PRESIDENT'S MESSAGE
- -------------------------------------------------------------------------------
Dear Shareholder:
I am pleased to present your Annual Report for CCB Equity Fund, which covers the
12-month fiscal year period from June 1, 1998 through May 31, 1999.
Inside, you will find complete information about the fund's operation during the
fiscal year, including an investment review by the fund's portfolio manager, a
list of the fund's quality stock holdings, and the financial statements.
To help your money grow in value over the long term, this fund invests in a
diversified portfolio of stocks. As you can see from the list of holdings, many
of these stocks are well-respected household names like American Express, AT&T,
General Electric, Intel, Mobil, Merck, Procter & Gamble, and Wal-Mart.
The 12-month reporting period saw the U.S. stock market continue its climb,
accompanied by a high level of day-to-day volatility. In this environment, CCB
Equity Fund delivered a competitive total return of 15.90% based on net asset
value for the fiscal year ended May 31, 1999.* Contributing to the total return
were income totaling $0.08 per share and a $1.50 increase in net asset value.
The fund's net assets totaled $99.5 million at the end of the reporting period.
Thank you for participating in the long-term growth opportunities of stocks
through the diversification, professional management and convenience of CCB
Equity Fund. We hope you are pleased with your investment progress.
Sincerely,
Edward C. Gonzales
President
July 15, 1999
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their
original cost. Total return for the period adjusted for the fund's sales
charge was 10.70%.
INVESTMENT REVIEW
- -------------------------------------------------------------------------------
The investment objective of the CCB Equity Fund is to provide high total return
over longer periods of time through appreciation of capital and current income
provided by dividends and interest payments. The fund attempts to achieve its
investment objective by investing primarily in a broad, diversified range of
dividend paying common stocks in companies deemed to have above average earnings
growth prospects that are available at reasonable prices.
The fund performed well during the year, even though the environment wasn't as
forgiving as the past years of this booming bull market. The fund faced three
significant market drops induced by factors ranging from the economic collapse
of Asian emerging markets and a slowdown in Europe to fears of a developing U.S.
recession. At the height of these concerns, the Federal Reserve Board (the
"Fed") reduced interest rates in a move that restored investor confidence. The
U.S. economy remained strong and continued to experience strong consumer demand,
low unemployment, low inflation and favorable interest rates. Even the political
instability prompted by the impeachment process could not derail the market's
momentum. The stock market averages surged to produce double digit returns. The
fund returned 15.90% based on net asset value for the fiscal year ended May 31,
1999.* This one-year performance is ahead of that of other funds with similar
growth and income objectives, which delivered an average of 11.5% as tracked by
Lipper Analytical Services, Inc.** As has been the experience in recent years,
the large-cap stocks led the market, although the breadth of stocks
participating in the market's advance did improve late in the reporting period.
As of May 31, 1999, total fund assets were $99,525,542. The portfolio was
99.2% invested in stocks and the remaining 0.5% in cash equivalents. The
fund's ten largest holdings were as follows:
<TABLE>
<S> <C>
General Electric Co. 5.01%
MCI Worldcom, Inc. 4.77%
Capital One Financial Corp. 4.54%
Cisco Systems, Inc. 4.38%
Citigroup, Inc. 4.33%
Fannie Mae Federal National Mortgage Association 3.93%
Tyco International Ltd. 3.78%
EMC Corp. Mass 3.40%
Duke Energy Corp. 3.33%
American International Group, Inc. 2.87%
</TABLE>
* Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that
an investor's shares, when redeemed, may be worth more or less than their
original cost. Total return for the period adjusted for the fund's sales
charge was 10.70%.
** Lipper figures represent the average of the total returns reported by all of
the mutual funds designated by Lipper Analytical Services, Inc. as falling
into the respective categories indicated. These figures do not reflect sales
charges.
Looking forward, we expect the global economic environment to be supportive of
further gains in stock prices. There are some signs of improvement in Japan and
emerging market economies. While the Fed may reverse some of its credit easing
moves from last fall, a modest increase in interest rates seems to be expected
by market participants. A key factor going forward will be the degree that
increases in labor cost exert inflationary pressures in an already tight job
market. However, with the Fed acting preemptively to avert potential
inflationary pressures, and the economy enjoying low unemployment and strong
consumer spending, the robust economic growth we have enjoyed should continue.
This should be a favorable environment for companies to produce strong earnings
growth, a necessity to support the rich valuations being afforded the large
capitalization growth stocks.
Thank you for your continued interest and investment in the CCB Equity Fund.
CCB EQUITY FUND
- -------------------------------------------------------------------------------
GROWTH OF $10,000 INVESTED IN CCB EQUITY FUND
SINCE INCEPTION AS OF MAY 31, 1999
The graph below illustrates the hypothetical investment of $10,000* in the CCB
Equity Fund (the "Fund") from December 5, 1994 (start of performance) to May 31,
1999, compared to the Standard & Poor's 500 Index ("S&P 500")+.
"Graphic representation "A" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT
RETURN AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY
BE WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after deducting
the maximum sales charge of 4.50% ($10,000 investment minus $450 sales charge
= $9,550). The Fund's performance assumes the reinvestment of all dividends
and distributions.
** Total return quoted reflects all applicable sales charges.
+ The S&P 500 is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The S&P 500
has been adjusted to reflect reinvestment of the dividends on securities.
This index is unmanaged.
CCB EQUITY FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
SHARES VALUE
------ -------------------------------------- -----------
<C> <S> <C>
COMMON STOCKS--99.2%
---------------------------------------------
AEROSPACE & DEFENSE--2.0%
--------------------------------------
35,000 Allied-Signal, Inc. $ 2,032,187
-------------------------------------- -----------
CHEMICALS--1.1%
--------------------------------------
24,000 Imperial Chemical Industries, PLC, ADR 1,054,500
-------------------------------------- -----------
CONSUMER BASICS--6.9%
--------------------------------------
30,000 Emerson Electric Co. 1,916,250
--------------------------------------
49,000 General Electric Co. 4,982,688
-------------------------------------- -----------
Total 6,898,938
-------------------------------------- -----------
CONSUMER NON-DURABLES--4.4%
--------------------------------------
20,000 General Mills, Inc. 1,607,500
--------------------------------------
15,000 Philip Morris Cos., Inc. 578,438
--------------------------------------
16,000 Procter & Gamble Co. 1,494,000
--------------------------------------
10,446 Unilever N.V., ADR 682,254
-------------------------------------- -----------
Total 4,362,192
-------------------------------------- -----------
ELECTRONIC TECHNOLOGY--14.3%
--------------------------------------
35,000 Applied Materials, Inc. 1,922,812
--------------------------------------
40,000 (1)Cisco Systems, Inc. 4,360,000
--------------------------------------
10,600 (1)Computer Sciences Corp. 685,687
--------------------------------------
34,000 (1)EMC Corp. Mass 3,387,250
--------------------------------------
33,400 Intel Corp. 1,805,687
--------------------------------------
10,000 Lucent Technologies, Inc. 568,750
--------------------------------------
14,000 Texas Instruments, Inc. 1,531,250
-------------------------------------- -----------
Total 14,261,436
-------------------------------------- -----------
ENERGY MINERALS--0.4%
--------------------------------------
5,000 Atlantic Richfield Co. 418,437
-------------------------------------- -----------
FINANCE--22.5%
-----------------------------------------
10,000 American Express Co. $ 1,211,875
-----------------------------------------
25,000 American International Group, Inc. 2,857,812
-----------------------------------------
25,000 Bank One Corporation 1,414,062
-----------------------------------------
20,000 Bank of America Corp. 1,293,750
-----------------------------------------
30,000 Capital One Financial Corp. 4,520,625
-----------------------------------------
65,000 Citigroup, Inc. 4,306,250
-----------------------------------------
70,000 Crescent Real Estate Equities, Inc. 1,614,375
-----------------------------------------
21,000 Federal Home Loan Mortgage Corp. 1,224,562
-----------------------------------------
41,500 Pennsylvania Real Estate Investment Trust 861,125
-----------------------------------------
50,000 Peoples Bank Bridgeport 1,500,000
-----------------------------------------
15,000 Reliastar Financial Corp. 623,438
-----------------------------------------
24,000 Washington Mutual, Inc. 916,500
----------------------------------------- -----------
Total 22,344,374
----------------------------------------- -----------
HEALTH TECHNOLOGY--9.4%
-----------------------------------------
13,400 Abbott Laboratories 605,513
-----------------------------------------
40,000 American Home Products Corp. 2,305,000
-----------------------------------------
30,000 Medtronic, Inc. 2,130,000
-----------------------------------------
31,800 Merck & Co., Inc. 2,146,500
-----------------------------------------
20,000 Pfizer, Inc. 2,140,000
----------------------------------------- -----------
Total 9,327,013
----------------------------------------- -----------
INDUSTRIAL SERVICES--2.1%
-----------------------------------------
5,000 Baker Hughes, Inc. 155,625
-----------------------------------------
15,000 Schlumberger Ltd. 902,813
-----------------------------------------
20,000 Waste Management, Inc. 1,057,500
----------------------------------------- -----------
Total 2,115,938
----------------------------------------- -----------
INSURANCE--1.2%
-----------------------------------------
17,500 Jefferson-Pilot Corp. 1,184,531
----------------------------------------- -----------
MORTGAGE--3.9%
-----------------------------------------
57,500 Fannie Mae Federal National Mortgage
Association $ 3,910,000
----------------------------------------- -----------
NON-ENERGY MINERALS--1.5%
-----------------------------------------
27,000 Alcoa, Inc. 1,485,000
----------------------------------------- -----------
OIL--5.9%
-----------------------------------------
15,000 BP Amoco PLC, ADR 1,606,875
-----------------------------------------
5,000 Chevron Corp. 463,438
-----------------------------------------
15,700 Exxon Corp. 1,254,037
-----------------------------------------
21,000 Halliburton Co. 868,875
-----------------------------------------
16,700 Mobil Corp. 1,690,875
----------------------------------------- -----------
Total 5,884,100
----------------------------------------- -----------
PHARMACEUTICALS--2.1%
-----------------------------------------
55,000 (1)Watson Pharmaceuticals, Inc. 2,107,188
----------------------------------------- -----------
PROCESS INDUSTRIES--1.1%
-----------------------------------------
27,000 Goodrich (B.F.) Co. 1,093,500
----------------------------------------- -----------
PRODUCER MANUFACTURING--4.7%
-----------------------------------------
15,000 Avery Dennison Corp. 898,125
-----------------------------------------
43,000 Tyco International Ltd. 3,757,125
----------------------------------------- -----------
Total 4,655,250
----------------------------------------- -----------
RETAIL--1.0%
-----------------------------------------
23,400 Wal-Mart Stores, Inc. 997,425
----------------------------------------- -----------
RETAIL TRADE--1.4%
-----------------------------------------
21,500 Dayton-Hudson Corp. 1,354,500
----------------------------------------- -----------
TECHNOLOGY SERVICES--2.5%
-----------------------------------------
19,000 (1)Microsoft Corp. 1,533,063
-----------------------------------------
40,000 Oracle Corp. 992,500
----------------------------------------- -----------
Total 2,525,563
----------------------------------------- -----------
TRANSPORTATION--0.2%
-----------------------------------------
4,500 Norfolk Southern Corp. $ 147,375
----------------------------------------- -----------
UTILITIES--10.6%
-----------------------------------------
45,000 AT&T Corp. 2,497,500
-----------------------------------------
55,000 Duke Energy Corp. 3,317,188
-----------------------------------------
55,053 (1)MCI Worldcom, Inc. 4,755,203
----------------------------------------- -----------
Total 10,569,891
----------------------------------------- -----------
TOTAL COMMON STOCKS
IDENTIFIED COST $57,680,554) 98,729,338
----------------------------------------- -----------
MUTUAL FUND--0.5%
- -------------------------------------------------
514,724 Goldman Sachs Money Market Fund 514,724
----------------------------------------- -----------
TOTAL INVESTMENTS
(IDENTIFIED COST $58,195,278)(2) $99,244,062
----------------------------------------- -----------
</TABLE>
(1) Non-income producing security.
(2) The cost of investments for federal tax purposes amounts to $58,195,278. The
net unrealized appreciation of investments on a federal tax basis amounts to
$41,048,784 which is comprised of $41,613,784 appreciation and $565,000
depreciation at May 31, 1999.
Note: The categories of investments are shown as a percentage of net assets
($99,525,542) at May 31, 1999.
The following acronyms are used throughout this portfolio:
ADR--American Depositary Receipt
PLC--Public Limited Company
(See Notes which are an integral part of the Financial Statements)
CCB EQUITY FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
ASSETS:
- ----------------------------------------------------------------
Total investments in securities, at value (identified and tax
cost $58,195,278) $ 99,244,062
- ----------------------------------------------------------------
Income receivable 210,307
- ----------------------------------------------------------------
Receivable for investments sold 1,799,677
- ----------------------------------------------------------------
Receivable for shares sold 16,000
- ----------------------------------------------------------------
Deferred organizational costs 4,397
- ----------------------------------------------------------------
Other assets 912
- ---------------------------------------------------------------- ------------
Total assets 101,275,355
- ----------------------------------------------------------------
LIABILITIES:
- ----------------------------------------------------
Payable for investments purchased $1,591,200
- ----------------------------------------------------
Advisory fee payable 115,951
- ----------------------------------------------------
Payable for shares redeemed 18,050
- ----------------------------------------------------
Payable for taxes withheld 1,488
- ----------------------------------------------------
Options written, at value (Premium Received $28,799) 2,500
- ----------------------------------------------------
Accrued expenses 20,624
- ---------------------------------------------------- ----------
Total liabilities 1,749,813
- ---------------------------------------------------------------- ------------
Net Assets for 4,577,195 shares outstanding $ 99,525,542
- ---------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
- ----------------------------------------------------------------
Paid in capital $ 43,565,694
- ----------------------------------------------------------------
Net unrealized appreciation of investments 41,075,083
- ----------------------------------------------------------------
Accumulated net realized gain on investments 14,833,414
- ----------------------------------------------------------------
Undistributed net investment income 51,351
- ---------------------------------------------------------------- ------------
Total Net Assets $ 99,525,542
- ---------------------------------------------------------------- ------------
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER
SHARE:
- ----------------------------------------------------------------
Net Asset Value Per Share ($99,525,542 divided by 4,577,195
shares outstanding) $21.74
- ---------------------------------------------------------------- ------------
Offering Price Per Share (100/95.50 of $21.74)(1) $22.76
- ---------------------------------------------------------------- ------------
</TABLE>
(1) See "What Shares Cost" in the Prospectus.
(See Notes which are an integral part of the Financial Statements)
CCB EQUITY FUND
STATEMENT OF OPERATIONS
YEAR ENDED MAY 31, 1999
- --------------------------------------------------------------------------------
<TABLE>
<S> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------
Dividends (net of foreign taxes withheld of $11,520) $ 2,129,932
- -----------------------------------------------------------
Interest 200,580
- ----------------------------------------------------------- -----------
Total income 2,330,512
- -----------------------------------------------------------
EXPENSES:
- -----------------------------------------------
Investment advisory fee $1,420,177
- -----------------------------------------------
Administrative personnel and services fee 241,260
- -----------------------------------------------
Custodian fees 13,795
- -----------------------------------------------
Transfer and dividend disbursing agent fees and
expenses 23,121
- -----------------------------------------------
Directors'/Trustees' fees 4,182
- -----------------------------------------------
Auditing fees 12,635
- -----------------------------------------------
Legal fees 5,821
- -----------------------------------------------
Portfolio accounting fees 54,208
- -----------------------------------------------
Share registration costs 19,834
- -----------------------------------------------
Printing and postage 9,366
- -----------------------------------------------
Insurance premiums 1,798
- -----------------------------------------------
Miscellaneous 13,436
- ----------------------------------------------- ----------
Total expenses 1,819,633
- -----------------------------------------------
Waiver--
- -----------------------------------------------
Waiver of investment advisory fee (148,367)
- ----------------------------------------------- ----------
Net expenses 1,671,266
- ----------------------------------------------------------- -----------
Net investment income 659,246
- ----------------------------------------------------------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
OPTIONS:
- -----------------------------------------------------------
Net realized gain on investments and options 15,309,462
- -----------------------------------------------------------
Net change in unrealized appreciation of investments and
options (7,645,911)
- ----------------------------------------------------------- -----------
Net realized and unrealized gain on investments and
options 7,663,551
- ----------------------------------------------------------- -----------
Change in net assets resulting from operations $ 8,322,797
- ----------------------------------------------------------- -----------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CCB EQUITY FUND
STATEMENT OF CHANGES IN NET ASSETS
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------
1999 1998
------------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
- ---------------------------------------------------
OPERATIONS--
- ---------------------------------------------------
Net investment income $ 659,246 $ 784,199
- ---------------------------------------------------
Net realized gain on investments and options
($15,378,089 and $21,100,147, respectively, as
computed for federal tax purposes) 15,309,462 21,189,873
- ---------------------------------------------------
Net change in unrealized appreciation of
investments and options (7,645,911) 19,481,961
- --------------------------------------------------- ------------- ------------
Change in net assets resulting from operations 8,322,797 41,456,033
- --------------------------------------------------- ------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS--
- ---------------------------------------------------
Distributions from net investment income (836,115) (721,356)
- ---------------------------------------------------
Distributions from net realized gains (17,056,128) (10,530,395)
- --------------------------------------------------- ------------- ------------
Change in net assets resulting from distributions
to shareholders (17,892,243) (11,251,751)
- --------------------------------------------------- ------------- ------------
SHARE TRANSACTIONS--
- ---------------------------------------------------
Proceeds from sale of shares 36,663,336 18,796,021
- ---------------------------------------------------
Net asset value of shares issued to shareholders
in payment of distributions declared 1,187,375 9,786,538
- ---------------------------------------------------
Cost of shares redeemed (148,449,379) (6,596,418)
- --------------------------------------------------- ------------- ------------
Change in net assets resulting from share
transactions (110,598,668) 21,986,141
- --------------------------------------------------- ------------- ------------
Change in net assets (120,168,114) 52,190,423
- ---------------------------------------------------
NET ASSETS:
- ---------------------------------------------------
Beginning of period 219,693,656 167,503,233
- --------------------------------------------------- ------------- ------------
End of period (including undistributed net
investment income
of $51,351 and $305,070, respectively) $ 99,525,542 $219,693,656
- --------------------------------------------------- ------------- ------------
</TABLE>
(See Notes which are an integral part of the Financial Statements)
CCB EQUITY FUND
FINANCIAL HIGHLIGHTS
- -------------------------------------------------------------------------------
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------------------------------
1999 1998 1997 1996 1995(1)
- ----------------------------- ------- -------- -------- ------- -------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE, BEGINNING OF
PERIOD $ 20.24 $ 17.33 $ 13.80 $ 11.48 $ 10.00
- -----------------------------
INCOME FROM INVESTMENT
OPERATIONS
- -----------------------------
Net investment income 0.08 0.07 0.13 0.14 0.11
- -----------------------------
Net realized and unrealized
gain on investments and
options 3.10 3.93 3.72 2.57 1.44
- ----------------------------- ------- -------- -------- ------- -------
Total from investment
operations 3.18 4.00 3.85 2.71 1.55
- ----------------------------- ------- -------- -------- ------- -------
LESS DISTRIBUTIONS
- -----------------------------
Distributions from net
investment income (0.08) (0.07) (0.13) (0.16) (0.07)
- -----------------------------
Total distributions from net
realized
gain on investments and
options (1.60) (1.02) (0.19) (0.23) --
- ----------------------------- ------- -------- -------- ------- -------
Total distributions (1.68) (1.09) (0.32) (0.39) (0.07)
- ----------------------------- ------- -------- -------- ------- -------
NET ASSET VALUE, END OF
PERIOD $21.74 $ 20.24 $ 17.33 $ 13.80 $ 11.48
- ----------------------------- ------- -------- -------- ------- -------
TOTAL RETURN(2) 15.90% 23.86% 28.25% 23.91% 15.55%
- -----------------------------
RATIOS TO AVERAGE NET ASSETS
- -----------------------------
Expenses(3) 1.09% 1.07% 1.19% 1.45% 2.67%(4)
- -----------------------------
Net investment income(3) 0.30% 0.32% 0.65% 0.88% 1.58%(4)
- -----------------------------
Expenses (after waivers) 1.00% 1.00% 1.03% 1.25% 1.25%(4)
- -----------------------------
Net investment income (after
waivers) 0.39% 0.39% 0.81% 1.08% 3.00%(4)
- -----------------------------
SUPPLEMENTAL DATA
- -----------------------------
Net assets, end of period
(000 omitted) $99,526 $219,694 $167,503 $29,194 $24,581
- -----------------------------
Portfolio turnover 92% 69% 55% 69% 4%
- -----------------------------
</TABLE>
(1) Reflects operations for the period from December 5, 1994 (date of initial
public investment) to May 31, 1995.
(2) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(3) During the period certain fees were voluntarily waived. If such waivers had
not occurred, the ratios would have been as indicated.
(4) Computed on an annualized basis.
(See Notes which are an integral part of the Financial Statements)
CCB EQUITY FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
- -------------------------------------------------------------------------------
(1) ORGANIZATION
CCB Funds (the "Trust") is registered under the Investment Company Act of 1940,
as amended (the "Act") as an open-end, management investment company. The Trust
consists of three portfolios. The financial statements included herein are only
those of CCB Equity Fund (the "Fund"), a diversified portfolio. The financial
statements of the other portfolio are presented separately. The assets of each
portfolio are segregated and a shareholder's interest is limited to the
portfolio in which shares are held. The investment objective of the Fund is to
provide high total return over longer periods of time through appreciation of
capital and current income provided by dividends and interest payments.
(2) SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS--Listed equity securities are valued at the last sale
price reported on the primary national securities exchange. Unlisted equity
securities are generally valued at the mean of the latest bid and asked prices
provided by an independent pricing service. Short-term securities are valued
at the prices provided by an independent pricing service. However, short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value. Investments in other open-end regulated investment companies are valued
at net asset value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS--Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized as
required by the Internal Revenue Code, as amended (the "Code"). Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
Income and capital gain distributions are determined in accordance with income
tax regulations which may differ from generally accepted accounting
principles. These differences are primarily due to differing treatments for
short-term gains. The following reclassifications have been made to the
financial statements.
<TABLE>
<CAPTION>
INCREASE (DECREASE)
-------------------------------------------------------
ACCUMULATED NET UNDISTRIBUTED NET
PAID-IN CAPITAL REALIZED GAIN INVESTMENT LOSS
--------------- --------------- -----------------
<S> <C> <C>
$(202) $77,052 $(76,850)
</TABLE>
Net investment income, net realized gains/losses and net assets were not
affected by this reclassification.
FEDERAL TAXES--It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS--The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the securities
purchased. Securities purchased on a when-issued or delayed delivery basis are
marked to market daily and begin earning interest on the settlement date.
OPTION CONTRACTS--The Fund may write option contracts. A written option
obligates the Fund to deliver (a call), or to receive (a put), the contract
amount upon exercise by the holder of the option. The principal reason for
writing call or put options is to obtain, through receipt of premiums, a
greater current return that would be realized on underlying securities alone.
By writing a call option, the Fund risks becoming obligated to sell the
underlying security for more than its current market price upon exercise. By
writing a put option, the Fund risks becoming obligated to purchase the
underlying security for more than its current market price upon exercise.
Premiums received from writing options are recorded as a liability and an
unrealized gain or loss is measured and recorded by the difference between the
current value and the premium received. For the period ended May 31, 1999, the
Fund had a realized gain of $151,113 on written options.
The following is a summary of the Fund's written option activity:
<TABLE>
<CAPTION>
CONTRACTS NUMBER OF CONTRACTS AGGREGATE FACE VALUE
--------- ------------------- --------------------
<S> <C> <C>
Outstanding at prior period-end 600 $131,322
Contracts written 6,261 1,226,910
Contracts expired (1,750) (297,751)
Contracts closed (4,711) (1,031,682)
------ ----------
Outstanding at May 31, 1999 400 $ 28,799
------ ----------
</TABLE>
At May 31, 1999, the Fund had the following outstanding options:
<TABLE>
<CAPTION>
UNREALIZED
EXPIRATION STRIKE NUMBER OF APPRECIATION MARKET
ISSUER TYPE DATE PRICE CONTRACTS (DEPRECIATION) VALUE
------ ---- ---------- ------ --------- -------------- ------
<S> <C> <C> <C> <C> <C> <C>
Oracle Corp. Call June 1999 $30 400 $26,299 $2,500
</TABLE>
USE OF ESTIMATES--The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the amounts of assets, liabilities, expenses and
revenues reported in the financial statements. Actual results could differ
from those estimated.
OTHER--Investment transactions are accounted for on the trade date.
(3) SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
<TABLE>
<CAPTION>
YEAR ENDED MAY 31,
---------------------
1999 1998
- ---------------------------------------------- ---------- ---------
<S> <C> <C>
Shares sold 3,263,940 986,350
- ----------------------------------------------
Shares issued to shareholders in payment of
distributions declared 57,062 541,306
- ----------------------------------------------
Shares redeemed (9,598,643) (338,851)
- ---------------------------------------------- ---------- ---------
Net change resulting from share transactions (6,277,641) 1,188,805
- ---------------------------------------------- ---------- ---------
</TABLE>
(4) INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE--Central Carolina Bank and Trust Company, the Fund's
investment adviser (the "Adviser"), receives for its services an annual
investment advisory fee equal to 0.85% of the Fund's average daily net assets.
The Adviser may voluntarily choose to waive any portion of its fee. The
Adviser can modify or terminate this voluntary waiver at any time at its sole
discretion.
Under the terms of an investment sub-advisory agreement between the Adviser
and Franklin Street Advisors, Inc., (the "Sub-Adviser"), the Sub- Adviser
receives an annual fee from the Adviser equal to 0.65% of the Fund's average
daily net assets. The Sub-Adviser may voluntarily waive any portion of its
fee.
ADMINISTRATIVE FEE--Federated Administrative Services ("FAS") provides the
Fund with certain administrative personnel and services. The fee paid to FAS
is based on the level of average aggregate net assets of the Trust for the
period.
DISTRIBUTION SERVICES FEE--The Fund has adopted a Distribution Plan (the
"Plan") pursuant to Rule 12b-1 under the Act. Under the terms of the Plan, the
Fund will compensate Federated Securities Corp. ("FSC") the principal
distributor, from the net assets of the Fund to finance activities intended to
result in the sale of the Fund shares. The Plan provides that the Fund may
incur distribution expenses up to 0.35% of the average daily net assets of the
Fund shares, annually, to compensate FSC. The Fund did not pay or accrue
distribution expenses during the period ended May 31, 1999.
SHAREHOLDER SERVICES FEE--Under the terms of a Shareholder Services Agreement
with FAS, the Fund will pay FAS up to 0.25% of average daily net assets of the
Fund for the period. The fee paid to FAS is used to finance certain services
for shareholders and to maintain shareholder accounts. The Fund did not pay or
accrue shareholder services expenses during the period ended May 31, 1999.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES--Federated Services
Company ("FServ"), through its subsidiary, Federated Shareholder Services
Company ("FSSC") serves as transfer and dividend disbursing agent for the
Fund. The fee paid to FSSC is based on the size, type, and number
of accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES--FServ maintains the Fund's accounting records for
which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
ORGANIZATIONAL EXPENSES--Organizational expenses of $35,000 were borne
initially by the Adviser. The Fund has reimbursed the Adviser for these
expenses. These expenses have been deferred and are being amortized over the
five year period following the Fund's effective date. For the year ended May
31, 1999, the Fund expensed $5,930 of organizational expenses.
GENERAL--Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
(5) INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1999, were as follows:
<TABLE>
<S> <C>
- ---------------------------------------------------
PURCHASES $145,996,973
- --------------------------------------------------- ------------
SALES $268,535,777
- --------------------------------------------------- ------------
</TABLE>
(6) YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
- -------------------------------------------------------------------------------
To the Shareholders and Board of Trustees of
CCB Funds
CCB Equity Fund
We have audited the accompanying statement of assets and liabilities of CCB
Equity Fund (an investment portfolio of CCB Funds, a Massachusetts business
trust), including the schedule of portfolio investments, as of May 31, 1999, the
related statement of operations for the year then ended, and the statement of
changes in net assets and the financial highlights for the periods presented.
These financial statements and financial highlights are the responsibility of
the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of the securities owned as of
May 31, 1999 by correspondence with the custodian. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of CCB
Equity Fund, an investment portfolio of CCB Funds, as of May 31, 1999, and the
results of its operations, for the year then ended, the changes in its net
assets for each of the two years in the period then ended, and its financial
highlights for the periods presented, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 9, 1999
TRUSTEES OFFICERS
- --------------------------------------------------------------------------------
John F. Donahue John F. Donahue
Chairman
Thomas G. Bigley
Edward C. Gonzales
John T. Conroy, Jr. President and Treasurer
William J. Copeland J. Christopher Donahue
Executive Vice President
John F. Cunningham
John W. McGonigle
Lawrence D. Ellis, M.D. Executive Vice President and Secretary
Edward C. Gonzales Richard B. Fisher
Vice President
Peter E. Madden
Joseph S. Machi
Charles F. Mansfield, Jr. Vice President and Assistant Treasurer
John E. Murray, Jr. C. Grant Anderson
Assistant Secretary
Marjorie P. Smuts
John S. Walsh
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U. S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
Federated Securities Corp. is the distributor of the fund.
Cusip 12500E307
G00926-02 (7/99)
[recycled logo]
CCB . FUNDS
Central Carolina Bank
CCB
Equity Fund
Annual Report
May 31, 1999
Following is the Annual Report for CCB North Carolina Municipal Securities Fund,
a portfolio of CCB Funds, covering the fiscal year ended May 31, 1999. If you
have any questions or comments, please contact your investment representative.
This report must be preceded or accompanied by a prospectus.
<PAGE>
24
1
PRESIDENT'S MESSAGE
Dear Shareholder:
I am pleased to present your Annual Report for CCB North Carolina Municipal
Securities Fund, which covers the 12-month fiscal year period from June 1, 1998
through May 31, 1999.
Inside, you will find complete information about the fund's operation during the
fiscal year, including an investment review by the fund's portfolio manager, a
list of the fund's quality municipal bond holdings, and the remaining financial
statements.
To help tax-sensitive North Carolina residents earn double-tax-free
income--exempt from federal AND state income taxes--the fund invests primarily
in a portfolio of high-quality bonds issued by North Carolina municipalities.*
All bonds in the fund's portfolio are rated A or higher by nationally recognized
rating agencies.
During the 12-month reporting period, CCB North Carolina Municipal Securities
Fund achieved a total return of 3.65% based on net asset value through
double-tax-free income totaling $0.47 per share.** The fund's net assets totaled
$40.2 million at the end of the reporting period.
Thank you for joining other tax-sensitive North Carolina investors in pursuing
tax-free income through the diversification, professional management and
convenience of this fund. We'll continue to update you on your fund's progress.
Sincerely,
[GRAPHIC OMITTED]
Edward C. Gonzales
President
July 15, 1999
* Income may be subject to the federal alternative minimum tax.
** Performance quoted represents past performance and is not indicative of
future results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total return for the period adjusted for the fund's sales charge was
(0.98%).
<PAGE>
INVESTMENT REVIEW
The municipal bond market was basically unchanged for the fiscal year ended May
31, 1999. While there were some yield deadlines in the short end, longer
maturity yields were actually slightly higher.
On balance, the North Carolina market underperformed the national market as the
historical premium of North Carolina bonds has largely disappeared.
The CCB North Carolina Municipal Securities Fund had a total return of 3.65%
based on net asset value for the fiscal year ended May 31, 1999.* The average
maturity of the portfolio at May 31, 1999 was 6.96 years and the 30-day SEC
yield was 4.09% (3.90% based on offering price).* We feel the fund offers value
and is well positioned.
* Performance quoted represents past performance and is not indicative of future
results. Investment return and principal value will fluctuate, so that an
investor's shares, when redeemed, may be worth more or less than their original
cost. Total return for the period adjusted for the fund's sales charge was
(0.98%).
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
GROWTH OF $10,000 INVESTED IN CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
SINCE INCEPTION AS OF MAY 31, 1999
The graph below illustrates the hypothetical investment of $10,000* in the CCB
North Carolina Municipal Securities Fund (the "Fund") from July 22, 1992 (start
of performance) to May 31, 1999, compared to the Lehman Brothers State General
Obligation Bond Index ( "LSGOB")+
"Graphic representation "B" omitted. See Appendix."
PAST PERFORMANCE IS NOT PREDICTIVE OF FUTURE PERFORMANCE. YOUR INVESTMENT RETURN
AND PRINCIPAL VALUE WILL FLUCTUATE SO WHEN SHARES ARE REDEEMED, THEY MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST. MUTUAL FUNDS ARE NOT OBLIGATIONS OF OR
GUARANTEED BY ANY BANK AND ARE NOT FEDERALLY INSURED.
* Represents a hypothetical investment of $10,000 in the Fund after
deducting the maximum sales charge of 4.50% ($10,000 investment minus $450 sales
charge = $9,550). The Fund's performance assumes the reinvestment of all
dividends and distributions.
** Total return quoted reflects all applicable sales charges.
+ The LSGOB is not adjusted to reflect sales charges, expenses, or other fees
that the SEC requires to be reflected in the Fund's performance. The LSGOB has
been adjusted to reflect reinvestment of the dividends on securities. This index
is unmanaged.
<PAGE>
<TABLE>
<CAPTION>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
PORTFOLIO OF INVESTMENTS
MAY 31, 1999
<S> <C> <C>
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--97.1%
NORTH CAROLINA--97.1%
$500,000 Buncombe County, NC, Certificate
Participation Refunding Bonds, 4.75%
(AMBAC INS), 12/1/2011 AAA $491,440
500,000 Cabarrus County, NC, GO UT, 5.30% (MBIA
INS), 2/1/2010 AAA 525,515
250,000 Catawba County, NC, GO UT Bonds, 5.70%,
6/1/2003 AA- 266,442
500,000 Catawba County, NC, GO UT Bonds, 5.75%,
6/1/2007 AA- 536,425
500,000 Catawba County, NC, Hospital Refunding
Revenue Bond, 5.85% (Catawba Memorial
Hospital)/(AMBAC INS)/(Original Issue
Yield: 5.90%), 10/1/2004 AAA 539,605
500,000 Catawba County, NC, Hospital Refunding
Revenue Bonds, 5.95% (Catawba Memorial
Hospital)/(AMBAC INS)/(Original Issue
Yield: 6.00%), 10/1/2005 AAA 541,155
750,000 Catawba County, NC, Refunding Revenue
Bonds, 4.50% (AMBAC INS), 10/1/2009 Aaa 737,482
500,000 Charlotte, NC, GO UT Public Improvement
Bonds, 4.75% (Original Issue Yield:
4.83%), 2/1/2013 AAA 497,235
500,000 Charlotte, NC, GO UT Public Improvement
Bonds, 5.30%, 4/1/2008 AAA 528,880
1,000,000 Charlotte, NC, GO UT, 4.75%, 2/1/2011 AAA 1,001,270
500,000 Chatham County, NC, GO UT Bonds, 5.40%,
4/1/2007 A+ 531,790
500,000 Chatham County, NC, GO UT Bonds, 5.40%,
4/1/2010 A+ 528,635
465,000 Chatham County, NC, GO UT Refunding Bonds,
5.25% (Original Issue Yield: 5.35%), A+ 487,683
5/1/2010
500,000 Chatham County, NC, GO UT, 5.40% (Original
Issue Yield: 5.50%), 4/1/2012 A+ 523,410
1,000,000 Concord, NC, Utility System Revenue
Refunding Bonds (Series B), 4.60% (MBIA
INS), 12/1/2010 AAA 991,270
1,000,000 Craven County, NC, GO UT Bonds, 5.50%
(MBIA INS), 6/1/2010 AAA 1,064,520
500,000 Cumberland County, NC, GO UT Refunding
Bonds, 5.00% (FGIC LOC), 2/1/2013 AAA 505,655
480,000 Cumberland County, NC, GO UT, 5.00% (MBIA
INS)/(Original Issue Yield: 5.15%), AAA 479,184
3/1/2015
470,000 Duplin County, NC, GO UT Bonds, 5.30%
(MBIA INS)/(Original Issue Yield: 5.40%),
4/1/2007 AAA 493,152
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--(CONTINUED)
$500,000 Durham & Wake Counties Special Airport
District, NC, GO UT Refunding Bonds, 5.75%
(Original Issue Yield: 5.80%), 4/1/2002 AAA $526,345
500,000 Durham County, NC, Water Utility, Sewer
and Public Improvements, 5.75% (Original
Issue Yield: 6.00%), 2/1/2011 AAA 529,680
250,000 Fayetteville, NC Public Works Commission,
Revenue Bonds (Series B), 5.90% (FSA
LOC)/(Original Issue Yield: 6.00%), AAA 266,463
3/1/2007
500,000 Fayetteville, NC Public Works Commission,
Revenue Bonds, 5.40% (AMBAC INS)/(Original
Issue Yield: 5.50%), 3/1/2009 AAA 521,240
500,000 Forsyth County, NC, GO UT, 4.75% (Original
Issue Yield: 5.00%), 2/1/2013 AAA 497,235
400,000 Forsyth County, NC, School Improvements,
4.50% (Original Issue Yield: 4.55%), AAA 387,940
8/1/2013
750,000 Gaston County, NC, GO UT, 5.70% (MBIA
INS), 3/1/2004 AAA 802,853
500,000 Gastonia, NC, GO UT, 5.50% (MBIA
INS)/(Original Issue Yield: 5.55%), AAA 528,165
5/1/2013
500,000 Guilford County, NC, GO UT Bonds, 5.30%
(Original Issue Yield: 5.40%), 5/1/2010 AA+ 527,685
500,000 Guilford County, NC, GO UT Bonds, 5.30%,
5/1/2009 AA+ 530,140
500,000 Guilford County, NC, GO UT Bonds, 5.40%
(Original Issue Yield: 5.55%), 4/1/2009 AA+ 524,525
500,000 Guilford County, NC, GO UT, 5.40%
(Original Issue Yield: 5.55%), 5/1/2012 AA+ 525,680
575,000 High Point, NC, Revenue Bonds, 5.60%
(Original Issue Yield: 5.85%), 3/1/2014 AA 606,458
500,000 Iredell County, NC, Certificates of
Participation, 5.50% (FGIC INS)/(Original
Issue Yield: 5.60%), 6/1/2001 AAA 516,920
350,000 Iredell County, NC, Certificates of
Participation, 6.125% (FGIC INS)/(Original
Issue Yield: 6.23%), 6/1/2007 AAA 376,684
500,000 Johnston County, NC, GO UT, 5.00% (FGIC
INS), 5/1/2010 AAA 513,760
500,000 Mecklenburg County, NC, GO UT Refunding Bonds, 5.90% (Original
Issue Yield:
6.05%), 3/1/2004 AAA 529,790
350,000 Mecklenburg County, NC, GO UT, 5.50%
(Original Issue Yield: 5.60%), 4/1/2011 AAA 373,065
1,000,000 Moore County, NC, GO UT Bonds, 4.90% (MBIA
INS), 6/1/2013 AAA 1,000,700
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
PRINCIPAL CREDIT
AMOUNT RATING* VALUE
LONG-TERM MUNICIPALS--(CONTINUED)
$500,000 Mooresville, NC Grade School District
Facilities Corp., Certificates of
Participation, 6.30% (AMBAC INS)/(Original
Issue Yield: 6.348%), 10/1/2009 AAA $544,530
500,000 Morganton, NC, GO UT Revenue Bonds, 5.60%
(FGIC INS), 6/1/2007 AAA 535,635
500,000 Morganton, NC, Water & Sewer GO UT Revenue
Bonds, 5.60% (FGIC INS), 6/1/2008 AAA 535,370
1,000,000 New Hanover County, NC Hospital, Health,
Hospital, Nursing Revenue Bonds, 5.25%,
10/1/2012 AAA 1,025,070
1,000,000 New Hanover County, NC, (Project R-5) GO UT Bonds, 5.40%
(Original Issue Yield:
5.45%), 3/1/2009 AA- 1,058,680
500,000 New Hanover County, NC, GO UT Bonds, 5.30%
(Original Issue Yield: 5.50%), 5/1/2014 AA- 517,530
500,000 New Hanover County, NC, GO UT Bonds, 5.50%
(Original Issue Yield: 5.70%), 3/1/2012 AA- 524,870
750,000 North Carolina Educational Facilities
Finance Agency, Revenue Bonds, 6.625%
(Duke University), 10/1/2008 AA+ 808,440
200,000 North Carolina Medical Care Commission ,
Revenue Bonds, 5.95% (Presbyterian Health
Services Corp. )/(Original Issue Yield:
6.00%), 10/1/2007 AA 216,462
1,850,000 North Carolina Municipal Power Agency No.
1, Revenue Bonds, 10.50% (Catawba
Electric)/(United States Treasury COL),
1/1/2010 AAA 2,473,006
500,000 North Carolina Municipal Power Agency No.
1, Revenue Refunding Bonds, 5.25% (Catawba
Electric)/(AMBAC INS)/(Original Issue
Yield: 5.55%), 1/1/2008 AAA 523,370
500,000 North Carolina Municipal Power Agency No.
1, Revenue Refunding Bonds, 5.75% (Catawba
Electric)/(AMBAC INS)/(Original Issue
Yield: 5.80%), 1/1/2002 AAA 521,630
1,000,000 North Carolina State, GO UT, 4.75%
(Original Issue Yield: 4.88%), 4/1/2013 AAA 994,430
500,000 North Carolina State, GO UT, 4.75%
(Original Issue Yield: 4.93%), 4/1/2014 AAA 494,460
500,000 North Carolina State, GO UT, 5.00%, AAA 522,835
6/1/2004
500,000 North Carolina State, GO UT, 5.10%, AAA 524,710
3/1/2008
1,000,000 Pitt County, NC, GO UT, 5.10% (Original
Issue Yield: 5.20%), 2/1/2006 AA- 1,041,260
750,000 Rocky Mountain, NC, GO UT Refunding Bonds,
5.00% (MBIA INS), 2/1/2009 AAA 781,200
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
PORTFOLIO OF INVESTMENTS (CONTINUED)
PRINCIPAL CREDIT
AMOUNT OR RATING* VALUE
SHARES
LONG-TERM MUNICIPALS--(CONTINUED)
$500,000 Rowan County, NC, GO UT Bonds, 5.60% (MBIA
INS), 4/1/2009 AAA $534,455
250,000 Stokes County, NC, GO UT Bonds, 4.90%
(FGIC INS), 6/1/2012 AAA 252,565
1,000,000 Surry County, NC, GO UT Refunding Bonds,
5.00% (FGIC LOC), 4/1/2010 AAA 1,033,350
500,000 Union County, NC, (Series B) GO UT , 5.20%
(MBIA INS)/(Original Issue Yield: 5.35%),
6/1/2012 AAA 516,550
600,000 Wake County, NC Industrial Facilities &
PCFA, Revenue Bonds, 6.90% (Carolina Power
& Light Co.)/(Fuji Bank, Ltd., Tokyo LOC), A 627,108
4/1/2009
500,000 Winston-Salem, NC, GO UT Bonds, 5.40%
(Original Issue Yield: 5.30%), 6/1/2009 AAA 531,740
500,000 Winston-Salem, NC, GO UT Bonds, 5.40%
(Original Issue Yield: 5.50%), 6/1/2011 AAA 525,510
TOTAL MUNICIPAL SECURITIES (IDENTIFIED
COST 39,020,842
$38,041,814)
MUTUAL FUNDS--1.8%
702,625 Blackrock Municipal Money Market Fund 702,625
1,000 North Carolina Daily Municipal Fund 1,000
TOTAL MUTUAL FUNDS (AT NET ASSET VALUE) 703,625
TOTAL INVESTMENTS (IDENTIFIED COST
$38,745,439)(1) $39,724,467
</TABLE>
* Please refer to the Appendix of the Statement of Additional Information
for an explanation of the credit ratings. Current credit ratings are unaudited.
(1) The cost of investments for federal tax purposes amounts to
$38,745,439. The net unrealized appreciation of investments on a
federal tax basis amounts to $979,028 which is comprised of $1,074,713
appreciation and $95,685 depreciation at May 31, 1999.
Note: The categories of investments are shown as a percentage of net assets
($40,176,980) at May 31, 1999.
The following acronyms are used throughout this portfolio:
AMBAC --American Municipal Bond Assurance Corporation
COL --Collateralized
FGIC --Financial Guaranty Insurance Company
FSA --Financial Security Assurance
GO --General Obligation
INS --Insured
LOC --Letter of Credit
MBIA --Municipal Bond Investors Assurance
PCFA --Pollution Control Finance Authority
UT --Unlimited Tax
(See Notes which are an integral part of the Financial Statements)
<PAGE>
<TABLE>
<CAPTION>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 1999
<S> <C> <C>
ASSETS:
Total investments in securities, at value(identified and tax 39,724,467 $
cost $38,745,439)
Cash 94
Income receivable 611,163
Total assets 40,335,724
LIABILITIES:
Payable for shares redeemed $ 12,000
Income distribution payable 136,032
Accrued expenses 10,712
Total liabilities 158,744
Net Assets for 3,747,285 shares outstanding 40,176,980 $
NET ASSETS CONSIST OF:
Paid in capital 39,141,470 $
Net unrealized appreciation of investments 979,028
Accumulated net realized gain on investments 55,737
Undistributed Net Investment Income 745
Total Net Assets 40,176,980 $
NET ASSET VALUE, OFFERING PRICE AND REDEMPTION PROCEEDS PER
SHARE:
Net Asset Value Per Share ($40,176,980 / 3,747,285 shares 10.72 $
outstanding)
Offering Price Per Share (100/95.50 of $10.72)1 11.23 $
1 See "What Shares Cost?" in the Prospectus.
(See Notes which are an integral part of the Financial Statements) INVESTMENT
INCOME:
Interest 1,931,609 $
EXPENSES:
Investment advisory fee $ 301,408
Administrative personnel and services fee 58,580
Custodian fees 13,069
Transfer and dividend disbursing agent fees and expenses 35,198
Directors'/Trustees' fees 4,761
Auditing fees 12,827
Legal fees 5,934
Portfolio accounting fees 45,190
Share registration costs 18,120
Printing and postage 8,748
Insurance premiums 339
Taxes 859
Miscellaneous 5,063
Total expenses 510,096
Waiver --
Waiver of investment advisory fee (301,408 )
Net expenses 208,688
Net investment income 1,722,921
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS:
Net realized gain on investments 181,395
Net change in unrealized appreciation of investments (440,652)
Net realized and unrealized loss on investments (259,257)
Change in net assets resulting from operations 1,463,664 $
(See Notes which are an integral part of the Financial Statements)
Year Ended May 31,
INCREASE (DECREASE) IN NET ASSETS: 1999 1998
---------------- ----------------
OPERATIONS--
Net investment income 1,722,921 1,656,571
$ $
Net realized gain on investments
($181,395 and $562,076, respectively, as computed
for federal tax purposes) 181,395 562,076
Net change in unrealized appreciation (440,652 ) 543,069
Change in net assets resulting from operations 1,463,664 2,761,716
DISTRIBUTIONS TO SHAREHOLDERS--
Distributions from net investment income (1,722,921 ) (1,656,571 )
Distributions from net realized gains (367,968 ) --
Change in net assets resulting from
distributions to (2,090,889 ) (1,656,571 )
shareholders
SHARE TRANSACTIONS--
Proceeds from sale of shares 10,238,583 5,401,737
Net asset value of shares issued to shareholders in
payment of distributions declared 188,967 169,069
Cost of shares redeemed (5,636,038 ) (6,554,865 )
Change in net assets resulting from share 4,791,512 (984,059 )
transactions
Change in net assets 4,164,287 121,086
NET ASSETS:
Beginning of period 36,012,693 35,891,607
End of period 40,176,980 36,012,693
$ $
(See Notes which are an integral part of the Financial Statements)
YEAR ENDED MAY 31,
1999 1998 1997 1996 1995
NET ASSET VALUE, BEGINNING OF PERIOD $10.89 $10.57 $10.34 $10.44 $10.17
INCOME FROM INVESTMENT OPERATIONS
Net investment income 0.47 0.45 0.49 0.49 0.48
Net realized and unrealized
gain (loss) on (0.07 ) 0.32 0.23 (0.10 ) 0.27
investments
Total from investment operations 0.40 0.77 0.72 0.39 0.75
LESS DISTRIBUTIONS
Distributions from net (0.47 ) (0.45 ) (0.49 ) (0.49 ) (0.48 )
investment income
Distributions from net realized
gain on (0.10 ) -- -- -- --
investments
Total distributions (0.57 ) (0.45 ) (0.49 ) (0.49 ) (0.48 )
NET ASSET VALUE, END OF PERIOD $10.72 $10.89 $10.57 $10.34 $10.44
TOTAL RETURN (1) 3.65 % 7.77 % 7.13 % 3.72 % 7.71 %
RATIOS TO AVERAGE NET ASSETS
Expenses (2) 1.27 % 1.26 % 1.38 % 1.27 % 1.32 %
Net investment income (2) 3.53 % 3.75 % 3.85 % 3.98 % 4.07 %
Expenses (after waivers) 0.52 % 0.51 % 0.63 % 0.52 % 0.57 %
Net investment income (after 4.28 % 4.50 % 4.60 % 4.73 % 4.82 %
waivers)
SUPPLEMENTAL DATA
Net assets, end of period (000 $40,177 $36,013 $35,892 $36,872 $39,803
omitted)
Portfolio turnover 18 % 41 % 30 % 61 % 47 %
</TABLE>
(1) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable. (2) During the period certain
fees were voluntarily waived. If such waivers had not occurred, the ratios would
have been as indicated.
(See Notes which are an integral part of the Financial Statements)
<PAGE>
CCB NORTH CAROLINA MUNICIPAL SECURITIES FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 1999
ORGANIZATION
CCB Funds (the "Trust") is registered under the Investment Company Act of 1940,
as amended (the "Act"), as an, open-end, management investment company. The
Trust consists of three portfolios. The financial statements included herein are
only those of CCB North Carolina Municipal Securities Fund (the "Fund"), a
non-diversified portfolio. The financial statements of the other portfolio are
presented separately. The assets of each portfolio are segregated and a
shareholder's interest is limited to the portfolio in which shares are held. The
investment objective of the Fund is to provide income which is exempt from
federal regular income tax and North Carolina state income tax.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. These
policies are in conformity with generally accepted accounting principles.
INVESTMENT VALUATIONS - Municipal bonds are valued by an independent pricing
service, taking into consideration yield, liquidity, risk, credit quality,
coupon, maturity, type of issue, and any other factors or market data the
pricing service deems relevant. Short-term securities are valued at the
prices provided by an independent pricing service. However, short-term
securities with remaining maturities of sixty days or less at the time of
purchase may be valued at amortized cost, which approximates fair market
value. Investments in other open-end regulated investment companies are
valued at net asset value.
INVESTMENT INCOME, EXPENSES AND DISTRIBUTIONS - Interest income and expenses
are accrued daily. Bond premium and discount, if applicable, are amortized
as required by the Internal Revenue Code, as amended (the "Code").
Distributions to shareholders are recorded on the ex-dividend date.
FEDERAL TAXES - It is the Fund's policy to comply with the provisions of the
Code applicable to regulated investment companies and to distribute to
shareholders each year substantially all of its income. Accordingly, no
provisions for federal tax are necessary.
WHEN-ISSUED AND DELAYED DELIVERY TRANSACTIONS - The Fund may engage in
when-issued or delayed delivery transactions. The Fund records when-issued
securities on the trade date and maintains security positions such that
sufficient liquid assets will be available to make payment for the
securities purchased. Securities purchased on a when-issued or delayed
delivery basis are marked to market daily and begin earning interest on the
settlement date.
USE OF ESTIMATES - The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the amounts of assets, liabilities,
expenses and revenues reported in the financial statements. Actual results
could differ from those estimated.
OTHER - Investment transactions are accounted for on the trade date.
SHARES OF BENEFICIAL INTEREST
The Declaration of Trust permits the Trustees to issue an unlimited number of
full and fractional shares of beneficial interest (without par value).
Transactions in shares were as follows:
YEAR ENDED MAY 31,
1999 1998
Shares sold 939,308 501,030
- ------------------------------------
Shares issued to shareholders in
payment of distributions declared 17,279 15,643
- ------------------------------------
Shares redeemed (516,525) (605,325)
--------- ---------
- ------------------------------------
Net change resulting from 440,062 (88,652)
share transactions
- ------------------------------------
INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
INVESTMENT ADVISORY FEE - Central Carolina Bank and Trust Company, the
Fund's investment adviser (the "Adviser"), receives for its services an
annual investment advisory fee equal to 0.75% of the Fund's average daily
net assets. The Adviser may voluntarily choose to waive any portion of its
fee. The Adviser can modify or terminate this voluntary waiver at any time
at its sole discretion.
ADMINISTRATIVE FEE - Federated Administrative Services ("FAS") provides the
Fund with certain administrative personnel and services. The fee paid to FAS
is based on the level of average aggregate net assets of the Trust for the
period.
SHAREHOLDER SERVICES FEE - Under the terms of a Shareholder Services
Agreement with FAS, the Fund will pay FAS up to 0.25% of average daily net
assets of the Fund for the period. The fee paid to FAS is used to finance
certain services for shareholders and to maintain shareholder accounts. The
Fund did not pay or accrue shareholder services expenses during the period
ended May 31, 1999.
TRANSFER AND DIVIDEND DISBURSING AGENT FEES AND EXPENSES - Federated
Services Company ("FServ"), through its subsidiary, Federated Shareholder
Services Company ("FSSC") serves as transfer and dividend disbursing agent
for the Fund. The fee paid to FSSC is based on the size, type, and number of
accounts and transactions made by shareholders.
PORTFOLIO ACCOUNTING FEES - FServ maintains the Fund's accounting records
for which it receives a fee. The fee is based on the level of the Fund's average
daily net assets for the period, plus out-of-pocket expenses.
GENERAL - Certain of the Officers and Trustees of the Trust are Officers and
Directors or Trustees of the above companies.
INVESTMENT TRANSACTIONS
Purchases and sales of investments, excluding short-term securities, for the
period ended May 31, 1999, were as follows:
PURCHASES $ 11,916,452
------------
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SALES $ 7,018,840
-----------
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CONCENTRATION OF CREDIT RISK
Since the Fund invests a substantial portion of its assets in issuers located in
one state, it will be more susceptible to factors adversely affecting issuers of
that state than would be a comparable tax-exempt mutual fund that invests
nationally. In order to reduce the credit risk associated with such factors, at
May 31, 1999, 43.6% of the securities in the portfolio of investments are backed
by letters of credit or bond insurance of various financial institutions and
financial guaranty assurance agencies. The percentage of investments insured by
or supported (backed) by a letter of credit from any one institution or agency
did not exceed 19.4% of total investments.
YEAR 2000 (UNAUDITED)
Similar to other financial organizations, the Fund could be adversely affected
if the computer systems used by the Fund's service providers do not properly
process and calculate date-related information and data from and after January
1, 2000. The Fund's Adviser and administrator are taking measures that they
believe are reasonably designed to address the Year 2000 issue with respect to
computer systems that they use and to obtain reasonable assurances that
comparable steps are being taken by each of the Fund's other service providers.
At this time, however, there can be no assurance that these steps will be
sufficient to avoid any adverse impact to the Fund.
SUBSEQUENT EVENT
At the close of business on July 23, 1999, CCB North Carolina Municipal
Securities Fund will cease to exist and will merge into Federated North Carolina
Municipal Income Fund on July 26, 1999.
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders and Board of Trustees of
CCB Funds
CCB North Carolina Municipal Securities Fund
We have audited the accompanying statement of assets and liabilities of CCB
North Carolina Municipal Securities Fund (an investment portfolio of CCB Funds,
a Massachusetts business trust), including the schedule of portfolio
investments, as of May 31, 1999, the related statement of operations for the
year then ended, and the statement of changes in net assets and the financial
highlights for the periods presented. These financial statements and financial
highlights are the responsibility of the Fund's management. Our responsibility
is to express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of May
31, 1999, by correspondence with the custodian. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of CCB
North Carolina Municipal Securities Fund, an investment portfolio of CCB Funds,
as of May 31, 1999, the results of its operations for the year then ended, the
changes in its net assets for each of the two years in the period then ended,
and its financial highlights for the periods presented, in conformity with
generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Boston, Massachusetts
July 9, 1999
<PAGE>
TRUSTEES OFFICERS
John F. Donahue John F. Donahue
Thomas G. Bigley Chairman
John T. Conroy, Jr. Edward C. Gonzales
William J. Copeland President and Treasurer
John F. Cunningham J. Christopher Donahue
Lawrence D. Ellis, M.D. Executive Vice President
Edward C. Gonzales John W. McGonigle
Peter E. Madden Executive Vice President and Secretary
Charles F. Mansfield, Jr. Richard B. Fisher
John E. Murray, Jr. Vice President
Marjorie P. Smuts Joseph S. Machi
John S. Walsh Vice President and Assistant Treasurer
C. Grant Anderson
Assistant Secretary
Mutual funds are not bank deposits or obligations, are not guaranteed by any
bank, and are not insured or guaranteed by the U.S. government, the Federal
Deposit Insurance Corporation, the Federal Reserve Board, or any other
government agency. Investment in mutual funds involves investment risk,
including possible loss of principal.
This report is authorized for distribution to prospective investors only when
preceded or accompanied by the fund's prospectus which contains facts concerning
its objective and policies, management fees, expenses and other information.
<PAGE>
Federated Securities Corp. is the distributor of the fund.
Cusip 12500E109
G00926-03 (7/99)
A. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The CCB Equity Fund ("Equity Fund") is represented by a solid line.
The Standard & Poor's 500 Index ("S&P 500") is represented by broken line. The
line graph is a visual representation of a comparison of change in value of a
$10,000 hypothetical investment in the Equity Fund and the S&P 500. The "x" axis
reflects computation periods from December 5, 1994 (start of performance) to May
31, 1999. The "y" axis reflects the cost of the investment. The right margin
reflects the ending value of the hypothetical investment in the Equity Fund, as
compared to the S&P 500; the ending values were $25,174 and $31,601,
respectively. The legend in the bottom quadrant of the graphic presentation
indicates the Equity Fund's Average Annual Total Returns for the 1-year and
start of performance periods ended May 31, 1999, which were 10.70% and 22.85%,
respectively.
B. The graphic presentation here displayed consists of a line graph. The
corresponding components of the line graph are listed in the upper left
quadrant. The CCB North Carolina Municipal Securities Fund ("North Carolina
Municipal Securities Fund") is represented by a solid line. The Lehman Brothers
State General Obligation Bond Index ("LSGOB") is represented by a broken line.
The line graph is a visual representation of a comparison of change in value of
a $10,000 hypothetical investment in the North Carolina Municipal Securities
Fund and the LSGOB. The "x" axis reflects computation periods from July 22, 1992
(start of performance) to May 31, 1999. The "y" axis reflects the cost of the
investment. The right margin reflects the ending value of the hypothetical
investment in the North Carolina Municipal Securities Fund, as compared to the
LSGOB; the ending values were $14,090 and $15,697, respectively. The legend in
the bottom quadrant of the graphic presentation indicates the North Carolina
Municipal Securities Fund's Average Annual Total Returns for the 1-year, 5-year,
and start of performance periods ended May 31, 1999, which were (0.98%), 5.01%,
and 5.13%, respectively.
