1933 Act File No. 33-44590
1940 Act File No. 811-6504
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
X
Pre-Effective Amendment No.
Post-Effective Amendment No. 13 X
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF
1940 X
Amendment No. 14 X
THE BILTMORE FUNDS
(Exact Name of Registrant as Specified in Charter)
Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)
(412) 288-1900
(Registrant's Telephone Number)
John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
It is proposed that this filing will become effective:
immediately upon filing pursuant to paragraph (b)
X on July 27, 1994 pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a)
on pursuant to paragraph (a) of Rule 485.
Registrant has filed with the Securities and Exchange
Commission a declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940, and:
x filed the Notice required by that Rule on January 15,
1994; or
intends to file the Notice required by that Rule on or
about ____________; or
during the most recent fiscal year did not sell any
securities pursuant to Rule 24f-2 under the Investment
Company Act of 1940, and, pursuant to Rule 24f-2(b)(2), need
not file the Notice.
Copies to:
Donald W. Smith, Esquire Alan C. Porter, Esq
Kirkpatrick & Lockhart Piper & Marbury
1800 M. Street, N.W. 1200 Nineteenth Street, N.W.
Washington, D.C. 20036-5891 Washington, D.C. 20036-2430
CROSS REFERENCE SHEET
This Amendment to the Registration Statement of THE
BILTMORE FUNDS which is comprised of eleven portfolios: (1)
Biltmore Balanced Fund, (2) Biltmore Equity Fund, (3) Biltmore
Equity Index Fund, (4) Biltmore Fixed Income Fund, (5)
Biltmore Special Values Fund, (6) Biltmore Short-Term Fixed
Income Fund, (7) Biltmore Money Market Fund (Institutional and
Investment Shares); (8) Biltmore Tax-Free Money Market Fund
(Institutional and Investment Shares); (9) Biltmore U.S.
Treasury Money Market Fund (Institutional and Investment
Shares), (10) Biltmore Prime Cash Management Fund
(Institutional Shares), and (11) Biltmore Quantitative Equity
Fund, relates only to one of the portfolios, Biltmore
Quantitive Equity Fund, and is comprised of the following:
PART A. INFORMATION REQUIRED IN A PROSPECTUS.
Prospectus Heading
(Rule 404(c) Cross Reference)
Item 1. Cover Page (1-11) Cover Page.
Item 2. Synopsis (1-11) Summary of Fund
Expenses.
Item 3. Condensed Financial
Information (1-11) Financial Highlights.
Item 4. General Description of
Registrant (1-11) General Information;
Investment Objective;
Investment Policies; Investment
Limitations; Regulatory
Compliance; (7,8,10) Investment
Risks; (1,2,4,5) Investment
Considerations; (3,5) Debt
Considerations; (1) Equity
Investment Considerations; (11)
Portfolio Turnover.
Item 5. Management of the Fund (1-11) The Biltmore Funds
Information; Management of The
Trust; Distribution of
(Institutional/Investment)
Shares; (7-9, Investment Shares
only) Distribution Plan; (1-
4,6,11) (7-10, Investment
Shares only) Administrative
Arrangements; (1-4, 6,11)
Shareholder Servicing
Arrangements; (1-11)
Administration of the Fund;
Legal Counsel; Independent
Auditors; Expenses of the Fund
(and Institutional/ Investment
Shares).
Item 6. Capital Stock and Other
Securities (1-11) Dividends; Capital
Gains; Shareholder Information;
Voting Rights; Massachusetts
Partnership Law; Federal
Income Tax; (8) State and Local
Taxes; (1) Effect of Banking
Laws; (7,8,9) Other Classes of
Shares.
Item 7. Purchase of Securities Being
Offered (1-11) Net Asset Value;
Investing in (the
Fund/Institutional/Investment)
Shares; Share Purchases; (1-
6,11) Through Wachovia
Brokerage Service; By Mail; By
Wire; Through the Trust
Divisions of The Wachovia
Banks;
(7-10) Through The Wachovia
Banks; (7-10) Via a Sweep
Account; (1-11) Minimum
Investment Required; What
Shares Cost; (1-6,11) Sales
Charge Reallowance, Reducing
the Sales Charge, Quantity
Discounts and Accumulated
Purchases, Letter of Intent,
Reinvestment Privilege,
Concurrent Purchases,
Systematic Investment Program;
(1-6,11) Exchanging Securities
for Fund Shares; Exchange
Privilege; (1-11) Certificates
and Confirmations; (7-10)
Exchanges.
Item 8. Redemption or Repurchase (1-11) Redeeming
(Institutional/Investment)
Shares; By Telephone (1-6,11)
(7-10, Investment Shares Only);
Through Wachovia Brokerage
Service; By Mail; Accounts With
Low Balances; (7-10) Redemption
In Kind; (1-4,6,11) Systematic
Withdrawal Program.
Item 9. Pending Legal Proceedings None.
PART B. INFORMATION REQUIRED IN A STATEMENT OF ADDITIONAL
INFORMATION.
Item 10. Cover Page (1-11) Cover Page.
Item 11. Table of Contents (1-11) Table of Contents.
Item 12. General Information and
History (1-11) General Information
About the Fund.
Item 13. Investment Objectives and
Policies (1-11) Investment Objective and
Policies; Investment
Limitations; (8) Investment
Risks.
Item 14. Management of the Fund (1-11) The Biltmore Funds
Management.
Item 15. Control Persons and Principal
Holders of Securities Not Applicable.
Item 16. Investment Advisory and Other
Services (1-11) Investment Advisory
Services; Administrative
Services; (1-6,11)
Administrative Arrangements.
Item 17. Brokerage Allocation (1-11) Brokerage Transactions.
Item 18. Capital Stock and Other
Securities Not Applicable
Item 19. Purchase, Redemption and
Pricing of Securities Being
Offered (1-11) Purchasing (Fund)/
(Institutional/Investment)
Shares; Determining Net Asset
Value; Redeeming
(Institutional/Investment)
Shares; (1-6,11) Redemption in
Kind; Determining Market Value
of Securities.
Item 20. Tax Status (1-11) Tax Status.
Item 21. Underwriters (7,8,10, Investment Shares
only) Distribution Plan.
Item 22. Calculation of Performance
Data (1-10) Effective Yield; (1-11)
Yield; (8) Tax-Equivalent
Yield, (1-6,11) Total Return;
(1-11) Performance Comparisons;
(4,6) Duration; (11) Standard &
Poor's Corporation.
Item 23. Financial Statements (1-11) Filed in Part A;
BILTMORE QUANTITATIVE EQUITY FUND
(A PORTFOLIO OF THE BILTMORE FUNDS)
- --------------------------------------------------------------------------------
SEMI-ANNUAL REPORT AND SUPPLEMENT TO PROSPECTUS DATED JANUARY 18, 1994
A. Please delete the "Summary of Fund Expenses" table on page 1 of the
Prospectus and replace it with the following table:
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)................................. 4.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price)...................... None
Contingent Deferred Sales Charge (as a percentage of original purchase price or redemption proceeds, as
applicable)............................................................................................... None
Redemption Fees (as a percentage of amount redeemed, if applicable)......................................... None
Exchange Fee................................................................................................ None
ANNUAL FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1)........................................................................... 0.60%
12b-1 Fees.................................................................................................. None
Other Expenses (after waiver) (2)........................................................................... 0.32%
Shareholder Servicing Fees (3)............................................................... 0.00%
Total Fund Operating Expenses (after waiver) (4)................................................... 0.92%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.70%.
(2) Other Expenses are estimated to be 0.34%, absent the anticipated voluntary
waiver by the administrator. The administrator may terminate this voluntary
waiver at any time at its sole discretion.
(3) As of the date of this prospectus, the Fund is not paying or accruing
shareholder servicing agent fees. The Fund will not pay or accrue
shareholder servicing agent fees until a separate class of shares has been
created for certain trust and institutional investors, including qualified
employee benefit plans. At that point, the Fund will be able to pay up to
0.25 of 1% of the Fund's average daily net assets for shareholder servicing
agent fees. See "The Biltmore Funds Information."
(4) Total Fund Operating Expenses are estimated to be at 1.04%, absent the
anticipated voluntary waivers by the investment adviser and administrator.
* Since the Fund does not have an operating history, the percentages indicated
as Annual Fund Operating Expenses are based on the Fund's projected fees and
estimated expenses for the fiscal year ending November 30, 1994. The table
should not be considered a representation of past or future expenses. Actual
expenses may be greater or less than those shown in this table.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "THE BILTMORE FUNDS INFORMATION" AND "INVESTING IN THE FUND."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period. As noted in the table above, the Fund charges no
redemption fees................................................................................ $54 $73
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1994.
B. Please insert the following Financial Highlights table as page 2 of the
Prospectus following the "Summary of Fund Expenses" table and before the
section entitled "General Information." In addition, please add the
heading "Financial Highlights" to the Table of Contents on page I after
the heading "Summary of Fund Expenses."
BILTMORE QUANTITATIVE EQUITY FUND
FINANCIAL HIGHLIGHTS
- --------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD)
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1994*
<S> <C>
- ----------------------------------------------------------------------------------------------- -----------------
NET ASSET VALUE, BEGINNING OF PERIOD $ 10.00
- -----------------------------------------------------------------------------------------------
INCOME FROM INVESTMENT OPERATIONS
- -----------------------------------------------------------------------------------------------
Net investment income 0.03
- -----------------------------------------------------------------------------------------------
Net realized and unrealized gain (loss) on investments (0.21)
- ----------------------------------------------------------------------------------------------- -----------------
Total from investment operations (0.18)
- -----------------------------------------------------------------------------------------------
LESS DISTRIBUTIONS
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income 0.00
- ----------------------------------------------------------------------------------------------- -----------------
NET ASSET VALUE, END OF PERIOD $ 9.82
- ----------------------------------------------------------------------------------------------- -----------------
TOTAL RETURN** (1.80%)
- -----------------------------------------------------------------------------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------------------------------------------------------------------------
Expenses 0.92%(b)
- -----------------------------------------------------------------------------------------------
Net investment income 1.61%(b)
- -----------------------------------------------------------------------------------------------
Expense waiver/reimbursement (a) 0.10%(b)
- -----------------------------------------------------------------------------------------------
SUPPLEMENTAL DATA
- -----------------------------------------------------------------------------------------------
Net assets, end of period (000 omitted) $90,622
- -----------------------------------------------------------------------------------------------
Portfolio turnover rate 23%
- -----------------------------------------------------------------------------------------------
</TABLE>
* Reflects operations for the period from March 28, 1994 (date of initial
public investment) to May 31, 1994 (unaudited).
** Based on net asset value which does not reflect the sales load or contingent
deferred sales charge, if applicable.
(a) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above (Note 4).
(b) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
C. Please add the following as a final paragraph under the section entitled
"Portfolio Turnover" on page 7 of the Prospectus:
"From March 28, 1994 (date of initial public investment) to May 31, 1994, the
Fund's portfolio turnover rate was 23%."
D. Please replace the reference to "The South Carolina National Bank" which
appears on page 8 of the Prospectus, in the "Adviser's Background"
subsection, with "Wachovia Bank of South Carolina, N.A."
E. Please replace the section entitled "Administrative Services" which
appears on pages 9 and 10 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
services 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
<C> <S>
0.150 of 1% on the first $250 million
0.125 of 1% on the next $250 million
0.100 of 1% on the next $250 million
0.075 of 1% on assets in excess of $750 million
</TABLE>
The administrative fee received during any fiscal year for the Fund and each of
the other portfolios of The Biltmore Funds shall aggregate at least $75,000.
Federated Administrative Services may choose voluntarily to waive or reimburse a
portion of its fee at any time."
F. Please add the following as the third sentence of the first paragraph of
the subsection entitled "Voting Rights" on page 18 of the Prospectus:
"As of July 15, 1994 the Wachovia Banks and their various affiliates and
subsidiaries, acting in various capacities for numerous accounts, were the owner
of record of certain shares of the Fund, and therefore may be deemed to control
the Fund and be able to affect the outcome of certain matters presented for a
vote of shareholders."
G. Please insert the following financial statements at the end of the
Prospectus beginning on page 21. In addition, please add the heading
"Financial Statements" to the Table of Contents on page I of the
Prospectus immediately before "Addresses"
BILTMORE QUANTITATIVE EQUITY FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- ---------------
COMMON STOCKS--95.9%
- ------------------------------------------------------------------------------------------------
CAPITAL GOODS--4.5%
---------------------------------------------------------------------------------
22,939 Cummins Engine, Inc. $ 983,510
---------------------------------------------------------------------------------
8,800 Deere & Co. 613,800
---------------------------------------------------------------------------------
49,842 General Electric Co. 2,473,409
--------------------------------------------------------------------------------- ---------------
Total 4,070,719
--------------------------------------------------------------------------------- ---------------
CONSUMER DURABLES--5.0%
---------------------------------------------------------------------------------
4,700 Briggs & Stratton Corp. 354,850
---------------------------------------------------------------------------------
15,764 Centex Corp. 384,248
---------------------------------------------------------------------------------
37,004 Chrysler Corp. 1,836,324
---------------------------------------------------------------------------------
14,632 Echlin, Inc. 396,893
---------------------------------------------------------------------------------
11,113 Ford Motor Co. 641,776
---------------------------------------------------------------------------------
5,286 Goodyear Tire and Rubber Co. 204,832
---------------------------------------------------------------------------------
13,000 Leggett & Platt, Inc. 487,500
---------------------------------------------------------------------------------
13,000 Maytag Corp. 242,125
--------------------------------------------------------------------------------- ---------------
Total 4,548,548
--------------------------------------------------------------------------------- ---------------
CONSUMER NON-DURABLES--26.5%
---------------------------------------------------------------------------------
10,370 Abbott Laboratories 309,804
---------------------------------------------------------------------------------
12,083 American Cyanamid Co. 629,826
---------------------------------------------------------------------------------
53,466 American Stores Co. 1,336,650
---------------------------------------------------------------------------------
9,629 *Amgen, Inc. 448,350
---------------------------------------------------------------------------------
6,702 Anheuser-Busch Cos., Inc. 364,421
---------------------------------------------------------------------------------
10,554 Becton, Dickinson & Co. 402,371
---------------------------------------------------------------------------------
42,384 Bergen Brunswig Corp. Class A 752,316
---------------------------------------------------------------------------------
</TABLE>
BILTMORE QUANTITATIVE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- ---------------
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
CONSUMER NON-DURABLES--CONTINUED
---------------------------------------------------------------------------------
50,000 Circuit City Stores, Inc. $ 968,750
---------------------------------------------------------------------------------
6,136 Colgate-Palmolive Co. 351,286
---------------------------------------------------------------------------------
15,589 CPC International, Inc. 756,067
---------------------------------------------------------------------------------
25,292 Gap, Inc. 1,097,040
---------------------------------------------------------------------------------
15,000 Gerber Products Co. 759,375
---------------------------------------------------------------------------------
14,500 Glaxo Holdings PLC 235,625
---------------------------------------------------------------------------------
59,801 IBP Inc. 1,532,401
---------------------------------------------------------------------------------
19,257 Johnson & Johnson 852,122
---------------------------------------------------------------------------------
32,756 Lilly (Eli) & Co. 1,879,375
---------------------------------------------------------------------------------
7,000 Mattel, Inc. 184,625
---------------------------------------------------------------------------------
40,500 Mercantile Stores, Inc. 1,417,500
---------------------------------------------------------------------------------
8,000 Nordstrom, Inc. 353,000
---------------------------------------------------------------------------------
34,340 Penney (J.C.) Inc. 1,755,633
---------------------------------------------------------------------------------
43,140 Pepsico, Inc. 1,553,040
---------------------------------------------------------------------------------
28,319 Philip Morris Cos., Inc. 1,394,711
---------------------------------------------------------------------------------
14,986 Premark International, Inc. 1,064,006
---------------------------------------------------------------------------------
13,300 Procter & Gamble Co. 749,787
---------------------------------------------------------------------------------
17,935 Schering-Plough Corp. 1,170,259
---------------------------------------------------------------------------------
5,758 Unilever N.V. 604,590
---------------------------------------------------------------------------------
9,629 V.F. Corp. 473,025
---------------------------------------------------------------------------------
14,000 Winn Dixie Stores, Inc. 633,500
--------------------------------------------------------------------------------- ---------------
Total 24,029,455
--------------------------------------------------------------------------------- ---------------
CONSUMER SERVICE--4.2%
---------------------------------------------------------------------------------
1,000 Capital Cities/ABC, Inc. 739,750
---------------------------------------------------------------------------------
3,021 CBS, Inc. 788,481
---------------------------------------------------------------------------------
8,873 McKesson Corp. 735,350
---------------------------------------------------------------------------------
51,912 Morrison Restaurants, Inc. 1,168,020
---------------------------------------------------------------------------------
</TABLE>
BILTMORE QUANTITATIVE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- ---------------
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
CONSUMER SERVICE--CONTINUED
---------------------------------------------------------------------------------
21,806 National Medical Enterprises, Inc. $ 357,073
--------------------------------------------------------------------------------- ---------------
Total 3,788,674
--------------------------------------------------------------------------------- ---------------
ENERGY--8.4%
---------------------------------------------------------------------------------
12,460 Amoco Corp. 733,583
---------------------------------------------------------------------------------
16,000 Chevron Corp. 1,392,000
---------------------------------------------------------------------------------
25,800 Coastal Corp. 728,850
---------------------------------------------------------------------------------
13,121 Equitable Resources, Inc. 451,034
---------------------------------------------------------------------------------
21,145 Exxon Corp. 1,289,845
---------------------------------------------------------------------------------
16,897 MAPCO, Inc. 1,056,063
---------------------------------------------------------------------------------
14,608 Mobil Corp. 1,183,248
---------------------------------------------------------------------------------
27,942 Sun, Inc. 813,811
--------------------------------------------------------------------------------- ---------------
Total 7,648,434
--------------------------------------------------------------------------------- ---------------
FINANCE--16.2%
---------------------------------------------------------------------------------
24,921 AFLAC, Inc. 834,853
---------------------------------------------------------------------------------
29,000 Chase Manhattan Corp. 1,094,750
---------------------------------------------------------------------------------
49,559 Comdisco, Inc. 1,028,349
---------------------------------------------------------------------------------
38,892 DQE 1,234,821
---------------------------------------------------------------------------------
12,272 GATX Corp. 490,880
---------------------------------------------------------------------------------
33,865 General Public Utilities Corp. 969,386
---------------------------------------------------------------------------------
49,747 Huntington Bancshares Inc. 1,312,077
---------------------------------------------------------------------------------
24,756 KeyCorp 804,570
---------------------------------------------------------------------------------
24,826 Merrill Lynch & Co., Inc. 968,214
---------------------------------------------------------------------------------
22,044 Morgan Stanley Group, Inc. 1,317,129
---------------------------------------------------------------------------------
10,478 PHH Corp. 385,066
---------------------------------------------------------------------------------
27,942 Signet Banking Corp. 1,166,578
---------------------------------------------------------------------------------
51,258 SouthTrust Corp. 1,082,825
---------------------------------------------------------------------------------
17,800 Transamerica Corp. 950,075
---------------------------------------------------------------------------------
</TABLE>
BILTMORE QUANTITATIVE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- ---------------
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
FINANCE--CONTINUED
---------------------------------------------------------------------------------
29,476 USLife Corp. $ 1,075,874
--------------------------------------------------------------------------------- ---------------
Total 14,715,447
--------------------------------------------------------------------------------- ---------------
MATERIALS & SERVICES--8.7%
---------------------------------------------------------------------------------
8,300 Armstrong World Industries, Inc. 404,625
---------------------------------------------------------------------------------
10,000 Ball Corp. 287,500
---------------------------------------------------------------------------------
27,281 Banta Corp. 913,913
---------------------------------------------------------------------------------
23,977 Ennis Business Forms, Inc. 332,681
---------------------------------------------------------------------------------
12,649 Grace (W.R.) & Co. 528,096
---------------------------------------------------------------------------------
11,044 Hercules, Inc. 1,163,762
---------------------------------------------------------------------------------
28,000 Kaydon Corp. 603,750
---------------------------------------------------------------------------------
7,835 Kimberly Clark Corp. 442,677
---------------------------------------------------------------------------------
25,723 Louisiana Pacific Corp. 871,367
---------------------------------------------------------------------------------
10,478 Monsanto Co. 856,577
---------------------------------------------------------------------------------
36,500 Pope & Talbot, Inc. 862,313
---------------------------------------------------------------------------------
28,036 Praxair, Inc. 571,233
--------------------------------------------------------------------------------- ---------------
Total 7,838,494
--------------------------------------------------------------------------------- ---------------
TECHNOLOGY--9.1%
---------------------------------------------------------------------------------
16,800 *Advanced Micro Devices, Inc. 453,600
---------------------------------------------------------------------------------
11,455 *Compaq Computer Corp. 1,354,554
---------------------------------------------------------------------------------
18,478 Computer Associates International, Inc. 769,147
---------------------------------------------------------------------------------
6,891 Intel Corp. 430,687
---------------------------------------------------------------------------------
11,115 Lockheed Corp. 709,971
---------------------------------------------------------------------------------
23,788 Martin Marietta Corp. 1,034,778
---------------------------------------------------------------------------------
38,467 Micron Technology Inc. 1,293,453
---------------------------------------------------------------------------------
58,700 *Quantum Corp. 961,212
---------------------------------------------------------------------------------
19,738 Raytheon Co. 1,228,691
--------------------------------------------------------------------------------- ---------------
Total 8,236,093
--------------------------------------------------------------------------------- ---------------
</TABLE>
BILTMORE QUANTITATIVE EQUITY FUND
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT
OR SHARES VALUE
<C> <S> <C>
- ------------- --------------------------------------------------------------------------------- ---------------
COMMON STOCKS--CONTINUED
- ------------------------------------------------------------------------------------------------
TRANSPORTATION--1.4%
---------------------------------------------------------------------------------
6,500 Burlington Northern Inc. $ 362,375
---------------------------------------------------------------------------------
4,059 *Federal Express Corp. 310,513
---------------------------------------------------------------------------------
12,500 Kansas City Southern Industries Inc. 565,625
--------------------------------------------------------------------------------- ---------------
Total 1,238,513
--------------------------------------------------------------------------------- ---------------
UTILITIES--11.9%
---------------------------------------------------------------------------------
47,671 Ameritech Corp. 1,865,128
---------------------------------------------------------------------------------
28,000 BellSouth Corp. 1,666,000
---------------------------------------------------------------------------------
11,705 Duke Power Co. 421,380
---------------------------------------------------------------------------------
8,835 New England Electric System 311,434
---------------------------------------------------------------------------------
14,254 Scana Corp. 625,394
---------------------------------------------------------------------------------
31,057 Southern Co. 574,554
---------------------------------------------------------------------------------
37,193 Southwestern Bell Corp. 1,529,562
---------------------------------------------------------------------------------
68,004 Sprint Corp. 2,584,152
---------------------------------------------------------------------------------
43,706 Williams Cos., Inc. 1,229,231
--------------------------------------------------------------------------------- ---------------
Total 10,806,835
--------------------------------------------------------------------------------- ---------------
TOTAL COMMON STOCKS (IDENTIFIED COST $87,803,150) 86,921,212
--------------------------------------------------------------------------------- ---------------
**REPURCHASE AGREEMENT--3.8%
- ------------------------------------------------------------------------------------------------
$ 3,451,667 PaineWebber, Inc., 4.2%, dated 5/31/94, due 6/01/94
(at amortized cost)(Note 2B) 3,451,667
--------------------------------------------------------------------------------- ---------------
TOTAL INVESTMENTS (IDENTIFIED COST $91,254,817) $ 90,372,879\
--------------------------------------------------------------------------------- ---------------
</TABLE>
* Non-income producing.
** The repurchase agreement is fully collateralized by U.S. Treasury obligations
based on market prices at the date of the portfolio.
\ The cost of investments for federal tax purposes amounts to $91,254,817. The
net unrealized depreciation of investments on a federal tax basis amounts to
$881,938, which is comprised of $2,895,209 appreciation and $3,777,147
depreciation at May 31, 1994.
Note: The categories of investments are shown as a percentage of net assets
($90,621,690) at
May 31, 1994.
(See Notes which are an integral part of the Financial Statements)
BILTMORE QUANTITATIVE EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- -------------------------------------------------------------------------------------------------
Investments in securities, at value (Notes 2A and 2B)
(identified and tax cost, $91,254,817) $ 90,372,879
- -------------------------------------------------------------------------------------------------
Dividends receivable 259,706
- -------------------------------------------------------------------------------------------------
Receivable for Fund shares sold 20,000
- -------------------------------------------------------------------------------------------------
Interest receivable 403
- ------------------------------------------------------------------------------------------------- ---------------
Total assets 90,652,988
- -------------------------------------------------------------------------------------------------
LIABILITIES:
- --------------------------------------------------------------------------------------
Accrued expenses $ 31,298
- -------------------------------------------------------------------------------------- ---------
Total liabilities 31,298
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSETS for 9,230,163 shares of beneficial interest outstanding $ 90,621,690
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSETS CONSIST OF:
- -------------------------------------------------------------------------------------------------
Paid-in capital $ 92,323,815
- -------------------------------------------------------------------------------------------------
Net unrealized appreciation (depreciation) of investments (881,938)
- -------------------------------------------------------------------------------------------------
Accumulated undistributed net realized gain (loss) on investments (1,077,181)
- -------------------------------------------------------------------------------------------------
Undistributed net investment income 256,994
- ------------------------------------------------------------------------------------------------- ---------------
Total Net Assets $ 90,621,690
- ------------------------------------------------------------------------------------------------- ---------------
NET ASSET VALUE AND REDEMPTION PROCEEDS PER SHARE:
($90,621,690 / 9,230,163 shares of beneficial interest outstanding) $9.82
- ------------------------------------------------------------------------------------------------- ---------------
OFFERING PRICE PER SHARE: (100/95.5 OF $9.82)* $10.28
- ------------------------------------------------------------------------------------------------- ---------------
</TABLE>
* See "What Shares Cost" in the prospectus.
(See Notes which are an integral part of the Financial Statements)
BILTMORE QUANTITATIVE EQUITY FUND
STATEMENT OF OPERATIONS
PERIOD ENDED MAY 31, 1994*
(UNAUDITED)
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- ----------------------------------------------------------------------------------------------------
Interest income $ 23,903
- ----------------------------------------------------------------------------------------------------
Dividend income 379,512
- ---------------------------------------------------------------------------------------------------- ------------
Total income (Note 2C) 403,415
- ----------------------------------------------------------------------------------------------------
EXPENSES:
- ----------------------------------------------------------------------------------------
Investment advisory fee (Note 4) $ 111,407
- ----------------------------------------------------------------------------------------
Trustees' fees 1,163
- ----------------------------------------------------------------------------------------
Administrative personnel and services fees (Note 4) 16,115
- ----------------------------------------------------------------------------------------
Custodian fees (Note 4) 3,183
- ----------------------------------------------------------------------------------------
Transfer and dividend disbursing agent fees and expenses (Note 4) 5,204
- ----------------------------------------------------------------------------------------
Legal fees 2,596
- ----------------------------------------------------------------------------------------
Printing and postage 4,673
- ----------------------------------------------------------------------------------------
Portfolio accounting fees (Note 4) 13,553
- ----------------------------------------------------------------------------------------
Insurance premiums 1,636
- ----------------------------------------------------------------------------------------
Miscellaneous 2,806
- ---------------------------------------------------------------------------------------- ----------
Total expenses 162,336
- ----------------------------------------------------------------------------------------
Deduct--
- ----------------------------------------------------------------------------------------
Waiver of investment advisory fee (Note 4) $ 15,915
- ----------------------------------------------------------------------------------------
Net expenses 146,421
- ---------------------------------------------------------------------------------------------------- ------------
Net investment income 256,994
- ---------------------------------------------------------------------------------------------------- ------------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
- ----------------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions (identified cost basis) (1,077,181)
- ----------------------------------------------------------------------------------------------------
Net change in unrealized appreciation (depreciation) of investments (881,938)
- ---------------------------------------------------------------------------------------------------- ------------
Net realized and unrealized gain (loss) on investments (1,959,119)
- ---------------------------------------------------------------------------------------------------- ------------
Change in net assets resulting from operations $ (1,702,125)
- ---------------------------------------------------------------------------------------------------- ------------
</TABLE>
*For the period from March 28, 1994 (date of initial public investment) to May
31, 1994.
(See Notes which are an integral part of the Financial Statements)
BILTMORE QUANTITATIVE EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1994*
(UNAUDITED)
<S> <C>
INCREASE (DECREASE) IN NET ASSETS:
- -----------------------------------------------------------------------------------------------
OPERATIONS--
- -----------------------------------------------------------------------------------------------
Net investment income $ 256,994
- -----------------------------------------------------------------------------------------------
Net realized gain (loss) on investment transactions ($1,077,181 net loss as computed for
federal income tax purposes) (1,077,181)
- -----------------------------------------------------------------------------------------------
Change in unrealized appreciation (depreciation) of investments (881,938)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets resulting from operations (1,702,125)
- ----------------------------------------------------------------------------------------------- -----------------
DISTRIBUTIONS TO SHAREHOLDERS (NOTE 2C)--
- -----------------------------------------------------------------------------------------------
Dividends to shareholders from net investment income --
- ----------------------------------------------------------------------------------------------- -----------------
FUND SHARE (PRINCIPAL) TRANSACTIONS (NOTE 3)--
- -----------------------------------------------------------------------------------------------
Proceeds from sale of shares 97,171,384
- -----------------------------------------------------------------------------------------------
Net asset value of shares issued to shareholders in payment of dividends declared --
- -----------------------------------------------------------------------------------------------
Cost of shares redeemed (4,847,569)
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets from Fund share transactions 92,323,815
- ----------------------------------------------------------------------------------------------- -----------------
Change in net assets 90,621,690
- -----------------------------------------------------------------------------------------------
NET ASSETS:
- -----------------------------------------------------------------------------------------------
Beginning of period --
- ----------------------------------------------------------------------------------------------- -----------------
End of period (including undistributed net investment income of $256,994) $ 90,621,690
- ----------------------------------------------------------------------------------------------- -----------------
</TABLE>
* For the period from March 28, 1994 (date of initial public investment) to May
31, 1994.
(See Notes which are an integral part of the Financial Statements)
BILTMORE QUANTITATIVE EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1994
(UNAUDITED)
- --------------------------------------------------------------------------------
(1) ORGANIZATION
The Biltmore Funds (the "Trust") is registered under the Investment Company Act
of 1940, as amended, (the "Act"), as an open-end management investment company.
The Trust consists of eleven diversified portfolios. The financial statements
included herein present only those of the Biltmore Quantitative Equity Fund (the
"Fund"). The financial statements of the other portfolios are presented
separately. The assets of each portfolio are segregated and a shareholder's
interest is limited to the portfolio in which shares are held.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles (GAAP).
A. INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on national securities exchanges. Unlisted securities,
short-term obligations and private placement securities are generally
valued at the price provided by an independent pricing service. Short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be stated at amortized cost, which approximates value.
B. REPURCHASE AGREEMENTS--It is the policy of the Fund 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 Fund to monitor, on a daily basis, the market value of
each repurchase agreement's underlying collateral to ensure the value at
least equals the principal amount of the repurchase agreement, including
accrued interest.
The Fund will only enter into repurchase agreements with banks and other
recognized financial institutions, such as broker/dealers, which are deemed
by the Fund's adviser to be creditworthy pursuant to guidelines established
by the Board of Trustees ("Trustees"). Risks may arise from the potential
inability of counterparties to honor the terms of the repurchase agreement.
Accordingly, the Fund could receive less than the repurchase price on the
sale of collateral securities.
C. INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Dividend income and
distributions to shareholders are recorded on the ex-dividend date.
Interest income and expenses are accrued daily. Bond premium and discount
if applicable, are amortized as required by the Internal Revenue Code, as
amended (the "Code").
D. FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its tax-exempt income.
Accordingly, no provisions for federal tax are necessary.
E. WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
F. DEFERRED EXPENSES--The costs incurred by the Fund with respect to
registration of its shares in its first fiscal year, excluding the initial
expense of registering the shares, have been deferred and are being
amortized using the straight-line method over a period of five years from
the Fund's commencement date.
G. OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in Fund shares were as follows:
<TABLE>
<CAPTION>
PERIOD ENDED
MAY 31, 1994*
<S> <C>
- ----------------------------------------------------------------------------------------------- -----------------
Shares sold 9,726,000
- -----------------------------------------------------------------------------------------------
Shares issued to shareholders in payment of dividends declared --
- -----------------------------------------------------------------------------------------------
Shares redeemed (495,837)
- ----------------------------------------------------------------------------------------------- -----------------
Net change resulting from Fund share transactions 9,230,163
- ----------------------------------------------------------------------------------------------- -----------------
</TABLE>
* For the period from March 28, 1994 (date of initial public investment) to May
31, 1994.
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Wachovia Investment Management Group, the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to .70 of 1% of the Fund's average daily net
assets. The Adviser may voluntarily choose to waive a portion of its fee. The
Adviser can modify or terminate this voluntary waiver at any time at its sole
discretion.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the Fund
with certain administrative personnel and services. The FAS fee is based on the
level of average aggregate net assets of the Trust and The Biltmore Municipal
Funds for the period. FAS may voluntarily choose to waive a portion of its fee
and reimburse certain operating expenses of the Fund. FAS can modify or
terminate this voluntary waiver and reimbursement at any time at its sole
discretion.
TRANSFER AND DIVIDEND DISBURSING AGENT, ACCOUNTING AND CUSTODY FEES--Federated
Services Company ("FServ") serves as transfer and dividend disbursing agent for
the Fund. The FServ fee is based on the size, type and number of accounts and
transactions made by shareholders.
FServ also maintains the Fund's accounting records. The fee is based on the
level of the Fund's average net assets for the period, plus out-of-pocket
expenses.
Wachovia Bank of North Carolina, N.A. is the Fund's custodian. The fee is based
on the level of the Fund's average net assets for the period, plus out-of pocket
expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses incurred by the Fund will be
borne initially by FAS and are estimated at $29,500. The Fund has agreed to
reimburse FAS for the organizational expenses during the five year period
following January 18, 1994 (date the Fund first became effective). For the
period ended May 31, 1994, the Fund paid $833, pursuant to this agreement.
Certain of the Officers of the Trust are Officers and Trustees of FAS and FServ.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1994 were as follows:
<TABLE>
<S> <C>
- -------------------------------------------------------------------------------------------------
PURCHASES $ 109,263,168
- ------------------------------------------------------------------------------------------------- ---------------
SALES $ 20,382,837
- ------------------------------------------------------------------------------------------------- ---------------
</TABLE>
BILTMORE QUANTITATIVE EQUITY FUND
(A PORTFOLIO OF THE BILTMORE FUNDS)
PROSPECTUS
The shares of Biltmore Quantitative Equity Fund (the "Fund") offered by this
prospectus represent interests in a diversified portfolio of securities, which
is one of a series of investment portfolios in The Biltmore Funds (the "Trust"),
an open-end management investment company (a mutual fund).
The investment objective of the Fund is to provide growth of principal and
income. The Fund pursues this objective by investing in a professionally-managed
and diversified portfolio consisting primarily of large capitalization common
stocks.
THE INVESTMENT COMPANY 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 (THE "FDIC"), THE FEDERAL RESERVE BOARD, OR ANY
OTHER GOVERNMENT AGENCY. INVESTMENT IN THESE SHARES INVOLVES INVESTMENT RISKS,
INCLUDING POSSIBLE LOSS OF PRINCIPAL.
This prospectus contains the information you should read and know before you
invest in the Fund. Keep this prospectus for future reference.
The Fund has also filed a Statement of Additional Information dated January 18,
1994 with the Securities and Exchange Commission. The information contained in
the Statement of Additional Information is incorporated by reference into this
prospectus. To request a copy of the Statement of Additional Information free of
charge, obtain other information, or make inquiries about the Fund, Trust
customers of the Wachovia Banks (as defined herein) may write the Fund or call
their Wachovia Bank Officer. Customers of Wachovia Brokerage Service may write
the Fund or call 1-800-462-7538.
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 18, 1994
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
SUMMARY OF FUND EXPENSES 1
- ------------------------------------------------------
GENERAL INFORMATION 2
- ------------------------------------------------------
INVESTMENT INFORMATION 2
- ------------------------------------------------------
Investment Objective 2
Investment Policies 2
Investment Process 2
Acceptable Investments 3
Corporate Obligations 4
Securities of Foreign Issuers 4
Stock Index Futures and Options 5
Put and Call Options 5
Restricted and Illiquid Securities 6
Temporary Investments 6
Repurchase Agreements 6
When-Issued and Delayed
Delivery Transactions 6
Lending of Portfolio Securities 6
Portfolio Turnover 7
Investment Limitations 7
THE BILTMORE FUNDS INFORMATION 7
- ------------------------------------------------------
Management of the Trust 7
Board of Trustees 7
Investment Adviser 7
Advisory Fees 7
Adviser's Background 8
Sub-Adviser 8
Distribution of Shares 9
Administrative Arrangements 9
Shareholder Servicing Arrangements 9
Administration of the Fund 9
Administrative Services 9
Custodian 10
Transfer Agent, Dividend Disbursing
Agent, and Portfolio Accounting
Services 10
Legal Counsel 10
Independent Auditors 10
Brokerage Transactions 10
Expenses of the Fund 10
NET ASSET VALUE 11
- ------------------------------------------------------
INVESTING IN THE FUND 11
- ------------------------------------------------------
Share Purchases 11
Through Wachovia Brokerage Service 11
By Mail 11
By Wire 12
Through the Trust Divisions of the
Wachovia Banks 12
Minimum Investment Required 12
What Shares Cost 12
Purchases at Net Asset Value 13
Sales Charge Reallowance 13
Reducing the Sales Charge 13
Quantity Discounts and Accumulated
Purchases 13
Letter of Intent 14
Reinvestment Privilege 14
Concurrent Purchases 14
Systematic Investment Program 14
Exchanging Securities for Fund Shares 15
Certificates and Confirmations 15
Dividends 15
Capital Gains 15
Exchange Privilege 15
Exchange by Telephone 16
REDEEMING SHARES 17
- ------------------------------------------------------
By Telephone 17
By Mail 17
Signatures 17
Systematic Withdrawal Program 18
Accounts with Low Balances 18
SHAREHOLDER INFORMATION 18
- ------------------------------------------------------
Voting Rights 18
Massachusetts Business Trusts 19
EFFECT OF BANKING LAWS 19
- ------------------------------------------------------
TAX INFORMATION 20
- ------------------------------------------------------
Federal Income Tax 20
PERFORMANCE INFORMATION 20
- ------------------------------------------------------
ADDRESSES 21
- ------------------------------------------------------
SUMMARY OF FUND EXPENSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
SHAREHOLDER TRANSACTION EXPENSES
Maximum Sales Load Imposed on Purchases (as a percentage of offering price)............................. 4.50%
Maximum Sales Load Imposed on Reinvested Dividends (as a percentage of offering price).................. None
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 FUND OPERATING EXPENSES*
(As a percentage of projected average net assets)
Management Fee (after waiver) (1)....................................................................... 0.60%
12b-1 Fees.............................................................................................. None
Other Expenses (after waiver) (2)....................................................................... 0.32%
Shareholder Servicing Fees (3)...................................................................... 0.00%
Total Fund Operating Expenses (after waiver) (4)............................................... 0.92%
</TABLE>
(1) The estimated management fee has been reduced to reflect the anticipated
voluntary waiver by the investment adviser. The adviser can terminate this
voluntary waiver at any time at its sole discretion. The maximum management
fee is 0.70%.
(2) Other Expenses are estimated to be 0.34%, absent the anticipated voluntary
waiver by the administrator. The administrator may terminate this voluntary
waiver at any time at its sole discretion.
(3)As of the date of this prospectus, the Fund is not paying or accruing
shareholder servicing agent fees. The Fund will not pay or accrue shareholder
servicing agent fees until a separate class of shares has been created for
certain trust and institutional investors, including qualified employee
benefit plans. At that point, the Fund will be able to pay up to 0.25 of 1%
of the Fund's average daily net assets for shareholder servicing agent fees.
See "The Biltmore Funds Information."
(4) Total Fund Operating Expenses are estimated to be at 1.04%, absent the
anticipated voluntary waivers by the investment adviser and administrator.
* Since the Fund does not have an operating history, the percentages indicated
as Annual Fund Operating Expenses are based on the Fund's projected fees and
estimated expenses for the fiscal year ending November 30, 1994. The table
should not be considered a representation of past or future expenses. Actual
expenses may be greater or less than those shown in this table.
THE PURPOSE OF THIS TABLE IS TO ASSIST AN INVESTOR IN UNDERSTANDING THE
VARIOUS COSTS AND EXPENSES THAT A SHAREHOLDER OF THE FUND WILL BEAR, EITHER
DIRECTLY OR INDIRECTLY. FOR MORE COMPLETE DESCRIPTIONS OF THE VARIOUS COSTS AND
EXPENSES, SEE "THE BILTMORE FUNDS INFORMATION" AND "INVESTING IN THE FUND."
<TABLE>
<CAPTION>
EXAMPLE 1 year 3 years
<S> <C> <C>
You would pay the following expenses on a $1,000 investment, assuming (1) 5% annual return and
(2) redemption at the end of each time period. As noted in the table above, the Fund charges no
redemption fees................................................................................ $54 $73
</TABLE>
THE ABOVE EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF PAST OR
FUTURE EXPENSES. ACTUAL EXPENSES MAY BE GREATER OR LESS THAN THOSE SHOWN. THIS
EXAMPLE IS BASED ON ESTIMATED DATA FOR THE FUND'S FISCAL YEAR ENDING NOVEMBER
30, 1994.
GENERAL INFORMATION
- --------------------------------------------------------------------------------
The Biltmore Funds 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. This prospectus relates only to
one portfolio, Biltmore Quantitative Equity Fund. The shares in any portfolio
may be offered in separate classes. As of the date of this prospectus, the Board
of Trustees (the "Trustees") has not established classes of shares of the Fund.
The Fund is designed for institutions, pension plans and individuals as a
convenient means of accumulating an interest in a professionally-managed,
diversified portfolio of common stocks. A minimum initial investment of $250 is
required. This amount may be waived from time to time. For further information,
Trust customers of the Wachovia Banks may telephone their account officer and
customers of Wachovia Brokerage Service may telephone a broker at
1-800-462-7538.
Except as otherwise noted in this prospectus, shares are currently sold at net
asset value plus an applicable sales charge and are redeemed at net asset value.
The other portfolios in the Trust are: Biltmore Balanced Fund, Biltmore Equity
Fund, Biltmore Equity Index Fund, Biltmore Fixed Income Fund, Biltmore Money
Market Fund (Institutional Shares and Investment Shares), Biltmore Prime Cash
Management Fund (Institutional Shares), Biltmore Short-Term Fixed Income Fund,
Biltmore Special Values Fund, Biltmore Tax-Free Money Market Fund (Institutional
Shares and Investment Shares), and Biltmore U.S. Treasury Money Market Fund
(Institutional Shares and Investment Shares) (hereinafter referred to
collectively as, the "Funds").
INVESTMENT INFORMATION
- --------------------------------------------------------------------------------
INVESTMENT OBJECTIVE
The investment objective of the Fund is to provide growth of principal and
income. While there is no assurance that the Fund will achieve its investment
objective, it endeavors to do so by following the investment policies described
in this prospectus. The investment objective cannot be changed without the
approval of shareholders. Unless indicated otherwise, the investment policies
described below may be changed by the Trustees without the approval of
shareholders. Shareholders will be notified before any material change in these
policies becomes effective.
INVESTMENT POLICIES
The Fund pursues its investment objective by investing in a
professionally-managed and diversified portfolio consisting primarily of large
capitalization common stocks. The average market capitalization of the stocks in
the Fund's universe will be in excess of $1 billion. These securities will
primarily be composed of issues of domestic companies. Under normal market
conditions, the Fund intends to invest at least 65% of its total assets in
equity securities.
INVESTMENT PROCESS. To select stocks for the Fund, the Fund's sub-adviser
initially identifies a broad universe of approximately 900 common stocks.The
sub-adviser utilizes four criteria when determining
what common stocks will be included in the Fund's universe: each stock must be
highly capitalized, each stock must be traded on the New York or American Stock
Exchanges or in the over-the-counter markets, each stock must be among the most
liquid and highly traded stocks on its respective exchange, and each stock must
be actively followed by a minimum of three industry analysts.
The Fund's sub-adviser then screens the stocks in the universe, using a
quantitative computer valuation model, to evaluate the relative attractiveness
of each stock. The sub-adviser's model focuses on two measurement factors: the
relative value of the stocks (including their present and historical price-to-
earnings and market price-to-book value ratios, and the present value of each
stock's projected dividend income) and the stock's growth prospects and earnings
momentum (including changes, over time, in analysts' earning forecasts, and
positive or negative surprises in reported earnings). The Fund's sub-adviser
will vary the importance placed on each factor, depending on market trends.
Using the valuation model described above, the Fund's investment adviser then
ranks each stock in the universe by decile. The stocks are classified by
industry group, based on industry categories and weightings found in the
Standard & Poor's 500 Composite Stock Price Index (the "Index"). In managing the
Fund, the adviser continuously monitors the rankings of the stocks in the
universe and employs an active selling discipline, replacing less attractive
stocks (as determined by the valuation model) with more attractive stocks to
maintain a high average rank for the portfolio. In maintaining the
diversification of the portfolio, the adviser gives consideration to the
industry weightings found in the Index.
Although the Fund intends to hold a broadly diversified portfolio of common
stocks that, in the aggregate, exhibit investment chacteristics similar to the
stocks found in the Index, the Fund will not limit its investments solely to
stocks represented in the Index. By investing in those common stocks that are
included in the universe described above (a large number of which are not
included in the Index), the Fund will seek to provide a higher rate of total
return than the Index. There can be no assurance that the Fund's investment
performance will match or exceed that of the Index.
The Index is an unmanaged, statistical measure of stock market performance. As
such, it does not reflect the actual cost of investing in common stocks. By
contrast, the Fund is actively managed and therefore incurs the normal costs of
a mutual fund, including brokerage and execution costs, advisory fees, and
administrative and custodial costs and expenses. Standard & Poor's Corporation
("S&P") selects the common stocks to be included in the Index solely on a
statistical basis. Inclusion of a particular security in the Index in no way
implies an opinion by S&P as to the stock's appropriateness as an investment.
The Fund is not sponsored, endorsed, sold or promoted by, or affiliated with,
S&P.
ACCEPTABLE INVESTMENTS. Although the Fund normally seeks to remain
substantially fully invested in the common stocks in the universe identified by
the Fund's investment adviser, the Fund may also invest in:
other common or preferred stocks of U.S. companies which are either
listed on the New York or American Stock Exchanges or traded in the
over-the-counter markets and are considered by the Fund's investment
adviser to have an established market;
convertible securities;
investments in American Depositary Receipts ("ADRs") of foreign companies
traded on the New York or American Stock Exchanges or in the
over-the-counter markets. The Fund may not invest more than 20% of its
assets in ADRs. In addition, the Fund may invest up to 10% of its assets
in other securities of foreign issuers ("Non-ADRs"). (See "Securities of
Foreign Issuers.");
domestic issues of corporate debt obligations rated Aa or better by
Moody's Investors Service, Inc. ("Moody's") or AA by S&P. (If a
security's rating is reduced below the required minimum after the Fund
has purchased it, the Fund is not required to sell the security, but may
consider doing so.);
restricted and illiquid securities;
securities of other investment companies;
demand master notes; and
securities issued or guaranteed by the U.S. government, its agencies, or
instrumentalities.
In addition, the Fund may borrow money, lend portfolio securities, and engage in
when-issued and delayed delivery transactions, and may also invest in put and
call options, futures, and options on futures, for hedging purposes.
CORPORATE OBLIGATIONS. The Fund may invest in preferred stocks, bonds,
notes, and debentures of corporate issuers. These obligations will be rated
at the time of purchase in the top two rating categories, or, if unrated,
will be of comparable quality as determined by the Fund's investment
adviser. In addition, the Fund may invest in convertible securities, which
are fixed income securities that may be exchanged or converted into a
predetermined number of shares at the option of the holder during a
specified time period. Convertible securities may take the form of
convertible preferred stock, convertible bonds or debentures, units
consisting of "usable" bonds and warrants or a combination of the features
of several of these securities. The investment characteristics of each
convertible security vary widely, which allows convertible securities to be
employed for different investment objectives.
SECURITIES OF FOREIGN ISSUERS. The Fund may invest in the securities of
foreign issuers. There may be certain risks associated with investing in
foreign securities. These include risks of adverse political and economic
developments (including possible governmental seizure or nationalization of
assets), the possible imposition of exchange controls or other governmental
restrictions, less uniformity in accounting and reporting requirements, and
the possibility that there will be less information on such securities and
their issuers available to the public. In addition, there are restrictions
on foreign investments in other jurisdictions and there tends to be
difficulty in obtaining judgments from abroad and affecting repatriation of
capital invested abroad. Delays could occur in settlement of foreign
transactions, which could adversely affect shareholder equity. Foreign
securities may be subject to foreign taxes, which reduce yield, and may be
less marketable than comparable United States securities. Foreign
securities may be denominated in foreign currencies. Therefore, the value
in U.S. dollars of the Fund's assets and income may be affected by changes
in exchange rates and regulations. As a matter of practice, the Fund will
not invest in the securities of a foreign issuer if any risk identified
above appears to the Fund's investment adviser to be substantial.
STOCK INDEX FUTURES AND OPTIONS. The Fund may utilize stock index futures
contracts, options, and options on futures contracts, subject to the
limitation that the value of these futures contracts and options will not
exceed 20% of the Fund's total assets. Also, the Fund will not purchase
options to the extent that more than 5% of the value of the Fund's total
assets would be invested in premiums on open put option positions. These
futures contracts and options will be used to handle cash flows into and
out of the Fund and to potentially reduce transactional costs, since
transactional costs associated with futures and options contracts can be
lower than costs stemming from direct investment in stocks.
There are several risks accompanying the utilization of futures contracts
to effectively anticipate market movements. First, positions in futures
contracts may be closed only on an exchange or board of trade that
furnishes a secondary market for such contracts. While the Fund plans to
utilize futures contracts only if there exists an active market for such
contracts, there is no guarantee that a liquid market will exist for the
contracts at a specified time. Furthermore, because, by definition, futures
contracts look to projected price levels in the future, and not to current
levels of valuation, market circumstances may result in there being a
discrepancy between the price of the stock index future and the movement in
the corresponding stock index. The absence of a perfect price correlation
between the futures contract and its underlying stock index could stem from
investors choosing to close futures contracts by offsetting transactions
rather than satisfying additional margin requirements. This could result in
a distortion of the relationship between the index and the futures market.
In addition, because the futures market imposes less burdensome margin
requirements than the securities market, an increased amount of
participation by speculators in the futures market could result in price
fluctuations.
The effective use of futures and options as hedging techniques depends on
the correlation between their prices and the behavior of the Fund's
portfolio securities as well as the Fund's investment adviser's ability to
accurately predict the direction of stock prices, interest rates and other
relevant economic factors. In addition, daily limits on the fluctuation of
futures and options prices could cause the Fund to be unable to timely
liquidate its futures or options position and cause it to suffer greater
losses than would otherwise be the case. In this regard, the Fund may be
unable to anticipate the extent of its losses from futures transactions.
PUT AND CALL OPTIONS. The Fund may purchase put options on its portfolio
securities. These options will be used only as a hedge to attempt to
protect securities which the Fund holds against decreases in value. The
Fund may purchase these put options as long as they are listed on a
recognized options exchange and the underlying stocks are held in its
portfolio. The Fund may also write call options on securities either held
in its portfolio or which it has the right to obtain without payment of
further consideration or for which it has segregated cash in the amount of
any additional consideration. The call options which the Fund writes and
sells must be listed on a recognized options exchange. Writing of calls by
the Fund is intended to generate income for the Fund and thereby protect
against price movements in particular securities in the Fund's portfolio.
Prior to exercise or expiration, an option position can only be terminated
by entering into a closing purchase or sale transaction. This requires a
secondary market on an exchange which may or may not exist for any
particular call or put option at any specific time. The absence of a liquid
secondary market also may limit the Fund's ability to dispose of the
securities underlying an
option. The inability to close options also could have an adverse impact on
the Fund's ability to effectively hedge its portfolio.
RESTRICTED AND ILLIQUID SECURITIES. The Fund may invest in restricted
securities. Restricted securities are any securities in which the Fund may
otherwise invest pursuant to its investment objective and policies, but which
are subject to restriction on resale under federal securities law. The Fund will
limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, non-negotiable time
deposits, over-the-counter options, and repurchase agreements providing for
settlement in more than seven days after notice, to 15% of its net assets.
TEMPORARY INVESTMENTS. In such proportions as, in the judgment of the Fund's
investment adviser, market conditions warrant, during periods of other than
normal market conditions, the Fund may, for temporary defensive purposes, invest
in:
certificates of deposit, demand and time deposits, savings shares,
bankers' acceptances, and other instruments of domestic and foreign banks
and savings and loans, which institutions have capital, surplus, and
undivided profits over $100 million, or if the principal amount of the
instrument is insured in full by the Bank Insurance Fund ("BIF"), or by
the Savings Association Insurance Fund ("SAIF"), both of which are
administered by the FDIC;
securities issued and/or guaranteed as to payment of principal and
interest by the U.S. government, its agencies, or instrumentalities;
commercial paper (including Canadian Commercial Paper and Europaper)
rated A-1 or better by S&P or Prime-1 by Moody's, or, if unrated, of
comparable quality as determined by the Fund's investment adviser; and
repurchase agreements.
REPURCHASE AGREEMENTS. The securities in which the Fund invests may be
purchased pursuant to 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 the Fund and
agree at the time of sale to repurchase them at a mutually agreed upon time and
price. To the extent that the original seller does not repurchase the securities
from the Fund, the Fund could receive less than the repurchase price on any sale
of such securities.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS. The Fund may purchase securities
on a when-issued or delayed delivery basis. These transactions are arrangements
in which the Fund purchases securities with payment and delivery scheduled for a
future time. In when-issued and delayed delivery transactions, the Fund relies
on the seller to complete the transaction. The seller's failure to complete the
transaction may cause the Fund to miss a price or yield considered to be
advantageous.
LENDING OF PORTFOLIO SECURITIES. In order to generate additional income, the
Fund may lend portfolio securities on a short-term or long-term basis, or both,
to broker/dealers, banks, or other institutional borrowers of securities. The
Fund will only enter into loan arrangements with broker/dealers, banks, or other
institutions which the Fund's investment adviser has determined are creditworthy
under guidelines established by the Trustees and will receive collateral in the
form of cash or U.S. government securities equal to at least 102% of the value
of the securities loaned.
PORTFOLIO TURNOVER. Although the Fund does not intend to invest for the purpose
of seeking short-term profits, securities in its portfolio will be sold whenever
the Fund's investment adviser believes it is appropriate to do so in light of
the Fund's investment objective, without regard to the length of time a
particular security may have been held. The Fund's investment adviser does not
anticipate that the Fund's annual portfolio turnover rate will exceed 200% under
normal market conditions. High portolio turnover (i.e. over 100%) may involve
correspondingly greater brokerage commissions and other transaction costs, which
would be directly borne by the Fund. In addition, high portfolio turnover may
result in increased short-term capital gains which, when distributed to
shareholders, are treated as ordinary income. Nevertheless, transactions for the
Fund's portfolio will be based only upon investment considerations and will not
be limited by any other considerations when the Fund's investment adviser deems
it appropriate to make changes in the Fund's portfolio. The portfolio turnover
rate of the Fund may vary significantly from year to year, as a result of the
presence or absence of defensive investment positions taken by the Fund's
investment adviser.
INVESTMENT LIMITATIONS
The Fund will not:
borrow money directly or through reverse repurchase agreements
(arrangements in which the Fund sells a portfolio instrument for a
percentage of its cash value with an agreement to buy it back on a set
date) or pledge securities except, under certain circumstances, the Fund
may borrow up to one-third of the value of its total assets and pledge up
to 15% of the value of those assets to secure such borrowings; 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 such securities, or acquire more
than 10% of the outstanding voting securities of any one issuer.
The above investment limitations cannot be changed without shareholder approval.
THE BILTMORE FUNDS INFORMATION
- --------------------------------------------------------------------------------
MANAGEMENT OF THE TRUST
BOARD OF TRUSTEES. The Trustees are 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
on behalf of the Fund, investment decisions for the Fund 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 the investments for
the Fund and is responsible for the purchase or sale of portfolio instruments,
for which it receives an annual fee from the assets of the Fund.
ADVISORY FEES. The Fund's Adviser receives an annual investment advisory
fee equal to 0.70 of 1% of the Fund's average daily net assets. The
investment advisory contract provides that such
fee shall be accrued and paid daily. The Adviser has undertaken to
reimburse the Fund for operating expenses in excess of limitations
established by certain states. The Adviser may voluntarily choose to waive
a portion of its fee or reimburse the Fund for certain other expenses of
the Fund 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., a national banking association,
offers financial services that include, but are not limited to, commercial
and consumer loans, corporate, institutional, and personal trust services,
demand and time deposit accounts, letters of credit and international
financial services.
The Adviser 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. Wachovia Bank of North Carolina, N.A., Wachovia Bank of
Georgia, N.A., The South Carolina National Bank, and their affiliates
(collectively, 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 Bank of North Carolina, N.A. has served as
investment adviser to The Biltmore Funds since February 24, 1992. As part
of their regular banking operations, the Wachovia Banks may make loans to
public companies. Thus, it may be possible, from time to time, for the Fund
to hold or acquire the securities of issuers which are also lending clients
of the Wachovia Banks. The lending relationship will not be a factor in the
selection of securities.
The Fund's portfolio manager is Cherry Stribling. Mr. Stribling is a Vice
President of Wachovia Bank of North Carolina, N.A., and, as a Portfolio
Investment Manager, managed the Wachovia Stock Fund, a bank collective
investment fund with an investment objective similar to the Fund's. Mr.
Stribling also manages individual and institutional accounts with the same
portfolio management style as the Fund. Mr. Stribling has managed the Fund
since its inception.
SUB-ADVISER. Pursuant to the terms of an investment sub-advisory agreement
between the Adviser and Twin Capital Management, Inc. ("Twin Capital" or the
"Sub-Adviser"), Twin Capital furnishes certain investment advisory services to
the Adviser, including investment research, the quantitative analysis described
in the "Investment Process" section of this prospectus, statistical and other
factual information, and recommendations, based on Twin Capital's analysis, and
assists the Adviser in identifying securities for potential purchase and/or sale
on behalf of the Fund's portfolio. For the services provided and the expenses
incurred by the Sub-Adviser pursuant to the sub-advisory agreement, Twin Capital
is entitled to receive an annual fee of $55,000, payable by the Adviser, in
quarterly installments. Twin Capital may elect to waive some or all of its fee.
In no event shall the Fund be responsible for any fees due to the Sub-Adviser
for its services to the Adviser. Twin Capital, which is located at 3244
Washington Road, McMurray, Pennsylvania, 15317-3153, provides investment counsel
to both individuals and institutions, including banks, thrift institutions, and
pension and profit-sharing plans. As of December 20, 1993, Twin Capital
furnished services, substantially similar to the services it provides to the
Adviser, to other accounts with assets in excess of $1.4 billion. Twin Capital
has not previously acted as an investment adviser to an investment company. The
Sub-Adviser is controlled by Geoffrey Gerber, its President.
DISTRIBUTION OF SHARES
Federated Securities Corp. is the distributor (the "Distributor") for shares of
the Fund. It is a Pennsylvania corporation organized on November 14, 1969, and
is the distributor for a number of investment companies. Federated Securities
Corp. is a subsidiary of Federated Investors.
ADMINISTRATIVE ARRANGEMENTS
The Distributor may pay financial institutions and other financial service
providers, such as banks, fiduciaries, custodians for public funds, investment
advisers, and broker/dealers, a fee based upon the average net asset value of
shares of their customers for providing administrative services. This fee, if
paid, will be reimbursed by the Adviser and not the Fund.
SHAREHOLDER SERVICING ARRANGEMENTS
Federated Administrative Services, a subsidiary of Federated Investors, is the
Fund's shareholder servicing agent (the "Shareholder Servicing Agent"). The Fund
may pay the Shareholder Servicing Agent a fee based on the average daily net
asset value of shares for which it provides shareholder services. These
shareholder services include, but are not limited to, distributing prospectuses
and other information, providing shareholder assistance and communicating or
facilitating purchases and redemptions of shares. This fee will be computed at
an annual rate equal to 0.25 of 1% of the Fund's average daily net assets for
which the Shareholder Servicing Agent provides services; however, the
Shareholder Servicing Agent may choose voluntarily to waive all or a portion of
its fee at any time or pay all or some of its fees to financial institutions or
other financial service providers.
ADMINISTRATION OF THE FUND
ADMINISTRATIVE SERVICES. Federated Administrative Services, Pittsburgh,
Pennsylvania, a subsidiary of Federated Investors, provides the Fund with
certain 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
services at an annual rate as specified below:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
ADMINISTRATIVE FEE NET ASSETS OF THE TRUST
<C> <S>
0.150 of 1% of the first $250 million
0.125 of 1% of the next $250 million
0.100 of 1% of 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 in the Trust.
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 (the "Custodian") for the securities and cash of the
Fund. Under the Custodian Agreement, the Custodian holds the Fund's portfolio
securities in safekeeping and keeps all necessary records and documents relating
to its duties. For the services to be provided to the Trust pursuant to the
Custodian Agreement, the Trust pays the Custodian an annual fee calculated based
upon the average daily net assets of each Fund in the Trust and payable monthly
as follows:
<TABLE>
<CAPTION>
MAXIMUM AVERAGE AGGREGATE DAILY
CUSTODIAN FEE NET ASSETS OF THE FUND
<C> <S>
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 is transfer agent (the "Transfer Agent") for the
shares of the Fund, and dividend disbursing agent for the Fund. Federated
Services Company also provides certain accounting and recordkeeping services
with respect to the Fund's portfolio investments.
LEGAL COUNSEL. Legal counsel for the Fund is provided by Kirkpatrick &
Lockhart, Washington, D.C. Piper & Marbury, Washington, D.C., serves as counsel
to the independent Trustees.
INDEPENDENT AUDITORS. The independent auditors are Ernst & Young, Pittsburgh,
Pennsylvania.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the Adviser looks for prompt execution of the order at a favorable
price. In working with dealers, the Adviser will generally utilize those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. In selecting among firms
believed to meet these criteria, the Adviser may give consideration to those
firms which have sold or are selling shares of the Fund and other funds
distributed by Federated Securities Corp. The Adviser makes decisions on
portfolio transactions and selects brokers and dealers subject to review by the
Trustees.
EXPENSES OF THE FUND
The Fund pays all of its own expenses and its allocable share of Trust expenses.
These expenses include, but are not limited to, the costs of: organizing the
Trust and continuing its existence; Trustees' fees; investment advisory and
administrative services; printing prospectuses and other Fund documents for
shareholders; registering the Trust, the Fund and shares of the Fund; taxes and
commissions; issuing, purchasing, repurchasing, and redeeming shares; fees for
custodian, transfer agent, dividend
disbursing agent, shareholder servicing agents, and registrars; printing,
mailing, auditing, accounting, and legal expenses; reports to shareholders and
government agencies; meetings of Trustees and shareholders and proxy
solicitations therefor; insurance premiums; association membership dues; and
such nonrecurring and extraordinary items as may arise. However, the Adviser may
voluntarily waive and/or reimburse some expenses.
NET ASSET VALUE
- --------------------------------------------------------------------------------
The Fund's net asset value per share fluctuates. It is determined by dividing
the sum of the market value of all securities and other assets, less
liabilities, by the number of shares outstanding.
INVESTING IN THE FUND
- --------------------------------------------------------------------------------
SHARE PURCHASES
Shares are sold on days on which the New York Stock Exchange and the Federal
Reserve Wire System are open for business. Shares may be purchased through the
Trust Divisions of the Wachovia Banks or Wachovia Brokerage Service and
authorized broker/dealers. Purchase orders must be received by the Fund by 4:00
p.m. (Eastern time) in order for shares to be purchased at that day's public
offering price. In connection with the sale of shares, the Distributor may from
time to time offer certain items of nominal value to any shareholder or
investor. The Fund and the Distributor reserve the right to reject any purchase
request.
Texas residents must purchase, exchange, and redeem shares through Federated
Securities Corp. at
1-800-618-8573.
THROUGH WACHOVIA BROKERAGE SERVICE. Customers of Wachovia Brokerage Service may
place an order to purchase shares by telephoning 1-800-462-7538, sending written
instructions, or placing an order in person. Payment may be made by check, by
wire of federal funds (the customer's bank sends money to the Fund's bank
through the Federal Reserve Wire System) or by debiting a customer's account at
Wachovia Brokerage Service. Purchase orders must be communicated to Wachovia
Brokerage Service before 4:00 p.m. (Eastern time). 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 shares of the Fund by mail, send a check made payable to
Biltmore Quantitative Equity 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 shares of the Fund by wire, wire funds as follows:
Wachovia Securities, Inc.
ABA Number 0531-00494
Credit: 8735-001342
Further credit to: Biltmore Quantitative Equity Fund
Re: (Customer name and brokerage account number)
Shares of the Fund cannot be purchased by wire on any day 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 TRUST DIVISIONS OF THE WACHOVIA BANKS. Trust customers of the
Wachovia Banks may place an order to purchase shares of the Fund by telephoning,
sending written instructions, or placing the order in person with their account
officer in accordance with the procedures established by the Wachovia Banks and
as set forth in the relevant account agreement.
Payment may be made to the Wachovia Banks by check, by wire of federal funds, or
by debiting a customer's account with the Wachovia Banks. Orders are considered
received after payment by check is converted into federal funds and received by
the Wachovia Banks, which is 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 4:00 p.m. (Eastern time).
Shares of the Fund cannot be purchased by wire on any day 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.
MINIMUM INVESTMENT REQUIRED
The minimum initial investment in shares of the Fund is $250. This amount may be
waived from time to time.
WHAT SHARES COST
Fund shares are sold at their net asset value next determined after an order is
received, plus a sales charge as follows:
<TABLE>
<CAPTION>
SALES CHARGE AS SALES CHARGE AS
A PERCENTAGE OF A PERCENTAGE OF
AMOUNT OF TRANSACTION PUBLIC OFFERING PRICE NET AMOUNT INVESTED
<S> <C> <C>
Less than $100,000 % 4.50 % 4.71
$100,000 but less than $250,000 % 3.75 % 3.90
$250,000 but less than $500,000 % 2.50 % 2.56
$500,000 but less than $750,000 % 2.00 % 2.04
$750,000 but less than $1 million % 1.00 % 1.01
$1 million or more % 0.25 % 0.25
</TABLE>
The net asset value is determined at or after the close of the New York Stock
Exchange, Monday through Friday, except on: (i) days on which there are not
sufficient changes in the value of the Fund's
portfolio securities that its net asset value might be materially affected; (ii)
days during which no shares are tendered for redemption and no orders to
purchase shares are received; or (iii) the following holidays: New Year's Day,
Martin Luther King Day, Presidents' Day, Good Friday, Memorial Day, Independence
Day, Labor Day, Columbus Day, Veterans' Day, Thanksgiving Day and Christmas Day.
PURCHASES AT NET ASSET VALUE. Shares of the Fund may be purchased at net asset
value, without a sales charge, by investment advisers registered under the
Investment Advisers Act of 1940 purchasing on behalf of their clients, and by
the Trust Divisions of the Wachovia Banks for funds which are held in a
fiduciary, agency, custodial, or similar capacity. Trustees, officers, directors
and retired directors, advisory board members, employees and retired employees
of the Fund and the Wachovia Banks, the spouses and children under the age of 21
of such persons, and any trusts, pension profit-sharing plans and individual
retirement accounts operated for such persons, may purchase shares of the Fund
at net asset value. In addition, trustees, officers, directors and employees of
the Distributor and its affiliates, and any bank or investment dealer who has a
sales agreement with the Distributor relating to the Fund, may also purchase
shares at their net asset value.
SALES CHARGE REALLOWANCE. For sales of shares of the Fund, a broker/dealer will
normally receive up to 90% of the applicable sales charge. Any portion of the
sales charge which is not paid to a broker/dealer will be retained by the
Distributor. However, the Distributor, at its sole discretion, may uniformly
offer to pay all broker/dealers selling shares of the Fund, all or a portion of
the sales charge it normally retains. If accepted by the broker/dealer, such
additional payments will be predicated upon the amount of Fund shares sold. In
addition, the Distributor may pay from its assets promotional incentives in the
form of cash or other compensation to the broker/dealers that sell shares of the
Fund.
The sales charge for shares sold other than through Wachovia Brokerage Service
or registered broker/dealers will be retained by the Distributor. The
Distributor may pay fees to banks out of the sales charge in exchange for sales
and/or administrative services performed on behalf of Wachovia Brokerage
Service's customers in connection with the initiation of customer accounts and
purchases of shares of the Fund.
REDUCING THE SALES CHARGE. The sales charge can be reduced on the purchase of
shares of the Fund through:
quantity discounts and accumulated purchases;
signing a 13-month letter of intent;
using the reinvestment privilege; or
concurrent purchases.
QUANTITY DISCOUNTS AND ACCUMULATED PURCHASES. As shown in the table on the
prior page, larger purchases reduce the sales charge paid. The Fund will combine
purchases made on the same day by the investor, the investor's spouse, and the
investor's children under age 21 when it calculates the sales charge.
If an additional purchase of shares of the Fund is made, the Fund will consider
the previous purchases still invested in the Fund. For example, if a shareholder
already owns shares having a current value at the public offering price of
$70,000 and then purchases $40,000 more at the current public offering
13
price, the sales charge of the additional purchase according to the schedule now
in effect would be 3.75%, not 4.50%.
To receive the sales charge reduction, Wachovia Brokerage Service or the
Distributor must be notified by the shareholder in writing at the time the
purchase is made that Fund shares are already owned or that purchases are being
combined. The Fund will reduce the sales charge after it confirms the purchase.
LETTER OF INTENT. If a shareholder intends to purchase shares of the Fund equal
in value to at least $100,000 over the next 13 months, the sales charge may be
reduced by signing a letter of intent to that effect. This letter of intent
includes a provision for a sales charge adjustment depending on the amount
actually purchased within the 13-month period and a provision for the Custodian
to hold 4.50% of the total amount intended to be purchased in escrow (in shares
of the Fund) until such purchase is completed.
The 4.50% held in escrow will be applied to the shareholder's account at the end
of the 13-month period, unless the amount specified in the letter of intent is
not purchased. In this event, an appropriate number of escrowed shares may be
redeemed in order to realize the difference in the sales charge.
This letter of intent will not obligate the shareholder to purchase shares, but
if the shareholder does, each purchase during the period will be at the sales
charge applicable to the total amount intended to be purchased. This letter may
be dated as of a prior date to include any purchases made within the past 90
days.
REINVESTMENT PRIVILEGE. If shares in the Fund have been redeemed, the
shareholder has a one-time right, within 90 days, to reinvest the redemption
proceeds in that Fund at the next-determined net asset value without any sales
charge. Wachovia Brokerage Service or the Distributor must be notified by the
shareholder in writing or by his financial institution of the reinvestment in
order to eliminate a sales charge. If the shareholder redeems his shares in the
Fund, there may be tax consequences.
CONCURRENT PURCHASES. For purposes of qualifying for a sales charge reduction,
a shareholder has the privilege of combining concurrent purchases of two or more
of the Funds, the purchase price of which includes a sales charge. For example,
if a shareholder concurrently invested $70,000 in one of the other Funds with a
sales charge, and $40,000 in another Fund with a sales charge, the sales charge
would be reduced.
To receive this sales charge reduction, Wachovia Brokerage Service or the
Distributor must be notified by the agent placing the order at the time the
concurrent purchases are made. The sales charge will be reduced after the
purchase is confirmed.
SYSTEMATIC INVESTMENT PROGRAM
Once a Fund account has been opened, shareholders may add to their investment on
a regular basis in a minimum amount of $50. Under this program, funds may be
automatically withdrawn periodically from the shareholder's checking account and
invested in Fund shares at the net asset value next determined after an order is
received by the Fund, plus the applicable sales charge. A shareholder may apply
for participation in this program through Wachovia Brokerage Service or through
the Distributor.
EXCHANGING SECURITIES FOR FUND SHARES
The Fund may accept securities in exchange for Fund shares. The Fund will allow
such exchanges only upon the prior approval of the Fund and a determination by
the Fund and the Adviser that the securities to be exchanged are acceptable.
Any securities exchanged must meet the investment objective and policies of the
Fund, must have a readily ascertainable market value, must be liquid and must
not be subject to restrictions on resale. The market value of any securities
exchanged in an initial investment, plus any cash, must be at least equal to the
minimum investment in the Fund.
Securities accepted by the Fund will be valued in the same manner as the Fund
values its assets. The basis of the exchange will depend upon the net asset
value of Fund shares on the day the securities are valued. One share of the Fund
will be issued for each equivalent amount of securities accepted.
Any interest earned on the securities prior to the exchange will be considered
in valuing the securities. All interest, dividends, subscription or other rights
attached to the securities become the property of the Fund, along with the
securities.
If an exchange is permitted, it will be treated as a sale for federal income tax
purposes. Depending upon the cost basis of the securities exchanged for Fund
shares, a gain or loss may be realized by the investor.
CERTIFICATES AND CONFIRMATIONS
As the Transfer Agent, Federated Services Company maintains a share account for
each shareholder of record. Share certificates are not issued.
Detailed confirmations of each purchase or redemption are sent to each
shareholder of record. Quarterly statements are sent to report dividends paid
during the quarter.
DIVIDENDS
Dividends are declared and paid quarterly to all shareholders invested in the
Fund on the record date. Unless shareholders request cash payments by writing to
the Fund, dividends are automatically reinvested in additional shares of the
Fund on the payment dates at the ex-dividend date net asset value without a
sales charge.
CAPITAL GAINS
Capital gains, when realized by the Fund, will be distributed at least once
every 12 months.
EXCHANGE PRIVILEGE
All shareholders of the Fund are shareholders of the Trust. The Trust currently
consists of the Funds, as previously defined in the "General Information"
section of this prospectus. The Funds are advised by Wachovia Investment
Management Group and distributed by Federated Securities Corp.
Shareholders of the Fund have easy access to the other Funds comprising the
Trust, to portfolios comprising The Biltmore Municipal Funds, and to the
International Equity Fund (a mutual fund advised by Fiduciary International,
Inc.) (hereinafter collectively referred to as, the "Participating Funds")
through a telephone exchange program. Shares of the Participating Funds may be
exchanged
for shares of the Fund at net asset value without a sales charge (if a sales
charge was previously paid). The exchange privilege is available to shareholders
residing in any state in which the shares being acquired may be legally sold.
Prior to any exchange, the shareholder must receive a copy of the current
prospectus of the Participating Fund into which an exchange is to be effected.
Shareholders using this privilege must exchange shares having a net asset value
at least equal to the minimum investment of the Participating Fund into which
they are exchanging. Shareholders who desire to automatically exchange shares of
a predetermined amount on a monthly, quarterly, or annual basis may take
advantage of a systematic exchange privilege. A shareholder may obtain further
information on these exchange privileges by calling the shareholder's Wachovia
Bank Officer or Wachovia Brokerage Service, as appropriate.
Shares of the Participating Funds with a sales charge may be exchanged at net
asset value for shares of other Participating Funds with an equal sales charge
or no sales charge. Exchanges are made at net asset value, plus the difference
between the sales charge already paid on the Fund's shares and any sales charge
of the Participating Fund into which the shares are to be exchanged, if higher.
Shares of Participating Funds with no sales charge acquired by direct purchase
or reinvestment of dividends on such shares may be exchanged for shares of
Participating Funds with a sales charge at net asset value plus the applicable
sales charge.
Upon receipt of proper instructions and all necessary supporting documents,
shares submitted for exchange will be redeemed at the next-determined net asset
value. Written exchange instructions may require a signature guarantee. Exercise
of this privilege is treated as a sale for federal income tax purposes and,
depending on the circumstances, a short or long-term capital gain or loss may be
realized. The exchange privilege may be modified or terminated at any time.
Shareholders will be notified of the modification or termination of the exchange
privilege.
EXCHANGE BY TELEPHONE. Instructions for exchanges between the Participating
Funds may be given by telephone to Wachovia Brokerage Service. Trust customers
should contact their account officer. Shares may be exchanged by telephone only
between fund accounts having identical shareholder registrations. Exchange
instructions given by telephone may be electronically recorded.
Telephone exchange instructions must be received before 4:00 p.m. (Eastern time)
for shares to be exchanged the same day. The telephone exchange privilege may be
modified or terminated at any time. Shareholders will be notified of such
modification or termination. Shareholders may have difficulty in making
exchanges by telephone through banks, brokers, and other financial institutions
during times of drastic economic or market changes. If a shareholder cannot
contact his bank, broker, or financial institution by telephone, it is
recommended that an exchange request be made in writing and sent by overnight
mail. If reasonable procedures are not followed by the Fund, it may be liable
for losses due to unauthorized or fraudulent telephone instructions.
REDEEMING SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at their net asset value next determined after the Trust
Divisions of the Wachovia Banks or Wachovia Brokerage Service receives the
redemption request. Redemptions will be made on days on which the Fund computes
its net asset value. Requests for redemption can be made in person, by
telephone, or by writing to the shareholder's account officer. If at any time
the Fund shall determine it necessary to terminate or modify any of these
methods of redemption, shareholders would be promptly notified.
BY TELEPHONE. A shareholder who is a customer of Wachovia Brokerage Service may
redeem shares of the Fund by telephoning Wachovia Brokerage Service at
1-800-462-7538. Shareholders wishing to redeem by phone will be required to
complete a telephone redemption authorization form available through Wachovia
Brokerage Service.
A shareholder who is a customer of a Trust Division of the Wachovia Banks and
whose account agreement with the Wachovia Banks permits telephone redemption may
redeem shares of the Fund by telephoning his account officer. Shares will be
redeemed at the net asset value next determined after the Fund receives the
redemption request. Redemption requests must be received by 4:00 p.m. (Eastern
time) in order for shares to be redeemed at that day's net asset value. In no
event will proceeds be credited more than seven days after a proper request for
redemption has been received. In the event of drastic economic or market
changes, a shareholder may experience difficulty in redeeming by telephone. If
such a case should occur, another method of redemption, such as "By Mail,"
should be considered.
An authorization permitting a Trust Division of the Wachovia Banks to accept
telephone requests is included as part of a shareholder's account agreement.
Telephone redemption instructions may be recorded. If reasonable procedures are
not followed by the Fund, it 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 shares by sending a written request to Wachovia Brokerage Service. The
written request should include the shareholder's name and address, the Fund
name, the brokerage account number, and the share or dollar amount requested.
Shareholders should call Wachovia Brokerage Service for assistance in redeeming
by mail. Normally, a check for the proceeds is mailed within one business day,
but in no event more than seven days, after receipt of a proper written
redemption request provided that the Transfer Agent has received payment for
shares from the shareholder.
SIGNATURES. Shareholders requesting a redemption of $50,000 or more, a
redemption of any amount to be sent to an address other than that on record with
the Fund, or a redemption payable other than to the shareholder of record, must
have signatures on written redemption requests guaranteed by:
a trust company or commercial bank whose deposits are insured by the BIF;
a member firm of the New York, American, Boston, Midwest, or Pacific
Stock Exchange;
a savings bank or savings and loan association whose deposits are insured
by the SAIF; or
any other "eligible guarantor institution," as defined in the Securities
Exchange Act of 1934.
The Fund does not accept signatures guaranteed by a notary public.
The Fund and the Transfer Agent have adopted standards for accepting signature
guarantees from the above institutions. The Fund may elect in the future to
limit eligible signature guarantors to institutions that are members of a
signature guarantee program. The Fund and the Transfer Agent reserve the right
to amend these standards at any time without notice.
SYSTEMATIC WITHDRAWAL PROGRAM
Shareholders who desire to receive payments of a predetermined amount may take
advantage of the Systematic Withdrawal Program. Under this program, shares are
redeemed to provide for monthly or quarterly withdrawal payments in an amount
directed by the shareholder. Shareholders may redeem by periodic withdrawal
payments in a minimum amount of $100. Depending upon the amount of the
withdrawal payments, the amount of dividends paid and capital gains
distributions with respect to shares, and the fluctuation of net asset value of
shares redeemed under this program, redemptions may reduce, and eventually
deplete, the shareholder's investment in the Fund. For this reason, payments
under this program should not be considered as yield or income on the
shareholder's investment in the Fund. To be eligible to participate in this
program, a shareholder must have an account value of at least $10,000. A
shareholder may apply for participation in this program through Wachovia
Brokerage Service. Due to the fact that shares are sold with a sales charge, it
is not advisable for shareholders to be purchasing shares while participating in
this program.
ACCOUNTS WITH LOW BALANCES
Due to the high cost of maintaining accounts with low balances, the Fund may
redeem shares in any account and pay the proceeds to the shareholder if the
account balance falls below the required minimum value of $250 due to
shareholder redemptions. This requirement does not apply, however, if the
balance falls below $250 because of changes in the Fund's net asset value.
Before shares are redeemed to close an account, the shareholder is notified in
writing and allowed 30 days to purchase additional shares to meet the minimum
requirement.
SHAREHOLDER INFORMATION
- --------------------------------------------------------------------------------
VOTING RIGHTS
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All shares of each of the
Funds in the Trust have equal voting rights, except that in matters affecting a
particular fund, only shares of that fund are entitled to vote.
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's or the Fund's operation 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 Fund. In the unlikely event a shareholder is held personally liable for
the Trust's obligations on behalf of the Fund, the Trust is required by its
Declaration of Trust to use the property of the Fund to protect or compensate
the shareholder. On request, the Trust will defend any claim made and pay any
judgment against a shareholder of the Fund for any act or obligation of the
Trust on behalf of the Fund. Therefore, financial loss resulting from liability
as a shareholder of the Fund will occur only if the Trust cannot meet its
obligations to indemnify shareholders and pay judgments against them from the
assets of the 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 prohibit 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 Fund's
investment adviser, Wachovia Investment Management Group, 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 Fund contemplated by its investment advisory contract and
the Custodian Agreement 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 Fund. 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 Fund 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.
The Glass-Steagall Act prohibits a depository institution (such as a commercial
bank or a savings and loan association) from being an underwriter or distributor
of most securities. In the event the Glass-Steagall Act is deemed to prohibit
depository institutions from acting in the administrative capacities
described above, or should Congress relax current restrictions on depository
institutions, the Trustees will consider appropriate changes in the services.
State securities laws governing the ability of depository institutions to act as
underwriters or distributors of securities may differ from interpretations given
to the Glass-Steagall Act and, therefore, banks and financial institutions may
be required to register as dealers pursuant to state law.
TAX INFORMATION
- --------------------------------------------------------------------------------
FEDERAL INCOME TAX
The Fund will pay no federal income tax because it expects to meet requirements
of the Internal Revenue Code applicable to regulated investment companies and to
receive the special tax treatment afforded to such companies.
The Fund will be treated as a single, separate entity for federal income tax
purposes so that income (including capital gains) and losses realized by the
Trust's other portfolios will not be combined for tax purposes with those
realized by the Fund.
Unless otherwise exempt, shareholders are required to pay federal income tax on
any dividends and other distributions, including capital gains distributions,
received. This applies whether dividends and distributions are received in cash
or as additional shares. The Fund will provide detailed tax information for
reporting purposes. Shareholders are urged to consult their own tax advisers
regarding the status of their accounts under state and local tax laws.
PERFORMANCE INFORMATION
- --------------------------------------------------------------------------------
From time to time the Fund advertises its total return and yield.
Total return represents the change, over a specified period of time, in the
value of an investment in the Fund after reinvesting all income and capital gain
distributions. It is calculated by dividing that change by the initial
investment and is expressed as a percentage.
The yield of the Fund is calculated by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This number is then annualized using semi-annual
compounding. The yield does not necessarily reflect income actually earned by
the Fund and, therefore, may not correlate to the dividends or other
distributions paid to shareholders.
The performance information reflects the effect of the maximum sales load which,
if excluded, would increase the total return and yield.
From time to time, the Fund may advertise its performance using certain
reporting services and/or compare its performance to certain indices.
ADDRESSES
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
Biltmore Quantitative Equity Fund Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Distributor
Federated Securities Corp. Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Investment Adviser
Wachovia Investment 301 North Main Street
Management Group Winston-Salem, North Carolina 27150
- ---------------------------------------------------------------------------------------------------------------------
Custodian
Wachovia Bank of Wachovia Trust Operations
North Carolina, N.A. 301 North Main Street
Winston-Salem, North Carolina 27150
- ---------------------------------------------------------------------------------------------------------------------
Transfer Agent, Dividend Disbursing Agent, and
Portfolio Accounting Services
Federated Services Company Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
- ---------------------------------------------------------------------------------------------------------------------
Counsel to The Biltmore Funds
Kirkpatrick & Lockhart 1800 M Street, N.W.
Washington, D.C. 20036-5891
- ---------------------------------------------------------------------------------------------------------------------
Counsel to the Independent Trustees
Piper & Marbury 1200 Nineteenth Street, N.W.
Washington, D.C. 20036-2430
- ---------------------------------------------------------------------------------------------------------------------
Independent Auditors
Ernst & Young One Oxford Centre
Pittsburgh, Pennsylvania 15219
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>
BILTMORE QUANTITATIVE EQUITY FUND
(A Portfolio of The Biltmore Funds)
- --------------------------------------------------------------------------------
SUPPLEMENT TO STATEMENT OF ADDITIONAL INFORMATION DATED JANUARY 18, 1994
A. Please add the following as a second paragraph to the section
entitled "Fund Ownership" on page 8 of the Statement of Additional
Information:
"As of July 15, 1994, the following shareholders of record owned 5%
or more of the outstanding shares of the Fund: Wachovia Bank of
North Carolina, Winston-Salem, North Carolina, on behalf of
Retirement Income Plan of Wachovia owned approximately 4,063,214
shares (42.91%); Wachovia Bank of South Carolina, N.A.,
Winston-Salem, North Carolina, as Trustee for Mayfair Mills Profit
Sharing Plan, owned approximately 795,897 shares (8.41%); Wachovia
Bank of South Carolina, N.A., Winston-Salem, North Carolina, as
Trustee for Retirement Program Plan of Employees of Kemet
Electronics Corporation, owned approximately 580,000 shares (6.13%);
and Wachovia Bank of South Carolina, N.A., Winston-Salem, North
Carolina, as Trustee for the Clinton Retirement Income Program
Trust, owned approximately 477,692 shares (5.04%)."
B. Please insert the following as the last paragraph in the sub-section
entitled "Advisory and Sub Advisory Fees" under the main section
entitled "Investment Advisory Services" on page 9 of the Statement
of Additional Information:
"From the date of initial public investment, March 28, 1994 through
May 31, 1994, the Adviser earned $111,407, of which $15,915 were
voluntarily waived."
C. Please insert the following information as the second sentence under
the section entitled "Administrative Services" on page 9 of the
Statement of Additional Information:
"From the date of initial public investment, March 28, 1994, to May
31, 1994, the Fund incurred costs for administrative services of
$16,115."
D. Please add the following information as the final paragraph under
the section entitled "Brokerage Transactions" on pages 9 and 10 of
the Statement of Additional Information:
"From the date of initial public investment, March 28, 1994 to May
31, 1994, $893,736 was paid in brokerage commissions."
E. Please insert the following information as a final paragraph under
the section entitled "Total Return" on page 11 of the Statement of
Additional Information:
"The Fund's average annual return for the period between March 25,
1994 (start of performance) and May 31, 1994 was (6.21%)."
F. Please insert the following information as a final paragraph under
the section entitled "Yield" on page 11 of the Statement of
Additional Information:
"The Fund's yield for the thirty-day period ended May 31, 1994 was
1.74%."
May 31, 1994
[LOGO] FEDERATED SECURITIES CORP.
-------------------------------------------------------------------------
Distributor
G00459-01 (7/94)
BILTMORE QUANTITATIVE EQUITY FUND
(A PORTFOLIO OF THE BILTMORE FUNDS)
STATEMENT OF ADDITIONAL INFORMATION
This Statement of Additional Information should be read with the
prospectus of Biltmore Quantitative Equity Fund (the "Fund") of The
Biltmore Funds (the "Trust"), dated January 18, 1994. This Statement
is not a prospectus itself. To receive a copy of the prospectus, Trust
customers of the Wachovia Banks (as defined in the prospectus) may
write the Fund or call their Wachovia Bank Officer. Customers of
Wachovia Brokerage Service may write the Fund or call 1-800-462-7538.
FEDERATED INVESTORS TOWER
PITTSBURGH, PENNSYLVANIA 15222-3779
Statement dated January 18, 1994
[LOGO] FEDERATED SECURITIES CORP.
---------------------------------------------------------
Distributor
A subsidiary of FEDERATED INVESTORS
TABLE OF CONTENTS
- --------------------------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND 1
- ---------------------------------------------------------------
INVESTMENT OBJECTIVE AND POLICIES 1
- ---------------------------------------------------------------
Types of Investments 1
Restricted and Illiquid Securities 3
Obligations of Foreign Issuers 3
Demand Master Notes 3
Convertible Securities 3
Zero Coupon Convertible Securities 4
Repurchase Agreements 4
Reverse Repurchase Agreements 4
When-Issued and Delayed Delivery Transactions 4
Temporary Investments 4
Lending of Portfolio Securities 5
Investment Limitations 5
THE BILTMORE FUNDS MANAGEMENT 7
- ---------------------------------------------------------------
Officers and Trustees 7
Fund Ownership 8
Trustee Liability 8
INVESTMENT ADVISORY SERVICES 9
- ---------------------------------------------------------------
Adviser to the Fund and Sub-Adviser 9
Advisory and Sub-Advisory Fees 9
ADMINISTRATIVE SERVICES 9
- ---------------------------------------------------------------
BROKERAGE TRANSACTIONS 9
- ---------------------------------------------------------------
PURCHASING FUND SHARES 10
- ---------------------------------------------------------------
Conversion to Federal Funds 10
DETERMINING NET ASSET VALUE 10
- ---------------------------------------------------------------
DETERMINING MARKET VALUE OF SECURITIES 10
- ---------------------------------------------------------------
REDEEMING FUND SHARES 11
- ---------------------------------------------------------------
Redemption in Kind 11
TAX STATUS 11
- ---------------------------------------------------------------
The Fund's Tax Status 11
Shareholders' Tax Status 11
Capital Gains 11
TOTAL RETURN 11
- ---------------------------------------------------------------
YIELD 11
- ---------------------------------------------------------------
PERFORMANCE COMPARISONS 12
- ---------------------------------------------------------------
STANDARD & POOR'S CORPORATION 12
- ---------------------------------------------------------------
APPENDIX 14
- ---------------------------------------------------------------
GENERAL INFORMATION ABOUT THE FUND
- --------------------------------------------------------------------------------
The Fund is a portfolio in The Biltmore Funds (the "Trust"). The Trust was
established as a Massachusetts business trust under a Declaration of Trust dated
November 19, 1991.
INVESTMENT OBJECTIVE AND POLICIES
- --------------------------------------------------------------------------------
The Fund's investment objective is to provide growth of principal and income.
The investment objective cannot be changed without the approval of shareholders.
Unless otherwise indicated, the investment policies described below may be
changed by the Board of Trustees (the "Trustees" or the "Board") without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.
TYPES OF INVESTMENTS
As more fully described in the prospectus, the Fund invests in a
professionally-managed and diversified portfolio consisting primarily of large
capitalization common stocks. The Fund's investment adviser seeks to identify
undervalued stocks with improving prospects by utilizing a computer valuation
model to capture both growth and value opportunities. Although the Fund may
invest in other securities of these companies, in money market instruments, and
in U.S. government obligations in such proportions as prevailing market
conditions warrant in the judgment of the Fund's investment adviser, it is the
Fund's policy, under normal market conditions, to invest at least 65% of its
total assets in equity securities.
Set forth below are other securities in which the Fund may invest from time to
time:
FUTURES AND OPTIONS TRANSACTIONS
As a means of reducing fluctuations in the net asset value of shares of
the Fund, the Fund may attempt to hedge all or a portion of its portfolio
by buying and selling financial futures contracts, buying put options on
portfolio securities and listed put options on futures contracts, and
writing call options on futures contracts. The Fund may also write
covered call options on portfolio securities to attempt to increase its
current income.
The Fund will maintain its positions in securities, options and
segregated cash subject to puts and calls until the options are
exercised, closed, or have expired. An option position on financial
futures contracts may be closed out over-the-counter or on a
nationally-recognized exchange which provides a secondary market for
options of the same series.
In addition to purchasing put options and writing call options as
described in the prospectus, the Fund may purchase and write
over-the-counter options on portfolio securities in negotiated
transactions with the buyers or writers of the options when options on
the portfolio securities held by the Fund are not traded on an exchange.
The Fund purchases and writes options only with investment dealers and
other financial institutions (such as commercial banks or savings and
loan associations) deemed creditworthy by the Fund's investment adviser.
Over-the-counter options are two party contracts with price and terms
negotiated between buyer and seller. In contrast, exchange-traded options
are third party contracts with standardized strike prices and expiration
dates and are purchased from a clearing corporation. Exchange-traded
options have a continuous liquid market while over-the-counter options
may not.
The Fund may also write call options and purchase put options on
financial futures and stock index futures contracts as a hedge to attempt
to protect securities in its portfolio against decreases in value.
FINANCIAL FUTURES CONTRACTS
A futures contract is a firm commitment by two parties: the seller who
agrees to make delivery of the specific type of security called for in
the contract ("going short") and the buyer who agrees to take delivery of
the security ("going long") at a certain time in the future.
A stock index futures contract is a bilateral agreement which obligates
the seller to deliver (and the purchaser to take delivery of) an amount
of cash equal to a specific dollar amount times the difference between
the value of a specific stock index at the close of trading of the
contract and the price at which the agreement is originally made. There
is no physical delivery of the stocks constituting the index, and no
price is paid upon entering into a futures contract. In general,
contracts are closed out prior to their expiration.
PUT OPTIONS ON FINANCIAL FUTURES CONTRACTS
The Fund may purchase listed put options on financial futures contracts.
Unlike entering directly into a futures contract, which requires the
purchaser to buy a financial instrument on a set date at a specified
price, the purchase of a put option on a futures contract entitles (but
does not obligate) its purchaser to decide on or before a future date
whether to assume a short position at the specified price.
Generally, if the hedged portfolio securities decrease in value during
the term of an option, the related futures contracts will also decrease
in value and the option will increase in value. In such an event, the
Fund will normally close out its option by selling an identical option.
If the hedge is successful, the proceeds received by the Fund upon the
sale of the second option will be large enough to offset both the premium
paid by the Fund for the original option plus the decrease in value of
the hedged securities.
Alternatively, the Fund may exercise its put option to close out the
position. To do so, it would simultaneously enter into a futures contract
of the type underlying the option (for a price less than the strike price
of the option) and exercise the option. The Fund would then deliver the
futures contract in return for payment of the strike price. If the Fund
neither closes out nor exercises an option, the option will expire on the
date provided in the option contract, and only the premium paid for the
contract will be lost.
CALL OPTIONS ON FINANCIAL FUTURES CONTRACTS
In addition to purchasing put options on futures, the Fund may write
listed call options on futures contracts to hedge its portfolio. When the
Fund writes a call option on a futures contract, it is undertaking the
obligation of assuming a short futures position (selling a futures
contract) at the fixed strike price at any time during the life of the
option if the option is exercised. As stock prices fall, causing the
prices of futures to go down, the Fund's obligation under a call option
on a future (to sell a futures contract) costs less to fulfill, causing
the value of the Fund's call option position to increase.
In other words, as the underlying futures price goes down below the
strike price, the buyer of the option has no reason to exercise the call,
so that the Fund keeps the premium received for the option. This premium
can substantially offset the drop in value of the Fund's fixed income or
indexed portfolio which is occurring as interest rates rise.
Prior to the expiration of a call written by the Fund, or exercise of it
by the buyer, the Fund may close out the option by buying an identical
option. If the hedge is successful, the cost of the second option will be
less than the premium received by the Fund for the initial option. The
net premium income of the Fund will then substantially offset the
decrease in value of the hedged securities.
The Fund will not maintain open positions in futures contracts it has
sold or call options it has written on futures contracts if, in the
aggregate, the value of the open positions (marked to market) exceeds the
current market value of its securities portfolio plus or minus the
unrealized gain or loss on those open positions, adjusted for the
correlation of volatility between the hedged securities and the futures
contracts. If this limitation is exceeded at any time, the Fund will take
prompt action to close out a sufficient number of open contracts to bring
its open futures and options positions within this limitation.
"MARGIN" IN FUTURES TRANSACTIONS
Unlike the purchase or sale of a security, the Fund does not pay or
receive money upon the purchase or sale of a futures contract. Rather,
the Fund is required to deposit an amount of "initial margin" in cash or
U.S. Treasury bills with its custodian (or the broker, if legally
permitted). The nature of initial margin in futures transactions is
different from that of margin in securities transactions in that initial
margin in futures transactions does not involve the borrowing of funds by
the Fund to finance the transactions. Initial margin is in the nature of
a performance bond or good faith deposit on the contract which is
returned to the Fund upon termination of the futures contract, assuming
all contractual obligations have been satisfied.
A futures contract held by the Fund is valued daily at the official
settlement price of the exchange on which it is traded. Each day the Fund
pays or receives cash, called "variation margin," equal to the daily
change in value of the futures contract. This process is known as
"marking to market." Variation margin does not represent a borrowing or
loan by the Fund but is instead settlement between the Fund and the
broker of the amount one would owe the other if the futures contract
expired. In computing its daily net asset value, the Fund will mark to
market its open futures positions.
The Fund is also required to deposit and maintain margin when it writes
call options on futures contracts.
The Fund will comply with the following restrictions when purchasing and
selling futures contracts. First, the Fund will not participate in
futures transactions if the sum of its initial margin deposits on open
contracts will exceed 5% of the market value of the Fund's total assets,
after taking into account the unrealized profits and losses on those
contracts it has entered into. Second, the Fund will not enter into these
contracts for speculative purposes. Third, since the Fund does not
constitute a commodity pool, it will not market itself as such, nor serve
as a vehicle for trading in the commodities futures or commodity options
markets. Connected with this, the Fund will disclose to all prospective
investors the limitations on its futures and option transactions, and
make clear that these transactions are entered into only for bona
fide hedging purposes, or other permissible purposes pursuant to
regulations promulgated by the Commodity Futures Trading Commission
("CFTC"). Finally, because the Fund will submit to the CFTC special calls
for information, the Fund will not register as a commodities pool
operator.
RESTRICTED AND ILLIQUID SECURITIES
The ability of the Trustees to determine the liquidity of certain restricted
securities is permitted under a Securities and Exchange Commission staff
position set forth in the adopting release for Rule 144A (the "Rule") under the
Securities Act of 1933. The Rule is a non-exclusive, safe-harbor for certain
secondary market transactions involving securities subject to restrictions on
resale under federal securities laws. The Rule provides an exemption from
registration for resales of otherwise restricted securities to qualified
institutional buyers. The Rule was expected to further enhance the liquidity of
the secondary market for securities eligible for resale under the Rule. The Fund
believes that the staff of the Securities and Exchange Commission has left the
question of determining the liquidity of all restricted securities to the Board.
The Board considers the following criteria in determining the liquidity of
certain restricted securities:
the frequency of trades and quotes for the security;
the number of dealers willing to purchase or sell the security and the number of
other potential buyers;
dealer undertakings to make a market in the security; and
the nature of the security and the nature of the marketplace trades.
OBLIGATIONS OF FOREIGN ISSUERS
Obligations of foreign issuers may include debt obligations of supranational
entities, which include international organizations designed or supported by
governmental entities to promote economic reconstruction or development, and
international banking institutions and related government agencies. Examples of
these include, but are not limited to, the International Bank for Reconstruction
and Development (World Bank), European Investment Bank and InterAmerican
Development Bank.
DEMAND MASTER NOTES
The Fund may invest in variable amount demand master notes. Demand notes are
short-term borrowing arrangements between a corporation or government agency and
an institutional lender (such as the 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. Many master notes give the Fund the
option of increasing or decreasing the principal amount of the master note on a
daily or weekly basis within certain limits. Demand master notes usually provide
for floating or variable rates of interest.
CONVERTIBLE SECURITIES
Convertible bonds and convertible preferred stocks are fixed income securities
that generally retain the investment characteristics of fixed income securities
until they have been converted but also react to movements in the underlying
equity securities. The holder is entitled to receive the fixed income of a bond
or the dividend preference of a preferred stock until the holder elects to
exercise the conversion privilege. Usable bonds are corporate bonds that can be
used in whole or in part, customarily at full face value, in lieu of cash to
purchase the issuer's common stock. When owned as part of a unit along with
warrants, which are options to buy the common stock, they function as
convertible bonds, except that the warrants generally will expire before the
bond's maturity. Convertible securities are senior to equity securities and,
therefore, have a claim to assets of the corporation prior to the holders of
common stock in the case of liquidation. However, convertible securities are
generally subordinated to similar nonconvertible securities of the same company.
The interest income and dividends from convertible bonds and preferred stocks
provide a stable stream of income with generally higher yields than common
stocks, but lower than nonconvertible securities of similar quality.
The Fund will exchange or convert the convertible securities held in its
portfolio into shares of the underlying common stock in instances in which, in
the Fund's investment adviser's opinion, the investment characteristics of the
underlying common shares will assist the Fund in achieving its investment
objective. Otherwise, the Fund will hold or trade the convertible securities. In
selecting convertible securities for the Fund, the Fund's investment adviser
evaluates the investment characteristics of the convertible security as a fixed
income instrument, and the investment potential of the underlying equity
security for capital appreciation. In evaluating these matters with respect to a
particular convertible security, the Fund's investment adviser considers
numerous factors, including the economic and political outlook, the value of the
security relative to other investment alternatives, trends in the determination
of the issuer's profits, and the issuer's management capability and practices.
ZERO COUPON CONVERTIBLE SECURITIES
Zero coupon convertible securities are debt securities which are issued at a
discount to their face amount and do not entitle the holder to any periodic
payments of interest prior to maturity. Rather, interest earned on zero coupon
convertible securities accretes at a stated yield until the security reaches its
face amount at maturity. Zero coupon convertible securities are convertible into
a specific number of shares of the issuer's common stock. In addition, zero
coupon convertible securities usually have put features that provide the holder
with the opportunity to put the bonds back to the issuer at a stated price
before maturity. Generally, the prices of zero coupon convertible securities may
be more sensitive to market interest rate fluctuations than conventional
convertible securities.
REPURCHASE AGREEMENTS
The Fund requires its custodian to take possession of the securities subject to
repurchase agreements, and these securities are marked to market daily. To the
extent that the original seller does not repurchase the securities from the
Fund, the Fund could receive less than the repurchase price on any sale of such
securities. In the event that such a defaulting seller filed for bankruptcy or
became insolvent, disposition of such securities by the Fund might be delayed
pending court action. The Fund believes that, under the regular procedures
normally in effect for custody of the Fund's portfolio securities subject to
repurchase agreements, a court of competent jurisdiction would rule in favor of
the Fund and allow retention or disposition of such securities. The Fund will
only enter into repurchase agreements with banks and other recognized financial
institutions, such as broker/dealers, which are deemed by the Fund's investment
adviser to be creditworthy pursuant to guidelines established by the Trustees.
REVERSE REPURCHASE AGREEMENTS
The Fund may also enter into reverse repurchase agreements. These transactions
are similar to borrowing cash. In a reverse repurchase agreement, the Fund
transfers possession of a portfolio instrument to another person, such as a
financial institution, broker, or dealer, in return for a percentage of the
instrument's market value in cash, and agrees that on a stipulated date in the
future the Fund will repurchase the portfolio instrument by remitting the
original consideration plus interest at an agreed upon rate. The use of reverse
repurchase agreements may enable the Fund to avoid selling portfolio instruments
at a time when a sale may be deemed to be disadvantageous, but the ability to
enter into reverse repurchase agreements does not ensure that the Fund will be
able to avoid selling portfolio instruments at a disadvantageous time.
When effecting reverse repurchase agreements, liquid assets of the Fund, in a
dollar amount sufficient to make payment for the obligations to be purchased,
are segregated at the trade date. These assets are marked to market daily and
are maintained until the transaction has been settled.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS
The Fund engages in when-issued and delayed delivery transactions only for the
purpose of acquiring portfolio securities consistent with the Fund's investment
objective and policies, and not for investment leverage.
These transactions are made to secure what is considered to be an advantageous
price and yield for the Fund. Settlement dates may be a month or more after
entering into these transactions and the market values of the securities
purchased may vary from the purchase prices.
No fees or other expenses, other than normal transaction costs, are incurred.
However, liquid assets of the Fund sufficient to make payment for the securities
to be purchased are segregated on the Fund's records at the trade date. These
securities are marked to market daily and maintained until the transaction is
settled. As a matter of policy, the Fund does not intend to engage in
when-issued and delayed delivery transactions to an extent that would cause the
segregation of more than 20% of the total value of its assets.
TEMPORARY INVESTMENTS
From time to time, during periods of other than normal market conditions, the
Fund may also invest in temporary investments for defensive purposes.
U.S. GOVERNMENT OBLIGATIONS
The types of U.S. government obligations in which the 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 an amount limited to a specific line of
credit 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 are permissible
investments 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.
LENDING OF PORTFOLIO SECURITIES
The collateral received when the Fund lends portfolio securities must be valued
daily and, should the market value of the loaned securities increase, the
borrower must furnish additional collateral to the Fund. During the time
portfolio securities are on loan, the borrower pays the Fund any dividends or
interest paid on such securities. Loans are subject to termination at the option
of the Fund or the borrower. The Fund may pay reasonable administrative and
custodial fees in connection with a loan and may pay a negotiated portion of the
interest earned on the cash or equivalent collateral to the borrower or placing
broker.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Fund will not sell any securities short or purchase any securities on
margin, other than in connection with buying stock index futures
contracts, put options on stock index futures, put options on financial
futures and portfolio securities, and writing covered call options, but
may obtain such short-term credits as are necessary for the clearance of
transactions.
The deposit or payment by the Fund of initial or variation margin in
connection with financial futures contracts or related options
transactions is not considered the purchase of a security on margin.
ISSUING SENIOR SECURITIES AND BORROWING MONEY
The Fund will not issue senior securities, except that the Fund may
borrow money and engage in reverse repurchase agreements in amounts up to
one-third of the value of its total assets, including the amounts
borrowed.
The Fund will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary, or
emergency measure or to facilitate management of the portfolio by
enabling the Fund to meet redemption requests when the liquidation of
portfolio securities is deemed to be inconvenient or disadvantageous. The
Fund will not purchase any securities while borrowings in excess of 5% of
the value of the Fund's total assets are outstanding.
PLEDGING ASSETS
The Fund will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, the Fund may mortgage,
pledge or hypothecate assets to secure such borrowings having a market
value not exceeding the lesser of the dollar amounts borrowed or 15% of
the value of total assets at the time of the borrowing. For purposes of
this limitation, the following are not deemed to be pledges: margin
deposits for the purchase and sale of futures contracts and related
options and segregation or collateral arrangements made in connection
with options activities or the purchase of securities on a when-issued
basis.
INVESTING IN REAL ESTATE
The Fund will not buy or sell real estate, including limited partnership
interests, although it may invest in the securities of companies whose
business involves the purchase or sale of real estate or in securities
which are secured by real estate or interests in real estate.
INVESTING IN COMMODITIES
The Fund will not purchase or sell commodities, commodity contracts, or
commodity futures contracts. However, the Fund may purchase put options
on stock index futures, put options on financial futures, stock index
futures contracts, and put options on portfolio securities, and may write
covered call options.
UNDERWRITING
The Fund will not underwrite any issue of securities, except as it may be
deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of any securities which the Fund may purchase
pursuant to its investment objective, policies and limitations.
DIVERSIFICATION OF INVESTMENTS
With respect to securities comprising 75% of the value of its total
assets, the Fund will not purchase securities issued by 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 such securities) if, as a result,
more than 5% of the value of the Fund's total assets would be invested in
the securities of that issuer or if the Fund would own more than 10% of
the outstanding voting securities of that issuer. (For purposes of this
limitation, the Fund considers 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 to be "cash items.")
CONCENTRATION OF INVESTMENTS
The Fund will not invest 25% or more of the value of its total assets in
any one industry, except that the Fund may invest 25% or more of the
value of its total assets in securities issued or guaranteed by the U.S.
government, its agencies or instrumentalities, and repurchase agreements
collateralized by such securities.
LENDING CASH OR SECURITIES
The Fund will not lend any of its assets except portfolio securities.
This shall not prevent the Fund from purchasing or holding U.S.
government obligations, money market instruments, demand master notes,
bonds, debentures, notes, certificates of indebtedness, or other debt
securities, entering into repurchase agreements, or engaging in other
transactions where permitted by the Fund's investment objective,
policies, and limitations.
The above investment limitations cannot be changed without shareholder approval.
The following investment limitations, however, may be changed by the Trustees
without shareholder approval. Shareholders will be notified before any material
change in these limitations becomes effective.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Fund will limit its investment in other investment companies to not
more than 3% of the total outstanding voting stock of any investment
company, will invest no more than 5% of its total assets in any one
investment company, and will invest no more than 10% of its total assets
in investment companies in general. The Fund will purchase securities of
closed-end investment companies only in open market transactions
involving customary brokers commissions. However, these limitations are
not applicable if the securities are acquired in a merger, consolidation,
reorganization, or acquisition of assets. While it is the policy of the
Fund to waive investment advisory fees on Fund assets invested in
securities of other open-end investment companies, it should be noted
that investment companies incur certain expenses, such as custodian and
transfer agent fees and, therefore, any investment by the Fund in shares
of another investment company would be subject to such duplicate
expenses. The Fund will invest in other investment companies primarily
for the purpose of investing its short-term cash on a temporary basis.
The Fund has a present intention of investing no more than 5% of its
total assets in investment companies during the current fiscal year.
INVESTING IN RESTRICTED SECURITIES
The Fund will not invest more than 5% of its total assets in securities
subject to restrictions on resale under the Securities Act of 1933,
except for certain restricted securities which meet the criteria for
liquidity as established by the Trustees.
INVESTING IN ILLIQUID SECURITIES
The Fund will not invest more than 15% of its net assets in illiquid
securities, including repurchase agreements providing for settlement in
more than seven days after notice, over-the-counter options, certain
securities not determined to be liquid under guidelines established by
the Trustees, and non-negotiable fixed income time deposits with
maturities over seven days.
INVESTING IN MINERALS
The Fund will not purchase interests in oil, gas, or other mineral
exploration or development programs or leases, except that the Fund may
purchase the securities of issuers which invest in or sponsor such
programs.
INVESTING IN NEW ISSUERS
The Fund will not invest more than 5% of the value of its total assets in
portfolio instruments of unseasoned issuers, including their
predecessors, that have been in operation for less than three years.
INVESTING IN ISSUERS WHOSE SECURITIES ARE OWNED BY OFFICERS AND TRUSTEES OF
THE TRUST
The Fund will not purchase or retain the securities of any issuer if the
officers and Trustees of the Trust or the Fund's investment adviser,
owning individually more than -1/2 of 1% of the issuer's securities,
together own more than 5% of the issuer's securities.
INVESTING IN PUT OPTIONS
The Fund will not purchase put options on securities unless the
securities are held in the Fund's portfolio and not more than 5% of the
value of the Fund's total assets would be invested in premiums on open
put option positions.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Fund will not purchase securities of a company for purposes of
exercising control or management.
INVESTING IN WARRANTS
The Fund will not invest more than 5% of its net assets in warrants,
including those acquired in units or attached to other securities. To
comply with certain state restrictions, the Fund will limit its
investment in such warrants not listed on the New York or American Stock
Exchanges to 2% of its net assets. (If state restrictions change, this
latter restriction may be revised without notice to shareholders.) For
purposes of this investment restriction, warrants acquired by the Fund in
units with or attached to securities may be deemed to be without value.
WRITING COVERED CALL OPTIONS
The Fund will not write call options on securities unless the securities
are held in the Fund's portfolio or unless the Fund is entitled to them
in deliverable form without further payment or after segregating cash in
the amount of any further payment.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction.
The Fund does not intend to borrow money in excess of 5% of the value of its
total assets during the current fiscal year.
THE BILTMORE FUNDS MANAGEMENT
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OFFICERS AND TRUSTEES
Officers and Trustees of the Trust are listed with their principal occupations
and present positions. Each of the Trustees and officers listed below holds an
identical position with The Biltmore Municipal Funds, another investment
company. Except as listed below, none of the Trustees or officers are affiliated
with Wachovia Bank of North Carolina, N.A., Federated Investors, Federated
Securities Corp., Federated Services Company or Federated Administrative
Services.
<TABLE>
<CAPTION>
POSITIONS WITH
NAME THE TRUST PRINCIPAL OCCUPATIONS DURING PAST FIVE YEARS
<S> <C> <C>
James A. Hanley Trustee Retired; Vice President and Treasurer, Abbott Laboratories (health care
products) until 1992.
Malcolm T. Hopkins Trustee Private investor and consultant; Director, The Columbia Gas System, Inc.
(integrated natural gas production, transmission and distribution);
Director, MAPCO, Inc. (diversified energy); Director, Metropolitan
Series Funds, Inc. (investment company); Director, Kinder-Care Learning
Centers, Inc. (child care); and Director, Wangner Systems Corporation
(manufacturer of fabrics for paper production).
Samuel E. Hudgins Trustee Principal, Lally, Percival & Company Inc.; Director, Atlantic American
Corporation (insurance holding company); Director, Bankers Fidelity Life
Insurance Company; Director and Vice Chairman, Leath Furniture, Inc.
(retail furniture); President, Atlantic American Corporation until 1988;
Director, Vice Chairman and Chief Executive Officer, Rhodes, Inc.
(retail furniture) until 1988; Chairman and Director, Atlantic American
Life Insurance Co., Georgia Casualty & Surety Company, and Bankers
Fidelity Life Insurance until 1988.
J. Berkley Ingram, Jr. Trustee Real estate investor and partner; Director, VF Corporation (apparel
company).
D. Dean Kaylor Trustee Retired; Executive Vice President and Chief Financial Officer, NBD Bank,
N.A. and NBD Bancorp, Inc. (bank and bank-
holding company) until 1990.
John W. McGonigle President and Vice President, Secretary, General Counsel, and Trustee, Federated
Treasurer Investors; Vice President, Secretary, and Trustee, Federated Advisers,
Federated Management, and Federated Research; Trustee, Federated
Services Company; Executive Vice President, Secretary, and Trustee,
Federated Administrative Services; Executive Vice President and
Director, Federated Securities Corp.
Ronald M. Petnuch Vice President Vice President, Federated Administrative Services; formerly, Associate
and Assistant Corporate Counsel, Federated Investors; Vice
Treasurer President and Assistant Treasurer for certain investment
companies for which Federated Securities Corp. is the
principal distributor.
Joseph M. Huber Secretary Corporate Counsel, Federated Investors.
</TABLE>
The address of the Trustees and officers of the Trust is Federated Investors
Tower, Pittsburgh, Pennsylvania 15222-3779.
FUND OWNERSHIP
Officers and Trustees own less than 1% of the Fund's outstanding shares.
TRUSTEE LIABILITY
The Trust's Declaration of Trust provides that the Trustees are not liable for
errors of judgment or mistakes of fact or law. However, they are not protected
against any liability to which they would otherwise be subject by reason of
willful misfeasance, bad faith, gross negligence, or reckless disregard of the
duties involved in the conduct of their office.
INVESTMENT ADVISORY SERVICES
- --------------------------------------------------------------------------------
ADVISER TO THE FUND AND SUB-ADVISER
The Fund's investment adviser is Wachovia Investment Management Group (the
"Adviser"). The Adviser is a business unit of Wachovia Bank of North Carolina,
N.A., which is a wholly-owned subsidiary of Wachovia Corporation.
The Adviser shall not be liable to the Trust, the Fund or any shareholder of the
Fund for any losses that may be sustained in the purchase, holding, or sale of
any security, or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.
Because of the internal controls maintained by the Wachovia Banks to restrict
the flow of non-public information, Fund investment decisions are typically made
without any knowledge of the Wachovia Banks' lending relationships with an
issuer.
Twin Capital Management, Inc. (the "Sub-Adviser" or "Twin Capital") serves as
the sub-adviser under the terms of an investment sub-advisory agreement between
the Adviser and the Sub-Adviser. Twin Capital, incorporated as a Pennsylvania
corporation in 1989, is a registered investment adviser under the Investment
Advisers Act of 1940.
ADVISORY AND SUB-ADVISORY FEES
For its advisory services, the Adviser receives an annual investment advisory
fee as described in the prospectus. For its services as Sub-Adviser, Twin
Capital receives an annual sub-advisory fee, payable solely by the Adviser, as
described in the prospectus.
STATE EXPENSE LIMITATIONS
The Adviser has undertaken to comply with the expense limitations
established by certain states for investment companies whose shares are
registered for sale in those states. If the Fund's normal operating
expenses (including the investment advisory fee, but not including
brokerage commissions, interest, taxes, and extraordinary expenses)
exceed 2-1/2% per year of the first $30 million of average net assets, 2%
per year of the next $70 million of average net assets, and 1-1/2% per
year of the remaining average net assets, the Adviser will waive its fee
or reimburse the Fund for its expenses over the limitation.
If the Fund's monthly projected operating expenses exceed this
limitation, the investment advisory fee paid will be reduced by the
amount of the excess, subject to an annual adjustment. If the expense
limitation is exceeded, the amount to be reimbursed by the Adviser will
be limited, in any single fiscal year, by the amount of the investment
advisory fee.
ADMINISTRATIVE SERVICES
- --------------------------------------------------------------------------------
Federated Administrative Services, a subsidiary of Federated Investors, provides
administrative personnel and services to the Fund for a fee as described in the
prospectus.
BROKERAGE TRANSACTIONS
- --------------------------------------------------------------------------------
The Adviser may select brokers and dealers who offer brokerage and research
services. These services may be furnished directly to the Fund or to the Adviser
and may include:
advice as to the advisability of investing in securities;
security analysis and reports;
economic studies;
industry studies;
receipt of quotations for portfolio evaluations; and
similar services.
The Adviser and its affiliates exercise reasonable business judgment in
selecting brokers who offer brokerage and research services to execute
securities transactions. They determine in good faith that commissions charged
by such persons are reasonable in relationship to the value of the brokerage and
research services provided.
Research services provided by brokers and dealers may be used by the Adviser in
advising the Fund and other accounts. To the extent that receipt of these
services may supplant services for which the Adviser or its affiliates might
otherwise have paid, it would tend to reduce expenses. The Fund has no
obligation to deal with any broker or group of brokers in the execution of
portfolio transactions.
Some of the Adviser's other clients have investment objectives and programs
similar to that of the Fund. Occasionally, the Adviser may make recommendations
to other clients which result in their purchasing or selling securities
simultaneously with the Fund. Consequently, the demand for securities being
purchased or the supply of securities being sold may increase, and this could
have an adverse effect on the price of those securities. It is the Adviser's
policy not to favor one client over another in making recommendations or in
placing orders. If two or more of the Adviser's clients are purchasing a given
security on the same day from the same broker or dealer, the Adviser may average
the price of the transactions and allocate the average among the clients
participating in the transaction.
PURCHASING FUND SHARES
- --------------------------------------------------------------------------------
Shares of the Fund are sold at net asset value plus an applicable sales charge
on days on which the New York Stock Exchange and the Federal Reserve Wire System
are open for business. The procedure for purchasing shares of the Fund is
explained in the prospectus under "Investing in the Fund."
CONVERSION TO FEDERAL FUNDS
It is the Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. The Wachovia Banks (as defined
in the prospectus) act as the shareholders' agent in depositing checks and
converting them to federal funds.
DETERMINING NET ASSET VALUE
- --------------------------------------------------------------------------------
Net asset value generally changes each day. The days on which net asset value is
calculated by the Fund are described in the prospectus.
DETERMINING MARKET VALUE OF SECURITIES
- --------------------------------------------------------------------------------
The market value of the Fund's portfolio securities is determined as follows:
for equity securities, according to the last sale price on a national securities
exchange, if available;
in the absence of recorded sales for listed equity securities, according to the
mean between the last closing bid and asked prices;
for unlisted equity securities, the latest bid prices;
for bonds and other fixed income securities, as determined by an independent
pricing service;
for short-term obligations, according to the mean between bid and asked prices
as furnished by an independent pricing service or for short-term obligations
with maturities of less than 60 days, at amortized cost; or
for all other securities, at fair value as determined in good faith by the
Trustees.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may reflect: institutional trading in
similar groups of securities, yield, quality, coupon rate, maturity, type of
issue, trading characteristics, and other market data.
The Fund will value futures contracts, options and put options on financial
futures at their market values established by the exchanges at the close of
option trading on such exchanges, unless the Trustees determine in good faith
that another method of valuing option positions is necessary.
REDEEMING FUND SHARES
- --------------------------------------------------------------------------------
The Fund redeems shares at the next computed net asset value after the Fund
receives the redemption request. Redemption procedures are explained in the
prospectus under "Redeeming Shares."
REDEMPTION IN KIND
Although the Fund intends to redeem shares in cash, it reserves the right under
certain circumstances to pay the redemption price in whole or in part by a
distribution of securities from the Fund's portfolio. To the extent available,
such securities will be readily marketable.
Redemption in kind will be made in conformity with applicable Securities and
Exchange Commission rules, taking such securities at the same value employed in
determining net asset value and selecting the securities in a manner the
Trustees determine to be fair and equitable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving their securities and selling them before their
maturity could receive less than the redemption value of their securities and
could incur transaction costs.
The Fund has elected to be governed by Rule 18f-1 under the Investment Company
Act of 1940, which obligates the Fund to redeem shares for any one shareholder
in cash only up to the lesser of $250,000 or 1% of the Fund's net asset value
during any 90-day period.
TAX STATUS
- --------------------------------------------------------------------------------
THE FUND'S TAX STATUS
The Fund will pay no federal income tax because it expects to meet the
requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and to receive the special tax treatment afforded
to such companies. To qualify for this treatment, the Fund must, among other
requirements:
derive at least 90% of its gross income from dividends, interest, and gains from
the sale of securities;
derive less than 30% of its gross income from the sale of securities held less
than three months;
invest in securities within certain statutory limits; and
distribute to its shareholders at least 90% of its net income earned during the
year.
SHAREHOLDERS' TAX STATUS
Shareholders are subject to federal income tax on dividends received as cash or
additional shares. The dividends received deduction for corporations will apply
to ordinary income distributions to the extent the distribution represents
amounts that would qualify for the dividends received deduction to the Fund if
the Fund were a regular corporation, and to the extent designated by the Fund as
so qualifying. These dividends, and any short-term capital gains, are taxable as
ordinary income.
CAPITAL GAINS
Long-term capital gains distributed to shareholders will be treated as long-term
capital gains regardless of how long shareholders have held shares.
TOTAL RETURN
- --------------------------------------------------------------------------------
The average annual total return for the Fund is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of shares owned at the end of the period by
the net asset value per share at the end of the period. The number of shares
owned at the end of the period is based on the number of shares purchased at the
beginning of the period with $1,000, less any applicable sales load, adjusted
over the period by any additional shares, assuming the reinvestment of all
dividends and distributions.
YIELD
- --------------------------------------------------------------------------------
The yield for the Fund is determined by dividing the net investment income per
share (as defined by the Securities and Exchange Commission) earned by the Fund
over a thirty-day period by the maximum offering price per share of the Fund on
the last day of the period. This value is then annualized using semi-annual
compounding. This means that the amount of income generated during the
thirty-day period is assumed to be generated each month over a 12-month period
and is reinvested every six months. The yield does not necessarily reflect
income actually earned by the Fund because of certain adjustments required by
the Securities and Exchange Commission and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
To the extent that financial institutions and broker/dealers charge fees in
connection with services provided in conjunction with an investment in the Fund,
the performance will be reduced for those shareholders paying those fees.
PERFORMANCE COMPARISONS
- --------------------------------------------------------------------------------
The Fund's performance depends upon such variables as:
stock market fluctuations;
portfolio quality;
average portfolio maturity;
type of instruments in which the portfolio is invested;
changes in interest rates and market value of portfolio securities;
changes in the Fund's expenses;
the relative amount of Fund cash flow; and
various other factors.
The Fund's performance fluctuates on a daily basis largely because net earnings
and net asset value per share fluctuate daily. Both net earnings and net asset
value per share are factors in the computation of yield and total return.
Investors may use financial publications and/or indices to obtain a more
complete view of the Fund's performance. When comparing performance, investors
should consider all relevant factors such as the composition of any index used,
prevailing market conditions, portfolio compositions of other funds, and methods
used to value portfolio securities and compute net asset value. The financial
publications and/or indices which the Fund uses in advertising may include:
LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in maximum offering price over a specific period of
time.
DOW JONES INDUSTRIAL AVERAGE ("DJIA") represents share prices of selected
blue-chip industrial corporations. The DJIA indicates daily changes in the
average price of stock of these corporations. Because it represents the top
corporations of America, the DJIA index is a leading economic indicator for the
stock market as a whole.
STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500 COMMON STOCKS (THE "INDEX"), is
a composite index of common stocks in industry, transportation, and financial
and public utility companies. In addition, the Index assumes reinvestment of
all dividends paid by stocks listed on the Index. Taxes due on any of these
distributions are not included, nor are brokerage or other fees calculated in
the Index figures.
MORNINGSTAR, INC., an independent rating service, is the publisher of the
bi-weekly Mutual Fund Values. Mutual Fund Values rates more than 1,000
NASDAQ-listed mutual funds of all types, according to their risk-adjusted
returns. The maximum rating is five stars, and ratings are effective for two
weeks.
Advertisements and other sales literature for the Fund may quote total returns
which are calculated on non-standardized base periods. These total returns also
represent the historic change in the value of an investment in the Fund based on
quarterly reinvestment of dividends over a specified period of time.
Advertisements may quote performance information which does not reflect the
effect of the sales load.
STANDARD & POOR'S CORPORATION
- --------------------------------------------------------------------------------
Standard & Poor's Corporation ("S&P") makes no representation or warranty,
express or implied, to the owners of the Fund or any member of the public
regarding the advisability of investing in securities generally or in the Fund
particularly or the ability of the Index to track general stock market
performance. S&P's only relationship to Federated Securities Corp., the Fund's
distributor (the "Licensee") is the licensing of certain trademarks and trade
names of S&P and of the Index which is determined, composed and calculated by
S&P without regard to the Licensee or the Fund. S&P has no obligation to take
the needs of the Licensee or the owners of the Fund into consideration in
determining, composing or calculating the Index. S&P is not responsible for and
has not participated in the determination of, the timing of, prices at, or
quantities of the Fund to be issued or in the determination or calculation of
the equation by which the Fund is to be converted into cash. S&P has no
obligation or liability in connection with the administration, marketing or
trading of the Fund.
S&P does not guarantee the accuracy and/or the completeness of the Index or any
data included therein. S&P makes no warranty, express or implied, as to results
to be obtained by the Licensee, owners of the Fund, or any
other person or entity from the use of the Index or any data included therein in
connection with the rights licensed hereunder or for any other use. S&P makes no
express or implied warranties, and expressly disclaims all warranties of
merchantability or fitness for a particular purpose or use with respect to the
Index or any data included therein. Without limiting any of the foregoing, in no
event shall S&P have any liability for any special, punitive, indirect or
consequential damages (including lost profits), even if notified of the
possibility of such damages.
APPENDIX
- --------------------------------------------------------------------------------
STANDARD & POOR'S CORPORATION CORPORATE BOND RATINGS
AAA--Debt rated AAA has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated AA has a very strong capacity to pay interest and repay principal
and differs from the higher rated issues only in small degree.
A--Debt rated A has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
NR--NR indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy. S&P may apply a plus (+) or
minus (-) to the above rating classifications to show relative standing within
the classifications.
MOODY'S INVESTORS SERVICE, INC. CORPORATE BOND RATINGS
Aaa--Bonds which are rated Aaa are judged to be of the best quality. They carry
the smallest degree of investment risk and are generally referred to as "gilt
edge." Interest payments are protected by a large or by an exceptionally stable
margin and principal is secure. While the various protective elements are likely
to change, such changes as can be visualized are most unlikely to impair the
fundamentally strong position of such issues.
Aa--Bonds which are rated Aa are judged to be of high quality by all standards.
Together with the Aaa group they comprise what are generally known as high grade
bonds. They are rated lower than the best bonds because margins of protection
may not be as large as in Aaa securities or fluctuation of protective elements
may be of greater amplitude or there may be other elements present which make
the long term risks appear somewhat larger than in Aaa securities.
A--Bonds which are rated A possess many favorable investment attributes and are
to be considered as upper medium grade obligations. Factors giving security to
principal and interest are considered adequate but elements may be present which
suggest a susceptibility to impairment some time in the future.
Baa--Bonds which are rated Baa are considered as medium grade obligations, i.e.,
they are neither highly protected nor poorly secured. Interest payments and
principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
NR--Not rated by Moody's. Moody's applies numerical modifiers, 1, 2 and 3 in
each generic rating classification from Aa through B in its corporate bond
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
FITCH INVESTORS SERVICE, INC. LONG-TERM DEBT RATINGS
AAA--Bonds considered to be investment grade and of the highest credit quality.
The obligor has an exceptionally strong ability to pay interest and repay
principal, which is unlikely to be affected by reasonably foreseeable events.
AA--Bonds considered to be investment grade and of very high credit quality. The
obligor's ability to pay interest and repay principal is very strong, although
not quite as strong as bonds rated AAA. Because bonds rated in the AAA and AA
categories are not significantly vulnerable to foreseeable future developments,
short-term debt of these issuers is generally rated F-1+.
A--Bonds considered to be investment grade and of high credit quality. The
obligor's ability to pay interest and repay principal is considered to be
strong, but may be more vulnerable to adverse changes in economic conditions and
circumstances than bonds with higher ratings.
BBB--Debt rated BBB is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
NR--NR indicates that Fitch does not rate the specific issue.
STANDARD & POOR'S CORPORATION COMMERCIAL PAPER RATINGS
A-1--This designation indicates that the degree of safety regarding timely
payment is strong. Those issues determined to have extremely strong safety
characteristics are denoted with a plus (+) sign.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated A-1.
MOODY'S INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
P-1--Issuers (or supporting institutions) rated Prime-1 (P-1) have a superior
capacity for repayment of senior short-term promissory obligations. P-1
repayment capacity will often be evidenced by many of the following
characteristics: leading market positions in well-established industries; high
rates of return on funds employed; conservative capitalization structure with
moderate reliance on debt and ample asset protection; broad margins in earnings
coverage of fixed financial charges and high internal cash generation; or
well-established access to a range of financial markets and assured sources of
alternate liquidity.
P-2--Issuers (or supporting institutions) rated Prime-2 (P-2) have a strong
capacity for repayment of senior short-term debt obligations. This will normally
be evidenced by many of the characteristics cited above, but to a lesser degree.
Earnings trends and coverage ratios, while sound, may be more subject to
variation. Capitalization characteristics, while still appropriate, may be more
affected by external conditions. Ample alternate liquidity is maintained.
FITCH INVESTORS SERVICE, INC. COMMERCIAL PAPER RATINGS
FITCH-1--(Highest Grade) Commercial paper assigned this rating is regarded as
having the strongest degree of assurance for timely payment.
FITCH-2--(Very Good Grade) Issuers assigned this rating reflect an assurance of
timely payment only slightly less in degree than the strongest issues.
3012914B (1/94)
PART C. OTHER INFORMATION.
Item 24. Financial Statements and Exhibits:
(a) Financial Statements (1-11) Filed in Part A.
(b) Exhibits:
(1) Copy of Declaration of Trust of the
Registrant;(1)
(i) Copy of the Amended and
Restated Declaration of Trust;(2)
(ii) Copy of Amendment No. 1 to
Declaration of Trust;(5)
(iii) Copy of Amendment No. 3 to
Declaration of Trust;(6)
(iv) Copy of Amendment No. 4 to
the Declaration of Trust; (8)
(v)Copy of Amendment No. 5 to the
Declaration of Trust; (8)
(2) Copy of By-Laws of the Registrant;(1)
(i) Amended By-Laws of the
Registrant;(2)
(3) Not applicable;
(4) Not Applicable;
(5) Copy of Investment Advisory Contract of the
Registrant(2);
(i) Copy of Exhibit to Investment
Advisory Contract of the Registrant;(3)
(ii) Conformed Copy of Exhibit to
Investment Advisory Contract of the
Registrant to add Biltmore Quantitative
Equity Fund to the present Investment
Advisory Contract; (8)
(iii) Conformed Copy of Sub-Advisory
Agreement of the Registrant; (10)
(iv) Conformed copy of Exhibits C-H to
Investment Advisory Contract of the
registrant to add the executed version
of these exhibits to the present
Investment Advisory Contract; (9)
+ All exhibits have been electronically filed.
(1) Response is incorporated by reference to Registrant's
Initial Registration Statement on Form N-1A filed December
18, 1991. (File Nos. 33-44590 and 811-6504)
(2) Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on form N-1A filed March 6, 1992.
(File Nos. 33-44590 and 811-6504)
(3) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 1 on Form N-1A filed May 12, 1992.
(File Nos. 33-44590 and 811-6504).
(5) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 4 on form N-1A filed September 29,
1992. (File Nos. 33-44590 and 811-6504)
(6) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 5 on form N-1A filed December 2,
1992 (File Nos. 33-44590 and 811-6504)
(8) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 8 on form N-1A filed July 29, 1993
(File Nos. 33-44590 and 811-6504)
(9) Response is incorporated by reference to Registrant's Post-
Effective Amendment No.11 on form N-1A filed January 28,
1994. (File Nos. 33-44590 and 811-6504)
(10) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 12 on Form N-1A filed June 29, 1994.
(File Nos. 33-44590 and 811-6504)
(6) Copy of Distributor's Contract of the
Registrant;(3)
(i) Copy of Exhibit to
Distributor's Contract of the
Registrant;(3)
(ii) Copy of Exhibit to
Distributor's Contract of the
Registrant;(6)
(iii) Copy of Exhibit to Distribution
Agreement of the Registrant;(7)
(iv)Conformed Copy of Exhibit to
Distributor's Contract; (8)
(7) Not applicable;
(8) Copy of Custodian Agreement of the Registrant;(2)
(i) Copy of Exhibit to Custodian
Agreement of the Registrant;(3)
(9) (i) Copy of Transfer Agency and Service
Agreement of the Registrant;(2)
(ii)Copy of Exhibit to Transfer Agency and
Service Agreement of the Registrant;(3)
(iii)Copy of Exhibit to Transfer Agency and
Service Agreement of the Registrant;(7)
(iv)Copy of Sub-Transfer Agency and Service
Agreement;(7)
(v)Conformed Copy of Administrative
Services Agreement through and
including copies of exhibits A, B, C, D
and Amendment 1.
(10) Copy of Opinion and Consent of Counsel
as to legality of shares being
registered;(2)
(11) Not applicable;
(12) Not applicable;
(13) Copy of Initial Capital
Understanding;(2)
(14) Not applicable
(15) (i)Copy of Distribution Plan;(2)
(ii) Copy of Exhibit to
Distribution Plan;(7)
(iii) Copy of Dealer Agreement;(2)
(iv) Copy of Exhibit to Dealer
Agreement(6)
(v) Copy of 12b-1 Agreement;(2)
(vi) Copy of Exhibit to 12b-1
Agreement;(6)
(vii) Copy of Shareholder Services
Plan; (7)
(viii) Conformed Copy of Exhibit to
Shareholder Services Plans; (8)
(ix) Copy of Shareholder Services
Agreement; (8)
+ All exhibits have been electronically filed.
(2) Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on form N-1A filed March 6, 1992.
(File Nos. 33-44590 and 811-6504)
(3) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 1 on Form N-1A filed May 12, 1992.
(File Nos. 33-44590 and 811-6504).
(6) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 5 on form N-1A filed December 2,
1992 (File Nos. 33-44590 and 811-6504)
(7) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 8 on form N-1A filed July 29, 1993
(File Nos. 33-44590 and 811-6504)
(8) Response is incorporated by reference to Registrant's Post-
Effective Amendment No.11 on form N-1A filed January 28,
1994. (File Nos. 33-44590 and 811-6504)
(16) (i) Schedule for Computation of Fund
Performance Data, Biltmore Prime
Cash Management Fund (10);
(ii) Copy of Schedule for Computation of Fund
Performance Data, Biltmore Equity Fund
(7);
(iii)Copy of Schedule for Computation of
Fund Performance Data, Biltmore
Fixed Income Fund (7);
(iv) Copy of Schedule for Computation of
Fund Performance Data, Biltmore
Equity Index Fund (7);
(v) Copy of Schedule for Computation of
Fund
Performance Data, Biltmore Short-
Term
Fixed Income Fund (7);
(vi) Copy of Schedule for Computation of
Fund
Performance Data, Biltmore Special
Values
Fund (7):
(vii) Copy of Schedule for
Computation of Fund
Performance Data, Biltmore Balanced
Fund
(7):
(viii) Copy of Schedule for Computation
of Fund
Performance Data, Biltmore
Quantitative Equity Fund+
(17) Power of Attorney;(8)
(18) Not applicable
Item 25. Persons Controlled by or Under Common Control with
Registrant
None
+ All exhibits have been electronically filed.
(7) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 8 on form N-1A filed July 29, 1993
(File Nos. 33-44590 and 811-6504)
(8) Response is incorporated by reference to Registrant's Post-
Effective Amendment No.11 on form N-1A filed January 28,
1994. (File Nos. 33-44590 and 811-6504)
(10) Response is incorporated by reference to Registrant's Post-
Effective Amendment No. 12 on Form N-1A filed June 29, 1994.
(File Nos. 33-44590 and 811-6504)
Item 26. Number of Holders of Securities:
Number of Record Holders
Title of Class as of May 31, 1994
Shares of beneficial interest
(no par value)
Biltmore Balanced Fund 411
Biltmore Equity Fund 453
Biltmore Equity Index Fund 248
Biltmore Fixed Income Fund 447
Biltmore Special Values Fund 96
Biltmore Short-Term Fixed Income Fund324
Biltmore Money Market Fund
(Investment Shares) 24
Biltmore Money Market Fund
(Institutional Shares) 15
Biltmore Tax-Free Money Market Fund
(Investment Shares) 21
Biltmore Tax-Free Money Market Fund
(Institutional Shares) 13
Biltmore U.S. Treasury Money Market Fund
(Investment Shares) 17
Biltmore U.S. Treasury Money Market Fund
(Institutional Shares) 13
Biltmore Prime Cash Management Fund 28
Biltmore Quantitative Equity Fund 139
Item 27. Indemnification: (2)
Item 28. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of
the investment adviser, see the section entitled
"The Biltmore Funds Information - Management of the
Trust" in Part A. The Officers of the investment
adviser are: Chairman of the Board, L. M. Baker,
Jr.; President and Chief Executive Officer, J.
Walter McDowell; Chief Financial Officer and
Executive Vice President, Robert F. McCoy; Chief
Loan Administration Officer and Executive Vice
President, Robert L. Alphin; Executive Vice
President, David L. Cotterill; Executive Vice
President, Mickey W. Dry; Executive Vice President,
Walter E. Leonard, Jr.; Executive Vice President,
Robert P. Noble III; and Executive Vice President,
Richard B. Roberts. The business address of each of
the Officers of the investment adviser is Wachovia
Bank of North Carolina, N.A., 310 North Main
Street, Winston-Salem, N.C. 27150.
The Directors of the investment adviser are listed
below with their occupations: L.M. Baker, Jr.,
President and Chief Executive Officer, Wachovia
Corporation, Chairman, Wachovia Bank of North
Carolina, N.A.; H.C. Bissell, Chairman of the Board
and Chief Executive Officer, The Bissell Companies,
Inc.; Felton J. Capel, Chairman of the Board and
President, Century Associates of North Carolina;
Richard L. Daugherty, North Carolina Senior
Executive and Vice President, Entry Systems
Division, IBM Corporation; Estell C. Lee, Chairman
of
(2) Response is incorporated by reference to Registrant's Pre-
Effective Amendment No. 1 on form N-1A filed March 6, 1992.
(File No. 33-44590)
the Board and President, The Lee Company; John G.
Medlin, Jr., Chairman of the Board, Wachovia
Corporation; David J. Whichard II, Chairman, The
Daily Reflector; John C. Whitaker, Jr., Chairman of
the Board and Chief Executive Officer, Inmar
Enterprises, Inc.; Herbert Brenner, President,
Brenner Companies, Inc.; William Cavanaugh, III,
President and Chief Operating Officer, Carolina
Power and Light Company; J. Walter McDowell,
President and Chief Executive Officer, Wachovia
Bank of North Carolina, N.A.; Wyndham Robertson,
Vice President for Communications, University of
North Carolina.
Item 29. Principal Underwriters:
(a) Federated Securities Corp., the Distributor
for shares of the Registrant, also acts as
principal underwriter for the following open-end
investment companies: Alexander Hamilton Funds;
American Leaders Fund, Inc.; Annuity Management
Series; Automated Cash Management Trust; Automated
Government Money Trust; BayFunds; The Biltmore
Funds; The Biltmore Municipal Funds; The Boulevard
Funds; California Municipal Cash Trust; Cambridge
Series Trust; Cash Trust Series, Inc.; Cash Trust
Series II; DG Investor Series; Edward D. Jones &
Co. Daily Passport Cash Trust; Federated ARMs Fund;
Federated Exchange Fund, Ltd.; Federated GNMA
Trust; Federated Government Trust; Federated Growth
Trust; Federated High Yield Trust; Federated Income
Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Intermediate Government
Trust; Federated Master Trust; Federated Municipal
Trust; Federated Short-Intermediate Government
Trust; Federated Short-Term U.S. Government Trust;
Federated Stock Trust; Federated Tax-Free Trust;
Federated U.S. Government Bond Fund; First Priority
Funds; First Union Funds; Fixed Income Securities,
Inc.; Fortress Adjustable Rate U.S. Government
Fund, Inc.; Fortress Municipal Income Fund, Inc.;
Fortress Utility Fund, Inc.; Fountain Square Funds;
Fund for U.S. Government Securities, Inc.;
Government Income Securities, Inc.; High Yield Cash
Trust; Independence One Mutual Funds; Insight
Institutional Series, Inc.; Insurance Management
Series; Intermediate Municipal Trust; International
Series Inc.; Investment Series Funds, Inc.;
Investment Series Trust; Liberty Equity Income
Fund, Inc.; Liberty High Income Bond Fund, Inc.;
Liberty Municipal Securities Fund, Inc.; Liberty
U.S. Government Money Market Trust; Liberty Utility
Fund, Inc.; Liquid Cash Trust; Managed Series
Trust; Mark Twain Funds; Marshall Funds, Inc.;
Money Market Management, Inc.; Money Market
Obligations Trust; Money Market Trust; The Monitor
Funds; Municipal Securities Income Trust; New York
Municipal Cash Trust; 111 Corcoran Funds; Peachtree
Funds; The Planters Funds; Portage Funds; RIMCO
Monument Funds; The Shawmut Funds; Short-Term
Municipal Trust; Signet Select Funds; SouthTrust
Vulcan Funds; Star Funds; The Starburst Funds; The
Starburst Funds II; Stock and Bond Fund, Inc.;
Sunburst Funds; Targeted Duration Trust; Tax-Free
Instruments Trust; Tower Mutual Funds; Trademark
Funds; Trust for Financial Institutions; Trust for
Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury
Obligations; Vision Fiduciary Funds, Inc.; Vision
Group of Funds, Inc.; and World Investment Series,
Inc.
Federated Securities Corp. also acts as principal
underwriter for the following closed-end investment
company: Liberty Term Trust, Inc.- 1999.
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions andOffices
Business Address With Underwriter With Registrant
Richard B. Fisher Director, Chairman, Chief None
Federated Investors Tower Executive Officer, Chief
Pittsburgh, PA 15222-3779 Operating Officer, and
Asst. Treasurer, Federated
Securities Corp.
Edward C. Gonzales Director, Executive Vice None
Federated Investors Tower President, and Treasurer,
Pittsburgh, PA 15222-3779 Federated Securities
Corp.
John W. McGonigle Director, Executive Vice President and
Federated Investors Tower President, and Assistant Treasurer
Pittsburgh, PA 15222-3779 Secretary, Federated
Securities Corp.
John A. Staley, IV Executive Vice President None
Federated Investors Tower and Assistant Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark R. Gensheimer Executive Vice President of --
Federated Investors Tower Bank/Trust
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
James R. Ball Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard W. Boyd Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Laura M. Deger Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jill Ehrenfeld Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David C. Glabicki Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard C. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Scott A. Hutton Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William J. Kerns Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William E. Kugler Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Francis J. Matten, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
J. Michael Miller Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
R. Jeffrey Niss Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Michael P. O'Brien Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Solon A. Person, IV Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Charles A. Robison Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas E. Territ Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Philip C. Hetzel Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
Pittsburgh, PA 15222-3779
S. Elliott Cohan Secretary, Federated Assistant
Federated Investors Tower Securities Corp. Secretary
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 30. Location of Accounts and Records:
Registrant Federated Investors Tower
Pittsburgh, PA 15222-3779
Federated Services Company Federated Investors
Tower
("Transfer Agent, Dividend Pittsburgh, PA 15222-
3779
Disbursing Agent and Portfolio
Recordkeeper")
Federated Administrative Services Federated Investors
Tower
("Administrator") Pittsburgh, PA 15222-
3779
Wachovia Investment Management Group 301 North Main
Street
("Adviser") Winston-Salem, NC
21750
Wachovia Bank of North Carolina Wachovia Trust
Operations
("Custodian") 301 North Main Street
Winston-Salem, NC 21750
Item 31. Management Services: Not applicable.
Item 32. Undertakings:
Registrant hereby undertakes to comply with the
provisions of Section 16(c) of the 1940 Act with
respect to the removal of Trustees and the calling of
special shareholder meetings by shareholders on behalf
of each of its portfolios.
Registrant hereby undertakes to furnish each person to
whom a
prospectus is delivered with a copy of the Registrant's
latest annual report to shareholders upon request and
without charge.
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933 and the Investment Company Act of 1940, the Registrant,
THE BILTMORE FUNDS, certifies that it meets all of the
requirements for effectiveness of this Amendment to its
Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to
its Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, all in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 26th day
of July, 1994.
THE BILTMORE FUNDS
BY: /s/Mark A. Sheehan
Mark A. Sheehan, Assistant Secretary
Attorney in Fact for John W. McGonigle
July 26, 1994
Pursuant to the requirements of the Securities Act of
1933, this Amendment to its Registration Statement has been
signed below by the following person in the capacity and on
the date indicated:
NAME TITLE DATE
By: /s/Mark A. Sheehan
Mark A. Sheehan Attorney In Fact July 26, 1994
ASSISTANT SECRETARY For the Persons
Listed Below
NAME TITLE
John W. McGonigle* President and Treasurer
James A. Hanley* Trustee
Malcolm T. Hopkins* Trustee
Samual E. Hudgins* Trustee
J. Berkley Ingram, Jr.* Trustee
D. Dean Kaylor* Trustee
* By Power of Attorney
Exhibit 9 (v) under Form N-1A
Exhibit 10 under Item 601/ Reg. S-K
ADMINISTRATIVE SERVICES AGREEMENT
This Administrative Services Agreement is made as of
this 9th day of March, 1992, between The Biltmore Funds, a
Massachusetts business trust (the "Trust"), and FEDERATED
ADMINISTRATIVE SERVICES, a Delaware business trust ("FAS").
WHEREAS, the Trust is a Massachusetts business trust,
consisting of one or more series ("Portfolios"), which
operates as an open-end management investment company and
will so register under the Investment Company Act of 1940,
as amended ("1940 Act"); and
WHEREAS, the Trust desires to retain FAS as its
Administrator to provide it with administrative services,
and FAS is willing to render such services;
NOW, THEREFORE, in consideration of the premises and
mutual covenants set forth herein, the parties hereto agree
as follows:
1. Appointment of Administrator. The Trust hereby
appoints FAS as Administrator of the Trust on the terms and
conditions set forth in this Agreement; and FAS hereby
accepts such appointment and agrees to perform the services
and duties set forth in Section 2 of this Agreement in
consideration of the compensation provided for in Section 5
of this Agreement.
2. Services and Duties. As Administrator, and
subject to the supervision and control of the Trust's Board
of Trustees, FAS will perform, and will provide facilities,
equipment, and personnel to carry out the following
administrative services for operation of the business and
affairs of the Trust and each of its Portfolios:
(a) prepare, file, and maintain the Trust's
governing documents, including the
Declaration of Trust, the By-laws, minutes of
meetings of Trustees and shareholders, and
proxy statements for meetings of
shareholders;
(b) with the approval of the Trust's counsel
and cooperation from the Trust's investment
adviser (the "Adviser") and other relevant
parties, prepare and disseminate materials
for meetings of the Board of Trustees;
(c) prepare and file with the Securities and
Exchange Commission and the appropriate state
securities authorities the registration
statements for the Trust and the Trust's
shares and all amendments thereto, reports to
regulatory authorities and shareholders,
prospectuses, proxy statements, and such
other documents as may be necessary or
convenient to enable the Trust to make a
continuous offering of its shares;
(d) with the cooperation and assistance of the
Trust's investment adviser, monitor sales of
each Portfolio's shares and ensure that such
shares are properly and duly registered with
the Securities and Exchange Commission and
applicable state securities authorities;
(e) coordinate the layout and printing of
publicly disseminated prospectuses and
reports;
(f) calculate performance data of each
Portfolio for dissemination to information
services covering the investment company
industry, for sales literature of the Trust
and other appropriate purposes;
(g) determine the amount of and supervise the
declaration of dividends and other
distributions to shareholders as necessary
to, among other things, maintain the
qualification of each Portfolio as a
regulated investment company under the
Internal Revenue Code of 1986, as amended, or
any successor statute, and prepare and
distribute to appropriate parties notices
announcing the declaration of dividends and
other distributions to shareholders;
(h) prepare and monitor an expense budget for
each Portfolio, including setting and
revising accruals for each category of
expenses and notifying trust management of
any proposed adjustments;
(i) prepare monthly financial statements, to
include the following items:
Schedule of Investments
Statement of Assets and Liabilities
Statement of Operations
Statement of Changes in Net Assets
Cash Statement
Schedule of Capital Gains and Losses
(j) prepare and file each Portfolio's tax
returns, arrange for and supervise
independent auditors as appropriate and take
all reasonable action in the performance of
its obligations under this Agreement to
assure that the necessary information is made
available to such accountants for the
expression of their opinion as such may be
required by the Trust from time to time;
(k) prepare, negotiate, and administer
contracts on behalf of the Trust with, among
others, the Adviser, the Trust's custodian
(the "Custodian"), the Trust's distributor
(the "Distributor"), and the Trust's transfer
agent (the "Transfer Agent");
(l) examine and review the operations of the
Custodian and the Transfer Agent;
(m) prepare and deliver such documents as the
Trust may be required to deliver by contract
with the Transfer Agent, Distributor,
Custodian or Adviser;
(n) perform internal audit examinations in
accordance with a charter developed by FAS
with the approval of the Trust's counsel,
including periodic reviewing and testing of
each Portfolio's compliance with the
investment restrictions and limitations
imposed by the 1940 Act and state Blue Sky
laws and the applicable regulations
thereunder, the fundamental and non-
fundamental investment policies and
limitations set forth in each Portfolio's
prospectus and statement of additional
information, and the investment restrictions
and limitations necessary for each Portfolio
to qualify as a regulated investment company
under the Internal Revenue Code ("Code") or
any successor statute;
(o) assist with the design, development, and
operation of the Trust;
(p) provide individuals reasonably acceptable
to the Trust's Board of Trustees for
nomination, appointment, or election as
officers of the Trust, who will be
responsible for the management of certain of
the Trust's affairs as determined by the
Trust's Board of Trustees; and
(q) advise the Trust and its Board of Trustees
on matters concerning the Trust and its
affairs.
The foregoing, along with any additional services
that FAS shall agree in writing to perform for the Trust
hereunder, shall hereafter be referred to as "Administrative
Services." Administrative Services shall not include any
duties, functions, or services to be performed for the Trust
by the Adviser, Distributor, Custodian, or Transfer Agent
pursuant to their agreements with the Trust.
3. Records. FAS shall create and maintain all
necessary books and records in accordance with all
applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the 1940 Act
and the rules thereunder, as the same may be amended from
time to time, pertaining to the Administrative Services
performed by it and not otherwise created and maintained by
another party pursuant to contract with the Trust. Where
applicable, such records shall be maintained by FAS for the
periods and in the places required by Rule 31a-2 under the
1940 Act. The books and records pertaining to the Trust
which are in the possession of FAS shall be the property of
the Trust. The Trust, or the Trust's authorized
representatives, shall have access to such books and records
at all times during FAS's normal business hours. Upon the
reasonable request of the Trust, copies of any such books
and records shall be provided promptly by FAS to the Trust
or the Trust's authorized representatives.
4. Expenses. FAS shall be responsible for expenses
incurred in providing office space, equipment, and personnel
as may be necessary or convenient to provide Administrative
Services to the Trust, including the compensation of FAS
employees who serve as officers of the Trust. The Trust
shall be responsible for all other expenses incurred by FAS
on behalf of the Trust, including without limitation postage
and courier expenses, printing expenses, travel expenses,
registration fees, filing fees, fees of outside counsel and
independent auditors, insurance premiums, fees payable to
trustees who are not interested persons of the Trust, and
trade association dues.
5. Compensation. For the Administrative Services
provided to each Portfolio of the Trust which is or
hereafter may be established, the Trust hereby agrees to pay
from the assets of the applicable Portfolio and FAS hereby
agrees to accept as full compensation for its services
rendered hereunder an Administrative Services fee at an
annual rate, computed and payable daily, as specified below:
Maximum Administrative Aggregate Daily Net Assets
Fee of the Trust
.145% on the first $400 million
.120% on the next $300 million
.095% on the next $300 million
.070% on assets in excess of
$1 billion
provided, however, that the administrative services fee
payable by the Trust to FAS in any month will be reduced in
an amount equal to the aggregate of all fees paid by the
Trust to Federated Services Company pursuant to the
Portfolio Recordkeeping and Shareholder Recordkeeping
Agreement, or any successor Portfolio Accounting Agent or
Transfer Agent pursuant to a similar agreement with the
Trust (other than out-of-pocket expenses payable under such
agreement) for those accounts for which Wachovia Bank of
North Carolina, N.A., or its affiliates or subsidiaries, or
any other financial institution maintains records for
beneficial owners of the Trust's shares; provided further
that a minimum annual fee for any Portfolio, other than the
Portfolios listed on Exhibit A hereto, may be established by
FAS in an amount not to exceed $75,000 computed on an
annualized basis. With respect to Portfolios subject to
such minimum, the Trust shall have the right to appoint
another administrator if FAS insists on assessing the
minimum fee over the objection of the Trust.
6. Confidentiality. FAS agrees, on behalf of itself
and its employees, to treat confidentially and as
proprietary information of the Trust all records and other
information relative to the Trust and its prior, present or
potential shareholders, and not to use such records and
information for any purpose other than performance of its
responsibilities and duties hereunder, except, after prior
notification to and approval in writing by the Trust, which
approval shall not be unreasonably withheld and may not be
withheld where FAS may be exposed to civil or criminal
contempt proceedings for failure to comply, when request to
divulge such information by duly constituted authorities, or
when so requested by the Trust. Notwithstanding the
foregoing, FAS may provide records required to be maintained
under Section 3 of this Agreement to the Securities and
Exchange Commission or state securities regulators without
prior approval.
7. Responsibility of Administrator.
(a) FAS shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the
Trust in connection with the matters to which this Agreement
relates, except a loss resulting from willful misfeasance,
bad faith or gross negligence on its part in the performance
of its duties or from reckless disregard by it of its
obligations and duties under this Agreement. FAS shall be
entitled to rely on and may act upon advice of the Trust's
counsel or other counsel reasonably acceptable to the
Trust's counsel on all matters, and shall be without
liability for any action reasonably taken or omitted
pursuant to such advice. Any person, even though also an
officer, trustee, employee or agent of FAS, who may be or
become an officer, employee or agent of the Trust, shall be
deemed, when rendering services to the Trust or acting on
any business of the Trust (other than services or business
in connection with the duties of FAS hereunder) to be
rendering such services to or acting solely for the Trust
and not as an officer, trustee, employee or agent or one
under the control or direction of FAS even though paid by
FAS.
(b) Subject to the conditions set forth below,
the Trust agrees to indemnify and hold harmless FAS against
any and all loss, liability, claim, damage or expense
whatsoever (including the reasonable cost of investigating
or defending any alleged loss, liability, damages, claim or
expense and reasonable counsel fees incurred in connection
therewith) arising by reason of any action taken or thing
done by FAS in performing Administrative Services if not
resulting from FAS's willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties
under this Agreement.
If any action is brought against FAS to which
indemnity may be sought against the Trust pursuant to the
foregoing paragraph, FAS shall promptly notify the Trust in
writing of the institution of such action and, provided such
notice has been given, the Trust shall assume the defense of
such action, including the employment of counsel selected by
the Trust and payment of expenses. FAS shall have the right
to employ separate counsel in any such case, but the fees
and expenses of such counsel shall be at the expense of FAS
unless the employment of such counsel shall have been
authorized in writing by the Trust in connection with the
defense of such action or the Trust shall not have employed
counsel to have charge of the defense of such action, in any
of which events such fees and expenses shall be borne by the
Trust. Anything in this paragraph to the contrary
notwithstanding, the Trust shall not be liable for any
settlement of any such claim or action effected without its
written consent. The Trust agrees promptly to notify FAS of
the commencement of any litigation or proceedings against
the Trust or any of its officers or Trustees in connection
with the Administrative Services.
(c) FAS agrees to indemnify and hold harmless
the Trust, each of its Trustees and each of its officers
against any loss, liability, damages, claim or expense
(including the reasonable cost of investigating or defending
any alleged loss, liability, damages, claim or expense and
reasonable counsel fees incurred in connection therewith)
arising by reason of any action taken or thing done by FAS
in performing Administrative Services if resulting from
FAS's willful misfeasance, bad faith or gross negligence on
its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this
Agreement. In case any action shall be brought against the
Trust or any other person so indemnified based on the
foregoing as described in this subsection (c), and with
respect to which indemnity may be sought against FAS, FAS
shall have the rights and duties given to the Trust, and the
Trust and each other person so indemnified shall have the
rights and duties given to FAS by the provisions of
subsection (b) above.
8. Duration and Termination.
(a) This Agreement shall be effective on the
date hereof, and extend for a period of five years provided
that such five year period shall be deemed to have commenced
on November 30, 1990 and shall end on November 30, 1995.
(b) Thereafter, this Agreement shall be
automatically renewed each year for an additional term of
one year provided that either party may terminate this
Agreement at any time after the initial term by at least six
months written notice to the other without regard to such
one year term.
(c) Notwithstanding the foregoing, this
Agreement may be terminated at any time by either party in
the event of a material breach by the other party involving
gross negligence, willful misfeasance, bad faith, or a
reckless of its obligations and duties under this Agreement
and such breach shall have remained unremedied for sixty
days or more after receipt of written specification thereof
and there has been a final determination by an arbitrator,
selected and acting pursuant to the rules of the American
Arbitration Association, that a breach, as specified herein,
has occurred and remained unremedied for sixty days or more
after notice. Any such termination shall not affect the
rights and obligations of the parties under Section 7
hereof.
(d) Upon the termination of this Agreement, the
Trust shall pay to FAS such compensation as may be payable
prior to the effective date of such termination. In the
event that the Trust designates a successor to any of FAS's
obligations hereunder, FAS shall, at the expense and
direction of the Trust, transfer to such successor all
relevant books, records and other data established or
maintained by FAS under the foregoing provisions.
9. Amendment. This Agreement may be amended or
modified by a written agreement executed by both parties and
authorized or approved by a resolution of the Trustees of
the Trust.
10. Limitation of Liability. FAS is expressly put on
notice of the limitation of liability as set forth in the
Declaration of Trust and agrees that the obligations assumed
by the Trust pursuant to this Agreement shall be limited in
any case to the Trust and its assets and that FAS shall not
seek satisfaction of any such obligations from the
shareholders of the Trust, the Trustees, officers, employees
or agents of the Trust, or any of them.
11. Notices. Notices of any kind to be given to the
Trust hereunder by FAS shall be in writing and shall be duly
given if delivered to the Trust and to its Adviser at the
following address: Wachovia Bank of North Carolina, N.A.,
Attn: Robert S. Kniejski, 301 North Main Street, Winston-
Salem, NC 27150. Notices of any kind to be given to FAS
hereunder by the Trust shall be in writing and shall be duly
given if delivered to FAS at Federated Investors Tower,
Pittsburgh, PA 15222-3779, Attention: President.
12. Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and
the same instrument.
13. Miscellaneous. The captions in this Agreement
are included for convenience of reference only and in no way
define or delimit any of the provisions hereof or otherwise
affect their construction or effect. If any provision of
this Agreement shall be held or made invalid by a court or
regulatory agency decision, statute, rule or otherwise, the
remainder of this Agreement shall not be affected thereby.
Subject to the provisions of Section 5, hereof, this
Agreement shall be binding upon and shall inure to the
benefit of the parties hereto and their respective
successors. This Agreement shall be governed by
Pennsylvania law; provided, however, that nothing herein
shall be construed in a manner inconsistent with the 1940
Act or any rule or regulation promulgated by the Securities
and Exchange Commission thereunder.
IN WITNESS WHEREOF, the parties hereto have caused
this instrument to be executed by their officers designated
below as of the day and year first above written.
The Biltmore Funds
Attest: /s/Peter J. Germain By: /s/John W. McGonigle
Its: Secretary Its: President
FEDERATED ADMINISTRATIVE SERVICES
Attest: /s/John W. McGonigle By: /s/ J. Christopher Donahue
Its: Secretary Its: President
EXHIBIT A
to the
Administrative Services Agreement
The Administrative Services Agreement dated the 9th
day of March, 1992 between The Biltmore Funds and FEDERATED
ADMINISTRATIVE SERVICES shall apply to the following
Portfolios:
Biltmore Money Market Fund
(Investment Shares)
(Institutional Shares)
Biltmore U.S. Government Money Market Fund
(Investment Shares)
(Institutional Shares)
Biltmore Tax-Free Money Market Fund
(Investment Shares)
(Institutional Shares)
Biltmore U.S. Treasury Money Market Fund
(Institutional Shares)
EXHIBIT B
to the
Administrative Services Agreement
The Administrative Services Agreement dated March 9,
1992 between The Biltmore Funds and FEDERATED ADMINISTRATIVE
SERVICES shall apply to the following Portfolios effective
as of the dates set forth below:
Biltmore Money Market Fund March 9, 1992
(Investment Shares)
(Institutional Shares)
Biltmore U.S. Government Money Market Fund March 9, 1992
(Investment Shares)
(Institutional Shares)
Biltmore Tax-Free Money Market Fund March 9, 1992
(Investment Shares)
(Institutional Shares)
Biltmore U.S. Treasury Money Market Fund March 9, 1992
(Institutional Shares)
Biltmore Prime Cash Management Fund June 12, 1992
(Institutional Shares)
EXHIBIT C
to the
Administrative Services Agreement
The Administrative Services Agreement dated March 9,
1992 between The Biltmore Funds and FEDERATED ADMINISTRATIVE
SERVICES shall apply to the following Portfolios effective
as of the dates set forth below:
Biltmore Money Market Fund March 9, 1992
(Investment Shares)
(Institutional Shares)
Biltmore Tax-Free Money Market Fund March 9, 1992
(Investment Shares)
(Institutional Shares)
Biltmore U.S. Treasury Money Market Fund March 9, 1992
(Institutional Shares)
(Investment Shares)
Biltmore Prime Cash Management Fund June 11, 1992
(Institutional Shares)
Biltmore Balanced Fund April 3, 1993
Biltmore Equity Fund April 3, 1993
Biltmore Equity Index Fund April 3, 1993
Biltmore Fixed Income Fund April 3, 1993
Biltmore Short-Term Fixed Income Fund April 3, 1993
Biltmore Special Values Fund April 3, 1993
EXHIBIT D
to the
Administrative Services Agreement
The Administrative Services Agreement dated March 9,
1992 between The Biltmore Funds and FEDERATED ADMINISTRATIVE
SERVICES shall apply to the following Portfolios effective
as of the dates set forth below:
Biltmore Money Market Fund March 9, 1992
(Investment Shares)
(Institutional Shares)
Biltmore Tax-Free Money Market Fund March 9, 1992
(Investment Shares)
(Institutional Shares)
Biltmore U.S. Treasury Money Market Fund March 9, 1992
(Institutional Shares)
(Investment Shares)
Biltmore Prime Cash Management Fund June 11, 1992
(Institutional Shares)
Biltmore Balanced Fund April 3, 1993
Biltmore Equity Fund April 3, 1993
Biltmore Equity Index Fund April 3, 1993
Biltmore Fixed Income Fund April 3, 1993
Biltmore Short-Term Fixed Income Fund April 3, 1993
Biltmore Special Values Fund April 3, 1993
Biltmore Quantitative Equity Fund December 9, 1993
Amendment No. 1
to
Administrative Services Agreement
This Amendment No. 1 to Administrative Services
Agreement is made and entered into as of the 1st day of
June, 1994 by and between The Biltmore Funds, a
Massachusetts business trust (the "Trust") and Federated
Administrative Services, a Delaware business trust ("FAS").
WHEREAS, the Trust and FAS entered into an
Administrative Services Agreement dated as of March 9, 1992
( the "Agreement" ) ; and
WHEREAS, the Trust and FAS desire to amend the
Agreement in certain respects.
NOW THEREFORE, the parties, intending to be legally
bound, agree as follows:
1. Paragraph 5 of the Agreement provides:
5. Compensation. For the Administrative
Services provided to each Portfolio of the Trust
which is or hereafter may be established, the
Trust hereby agrees to pay from the assets of the
applicable Portfolio and FAS hereby agrees to
accept as full compensation for its services
rendered hereunder an Administrative Services fee
at an annual rate, computed and payable daily, as
specified below:
Maximum
Administrative Aggregate Daily Net Assets
Fee of the Trust
.145% on the first $400 million
.120% on the next $300 million
.095% on the next $300 million
.070% on assets in excess of $1 billion
provided, however, that the administrative
services fee payable by the Trust to FAS in any
month will be reduced in an amount equal to the
aggregate of all fees paid by the Trust to
Federated Services Company pursuant to the
Portfolio Recordkeeping and Shareholder
Recordkeeping Agreement, or any successor
Portfolio Accounting Agent or Transfer Agent
pursuant to a similar agreement with the Trust
(other than out-of-pocket expenses payable under
such agreement) for those accounts for which
Wachovia Bank of North Carolina, N.A., or its
affiliates or subsidiaries, or any other
financial institution maintains records for
beneficial owners of the Trust's shares; provided
further that a minimum annual fee for any
Portfolio, other than the Portfolios listed on
Exhibit A hereto, may be established by FAS in an
amount not to exceed $75,000 computed on an
annualized basis. With respect to Portfolios
subject to such minimum, the Trust shall have the
right to appoint another administrator if FAS
insists on assessing the minimum fee over the
objection of the Trust.
2. Paragraph 5 of the Agreement is amended by deleting the
paragraph in its entirety and inserting in lieu thereof the
following:
5. Compensation. For the Administrative
Services provided to each Portfolio of the Trust
which is or hereafter may be established, the
Trust hereby agrees to pay from the assets of the
applicable Portfolio and FAS hereby agrees to
accept as full compensation for its services
rendered hereunder an Administrative Services fee
at an annual rate, computed and payable daily, as
specified below:
Average Aggregate Daily Net
Maximum Administrative Assets of The Biltmore Funds
Fee and The Biltmore Municipal Funds
.15% on the first $250 million
.125% on the next $250 million
100%on the next $250
million
.075% on assets in excess of
$750 million
However, in no event shall the administrative
fee received during any year of this Agreement be
less than, or be paid at a rate less than would
aggregate $75,000 per portfolio .
3. The Trust and FAS hereby ratify and confirm all of the
terms, conditions and provisions of the Administrative
Services Agreement, as herein amended, as remaining, in
full force and effect.
WITNESS the above due execution hereof as of the day
and year first above written.
THE BILTMORE FUNDS
By: /s/ John W. McGonigle
Its: President
FEDERATED ADMINISTRATIVE
SERVICES
By: /s/ James J. Dolan
Its: President
Exhibit 15 under Form N-1A
Exhibit 1 under Item 601 / Reg S-K
The Biltmore Funds
__________________________
EXHIBIT B to 12b-1 Agreement with
Federated Securities Corp. ("FSC")
Portfolios
FSC will pay the Administrator fees for the following
mutual funds, portfolios or classes thereof (the "Funds")
effective as of the dates set forth below:
Name Date
Biltmore Money Market Fund March 9, 1992
(Investment Shares)
Biltmore U.S. Government Money Market Fund March 9, 1992
(Investment Shares)
Biltmore Tax-Free Money Market Fund March 9, 1992
(Investment Shares)
Biltmore U.S. Treasury Money Market Fund January 31, 1993
(Investment Shares)
Administrative Fees
1. During the term of this Agreement, FSC will pay
Administrator a monthly fee in respect of each Fund. This
fee will be computed at the annual rate of 0.40% of the
average net asset value of Shares held during the month in
accounts for which the Administrator provides services under
this Agreement.
2. For the monthly period in which the Agreement
becomes effective or terminates, there shall be an
appropriate proration of any fee payable on the basis of the
number of days that the Agreement is in effect during the
month.
Exhibit 16 under Form N-1A
Exhibit 99 under Item 601 / Reg.
Biltmore Quat. Equity Yield = 2{( $204,854.86 - $67,675.87 )+1)^6-1}=
Computation of SEC Yield 9,227,657 * $10.28 - 0.00000 )
As of: May 31, 1994
SEC Yield = 1.74%
Dividend and/or Interest
Inc for the 30 days ended $204,854.86
Net Expenses for $67,675.87
the Period
Avg Daily Shares
Outstanding and entitled
to receive dividends 9,227,657
Maxium offering price $10.28
per share as of 5-31-94
Undistributed net income 0.00000
Exhibit 16 under Form N-1A
Exhibit 99 under Item 601 / Reg
Schedule for Computation Initial
of Fund Performance Data Invest of: $250
Offering
Biltmore Quant. Equity Price/
Share= $10.47
Return Since Inception
ending 5/31/94 NAV= $10.00
FYE: November 30
<TABLE>
<CAPTION>
Begin Capital Reinvest Ending Total
DECLARED: QUARTERLY Reinvest Period Dividend Gain Price Period Ending Invest
PAID: QUARTERLY Dates Shares /Share /Share /Share Shares Price Value
<S> <C> <C> <C> <C> <C> <C> <C>
3/25/94 23.878 0.000000000 0.00000 $10.00 23.878 $10.47 $250.00
3/31/94 23.878 0.000000000 0.00000 $9.63 23.878 $9.63 $229.94
4/30/94 23.878 0.000000000 0.00000 $9.80 23.878 $9.80 $234.00
5/31/94 23.878 0.000000000 0.00000 $9.82 23.878 $9.82 $234.48
</TABLE>
$1000(1+T) = End Value
T = -6.21%
