yankee Certificates of
Deposit ("Yankee CDs") and Eurodollar Time Deposits ("ETDs"). The Money
Market Fund will treat securities credit enhanced with a bank's irrevocable
letter of credit or unconditional guaranty as bank instruments.
SHORT-TERM CREDIT FACILITIES. Demand notes are short-term borrowing
arrangements between a corporation and an institutional lender (such as the
Money Market Fund) payable upon demand by either party. The notice period
for demand typically ranges from one to seven days, and the party may
demand full or partial payment. The Money Market Fund may also enter into,
or acquire participations in, short-term revolving credit facilities with
corporate borrowers. Demand notes and other short-term credit arrangements
usually provide for floating or variable rates of interest.
RATINGS. An NRSRO's highest rating category is determined without regard for
sub-categories and gradations. For example, securities rated A-1+ or A-1 by
Standard & Poor's Corporation ("S&P"), Prime-1 by Moody's Investors Service,
Inc. ("Moody's"), or F-1 (+ or -) by Fitch Investors Service, Inc. ("Fitch") are
all considered rated in the highest short-term rating category. The Money Market
Fund will follow applicable regulations in determining whether a security rated
by more than one NRSRO can be treated as being in the highest short-term rating
category; currently, such securities must be rated by two NRSROs in their
highest rating categories. See "Regulatory Compliance" on page 16 of this
Prospectus.
RESTRICTED AND ILLIQUID SECURITIES. The Money Market Fund may invest in
restricted securities. Restricted securities are any securities in which the
Money Market Fund may otherwise invest pursuant to its investment objective and
policies but which are subject to restrictions on resale under federal
securities law. However, the Money Market Fund will limit investments in
illiquid securities, including certain restricted securities not determined by
the Trustees to be liquid, non-negotiable time deposits, and repurchase
agreements providing for settlement in more than seven days after notice, to 10%
of its net assets.
The Money Market Fund may invest in commercial paper issued in reliance on the
exemption from registration afforded by Section 4(2) of the Securities Act of
1933. Section 4(2) commercial paper is restricted as to disposition under
federal securities law, and is generally sold to institutional investors, such
as the Money Market Fund, who agree that they are purchasing the paper for
investment purposes and not with a view to public distribution. Any resale by
the purchaser must be in an exempt transaction. Section 4(2) commercial paper is
normally resold to other institutional investors, like the Money Market Fund,
through or with the assistance of the issuer or investment dealers who make a
market in Section 4(2) commercial paper, thus providing liquidity. The Money
Market Fund believes that Section 4(2) commercial paper and possibly certain
other restricted securities which meet the criteria for liquidity established by
the Trustees are quite liquid. The Money Market Fund intends, therefore, to
treat the restricted securities which meet the criteria for liquidity
established by the Trustees, including Section 4(2) commercial paper, as
determined by the Money Market Fund's investment adviser, as liquid and not
subject to the investment limitation applicable to illiquid securities. In
addition, because Section 4(2) commercial paper is liquid, the Money Market Fund
intends to not subject such paper to the limitation applicable to restricted
securities.
INVESTMENT RISKS
ECDs, ETDs, Yankee CDs, and Europaper are subject to somewhat different risks
than domestic obligations of domestic issuers. Examples of these risks include
international economic and political developments, foreign governmental
restrictions that may adversely affect the payment of principal or interest,
foreign withholding or other taxes on interest income, difficulties in obtaining
or enforcing a judgment against the issuing bank, and the possible impact of
interruptions in the flow of international currency transactions. Different
risks may also exist for ECDs, ETDs, and Yankee CDs because the banks issuing
these instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks, such
as reserve requirements, loan limitations, examinations, accounting, auditing,
and recordkeeping, and the public availability of information. These factors
will be carefully considered by the Money Market Fund's investment adviser in
selecting investments for the Money Market Fund.
TAX-FREE FUND
INVESTMENT OBJECTIVE
The investment objective of the Tax-Free Fund is to provide current income
exempt from federal regular income tax consistent with stability of principal
and liquidity. Interest income of the Tax-Free Fund that is exempt from federal
regular income tax retains its tax-free status when distributed to the Tax-Free
Fund's shareholders. While there is no assurance that the Tax-Free Fund will
achieve its investment objective, it endeavors to do so by following the
investment policies described in this Prospectus. The investment objective
cannot be changed without approval of shareholders.
INVESTMENT POLICIES
The Tax-Free Fund pursues its investment objective by investing primarily in a
diversified portfolio of short-term municipal securities maturing in 397 days
or less. The average maturity of money market instruments in the Tax-Free
Fund's portfolio, computed on a dollar weighted basis, will be 90 days or less.
Unless indicated otherwise, the investment policies of the Tax-Free Fund may
be changed by the Trustees without the approval of shareholders. Shareholders
will be notified before any material change in these policies becomes effective.
ACCEPTABLE INVESTMENTS. The Tax-Free Fund invests primarily in debt obligations
issued by or on behalf of states, territories and possessions of the United
States, including the District of Columbia, and any political subdivision or
financing authority of any of these, the income from which is, in the opinion of
qualified legal counsel, exempt from federal regular income tax ("Municipal
Securities"). Examples of Municipal Securities include, but are not limited to:
tax and revenue anticipation notes ("TRANs") issued to finance working
capital needs in anticipation of receiving taxes or other revenues;
bond anticipation notes ("BANs") that are intended to be refinanced
through a later issuance of longer-term bonds;
municipal commercial paper and other short-term notes;
variable rate demand notes;
municipal bonds (including bonds having serial maturities and pre-refunded
bonds) and leases; and
participation, trust and partnership interests in any of the foregoing
obligations.
For further discussion of the instruments described above and rating categories,
consult the Tax-Free Fund's Combined Statement of Additional Information.
MUNICIPAL SECURITIES
Municipal Securities are generally issued to finance public works such as
airports, bridges, highways, housing, hospitals, mass transportation projects,
schools, streets, and water and sewer works. They are also issued to repay
outstanding obligations, to raise funds for general operating expenses, and to
make loans to other public institutions and facilities.
Municipal Securities include industrial development bonds issued by or on behalf
of public authorities to provide financing aid to acquire sites or construct and
equip facilities for privately or publicly owned corporations. The availability
of this financing encourages these corporations to locate within the sponsoring
communities and thereby increases local employment.
The two principal classifications of Municipal Securities are "general
obligation" and "revenue" bonds. General obligation bonds are secured by the
issuer's pledge of its full faith and credit and taxing power for the payment of
principal and interest. Interest on and principal of revenue bonds, however, are
payable only from the revenue generated by the facility financed by the bond or
other specified sources of revenue. Revenue bonds do not represent a pledge of
credit or create any debt of or charge against the general revenues of a
municipality or public authority. Industrial development bonds are typically
classified as revenue bonds.
VARIABLE RATE DEMAND NOTES. Variable rate demand notes are long-term
Municipal Securities that have variable or floating interest rates and
provide the Tax-Free Fund with the right to tender the security for
repurchase at its stated principal amount plus accrued interest. Such
securities typically bear interest at a rate that is intended to cause the
securities to trade at par. The interest rate may float or be adjusted at
regular intervals (ranging from daily to annually), and is normally
based on a municipal interest rate index or a published interest rate. Most
variable rate demand notes allow the Tax-Free Fund to demand the repurchase
of the security on not more than seven days' prior notice. Other notes only
permit the Tax-Free Fund to tender the security at the time of each
interest rate adjustment or at other fixed intervals. See "Demand Features"
on page 14 of this Prospectus. The Tax-Free Fund treats variable rate
demand notes as maturing on the later of the date of the next interest
adjustment or the date on which the Tax-Free Fund may next tender the
security for repurchase.
PARTICIPATION INTERESTS. The Tax-Free Fund may purchase interests in
Municipal Securities from financial institutions such as commercial and
investment banks, savings and loan associations and insurance companies.
These interests may take the form of participations, beneficial interests
in a trust, partnership interests or any other form of indirect ownership
that allows the Tax-Free Fund to treat the income from the investment as
exempt from federal income tax. The Tax-Free Fund invests in these
participation interests in order to obtain credit enhancement or demand
features that would not be available through direct ownership of the
underlying Municipal Securities.
MUNICIPAL LEASES. Municipal leases are obligations issued by state and
local governments or authorities to finance the acquisition of equipment
and facilities and may be considered to be illiquid. They may take the form
of a lease, an installment purchase contract, a conditional sales contract
or a participation interest in any of the above.
RATINGS. The Municipal Securities in which the Tax-Free Fund invests must be
rated in the highest short-term rating category by one or more NRSRO or be of
comparable quality to securities having such ratings. An NRSRO's highest rating
category is determined without regard for sub-categories and gradations. For
example, securities rated SP-1+, SP-1, A-1K, or A-1 by S&P, MIG-1, P-1, or
VMIG-1 by Moody's, or FIN-1+ or FIN-1 by Fitch are all considered rated in the
highest short-term rating category. The Tax-Free Fund will follow applicable
regulations in determining whether a security rated by more than one NRSRO can
be treated as being in the highest short-term rating category; currently, such
securities must be rated by two NRSROs in their highest rating category. See
"Regulatory Compliance" on page 16 of this Prospectus.
RESTRICTED AND ILLIQUID SECURITIES. The Tax-Free Fund may invest in restricted
securities. Restricted securities are any securities in which the Tax-Free Fund
may invest pursuant to its investment objective and policies but which are
subject to restrictions on resale under federal securities law. However, the
Tax-Free Fund will limit investments in illiquid securities, including certain
restricted securities not determined by the Trustees to be liquid, and
repurchase agreements providing for settlement in more than seven days after
notice, to 10% of its net assets.
TEMPORARY INVESTMENTS. As a matter of fundamental investment policy, which
cannot be changed without approval of shareholders, the Tax-Free Fund invests
its assets so that at least 80% of its annual interest income is exempt from
federal regular income tax. However, from time to time when the Tax-Free Fund's
investment adviser determines that market conditions call for a temporary
defensive posture, the Tax-Free Fund may invest in short-term temporary
investments. Interest income from temporary investments may be taxable to
shareholders as ordinary income. These temporary investments include:
obligations issued by or on behalf of municipal or corporate issuers having the
same quality characteristics as Municipal Securities purchased by the Tax-Free
Fund; marketable obligations issued or guaranteed by the U.S. government, its
agencies or instrumentalities; instruments issued by banks or other depository
institutions which have capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment and if their deposits are insured by BIF
or the Savings Association Insurance Fund (which are administered by the FDIC);
repurchase agreements (arrangements in which the organization is selling the
Tax-Free Fund a temporary investment and agrees at the time of sale to
repurchase it at a mutually agreed upon time and price); and prime commercial
paper rated A-1 by S&P, Prime-1 by Moody's, or F-1 by Fitch and other short-term
credit instruments.
Although the Tax-Free Fund is permitted to make taxable, temporary investments,
there is no current intention of generating income subject to federal regular
income tax. However, the Tax-Free Fund may purchase Municipal Securities, the
interest on which is subject to the federal alternative minimum tax, in an
amount not to exceed 20% of the total net assets of the Tax-Free Fund.
INVESTMENT RISKS
Yields on Municipal Securities depend on a variety of factors, including: the
general conditions of the short-term municipal note market and of the municipal
bond market; the size of the particular offering; the maturity of the
obligations; and the rating of the issue. The ability of the Tax-Free Fund to
achieve its investment objective also depends on the continuing ability of the
issuers of Municipal Securities and demand features, or the guarantors of
either, to meet their obligations for the payment of interest and principal when
due.
U.S. TREASURY FUND
INVESTMENT OBJECTIVE
The investment objective of the U.S. Treasury Fund is to provide current income
consistent with stability of principal and liquidity. This investment objective
cannot be changed without approval of shareholders. While there is no assurance
that the U.S. Treasury Fund will achieve its investment objective, it endeavors
to do so by following the investment policies described in this Prospectus.
INVESTMENT POLICIES
The U.S. Treasury Fund pursues its investment objective by investing in a
portfolio of short-term U.S. Treasury obligations which are issued by the U.S.
government, and are fully guaranteed as to payment of principal and interest by
the United States. Unless indicated otherwise, the investment policies of the
U.S. Treasury Fund may be changed by the Trustees without approval of
shareholders. Shareholders will be notified before any material changes in these
policies become effective.
ACCEPTABLE INVESTMENTS. The U.S. Treasury Fund invests only in U.S. Treasury
obligations maturing in 397 days or less. The average maturity of the U.S.
Treasury obligations in the U.S. Treasury Fund's portfolio, computed on a
dollar-weighted basis, will be 90 days or less.
ALL FUNDS
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES. The Funds may invest
in the securities of other investment companies, but they will not own more
than 3% of the total outstanding voting stock of any investment company,
invest more than 5% of their respective total assets in any one investment
company, or invest more than 10% of their respective total assets in
investment companies in general. The Funds will only invest in other investment
companies that are money market funds having investment objectives and policies
similar to their own andprimarily for the purpose of investing short-term cash
which has not yet been invested in other portfolio instruments. The investment
adviser to the Funds will waive its investment advisory fee on assets invested
in securities of open-end investment companies.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Funds may purchase
securities on a when-issued or delayed delivery basis. These transactions are
arrangements in which a Fund purchases securities with payment and delivery
scheduled for a future time. The Funds engage in when-issued and delayed
delivery transactions only for the purpose of acquiring portfolio securities
consistent with their investment objectives and policies, not for investment
leverage. In when-issued and delayed delivery transactions, a Fund rely on the
seller to complete the transaction. The seller's failure to complete the
transaction may cause the Funds to miss a price or yield considered to be
advantageous.
REPURCHASE AGREEMENTS. Repurchase agreements are arrangements in which banks,
broker/dealers, and other recognized financial institutions sell U.S. government
securities or other securities to a Fund and agree at the time of sale to
repurchase them at a mutually agreed upon time and price. The Funds or their
custodian will take possession of the securities subject to repurchase
agreements and these securities will be marked to market daily. To the extent
that the original seller does not repurchase the securities from a Fund, that
Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by a Fund might be delayed
pending court action. The Funds believe that under the regular procedures
normally in effect for custody of the Funds' portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Funds and allow retention or disposition of such securities. The Funds will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Funds' investment
adviser to be creditworthy pursuant to guidelines established by the Trustees.
As a matter of investment practice, which can be changed without shareholder
approval, repurchase agreements providing for settlement in more than seven days
after notice, along with illiquid obligations, will be limited to not more than
10% of each Fund's respective net assets.
MONEY MARKET AND TAX-FREE FUNDS
CONCENTRATION OF INVESTMENTS. The Money Market and Tax-Free Funds may invest
more than 25% of the value of their respective total assets in cash or certain
money market instruments (including instruments issued by a U.S. branch of a
domestic bank having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment), securities issued or guaranteed by the
U.S. government, its agencies, or instrumentalities, or instruments secured by
these money market instruments, such as repurchase agreements.
DEMAND FEATURES. The Money Market and Tax-Free Funds may acquire securities
that are subject to puts and standby commitments ("demand features") to purchase
the securities at their principal amount (usually with accrued interest) within
a fixed period (usually seven days) following a demand by the Funds. The demand
feature may be issued by the issuer of the underlying securities, a dealer in
the securities or by another third party, and may not be transferred separately
from the underlying security. The Money Market and Tax-Free Funds use these
arrangements to provide liquidity and not to protect against changes in the
market value of the underlying securities. The bankruptcy, receivership or
default by the issuer of the demand feature, or a default on the underlying
security or other event that terminates the demand feature before its exercise,
will adversely affect the liquidity of the underlying security. Demand features
that are exercisable even after a payment default on the underlying security
may be treated as a form of credit enhancement.
CREDIT ENHANCEMENT. Certain of the Money Market and Tax-Free Funds' acceptable
investments may have been credit enhanced by a guaranty, letter of credit or
insurance. The Money Market and Tax-Free Funds typically evaluate the credit
quality and ratings of credit enhanced securities based upon the financial
condition and ratings of the party providing the credit enhancement (the "credit
enhancer"), rather than the issuer. Generally, the Money Market and Tax-Free
Funds will not treat credit enhanced securities as having been issued by the
credit enhancer for diversification purposes. However, under certain
circumstances, applicable regulations may require the Money Market and Tax-Free
Funds to treat the securities as having been issued both by the issuer and the
credit enhancer. The bankruptcy, receivership or default of the credit enhancer
will adversely affect the quality and marketability of the underlying security.
The Tax-Free Fund may have more than 25% of its total assets invested in
securities credit enhanced by banks.
MONEY MARKET AND U.S. TREASURY FUNDS
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Money Market and U.S. Treasury Funds may lend their portfolio securities on a
short-term basis to broker/dealers, banks, or other institutional borrowers of
securities. The Funds will only enter into loan arrangements with
broker/dealers, banks, or other institutions which the Funds' investment adviser
has determined are creditworthy under guidelines established by the Trustees,
and will receive collateral in the form of cash or U.S. Treasury securities
equal to at least 100% of the value of the securities loaned at all times. The
Money Market and U.S. Treasury Funds will limit the amount of portfolio
securities they may lend to not more than one-third of their respective total
assets.
MONEY MARKET FUND
INVESTMENT LIMITATIONS
The Money Market Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Money Market Fund sells a money market
instrument for a percentage of its cash value with an agreement to buy it
back on a set date) except, under certain circumstances, the Money Market
Fund may borrow up to one-third of the value of its total assets; nor
with respect to 75% of the value of its total assets, invest more than 5%
of the value of its total assets in securities of any one issuer (other
than cash, cash items or securities issued or guaranteed by the government
of the United States or its agencies or instrumentalities and repurchase
agreements collateralized by U.S. government securities).
The above investment limitations cannot be changed without shareholder approval.
TAX-FREE FUND
INVESTMENT LIMITATIONS
The Tax-Free Fund will not:
borrow money directly or through reverse repurchase agreements except,
under certain circumstances, the Tax-Free Fund may borrow up to one-third
of the value of its total assets; nor
with respect to 75% of the value of its total assets, invest more than 5%
of its total assets in securities of one issuer (except cash, cash items,
repurchase agreements collateralized by U.S. government securities and
U.S. government obligations). The remaining 25% of its total assets may be
invested in a single issuer if the Fund's investment adviser believes such
a strategy is prudent.
The above investment limitations cannot be changed without shareholder approval.
The following limitation, however, can be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in this limitation becomes effective.
The Tax-Free Fund will not:
invest more than 5% of the value of its total assets in industrial revenue
bonds where the payment of principal and interest is the responsibility of
companies (or guarantors, if applicable) that have records of less than
three years of continuous operations, including the operation of any
predecessor.
U.S. TREASURY FUND
INVESTMENT LIMITATIONS
The U.S. Treasury Fund will not borrow money directly or through reverse
repurchase agreements except, under certain circumstances, the U.S. Treasury
Fund may borrow up to one-third of the value of its total assets. This
limitation cannot be changed without shareholder approval.
REGULATORY COMPLIANCE (ALL FUNDS)
The Funds may follow non-fundamental operational policies that are more
restrictive than their fundamental investment limitations, as set forth in this
Prospectus and the Funds' Combined Statements of Additional Information, in
order to comply with applicable laws and regulations, including the provisions
of and regulations under the Investment Company Act of 1940, as amended. In
particular, the Funds will comply with the various requirements of Rule 2a-7,
which regulates money market mutual funds. The Tax-Free and U.S. Treasury Funds
will determine the effective maturity of their investments, as well as their
ability to consider a security as having received the requisite short-term
ratings by NRSROs, according to Rule 2a-7. The Funds may change these
operational policies to reflect changes in the laws and regulations without the
approval of their shareholders.
THE BILTMORE FUNDS INFORMATION
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MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Board of Trustees is responsible for managing the
Trust's business affairs and for exercising all the Trust's powers except those
reserved for the shareholders.
INVESTMENT ADVISER. Pursuant to an investment advisory contract with the Trust,
investment decisions for the Funds are made by Wachovia Investment Management
Group (the "Adviser"), a business unit of Wachovia Bank of North Carolina, N.A.
subject to direction by the Trustees. The Adviser continually conducts
investment research and supervision of investments for the Funds and is
responsible for the purchase or sale of portfolio instruments, for which it
receives annual fees from the assets of the Funds.
ADVISORY FEES. The Funds' Adviser receives an annual investment advisory
fee equal to 0.50 of 1% of each Fund's average daily net assets. The
investment advisory contract provides that such fees shall be accrued and
paid daily. The Adviser has undertaken to reimburse the Funds for operating
expenses in excess of limitations established by certain states. The
Adviser may voluntarily choose to waive a portion of its fees or reimburse
the Funds for certain other expenses of the Funds, but reserves the right
to terminate such waiver or reimbursement at any time at its sole
discretion.
ADVISER'S BACKGROUND. Wachovia Bank of North Carolina, N.A. is a direct,
wholly-owned subsidiary of Wachovia Corporation, a registered bank holding
company headquartered in Winston-Salem, North Carolina and Atlanta,
Georgia. Through offices in eight states, Wachovia Corporation and its
subsidiaries provide a broad range of financial services to individuals and
businesses.
Wachovia Bank of North Carolina, N.A. is a national banking association,
which offers a broad range of financial services, including commercial and
consumer loans, corporate, institutional and personal trust services,
demand and time deposit accounts, letters of credit and international
financial services.
Wachovia Investment Management Group employs an experienced staff of
professional investment analysts, portfolio managers and traders. The
Adviser uses fundamental analysis and other investment management
disciplines to identify investment opportunities. The Wachovia Banks have
been managing trust assets for over 100 years with approximately $18
billion in managed assets as of September 30, 1993. Wachovia Investment
Management Group has served as investment adviser for The Biltmore Funds
since March 9, 1992.
DISTRIBUTION OF INVESTMENT SHARES
Federated Securities Corp. is the distributor for Investment Shares of the
Funds. It is a Pennsylvania corporation organized on November 14, 1969, and is
the distributor for a number of investment companies. Federated Securities Corp.
is a subsidiary of Federated Investors.
DISTRIBUTION PLAN. Pursuant to the provisions of a distribution plan adopted in
accordance with Rule 12b-1 under the Investment Company Act of 1940 (the
"Plan"), the Funds will pay Federated Securities Corp. an amount computed at an
annual rate of 0.40 of 1% of the average daily net asset value of the Investment
Shares of each Fund to finance any activity which is principally intended to
result in the sale of Investment Shares.
The distributor may, from time to time and for such periods as it deems
appropriate, voluntarily reduce its compensation under the Plan to the extent
the expenses attributable to the Investment Shares exceed such lower expense
limitation as the distributor may, by notice to the Trust, voluntarily declare
to be effective.
The distributor may select financial institutions such as banks, fiduciaries,
custodians for public funds, investment advisers, and broker/dealers ("Service
Organizations") to provide sales and/or administrative services as agent for
their clients or customers who beneficially own Investment Shares.
Administrative services may include, but are not limited to, the following
functions: communicating Fund account openings and closings; entering share
purchase and redemption transactions; electronically transferring and receiving
funds for those transactions; confirming and reconciling all such transactions
and reviewing activity in Fund accounts; posting and reinvesting dividends and
other distributions to Fund accounts; maintaining and distributing current
copies of prospectuses, statements of additional information, and shareholder
reports of the Funds; advertising and marketing assistance; responding to
clients' and potential clients' questions about the Funds; and other sales and
administrative support services to the Funds and their shareholders.
Service Organizations, including the Wachovia Banks, will receive fees from the
distributor based upon Investment Shares owned by their clients or customers.
The schedules of such fees and the basis upon which such fees will be paid will
be determined from time to time by the distributor.
The Funds' Plan is a compensation type plan. As such, the Funds make no payments
to the distributor except as described above. Therefore, the Funds do not pay
for unreimbursed expenses of the distributor, including amounts expended by the
distributor in excess of amounts received by it from the Funds, interest,
carrying or other financing charges in connection with excess amounts expended,
or the distributor's overhead expenses. However, the distributor may be able to
recover such amounts or may earn a profit from future payments made by the Funds
under the Plan.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities described
above or should Congress relax current restrictions on depository institutions,
the Trustees will consider appropriate changes in the service providers.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
ADMINISTRATIVE ARRANGEMENTS. The distributor may also pay Service Organizations
a fee based upon the average net asset value of Investment Shares of their
customers for providing administrative services. This fee is in addition to
the amounts paid under the Plan for administrative services, and if paid, will
be reimbursed by the Adviser and not the Funds.
ADMINISTRATION OF THE FUNDS
ADMINISTRATIVE SERVICES. _Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides the Funds with the
administrative personnel and services necessary to operate the Funds. Such
services include the preparation of filings with the Securities and Exchange
Commission and other regulatory authorities, assistance with respect to meetings
of the Trustees, shareholder servicing and accounting services, and other
administrative services. Federated Administrative Services provides these at an
annual rate, computed and payable daily, as specified below:
<TABLE>
<CAPTION>
AVERAGE AGGREGATE DAILY NET
MAXIMUM ASSETS OF THE BILTMORE FUNDS
ADMINISTRATIVE FEE AND THE BILTMORE MUNICIPAL FUNDS
<S> <C>
0.15 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year shall aggregate at least
$75,000 for each Fund and for each of the portfolios of The Biltmore Funds.
Federated Administrative Services may choose voluntarily to waive or reimburse a
portion of its fee at any time.
CUSTODIAN. Wachovia Bank of North Carolina, N.A., Winston-Salem, North
Carolina, is custodian for the securities and cash of the Funds. Under the
Custodian Agreement, Wachovia Bank of North Carolina, N.A. holds the Funds'
portfolio securities in safekeeping and keeps all necessary records and
documents relating to its duties. For the services provided to the Trust
pursuant to the Custodian Agreement, the Trust pays Wachovia Bank of North
Carolina, N.A. an annual fee calculated based upon the average daily net assets
of each Fund and payable monthly as follows:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
CUSTODIAN FEE NET ASSETS OF EACH FUND
<S> <C>
0.02 of 1% $0 to $250 million
0.015 of 1% $250 million to $500 million
0.01 of 1% Over $500 million
</TABLE>
The Custodian will also charge transaction fees and out-of-pocket expenses.
TRANSFER AGENT, DIVIDEND DISBURSING AGENT, AND PORTFOLIO ACCOUNTING SERVICES.
Federated Services Company, Pittsburgh, PA, a subsidiary of Federated
Investors, is 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' portfolios of
investments.
LEGAL SERVICES. Legal services for the Funds are provided by Kirkpatrick &
Lockhart, Washington, D.C. Piper & Marbury, Washington, D.C. serves as counsel
to the disinterested Trustees.
INDEPENDENT AUDITORS. The independent auditors for the Funds are Ernst & Young,
Pittsburgh, Pennsylvania.
EXPENSES OF THE FUNDS AND INVESTMENT SHARES
Holders of Investment Shares pay their allocable portion of Fund and Trust
expenses. The Trust expenses for which holders of Investment Shares pay their
allocable portion include, but are not limited to: the cost of organizing the
Trust and continuing its existence; registering the Trust; Trustees' fees;
auditors' fees; the cost of meetings of Trustees; legal fees of the Trust;
association membership dues; and such non-recurring and extraordinary items as
may arise.
Each Fund's expenses for which holders of shares pay their allocable portion
include, but are not limited to: registering the Funds and shares of the Funds
under state and federal law; investment advisory services; taxes and
commissions; custodian fees; insurance premiums; auditors' fees; and such
non-recurring and extraordinary items as may arise.
At present, the only expenses allocated to Investment Shares as a class are
expenses under the Funds' Rule 12b-1 Plan. However, the Trustees reserve the
right to allocate certain other expenses to the shareholders of a particular
class as they deem appropriate ("Class Expenses"). In any case, Class Expenses
would be limited to: transfer agent fees as identified by the transfer agent as
attributable to holders of Investment Shares; printing and postage expenses
related to preparing and distributing materials such as shareholder reports,
prospectuses and proxies to current shareholders; registration fees paid to the
Securities and Exchange Commission and registration fees paid to states;
expenses related to administrative personnel and services as required to support
holders of Investment Shares; legal fees relating solely to Investment Shares;
and Trustees' fees incurred as a result of issues relating solely to Investment
Shares.
NET ASSET VALUE
--------------------------------------------------------------------------------
The Funds attempt to stabilize the net asset value of Investment Shares at $1.00
by valuing the portfolio securities using the amortized cost method. The net
asset value per share of each Fund is determined by adding the interest of the
Investment Shares in the value of all securities and other assets of that Fund,
subtracting the interest of the Investment Shares in the liabilities of that
Fund and those attributable to that Fund's Investment Shares, and dividing the
remainder by the total number of that Fund's Investment Shares outstanding. The
Funds, of course, cannot guarantee that their net asset values will always
remain at $1.00 per share.
INVESTING IN INVESTMENT SHARES
--------------------------------------------------------------------------------
SHARE PURCHASES
Investment Shares are sold on days on which Wachovia Bank of North Carolina,
N.A., the New York Stock Exchange and the Federal Reserve Wire System are open
for business. Investment Shares may be purchased through Wachovia Brokerage
Service, the Wachovia Banks or other Service Organizations. Texas residents must
purchase, exchange, and redeem shares through Federated Securities Corp. at
1- 800-618-8573. In connection with the sale of Investment Shares, the
distributor may from time to time offer certain items of nominal value to any
shareholder or investor. The Funds and the distributor reserve the right to
reject any purchase request.
THROUGH WACHOVIA BROKERAGE SERVICE. To place an order to purchase Investment
Shares, customers of Wachovia Brokerage Service may telephone (1-800-462-7538),
send written instructions or place an order in person. Payment may be made
either by check, wire of federal funds or by debiting a customer's account at
Wachovia Brokerage Service. Purchase orders must be communicated to Wachovia
Brokerage Service before 11:00 a.m. (Eastern time) and payment by federal funds
must be received by Wachovia Brokerage Service before 4:00 p.m. (Eastern time)
on the same day as the order to earn dividends that day. Wachovia Brokerage
Service is a division of Wachovia Securities, Inc., a registered broker/dealer
and member of the National Association of Securities Dealers, Inc. Wachovia
Securities, Inc. is a wholly-owned subsidiary of Wachovia Corporation.
BY MAIL. To purchase Investment Shares of a Fund by mail, send a check
made payable to the appropriate Fund to Wachovia Securities, Inc., P.O. Box
110, MC 32022, Winston-Salem, N.C. 27102. Orders by mail are considered
received after payment by check is converted by Wachovia Brokerage Service
into federal funds. This is normally the next business day after Wachovia
Brokerage Service receives the check.
BY WIRE. To purchase Investment Shares of a Fund by wire, wire funds as
follows:
Wachovia Securities, Inc.
ABA Number 0531-00494
Credit: 8735-001342
Further credit to: (name of appropriate Fund)
Re: (Customer name and brokerage account number)
When payment is made by wire, the order must be placed by 11:00 a.m.
(Eastern time) and the wire must be received by Wachovia Brokerage Service
before 4:00 p.m. (Eastern time) on the same day to earn dividends that day.
Shares of a Fund cannot be purchased on days on which Wachovia Bank of
North Carolina, N.A., the New York Stock Exchange, and the Federal Reserve
Wire System are not open for business.
THROUGH THE WACHOVIA BANKS OR OTHER SERVICE ORGANIZATIONS. Investors may
purchase Investment Shares of the Funds through one of the Wachovia Banks or
through another Service Organization, which will place share purchase orders as
agent for the account of the investor. The Wachovia Banks and other Service
Organizations maintain omnibus accounts with the Funds for shares of the Funds
that are purchased for their clients and customers. The Wachovia Bank or other
Service Organization will take all information from the investor necessary to
the purchase of Investment Shares and is responsible for the prompt transmission
of investor orders to the Funds.
The Wachovia Banks or other Service Organizations may assess fees to their
customers for services or in connection with the accounts through which
Investment Shares are purchased. This Prospectus and the Combined Statements of
Additional Information should be read together with any applicable account
agreement with regard to the services provided, the fees charged for those
services, and any restrictions and limitations imposed.
For investors who purchase Investment Shares of the Funds as part of a sweep
account program with one of the Wachovia Banks or another Service Organization,
automatic purchases and redemptions of Investment Shares will be made on behalf
of the investor pursuant to the investor's sweep account agreement.
Other investors who are customers of the Wachovia Banks may place orders to
purchase Investment Shares of the Funds by telephone, through written
instructions, or in person with their account officer in accordance with the
procedures established by the Wachovia Banks pursuant to the relevant account
agreement. Unless otherwise specified by the account agreement, payment may be
made to the Wachovia Banks by check, federal funds, or by debiting a customer's
Wachovia Bank account. Orders are considered received after payment by check is
converted into federal funds and received by the Wachovia Banks, normally the
next business day. When payment is made with federal funds, the order is
considered received when federal funds are received by the Wachovia Banks or
available in the customer's account. Purchase orders must be communicated to the
Wachovia Banks by 11:00 a.m. (Eastern time) and payment by federal funds must be
received by the Wachovia Banks before 4:00 p.m. (Eastern time) on the same day
as the order to earn dividends for that day. Investment Shares cannot be
purchased on days on which Wachovia Bank of North Carolina, N.A., the New York
Stock Exchange or the Federal Reserve Wire System are not open for business.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in Investment Shares in each Fund is $1,000,
except that, with respect to investments made through a sweep account program
with a Wachovia Bank or another Service Organization, initial investment
minimums may be modified under the relevant account agreement.
WHAT SHARES COST
Investment Shares are sold at their net asset value next determined after an
order is received. There is no sales charge imposed by the Funds.
The net asset value for each Fund is determined at 12:00 (Eastern time) noon and
4:00 p.m. (Eastern time), Monday through Friday, except on: (i) days on which
there are not sufficient changes in the value of a Fund's portfolio securities
that its net asset value might be materially affected; (ii) days during which no
Investment Shares are tendered for redemption and no orders to purchase
Investment Shares are received; or (iii) the following holidays: New Year's Day,
Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
CERTIFICATES AND CONFIRMATIONS
As transfer agent for the Funds, Federated Services Company maintains a share
account for each shareholder of record. Share certificates are not issued.
Federated Services Company provides Wachovia Brokerage Service, the Wachovia
Banks and other Service Organizations, as shareholders of record, with detailed
statements on a monthly basis that include account balances, information on each
purchase or redemption, and a report of dividends paid during the month.
Wachovia Brokerage Service, the Wachovia Banks and other Service Organizations
maintain omnibus accounts for beneficial owners who are their clients or
customers and will provide such owners with statements on a monthly basis that
reflect account activity during the month. These statements will serve as
confirmations of all transactions in the shareholder's account for the
statement period.
DIVIDENDS
Dividends are declared daily and paid monthly. Ordinarily, dividends will be
reinvested on payment dates in additional Investment Shares of the Funds unless
cash payments are requested by writing to Wachovia Brokerage Service, the
Wachovia Banks or other Service Organization through which the shareholder
invested. Those investors who purchase Investment Shares through the Wachovia
Banks or another Service Organization should consult their account agreement for
any special provisions with respect to the receipt of dividends or available
reinvestment options.
CAPITAL GAINS
Capital gains, if any, could result in an increase in dividends. Capital losses
could result in a decrease in dividends. If for some extraordinary reason the
Funds realize net long-term capital gains, they will distribute them at least
once every 12 months.
EXCHANGES
--------------------------------------------------------------------------------
Unless otherwise limited in the shareholder's account agreement with a Wachovia
Bank or the relevant Service Organization, a shareholder may exchange Investment
Shares of one Fund for Investment Shares of any other Fund on the basis of their
respective net asset values by calling or writing the shareholder's account
representative at the Wachovia Bank or other Service Organization, or by calling
1-800-462-7538, or by writing to Wachovia Securities, Inc. at P.O. Box 110, MC
32022, Winston-Salem, NC 27102. Telephone exchange instructions may be recorded.
If reasonable procedures are not followed by the Funds, they may be liable for
losses due to unauthorized or fraudulent telephone instructions. Investment
Shares purchased by check are eligible for exchange after the purchase check has
cleared, which can take up to ten calendar days. The exchange feature applies to
the Investment Shares of each Fund that does not assess a sales charge as of the
effective offering date of each Fund's Investment Shares.
Orders to exchange Investment Shares of one Fund for Investment Shares of any of
the other Biltmore Funds that do not assess a sales charge will be executed by
redeeming the Investment Shares owned at net asset value next determined after
receipt of the order, and purchasing Investment Shares of any such other
Biltmore Funds at the net asset value determined after the proceeds from such
redemption become available. Orders for exchanges received by any of the Funds
after 12:00 noon (Eastern time) but prior to 4:00 p.m. (Eastern time) on any day
that the Trust is open for business will be executed at the price determined at
4:00 p.m. (Eastern time) that day. Orders for exchanges received after 4:00 p.m.
(Eastern time) on any business day will be executed at the price determined at
12:00 noon (Eastern time) the next business day.
An excessive number of exchanges may be disadvantageous to the Trust. Therefore
the Trust, in addition to its right to reject any exchange, reserves the right
to modify or terminate the exchange privilege of any shareholder who makes
more than five exchanges of shares of any of The Biltmore Funds in a year or
three in a calendar quarter.
An exchange order must comply with the requirements for a redemption and
purchase order and must specify the dollar value or number of shares to be
exchanged. Exchanges are subject to the minimum initial investment requirement
of the fund being acquired. An exchange constitutes a sale for federal income
tax purposes.
This exchange privilege is available to shareholders residing in any state in
which the fund shares being acquired may be sold. Before the exchange, a
shareholder should review a prospectus of the fund for which the exchange is
being made.
REDEEMING INVESTMENT SHARES
--------------------------------------------------------------------------------
THROUGH WACHOVIA BROKERAGE SERVICE
Investment Shares are redeemed at their net asset value next determined after
Wachovia Brokerage Service receives the redemption request. Redemptions will be
made on days on which the Funds compute their net asset values. Requests for
redemption can be made in person, by telephone, or by writing to Wachovia
Brokerage Service. Telephone or written requests for redemption must be received
in proper form by Wachovia Brokerage Service. If at any time the Funds shall
determine it necessary to terminate or modify these methods of redemption,
shareholders would be promptly notified.
BY TELEPHONE. A shareholder who is a customer of Wachovia Brokerage Service may
redeem Investment Shares by telephoning Wachovia Brokerage Service at
1-800-462-7538. Shareholders wishing to redeem by telephone will be required to
complete a telephone redemption authorization form available through Wachovia
Brokerage Service. For calls received by Wachovia Brokerage Service before 11:00
a.m. (Eastern time), proceeds will normally be credited the same day to the
shareholder's brokerage account at Wachovia Brokerage Service. Those Investment
Shares will not be entitled to the dividend declared that day. For calls
received by Wachovia Brokerage Service after 11:00 a.m. (Eastern time) proceeds
will normally be credited to the brokerage account the following business day.
Those Investment Shares will be entitled to the dividend declared on the day the
redemption request was received. In no event will proceeds be credited or paid
more than seven days after a proper request for redemption has been received. In
the event of drastic economic or market changes, a shareholder may experience
difficulty in redeeming by telephone. If such a case should occur, another
method of redemption, such as by mail, should be considered.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Funds, they may be liable for losses due to unauthorized or
fraudulent telephone instructions.
BY MAIL. A shareholder who is a customer of Wachovia Brokerage Service may
redeem Investment Shares by sending a written request to Wachovia Brokerage
Service. The written request should include the shareholder's name, the Fund
name and class of shares, the brokerage account number, and the share or dollar
amount requested. Shareholders should call Wachovia Brokerage Service for
assistance in redeeming by mail.
THROUGH THE WACHOVIA BANKS
The Funds redeem Investment Shares at their net asset value next determined
after the Wachovia Banks receive the redemption request. Redemptions will be
made on days on which the Funds compute their net asset values. Requests for
redemption can be made in person, by telephone or by writing to the
shareholder's account officer. If at any time the Funds shall deem it necessary
to terminate or modify these methods of redemption, shareholders would be
promptly notified.
BY TELEPHONE. A shareholder who is a customer of the Wachovia Banks and whose
account agreement with the Wachovia Banks permits telephone redemption may
redeem Investment Shares by telephoning the shareholder's account officer. For
calls received by the Wachovia Banks before
11:00 a.m. (Eastern time), proceeds will normally be wired the same day to the
shareholder's account at the Wachovia Banks or a check will be sent to the
address of record. Those Investment Shares will not be entitled to the dividend
declared that day. For calls received by the Wachovia Banks after 11:00 a.m.
(Eastern time), proceeds will normally be wired or a check mailed the following
business day. Those Investment Shares will be entitled to the dividend declared
on the day the redemption request was received. In no event will proceeds be
wired or a check mailed more than seven days after a proper request for
redemption has been received. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming by telephone. If
such a case should occur, another method of redemption should be considered.
An authorization permitting the Wachovia Banks to accept telephone requests is
included as part of the shareholder's account agreement. Telephone redemption
instructions may be recorded. If reasonable procedures are not followed by the
Funds, they may be liable for losses due to unauthorized or fraudulent telephone
instructions.
VIA SWEEP AGREEMENT. Redemptions of Investment Shares held through a sweep
program will be effected through, and in accordance with, the related account
agreement.
THROUGH SERVICE ORGANIZATIONS
The Funds redeem Investment Shares at their net asset value next determined
after the Funds receive the redemption request from the Service Organization.
Redemptions will be made on days on which the Funds compute their net asset
value. Requests for redemption can be made in person, by telephone or by writing
to the customer's account representative who, in turn, will place share
redemption orders as agent for the account of the customer, through the relevant
Service Organization. Service Organizations may charge their customers for their
services. Therefore, this Prospectus and the Combined Statements of Additional
Information should be read together with any applicable account agreement with
regard to the services provided, the fees charged for those services, and any
restrictions and limitations imposed. If at any time, the Funds shall determine
it necessary to terminate or modify this method of redemption, shareholders will
be promptly notified.
BY TELEPHONE. Shareholders who are customers of Service Organizations, and
whose account agreement with the Service Organization permits telephone
redemption, may redeem shares of the Funds by telephoning their account
representative. The account representative will, in turn, contact the Funds. The
Service Organization is responsible for promptly submitting redemption requests
and providing proper redemption instructions to the Funds. Redemption requests
received by a Service Organization before 11:00 a.m. (Eastern time) will
normally be paid the same day but will not earn that day's dividend. Redemption
requests received by a Service Organization after 11:00 a.m. (Eastern time)
will receive that day's dividend but the monies will not be credited to the
shareholder's account until the following day. In the event of drastic economic
or market changes, a shareholder may experience difficulty in redeeming by
telephone. If such a case should occur, another method of redemption should be
considered.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Funds, they may be liable for losses due to unauthorized or
fraudulent telephone instructions.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Funds may
redeem Investment Shares in any account and pay the proceeds to the shareholder
if the account balance falls below a required minimum value of $1,000 due to
shareholder redemptions.
SHAREHOLDER INFORMATION
--------------------------------------------------------------------------------
VOTING RIGHTS
Each Investment Share of a Fund gives the shareholder one vote in Trustee
elections and other matters submitted to shareholders for vote. All shares of
all classes of each fund in the Trust have equal voting rights, except that in
matters affecting only a particular fund or class, only shares of that fund or
class are entitled to vote. As of January 7, 1994, Wachovia Brokerage Service
Winston-Salem, North Carolina, acting in various capacities for numerous
accounts, was the owner of record of approximately 7,317,606 (82%) and
16,150,263 (94%) Investment Shares of the Money Market Fund and U.S. Treasury
Fund, respectively, and therefore may, for certain purposes, be deemed to
control the Funds and be able to affect the outcome of certain matters presented
for a vote of shareholders. As of January 7, 1994, The South Carolina National
Bank, Winston-Salem, North Carolina, and Wachovia Brokerage Service,
Winston-Salem, North Carolina, acting in various capacities for numerous
accounts, were the owners of record of approximately 13,337,356 (58%) and
9,090,337 (39%) Investment Shares of the Tax-Free Fund, respectively, and
therefore may, for certain purposes, be deemed to control the Tax-Free Fund and
be able to affect the outcome of certain matters presented for a vote of
shareholders.
As a Massachusetts business trust, the Trust is not required to hold annual
shareholder meetings. Shareholder approval will be sought only for certain
changes in the Trust or the Funds' operations and for the election of Trustees
under certain circumstances.
Trustees may be removed by the Trustees or shareholders at a special meeting. A
special meeting of the shareholders shall be called by the Trustees upon the
written request of shareholders owning at least 10% of the Trust's outstanding
shares.
MASSACHUSETTS BUSINESS TRUSTS
Under certain circumstances, shareholders may be held personally liable under
Massachusetts law for acts or obligations of the Trust. To protect shareholders,
the Trust has filed legal documents with Massachusetts that expressly disclaim
the liability of shareholders for such acts or obligations of the
Trust. These documents require notice of this disclaimer to be given in each
agreement, obligation, or instrument the Trust or the Trustees enter into or
sign on behalf of the Funds.
In the unlikely event a shareholder of a Fund is held personally liable for the
Trust's obligations on behalf of that Fund, the Trust is required by the
Declaration of Trust to use the property of that Fund to protect or compensate
the shareholder. On request, the 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 that 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 that
Fund.
EFFECT OF BANKING LAWS
--------------------------------------------------------------------------------
The Glass-Steagall Act and other banking laws and regulations presently prohibit
a bank holding company registered under the Bank Holding Company Act of 1956 or
any bank or non-bank affiliate thereof from sponsoring, organizing, controlling
or distributing the shares of a registered, open-end investment company
continuously engaged in the issuance of its shares, and prohibits banks
generally from issuing, underwriting or distributing most securities. However,
such banking laws and regulations do not prohibit such a holding company or its
bank and non-bank affiliates generally from acting as investment adviser,
transfer agent or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the order of their customer. The
Funds' investment adviser and its affiliate banks are subject to such banking
laws and regulations.
The Adviser believes, based on the advice of its counsel, that it may perform
the services for the Funds contemplated by its investment advisory and custody
agreements with the Trust without violation of the Glass-Steagall Act or other
applicable banking laws or regulations. Changes in either federal or state
statutes and regulations relating to the permissible activities of banks and
their subsidiaries or affiliates, as well as further judicial or administrative
decisions or interpretations of present or future statutes and regulations,
could prevent the Adviser from continuing to perform all or a part of the above
services for its customers and/or the Funds. If it were prohibited from engaging
in these customer-related activities, the Trustees would consider alternative
service providers and means of continuing available investment services. In such
event, changes in the operation of the Funds may occur, including the possible
termination of any automatic or other fund share investment and redemption
services then being provided by the Adviser. It is not expected that existing
Fund shareholders would suffer any adverse financial consequences (if another
adviser with equivalent abilities to the Adviser is found) as a result of any of
these occurrences.
TAX INFORMATION
--------------------------------------------------------------------------------
The Funds expect to pay no federal income tax because they will meet
requirements of the Internal Revenue Code applicable to regulated investment
companies and to receive the special tax treatment afforded to such companies.
Each Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
other Funds and other portfolios in the Trust will not be combined for tax
purposes with those realized by each Fund.
Dividends of the Funds representing net interest income earned on some temporary
investments and any realized net short-term gains are taxed as ordinary income.
These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and distributions
is provided annually.
MONEY MARKET AND U.S. TREASURY FUNDS
Unless otherwise exempt, shareholders of the Money Market and U.S. Treasury
Funds will be subject to federal income tax on any dividends and other
distributions received. This applies whether dividends and distributions are
received in cash or as additional shares. Shareholders of the Money Market and
U.S. Treasury Funds are urged to consult their own tax advisers regarding the
status of their accounts under state and local tax laws.
TAX-FREE FUND
Shareholders of the Tax-Free Fund will not be subject to the federal regular
income tax on any dividends received from the Tax-Free Fund that represent net
interest on tax-exempt municipal bonds. However, under the Tax Reform Act of
1986, dividends representing net interest earned on some municipal bonds may be
included in calculating the federal individual alternative minimum tax or the
federal alternative minimum tax for corporations.
The alternative minimum tax, equal to up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is equal to
the regular taxable income of the taxpayer increased by certain "tax preference"
items not included in regular taxable income and reduced by only a portion of
the deductions allowed in the calculation of the regular tax.
The Tax Reform Act of 1986 treats interest on certain "private activity" bonds
issued after August 7, 1986, as a tax preference item for both individuals and
corporations. Unlike traditional governmental purpose municipal bonds, which
finance roads, schools, libraries, prisons and other public facilities, private
activity bonds provide benefits to private parties. The Tax-Free Fund may
purchase all types of municipal bonds, including "private activity" bonds. Thus,
while the Tax-Free Fund has no present intention of purchasing any private
activity bonds, should it purchase any such bonds, a portion of the Tax-Free
Fund's dividends may be treated as a tax preference item.
In addition, in the case of a corporate shareholder, dividends of the Tax-Free
Fund which represent interest on municipal bonds will be subject to the 20%
corporate alternative minimum tax because the dividends are included in
corporation's "adjusted current earnings." The corporate minimum tax treats 75%
of the excess of a taxpayer's pre-tax "adjusted current earnings" over the
taxpayer's alternative minimum taxable income as a tax preference item.
"Adjusted current earnings" is based upon the concept of a corporation's
"earnings and profits." Since "earnings and profits" generally includes the full
amount of any fund dividend, and alternative minimum taxable income does not
include the portion of the Tax-Free Fund's dividend attributable to municipal
bonds which are not private activity bonds, the 75% difference will be included
in the calculation of the corporation's alternative minimum tax.
STATE AND LOCAL TAXES (TAX-FREE FUND ONLY)
Distributions representing net interest received on tax-exempt municipal
securities are not necessarily free from income taxes of any state or local
taxing authority. State laws differ on this issue and shareholders are urged to
consult their own tax advisers.
PERFORMANCE INFORMATION
--------------------------------------------------------------------------------
From time to time, the Funds advertise their yield, effective yield and
tax-equivalent yield (for the Tax-Free Fund only) for Investment Shares.
The yield of Investment Shares represents the annualized rate of income earned
on an investment in Investment Shares over a seven-day period. It is the
annualized dividends earned during the period on the investment, shown as a
percentage of the investment. The effective yield is calculated similarly to the
yield, but, when annualized, the income earned by an investment in Investment
Shares is assumed to be reinvested daily. The effective yield will be slightly
higher than the yield because of the compounding effect of this assumed
reinvestment. The tax-equivalent yield of the Tax-Free Fund's Investment Shares
is calculated similarly to the yield, but is adjusted to reflect the taxable
yield that the Tax-Free Fund's Investment Shares would have had to earn to equal
its actual yield, assuming a specific tax rate. The yield and the tax-equivalent
yield do not necessarily reflect income actually earned by Investment Shares
and, therefore, may not correlate to the dividends or other distributions paid
to shareholders.
Advertisements and other sales literature may also refer to total return. Total
return represents the change, over a specified period of time, in the value of
an investment in Investment Shares after reinvesting all distributions. It is
calculated by dividing that change by the initial investment and is expressed as
a percentage.
Yield, effective yield, and tax-equivalent yield (for the Tax-Free Fund only)
will be calculated separately for Investment Shares and Institutional Shares.
Because Investment Shares are subject to a Rule 12b-1 fee, the yield and
effective yield for Institutional Shares, for the same period, will exceed that
of Investment Shares.
From time to time, the Funds may advertise their performances using certain
financial publications and/or compare their performance to certain indices.
OTHER CLASSES OF SHARES
--------------------------------------------------------------------------------
Institutional Shares are offered only to accounts held by the Wachovia Banks in
a fiduciary, agency, custodial, or similar capacity and are subject to a minimum
initial investment as provided in the Wachovia Banks' customer's relevant
account agreement. Institutional Shares are sold at net asset value and are
distributed without a Rule 12b-1 Plan.
Financial institutions and brokers providing sales and/or administrative
services may receive different compensation from one class of shares than from
another class of shares.
The amount of dividends payable to Institutional Shares of a Fund will be
greater than those payable to Investment Shares of the same Fund by the
difference between class expenses and distribution expenses borne by shares of
each respective class. The stated advisory fee is the same for both classes of
shares.
BILTMORE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young, Independent Auditors, on page
60.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
<S> <C> <C>
1993 1992*
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
-------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------------------------------------------------------------
Net investment income 0.03 0.02
-------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
-------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.02)
------------------------------------------------------------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
------------------------------------------------------------------------------------------- --------- ---------
TOTAL RETURN** 3.05% 1.71%
-------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-------------------------------------------------------------------------------------------
Expenses 0.25% 0.14%(a)
-------------------------------------------------------------------------------------------
Net investment income 3.00% 3.38%(a)
-------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.56% 0.65%(a)
-------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $177,090 $84,698
-------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from June 2, 1992 (date of initial public
investment) to November 30, 1992.
** Based on net asset value, which does not reflect the sales load or
redemption
fee, if applicable.
(a) Computed on an annualized basis.
(b) This expense decrease is reflected in both the expenses and net investment
income ratios shown above (Note 5).
(See Notes, which are an integral part of the Financial Statements)
BILTMORE TAX-FREE MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young, Independent Auditors, on page
60.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
<S> <C> <C>
1993 1992*
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
-------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------------------------------------------------------------
Net investment income 0.02 0.01
-------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
-------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.02) (0.01)
------------------------------------------------------------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
------------------------------------------------------------------------------------------- --------- ---------
TOTAL RETURN** 2.30% 1.49%
-------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-------------------------------------------------------------------------------------------
Expenses 0.29% 0.16%(a)
-------------------------------------------------------------------------------------------
Net investment income 2.28% 2.71%(a)
-------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.60% 0.78%(a)
-------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $59,269 $61,632
-------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 14, 1992 (date of initial public
investment) to November 30, 1992.
** Based on net asset value, which does not reflect the sales load or
redemption
fee, if applicable.
(a) Computed on an annualized basis.
(b) This expense decrease is reflected in both the expenses and net investment
income ratios shown above (Note 5).
(See Notes, which are an integral part of the Financial Statements)
BILTMORE U.S. TREASURY MONEY MARKET FUND
FINANCIAL HIGHLIGHTS
INSTITUTIONAL SHARES
--------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Reference is made to the Report of Ernst & Young, Independent Auditors, on page
60.
<TABLE>
<CAPTION>
YEAR ENDED
NOVEMBER 30,
<S> <C> <C>
1993 1992*
NET ASSET VALUE, BEGINNING OF PERIOD $ 1.00 $ 1.00
-------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
-------------------------------------------------------------------------------------------
Net investment income 0.03 0.02
-------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
-------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income (0.03) (0.02)
------------------------------------------------------------------------------------------- --------- ---------
NET ASSET VALUE, END OF PERIOD $ 1.00 $ 1.00
------------------------------------------------------------------------------------------- --------- ---------
TOTAL RETURN** 2.91% 1.90%
-------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
-------------------------------------------------------------------------------------------
Expenses 0.28% 0.17%(a)
-------------------------------------------------------------------------------------------
Net investment income 2.87% 3.24%(a)
-------------------------------------------------------------------------------------------
Expense waiver/reimbursement (b) 0.63% 0.71%(a)
-------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
-------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $65,353 $55,408
-------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from May 7, 1992 (the date of initial
public investment) to November 30, 1992. During the period from February 19,
1992 (start of business) to May 7, 1992, net investment income aggregating
$0.00806 per share ($806) was distributed to Federated Administrative
Services.
** Based on net asset value, which does not reflect the sales load or
redemption
fee, if applicable.
(a) Computed on an annualized basis.
(b) This expense decrease is reflected in both the expenses and net investment
income ratios shown above (Note 5).
(See Notes, which are an integral part of the Financial Statements)
BILTMORE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
-------------- -------------------------------------------------------------------------------- ---------------
*COMMERCIAL PAPER--52.1%
------------------------------------------------------------------------------------------------
FINANCE--AUTOMOTIVE--4.0%
--------------------------------------------------------------------------------
$ 7,500,000 Ford Motor Credit Co., 3.11%-3.33%, 12/2/93-4/15/94 $ 7,500,000
-------------------------------------------------------------------------------- ---------------
FINANCE--COMMERCIAL--8.6%
--------------------------------------------------------------------------------
8,000,000 CIT Group Holdings, Inc., 3.10%-3.18%, 12/2/93-2/4/94 7,977,033
--------------------------------------------------------------------------------
8,000,000 General Electric Capital Corp., 3.10%-3.48%, 12/2/93-3/31/94 8,000,000
-------------------------------------------------------------------------------- ---------------
Total 15,977,033
-------------------------------------------------------------------------------- ---------------
FINANCE--COMPUTERS--4.0%
--------------------------------------------------------------------------------
7,500,000 Xerox Credit Corp., 3.20%-3.30%, 12/1/93-4/8/94 7,441,333
-------------------------------------------------------------------------------- ---------------
FINANCE--FOOD & BEVERAGE--2.1%
--------------------------------------------------------------------------------
4,000,000 Bass Finance, 3.32%, 1/28/94 3,978,604
-------------------------------------------------------------------------------- ---------------
FINANCE--RETAIL--8.3%
--------------------------------------------------------------------------------
7,500,000 Associate Corp. of North America, 3.10%, 12/2/93 7,500,000
--------------------------------------------------------------------------------
8,000,000 Commercial Credit Corp., 3.10%-3.33%, 12/2/93-1/27/94 8,000,000
-------------------------------------------------------------------------------- ---------------
Total 15,500,000
-------------------------------------------------------------------------------- ---------------
FINANCE--TELECOMMUNICATIONS--2.7%
--------------------------------------------------------------------------------
5,000,000 Bell Atlantic Financial Services, 3.11%, 12/2/93 4,999,568
-------------------------------------------------------------------------------- ---------------
FOOD & BEVERAGE--2.1%
--------------------------------------------------------------------------------
4,000,000 Pepsico Inc., 3.08%, 12/3/93 3,999,316
-------------------------------------------------------------------------------- ---------------
OIL & OIL FINANCE--20.3%
--------------------------------------------------------------------------------
7,500,000 Chevron Oil Finance Co., 3.10%, 12/2/93 7,500,000
--------------------------------------------------------------------------------
7,500,000 Cooper Industries, Inc., 3.05%-3.35%, 12/2/93-2/1/94 7,473,495
--------------------------------------------------------------------------------
7,500,000 Cortez Capital, 3.09%, 12/2/93 7,499,356
--------------------------------------------------------------------------------
7,500,000 Exxon Imperial U.S., Inc., 3.06%, 12/2/93 7,499,363
--------------------------------------------------------------------------------
8,000,000 Texaco, Inc., 3.10%, 12/2/93 8,000,000
-------------------------------------------------------------------------------- ---------------
Total 37,972,214
-------------------------------------------------------------------------------- ---------------
TOTAL COMMERCIAL PAPER 97,368,068
-------------------------------------------------------------------------------- ---------------
TIME DEPOSITS--16.6%
------------------------------------------------------------------------------------------------
6,500,000 Barclays Bank, Canada, 3.38%-3.44%, 1/4/94-4/14/94 6,500,000
--------------------------------------------------------------------------------
7,500,000 Commonwealth Bank of Australia, 3.31%-3.38%, 1/5/94-3/9/94 7,500,000
--------------------------------------------------------------------------------
2,500,000 NationsBank, London, 3.31%, 1/10/94 2,500,000
--------------------------------------------------------------------------------
5,000,000 NBD Bank, Canada, 3.09%, 12/2/93 5,000,000
--------------------------------------------------------------------------------
4,500,000 Mitsubishi Bank, Ltd., London, 3.50%, 12/14/93 4,500,000
--------------------------------------------------------------------------------
2,500,000 Royal Bank of Scotland, 3.63%, 6/1/94 2,500,000
--------------------------------------------------------------------------------
2,500,000 SouthTrust Bank of Alabama, 3.31%, 1/25/94 2,500,000
-------------------------------------------------------------------------------- ---------------
TOTAL TIME DEPOSITS 31,000,000
-------------------------------------------------------------------------------- ---------------
**REPURCHASE AGREEMENTS--31.2%
------------------------------------------------------------------------------------------------
38,370,076 Daiwa Securities America, Inc., 3.22%, dated 11/30/93, due 12/1/93 38,370,076
--------------------------------------------------------------------------------
20,000,000 PaineWebber, Inc., 3.20%, dated 11/30/93, due 12/1/93 20,000,000
-------------------------------------------------------------------------------- ---------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 58,370,076
-------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS, AT AMORTIZED COST $ 186,738,144\
-------------------------------------------------------------------------------- ---------------
</TABLE>
* Each issue shows the rate of discount at the time of purchase for discount
issues, or the coupon for interest bearing issues.
** The repurchase agreements are fully collateralized by U.S. government and/or
agency obligations based on market prices at the date of the portfolio.
\ Also represents cost for federal tax purposes.
Note: The categories of investments are shown as a percentage of net assets
($186,932,159) at November 30, 1993.
(See Notes, which are an integral part of the Financial Statements)
BILTMORE MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
------------------------------------------------------------------------------------------------
Investments in repurchase agreements $ 58,370,076
-------------------------------------------------------------------------------
Investments in securities 128,368,068
------------------------------------------------------------------------------- ---------------
Total investments, at amortized cost and value
(Notes 2A and 2B) $ 186,738,144
------------------------------------------------------------------------------------------------
Interest receivable 565,057
------------------------------------------------------------------------------------------------
Deferred expenses (Note 2F) 35,132
------------------------------------------------------------------------------------------------ ---------------
Total assets 187,338,333
------------------------------------------------------------------------------------------------
LIABILITIES:
------------------------------------------------------------------------------------------------
Dividends payable 398,412
-------------------------------------------------------------------------------
Accrued expenses 7,762
------------------------------------------------------------------------------- ---------------
Total liabilities 406,174
------------------------------------------------------------------------------------------------ ---------------
NET ASSETS for 186,932,159 shares of beneficial interest outstanding $ 186,932,159
------------------------------------------------------------------------------------------------ ---------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share:
------------------------------------------------------------------------------------------------
Institutional Shares ($177,090,062 / 177,090,062 shares of beneficial interest outstanding)
$1.00
------------------------------------------------------------------------------------------------ ---------------
Investment Shares ($9,842,097 / 9,842,097 shares of beneficial interest outstanding) $1.00
------------------------------------------------------------------------------------------------ ---------------
</TABLE>
(See Notes, which are an integral part of the Financial Statements)
BILTMORE MONEY MARKET FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1993
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
---------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 4,572,488
---------------------------------------------------------------------------------------------------
EXPENSES:
---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 703,812
------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 5) 183,805
------------------------------------------------------------------------------------
Trustees' fees 36,195
------------------------------------------------------------------------------------
Custodian fees (Note 5) 28,152
------------------------------------------------------------------------------------
Recordkeeper fees (Note 5) 43,796
------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 5) 23,666
------------------------------------------------------------------------------------
Legal fees 12,809
------------------------------------------------------------------------------------
Printing and postage 29,319
------------------------------------------------------------------------------------
Insurance premiums 2,248
------------------------------------------------------------------------------------
Fund share registration costs 24,492
------------------------------------------------------------------------------------
Distribution fees (Note 5) 20,582
------------------------------------------------------------------------------------
Auditing fees 19,175
------------------------------------------------------------------------------------
Miscellaneous 29,783
------------------------------------------------------------------------------------ -------------
Total expenses 1,157,834
------------------------------------------------------------------------------------
Deduct--
------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 549,233
-----------------------------------------------------------------------
Waiver of administrative personnel and services fee (Note 5) 142,842
-----------------------------------------------------------------------
Waiver of custodian fees (Note 5) 28,152
-----------------------------------------------------------------------
Waiver of distribution fees (Note 5) 5,145
-----------------------------------------------------------------------
Reimbursement of other operating expenses by Administrator (Note 5) 67,462 792,834
----------------------------------------------------------------------- ----------- -------------
Net expenses 365,000
--------------------------------------------------------------------------------------------------- -------------
Net investment income $ 4,207,488
--------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes, which are an integral part of the Financial Statements)
BILTMORE MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
<S> <C> <C>
1993 1992*
INCREASE (DECREASE) IN NET ASSETS:
----------------------------------------------------------------------------
OPERATIONS--
----------------------------------------------------------------------------
Net investment income $ 4,207,488 $ 1,432,694
---------------------------------------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
----------------------------------------------------------------------------
Dividends to shareholders from net investment income:
----------------------------------------------------------------------------
Institutional Shares (4,068,438) (1,413,297)
----------------------------------------------------------------------------
Investment Shares (139,050) (19,397)
---------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from distributions to
shareholders (4,207,488) (1,432,694)
---------------------------------------------------------------------------- ---------------- ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
----------------------------------------------------------------------------
Proceeds from sales of shares 523,338,578 358,902,598
----------------------------------------------------------------------------
Cost of shares redeemed (424,210,993) (271,098,024)
---------------------------------------------------------------------------- ---------------- ----------------
Change in net assets from fund share transactions 99,127,585 87,804,574
---------------------------------------------------------------------------- ---------------- ----------------
Change in net assets 99,127,585 87,804,574
----------------------------------------------------------------------------
NET ASSETS:
----------------------------------------------------------------------------
Beginning of period 87,804,574 --
---------------------------------------------------------------------------- ---------------- ----------------
End of period $ 186,932,159 $ 87,804,574
---------------------------------------------------------------------------- ---------------- ----------------
</TABLE>
*For the period from June 2, 1992 (date of initial public investment) to
November 30, 1992.
(See Notes, which are an integral part of the Financial Statements)
BILTMORE TAX-FREE MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
MOODY'S
PRINCIPAL OR S&P*
AMOUNT (NOTE 6) VALUE
<C> <S> <C> <C>
------------- ---------------------------------------------------------------------- ---------- --------------
SHORT-TERM MUNICIPAL SECURITIES--94.7%
-------------------------------------------------------------------------------------
ALABAMA--12.1%
----------------------------------------------------------------------
$ 2,085,000 Alabama HFA Weekly VRDNs (SouthTrust Bank of Alabama LOC) A-1 $ 2,085,000
----------------------------------------------------------------------
4,000,000 Birmingham City, AL, Weekly VRDNs (First Alabama Bank LOC) A-1+ 4,000,000
----------------------------------------------------------------------
2,500,000 Huntsville, AL Health Care Authority, Weekly VRDNs (Amsouth Bank LOC) VMIG-1 2,500,000
----------------------------------------------------------------------
1,500,000 Mobile, AL, IDB Weekly VRDNs (Swiss Bank LOC) A-1+ 1,500,000
---------------------------------------------------------------------- --------------
Total 10,085,000
---------------------------------------------------------------------- --------------
ARKANSAS--4.8%
----------------------------------------------------------------------
425,000 Arkansas Hospital Equipment Finance Authority Weekly VRDNs (Credit
Suisse LOC) A-1+ 425,000
----------------------------------------------------------------------
750,000 Fayetteville, AR, Weekly VRDNs (Public Facility)/(Mitsubishi Bank LTD
LOC) VMIG-1 750,000
----------------------------------------------------------------------
2,800,000 University of Arkansas Weekly VRDNs (Board of Trustees)/
(First Union LOC) A-1+ 2,800,000
---------------------------------------------------------------------- --------------
Total 3,975,000
---------------------------------------------------------------------- --------------
CALIFORNIA--3.7%
----------------------------------------------------------------------
1,100,000 Irvine Ranch, CA, Water District Weekly VRDNs (Morgan Guaranty LOC) VMIG-1 1,100,000
----------------------------------------------------------------------
1,000,000 San Francisco Unified School District, CA, 3.50%, 8/12/94 SP-1+ 1,003,035
----------------------------------------------------------------------
1,000,000 Visalia, CA, Weekly VRDNs (Convention Central Project)/ Mitsubishi LTD
LOC) A-1+ 1,000,000
---------------------------------------------------------------------- --------------
Total 3,103,035
---------------------------------------------------------------------- --------------
CONNECTICUT--.8%
----------------------------------------------------------------------
700,000 Connecticut State Economic Recovery Notes Weekly VRDNs (Series B) VMIG-1 700,000
---------------------------------------------------------------------- --------------
DISTRICT OF COLUMBIA--1.2%
----------------------------------------------------------------------
1,000,000 District of Columbia Hospital Revenue Weekly VRDNs
(Columbia Hospital For Women 1988A)/(Mitsubishi
International LOC) VMIG-1 1,000,000
---------------------------------------------------------------------- --------------
FLORIDA--8.5%
----------------------------------------------------------------------
2,200,000 Broward County, FL, HFA Weekly VRDNs (Welleby Apt. Project)/(Bank of
America N.T. & S.A. LOC) VMIG-1 2,200,000
----------------------------------------------------------------------
2,100,000 Collier County, FL, HFA Monthly VRDNs (River Beach
Project)/(Morgan Guaranty LOC) VMIG-1 2,100,000
----------------------------------------------------------------------
900,000 Florida Escambia County Facility Authority Weekly VRDNs (Florida
Convalescent Centers Project)/(Toronto Dominion LOC) P-1 900,000
----------------------------------------------------------------------
900,000 Polk County, FL, IDA Weekly VRDNs (Florida Convalescent Center
Project)/(Toronto Dominion LOC) P-1 900,000
----------------------------------------------------------------------
1,000,000 St. Lucie County, FL, Weekly VRDNs (Florida Power & Light project) P-1 1,000,000
---------------------------------------------------------------------- --------------
Total 7,100,000
---------------------------------------------------------------------- --------------
GEORGIA--4.8%
----------------------------------------------------------------------
2,000,000 Burke County, GA, Development Pollution Authority, 2.50%, 1/6/94
(Credit Suisse LOC) P-1 2,000,000
----------------------------------------------------------------------
1,000,000 Housing Authority of Fulton County, GA, 3.10%, 8/1/94 (First Mutual
Savings--Florida LOC) A-1+ 1,000,000
----------------------------------------------------------------------
1,000,000 Development Authority of Walton County, GA, Weekly VRDNs (Trust
Company Bank LOC) Aa3 1,000,000
---------------------------------------------------------------------- --------------
Total 4,000,000
---------------------------------------------------------------------- --------------
ILLINOIS--13.7%
----------------------------------------------------------------------
1,000,000 Chicago, IL, GO Weekly VRDNs (Canadian Imperial Bank LOC) VMIG-1 1,000,000
----------------------------------------------------------------------
2,875,000 Cook County, IL, 3.20%, 4/1/94 MIG-1 2,881,536
----------------------------------------------------------------------
1,500,000 Illinois Cook County Township District, 4.625%, 12/1/93 AA1 1,500,000
----------------------------------------------------------------------
1,000,000 Illinois Development Finance Authority Revenue Weekly VRDNs (National
Westminster Bank LOC) VMIG-1 1,000,000
----------------------------------------------------------------------
2,000,000 Illinois State, 3.25%, 5/16/94 MIG-1 2,003,123
----------------------------------------------------------------------
3,000,000 Illinois State, Weekly VRDNs (Toll Highway Authority)/
(Societe Generale LOC) VMIG-1 3,000,000
---------------------------------------------------------------------- --------------
Total 11,384,659
---------------------------------------------------------------------- --------------
INDIANA--2.5%
----------------------------------------------------------------------
2,100,000 Indianapolis, IN, Weekly VRDNs (Canal Square Project)/ (Societe
Generale LOC) VMIG-1 2,100,000
---------------------------------------------------------------------- --------------
IOWA--3.8%
----------------------------------------------------------------------
600,000 Indianola, Iowa, IDR Monthly VRDNs (HY-VEE Foods)/ (Swiss Bank LOC) A-1+ 600,000
----------------------------------------------------------------------
2,500,000 Iowa State, 3.25%, 6/30/94 (Union Bank of Switzerland LOC) MIG-1 2,505,611
---------------------------------------------------------------------- --------------
Total 3,105,611
---------------------------------------------------------------------- --------------
KENTUCKY--1.2%
----------------------------------------------------------------------
1,000,000 City of Georgetown, KY, Educational Institution Weekly VRDNs (PNC
Bank, Kentucky, Inc. LOC) VMIG-1 1,000,000
---------------------------------------------------------------------- --------------
LOUISIANA--2.9%
----------------------------------------------------------------------
1,500,000 Calcasieu Parrish, LA, IDR Pollution Control Weekly VRDNs (National
Westminster Bank LOC) P-1 1,500,000
----------------------------------------------------------------------
900,000 Lake Charles Harbor & Terminal District, LA, Weekly VRDNs (National
Westminster Bank LOC) P-1 900,000
---------------------------------------------------------------------- --------------
Total 2,400,000
---------------------------------------------------------------------- --------------
MARYLAND--2.4%
----------------------------------------------------------------------
2,000,000 Maryland Health Higher Education Facility Anne Arumdel Hospital Weekly
VRDNs (Mellon Bank LOC) VMIG-1 2,000,000
---------------------------------------------------------------------- --------------
MASSACHUSETTS--2.4%
----------------------------------------------------------------------
2,000,000 Massachusetts State, Daily VRDNs (Series E) (ABN--AMRO LOC) VMIG-1 2,000,000
---------------------------------------------------------------------- --------------
MICHIGAN--5.9%
----------------------------------------------------------------------
4,600,000 Michigan State Hospital Finance Authority Revenue, 11.25%, 6/1/94
(Prerefunded) AAA 4,885,662
---------------------------------------------------------------------- --------------
MISSOURI--1.8%
----------------------------------------------------------------------
1,500,000 Missouri Planned Industry Expansion Authority of St. Louis Weekly
VRDNs (PNC Bank, N.A. LOC) AA3 1,500,000
---------------------------------------------------------------------- --------------
NORTH CAROLINA--6.6%
----------------------------------------------------------------------
2,500,000 North Carolina Eastern Municipal Power, 2.40%, 3/9/94 (UBS & Morgan
Guaranty LOC) A-1+ 2,500,000
----------------------------------------------------------------------
3,000,000 Wake County, NC, 4.00%, 4/1/94 AAA 3,014,256
---------------------------------------------------------------------- --------------
Total 5,514,256
---------------------------------------------------------------------- --------------
</TABLE>
BILTMORE TAX-FREE MONEY MARKET FUND
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
CREDIT
RATING:
PRINCIPAL MOODY'S
AMOUNT OR S&P*
OR SHARES (NOTE 6) VALUE
<C> <S> <C> <C>
------------- ---------------------------------------------------------------------- ---------- --------------
SHORT-TERM MUNICIPAL SECURITIES--CONTINUED
-------------------------------------------------------------------------------------
PENNSYLVANIA--2.4%
----------------------------------------------------------------------
$ 2,000,000 Pennsylvania State University, 3.00%, 12/5/94 SP-1+ $ 2,005,240
---------------------------------------------------------------------- --------------
TENNESSEE--1.3%
----------------------------------------------------------------------
1,000,000 Shelby County, TN, 6.25%, 8/1/94 (Prerefunded) AAA 1,032,280
---------------------------------------------------------------------- --------------
TEXAS--4.9%
----------------------------------------------------------------------
1,000,000 Dallas, TX, 9.50%, 6/1/94 (Prerefunded) AAA 1,033,827
----------------------------------------------------------------------
1,000,000 Houston, TX, 9.75%, 5/1/94 (Prerefunded) AAA 1,029,340
----------------------------------------------------------------------
1,000,000 Lower Neches Valley Authority Texan Monthly VRDNs, 2.70%, 2/15/94
(Chevron Guaranty) A-1+ 1,000,000
----------------------------------------------------------------------
1,000,000 San Antonio, TX, Electric & Gas Revenue, 8.00%, 2/1/94 (Prerefunded) AAA 1,024,154
---------------------------------------------------------------------- --------------
Total 4,087,321
---------------------------------------------------------------------- --------------
WASHINGTON--3.6%
----------------------------------------------------------------------
3,000,000 Port Anacortes, WA, IDA, 2.63%, 2/10/94 P-1 3,000,000
---------------------------------------------------------------------- --------------
WYOMING--3.6%
----------------------------------------------------------------------
3,000,000 Uinta County, WY, Pollution Control Revenue Weekly VRDNs (Chevron
Guaranty)) P-1 3,000,000
---------------------------------------------------------------------- --------------
TOTAL SHORT-TERM MUNICIPAL BONDS 78,978,064
---------------------------------------------------------------------- --------------
REGULATED INVESTMENT COMPANIES--6.9%
-------------------------------------------------------------------------------------
1,864,700 AIM Management Co. 1,864,700
----------------------------------------------------------------------
3,840,233 Fidelity Tax-Exempt Money Market Fund Instruments
Portfolio 3,840,233
---------------------------------------------------------------------- --------------
TOTAL REGULATED INVESTMENT COMPANIES 5,704,933
---------------------------------------------------------------------- --------------
TOTAL INVESTMENTS, AT AMORTIZED COST $ 84,682,997\
---------------------------------------------------------------------- --------------
</TABLE>
\ Also represents cost for federal tax purposes.
* See Notes to Portfolio of Investments on Page 45.
Note: The categories of investments are shown as a percentage of net assets
($83,244,579) at November 30, 1993.
BILTMORE TAX-FREE MONEY MARKET FUND
--------------------------------------------------------------------------------
The following abbreviations are used throughout this portfolio:
GO--General Obligation
HFA--Housing Finance Authority
IDA--Industrial Development Authority
IDB--Industrial Development Board
IDR--Industrial Development Revenue
LOC--Letter(s) of Credit
VRDNs--Variable Rate Demand Notes
BILTMORE TAX-FREE MONEY MARKET FUND
--------------------------------------------------------------------------------
NOTES TO PORTFOLIO OF INVESTMENTS
SHORT-TERM MUNICIPAL OBLIGATION RATINGS
S&P
A Standard & Poor's note rating reflects the liquidity concerns and market
access risks unique to notes.
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 (+) designation.
SP-2 Satisfactory capacity to pay principal and interest.
MOODY'S
Moody's short-term ratings are designated Moody's Investment Grade (MIG OR VMIG
(see below)). The purpose of the MIG or VMIG ratings is to provide investors
with a simple system by which the relative investment qualities of short-term
obligations may be evaluated.
MIG-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 This designation denotes high quality. Margins of protection are ample,
although not so large as in the preceding group.
VARIABLE RATE DEMAND NOTES (VRDNS)
AND
TENDER OPTION BONDS (TOBS)
RATINGS
S&P
Standard & Poor's assigns dual ratings to all long-term debt issues that have as
part of their provisions a variable rate demand feature. The first rating
(long-term rating) addresses the likelihood of repayment of principal and
interest when due, and the second rating (short-term rating) describes the
demand characteristics. Several examples are AAA/A-1+, AA/A-1K, A/A-1. (The
definitions for the short-term ratings are provided below.)
MOODY'S
Short-term ratings on issues with demand features are differentiated by the use
of the VMIG symbol to reflect such characteristics as payment upon periodic
demand rather than fixed maturity dates and payment relying on external
liquidity.
In this case, two ratings are usually assigned, (for example, Aaa/VMIG-1) with
the first representing an evaluation of the degree of risk associated with
scheduled principal and interest payments, and the second representing an
evaluation of the degree of risk associated with the demand feature. The VMIG
rating can be assigned a 1 or 2 designation using the same definitions described
above for the MIG rating.
COMMERCIAL PAPER (CP) RATINGS
S&P
A Standard & Poor's commercial paper rating is a current assessment of the
likelihood of timely payment of debt having an original maturity of no more than
365 days.
A-1 This designation indicates that the degree of safety regarding timely
payment is either overwhelming or very strong. Those issues determined to
possess overwhelming safety characteristics are denoted with a plus (+)
designation.
A-2 Capacity for timely payment on issues with this designation is strong.
However, the relative degree of safety is not as high as for issues
designated "A-1".
MOODY'S
P-1 Issuers rated PRIME-1 (or related supporting institutions) have a superior
capacity for repayment of short-term promissory obligations.
P-2 Issuers rated PRIME-2 (or related supporting institutions) have a strong
capacity for repayment of short-term promissory obligations.
LONG-TERM DEBT RATINGS
S&P
AAA Debt rated "AAA" has the highest rating assigned by Standard & Poor's.
Capacity to pay interest and repay principal is extremely strong.
AA Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the highest 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 rate
categories.
MOODY'S
Aaa Bonds that 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 edge." Interest payments are protected by a large margin and principal
is secure. While the various protective elements are likely to change, such
changes which can be foreseen are most unlikely to impair the fundamentally
strong position of such issues.
Aa Bonds that 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 that 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 that suggest a susceptibility to impairment some time in the future.
NR indicates that both the bonds and the obligor or credit enhancer are not
currently rated by S&P's or Moody's with respect to short-term indebtedness.
However, management considers them to be of comparable quality to securities
rated A-1 or P-1.
NR (1) The underlying issuer/obligor/guarantor has other outstanding debt rated
"AAA" by Standard & Poor's or "Aaa" by Moody's.
NR (2) The underlying issuer/obligor/guarantor has other outstanding debt rated
"AA" by Standard & Poor's or "Aa" by Moody's.
NR (3) The underlying issuer/obligor/guarantor has other outstanding debt rated
"A" by Standard & Poor's or by Moody's.
(See Notes, which are an integral part of the Financial Statements)
BILTMORE TAX-FREE MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
--------------------------------------------------------------------------------------------------
Investments, at amortized cost and value (Note 2A) $ 84,682,997
--------------------------------------------------------------------------------------------------
Cash 8,699
--------------------------------------------------------------------------------------------------
Interest receivable 672,096
--------------------------------------------------------------------------------------------------
Deferred expenses (Note 2F) 32,048
-------------------------------------------------------------------------------------------------- --------------
Total assets 85,395,840
--------------------------------------------------------------------------------------------------
LIABILITIES:
--------------------------------------------------------------------------------------------------
Payable for investments purchased $ 2,005,240
-----------------------------------------------------------------------------------
Dividends payable 144,190
-----------------------------------------------------------------------------------
Accrued expenses 1,831
----------------------------------------------------------------------------------- -------------
Total liabilities 2,151,261
-------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 83,244,579 shares of beneficial interest outstanding $ 83,244,579
-------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share:
--------------------------------------------------------------------------------------------------
Institutional Shares ($59,268,563 / 59,268,563 shares of beneficial interest outstanding) $1.00
-------------------------------------------------------------------------------------------------- --------------
Investment Shares ($23,976,016 / 23,976,016 shares of beneficial interest outstanding)
$1.00
-------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes, which are an integral part of the Financial Statements)
BILTMORE TAX-FREE MONEY MARKET FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1993
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
----------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 1,948,752
----------------------------------------------------------------------------------------------------
EXPENSES:
----------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 380,443
----------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 5) 100,161
----------------------------------------------------------------------------------------
Trustees' fees 9,465
----------------------------------------------------------------------------------------
Custodian fees (Note 5) 15,218
----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 5) 23,759
----------------------------------------------------------------------------------------
Recordkeeper fees (Note 5) 37,320
----------------------------------------------------------------------------------------
Legal fees 6,951
----------------------------------------------------------------------------------------
Printing and postage 21,396
----------------------------------------------------------------------------------------
Auditing fees 19,175
----------------------------------------------------------------------------------------
Insurance premiums 1,744
----------------------------------------------------------------------------------------
Registration fees 22,383
----------------------------------------------------------------------------------------
Distribution fees (Note 5) 59,172
----------------------------------------------------------------------------------------
Miscellaneous 32,359
---------------------------------------------------------------------------------------- ----------
Total expenses 729,546
----------------------------------------------------------------------------------------
Deduct--
----------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 297,388
----------------------------------------------------------------------------
Waiver of administrative personnel and services fee (Note 5) 79,813
----------------------------------------------------------------------------
Waiver of custodian fees (Note 5) 15,218
----------------------------------------------------------------------------
Waiver of distribution fees (Note 5) 14,792
----------------------------------------------------------------------------
Reimbursement of other operating expenses by Administrator (Note 5) 61,079 468,290
---------------------------------------------------------------------------- ---------- ----------
Net expenses 261,256
---------------------------------------------------------------------------------------------------- -----------
Net investment income $ 1,687,496
---------------------------------------------------------------------------------------------------- -----------
</TABLE>
(See Notes, which are an integral part of the Financial Statements)
BILTMORE TAX-FREE MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
<S> <C> <C>
----------------------------------
<CAPTION>
1993 1992*
---------------- ----------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
-----------------------------------------------------------------------------
OPERATIONS--
-----------------------------------------------------------------------------
Net investment income $ 1,687,496 $ 800,075
-----------------------------------------------------------------------------
Net realized gain (loss) on investments ($5,343 net gain and
$5,749 net loss, respectively, as computed for federal tax purposes)
(Note 2D) -- (5,749)
----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from operations 1,687,496 794,326
----------------------------------------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
-----------------------------------------------------------------------------
Dividends to shareholders from net investment income:
-----------------------------------------------------------------------------
Institutional Shares (1,400,375) (761,917)
-----------------------------------------------------------------------------
Investment Shares (287,121) (32,409)
----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from distributions to shareholders (1,687,496) (794,326)
----------------------------------------------------------------------------- ---------------- ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
-----------------------------------------------------------------------------
Proceeds from sale of shares 202,842,602 178,065,356
-----------------------------------------------------------------------------
Cost of shares redeemed (186,567,848) (111,095,531)
----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets from fund share transactions 16,274,754 66,969,825
----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets 16,274,754 66,969,825
-----------------------------------------------------------------------------
NET ASSETS:
-----------------------------------------------------------------------------
Beginning of period 66,969,825 --
----------------------------------------------------------------------------- ---------------- ----------------
End of period (including undistributed net investment income
of $0 and $5,749, respectively) $ 83,244,579 $ 66,969,825
----------------------------------------------------------------------------- ---------------- ----------------
</TABLE>
*For the period from May 14, 1992 (date of initial public investment) to
November 30, 1992.
(See Notes, which are an integral part of the Financial Statements)
BILTMORE U.S. TREASURY MONEY MARKET FUND
PORTFOLIO OF INVESTMENTS
NOVEMBER 30, 1993
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
<C> <S> <C>
-------------- --------------------------------------------------------------------------------- --------------
U.S. GOVERNMENT OBLIGATIONS--43.2%
-------------------------------------------------------------------------------------------------
U.S. TREASURY BILLS
---------------------------------------------------------------------------------
$ 36,000,000 2/10/94-10/20/94 $ 35,573,602
--------------------------------------------------------------------------------- --------------
*REPURCHASE AGREEMENTS--57.0%
-------------------------------------------------------------------------------------------------
3,000,000 Barclays De Zoete Wedd, Inc., 3.18%, dated 11/30/93, due 12/1/93 3,000,000
---------------------------------------------------------------------------------
3,000,000 Carroll McEntee & McGinley Inc., 3.20%, dated 11/30/93,
due 12/1/93 3,000,000
---------------------------------------------------------------------------------
17,871,523 Daiwa Securities America, Inc., 3.22%, dated 11/30/93,
due 12/1/93 17,871,523
---------------------------------------------------------------------------------
3,000,000 Merrill Lynch, Pierce, Fenner & Smith Inc. 3.15%, dated 11/30/93, due 12/1/93 3,000,000
---------------------------------------------------------------------------------
3,000,000 Nomura Securities International, Inc., 3.13%, dated 11/30/93,
due 12/1/93 3,000,000
---------------------------------------------------------------------------------
17,000,000 PaineWebber, Inc., 3.23%, dated 11/30/93, due 12/1/93 17,000,000
--------------------------------------------------------------------------------- --------------
TOTAL REPURCHASE AGREEMENTS (NOTE 2B) 46,871,523
--------------------------------------------------------------------------------- --------------
TOTAL INVESTMENTS, AT AMORTIZED COST $ 82,445,125\
--------------------------------------------------------------------------------- --------------
</TABLE>
\ Also represents cost for federal tax purposes.
* Repurchase agreements are fully collateralized by U.S. Treasury obligations.
Note: The categories of investments are shown as a percentage of net assets
($82,294,360) at November 30, 1993.
(See Notes, which are an integral part of the Financial Statements)
BILTMORE U.S. TREASURY MONEY MARKET FUND
STATEMENT OF ASSETS AND LIABILITIES
NOVEMBER 30, 1993
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
-------------------------------------------------------------------------------------------------
Investments in repurchase agreements (Note 2B) $ 46,871,523
---------------------------------------------------------------------------------
Investments in securities 35,573,602
--------------------------------------------------------------------------------- --------------
Total investments, at amortized cost and value (Note 2A and 2B) $ 82,445,125
-------------------------------------------------------------------------------------------------
Interest receivable 4,178
-------------------------------------------------------------------------------------------------
Deferred expenses (Note 2F) 28,561
------------------------------------------------------------------------------------------------- --------------
Total assets 82,477,864
-------------------------------------------------------------------------------------------------
LIABILITIES:
-------------------------------------------------------------------------------------------------
Dividends payable 183,504
--------------------------------------------------------------------------------- --------------
Total liabilities 183,504
------------------------------------------------------------------------------------------------- --------------
NET ASSETS for 82,294,360 shares of beneficial interest outstanding $ 82,294,360
------------------------------------------------------------------------------------------------- --------------
NET ASSET VALUE, Offering Price, and Redemption Price Per Share:
-------------------------------------------------------------------------------------------------
Institutional Shares ($65,352,944 / 65,352,944 shares of beneficial interest outstanding)
$1.00
------------------------------------------------------------------------------------------------- --------------
Investment Shares ($16,941,416 / 16,941,416 shares of beneficial interest outstanding)
$1.00
------------------------------------------------------------------------------------------------- --------------
</TABLE>
(See Notes, which are an integral part of the Financial Statements)
BILTMORE U.S. TREASURY MONEY MARKET FUND
STATEMENT OF OPERATIONS
YEAR ENDED NOVEMBER 30, 1993
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C> <C>
INVESTMENT INCOME:
---------------------------------------------------------------------------------------------------
Interest income (Note 2C) $ 2,099,428
---------------------------------------------------------------------------------------------------
EXPENSES:
---------------------------------------------------------------------------------------------------
Investment advisory fee (Note 5) $ 333,904
--------------------------------------------------------------------------------------
Administrative personnel and services fee (Note 5) 88,313
--------------------------------------------------------------------------------------
Recordkeeper fees (Note 5) 33,110
--------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees (Note 5) 22,492
--------------------------------------------------------------------------------------
Custodian fees (Note 5) 13,358
--------------------------------------------------------------------------------------
Distribution fees (Note 5) 11,831
--------------------------------------------------------------------------------------
Printing and postage 11,681
--------------------------------------------------------------------------------------
Legal 9,862
--------------------------------------------------------------------------------------
Registration fees 29,239
--------------------------------------------------------------------------------------
Auditing fees 19,175
--------------------------------------------------------------------------------------
Trustees' fees 10,902
--------------------------------------------------------------------------------------
Insurance premiums 1,199
--------------------------------------------------------------------------------------
Miscellaneous 34,072
-------------------------------------------------------------------------------------- -----------
Total expenses 619,138
--------------------------------------------------------------------------------------
Deduct--
--------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 5) $ 276,657
-------------------------------------------------------------------------
Waiver of administrative personnel and services fee (Note 5) 71,133
-------------------------------------------------------------------------
Waiver of custodian fees (Note 5) 13,358
-------------------------------------------------------------------------
Waiver of distribution fees (Note 5) 2,966
-------------------------------------------------------------------------
Reimbursement of other operating expenses by Administrator (Note 5) 55,602 419,716
------------------------------------------------------------------------- ----------- -----------
Net expenses 199,422
--------------------------------------------------------------------------------------------------- -------------
Net investment income $ 1,900,006
--------------------------------------------------------------------------------------------------- -------------
</TABLE>
(See Notes, which are an integral part of the Financial Statements)
BILTMORE U.S. TREASURY MONEY MARKET FUND
STATEMENT OF CHANGES IN NET ASSETS
--------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED NOVEMBER 30,
<S> <C> <C>
1993 1992*
INCREASE (DECREASE) IN NET ASSETS:
-----------------------------------------------------------------------------
OPERATIONS--
-----------------------------------------------------------------------------
Net investment income $ 1,900,006 $ 926,987
----------------------------------------------------------------------------- ---------------- ----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 3)--
-----------------------------------------------------------------------------
Dividends to shareholders from net investment income:
-----------------------------------------------------------------------------
Institutional shares (1,826,489) (926,987)
-----------------------------------------------------------------------------
Investment shares (73,517) --
----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets resulting from distributions to shareholders (1,900,006) (926,987)
----------------------------------------------------------------------------- ---------------- ----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 4)--
-----------------------------------------------------------------------------
Proceeds from sale of shares 288,944,990 211,639,475
-----------------------------------------------------------------------------
Cost of shares redeemed (262,058,559) (156,231,546)
----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets from fund share transactions 26,886,431 55,407,929
----------------------------------------------------------------------------- ---------------- ----------------
Change in net assets 26,886,431 55,407,929
-----------------------------------------------------------------------------
NET ASSETS:
-----------------------------------------------------------------------------
Beginning of period 55,407,929 --
----------------------------------------------------------------------------- ---------------- ----------------
End of period $ 82,294,360 $ 55,407,929
----------------------------------------------------------------------------- ---------------- ----------------
</TABLE>
*For the period from May 7, 1992 (date of initial public investment) to November
30, 1992.
(See Notes, which are an integral part of the Financial Statements)
BILTMORE MONEY MARKET FUNDS
COMBINED NOTES TO FINANCIAL STATEMENTS
NOVEMBER 30, 1993
--------------------------------------------------------------------------------
(1) ORGANIZATION
The Biltmore Funds (the "Trust") is registered under the Investment Company Act
of 1940, as amended, as an open-end, management investment company. The Trust
consists of eleven diversified portfolios. The financial statements included
herein present only those of the Biltmore Money Market Fund (Money Market Fund),
the Biltmore Tax-Free Money Market Fund (Tax-Free Fund), and the Biltmore U.S.
Treasury Money Market Fund (U.S. Treasury Fund) (hereinafter each referred to as
a "Fund," or collectively as the "Funds" or the "Biltmore Money Market Funds").
The financial statements of the other portfolios are presented separately. The
assets of each portfolio are segregated, and a shareholder's interest is limited
to the portfolio in which shares are held.
The Funds offer two classes of shares ("Institutional Shares" and "Investment
Shares"). Investment Shares are identical in all respects to Institutional
Shares, except that Investment Shares are sold pursuant to a distribution plan
(the "Plan") adopted in accordance with Rule 12b-1 under the Investment Company
Act of 1940, as amended. Under the Plan, each Fund may pay Federated Securities
Corp. ("FSC") a fee at an annual rate up to 0.40 of 1% of the average aggregate
net asset value of Investment Shares of each Fund to finance any activity which
is principally intended to result in the sale of Investment Shares.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by each Fund in the preparation of its financial statements. The
policies are in conformity with generally accepted accounting principles.
A. INVESTMENT VALUATIONS--The Board of Trustees ("Trustees") has determined
that the best method currently available for valuing portfolio securities
for the Funds is amortized cost. Each Fund's use of the amortized cost
method to value its portfolio securities is conditioned on its compliance
with Rule 2a-7 under the Investment Company Act of 1940, as amended.
Investments in other regulated investment companies are valued at net asset
value.
B. REPURCHASE AGREEMENTS--It is the policy of the Funds to require the
custodian bank to take possession, to have legally segregated in the
Federal Reserve Book Entry System or to have segregated within the
custodian bank's vault, all securities held as collateral in support of
repurchase agreement investments. Additionally, procedures have been
established by the Funds to monitor, on a daily basis, the market value of
each repurchase agreement's underlying investments to ensure the existence
of a proper level of collateral.
The Funds will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Funds' investment adviser to be creditworthy pursuant to guidelines
established by the Trustees. Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase agreement.
Accordingly, the Funds could receive less than the repurchase price on the
sale of collateral securities.
C. INCOME--Interest income is recorded on the accrual basis. Interest income
includes interest and discount earned (net of premium), including original
issue discount as required by the Internal Revenue Code (the "Code"), plus
net realized gains, if any, on portfolio securities.
D. FEDERAL TAXES--It is each Fund's policy to comply with the provisions of
the Code applicable to regulated investment companies and to distribute to
shareholders each year all of each Fund's taxable income, including any net
realized gain on investments. Accordingly, no provision for federal income
tax is necessary.
At November 30, 1993, the Tax-Free Money Market Fund, for federal tax
purposes, had a capital loss carryforward of $406, which will reduce the
Fund's taxable income arising from future net realized gain on investments,
if any, to the extent permitted by the Code, and thus will reduce the
amount of distributions to shareholders which would otherwise be necessary
to relieve the Fund of any liability for federal tax. Pursuant to the Code,
such capital loss carryforward will expire in 2000.
Dividends paid by the Tax-Free Fund representing net interest received on
tax-exempt municipal securities are not includable by shareholders as gross
income for federal income tax purposes because the Tax-Free Fund intends to
meet certain requirements of the Code applicable to regulated investment
companies which will enable the Tax-Free Fund to pay tax-exempt interest
dividends. The portion of such interest, if any, earned on private activity
municipal bonds issued after August 7, 1986 may be considered a tax
preference item to shareholders.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Funds may engage in
when-issued or delayed delivery transactions. To the the extent the Funds
engage in such transactions, they will do so for the purpose of acquiring
portfolio securities consistent with their investment objectives and
policies and not for the purpose of investment leverage. The Funds will
record a when-issued security and the related liability on the trade date.
Until the securities are received and paid for, the Funds will maintain
security positions such that sufficient liquid assets will be available to
make payment for the securities purchased. Securities purchased on a
when-issued or delayed delivery basis are marked to market daily and begin
earning interest on the settlement date.
F. DEFERRED EXPENSES--Costs incurred by each Fund with respect to the
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized on a straight-line basis over a period of five years from each
Fund's commencement date.
G. OTHER--Investment transactions are accounted for as of the trade date of
the transaction.
(3) DIVIDENDS
Each Fund computes its net income daily, and, immediately prior to the
calculation of its net asset value at the close of business, declares and
records dividends to shareholders of record at the time of the previous
computation of the Fund's net asset value. Payment of dividends is made monthly
in cash or in additional shares at the net asset value on the payable date.
(4) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value) for each
class of shares. At November 30, 1993, capital paid-in for the Money Market
Fund, the Tax-Free Fund, and the U.S. Treasury Fund aggregated $186,932,159,
$83,244,579 and $82,294,360, respectively. Transactions in Fund shares were as
follows:
<TABLE>
<CAPTION>
MONEY MARKET FUND TAX-FREE FUND
<S> <C> <C> <C> <C>
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30,
<CAPTION>
1993 1992* 1993 1992**
INSTITUTIONAL SHARES
<S> <C> <C> <C> <C>
Shares outstanding, beginning of period 84,698,420 -- 61,632,180 --
-----------------------------------------------------
Shares sold 508,765,112 354,809,984 157,797,806 169,860,061
-----------------------------------------------------
Shares redeemed (416,373,470) (270,111,564) (160,161,423) (108,227,881)
----------------------------------------------------- ------------ ------------ ------------ ------------
Shares outstanding, end of period 177,090,062 84,698,420 59,268,563 61,632,180
----------------------------------------------------- ------------ ------------ ------------ ------------
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY FUND
<S> <C> <C>
YEAR ENDED NOVEMBER 30,
<CAPTION>
1993 1992***
INSTITUTIONAL SHARES
<S> <C> <C>
Shares outstanding, beginning of period 55,407,929 --
-------------------------------------------------------------------------------------
Shares sold 268,967,543 211,639,475
-------------------------------------------------------------------------------------
Shares redeemed (259,022,528) (156,231,546)
------------------------------------------------------------------------------------- ------------ ------------
Shares outstanding, end of period 65,352,944 55,407,929
------------------------------------------------------------------------------------- ------------ ------------
</TABLE>
* For the period from June 2, 1992 (date of initial public investment) to
November 30, 1992.
** For the period from May 14, 1992 (date of initial public investment) to
November 30, 1992.
*** For the period from February 19, 1992 (start of business) to November 30,
1992.
<TABLE>
<CAPTION>
MONEY MARKET FUND TAX-FREE FUND
YEAR ENDED NOVEMBER 30, YEAR ENDED NOVEMBER 30,
1993 1992* 1993 1992**
<S> <C> <C> <C> <C>
INVESTMENT SHARES
Shares outstanding, beginning of period 3,106,154 -- 5,337,645 --
---------------------------------------------------------
Shares sold 14,573,466 4,092,614 45,044,796 8,205,295
---------------------------------------------------------
Shares redeemed (7,837,523) (986,460) (26,406,425) (2,867,650)
--------------------------------------------------------- ----------- ----------- ----------- -----------
Shares outstanding, end of period 9,842,097 3,106,154 23,976,016 5,337,645
--------------------------------------------------------- ----------- ----------- ----------- -----------
</TABLE>
<TABLE>
<CAPTION>
U.S. TREASURY FUND
YEAR ENDED
NOVEMBER 30,
1993***
<S> <C>
INVESTMENT SHARES
Shares outstanding, beginning of period --
-----------------------------------------------------------------------------------------------
Shares sold 19,977,447
-----------------------------------------------------------------------------------------------
Shares redeemed (3,036,031)
----------------------------------------------------------------------------------------------- -------------------
Shares outstanding, end of period 16,941,416
----------------------------------------------------------------------------------------------- -------------------
</TABLE>
* For the period from June 9, 1992 (date of initial public investment) to
November 30, 1992.
** For the period from May 20, 1992 (date of initial public investment) to
November 30, 1992.
*** For the period from May 12, 1993 (date of initial public investment) to
November 30, 1993.
(5) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
Wachovia Investment Management Group, the Funds' investment adviser ("Adviser"),
receives for its services an annual investment advisory fee equal to .50 of 1%
of each of the Fund's average daily net assets. The Adviser may voluntarily
choose to waive a portion of its fee or reimburse certain operating expenses of
the Funds in excess of limitations imposed by certain states. The Adviser can
modify or terminate the voluntary waiver and reimbursement at any time at its
own discretion. For the year ended November 30, 1993, the Adviser earned
investment advisory fees from the Money Market Fund, the Tax-Free Fund and the
U.S. Treasury Fund of $703,812, $380,443, and $333,904, respectively, of which
$549,233, $297,388 and $276,657 were voluntarily waived, respectively.
Federated Administrative Services ("FAS") provides the Funds with certain
administrative personnel and services, and receives an annual administrative fee
equal to .145 of 1% of the first $400 million of average aggregate daily net
assets of the Trust; .120 of 1% of the next $300 million; .095 of 1% of the next
$300 million; and .070 of 1% on average aggregate daily net assets of the Trust
in excess of $1 billion. FAS may voluntarily waive a portion of its fee or
reimburse certain operating expenses of the Fund. For the year ended November
30, 1993, FAS earned administrative fees from the Money Market Fund, the
Tax-Free Fund and the U.S. Treasury Fund of $183,805, $100,161, and $88,313,
respectively, of which $142,842, $79,813, and $71,133 were voluntarily waived,
respectively. In addition, FAS reimbursed other operating expenses for the Money
Market Fund, Tax-Free Fund and the U.S. Treasury Fund of $67,462, $61,079, and
$55,602, respectively. FAS can modify or terminate the voluntary waiver and
reimbursement at any time at its sole discretion.
Organization expenses of the Money Market Fund, Tax-Free Fund, and U.S. Treasury
Fund of $65,357, $59,661, and $33,032, respectively, were borne initially by
FAS. The Funds have agreed to reimburse FAS for the organization expenses
initially borne by FAS during the five year periods following the date that each
Fund's registration statements first became effective. During the year ended
November 30, 1993, the Money Market Fund, Tax-Free Fund, and U.S. Treasury Fund
paid $6,741, $7,842, and $6,506, respectively, pursuant to this agreement.
For the services to be provided to the Funds pursuant to the Custodian
Agreement, the Funds pay Wachovia Bank of North Carolina, N.A. (the "Custodian")
an annual fee equal to .02 of 1% on the first $250 million of average aggregate
daily net assets of the Trust; .015 of 1% of average aggregate daily net assets
from $250 million to $500 million; and .01 of 1% of average aggregate daily net
assets over $500 million. The Custodian may voluntarily waive a portion of its
fees. The Custodian can modify or terminate the voluntary waiver at any time at
its own discretion. For the year ended November 30, 1993, the Custodian earned
from the Money Market Fund, Tax-Free Fund, and U.S. Treasury Fund fees of
$28,152, $15,218, and $13,358, respectively, all of which were voluntarily
waived.
Federated Services Company ("FSC") is transfer agent for the shares of the Funds
and dividend disbursing agent for the Funds. It also provides certain accounting
and recordkeeping services with respect to the Funds' portfolios of investments.
FSC may voluntarily waive a portion of its fees. FSC can modify or terminate the
voluntary waiver at any time at its sole discretion. For the year ended November
30, 1993, FSC earned from the Money Market Fund, Tax-Free Fund, and U.S.
Treasury Fund transfer and dividend disbursing agent fees of $23,666, $23,759,
and $22,492, respectively. For the year ended November 30, 1993, FSC earned
recordkeeper fees of $43,796, $37,320, and $33,110, respectively.
The Trust has adopted a Distribution Plan (the "Plan") pursuant to Rule 12b-1
under the Investment Company Act of 1940. The Funds will compensate Federated
Securities Corp., the principal distributor, from the assets of the Investment
Shares of the Funds to finance any activity which is principally intended to
result in the sale of Investment Shares. The Plan provides that the Funds may
incur distribution expenses up to 0.40 of 1% of the average daily net assets of
the Investment Shares, annually, to compensate Federated Securities Corp. During
the year ended November 30, 1993, Federated Securities Corp. earned from the
Money Market Fund, the Tax-Free Fund and the U.S. Treasury Fund fees of $20,582,
$59,172, and $11,831, respectively, pursuant to the Plan, of which $5,145,
$14,792, and $2,966, respectively, were voluntarily waived.
Certain Officers of the Trust are Officers and Directors of Federated Securities
Corp., FAS and FSC.
(6) CURRENT CREDIT RATINGS
Current credit ratings and related footnotes are unaudited.
REPORT OF ERNST & YOUNG, INDEPENDENT AUDITORS
--------------------------------------------------------------------------------
To the Trustees and Shareholders of
THE BILTMORE FUNDS:
We have audited the accompanying statements of assets and liabilities, including
the portfolios of investments, of Biltmore Money Market Fund, Biltmore Tax-Free
Money Market Fund and Biltmore U.S. Treasury Money Market Fund (portfolios of
The Biltmore Funds) as of November 30, 1993, and the related statements of
operations for the year then ended and the statements of changes in net assets
and financial highlights (see pages 4, 5, 6, and 31, 32, 33 of this prospectus)
for the periods presented therein. These financial statements and financial
highlights are the responsibility of the Funds' management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
November 30, 1993, by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of
Biltmore Money Market Fund, Biltmore Tax-Free Money Market Fund and Biltmore
U.S. Treasury Money Market Fund of The Biltmore Funds at November 30, 1993, and
the results of their operations for the year then ended, and changes in their
net assets and financial highlights for the periods presented therein, in
conformity with generally accepted accounting principles.
ERNST
& YOUNG
Pittsburgh, Pennsylvania
January 14, 1994
ADDRESSES
--------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Biltmore Money Market Fund
Investment Shares
Biltmore Tax-Free Money Market Fund Federated Investors Tower
Investment Shares Pittsburgh, Pennsylvania 15222-3779
Biltmore U.S. Treasury Money Market Fund
Investment Shares
---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Wachovia Investment Management Group 301 North Main Street
Winston-Salem, N.C. 27150
---------------------------------------------------------------------------------------------------------------------
Custodian
Wachovia Bank of North Carolina, N.A. Wachovia Trust Operations
301 North Main Street
Winston-Salem, N.C. 27150
---------------------------------------------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent,
and Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Kirkpatrick & Lockhart 1800 M Street, N.W.
Washington, D.C. 20036-5891
---------------------------------------------------------------------------------------------------------------------
Legal Counsel
Piper & Marbury 1200 Nineteenth Street, N.W.
Washington, D.C. 20036-2430
---------------------------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
---------------------------------------------------------------------------------------------------------------------
Wachovia Securities, Inc.
P.O. Box 110 MC 32022
Winston-Salem, N.C. 27102
---------------------------------------------------------------------------------------------------------------------
</TABLE>
