1933 Act File No.
1940 Act File No.
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933..... X
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Pre-Effective Amendment No. ...........................
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. _____.........................................
THE WACHOVIA VARIABLE INSURANCE 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)
Gail Cagney
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)
Approximate Date of Proposed Public Offering AS SOON AS
POSSIBLE AFTER THE EFFECTIVENESS OF THE
REGISTRATION STATEMENT
Pursuant to the provisions of Rule 24f-2 of the Investment Company Act of 1940,
Registrant hereby elects to register an indefinite number of shares.
AMENDMENT PURSUANT TO RULE 473
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission acting pursuant to said Section 8(a),
may determine.
Copies To:
Donald W. Smith, Esquire
Kirkpatrick & Lockhart L.L.P.
1800 Massachusetts Avenue, N.W.
Washington, D.C. 20036-1800
Wachovia Equity Fund II
(A PORTFOLIO OF THE WACHOVIA VARIABLE INSURANCE FUNDS)
Prospectus
____________, 2000
WACHOVIA EQUITY FUND II
A Portfolio of the wachovia VARIABLE Insurance funds
This prospectus offers shares of the Wachovia Equity Fund II (Fund), which is an
investment portfolio of The Wachovia Variable Insurance Funds (Trust), an
open-end, management investment company. Shares of the Fund may be sold only to
separate accounts of insurance companies to serve as the investment medium for
variable life insurance policies and variable annuity contracts issued by the
insurance companies.
The separate accounts invest in the Fund in accordance with allocation
instructions received from owners of life insurance policies and annuity
contracts. Such allocation rights are described further in the prospectus for
the separate account. This prospectus contains the information you should read
and know before you invest in the Fund through the variable annuity contracts
and variable life insurance policies offered by insurance companies which
provide for investment in the Trust. Keep this prospectus for future reference.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Fund shares are available exclusively as a funding vehicle for life insurance
companies writing variable life insurance policies and variable annuity
contracts. They are subject to investment limitations that do not apply to other
mutual funds available directly to the general public. Therefore, any comparison
of these two types of mutual funds would be inappropriate. This prospectus
should be accompanied by the prospectuses for such variable contracts.
CONTENTS
Goal, Strategy and Risks of the Wachovia Insurance Equity Fund Comparative
Performance What are the Fund's Main Investments and Investment Techniques? What
are the Risks of Investing in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase and Redeem Shares
How to Exchange Shares
How to Redeem Shares
Account and Share Information
Who Manages the Fund?
____________, 2000
GOAL, STRATEGY AND RISKS OF THE WACHOVIA EQUITY FUND II
GOAL
Seeks to produce growth of principal and income.
STRATEGY
The Fund pursues its investment objective by investing primarily in a portfolio
of common stocks. Under normal market conditions, the Fund intends to invest at
least 65% of its assets in stocks. The Fund's investment adviser selects
securities based on a number of factors, incorporating both growth and value
measures. A combination of fundamental analysis, quantitative modeling,
strategic outlook, and relative price performance trends are used to select
stocks perceived to be undervalued with prospects for improving fundamentals.
PRINCIPAL INVESTMENT RISKS
All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by Wachovia Bank, N.A., the Federal Deposit Insurance Corporation or
any other government agency.
A more detailed description of these risks can be found in "What are the Risks
of Investing in the Fund?" herein. STOCK MARKET RISKS The Fund is subject to
fluctuations in the stock market which has periods of increasing and decreasing
values. These fluctuations can be caused by many events, including changes to
domestic or international economic conditions. Stocks have greater volatility
than debt securities. RISKS OF INVESTING FOR GROWTH & VALUE Due to their
relatively high valuations, growth stocks are typically more volatile than value
stocks. Further, growth stocks may not pay dividends or may pay lower dividends
than value stocks. Growth stocks may be more adversely affected in a down market
compared to value stocks that pay higher dividends and may lag behind growth
stocks in an up market.
RISKS OF FOREIGN INVESTING
Because the Fund invests in securities issued by foreign companies, the Fund's
share price may be more affected by foreign economic and political conditions,
taxation policies and accounting and auditing standards than would otherwise be
the case.
TAX RISK
Since any investment can be adversely affected by changes in tax laws, the Fund
is subject to this risk.
LEVERAGING
Various investment strategies involve agreements to purchase or sell securities
or currencies in amounts that exceed the amount the Fund has invested in the
underlying securities or currencies.
FUTURES AND OPTIONS RISKS
The successful use of futures, options, and other derivative instruments is
based on the investment adviser's ability to correctly anticipate market
movements.
SECURITIES LENDING RISKS
When lending securities, the Fund may not be able to get them back from the
borrower on a timely basis, thereby exposing the Fund to a loss of investment
opportunities.
COMPARATIVE PERFORMANCE
The Fund is a new fund that is just commencing operations, and therefore, has no
performance history. However, Wachovia Asset Management, the Fund's investment
adviser, also manages Wachovia Equity Fund, a comparable fund with substantially
similar investment policies, strategies, restrictions and investment goal. The
historical performance of the Wachovia Equity Fund is presented below. The bar
chart illustrates how the Wachovia Equity Fund's return has changed from year to
year. The table shows how the Wachovia Equity Fund's average annual returns for
certain periods compare with those of the S&P 500 Index (S&P 500), a broad-based
market index. This performance data is provided to demonstrate how the Fund's
investment adviser has performed historically with a substantially similar
investment strategy as the Fund. The results presented are not intended to
suggest the future return of the Fund, or the return that an individual investor
may achieve by investing in the Fund. The Fund's investment returns may differ
from those of the Wachovia Equity Fund because, among other factors, the Fund's
fees and expenses will differ to some extent from those of the Wachovia Equity
Fund. For example, the performance presented below does not reflect any expenses
of a variable annuity or variable life insurance contract.
TOTAL RETURN BAR CHART AND TABLE FOR THE WACHOVIA EQUITY FUND
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Class A Shares of Wachovia Equity Fund as of the
calendar year-end for each of six years.
The `y' axis reflects the "% Total Return" beginning with "0%" and increasing in
increments of 10% up to 40%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Fund's start of business through the calendar year
ended December 31, 1999. The light gray shaded chart features six distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Fund's Class A Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1994 through 1999, The percentages noted are: 2.03%, 31.50%,
18.80%, 25.08%, 22.85% and 26.05%.
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's highest quarterly return was
21.97% (quarter ended December 31, 1998). Its lowest quarterly return was
(11.37%) (quarter ended September 30, 1998).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Fund's Class A and Class B Average Annual
Total Returns, reduced to reflect applicable sales charges, for the calendar
periods ended December 31, 1999. The table shows the Fund's Class A Shares and
Class B Shares total returns averaged over a period of years relative to the
Standard & Poor's 500 Index (S&P 500), a broad-based market index. Total returns
for the indexes shown do not reflect sales charges, expenses or other fees that
the SEC requires to be reflected in the Fund's performance. Indexes are
unmanaged, and it is not possible to invest directly in an index.
CALENDAR PERIOD CLASS A CLASS B S&P 500
1 Year 20.40% 20.06% 21.05%
5 Years 23.64% NA 28.56%
Start of 18.62% 25.22% 22.33%
Performance1
1 THE FUND'S CLASS A SHARES AND CLASS B SHARES START OF PERFORMANCE DATES WERE
MAY 7, 1993 AND JULY 23, 1996, RESPECTIVELY.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
returns.
WHAT ARE THE FUND'S MAIN INVESTMENTS AND INVESTMENT TECHNIQUES?
EQUITY SECURITIES
The Fund invests primarily in equity securities. Equity securities are the
fundamental unit of ownership in a company. They represent a share of the
issuer's earnings and assets, after the issuer pays its liabilities. Generally,
issuers have discretion as to the payment of any dividends or distributions. As
a result, investors cannot predict the income they will receive from equity
securities. However, equity securities offer greater potential for appreciation
than many other types of securities, because their value increases directly with
the value of the issuer's business. The following describes the types of equity
securities in which the Fund may invest.
COMMON STOCKS
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock.
PREFERRED STOCKS
Preferred stocks have the right to receive specified dividends or distributions
before the issuer makes payments on its common stock. Some preferred stocks also
participate in dividends and distributions paid on common stock. Preferred
stocks may also permit the issuer to redeem the stock. The Fund may treat such
redeemable preferred stock as a fixed income security.
WARRANTS
Warrants give the Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the expiration
date). The Fund may buy the designated securities by paying the exercise price
before the expiration date. Warrants may become worthless if the price of the
stock does not rise above the exercise price by the expiration date. This
increases the market risks of warrants as compared to the underlying security.
Rights are the same as warrants, except companies typically issue rights to
existing stockholders.
DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty. Many
derivative contracts are traded on securities or commodities exchanges. In this
case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.
The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to market and
currency risks, and may also expose the Fund to liquidity and leverage risks.
OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.
The Fund may trade in the following types of derivative contracts.
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset
is commonly referred to as buying a contract or holding a long position in
the asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts. Futures
contracts traded OTC are frequently referred to as forward contracts.
The Fund may buy and sell the following type of futures contracts:
stock index futures.
PORTFOLIO TURNOVER
Instead of a buy-and-hold strategy, the Fund will actively trade its portfolio
securities in an attempt to achieve the Fund's investment objective. Active
trading will cause the Fund to have an increased portfolio turnover rate, which
is likely to generate shorter-term gains (losses) for its shareholders, which
are taxed at a higher rate than longer-term gains (losses). Actively trading
portfolio securities increases the Fund's trading costs and may have an adverse
impact on the Fund's performance.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash and shorter-term debt securities and similar
obligations. It may do this to minimize potential losses and maintain liquidity
to meet shareholder redemptions during adverse market conditions. This may cause
the Fund to give up greater investment returns to maintain the safety of
principal, that is, the original amount invested by shareholders.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
STOCK MARKET RISKS
The Fund is subject to fluctuations in the stock market which has periods of
increasing and decreasing values. These fluctuations can be caused by many
events, including changes to domestic or international economic conditions.
Because the Fund invests primarily in stocks it is more subject to equity risks
than funds with porfolios that do not invest in stocks. Stocks have greater
volatility than debt securities. While greater volatility increases risk, it
offers the potential for greater reward.
Equity risk is also related to the size of the company issuing stock. Companies
may be categorized as having a small, medium, or large capitalization (market
value). The Fund generally invests in large capitalization companies, which are
considered to pose less equity risk than medium or small capitalization
companies.
RISKS RELATED TO INVESTING FOR GROWTH AND VALUE
Due to their relatively high valuations, growth stocks are typically more
volatile than value stocks. For instance, the price of a growth stock may
experience a larger decline on a forecast of lower earnings, a negative
fundamental development, or an adverse market development. Further, growth
stocks may not pay dividends or may pay lower dividends than value stocks. This
means they depend more on price changes for returns and may be more adversely
affected in a down market compared to value stocks that pay higher dividends.
The price of a value stock may experience a smaller increase on a forecast of
higher earnings, a positive fundamental development, or positive market
development. Value stocks depend less on price changes for returns and may lag
behind growth stocks in an up market.
TAX RISK
Since any investment can be adversely affected by changes in tax laws, the Fund
is subject to this risk. For example, the value of stocks can be affected by
changes in capital gains tax rates.
LEVERAGING
Various investment strategies involve agreements to purchase or sell securities
or currencies in amounts that exceed the amount the Fund has invested in the
underlying securities or currencies. The excess exposure increases the risks
associated with the underlying securities or currencies on the Fund's investment
performance.
FOREIGN SECURITIES RISKS
The Fund may invest in foreign securities. Foreign securities pose additional
risks because foreign economic or political conditions may be less favorable
than those of the United States. Securities in foreign markets may also be
subject to taxation policies that reduce returns for U.S. investors.
Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States.
Foreign companies may also receive less coverage than United States companies by
market analysts and the financial press. In addition, foreign countries may lack
uniform accounting, auditing and financial reporting standards or regulatory
requirements comparable to those applicable to U.S. companies. These factors may
prevent the Fund and Wachovia Asset Management, the Fund's investment adviser,
from obtaining information concerning foreign companies that is as frequent,
extensive and reliable as the information available concerning companies in the
United States.
Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.
FUTURES AND OPTIONS RISKS
The successful use of futures, options, and other derivative instruments is
based on the investment adviser's ability to correctly anticipate market
movements. When the direction of the prices of the Fund's securities does not
correlate with the changes in the value of these transactions, or when the
trading market for derivatives becomes illiquid, the Fund could lose money.
SECURITIES LENDING RISKS
The Fund may lend securities. When the Fund lends its portfolio securities, it
may not be able to get them back from the borrower on a timely basis, thereby
exposing the Fund to a loss of investment opportunities.
WHAT DO SHARES COST?
Shares may be purchased or redeemed by participating insurance companies any day
Wachovia Bank, N.A. (Wachovia Bank), the New York Stock Exchange (NYSE) and the
Federal Reserve Wire System are open for business. When the Fund receives the
insurance company's transaction request in proper form, it is processed at the
next calculated net asset value (NAV).
NAV is determined at the end of regular trading (normally 4 p.m. Eastern time)
each day the NYSE is open. The Fund generally values equity securities according
to the last sale price in the market in which they are primarily traded (either
a national securities exchange or the over-the-counter market). However, the
Trust's Board of Trustees may determine in good faith that another method of
valuing investments is necessary to appraise their fair market value when a
market price is unavailable.
The minimum initial investment required in the Fund is [$ ], and each subsequent
investment must be at least [$ ].
Shares of the Fund are sold at their NAV next determined after an order is
received. Shares are not subject to any sales or distribution charges.
HOW IS THE FUND SOLD?
The Fund's distributor, Federated Securities Corp. (Distributor), markets the
Shares described in this prospectus to your insurance company as a funding
vehicle for variable annuity contracts and variable life insurance policies
issued by your insurance company.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows the Fund to pay marketing
fees to the Distributor and investment professionals for the sale, distribution
and customer servicing of the Fund's Shares at an annual rate of up to 0.25% of
the average daily NAV of the Fund's Shares. The Fund has no present intention of
accruing or paying marketing fees.
HOW TO PURCHASE AND REDEEM SHARES
Shares are used solely as the investment vehicle for separate accounts of your
insurance company offering variable annuity contracts and variable life
insurance policies. The general public has access to the Fund only by purchasing
a variable annuity contract or variable life insurance policy (thus becoming a
contract owner). Shares are not sold directly to the general public.
Purchase orders are placed by your insurance company when your funds are
credited to that insurance company's accounts. Purchase orders received from
your insurance company by 4:00 p.m. (Eastern time) will be processed at the NAV
calculated on that day. If the Fund receives a purchase order from your
insurance company after 4:00 p.m. (Eastern time), that purchase will receive the
NAV computed on the next business day.
Your insurance company is responsible for properly transmitting purchase orders
and federal funds to the Fund.
HOW TO EXCHANGE SHARES
EXCHANGE PRIVILEGE
You may instruct your insurance company to exchange Shares of the Fund into
shares of the same class of another portfolio of the Trust offered by your
insurance company at NAV. Contact your insurance company to find out what
portfolios of the Trust are available for exchange. To exchange Shares, you
must:
o meet any minimum initial investment requirements; and
o receive a prospectus for the Trust portfolio into which you wish to
exchange.
An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction. Signatures must be guaranteed if you request that your
insurance company exchange Shares of the Fund for another portfolio of the Trust
with a different shareholder registration.
The Fund may modify or terminate the exchange privilege at any time.
Shareholders will be notified of the modification or termination of the exchange
privilege. The Fund's management or investment adviser may determine from the
amount, frequency and pattern of exchanges that a shareholder is engaged in
excessive trading which is detrimental to the Fund and other shareholders. If
this occurs, the Fund may terminate the availability of exchanges to that
shareholder and may bar that shareholder from purchasing other portfolios of the
Trust.
ACCOUNT AND SHARE INFORMATION
DIVIDENDS AND CAPITAL GAINS
The Fund declares and pays any dividends annually.
Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional Shares.
TAX INFORMATION
The Fund will seek to comply with asset diversification regulations applicable
to registered investment companies under the Investment Company Act of 1940 and
the Internal Revenue Code. The variable insurance accounts that invest in the
Fund will be affected by the Fund's compliance with applicable diversification
tests. If the Fund fails to comply with these regulations, separate accounts
owning shares of the Fund may not be treated as annuity, endowment, or life
insurance contracts under the Internal Revenue Code. For more information
concerning the consequences of the Fund failing to meet the asset
diversification regulations, consult your separate account prospectus.
Contract owners should review the applicable contract prospectus for information
concerning the federal income tax treatment of their contracts and distributions
from the Fund to the separate accounts.
Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.
WHO MANAGES THE FUND?
The Board of Trustees governs the Fund. The Board selects and oversees the
investment adviser for the Fund, Wachovia Asset Management, a business unit of
Wachovia Bank. The investment adviser manages the Fund's assets, including
buying and selling portfolio securities. The investment adviser's address is 100
North Main Street, Winston-Salem, NC 27101. Wachovia Asset Management is the
investment adviser for two other registered investment companies, The Wachovia
Funds and The Wachovia Municipal Funds.
Wachovia Bank has been managing trust assets for over 100 years, with over
$41billion in managed assets as of December 31, 1999.
The investment adviser is entitled to receive an annual investment advisory fee
equal to 0.70% of the Fund's average daily net assets. The investment adviser
may voluntarily choose to waive a portion of its fees or reimburse the Fund for
certain expenses.
Wachovia Asset Management manages the Fund using seven teams of investment
professionals.
The Fund is only available as an investment option in variable annuity or
variable life insurance contracts. Please consult the accompanying separate
account prospectus for information about the terms of an investment in a
contract.
The following documents contain further details about the Fund and are available
upon request and without charge:
Statement of Additional Information (SAI)--The SAI includes additional
information about the Fund. The SAI is incorporated by reference into this
prospectus, making it legally a part of this prospectus.
Shareholder Reports--The Fund will publish annual and semi-annual reports to
shareholders which include information about the Fund's investments. The annual
report will discuss market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
To obtain the SAI, the annual and semi-annual reports and other information
without charge call your insurance company or the Fund at 1- 800-994-4414.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
Investment Company Act File No. 811-___.
CUSIP _________
_________ (3/00)
The Wachovia VARIABLE Insurance Funds
WACHOVIA EQUITY FUND II
Addresses
Wachovia Equity Fund II
101 Greystone Boulevard
SC-9215
Columbia, SC 29226
distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Wachovia Asset Management
100 North Main Street
Winston-Salem, NC 27101
transfer agent, dividend disbursing agent, and portfolio recordkeeper Federated
Shareholder Services Company Federated Investors Tower 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
counsel to The Wachovia VARIABLE Insurance Funds
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036-1800 counsel to the independent trustees Piper Marbury
Rudnick & Wolfe LLP 1200 Nineteenth Street, N.W. Washington, DC 20036-2412
independent auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
________, 2000
Wachovia Balanced Fund II
(A PORTFOLIO OF THE WACHOVIA VARIABLE INSURANCE FUNDS)
Prospectus
______, 2000
WACHOVIA BALANCED FUND II
A portfolio of the Wachovia VARIABLE Insurance funds
This prospectus offers shares of the Wachovia Balanced Fund II (Fund), which is
an investment portfolio of The Wachovia Variable Insurance Funds (Trust), an
open-end, management investment company. Shares of the Fund may be sold only to
separate accounts of insurance companies to serve as the investment medium for
variable life insurance policies and variable annuity contracts issued by the
insurance companies.
The separate accounts invest in the Fund in accordance with allocation
instructions received from owners of life insurance policies and annuity
contracts. Such allocation rights are described further in the prospectus for
the separate account. This prospectus contains the information you should read
and know before you invest in the Fund through the variable annuity contracts
and variable life insurance policies offered by insurance companies which
provide for investment in the Trust. Keep this prospectus for future reference.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Fund shares are available exclusively as a funding vehicle for life insurance
companies writing variable life insurance policies and variable annuity
contracts. They are subject to investment limitations that do not apply to other
mutual funds available directly to the general public. Therefore, any comparison
of these two types of mutual funds would be inappropriate. This prospectus
should be accompanied by the prospectuses for such variable contracts.
CONTENTS
Goal, Strategy and Risks of the Wachovia Insurance Balanced Fund Comparative
Performance What are the Fund's Main Investments and Investment Techniques?
What are the Risks of Investing in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase and Redeem Shares
How to Exchange Shares
Account and Share Information
Who Manages the Fund?
____________, 2000
GOAL, STRATEGY AND RISKS OF THE WACHOVIA BALANCED FUND II
GOAL
Seeks to produce long-term growth of principal and current income.
STRATEGY
The Fund pursues its investment objective by investing primarily in a portfolio
of equity securities and debt securities. In selecting equity securities, the
investment adviser uses a combined growth and value approach, seeking
undervalued companies that it believes have improving prospects for growth. In
selecting debt securities, the investment adviser seeks to maximize total return
(which consists of capital gains and income) available from a diversified
portfolio of fixed income securities which provide relative stability of
principal and income as compared to other fixed income securities. Under normal
market circumstances, the Fund will invest at least 65% of its holdings in
equity securities and debt securities. As a matter of operating policy, the
asset mix of the Fund will normally range between 50-70% in common stocks and
convertible securities, 30-50% in preferred stocks and bonds, and 0-20% in money
market instruments. The Fund will maintain at least 25% of its holdings in fixed
income senior securities, including convertible senior securities.
PRINCIPAL INVESTMENT RISKS
All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by Wachovia Bank, N.A., the Federal Deposit Insurance Corporation or
any other government agency.
A more detailed description of these risks can be found in "What are the
Risks of Investing in the Fund?" herein.
STOCK MARKET RISKS
The Fund is subject to fluctuations in the stock market which has periods of
increasing and decreasing values. These fluctuations can be caused by many
events, including changes to domestic or international economic conditions.
RISKS OF INVESTING FOR GROWTH & VALUE
Due to their relatively high valuations, growth stocks are typically more
volatile than value stocks. Further, growth stocks may not pay dividends or may
pay lower dividends than value stocks. Growth stocks may be more adversely
affected in a down market compared to value stocks that pay higher dividends and
may lag behind growth stocks in an up market. DEBT SECURITIES RISKS Prices of
fixed-rate debt securities generally move in the opposite direction of the
interest rates. The interest payments on fixed-rate debt securities do not
change when interest rates change. Therefore, the price of these securities can
be expected to decrease when interest rates increase and the Fund's net asset
value may go down.
PREPAYMENT RISKS
When homeowners prepay their mortgages in response to lower interest rates, the
Fund will be required to reinvest the proceeds at the lower interest rates
available. Also, when interest rates fall, the price of mortgage backed
securities may not rise to as great an extent as that of other fixed income
securities.
RISKS OF FOREIGN INVESTING
Because the Fund invests in securities issued by foreign companies, the Fund's
share price may be more affected by foreign economic and political conditions,
taxation policies and accounting and auditing standards than would otherwise be
the case.
TAX RISK
Since any investment can be adversely affected by changes in tax laws, the Fund
is subject to this risk.
LEVERAGING
Various investment strategies involve agreements to purchase or sell securities
or currencies in amounts that exceed the amount the Fund has invested in the
underlying securities or currencies.
FUTURES AND OPTIONS RISKS
The successful use of futures, options, and other derivative instruments is
based on the investment adviser's ability to correctly anticipate market
movements.
SECURITIES LENDING RISKS
When lending securities, the Fund may not be able to get them back from the
borrower on a timely basis, thereby exposing the Fund to a loss of investment
opportunities.
ASSET-BACKED/MORTGAGE-BACKED SECURITIES RISKS
Asset-backed and mortgage-backed securities are subject to risks of prepayment
which generally occurs when interest rates fall.
COMPARATIVE PERFORMANCE
The Fund is a new fund that is just commencing operations, and therefore, has no
performance history. However, Wachovia Asset Management, the Fund's investment
adviser, also manages Wachovia Balanced Fund, a comparable fund with
substantially similar investment policies, strategies, restrictions and
investment goal. The historical performance of the Wachovia Balanced Fund is
presented below. The bar chart below illustrates how the Wachovia Balanced
Fund's return has changed from year to year. The table shows how the Wachovia
Balanced Fund's average annual returns for certain periods compare with those of
two broad-based market indexes, the S&P 500 Index (S&P 500), and the Lehman
Brothers Aggregate Bond Index (LBABI), a broad-based market index which measures
both the capital price changes and income provided by the underlying universe of
securities, comprised of U.S. Treasury obligations, U.S. agency obligations,
foreign obligations, U.S. investment-grade corporate debt , asset-backed
obligations and mortgage-backed obligations. This performance data is provided
to demonstrate how the Fund's investment adviser has performed historically with
a substantially similar investment strategy as the Fund. The results presented
are not intended to suggest the future return of the Fund, or the return that an
individual investor may achieve by investing in the Fund. The Fund's investment
returns may differ from those of the Wachovia Balanced Fund because, among other
factors, the Fund's fees and expenses will differ to some extent from those of
the Wachovia Balanced Fund. For example, the performance presented below does
not reflect any expenses of a variable annuity or variable life insurance
contract.
TOTAL RETURN BAR CHART AND TABLE FOR THE WACHOVIA BALANCED FUND
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Class A Shares of Wachovia Balanced Fund as of the
calendar year-end for each of six years.
The `y' axis reflects the "% Total Return" beginning with "-10%" and increasing
in increments of 10% up to 30%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Fund's start of business through the calendar year
ended December 31, 1999. The light gray shaded chart features six distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Fund's Class A Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1994 through 1999, The percentages noted are: (0.51%), 27.72%,
13.64%, 19.13%, 17.35%, and 14.80%.
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's highest quarterly return was
12.86% (quarter ended December 31, 1998). Its lowest quarterly return was
(5.22%) (quarter ended September 30, 1998).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Fund's Class A and Class B Average Annual
Total Returns, reduced to reflect applicable sales charges, for the calendar
periods ended December 31, 1999. The table shows the Fund's Class A Shares and
Class B Shares total returns averaged over a period of years relative to the
Standard & Poor's 500 Index (S&P 500) and the Lehman Brothers Aggregate Bond
Index (LBABI), each a broad-based market index. LBABI measures both the capital
price changes and the income provided by the underlying universe of securities,
comprised of U.S. Treasury obligations, U.S. agency obligations, foreign
obligations, U.S. investment-grade corporate debt , asset-backed obligations and
mortgage-backed obligations. Total returns for the indexes shown do not reflect
sales charges, expenses or other fees that the SEC requires to be reflected in
the Fund's performance. Indexes are unmanaged, and it is not possible to invest
directly in an index.
CALENDAR PERIOD CLASS A CLASS B S&P 500 LBABI
1 Year 9.61% 9.01% 21.05% (0.82%)
5 Years 17.34% NA 28.56% 7.73%
Start of 13.67% 17.16% 22.33% 5.99%
Performance1
1 THE FUND'S CLASS A SHARES AND CLASS B SHARES START OF PERFORMANCE DATES WERE
MAY 7, 1993 AND JULY 23, 1996, RESPECTIVELY.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
returns.
WHAT ARE THE FUND'S MAIN INVESTMENTS AND INVESTMENT TECHNIQUES?
EQUITY SECURITIES
The Fund invests a substantial portion of its assets in equity securities.
Equity securities are the fundamental unit of ownership in a company. They
represent a share of the issuer's earnings and assets, after the issuer pays its
liabilities. Generally, issuers have discretion as to the payment of any
dividends or distributions. As a result, investors cannot predict the income
they will receive from equity securities. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which the Fund may invest.
COMMON STOCKS
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock.
PREFERRED STOCKS
Preferred stocks have the right to receive specified dividends or distributions
before the issuer makes payments on its common stock. Some preferred stocks also
participate in dividends and distributions paid on common stock. Preferred
stocks may also permit the issuer to redeem the stock. The Fund may treat such
redeemable preferred stock as a fixed income security.
WARRANTS
Warrants give the Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the expiration
date). The Fund may buy the designated securities by paying the exercise price
before the expiration date. Warrants may become worthless if the price of the
stock does not rise above the exercise price by the expiration date. This
increases the market risks of warrants as compared to the underlying security.
Rights are the same as warrants, except companies typically issue rights to
existing stockholders.
FIXED INCOME SECURITIES
The Fund invests a substantial portion of its assets in fixed income securities.
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty. Many
derivative contracts are traded on securities or commodities exchanges. In this
case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.
The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to market and
currency risks, and may also expose the Fund to liquidity and leverage risks.
OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.
The Fund may trade in the following types of derivative contracts.
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset
is commonly referred to as buying a contract or holding a long position in
the asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts. Futures
contracts traded OTC are frequently referred to as forward contracts.
The Fund may buy and sell the following type of futures contracts:
stock index futures.
PORTFOLIO TURNOVER
Instead of a buy-and-hold strategy, the Fund will actively trade its portfolio
securities in an attempt to achieve the Fund's investment objective. Active
trading will cause the Fund to have an increased portfolio turnover rate, which
is likely to generate shorter-term gains (losses) for its shareholders, which
are taxed at a higher rate than longer-term gains (losses). Actively trading
portfolio securities increases the Fund's trading costs and may have an adverse
impact on the Fund's performance.
CREDIT QUALITY AND INVESTMENT RATINGS
When the Fund invests in debt securities or convertible securities most will be
rated BBB or better by Standard & Poor's or Baa or better by Moody's Investors
Service at the time of purchase. Unrated securities will be determined by the
investment adviser to be of like quality and may have greater risk but a higher
yield than comparable rated securities.
Securities rated BBB by Standard and Poor's or Baa by Moody's Investors Service
have speculative characteristics.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash and shorter-term debt securities and similar
obligations. It may do this to minimize potential losses and maintain liquidity
to meet shareholder redemptions during adverse market conditions. This may cause
the Fund to give up greater investment returns to maintain the safety of
principal, that is, the original amount invested by shareholders.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
STOCK MARKET RISKS
The Fund is subject to fluctuations in the stock market which has periods of
increasing and decreasing values. These fluctuations can be caused by many
events, including changes to domestic or international economic conditions.
Because the Fund invests substantially in stocks, it is more subject to stock
market risks than funds with portfolios that do not invest in stocks. Stocks
have greater volatility than debt securities. While greater volatility increases
risk, it offers the potential for greater reward.
RISKS RELATED TO INVESTING FOR GROWTH AND VALUE
Due to their relatively high valuations, growth stocks are typically more
volatile than value stocks. For instance, the price of a growth stock may
experience a larger decline on a forecast of lower earnings, a negative
fundamental development, or an adverse market development. Further, growth
stocks may not pay dividends or may pay lower dividends than value stocks. This
means they depend more on price changes for returns and may be more adversely
affected in a down market compared to value stocks that pay higher dividends.
The price of a value stock may experience a smaller increase on a forecast of
higher earnings, a positive fundamental development, or positive market
development. Value stocks depend less on price changes for returns and may lag
behind growth stocks in an up market.
DEBT SECURITIES RISKS
Prices of fixed-rate debt securities generally move in the opposite direction of
the interest rates. The interest payments on fixed-rate debt securities do not
change when interest rates change. Therefore, the price of these securities can
be expected to decrease when interest rates increase and the Fund's net asset
value may go down. While the investment adviser attempts to anticipate interest
rate movements, there is no guarantee that it will be able to correctly predict
them.
In addition, debt securities with longer maturities or durations will experience
greater price volatility than those with shorter maturities or durations, and
the Fund's net asset value can be expected to fluctuate accordingly.
The credit quality of a debt security is based upon the ability of the issuer to
repay the security. If the credit quality of securities held by Fund declines,
the Fund's net asset value could go down.
Principal and interest payments on a security may not be paid when due. If
interest rates are declining, an issuer may repay a debt security held in the
portfolio prior to its maturity. If this occurs, the investment adviser may have
to reinvest the proceeds in debt securities paying lower interest rates
resulting in lower yields to the Fund.
PREPAYMENT RISK
The Fund is subject to prepayment risks. Principal on a fixed income security
may be repaid before its scheduled maturity. This may reduce the security's
value and require the Fund to reinvest the prepayment at a lower yield. In
addition, the Fund may buy a fixed income security with an expectation of early
prepayment. If the prepayment does not occur, the security will decline in
value. This is known as Extension Risk.
TAX RISK
Since any investment can be adversely affected by changes in tax laws, the Fund
is subject to this risk. For example, the value of stocks can be affected by
changes in capital gains tax rates.
LEVERAGING
Various investment strategies involve agreements to purchase or sell securities
or currencies in amounts that exceed the amount the Fund has invested in the
underlying securities or currencies. The excess exposure increases the risks
associated with the underlying securities or currencies on the Fund's investment
performance.
FOREIGN SECURITIES RISKS
The Fund may invest in foreign securities. Foreign securities pose additional
risks because foreign economic or political conditions may be less favorable
than those of the United States. Securities in foreign markets may also be
subject to taxation policies that reduce returns for U.S. investors.
Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States.
Foreign companies may also receive less coverage than United States companies by
market analysts and the financial press. In addition, foreign countries may lack
uniform accounting, auditing and financial reporting standards or regulatory
requirements comparable to those applicable to U.S. companies. These factors may
prevent the Fund and Wachovia Asset Management, the Fund's investment adviser
from obtaining information concerning foreign companies that is as frequent,
extensive and reliable as the information available concerning companies in the
United States.
Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.
ASSET-BACKED/MORTGAGE-BACKED SECURITIES RISKS
Asset-backed and mortgage-backed securities are subject to risks of prepayment
which generally occurs when interest rates fall. Reinvesting these prepayments
in a lower interest rate environment reduces the Fund's income. Asset-backed
securities may have a higher level of default and recovery risk than
mortgage-backed securities.
FUTURES AND OPTIONS RISKS
The successful use of futures, options, and other derivative instruments is
based on the investment adviser's ability to correctly anticipate market
movements. When the direction of the prices of the Fund's securities does not
correlate with the changes in the value of these transactions, or when the
trading market for derivatives becomes illiquid, the Fund could lose money.
SECURITIES LENDING RISKS
The Fund may lend securities. When the Fund lends its portfolio securities, it
may not be able to get them back from the borrower on a timely basis, thereby
exposing the Fund to a loss of investment opportunities.
WHAT DO SHARES COST?
Shares may be purchased or redeemed by participating insurance companies any day
Wachovia Bank, N.A. (Wachovia Bank), the New York Stock Exchange (NYSE) and the
Federal Reserve Wire System are open for business. When the Fund receives the
insurance company's transaction request in proper form, it is processed at the
next calculated net asset value (NAV).
NAV is determined at the end of regular trading (normally 4 p.m. Eastern time)
each day the NYSE is open. The Fund generally values equity securities according
to the last sale price in the market in which they are primarily traded (either
a national securities exchange or the over-the-counter market). The Fund
generally values fixed income securities at the last sale price on a national
securities exchange, if available, otherwise, as determined by an independent
pricing service. However, the Trust's Board of Trustees may determine in good
faith that another method of valuing investments is necessary to appraise their
fair market value when a market price is unavailable.
The minimum initial investment required in the Fund is [$ ], and each subsequent
investment must be at least [$ ].
Shares of the Fund are sold at their NAV next determined after an order is
received. Shares are not subject to any sales or distribution charges.
HOW IS THE FUND SOLD?
The Fund's distributor, Federated Securities Corp. (Distributor), markets the
Shares described in this prospectus to your insurance company as a funding
vehicle for variable annuity contracts and variable life insurance policies
issued by your insurance company.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows the Fund to pay marketing
fees to the Distributor and investment professionals for the sale, distribution
and customer servicing of the Fund's Shares at an annual rate of up to 0.25% of
the average daily NAV of the Fund's Shares. The Fund has no present intention of
accruing or paying marketing fees.
HOW TO PURCHASE AND REDEEM SHARES
Shares are used solely as the investment vehicle for separate accounts of your
insurance company offering variable annuity contracts and variable life
insurance policies. The general public has access to the Fund only by purchasing
a variable annuity contract or variable life insurance policy (thus becoming a
contract owner). Shares are not sold directly to the general public.
Purchase orders are placed by your insurance company when your funds are
credited to that insurance company's accounts. Purchase orders received from
your insurance company by 4:00 p.m. (Eastern time) will be processed at the NAV
calculated on that day. If the Fund receives a purchase order from your
insurance company after 4:00 p.m. (Eastern time), that purchase will receive the
NAV computed on the next business day.
Your insurance company is responsible for properly transmitting purchase orders
and federal funds to the Fund.
HOW TO EXCHANGE SHARES
EXCHANGE PRIVILEGE
You may instruct your insurance company to exchange Shares of the Fund into
shares of the same class of another portfolio of the Trust offered by your
insurance company at NAV. Contact your insurance company to find out what
portfolios of the Trust are available for exchange. To exchange Shares, you
must:
o meet any minimum initial investment requirements; and
o receive a prospectus for the Trust portfolio into which you wish to
exchange.
An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction. Signatures must be guaranteed if you request that your
insurance company exchange Shares of the Fund for another portfolio of the Trust
with a different shareholder registration.
The Fund may modify or terminate the exchange privilege at any time.
Shareholders will be notified of the modification or termination of the exchange
privilege. The Fund's management or investment adviser may determine from the
amount, frequency and pattern of exchanges that a shareholder is engaged in
excessive trading which is detrimental to the Fund and other shareholders. If
this occurs, the Fund may terminate the availability of exchanges to that
shareholder and may bar that shareholder from purchasing other portfolios of the
Trust.
ACCOUNT AND SHARE INFORMATION
DIVIDENDS AND CAPITAL GAINS
The Fund declares and pays any dividends annually.
Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional Shares.
TAX INFORMATION
The Fund will seek to comply with asset diversification regulations applicable
to registered investment companies under the Investment Company Act of 1940 and
the Internal Revenue Code. The variable insurance accounts that invest in the
Fund will be affected by the Fund's compliance with applicable diversification
tests. If the Fund fails to comply with these regulations, separate accounts
owning shares of the Fund may not be treated as annuity, endowment, or life
insurance contracts under the Internal Revenue Code. For more information
concerning the consequences of the Fund failing to meet the asset
diversification regulations, consult your separate account prospectus.
Contract owners should review the applicable contract prospectus for information
concerning the federal income tax treatment of their contracts and distributions
from the Fund to the separate accounts.
Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.
WHO MANAGES THE FUND?
The Board of Trustees governs the Fund. The Board selects and oversees the
investment adviser for the Fund, Wachovia Asset Management, a business unit of
Wachovia Bank. The investment adviser manages the Fund's assets, including
buying and selling portfolio securities. The investment adviser's address is 100
North Main Street, Winston-Salem, NC 27101. Wachovia Asset Management is the
investment adviser for two other registered investment companies, The Wachovia
Funds and The Wachovia Municipal Funds.
Wachovia Bank has been managing trust assets for over 100 years, with over $41
billion in managed assets as of December 31, 1999.
The investment adviser is entitled to receive an annual investment advisory fee
equal to 0.70% of the Fund's average daily net assets. The investment adviser
may voluntarily choose to waive a portion of its fees or reimburse the Fund for
certain expenses.
Wachovia Asset Management manages the Fund using eight teams of investment
professionals.
The Fund is only available as an investment option in variable annuity or
variable life insurance contracts. Please consult the accompanying separate
account prospectus for information about the terms of an investment in a
contract.
The following documents contain further details about the Fund and are available
upon request and without charge:
Statement of Additional Information (SAI)--The SAI includes additional
information about the Fund. The SAI is incorporated by reference into this
prospectus, making it legally a part of this prospectus.
Shareholder Reports--The Fund will publish annual and semi-annual reports to
shareholders which include information about the Fund's investments. The annual
report discusses market conditions and investment strategies that significantly
affected each Fund's performance during its last fiscal year.
To obtain the SAI, the annual and semi-annual reports and other information
without charge call your insurance company or the Fund at 1- 800-994-4414.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
Investment Company Act File No. 811- ____.
CUSIP ________
_______ (3/00)
The Wachovia VARIABLE Insurance Funds
WACHOVIA BALANCED FUND II
Addresses
wachovia Balanced Fund II
101 Greystone Boulevard
SC-9215
Columbia, SC 29226
distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Wachovia Asset Management
100 North Main Street
Winston-Salem, NC 27101
transfer agent, dividend disbursing agent, and portfolio recordkeeper Federated
Shareholder Services Company Federated Investors Tower 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
counsel to The Wachovia VARIABLE Insurance Funds
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036-1800 counsel to the independent trustees Piper Marbury
Rudnick & Wolfe LLP 1200 Nineteenth Street, N.W. Washington, DC 20036-2412
independent auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
_________, 2000
Wachovia Special values Fund II
(A PORTFOLIO OF THE WACHOVIA VARIABLE INSURANCE FUNDS)
Prospectus
______, 2000
WACHOVIA SPECIAL VALUES FUND II
A Portfolio of The Wachovia VARIABLE Insurance Funds
This prospectus offers shares of the Wachovia Special Values Fund II (the Fund),
which is an investment portfolio of The Wachovia Variable Insurance Funds (the
Trust), an open-end, management investment company. Shares of the Fund may be
sold only to separate accounts of insurance companies to serve as the investment
medium for variable life insurance policies and variable annuity contracts
issued by the insurance companies.
The separate accounts invest in the Fund in accordance with allocation
instructions received from owners of life insurance policies and annuity
contracts. Such allocation rights are described further in the prospectus for
the separate account. This prospectus contains the information you should read
and know before you invest in the Fund through the variable annuity contracts
and variable life insurance policies offered by insurance companies which
provide for investment in the Trust. Keep this prospectus for future reference.
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
Fund shares are available exclusively as a funding vehicle for life insurance
companies writing variable life insurance policies and variable annuity
contracts. They are subject to investment limitations that do not apply to other
mutual funds available directly to the general public. Therefore, any comparison
of these two types of mutual funds would be inappropriate. This prospectus
should be accompanied by the prospectuses for such variable contracts.
CONTENTS
Goal, Strategy and Risks of the Wachovia Insurance Special Values Fund
Comparative Performance What are the Fund's Main Investments and Investment
Techniques?
What are the Risks of Investing in the Fund?
What do Shares Cost?
How is the Fund Sold?
How to Purchase and Redeem Shares
How to Exchange Shares
Account and Share Information
Who Manages the Fund?
____________, 2000
GOAL, STRATEGY AND RISKS OF WACHOVIA SPECIAL VALUES FUND II
GOAL
Seeks to produce growth of principal.
STRATEGY
The Fund pursues its investment objective by investing primarily in a portfolio
of stocks of small U.S. companies. The investment adviser looks for
significantly undervalued companies that it believes have the potential for
above-average growth commensurate with increased risk. Typical investments are
in stocks of companies that have low price-to-earnings ratios, are generally out
of favor in the marketplace, are selling significantly below their stated or
replacement book value or are undergoing a reorganization or other corporate
action that may create above-average price appreciation. Under normal market
conditions, the Fund intends to invest at least 65% of its assets in stocks of
companies that have a market value capitalization of $1 .5 billion or less. The
Fund may invest up to 20% of total assets in foreign securities.
PRINCIPAL INVESTMENT RISKS
All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Fund.
An investment in the Fund is not a deposit of a bank and is not insured or
guaranteed by Wachovia Bank, N.A., the Federal Deposit Insurance Corporation or
any other government agency.
A more detailed description of these risks can be found in "What are the
Risks of Investing in the Fund?" herein.
STOCK MARKET RISKS
The Fund is subject to fluctuations in the stock market which has periods of
increasing and decreasing values. These fluctuations can be caused by many
events, including changes to domestic or international economic conditions.
Stocks have greater volatility than debt securities.
RISKS RELATED TO INVESTING FOR VALUE
Due to the Fund's value style of investing, the Fund's share price may lag that
of other funds using a different investment style.
RISKS OF FOREIGN INVESTING
Because the Fund invests in securities issued by foreign companies, the Fund's
share price may be more affected by foreign economic and political conditions,
taxation policies and accounting and auditing standards than would otherwise be
the case.
TAX RISK
Since any investment can be adversely affected by changes in tax laws, the Fund
is subject to this risk.
LEVERAGING
Various investment strategies involve agreements to purchase or sell securities
or currencies in amounts that exceed the amount the Fund has invested in the
underlying securities or currencies.
FUTURES AND OPTIONS RISKS
The successful use of futures, options, and other derivative instruments is
based on the investment adviser's ability to correctly anticipate market
movements.
SECURITIES LENDING RISKS
When lending securities, the Fund may not be able to get them back from the
borrower on a timely basis, thereby exposing the Fund to a loss of investment
opportunities.
COMPARATIVE PERFORMANCE
The Fund is a new fund that is just commencing operations, and therefore, has no
performance history. However, Wachovia Asset Management, the Fund's investment
adviser, also manages Wachovia Special Values Fund, a comparable fund with
substantially similar investment policies, strategies, restrictions and
investment goal. The historical performance of the Wachovia Special Values Fund
is presented below. The bar chart illustrates how the Wachovia Special Values
Fund's return has changed from year to year. The table shows how the Wachovia
Special Values Fund's average annual returns for certain periods compare with
those of the Russell 2000 Small Stock Index (Russell 2000), a broad-based market
index which measures the performance of the 2,000 smallest companies in the
Russell 3000 Index, and the Russell 2000 Value Index, a broad-based market index
which measures the performance of those Russell 2000 companies with lower
price-to-book ratios and lower forecasted growth values. This performance data
is provided to demonstrate how the Fund's investment adviser has performed
historically with a substantially similar investment strategy as the Fund. The
results presented are not intended to suggest the future return of the Fund, or
the return that an individual investor may achieve by investing in the Fund. The
Fund's investment returns may differ from those of the Wachovia Special Values
Fund because, among other factors, the Fund's fees and expenses will differ to
some extent from those of the Wachovia Special Values Fund. For example, the
performance presented below does not reflect any expenses of a variable annuity
or variable life insurance contract.
TOTAL RETURN BAR CHART AND TABLE FOR THE WACHOVIA SPECIAL VALUES FUND
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of the Class A Shares of Wachovia Special Values Fund as of
the calendar year-end for each of six years.
The `y' axis reflects the "% Total Return" beginning with "-10%" and increasing
in increments of 10% up to 40%.
The `x' axis represents calculation periods from the earliest first full
calendar year-end of the Fund's start of business through the calendar year
ended December 31, 1999. The light gray shaded chart features six distinct
vertical bars, each shaded in charcoal, and each visually representing by height
the total return percentages for the calendar year stated directly at its base.
The calculated total return percentage for the Fund's Class A Shares for each
calendar year is stated directly at the top of each respective bar, for the
calendar years 1994 through 1999, The percentages noted are: (3.32%), 30.26%,
36.98%, 29.08%, (1.51%) and 6.39%.
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's highest quarterly return was
16.56% (quarter ended June 30, 1999). Its lowest quarterly return was (18.00%)
(quarter ended September 30, 1998).
AVERAGE ANNUAL TOTAL RETURN TABLE
The following table represents the Fund's Class A and Class B Average Annual
Total Returns, reduced to reflect applicable sales charges, for the calendar
periods ended December 31, 1999. The table shows the Fund's Class A Shares and
Class B Shares total returns averaged over a period of years relative to the
Russell 2000 Small Stock Index (Russell 2000), a broad based market index
consisting of 2,000 small capitalization common stocks and the Russell 2000
Value Index (Russell Value), a broad based market index which measures the
performance of those Russell 2000 companies with lower price-to-book ratios and
lower forecasted growth values. Total returns for the indexes shown do not
reflect sales charges, expenses or other fees that the SEC requires to be
reflected in the Fund's performance. Indexes are unmanaged, and it is not
possible to invest directly in an index.
CALENDAR PERIOD CLASS A CLASS B RUSSELL
2000 Russell
Value
1 Year 1.57% NA 21.26% ___%
5 Years 18.18% NA 16.69% ___%
Start of 13.81% 8.32% 14.29% ___%
Performance1
1 THE FUND'S CLASS A SHARES AND CLASS B SHARES START OF PERFORMANCE DATES WERE
MAY 7, 1993 AND MARCH 26, 1999, RESPECTIVELY.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you can
analyze whether the Fund's investment risks are balanced by its potential
returns.
.
WHAT ARE THE FUND'S MAIN INVESTMENTS AND INVESTMENT TECHNIQUES?
EQUITY SECURITIES
The Fund invests primarily in equity securities. Equity securities are the
fundamental unit of ownership in a company. They represent a share of the
issuer's earnings and assets, after the issuer pays its liabilities. Generally,
issuers have discretion as to the payment of any dividends or distributions. As
a result, investors cannot predict the income they will receive from equity
securities. However, equity securities offer greater potential for appreciation
than many other types of securities, because their value increases directly with
the value of the issuer's business. The following describes the types of equity
securities in which the Fund may invest.
COMMON STOCKS
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock.
PREFERRED STOCKS
Preferred stocks have the right to receive specified dividends or distributions
before the issuer makes payments on its common stock. Some preferred stocks also
participate in dividends and distributions paid on common stock. Preferred
stocks may also permit the issuer to redeem the stock. The Fund may treat such
redeemable preferred stock as a fixed income security.
WARRANTS
Warrants give the Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the expiration
date). The Fund may buy the designated securities by paying the exercise price
before the expiration date. Warrants may become worthless if the price of the
stock does not rise above the exercise price by the expiration date. This
increases the market risks of warrants as compared to the underlying security.
Rights are the same as warrants, except companies typically issue rights to
existing stockholders.
DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty. Many
derivative contracts are traded on securities or commodities exchanges. In this
case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.
The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to market and
currency risks, and may also expose the Fund to liquidity and leverage risks.
OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.
The Fund may trade in the following types of derivative contracts.
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset
is commonly referred to as buying a contract or holding a long position in
the asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts. Futures
contracts traded OTC are frequently referred to as forward contracts.
The Fund may buy and sell the following type of futures contracts:
stock index futures.
PORTFOLIO TURNOVER
Instead of a buy-and-hold strategy, the Fund will actively trade its portfolio
securities in an attempt to achieve the Fund's investment objective. Active
trading will cause the Fund to have an increased portfolio turnover rate, which
is likely to generate shorter-term gains (losses) for its shareholders, which
are taxed at a higher rate than longer-term gains (losses). Actively trading
portfolio securities increases the Fund's trading costs and may have an adverse
impact on the Fund's performance.
TEMPORARY DEFENSIVE INVESTMENTS
The Fund may temporarily depart from its principal investment strategies by
investing its assets in cash and shorter-term debt securities and similar
obligations. It may do this to minimize potential losses and maintain liquidity
to meet shareholder redemptions during adverse market conditions. This may cause
the Fund to give up greater investment returns to maintain the safety of
principal, that is, the original amount invested by shareholders.
WHAT ARE THE RISKS OF INVESTING IN THE FUND?
STOCK MARKET RISKS
The Fund is subject to fluctuations in the stock market which has periods of
increasing and decreasing values. These fluctuations can be caused by many
events, including changes to domestic or international economic conditions.
Because the Fund invests primarily in stocks it is more subject to equity risks
than portfolios that do not invest in stocks. Stocks have greater volatility
than debt securities. While greater volatility increases risk, it offers the
potential for greater reward.
Equity risk is also related to the size of the company issuing stock. Companies
may be categorized as having a small, medium, or large capitalization (market
value). The potential risks are higher with small capitalization companies and
lower with large capitalization companies. Therefore, you should expect that
investments in the Fund will be more volatile than broad stock market indices
such as the S&P 500 or other funds that invest in large-capitalization
companies.
RISKS RELATED TO INVESTING FOR VALUE
Due to their relatively low valuations, value stocks are typically less volatile
than growth stocks. For instance, the price of a value stock may experience a
smaller increase on a forecast of higher earnings, a positive fundamental
development or positive market development. Further, value stocks tend to have
higher dividends than growth stocks. This means they depend less on price
changes for returns and may lag behind growth stocks in an up market.
TAX RISK
Since any investment can be adversely affected by changes in tax laws, the Fund
is subject to this risk. For example, the value of stocks can be affected by
changes in capital gains tax rates.
LEVERAGING
Various investment strategies involve agreements to purchase or sell securities
or currencies in amounts that exceed the amount the Fund has invested in the
underlying securities or currencies. The excess exposure increases the risks
associated with the underlying securities or currencies on the Fund's investment
performance.
FOREIGN SECURITIES RISKS
The Fund may invest in foreign securities. Foreign securities pose additional
risks because foreign economic or political conditions may be less favorable
than those of the United States. Securities in foreign markets may also be
subject to taxation policies that reduce returns for U.S. investors.
Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States.
Foreign companies may also receive less coverage than United States companies by
market analysts and the financial press. In addition, foreign countries may lack
uniform accounting, auditing and financial reporting standards or regulatory
requirements comparable to those applicable to U.S. companies. These factors may
prevent the Fund and Wachovia Asset Management, the Fund's investment adviser,
from obtaining information concerning foreign companies that is as frequent,
extensive and reliable as the information available concerning companies in the
United States.
Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.
FUTURES AND OPTIONS RISKS
The successful use of futures, options, and other derivative instruments is
based on the investment adviser's ability to correctly anticipate market
movements. When the direction of the prices of the Fund's securities does not
correlate with the changes in the value of these transactions, or when the
trading market for derivatives becomes illiquid, the Fund could lose money.
SECURITIES LENDING RISKS
The Fund may lend securities. When the Fund lends its portfolio securities, it
may not be able to get them back from the borrower on a timely basis, thereby
exposing the Fund to a loss of investment opportunities.
WHAT DO SHARES COST?
Shares may be purchased or redeemed by participating insurance companies any day
Wachovia Bank, N.A. (Wachovia Bank), the New York Stock Exchange (NYSE) and the
Federal Reserve Wire System are open for business. When the Fund receives the
insurance company's transaction request in proper form, it is processed at the
next calculated net asset value (NAV).
NAV is determined at the end of regular trading (normally 4 p.m. Eastern time)
each day the NYSE is open. The Fund generally values equity securities according
to the last sale price in the market in which they are primarily traded (either
a national securities exchange or the over-the-counter market). However, the
Trust's Board of Trustees may determine in good faith that another method of
valuing investments is necessary to appraise their fair market value when a
market price is unavailable.
The minimum initial investment required in the Fund is [$ ], and each subsequent
investment must be at least [$ ].
Shares of the Fund are sold at their NAV next determined after an order is
received. Shares are not subject to any sales or distribution charges.
HOW IS THE FUND SOLD?
The Fund's distributor, Federated Securities Corp. (Distributor), markets the
Shares described in this prospectus to your insurance company as a funding
vehicle for variable annuity contracts and variable life insurance policies
issued by your insurance company.
When the Distributor receives marketing fees, it may pay some or all of them to
investment professionals. The Distributor and its affiliates may pay out of
their assets other amounts (including items of material value) to investment
professionals for marketing and servicing Shares. The Distributor is a
subsidiary of Federated Investors, Inc. (Federated).
RULE 12B-1 PLAN
The Fund has adopted a Rule 12b-1 Plan, which allows the Fund to pay marketing
fees to the Distributor and investment professionals for the sale, distribution
and customer servicing of the Fund's Shares at an annual rate of up to 0.25% of
the average daily NAV of the Fund's Shares. The Fund has no present intention of
accruing or paying marketing fees.
HOW TO PURCHASE AND REDEEM SHARES
Shares are used solely as the investment vehicle for separate accounts of your
insurance company offering variable annuity contracts and variable life
insurance policies. The general public has access to the Fund only by purchasing
a variable annuity contract or variable life insurance policy (thus becoming a
contract owner). Shares are not sold directly to the general public.
Purchase orders are placed by your insurance company when your funds are
credited to that insurance company's accounts. Purchase orders received from
your insurance company by 4:00 p.m. (Eastern time) will be processed at the NAV
calculated on that day. If the Fund receives a purchase order from your
insurance company after 4:00 p.m. (Eastern time), that purchase will receive the
NAV computed on the next business day.
Your insurance company is responsible for properly transmitting purchase orders
and federal funds to the Fund.
HOW TO EXCHANGE SHARES
EXCHANGE PRIVILEGE
You may instruct your insurance company to exchange Shares of the Fund into
shares of the same class of another portfolio of the Trust offered by your
insurance company at NAV. Contact your insurance company to find out what
portfolios of the Trust are available for exchange. To exchange Shares, you
must:
o meet any minimum initial investment requirements; and
o receive a prospectus for the Trust portfolio into which you wish to
exchange.
An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction. Signatures must be guaranteed if you request that your
insurance company exchange Shares of the Fund for another portfolio of the Trust
with a different shareholder registration.
The Fund may modify or terminate the exchange privilege at any time.
Shareholders will be notified of the modification or termination of the exchange
privilege. The Fund's management or investment adviser may determine from the
amount, frequency and pattern of exchanges that a shareholder is engaged in
excessive trading which is detrimental to the Fund and other shareholders. If
this occurs, the Fund may terminate the availability of exchanges to that
shareholder and may bar that shareholder from purchasing other portfolios of the
Trust.
ACCOUNT AND SHARE INFORMATION
DIVIDENDS AND CAPITAL GAINS
The Fund declares and pays any dividends annually.
Shares of the Fund will begin earning dividends if owned on the record date.
Dividends of the Fund are automatically reinvested in additional Shares.
TAX INFORMATION
The Fund will seek to comply with asset diversification regulations applicable
to registered investment companies under the Investment Company Act of 1940 and
the Internal Revenue Code. The variable insurance accounts that invest in the
Fund will be affected by the Fund's compliance with applicable diversification
tests. If the Fund fails to comply with these regulations, separate accounts
owning shares of the Fund may not be treated as annuity, endowment, or life
insurance contracts under the Internal Revenue Code. For more information
concerning the consequences of the Fund failing to meet the asset
diversification regulations, consult your separate account prospectus.
Contract owners should review the applicable contract prospectus for information
concerning the federal income tax treatment of their contracts and distributions
from the Fund to the separate accounts.
Contract owners are urged to consult their own tax advisers regarding the status
of their contracts under state and local tax laws.
WHO MANAGES THE FUND?
The Board of Trustees governs the Fund. The Board selects and oversees the
investment adviser for the Fund, Wachovia Asset Management, a business unit of
Wachovia Bank. The investment adviser manages each Fund's assets, including
buying and selling portfolio securities. The investment adviser's address is 100
North Main Street, Winston-Salem, NC 27101. Wachovia Asset Management is the
investment adviser for two other registered investment companies, The Wachovia
Funds and The Wachovia Municipal Funds.
Wachovia Bank has been managing trust assets for over 100 years, with over $41
billion in managed assets as of December 31, 1999.
The investment adviser is entitled to receive an annual investment advisory fee
equal to 0.80% of the Fund's average daily net assets. The investment adviser
may voluntarily choose to waive a portion of its fees or reimburse the Fund for
certain expenses.
PORTFOLIO MANAGERS
Roger L. Glenski is a vice president with Wachovia Asset Management and is a
co-manager of the Wachovia Special Values Fund. He is responsible for equity
analysis and portfolio allocation decisions for the Fund. Prior to joining
Wachovia Asset Management, Mr. Glenski was an accountant with the national
accounting firm Deloitte & Touche. He received a bachelor's degree from the
University of Missouri and a master's degree in Business Administration from the
University of Chicago.
James M. Tringas is a vice president with Wachovia Asset Management and is a
co-manager of the Wachovia Special Values Fund. He is responsible for equity
analysis and portfolio allocation decisions for the Fund. Before joining
Wachovia Asset Management, Mr. Tringas was a senior consultant in the Personal
Financial Consulting Group of Ernst & Young. He received a bachelor's degree in
Accounting and a master's degree in Tax from the University of Florida. Mr.
Tringas is a member of the Association for Investment Management and Research
and the Atlanta Society of Financial Analysts.
The Fund is only available as an investment option in variable annuity or
variable life insurance contracts. Please consult the accompanying separate
account prospectus for information about the terms of an investment in a
contract.
The following documents contain further details about the Fund and are available
upon request and without charge:
Statement of Additional Information (SAI)--The SAI includes additional
information about the Fund. The SAI is incorporated by reference into this
prospectus, making it legally a part of this prospectus.
Shareholder Reports--The Fund will publish annual and semi-annual reports to
shareholders which include information about the Fund's investments. The annual
report will discuss market conditions and investment strategies that
significantly affected the Fund's performance during its last fiscal year.
To obtain the SAI, the annual and semi-annual reports and other information
without charge call your insurance company or the Fund at 1-800-994-4414.
You can obtain information about the Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
Investment Company Act File No. 811-_____.
CUSIP ________
_______ (3/00)
The Wachovia VARIABLE Insurance Funds
WACHOVIA SPECIAL VALUES FUND II
Addresses
Wachovia Special Values Fund II
101 Greystone Boulevard
SC-9215
Columbia, SC 29226
distributor
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Investment Adviser
Wachovia Asset Management
100 North Main Street
Winston-Salem, NC 27101
transfer agent, dividend disbursing agent, and portfolio recordkeeper Federated
Shareholder Services Company Federated Investors Tower 1001 Liberty Avenue
Pittsburgh, PA 15222-3779
counsel to The Wachovia VARIABLE Insurance Funds
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, N.W.
Washington, DC 20036-1800 counsel to the independent trustees Piper Marbury
Rudnick & Wolfe LLP 1200 Nineteenth Street, N.W. Washington, DC 20036-2412
independent auditors
Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116-5072
__________, 2000
THE WACHOVIA VARIABLE INSURANCE FUNDS
WACHOVIA BALANCED FUND II
WACHOVIA EQUITY FUND II
WACHOVIA SPECIAL VALUES FUND II
STATEMENT OF ADDITIONAL INFORMATION
__________, 2000
This Statement of Additional Information (SAI) is not a prospectus. Read
this SAI in conjunction with the prospectuses of The Wachovia Variable
Insurance Funds dated__________, 2000.
CONTENTS
HOW ARE THE FUNDS ORGANIZED?..........................................
SECURITIES IN WHICH THE FUNDS INVEST..................................
WHAT DO SHARES COST?..................................................
MIXED AND SHARED FUNDING..............................................
HOW ARE THE FUNDS SOLD?...............................................
WHAT DO SHARES COST?..................................................
SUBACCOUNTING SERVICES................................................
REDEMPTION IN KIND....................................................
ACCOUNT AND SHARE INFORMATION.........................................
TAX INFORMATION.......................................................
WHO MANAGES AND PROVIDES SERVICES TO THE FUNDS........................
HOW DO THE FUNDS MEASURE PERFORMANCE?.................................
FINANCIAL INFORMATION.................................................
INVESTMENT RATINGS....................................................
ADDRESSES.............................................................
Federated Securities Corp.,
Distributor,
subsidiary of Federated
Investors, Inc.
HOW ARE THE FUNDS ORGANIZED?
The Wachovia Variable Insurance Funds (the Trust) is an open-end, management
investment company that was established under the laws of the Commonwealth of
Massachusetts on March 3, 2000. The Trust may offer separate series of shares
representing interests in separate portfolios of securities. The Trust currently
offers interests in three professionally managed, diversified series (together
referred to as the Funds): Wachovia Balanced Fund II; Wachovia Equity Fund II;
and Wachovia Special Values Fund II.
SECURITIES IN WHICH THE FUNDS INVEST
The following table indicates which types of securities are a:
o Principal = PRINCIPAL investment of a Fund (shaded in chart); o Acceptable =
ACCEPTABLE (but not principal) investment of a Fund; or o Not Acceptable = NOT
AN ACCEPTABLE investment of a Fund.
- --------------------------------------------------------------------
SECURITIES BALANCED EQUITY FUND SPECIAL
FUND II II VALUES FUND II
- -----------------------------------------
- --------------------------------------------------------------------
AMERICAN DEPOSITORY Acceptable Acceptable Acceptable
RECEIPTS1
- --------------------------------------------------------------------
- --------------------------------------------------------------------
ASSET-BACKED SECURITIES2 Acceptable NOT NOT
ACCEPTABLE ACCEPTABLE
- -----------------------------------------
- --------------------------------------------------------------------
BANKING INSTRUMENTS Acceptable Acceptable Acceptable
- -----------------------------------------
- --------------------------------------------------------------------
COMMERCIAL PAPER3 Acceptable Acceptable Acceptable
- -----------------------------------------
- --------------------------------------------------------------------
COMMON STOCKS PRINCIPAL PRINCIPAL PRINCIPAL
- --------------------------------------------------------------------
- -----------------------------------------
CONVERTIBLE SECURITIES Acceptable Acceptable Acceptable
- -----------------------------------------
- --------------------------------------------------------------------
CORPORATE DEBT OBLIGATIONS4 PRINCIPAL Acceptable Acceptable
- -------------------------------------------------------
- --------------------------------------------------------------------
CREDIT ENHANCEMENT ACCEPTABLE ACCEPTABLE ACCEPTABLE
- --------------------------------------------------------------------
- --------------------------------------------------------------------
DEMAND MASTER NOTES Acceptable NOT NOT
ACCEPTABLE ACCEPTABLE
- --------------------------------------------------------------------
- -----------------------------------------
EUROPEAN DEPOSITORY ACCEPTABLE Acceptable Acceptable
RECEIPTS
- --------------------------------------------------------------------
- --------------------------------------------------------------------
FOREIGN BANK INSTRUMENTS ACCEPTABLE ACCEPTABLE ACCEPTABLE
- ----------------------------------------- -------------
- --------------------------------------------------------------------
FOREIGN CURRENCY NOT Not Not
TRANSACTIONS ACCEPTABLE Acceptable Acceptable
- ----------------------------------------- -------------
- --------------------------------------------------------------------
FOREIGN SECURITIES1 Acceptable Acceptable Acceptable
- --------------------------------------------------------------------
- --------------------------------------------------------------------
FUTURES AND OPTIONS Acceptable Acceptable Acceptable
TRANSACTIONS
- --------------------------------------------------------------------
- ----------------------------------------- -------------
FUTURES ON FOREIGN Acceptable NOT NOT
GOVERNMENT DEBT ACCEPTABLE ACCEPTABLE
- --------------------------------------------------------------------
- ----------------------------------------- -------------
GLOBAL DEPOSITORY RECEIPTS ACCEPTABLE Acceptable Acceptable
- --------------------------------------------------------------------
- --------------------------------------------------------------------
HIGH-YIELD SECURITIES5 NOT Not Acceptable
ACCEPTABLE Acceptable
- --------------------------------------------------------------------
- --------------------------------------------------------------------
LENDING OF PORTFOLIO ACCEPTABLE Acceptable Acceptable
SECURITIES
- --------------------------------------------------------------------
- --------------------------------------------------------------------
MASTER LIMITED PARTNERSHIPS NOT Not Acceptable
ACCEPTABLE Acceptable
- --------------------------------------------------------------------
- --------------------------------------------------------------------
MONEY MARKET INSTRUMENTS ACCEPTABLE Acceptable Acceptable
- --------------------------------------------------------------------
- --------------------------------------------------------------------
OPTIONS ON FINANCIAL ACCEPTABLE Acceptable Acceptable
FUTURES
- --------------------------------------------------------------------
- --------------------------------------------------------------------
OVER-THE-COUNTER OPTIONS ACCEPTABLE Acceptable Acceptable
- --------------------------------------------------------------------
- --------------------------------------------------------------------
PREFERRED STOCKS Acceptable Acceptable Acceptable
- --------------------------------------------------------------------
- --------------------------------------------------------------------
REPURCHASE AGREEMENTS Acceptable Acceptable Acceptable
- --------------------------------------------------------------------
- --------------------------------------------------------------------
RESTRICTED AND ILLIQUID Acceptable Acceptable Acceptable
SECURITIES6
- --------------------------------------------------------------------
- --------------------------------------------------------------------
REVERSE REPURCHASE Acceptable Acceptable Acceptable
AGREEMENTS
- --------------------------------------------------------------------
- --------------------------------------------------------------------
SECURITIES OF OTHER Acceptable Acceptable Acceptable
INVESTMENT COMPANIES
- --------------------------------------------------------------------
- --------------------------------------------------------------------
STOCK INDEX FUTURES AND Acceptable Acceptable Acceptable
OPTIONS7
- --------------------------------------------------------------------
- --------------------------------------------------------------------
STRIPPED MORTGAGE-BACKED Acceptable NOT NOT
SECURITIES ACCEPTABLE ACCEPTABLE
- --------------------------------------------------------------------
- --------------------------------------------------------------------
TEMPORARY INVESTMENTS Acceptable Acceptable Acceptable
- --------------------------------------------------------------------
- --------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS Principal Acceptable Acceptable
- -----------------------------------------
- --------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES Acceptable Acceptable Acceptable
- --------------------------------------------------------------------
- ----------------------------------------- -------------
WARRANTS Acceptable Acceptable Acceptable
- --------------------------------------------------------------------
WHEN-ISSUED AND DELAYED Acceptable Acceptable Acceptable
DELIVERY TRANSACTIONS
- --------------------------------------------------------------------
1. The Balanced Fund II, Equity Fund II and Special Values Fund II may not
invest more than 20% of its assets in ADRs and not more than 10% of its assets
in other securities of foreign issuers (non-ADRs).
2. Rated A or better by Moody's or S&P.
3. Rated Prime-1 by Moody's or A-1 by S&P or of comparable quality as
determined by the investment adviser.
4. Rated A or better by Moody's or S&P or of comparable quality as determined by
the investment adviser. The Balanced Fund II may invest up to 5% of its assets
in obligations rated Baa by Moody's or BBB by S&P or of comparable quality as
determined by the investment adviser.
5. Securities are rated Baa or lower by Moody's or BBB or lower by S&P. The
Special Values Fund II swill not invest more than 35% of their total assets in
such securities.
6. The Balanced Fund II, Equity Fund II and the Special Values Fund II 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.
7. Not more than 20% of each Fund's assets will be invested in stock index
futures and options. Each 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 or margin deposits on open positions, as applicable.
SECURITIES DESCRIPTIONS AND TECHNIQUES
EQUITY SECURITIES
Equity securities represent a share of an issuer's earnings and assets, after
the issuer pays its liabilities. The Funds cannot predict the income they will
receive from equity securities because issuers generally have discretion as to
the payment of any dividends or distributions. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which a Fund may invest.
COMMON STOCKS
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings directly
influence the value of its common stock. PREFERRED STOCKS Preferred stocks
have the right to receive specified dividends or distributions before the
issuer makes payments on its common stock. Some preferred stocks also
participate in dividends and distributions paid on common stock. Preferred
stocks may also permit the issuer to redeem the stock. A Fund may also treat
such redeemable preferred stock as a fixed income security.
INTERESTS IN OTHER LIMITED LIABILITY COMPANIES
Entities such as limited partnerships, limited liability companies, business
trusts and companies organized outside the United States may issue securities
comparable to common or preferred stock.
REAL ESTATE INVESTMENT TRUSTS (REITS)
REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax if
they limit their operations and distribute most of their income. Such tax
requirements limit a REIT's ability to respond to changes in the commercial
real estate market.
WARRANTS
Warrants give a Fund the option to buy the issuer's equity securities at a
specified price (the exercise price) at a specified future date (the
expiration date). The Fund may buy the designated securities by paying the
exercise price before the expiration date. Warrants may become worthless if
the price of the stock does not rise above the exercise price by the
expiration date. This increases the market risks of warrants as compared to
the underlying security. Rights are the same as warrants, except companies
typically issue rights to existing stockholders.
MASTER LIMITED PARTNERSHIPS
A master limited partnership is a publicly owned limited partnership whose
shares are bought and sold on an organized stock exchange.
FIXED INCOME SECURITIES
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
The following describes the types of fixed income securities in which a Fund may
invest.
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Investors regard treasury securities as having the lowest
credit risks.
AGENCY SECURITIES
Agency securities are issued or guaranteed by a federal agency or other
government sponsored entity acting under federal authority (a GSE). The
United States supports some GSEs with its full, faith and credit. Other GSEs
receive support through federal subsidies, loans or other benefits. A few
GSEs have no explicit financial support, but are regarded as having implied
support because the federal government sponsors their activities. Investors
regard agency securities as having low credit risks, but not as low as
treasury securities. The Fund treats mortgage backed securities guaranteed by
GSEs as agency securities. Although a GSE guarantee protects against credit
risks, it does not reduce the interest rate and prepayment risks of these
mortgage backed securities.
CORPORATE DEBT SECURITIES
Corporate debt securities are fixed income securities issued by businesses.
Notes, bonds, debentures and commercial paper are the most prevalent types of
corporate debt securities. A Fund may also purchase interests in bank loans
to companies. The credit risks of corporate debt securities vary widely
amount issuers.
The credit risk of an issuer's debt security may also vary based on its
priority for repayment. For example, higher ranking (senior) debt securities
have a higher priority than lower ranking (subordinated) securities. This
means that the issuer might not make payments on subordinated securities
while continuing to make payments on senior securities. In addition, in the
event of bankruptcy, holders of senior securities may receive amounts
otherwise payable to the holders of subordinated securities. Some
subordinated securities, such as trust preferred and capital securities
notes, also permit the issuer to defer payments under certain circumstances.
For example, insurance companies issue securities known as surplus notes that
permit the insurance company to defer any payment that would reduce its
capital below regulatory requirements.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and
use the proceeds (or bank loans) to repay maturing paper. If the issuer
cannot continue to obtain liquidity in this fashion, its commercial paper
may default. The short maturity of commercial paper reduces both the
market and credit risks as compared to other debt securities of the same
issuer. DEMAND INSTRUMENTS Demand instruments are corporate debt
securities that the issuer must repay upon demand. Other demand
instruments require a third party, such as a dealer or bank, to repurchase
the security for its face value upon demand. The Fund treats demand
instruments as short-term securities, even though their stated maturity
may extend beyond one year.
MORTGAGE BACKED SECURITIES
Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates,
maturities and other terms. Mortgages may have fixed or adjustable interest
rates. Interests in pools of adjustable rate mortgages are known as ARMs.
Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer
deducts its fees and expenses and passes the balance of the payments onto the
certificate holders once a month. Holders of pass-through certificates
receive a pro rata share of all payments and pre-payments from the underlying
mortgages. As a result, the holders assume all the prepayment risks of the
underlying mortgages. ASSET BACKED SECURITIES Asset backed securities are
payable from pools of obligations other than mortgages. Most asset backed
securities involve consumer or commercial debts with maturities of less than
ten years. However, almost any type of fixed income assets (including other
fixed income securities) may be used to create an asset backed security.
Asset backed securities may take the form of commercial paper, notes, or pass
through certificates. Asset backed securities have prepayment risks. Asset
backed securities may be structured in multiple classes. Historically,
borrowers are more likely to refinance their mortgage than any other type of
consumer or commercial debt. In addition, some asset backed securities use
prepayment to buy additional assets, rather than paying off the securities.
Therefore, while asset backed securities may have some prepayment risks, they
generally do not present the same degree of risk as mortgage backed
securities. ZERO COUPON SECURITIES Zero coupon securities do not pay interest
or principal until final maturity unlike debt securities that provide
periodic payments of interest (referred to as a coupon payment). Investors
buy zero coupon securities at a price below the amount payable at maturity.
The difference between the purchase price and the amount paid at maturity
represents interest on the zero coupon security. An investor must wait until
maturity to receive interest and principal, which increases the interest rate
and credit risks of a zero coupon security. A zero coupon step-up security
converts to a coupon security before final maturity. There are many forms of
zero coupon securities. Some are issued at a discount and are referred to as
zero coupon or capital appreciation bonds. Others are created from interest
bearing bonds by separating the right to receive the bond's coupon payments
from the right to receive the bond's principal due at maturity, a process
known as coupon stripping. The most common forms of stripped zero coupon
securities include Treasury STRIPs, interest-only securities and
principal-only securities. In addition, some securities give the issuer the
option to deliver additional securities in place of cash interest payments,
thereby increasing the amount payable at maturity. These are referred to as
pay-in-kind or PIK securities.
BANK INSTRUMENTS
Bank instruments are unsecured interest bearing deposits with banks.
Bank instruments include bank accounts, time deposits, certificates of
deposit and banker's acceptances. Yankee instruments are denominated
in U.S. dollars and issued by U.S. branches of foreign banks.
Eurodollar instruments are denominated in U.S. dollars and issued by
non-U.S. branches of U.S. or foreign banks.
INSURANCE CONTRACTS
Insurance contracts include guaranteed investment contracts, funding
agreements and annuities. A Fund may treat these contracts as fixed income
securities.
CREDIT ENHANCEMENT
Credit enhancement consists of an arrangement in which a company agrees to
pay amounts due on a fixed income security after the issuer defaults. In some
cases the company providing credit enhancement makes all payments directly to
the security holders and receives reimbursement from the issuer. Normally,
the credit enhancer has greater financial resources and liquidity than the
issuer. For this reason, the investment adviser may evaluate the credit risk
of a fixed income security based solely upon its credit enhancement. Common
types of credit enhancement include guarantees, letters of credit, bond
insurance and surety bonds. Credit enhancement also includes arrangements
where securities or other liquid assets secure payment of a fixed income
security. Following a default, these assets may be sold and the proceeds paid
to security's holders. Either form of credit enhancement reduces credit risks
by providing another source of payment for a fixed income security.
CONVERTIBLE SECURITIES
Convertible securities are fixed income securities that the Fund has the option
to exchange for equity securities at a specified conversion price. The option
allows the Fund to realize additional returns if the market price of the equity
securities exceeds the conversion price. For example, the Fund may hold fixed
income securities that are convertible into shares of common stock at a
conversion price of $10 per share. If the market value of the shares of common
stock reached $12, the Fund could realize an additional $2 per share by
converting its fixed income securities.
Convertible securities have lower yields than comparable fixed income
securities. In addition, at the time a convertible security is issued the
conversion price exceeds the market value of the underlying equity securities.
Thus, convertible securities may provide lower returns than non-convertible
fixed income securities or equity securities depending upon changes in the price
of the underlying equity securities. However, convertible securities permit the
Fund to realize some of the potential appreciation of the underlying equity
securities with less risk of losing its initial investment.
A Fund may treat convertible securities as both fixed income and equity
securities for purposes of its investment policies and limitations, because of
their unique characteristics.
TAX EXEMPT SECURITIES
Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Typically, states, counties, cities and
other political subdivisions and authorities issue tax exempt securities. The
market categorizes tax exempt securities by their source of repayment.
VARIABLE RATE DEMAND INSTRUMENTS
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the security
for its face value upon demand. The securities also pay interest at a
variable rate intended to cause the securities to trade at their face value.
A Fund treats demand instruments as short-term securities, because their
variable interest rate adjusts in response to changes in market rates, even
though their stated maturity may extend beyond thirteen months.
FOREIGN SECURITIES
Foreign securities are securities of issuers based outside the United States. A
Fund considers an issuer to be based outside the United States if:
o it is organized under the laws of, or has a principal office located
in, another country;
o the principal trading market for its securities is in another
country; or
o it (or its subsidiaries) derived in its most current fiscal year at least 50%
of its total assets, capitalization, gross revenue or profit from goods
produced, services performed, or sales made in another country.
Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing. Trading
in certain foreign markets is also subject to liquidity risks.
DEPOSITARY RECEIPTS
Depositary receipts represent interests in underlying securities issued by a
foreign company. Depositary receipts are not traded in the same market as the
underlying security. The foreign securities underlying American Depositary
Receipts (ADRs) are not traded in the United States. ADRs provide a way to
buy shares of foreign-based companies in the United States rather than in
overseas markets. ADRs are also traded in U.S. dollars, eliminating the need
for foreign exchange transactions. The foreign securities underlying European
Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), and
International Depositary Receipts (IDRs), are traded globally or outside the
United States. Depositary Receipts involve many of the same risks of
investing directly in foreign securities, including currency risks and risks
of foreign investing.
FOREIGN EXCHANGE CONTRACTS
In order to convert U.S. dollars into the currency needed to buy a foreign
security, or to convert foreign currency received from the sale of a foreign
security into U.S. dollars, a Fund may enter into spot currency trades. In a
spot trade, the Fund agrees to exchange one currency for another at the
current exchange rate. The Fund may also enter into derivative contracts in
which a foreign currency is an underlying asset. The exchange rate for
currency derivative contracts may be higher or lower than the spot exchange
rate. Use of these derivative contracts may increase or decrease the Fund's
exposure to currency risks.
FOREIGN GOVERNMENT SECURITIES
Foreign government securities generally consist of fixed income securities
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations of
supranational entities, such as international organizations designed or
supported by governmental entities to promote economic reconstruction or
development, international banking institutions and related government
agencies. Examples of these include, but are not limited to, the
International Bank for Reconstruction and Development (the World Bank), the
Asian Development Bank, the European investment Bank and the Inter-American
Development Bank.
Foreign government securities also include fixed income securities of
quasi-governmental agencies that are either issued by entities owned by a
national, state or equivalent government or are obligations of a political
unit that are not backed by the national government's full faith and credit.
Further, foreign government securities include mortgage-related securities
issued or guaranteed by national, state or provincial governmental
instrumentalities, including quasi-governmental agencies.
DERIVATIVE CONTRACTS
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty.
Many derivative contracts are traded on securities or commodities exchanges. In
this case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract.
The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to interest
rate and currency risks, and may also expose the Fund to liquidity and leverage
risks. OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.
A Fund may trade in the following types of derivative contracts.
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset is
commonly referred to as buying a contract or holding a long position in the
asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts. Futures contracts
traded OTC are frequently referred to as forward contracts.
OPTIONS
Options are rights to buy or sell an underlying asset for a specified price
(the exercise price) during, or at the end of, a specified period. A call
option gives the holder (buyer) the right to buy the underlying asset from
the seller (writer) of the option. A put option gives the holder the right to
sell the underlying asset to the writer of the option. The writer of the
option receives a payment, or premium, from the buyer, which the writer keeps
regardless of whether the buyer uses (or exercises) the option.
A Fund may engage in one or more of the following:
Buy call options on securities, securities indices and futures contracts in
anticipation of an increase in the value of the underlying asset.
Buy put options on securities, securities indices and futures contracts in
anticipation of a decrease in the value of the underlying asset. Write call
options on securities, securities indices and futures contracts to generate
income from premiums, and in anticipation of a decrease or only limited
increase in the value of the underlying asset. If a call written by the Fund
is exercised, the Fund foregoes any possible profit from an increase in the
market price of the underlying asset over the exercise price plus the premium
received. Write put options on securities, securities indices and futures
contracts (to generate income from premiums, and in anticipation of an
increase or only limited decrease in the value of the underlying asset). In
writing puts, there is a risk that the Fund may be required to take delivery
of the underlying asset when its current market price is lower than the
exercise price.
When the Fund writes options on futures contracts, it will be subject to
margin requirements similar to those applied to futures contracts. Buy or
write options to close out existing options positions. HYBRID INSTRUMENTS
Hybrid instruments combine elements of derivative contracts with those of
another security (typically a fixed income security). All or a portion of the
interest or principal payable on a hybrid security is determined by reference
to changes in the price of an underlying asset or by reference to another
benchmark (such as interest rates, currency exchange rates or indices).
Hybrid instruments also include convertible securities with conversion terms
related to an underlying asset or benchmark.
The risks of investing in hybrid instruments reflect a combination of the
risks of investing in securities, options, futures and currencies, and depend
upon the terms of the instrument. Thus, an investment in a hybrid instrument
may entail significant risks in addition to those associated with traditional
fixed income or convertible securities. Hybrid instruments are also
potentially more volatile and carry greater interest rate risks than
traditional instruments. Moreover, depending on the structure of the
particular hybrid, it may expose the Fund to leverage risks or carry
liquidity risks.
SPECIAL TRANSACTIONS
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which a Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest
rate on the underlying security. The Fund will enter into repurchase
agreements only with banks and other recognized financial institutions, such
as securities dealers, deemed creditworthy by the investment adviser.
The Funds' custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The investment adviser or subcustodian will
monitor the value of the underlying security each day to ensure that the
value of the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which the Fund is
the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must repurchase
the underlying security at a higher price, regardless of the market value of
the security at the time of repurchase.
DELAYED DELIVERY TRANSACTIONS
Delayed delivery transactions are arrangements in which the Fund buys
securities for a set price, with payment and delivery of the securities
scheduled for a future time. During the period between purchase and
settlement, no payment is made by the Fund to the issuer and no interest
accrues to the Fund. The Fund records the transaction when it agrees to buy
the securities and reflects their value in determining the price of its
shares. Settlement dates may be a month or more after entering into these
transactions so that the market values of the securities bought may vary from
the purchase prices. Therefore, delayed delivery transactions create interest
rate risks for the Fund. Delayed delivery transactions also involve credit
risks in the event of a counterparty default.
TO BE ANNOUNCED SECURITIES (TBAS)
As with other when issued transactions, a seller agrees to issue a TBA
security at a future date. However, the seller does not specify the
particular securities to be delivered. Instead, the Fund agrees to accept
any security that meets specified terms. For example, in a TBA mortgage
backed transaction, the Fund and the seller would agree upon the issuer,
interest rate and terms of the underlying mortgages. However, the seller
would not identify the specific underlying mortgages until it issues the
security. TBA mortgage backed securities increase interest rate risks
because the underlying mortgages may be less favorable than anticipated by
the Fund.
SECURITIES LENDING
A Fund may lend portfolio securities to borrowers that the investment adviser
deems creditworthy. In return, the Fund receives cash or liquid securities
from the borrower as collateral. The borrower must furnish additional
collateral if the market value of the loaned securities increases. Also, the
borrower must pay the Fund the equivalent of any dividends or interest
received on the loaned securities.
The Fund will reinvest cash collateral in securities that qualify as an
acceptable investment for the Fund. However, the Fund must pay interest to
the borrower for the use of cash collateral. Loans are subject to termination
at the option of the Fund or the borrower. The Fund will not have the right
to vote on securities while they are on loan, but it will terminate a loan in
anticipation of any important vote. The Fund may pay administrative and
custodial fees in connection with a loan and may pay a negotiated portion of
the interest earned on the cash collateral to a securities lending agent or
broker. Securities lending activities are subject to interest rate risks and
credit risks. These transactions create leverage risks.
ASSET COVERAGE
In order to secure its obligations in connection with derivatives contracts or
special transactions, a Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions.
INVESTMENT RISKS
STOCK MARKET RISKS
o The value of equity securities in a Fund's portfolio will rise and fall.
These fluctuations could be a sustained trend or a drastic movement. A Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund's share price may
decline and you could lose money.
o The investment adviser attempts to manage market risk by limiting the amount
a Fund invests in each company's equity securities. However, diversification
will not protect the Fund against widespread or prolonged declines in the
stock market.
SECTOR RISKS
O Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain
sector may underperform other sectors or the market as a whole. As the
investment adviser allocates more of the Fund's portfolio holdings to a
particular sector, the Fund's performance will be more susceptible to any
economic, business or other developments which generally affect that sector.
LIQUIDITY RISKS
o Trading opportunities are more limited for equity securities that are not
widely held and for fixed income securities that have not received any credit
ratings, have received ratings below investment grade or are not widely held.
This may make it more difficult to sell or buy a security at a favorable
price or time. Consequently, a Fund may have to accept a lower price to sell
a security, sell other securities to raise cash or give up an investment
opportunity, any of which could have a negative effect on the Fund's
performance. Infrequent trading of securities may also lead to an increase in
their price volatility.
o Liquidity risk also refers to the possibility that a Fund may not be able to
sell a security or close out a derivative contract when it wants to. If this
happens, the Fund will be required to continue to hold the security or keep
the position open, and the Fund could incur losses.
o OTC derivative contracts generally carry greater liquidity risk than
exchange-traded contracts.
RISKS RELATED TO COMPANY SIZE
o Generally, the smaller the market capitalization of a company, the fewer the
number of shares traded daily, the less liquid its stock and the more
volatile its price. Market capitalization is determined by multiplying the
number of its outstanding shares by the current market price per share.
o Companies with smaller market capitalizations also tend to have unproven
track records, a limited product or service base and limited access to
capital. These factors also increase risks and make these companies more
likely to fail than companies with larger market capitalizations.
CURRENCY RISKS
o Exchange rates for currencies fluctuate daily. The combination of currency
risk and market risk tends to make securities traded in foreign markets more
volatile than securities traded exclusively in the U.S.
O The investment adviser attempts to manage currency risk by limiting the
amount the Fund invests in securities denominated in a particular currency.
However, diversification will not protect the Fund against a general increase
in the value of the U.S. dollar relative to other currencies.
RISKS OF FOREIGN INVESTING
o The Funds may invest in foreign securities. Foreign securities pose
additional risks because foreign economic or political conditions may be less
favorable than those of the United States. Securities in foreign markets may
also be subject to taxation policies that reduce returns for U.S. investors.
o Foreign companies may not provide information (including financial
statements) as frequently or to as great an extent as companies in the United
States. Foreign companies may also receive less coverage than United States
companies by market analysts and the financial press. In addition, foreign
countries may lack uniform accounting, auditing and financial reporting
standards or regulatory requirements comparable to those applicable to U.S.
companies. These factors may prevent a Fund and its investment adviser from
obtaining information concerning foreign companies that is as frequent,
extensive and reliable as the information available concerning companies in
the United States.
o Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of a Fund's
investments.
LEVERAGE RISKS
o Leverage risk is created when an investment exposes the Fund to a level of
risk that exceeds the amount invested. Changes in the value of such an
investment magnify the Fund's risk of loss and potential for gain.
o Investments can have these same results if their returns are based on a
multiple of a specified index, security, or other benchmark.
INTEREST RATE RISKS
o Prices of fixed income securities rise and fall in response to interest rate
changes in the interest rate paid by similar securities. Generally, when
interest rates rise, prices of fixed income securities fall. However, market
factors, such as the demand for particular fixed income securities, may cause
the price of certain fixed income securities to fall while the prices of
other securities rise or remain unchanged.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.
CREDIT RISKS
o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, a Fund
will lose money.
o Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investors Service. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not
received a rating, the Fund must rely entirely upon the investment adviser's
credit assessment.
o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable maturity
(the spread) measures the additional interest paid for risk. Spreads may
increase generally in response to adverse economic or market conditions. A
security's spread may also increase if the security's rating is lowered, or
the security is perceived to have an increased credit risk. An increase in
the spread will cause the price of the security to decline.
o Credit risk includes the possibility that a party to a transaction involving
the Fund will fail to meet its obligations. This could cause the Fund to lose
the benefit of the transaction or prevent the Fund from selling or buying
other securities to implement its investment strategy.
CALL RISKS
o Call risk is the possibility that an issuer may redeem a fixed income
security before maturity (a call) at a price below its current market price.
An increase in the likelihood of a call may reduce the security's price.
o If a fixed income security is called, the Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.
PREPAYMENT RISKS
o Unlike traditional fixed income securities, which pay a fixed rate of
interest until maturity (when the entire principal amount is due) payments on
mortgage backed securities include both interest and a partial payment of
principal. Partial payment of principal may be comprised of scheduled
principal payments as well as unscheduled payments from the voluntary
prepayment, refinancing, or foreclosure of the underlying loans. These
unscheduled prepayments of principal create risks that can adversely affect a
Fund holding mortgage backed securities.
For example, when interest rates decline, the values of mortgage backed
securities generally rise. However, when interest rates decline, unscheduled
prepayments can be expected to accelerate, and the Fund would be required to
reinvest the proceeds of the prepayments at the lower interest rates then
available. Unscheduled prepayments would also limit the potential for capital
appreciation on mortgage backed securities.
Conversely, when interest rates rise, the values of mortgage backed
securities generally fall. Since rising interest rates typically result in
decreased prepayments, this could lengthen the average lives of mortgage
backed securities, and cause their value to decline more than traditional
fixed income securities.
o Generally, mortgage backed securities compensate for the increased risk
associated with prepayments by paying a higher yield. The additional interest
paid for risk is measured by the difference between the yield of a mortgage
backed security and the yield of a U.S. Treasury security with a comparable
maturity (the spread). An increase in the spread will cause the price of the
mortgage backed security to decline. Spreads generally increase in response
to adverse economic or market conditions. Spreads may also increase if the
security is perceived to have an increased prepayment risk or is perceived to
have less market demand.
RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES
o The Balanced Fund may invest in securities rated below investment grade.
These securities, also known as junk bonds, generally entail greater market,
credit and liquidity risks than investment grade securities. For example,
their prices are more volatile, economic downturns and financial setbacks may
affect their prices more negatively, and their trading market may be more
limited.
INVESTMENT LIMITATIONS
SELLING SHORT AND BUYING ON MARGIN
The Funds 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
purchases and sales of portfolio securities.
The deposit or payment by a 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 Funds will not issue
senior securities, except that a Fund may borrow money directly or through
reverse repurchase agreements in amounts up to one-third of the value of
its net assets, including the amounts borrowed and except, with respect to
the Balanced Funds, as permitted by its investment objective and policies.
The Funds will not borrow money or engage in reverse repurchase agreements
for investment leverage, but rather as a temporary, extraordinary, or
emergency measure to facilitate management of the portfolio by enabling a
Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. Each Fund,
except the Money Market Funds, will not purchase any securities while
borrowings in excess of 5% of the value of its total assets are
outstanding.
PLEDGING ASSETS
The Funds will not mortgage, pledge, or hypothecate any assets except to
secure permitted borrowings. In those cases, a 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 Funds will not buy or sell real estate, including limited partnership
interests, although a Fund 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 Funds will not buy or sell commodities, commodity contracts, or
commodities futures contracts, except however, to the extent that each
Fund (except the Money Market Funds) may engage in transactions involving
futures contracts and related options. UNDERWRITING The Funds will not
underwrite any issue of securities, except as each Fund may be deemed to
be an underwriter under the Securities Act of 1933 in connection with the
sale of 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, each 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. Also, a Fund will not acquire more than 10%
of the outstanding voting securities of any one issuer.
CONCENTRATION OF INVESTMENTS
The Funds will not invest 25% or more of the value of their total assets
in any one industry, except that a Fund may invest 25% or more of the
value of its total assets in cash, cash items, or 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 Funds will not lend any of their assets except portfolio securities,
the market values of which do not exceed one-third of the value of a
Fund's total assets.
This shall not prevent the Funds 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 each Fund's investment objective,
policies, and limitations.
THE ABOVE INVESTMENT LIMITATIONS CANNOT BE CHANGED BY THE BOARD OF TRUSTEES
(BOARD) UNLESS AUTHORIZED BY THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING
SECURITIES," AS DEFINED BY THE INVESTMENT COMPANY ACT. THE FOLLOWING
LIMITATIONS, HOWEVER, MAY BE CHANGED BY THE BOARD WITHOUT SHAREHOLDER APPROVAL.
SHAREHOLDERS WILL BE NOTIFIED BEFORE ANY MATERIAL CHANGE IN THESE LIMITATIONS
BECOMES EFFECTIVE.
INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES The Funds will limit
their 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 their total assets in any one investment company, and will
invest no more than 10% of their total assets in investment companies in
general, unless, they are permitted to exceed these limitations by action
of the SEC. The Funds will purchase securities of closed-end investment
companies only in open market transactions involving only customary
brokers' commissions. However, these limitations are not applicable if the
securities are acquired in a merger, consolidation, reorganization, or
acquisition of assets. It should be noted that investment companies incur
certain expenses such as custodian and transfer agency fees, and
therefore, any investment by a Fund in shares of another investment
company would be subject to such duplicate expenses. The Funds will invest
in other investment companies primarily for the purpose of investing their
short-term cash on a temporary basis.
INVESTING IN RESTRICTED SECURITIES
The Funds will not invest more than 10% of their 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 Funds will not invest more than 15% of their net assets in securities
which are illiquid, including repurchase agreements providing for
settlement in more than seven days after notice, over-the-counter options,
non-negotiable time deposits with maturities over seven days, and certain
securities not determined under guidelines established by the Trustees to
be liquid. INVESTING IN PUT OPTIONS The Funds will not purchase put
options on securities, other than put options on stock indices, unless the
securities are held in a 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.
WRITING COVERED CALL OPTIONS
The Funds will not write call options on securities unless the securities
are held in a Fund's portfolio or unless a Fund is entitled to them in
deliverable form without further payment or after segregating cash in the
amount of any further payment. INVESTING IN WARRANTS The Funds will not
invest more than 5% of their net assets in warrants. No more than 2% of a
Fund's net assets, to be included within the overall 5% limit on
investments in warrants, may be warrants which are not listed on the New
York Stock Exchange or the American Stock Exchange.
PURCHASING SECURITIES TO EXERCISE CONTROL
The Funds will not purchase securities of a company for purposes of
exercising control or management.
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.
For purposes of its policies and limitations, the Funds consider certificates of
deposit and demand and time deposits issued by a U.S. branch of a domestic bank
or savings association, having capital, surplus, and undivided profits in excess
of $100,000,000 at the time of deposit, to be "cash items."
WHAT DO SHARES COST?
DETERMINING MARKET VALUE OF SECURITIES
Market values of the Funds' portfolio securities are determined as follows:
o for equity securities, according to the last sale price in the
market in which they are primarily traded (either a national securities
exchange or the over-the-counter market), if available;
o in the absence of recorded sales for equity securities, according to
the mean between the last closing bid and asked prices;
o for bonds and other fixed income securities, at the last sale price on a
national securities exchange, if available, otherwise, as determined by an
independent pricing service;
o for short-term obligations, according to the mean between bid and asked
prices as furnished by an independent pricing service, except that short-term
obligations with remaining maturities of less than 60 days at the time of
purchase may be valued at amortized cost or at fair market value as
determined in good faith by the Board; and
o for all other securities, at fair value as determined in good faith
by the Board.
Prices provided by independent pricing services may be determined without
relying exclusively on quoted prices and may consider: institutional trading in
similar groups of securities, yield, quality, stability, risk, coupon rate,
maturity, type of issue, trading characteristics, and other market data or
factors. From time to time, when prices cannot be obtained from an independent
pricing service, securities may be valued based on quotes from broker-dealers or
other financial institutions that trade the securities.
The Funds value futures contracts and options at their market values established
by the exchanges on which they are traded at the close of trading on such
exchanges. Options traded in the over-the-counter market are valued according to
the mean between the last bid and the last asked price for the option as
provided by an investment dealer or other financial institution that deals in
the option. The Board may determine in good faith that another method of valuing
such investments is necessary to appraise their fair market value.
TRADING IN FOREIGN SECURITIES. Trading in foreign securities may be completed at
times which vary from the closing of the New York Stock Exchange (NYSE). In
computing its net asset value (NAV), the Fund values foreign securities at the
latest closing price on the exchange on which they are traded immediately prior
to the closing of the NYSE. Certain foreign currency exchange rates may also be
determined at the latest rate prior to the closing of the NYSE. Foreign
securities quoted in foreign currencies are translated into U.S. dollars at
current rates. Occasionally, events that affect these values and exchange rates
may occur between the times at which they are determined and the closing of the
NYSE. If such events materially affect the value of portfolio securities, these
securities may be valued at their fair value as determined in good faith by the
Fund's Board, although the actual calculation may be done by others.
Each Fund's NAV per Share fluctuates and is based on the market value of all
securities and other assets of the Fund. The NAV for each class of Shares may
differ due to the variance in daily net income realized by each class. Such
variance will reflect only accrued net income to which the shareholders of a
particular class are entitled.
MIXED AND SHARED FUNDING
Shares of the Funds will be used for funding of both variable annuity contracts
and variable life insurance policies. This is called "mixed funding." Shares of
the Funds may be used in the future for investments by unaffiliated insurance
companies. This is referred to as "shared funding." Although the Funds do not
currently foresee any disadvantage to contract owners due to differences in
redemption rates, tax treatment, or other considerations resulting from mixed
funding or shared funding, the Trustees will closely monitor the operation of
mixed funding and shared funding and will consider appropriate action to avoid
material conflicts and take appropriate action in response to any material
conflicts that occur. Such action could result in one or more participating
investment companies withdrawing all or a portion of their investments in the
Funds.
HOW ARE THE FUNDS SOLD?
Under the Distributor's Contract with the Trust, the Distributor
(Federated Securities Corp.) offers Shares on a continuous, best-efforts
basis.
RULE 12B-1 PLAN
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professional such as banks,
broker/dealers, trust departments of bank, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professional) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Funds achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. Also, the
Funds' service providers that receive asset-based fees also benefit from stable
or increasing Fund assets.
The Funds may compensate the Distributor more or less than its actual marketing
expenses. In no event will a Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.
SUBACCOUNTING SERVICES
Certain participating insurance companies may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Participating insurance companies holding Shares in a fiduciary,
agency, custodial, or similar capacity may charge or pass through subaccounting
fees as part of or in addition to normal trust or agency account fees. They may
also charge fees for other services that may be related to the ownership of
Shares. This information should, therefore, be read together with any agreement
between the customer and the participating insurance company about the services
provided, the fees charged for those services, and any restrictions and
limitations imposed.
REDEMPTION IN KIND
Although the Funds intend to pay Share redemptions in cash, they reserve the
right, as described below, to pay the redemption price in whole or in part by a
distribution of a Fund's portfolio securities. Because the Funds have elected to
be governed by Rule 18f-1 under the Investment Company Act of 1940, the Funds
are obligated to pay Share redemptions to any one shareholder in cash only up to
the lesser of $250,000 or 1% of the net assets represented by such Share class
during any 90-day period.
Any Share redemption payment greater than this amount will also be in cash
unless the Board determines that payment should be in kind. In such a case, a
Fund will pay all or a portion of the remainder of the redemption in portfolio
securities, valued in the same way as the Fund determines its NAV. The portfolio
securities will be selected in a manner that the Trust's Board deems fair and
equitable and, to the extent available, such securities will be readily
marketable.
Redemption in kind is not as liquid as a cash redemption. If redemption is made
in kind, shareholders receiving the portfolio securities and selling them before
their maturity could receive less than the redemption value of the securities
and could incur certain transaction costs.
ACCOUNT AND SHARE INFORMATION
VOTING RIGHTS
The insurance company separate accounts, as shareholders of the Funds, will vote
the Fund Shares held in their separate accounts at meetings of the shareholders.
Voting will be in accordance with instructions received from contract owners of
the separate accounts, as more fully outlined in the prospectus of the separate
account.
Each share of the Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All classes of each Fund in
the Trust have equal voting rights, except that in matters affecting only a
particular Fund or class, only Shares of that Fund or class are entitled to
vote.
Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of shareholders will be called by the Trustees upon the
written request of shareholders who own at least 10% of the Trust's outstanding
shares of all series entitled to vote. As of ________________, which was prior
to the public offering of any of the Funds' shares, __________ was the holder of
100% of each Fund's shares, and there were otherwise no control persons or
principal holders of securities of the Funds.
Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.
TAX INFORMATION
FEDERAL INCOME TAX
Each Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, the Funds will not receive special tax treatment and will pay federal
income tax.
Each Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trusts' other portfolios will be separate from those realized by the Fund.
Each Fund must, and intends to, comply with the diversification requirements
imposed by Section 817(h) of the Internal Revenue Code. For information
concerning the consequence of a Fund not meeting the Section 817(h)
requirements, see the prospectus of the separate account. FOREIGN INVESTMENTS If
a Fund purchases foreign securities, its investment income may be subject to
foreign withholding or other taxes that could reduce the return on these
securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of Fund assets to be invested within various countries is uncertain.
However, the Fund intends to operate so as to qualify for treaty-reduced tax
rates when applicable. Distributions from a Fund may be based on estimates of
book income for the year. Book income generally consists solely of the coupon
income generated by the portfolio, whereas tax basis income includes gains or
losses attributable to currency fluctuation. Due to differences in the book and
tax treatment of fixed income securities denominated in foreign currencies, it
is difficult to project currency effects on an interim basis. Therefore, to the
extent that currency fluctuations cannot be anticipated, a portion of
distributions to shareholders could later be designated as a return of capital,
rather than income, for income tax purposes, which may be of particular concern
to simple trusts. If a Fund invests in the stock of certain foreign
corporations, they may constitute Passive Foreign Investment Companies (PFIC),
and the Fund may be subject to Federal income taxes upon disposition of PFIC
investments. If more than 50% of the value of the Fund's assets at the end of
the tax year is represented by stock or securities of foreign corporations, the
Fund intends to qualify for certain Code stipulations that would allow
shareholders to claim a foreign tax credit or deduction on their U.S. income tax
returns. The Code may limit a shareholder's ability to claim a foreign tax
credit. Shareholders who elect to deduct their portion of the Fund's foreign
taxes rather than take the foreign tax credit must itemize deductions on their
income tax returns.
WHO MANAGES AND PROVIDES SERVICES TO THE FUNDS?
BOARD OF TRUSTEES
The Board is responsible for managing the Trust's business affairs and for
exercising all of the Trust's powers except those reserved for the shareholders.
Information about each Board member is provided below and includes the following
data: name, birthdate, address, present position(s) held with the Trust,
principal occupations for the past five years, and total compensation received
as a Trustee from the Fund Complex (as defined below) for the most recent fiscal
year. Each of the Trustees and officers listed below holds an identical position
with The Wachovia Funds and The Wachovia Municipal Funds, two other registered
investment companies in the Fund Complex. Because the Trust has not had
operations prior to the date of this SAI, the aggregate compensation figures
provided in the table below represent the compensation that the Trustees
received from The Wachovia Funds and The Wachovia Municipal Funds for their last
fiscal years. The Trust is comprised of three Funds, The Wachovia Funds are
comprised of seventeen series and The Wachovia Municipal Funds are comprised of
four series, and together they form the Fund Complex. As of ____________, 2000,
the Trustees and Officers as a group owned less than 1% of the Funds'
outstanding Shares. An asterisk (*) denotes a Trustee who is deemed to be an
interested person as defined in the Investment Company Act of 1940.
<TABLE>
<CAPTION>
<S> <C> <C>
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NAME AGGREGATE
BIRTHDATE COMPENSATION
ADDRESS FROM FUND
POSITION WITH TRUST OCCUPATIONS FOR PAST 5 YEARS COMPLEX
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
JAMES A. HANLEY Retired; Vice President and Treasurer, Abbott $33,200 August 13,
1931 Laboratories (health care products) (until 4272 Sanctuary Way 1992).
Bonita Springs, FL
Trustee
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
SAMUEL E. HUDGINS Hudgins Consulting, LLC (independent $33,200
March 4, 1929 consultant); President, Percival Hudgins &
715 Whitemere Court, Company, LLC (investment bankers/financial
N.W. consultants) (until September 1997); Director,
Atlanta, GA Atlantic American Corporation (insurance
Trustee holding company).
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
D. DEAN KAYLOR Retired; Executive Vice President and Chief $26,000
June 29, 1930 Financial Officer, NBD Bank, N.A. and NBD
2835 Greenbriar Bancorp, Inc. (bank and bank holding company)
Harbor Springs, MI (until 1990).
Trustee
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
ALVIN J. SCHEXNIDER, Director, Office of Health Policy Development, $26,000
PH.D. Wake Forest University School of Medicine;
May 26, 1945 formerly, Chancellor, Winston-Salem State
3174 Turkey Hill Road University
Winston-Salem, NC 27106
Trustee
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
CHARLES S. WAY, JR.* President and CEO, The Beach Company and its $26,000
December 18, 1937 various affiliated companies and partnerships.
211 King Street
Suite 300
Charleston, SC
Trustee
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
JOHN W. MCGONIGLE Executive Vice President and Secretary of the $0
October 26, 1938 Federated Fund Complex; Executive Vice
Federated Investors President, Secretary and Director, Federated
Tower Investors, Inc.; Trustee, Federated Investment
Pittsburgh, PA Management Company and Federated Investment
President and Treasurer Counseling; Director, Federated Global
Investment Management Corp, Federated Services
Company and Federated Securities Corp.
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
JAMES OSTROWSKI Assistant Vice President and Client Services $0 November 13,
1959 Officer, Mutual Fund Services Division, Federated Investors Federated
Services Company; formerly, Client Tower Services Officer, Federated Services
Company.
Pittsburgh, PA
Vice President and
Assistant Treasurer
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
R. EDWARD BOWLING Senior Vice President, Wachovia Bank, N.A. and $0
March 25, 1958 Product Manager of the Trust, The Wachovia
100 N. Main Street Funds, and The Wachovia Municipal Funds.
Winston-Salem, NC
Vice President
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
GAIL CAGNEY Corporate Counsel and Vice President, $0
October 26, 1953 Federated Services Company.
Federated Investors
Tower
Pittsburgh, PA
Secretary
- ------------------------------------------------------------------------ --------------
</TABLE>
INVESTMENT ADVISER
The investment adviser conducts investment research and makes investment
decisions for the Funds. The investment adviser is a business unit of Wachovia
Bank, N.A.
The investment adviser shall not be liable to the Trust, the Funds, or any Fund
shareholder 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.
CODE OF ETHICS RESTRICTIONS ON PERSONAL TRADING
As required by SEC rules, the Funds, their Adviser, and their Distributor have
adopted codes of ethics. These codes govern securities trading activities of
investment personnel, the Funds' Trustees, and certain other employees. Although
they do permit these people to trade in securities, including those that the
Funds could buy, they also contain significant safeguards designed to protect
the Funds and their shareholders from abuses in this area, such as requirements
to obtain prior approval for, and to report, particular transactions.
BROKERAGE TRANSACTIONS
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the investment adviser looks for prompt execution of the order at a
favorable price. The investment adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The investment adviser may
select brokers and dealers based on whether they also offer research services
(as described below). In selecting among firms believed to meet these criteria,
the investment adviser may give consideration to those firms which have sold or
are selling Shares of the Funds and other funds distributed by the Distributor
and its affiliates. The investment adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to review by the Trust's
Board.
RESEARCH SERVICES. Research services 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. Research services may be used by the investment adviser or by
affiliates of Federated in advising other accounts. To the extent that receipt
of these services may replace services for which the investment adviser or its
affiliates might otherwise have paid, it would tend to reduce their expenses.
The investment adviser and its affiliates exercise reasonable business judgment
in selecting those 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. Investment decisions for the Funds are made
independently from those of other accounts managed by the investment adviser.
When a Fund and one or more of those accounts invests in, or disposes of, the
same security, available investments or opportunities for sales will be
allocated among the Fund and the account(s) in a manner believed by the
investment adviser to be equitable. While the coordination and ability to
participate in volume transactions may benefit the Funds, it is possible that
this procedure could adversely impact the price paid or received and/or the
position obtained or disposed of by the Funds.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated provides administrative
personnel and services (including certain legal and financial reporting
services) necessary to operate the Funds. Federated Services Company provides
these at the following annual rate of the average aggregate daily net assets of
the Funds in the Trust as specified below:
MAXIMUM AVERAGE AGGREGATE DAILY NET
ADMINISTRATIVE FEE ASSETS OF THE FUNDS
.10 of 1% on the first $3.5 billion
.06 of 1% on assets in excess of $3.5 billion
CUSTODIAN
Wachovia Bank, N.A., is custodian (the Custodian) for the securities and cash of
the Funds. Under the Custodian Agreement, the Custodian holds the Funds'
portfolio securities in safekeeping and keeps all necessary records and
documents relating to its duties. For the services to be provided to the Trust
pursuant to the Custodian Agreement, the Trust pays the Custodian an annual fee
based upon the average daily net assets of the Funds and which is payable
monthly. The Custodian will also charge transaction fees and out-of-pocket
expenses. Foreign instruments purchased by the Funds are held by foreign banks
participating in a network coordinated by State Street Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, also provides certain accounting and
recordkeeping services with respect to the Funds' portfolio investments.
INDEPENDENT PUBLIC ACCOUNTANTS
The independent public accountant for the Trust, Ernst & Young LLP, plans and
performs its audit so that it may provide an opinion as to whether the Funds'
financial statements and financial highlights are free of material misstatement.
SHAREHOLDER SERVICES
The Funds may pay Federated Administrative Services, a subsidiary of Federated,
for providing shareholder services and maintaining shareholder accounts.
Federated Administrative Services may select others to perform these services
for their customers and may pay them fees.
HOW DO THE FUNDS MEASURE PERFORMANCE?
The Funds may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.
Unless otherwise stated, any quoted Share performance reflects the effect of
non-recurring charges, such as maximum sales charges, which, if excluded, would
increase the total return and yield. The performance of Shares depends upon such
variables as: portfolio quality; average portfolio maturity; type and value of
portfolio securities; changes in interest rates; changes or differences in the
Fund's or any class of Shares' expenses; and various other factors.
Share performance fluctuates on a daily basis largely because net earnings and
offering price per Share fluctuate daily. Both net earnings and offering price
per Share are factors in the computation of yield and total return.
TOTAL RETURN
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions. The average annual total return for Shares 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 NAV 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 charge,
adjusted over the period by any additional Shares, assuming the annual
reinvestment of all dividends and distributions. When Shares of a Fund are in
existence for less than a year, the Fund may advertise cumulative total return
for that specific period of time, rather than annualizing the total return.
YIELD
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a thirty-day period; by (ii) the maximum
offering price per Share on the last day of the period. This number 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 Shares because of certain
adjustments required by the SEC and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.
To the extent investment professional and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
A Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
A Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:
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. From time to time, a Fund will quote its Lipper ranking in advertising and
sales literature.
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 "S&P
INDEX"), is a composite index of common stocks in industry, transportation, and
financial and public utility companies. In addition, the S&P Index assumes
reinvestment of all dividends paid by stocks listed on the S&P Index. Taxes due
on any of these distributions are not included, nor are brokerage or other fees
calculated in the S&P Index figures.
RUSSELL 2000 INDEX is a broadly diversified index consisting of approximately
2,000 small capitalization common stocks that can be used to compare the total
returns of funds whose portfolios are invested primarily in small capitalization
common stocks.
RUSSELL 2000 VALUE INDEX measures the performance of those Russell 2000
companies with lower price-to-book ratios and lower forecasted growth values.
MERRILL LYNCH COMPOSITE 1-3 YEAR TREASURY INDEX is an unmanaged index tracking
short-term U.S. government securities with maturities between 1 and 2.99 years.
The index is produced by Merrill Lynch, Pierce, Fenner & Smith.
MERRILL LYNCH COMPOSITE 1-5 YEAR TREASURY INDEX is comprised of approximately 66
issues of U.S. Treasury securities maturing between 1 and 4.99 years, with
coupon rates of 4.25% or more. These total return figures are calculated for
one, three, six, and twelve month periods and year-to-date and include the value
of the bond plus income and any price appreciation or depreciation.
SALOMON BROTHERS 3-5 YEAR GOVERNMENT INDEX quotes total returns for U.S.
Treasury issues (excluding flower bonds) which have maturities of three to five
years. These total returns are year-to-date figures which are calculated each
month following January 1.
MERRILL LYNCH 3-5 YEAR TREASURY INDEX is comprised of approximately 24 issues of
intermediate-term U.S. government and U.S. Treasury securities with maturities
between 3 and 4.99 years and coupon rates above 4.25%. Index returns are
calculated as total returns for periods of one, three, six and twelve months as
well as year-to-date.
MERRILL LYNCH 3-YEAR TREASURY YIELD CURVE INDEX is an unmanaged index comprised
of the most recently issued 3-year U.S. Treasury notes. Index returns are
calculated as total returns for periods of one, three, six, and twelve months as
well as year-to-date.
LEHMAN BROTHERS GOVERNMENT INDEX is an unmanaged index comprised of all publicly
issued, non-convertible domestic debt of the U.S. government, or any agency
thereof, or any quasi-federal corporation and of corporate debt guaranteed by
the U.S. government. Only notes and bonds with a minimum outstanding principal
of $1 million and a minimum maturity of one year are included.
LEHMAN BROTHERS AGGREGATE BOND INDEX is a total return index measuring both the
capital price changes and income provided by the underlying universe of
securities, weighted by market value outstanding. The Aggregate Bond Index is
comprised of the Lehman Brothers Government Bond Index, Corporate Bond Index,
Mortgage-Backed Securities Index and the Yankee Bond Index. These indices
include: U.S. Treasury obligations, including bonds and notes; U.S. agency
obligations, including those of the Farm Credit System, including the National
Bank for Cooperatives, Farm Credit Banks, and Banks for Cooperatives; Farmers
Home Administration; Federal Home Loan Banks; Federal Home Loan Mortgage
Corporation; Fannie Mae; Government National Mortgage Association and Student
Loan Marketing Association; foreign obligations; and U.S. investment-grade
corporate debt and mortgage-backed obligations. All corporate debt included in
the Aggregate Bond Index has a minimum S&P rating of BBB or a minimum Moody's
rating of Baa.
MERRILL LYNCH CORPORATE AND GOVERNMENT INDEX includes issues which must be in
the form of publicly placed, nonconvertible, coupon-bearing domestic debt and
must carry a term of maturity of at least one year. Par amounts outstanding must
be no less than $10 million at the start and at the close of the performance
measurement period. Corporate instruments must be rated by S&P or by Moody's as
investment grade issues (i.e., BBB/Baa or better).
MERRILL LYNCH DOMESTIC MASTER INDEX includes issues which must be in the form of
publicly placed, nonconvertible, coupon-bearing domestic debt and must carry a
term to maturity of at least one year. Par amounts outstanding must be no less
than $10 million at the start and at the close of the performance measurement
period. The Domestic Master Index is a broader index than the Merrill Lynch
Corporate and Government Index and includes, for example, mortgage-related
securities. The mortgage market is divided by agency, type of mortgage and
coupon and the amount outstanding in each agency/type/coupon subdivision must be
no less than $200 million at the start and at the close of the performance
measurement period. Corporate instruments must be rated by S&P or by Moody's as
investment-grade issues (i.e. BBB/Baa or better).
S&P 500/LEHMAN BROTHERS GOVERNMENT/CORPORATE (WEIGHTED INDEX) and the S&P
500/LEHMAN BROTHERS GOVERNMENT (WEIGHTED INDEX) combine the components of a
stock-oriented index and a bond-oriented index to obtain results which can be
compared to the performance of a managed fund. The indices' total returns will
be assigned various weights depending upon a Fund's current asset allocation.
SALOMON BROTHERS AAA-AA CORPORATE index calculates total returns of
approximately 775 issues which include long-term, high grade domestic corporate
taxable bonds, rated AAA-AA with maturities of twelve years or more and
companies in industry, public utilities, and finance.
LEHMAN BROTHERS INTERMEDIATE GOVERNMENT/CORPORATE BOND INDEX is an unmanaged
index comprised of all the bonds issued by the Lehman Brothers
Government/Corporate Bond Index with maturities between 1 and 9.99 years. Total
return is based on price appreciation/depreciation and income as a percentage of
the original investment. Indices are rebalanced monthly by market
capitalization.
SEI BALANCED UNIVERSE is composed of 916 portfolios managed by 390 managers
representing $86 billion in assets. To be included in the universe, a portfolio
must contain a 5% minimum commitment in both equity and fixed-income securities.
Consulting universes may be composed of pension, profit-sharing, commingled,
endowment/foundation and mutual funds.
LEHMAN BROTHERS GOVERNMENT/CORPORATE (TOTAL) index is comprised of approximately
5,000 issues which include: non-convertible bonds publicly issued by the U.S.
government or its agencies; corporate bonds guaranteed by the U.S. government
and quasi-federal corporations; and publicly issued, fixed rate, non-convertible
domestic bonds of companies in industry, public utilities, and finance. The
average maturity of these bonds approximates nine years. Tracked by Lehman
Brothers, the index calculates total returns for one-month, three-month,
twelve-month, and ten-year periods and year-to-date.
MERRILL LYNCH CORPORATE MASTER is an unmanaged index comprised of approximately
4,356 corporate debt obligations rated BBB or better. These quality parameters
are based in composites of ratings assigned by S&P and Moody's. Only bonds with
a minimum maturity of one year are included.
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.
SALOMON BROTHERS ONE-MONTH TAX-EXEMPT COMMERCIAL PAPER is an index of
selected tax-exempt commercial paper issues, maturing in one month, whose
yields are chosen as representative of this particular market.
Calculations are made weekly and monthly. Ehrlich-Bober & Co., Inc. also
tracks this Salomon Brothers index.
INVESTMENT RATINGS
STANDARD & POOR'S CORPORATE BOND RATINGS
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.
AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.
A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effects of changes in
circumstances and economic conditions than debt in higher rated categories.
BBB--Debt rated "BBB" is regarded as having an adequate capacity to pay interest
and repay principal. Whereas it normally exhibits adequate protection
parameters, adverse economic conditions or changing circumstances are more
likely to lead to a weakened capacity to pay interest and repay principal for
debt in this category than in higher rated categories.
BB, B, CCC, CC -- Debt rated "BB", "B", "CCC", and "CC" is regarded, on balance,
as predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "CC" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
are outweighed by large uncertainties of major risk exposure to adverse
conditions.
C -- The rating "C" is reserved for income bonds on which no interest is being
paid.
D -- Debt rated "D" is in default, and payment of interest and/or repayment of
principal is in arrears.
NR--NR indicates that no public rating has been requested, that there is
insufficient information on which to base a rating, or that S&P does not rate a
particular type of obligation as a matter of policy.
S&P may apply a plus (+) sign or minus (-) sign to the above rating
classifications to show relative standing within the classifications.
MOODY'S INVESTORS SERVICE CORPORATE BOND RATING
AAA--Bonds which are rated "AAA" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.
AA--Bonds which are rated "AA" are judged to be of high quality by all
standards. Together with the "AAA" group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "AAA" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long-term risks appear somewhat larger than in "AAA"
securities.
A--Bonds which are rated "A" possess many favorable investment attributes and
are to be considered as upper medium grade obligations. Factors giving security
to principal and interest are considered adequate but elements may be present
which suggest a susceptibility to impairment some time in the future.
BAA--Bonds which are rated "BAA" are considered as medium-grade obligations,
(i.e., they are neither highly protected nor poorly secured). Interest payments
and principal security appear adequate for the present but certain protective
elements may be lacking or may be characteristically unreliable over any great
length of time. Such bonds lack outstanding investment characteristics and in
fact have speculative characteristics as well.
BA--Bonds which are "BA" are judged to have speculative elements; their future
cannot be considered as well assured. Often the protection of interest and
principal payments may be very moderate and thereby not well safeguarded during
both good and bad times over the future. Uncertainty of position characterizes
bonds in this class.
B--Bonds which are rated "B" generally lack characteristics of a desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.
CAA -- Bonds which are rated "CAA" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.
CA--Bonds which are rated "CA" represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.
C--Bonds which are rated "C" are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects or ever attaining any
real investment standing.
NR--Not rated by Moody's. Moody's applies numerical modifiers, 1, 2 and 3 in
each generic rating classification from "AA" through "B" in its corporate bond
rating system. The modifier 1 indicates that the security ranks in the higher
end of its generic rating category; the modifier 2 indicates a mid-range
ranking; and the modifier 3 indicates that the issue ranks in the lower end of
its generic rating category.
STANDARD & POOR'S COMMERCIAL PAPER RATINGS
A-1--This highest category indicates that the degree of safety regarding timely
payment is strong. Those issues determined to possess extremely strong safety
characteristics are denoted with a plus sign (+) designation.
A-2--Capacity for timely payment on issues with this designation is
satisfactory. However, the relative degree of safety is not as high as for
issues designated "A-1."
A-3--Issues carrying this designation have adequate capacity for timely payment.
They are, however, more vulnerable to the adverse effects of changes in
circumstances than obligations carrying the higher designations.
B--Issues rated "B" are regarded as having only speculative capacity for timely
payment.
C--This rating is assigned to short-term debt obligations with a doubtful
capacity for payment.
D--Debt rated "D" is in payment default. The "D" rating category is used when
interest payments or principal payments are not made on the date due, even if
the applicable grace period has not expired, unless S&P believes that such
payments will be made during such grace period.
MOODY'S INVESTORS SERVICE COMMERCIAL PAPER RATING DEFINITIONS
PRIME-1--Issuers rated "PRIME-1" (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. "PRIME-1"
repayment capacity will normally be evidenced by many of the following
characteristics:
o Leading market positions in well-established industries;
o High rates of return on funds employed;
o Conservative capitalization structure with moderate reliance
on debt and ample asset protection;
o Broad margins in earnings coverage of fixed financial charges
and high internal cash generation; or
o Well-established access to a range of financial markets and assured
sources of alternate liquidity.
PRIME-2--Issuers rated "PRIME-2" (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
MOODY'S INVESTORS SERVICE SHORT-TERM DEBT RATINGS
PRIME-1--Issuers rated PRIME-1 (or related supporting institutions) have a
superior capacity for repayment of short-term promissory obligations. PRIME-1
repayment capacity will normally be evidenced by the following characteristics:
o Leading market positions in well established industries; o High rates of
return on funds employed; o Conservative capitalization structure with moderate
reliance on debt
and ample asset protection;
o Broad margins in earning coverage of fixed financial charges and
high internal cash generation; and
o Well-established access to a range of financial markets and assured sources
of alternate liquidity.
PRIME-2--Issuers rated PRIME-2 (or related supporting institutions) have a
strong capacity for repayment of short-term promissory obligations. This will
normally be evidenced by many of the characteristics cited above, but to a
lesser degree. Earnings trends and coverage ratios, while sound, will be more
subject to variation. Capitalization characteristics, while still appropriate,
may be more affected by external conditions. Ample alternate liquidity is
maintained.
PRIME-3--Issuers rated PRIME-3 (or related supporting institutions) have an
acceptable ability for repayment of senior short-term obligations. The effect of
industry characteristics and market compositions may be more pronounced.
Variability in earnings and profitability may result in changes in the level of
debt protection measurements and may require relatively high financial leverage.
Adequate alternate liquidity is maintained.
NOT PRIME--Issuers rated NOT PRIME do not fall within any of the Prime rating
categories.
MOODY'S INVESTORS SERVICE SHORT TERM LOAN RATINGS
MIG 1/VMIG 1--This designation denotes best quality. There is present strong
protection by established cash flows, superior liquidity support or demonstrated
broad based access to the market for refinancing.
MIG 2/VMIG 2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group.
MIG 3/VMIG 3--This designation denotes favorable quality. All security elements
are accounted for but there is lacking the undeniable strength of the preceding
grades. Liquidity and cash flow protection may be narrow and market access for
refinancing is likely to be less well established.
ADDRESSES
THE WACHOVIA VARIABLE INSURANCE FUNDS
101 Greystone Boulevard
SC-9215
Columbia, SC 29226
Distributor
FEDERATED SECURITIES CORP. Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779
Investment Adviser
WACHOVIA ASSET MANAGEMENT 100 North Main Street
Winston-Salem, NC 27101
Custodian
WACHOVIA BANK, N.A. 100 North Main Street
Winston-Salem, NC 27101
Transfer Agent and Dividend Disbursing Agent
FEDERATED SHAREHOLDER SERVICES COMPANY Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Independent Auditors
ERNST & YOUNG LLP 200 Clarendon Street
Boston, MA 02116
PART C. OTHER INFORMATION.
Item 23.
(a) Conformed Copy of Declaration of Trust of the
Registrant; +
(b) Copy of By-Laws of the Registrant; +
(c) Copy of Specimen Certificate for Shares of Capital
Stock of the Registrant; (to be filed by amendment)
(d) Form of Investment Advisory Contract of the Registrant;
+
(e) (i) Form of Distributor's Contract of the
Registrant; +
(ii) Conformed Copy of Administrative Agreement; (to
be filed by amendment)
(f) Not applicable;
(g) Form of Custodian Agreement of the Registrant; +
(h) Form of Agreement for Fund Accounting Services,
Administrative Services and Transfer Agency Services;+
(i) Conformed Copy of Opinion and Consent of Counsel
as to legality of shares being registered; (to be
filed by amendment)
(j) Not applicable;
(k) Not applicable;
(l) Conformed Copy of Initial Capital Understanding;
(to be filed by amendment)
(m) (i) Form of Distribution Plan; +
(ii) Form of Mutual Funds Sales and Service
Agreement; +
(n) Not applicable;
(o) Conformed copy of Power of Attorney. +
(p) Copy of Code of Ethics; (to be filed by amendment).
Item 24. Persons Controlled by or Under Common Control with Registrant:
To be filed by amendment
Item 25. Indemnification:
Indemnification is provided to Officers and Trustees of the
Registrant pursuant to Section 2 of Article XI of Registrant's
Declaration of Trust. The Investment Advisory Contract between the
Registrant and Wachovia Bank, N.A. ("Adviser") provides that, in the
absence of willful misfeasance, bad faith, gross negligence, or
reckless disregard of the obligations or duties under the Investment
Advisory Contract on the part of Adviser, Adviser shall not be
liable to the Registrant or to any shareholder for any act or
omission in the course of or connected in any way with rendering
services or for any losses that may be sustained in the purchase,
holding, or sale of any security. Registrant's Trustees and Officers
are covered by an Investment Trust Errors and Omissions Policy.
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 may be permitted to Trustees, Officers, and
controlling persons of the Registrant by the Registrant pursuant to
the Declaration of Trust or otherwise, the Registrant is aware that
in the opinion of the Securities and Exchange Commission, such
indemnification is against public policy as expressed in the Act
and, therefore, is unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by
the Registrant of expenses incurred or paid by Trustees, Officers,
or controlling persons of the Registrant in connection with the
successful defense of any act, suit, or proceeding) is asserted by
such Trustees, Officers, or controlling persons in connection with
the shares being registered, the Registrant will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy
as expressed in the Act and will be governed by the final
adjudication of such issues.
Insofar as indemnification for liabilities may be permitted pursuant
to Section 17 of the Investment Company Act of 1940 for Trustees,
Officers, and controlling persons of the Registrant by the
Registrant pursuant to the Declaration of Trust or otherwise, the
Registrant is aware of the position of the Securities and Exchange
Commission as set forth in Investment Company Act Release No.
IC-11330. Therefore, the Registrant undertakes that in addition to
complying with the applicable provisions of the Declaration of Trust
or otherwise, in the absence of a final decision on the merits by a
court or other body before which the proceeding was brought, that an
indemnification payment will not be made unless in the absence of
such a decision, a reasonable determination based upon factual
review has been made (i) by a majority vote of a quorum of non-party
Trustees who are not interested persons of the Registrant or (ii) by
independent legal counsel in a written opinion that the indemnitee
was not liable for an act of willful misfeasance, bad faith, gross
negligence, or reckless disregard of duties. The Registrant further
undertakes that advancement of expenses incurred in the defense of a
proceeding (upon undertaking for repayment unless it is ultimately
determined that indemnification is appropriate) against an Officer,
Trustee, or controlling person of the Registrant will not be made
absent the fulfillment of at least one of the following conditions:
(i) the indemnitee provides security for his undertaking; (ii) the
Registrant is insured against losses arising by reason of any lawful
advances; or (iii) a majority of a quorum of disinterested non-party
Trustees or independent legal counsel in a written opinion makes a
factual determination that there is reason to believe the indemnitee
will be entitled to indemnification.
Item 26. Business and Other Connections of Investment Adviser:
(a) For a description of the other business of the investment
adviser, see the section entitled "Who Manages the
Funds?" in Part A. The Officers of the investment
adviser are: Chief Executive Officer, L. M. Baker, Jr.;
President and Chief Operating Officer, G. Joseph
Prendergast; Vice Chairman, Robert S. McCoy, Jr.; Vice
Chairman, Walter E. Leonard, Jr.; State Chief Executive
Officer, Lewis N. Miller, Jr. (Virginia); State Chief
Executive Officer, Will B. Spence (North Carolina/South
Carolina); State Chief Executive Officer, D. Gary
Thompson (Florida/Georgia); State President, James C.
Cherry (Virginia Banking); State President, J. Kenneth
Coppedge (Florida Banking); State President, Isaiah
Tidwell (Georgia Banking); Senior Executive Vice
President, Jean E. Davis; Senior Executive Vice
President, Mickey W. Dry; Senior Executive Vice
President, Stanhope A. Kelly; Senior Executive Vice
President, Kenneth W. McAllister; Senior Executive Vice
President, John C. McLean, Jr.; and Senior Executive Vice
President, Donald K. Truslow. The business address of
each of the Officers of the investment adviser is
Wachovia Bank, N.A., 100 North Main Street,
Winston-Salem, N.C. 27101.
The Directors of the investment adviser are: L.M. Baker,
Jr.; James S. Balloun; Peter C. Browning; John T.
Casteen, III; John L. Clendenin; Thomas K. Hearn, Jr.;
George W. Henderson, III; W. Hayne Hipp; Robert A.
Ingram; George R. Lewis; Elizabeth Valk Long; John G.
Medlin, Jr.; Lloyd U. Noland, III; Morris W. Offit; G.
Joseph Prendergast; Sherwood H. Smith, Jr.; and John C.
Whitaker, Jr.
Item 27. Principal Underwriters:
......(a) Federated Securities Corp. the Distributor for
sharesof the Registrant, acts as principal underwriter
for the following open-end investment companies,
including the Registrant:
Cash Trust Series II; Cash Trust Series, Inc.; CCB Funds; Edward D. Jones
& Co. Daily Passport Cash Trust; Federated Adjustable Rate U.S. Government
Fund, Inc.; Federated American Leaders Fund, Inc.; Federated ARMs Fund;
Federated Core Trust; Federated Equity Funds; Federated Equity Income
Fund, Inc.; Federated Fixed Income Securities, Inc.;
Federated Fund for U.S. Government Securities, Inc.; Federated GNMA Trust;
Federated Government Income Securities, Inc.; Federated High Income Bond
Fund, Inc.; Federated High Yield Trust; Federated Income Securities Trust;
Federated Income Trust; Federated Index Trust; Federated Institutional
Trust; Federated Insurance Series; Federated Investment Series Funds,
Inc.; Federated Managed Allocation Portfolios;
Federated Municipal Opportunities Fund, Inc.; Federated Municipal
Securities Fund, Inc.; Federated Municipal Securities Income Trust;
Federated Short-Term Municipal Trust; Federated Stock and Bond Fund, Inc.;
Federated Stock Trust; Federated Tax-Free Trust; Federated Total Return
Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government
Securities Fund: 2-5 Years; Federated U.S. Government Securities Fund:
5-10 Years; Federated Utility Fund, Inc.; FirstMerit Funds; Hibernia
Funds; Independence One Mutual Funds; Intermediate Municipal Trust;
International Series, Inc.; Marshall Funds, Inc.; Money Market Obligations
Trust; Regions Funds; RIGGS Funds; SouthTrust Funds;
Tax-Free Instruments Trust; The Wachovia Funds; The Wachovia Municipal
Funds; Vision Group of Funds, Inc.; and World Investment Series, Inc.;
(b)
(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
BUSINESS ADDRESS WITH DISTRIBUTOR WITH REGISTRANT
Richard B. Fisher Chairman, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Arthur L. Cherry Director, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional Sales --
Federated Investors Tower and Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Director, Executive Vice --
Federated Investors Tower Vice President and Assistant
1001 Liberty Avenue Secretary,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
James F. Getz President-Broker/Dealer and --
Federated Investors Tower Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Senior Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark D. Fisher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Anthony J. Harper Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Amy Michalisyn Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas A. Peter III Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert F. Phillips Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard A. Recker Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Eugene B. Reed Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul V. Riordan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John Rogers Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Brian S. Ronayne Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas S. Schinabeck Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Larry Sebbens Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Donald C. Edwards Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kirk A. Montgomery Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Denis McAuley, III Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy S. Johnson Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Victor R. Siclari Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
(c) Not applicable.
Item 28. Location of Accounts and Records:
All accounts and records required to be maintained by Section 31(a) of the
Investment Company Act of 1940 and Rules 31a-1 through 31a-3 promulgated
thereunder are maintained at one of the following locations:
REGISTRANT
The Wachovia Variable Insurance 5800 Corporate Drive
Funds Pittsburgh, PA 15237-7010
FEDERATED SERVICES COMPANY Federated Investors Tower
--------------------------
(Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and Portfolio
Recordkeeper)
FEDERATED SERVICES COMPANY Federated Investors Tower
--------------------------
(Administrator) Pittsburgh, PA 15222-3779
WACHOVIA BANK, N.A. 100 North Main Street
--------------------
(Adviser) Winston-Salem, NC 27101
WACHOVIA BANK, N.A. 100 North Main Street
-------------------
(Custodian) Winston-Salem, NC 27101
Item 29. Management Services: Not applicable.
Item 30. 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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, THE WACHOVIA VARIABLE INSURANCE
FUNDS, has duly caused this Registration Statement to be signed on its behalf by
the undersigned, thereto duly authorized, in the City of Pittsburgh and
Commonwealth of Pennsylvania, on the 16th day of March, 2000.
THE WACHOVIA VARIABLE INSURANCE FUNDS
BY: /s/Gail Cagney
Gail Cagney, Secretary
Attorney in Fact for John W. McGonigle
March 16, 2000
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/Gail Cagney
Gail Cagney Attorney In Fact March 16, 2000
SECRETARY For the Persons
Listed Below
NAME TITLE
John W. McGonigle* President and Treasurer
(Chief Executive Officer and Principal
Financial and Accounting Officer)
James A. Hanley* Trustee
Samuel E. Hudgins* Trustee
D. Dean Kaylor* Trustee
Alvin J. Schexnider, Ph.D.* Trustee
Charles S. Way, Jr.* Trustee
* By Power of Attorney
Exhibit (d) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
INVESTMENT ADVISORY CONTRACT
This Investment Advisory Contract is made as of this 3rd day of March,
2000, between WACHOVIA VARIABLE INSURANCE FUNDS, a Massachusetts business trust
(the "Trust"), and WACHOVIA BANK, N.A. (the "Adviser").
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 Adviser is engaged in the business of rendering
investment advisory and management services;
WHEREAS, the Trust desires to retain the Adviser as investment adviser to
those of its Portfolios which are identified in an exhibit hereto, and the
Adviser 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 ADVISER; SERVICES AND DUTIES.
-------------------------------------------
(a) The Trust hereby appoints the Adviser as investment adviser for each
of the Portfolios of the Trust which executes an exhibit to this Contract, and
the Adviser accepts the appointments. Subject to the direction of the Trustees
of the Trust, the Adviser shall provide investment research and supervision of
the investments of such Portfolios and conduct a continuous program of
investment evaluation and of appropriate investment, sale or other disposition
and reinvestment of the Portfolios' assets.
(b) The Adviser shall direct the investments of each such Portfolio
subject to and in accordance with the Portfolio's investment objective,
policies, limitations and other provisions contained in the Portfolio's
prospectus and statement of additional information, as amended from time to
time, the Trust's Declaration of Trust and By-Laws, and any other directions and
policies which the Trustees of the Trust may issue to the Adviser from time to
time.
2. EXECUTION AND ALLOCATION OF BROKERAGE.
-------------------------------------
(a) The Adviser, subject to the control and direction of the Trustees,
shall have authority and discretion to select brokers and dealers to execute
portfolio transaction for each Portfolio, and to select the markets on or in
which the transactions will be executed. In acting pursuant to this paragraph 2,
the Adviser will place orders through such brokers or dealers in conformity with
the policies with respect to portfolio transactions set forth in the applicable
Portfolio's prospectus and statement of additional information. It is understood
that neither the Trust nor the Adviser will adopt a formula for allocation of
each Portfolio's brokerage. It is understood that the Adviser may, to the extent
permitted by applicable laws and regulations, aggregate securities to be sold or
purchased for a Portfolio and for other clients in order to obtain the most
favorable price and efficient execution. In that event, allocation of the
securities purchased or sold, as well as expenses incurred in the transaction,
will be made by the Adviser in the manner it considers to be the most equitable
and consistent with its fiduciary obligations to the Trust and to its other
clients. The Adviser shall provide such reports as the Trustees may reasonably
request with respect to each Portfolio's total brokerage and portfolio
transaction activities and the manner in which that business was allocated.
(b) The Adviser agrees that in placing orders with brokers and dealers, it
will attempt to obtain the best net results in terms of price and execution;
provided that, on behalf of any Portfolio, the Adviser may, in its discretion,
purchase and sell portfolio securities to and from brokers and dealers who
provide research, analysis, advice and similar services, and the Adviser may pay
to those brokers and dealers, in return for research and analysis, a higher
commission or spread than may be charged by other brokers and dealers, subject
to the Adviser determining in good faith that such commission or spread is
reasonable in terms either of the particular transaction or of the overall
responsibility of the Adviser to such Portfolio and its other clients and that
the total commissions or spreads paid by such Portfolio will be reasonable in
relation to the benefits to the Portfolio over the long term. In no instance
will portfolio securities be purchased from or sold to the Adviser, or any
affiliated person thereof, except in accordance with the federal securities laws
and the rules, regulations and orders thereunder.
(c) The Trust hereby authorizes the Adviser and any entity or person
associated with the Adviser which is a member of a national securities exchange
to effect any transaction on such exchange for the account of any Portfolio,
which transaction is permitted by Section 11(a) of the Securities Exchange Act
of 1934 and Rule 11a2-2(T) thereunder, and the Trust hereby consents to the
retention of compensation by the Adviser or any person or entity associated with
the Adviser for such transactions in accordance with Rule 11a2-2(T)(a)(2)(iv).
3. RECORDS. The Adviser 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 investment advisory 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 the Adviser 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 the Adviser 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 the Adviser's
normal business hours. Upon the reasonable request of the Trust, copies of any
such books and records shall be provided promptly by the Adviser to the Trust or
the Trust's authorized representatives.
4. ACTIVITIES AND AFFILIATES OF THE ADVISER.
----------------------------------------
(a) The services furnished by the Adviser hereunder to the Trust are not
to be deemed exclusive, the Adviser being free to render services to others and
engage in other activities, provided, however, that such other services and
activities do not, during the term of this Agreement, interfere, in a material
manner, with the Adviser's ability to meet all of its obligations with respect
to rendering services to the Trust hereunder.
(b) The Trust acknowledges that the Adviser or one or more of its
affiliated persons may have investment responsibilities or render investment
advice to or perform other investment advisory services for other individuals or
entities and that the Adviser, its affiliated persons or any of its or their
directors, officers, agents or employees may buy, sell or trade in securities
for its or their respective accounts ("Affiliated Accounts"). Subject to the
provisions of paragraph 2, the Trust agrees that the Adviser or its affiliated
persons may give advice or exercise investment responsibility and take such
other action with respect to Affiliated Accounts which may differ from the
advice given or the timing or nature of action with respect to a Portfolio of
the Trust, provided that the Adviser acts in good faith. The Trust acknowledges
that one or more of the Affiliated Accounts may at any time hold, acquire,
increase, decrease, dispose of or otherwise deal with positions in investments
in which a Portfolio may have an interest. The Adviser shall have no obligation
to recommend for a Portfolio a position in any investment which an Affiliated
Account may acquire, and the Trust shall have no first refusal, co-investment or
other rights in respect of any such investment, either for its Portfolios or
otherwise.
(c) Subject to and in accordance with the Trust's Declaration of Trust and
By-Laws, as currently in effect and as amended from time to time, the 1940 Act
and the rules thereunder, and the Banking Act of 1933, it is understood that
Trustees, officers, agents and shareholders of the Trust are or may be
interested in the Adviser or its affiliated persons as directors, officers,
agents or shareholders of the Adviser or its affiliated persons; that directors,
officers, agents and shareholders of the Adviser or its affiliated persons are
or may be interested in the Trust as trustees, officers, agents, shareholders or
otherwise; that the Adviser or its affiliated persons may be interested in the
Trust as shareholders or otherwise; and that the effect of any such interests
shall be governed by said Declaration of Trust, By-Laws and the 1940 Act and the
rules thereunder.
5. EXPENSES. The Adviser shall be responsible for expenses incurred in
providing office space, equipment and personnel as may be necessary or
convenient to provide investment advisory services to the Trust. Each Portfolio
shall pay or cause to be paid all of its own expenses and its allocable share of
Trust expenses, including, without limitation, the expenses of organizing the
Trust and continuing its existence; fees and expenses of Trustees and officers
of the Trust; fees for administrative services; fees and expenses of preparing
and printing its Registration Statements under the Securities Act of 1933 and
the 1940 Act and any amendments thereto; expenses of registering and qualifying
the Trust, the Portfolios, and shares ("Shares") of the Portfolios under federal
and state laws and regulations; expenses of preparing, printing, and
distributing prospectuses (and any amendments thereto) to existing shareholders;
interest expense, taxes, fees, and commissions of every kind; expenses of issue
(including cost of Share certificates), purchase, repurchase, and redemption of
Shares, including expenses attributable to a program of periodic issue; charges
and expenses of custodians, transfer agents, dividend disbursing agents,
shareholder servicing agents, and registrars; printing and mailing costs,
auditing, accounting, and legal expenses; reports to shareholders and
governmental officers and commissions; expenses of meetings of Trustees and
shareholders and proxy solicitations therefor; insurance expenses; association
membership dues and such nonrecurring items as may arise, including all losses
and liabilities incurred in administering the Trust and the Portfolios. Each
Portfolio will also pay its allocable share of such extraordinary expenses as
may arise including expenses incurred in connection with litigation,
proceedings, and claims and the legal obligations of the Trust to indemnify its
officers and Trustees and agents with respect thereto.
6. COMPENSATION.
------------
(a) The Trust shall pay to the Adviser, for all services rendered to each
Portfolio by the Adviser hereunder, the fees set forth in the exhibits attached
hereto. If applicable, for purposes of calculating such fees, the value of each
Portfolio's net assets shall be determined pursuant to the applicable provisions
of the Portfolio's prospectus and statement of additional information, the
Trust's Declaration of trust and By-laws and the 1940 Act.
(b) The Adviser agrees to reimburse the Trust or to waive all or part of
its advisory fee, with the same frequency with which the advisory fee is paid to
the Adviser, to the extent the annual operating expenses of any Portfolio or
class thereof exceeds the highest applicable expense limitation established
pursuant to the statutes or regulations of any jurisdiction in which the Shares
of the Portfolios are qualified or registered for offer and sale.
(c) The Adviser may from time to time and for such periods as it deems
appropriate reduce its compensation from a Portfolio (and, if appropriate,
assume expenses of one or more of the Portfolios or classes thereof) to the
extent the expenses of any Portfolio or a class thereof exceed such lower
expense limitation as the Adviser may, by notice to the Portfolio, voluntarily
declare to be effective.
(d) To the extent the Adviser has reimbursed the Trust or waived all or
part of its advisory fee, the Trust agrees to reimburse the Adviser if so
requested by the Adviser, provided that such reimbursement does not cause the
annual operating expenses of any Portfolio or class thereof to exceed the
highest applicable expense limitation established pursuant to the statutes or
regulations of any jurisdiction in which the Shares of the Portfolios are
qualified or registered for offer and sale.
7. EFFECTIVE DATE; TERM. This Contract shall begin for each Portfolio as
of the date of execution of the applicable exhibit and shall continue in effect
with respect to each Portfolio initially set forth on an exhibit (and any
subsequent Portfolios added pursuant to an exhibit during the initial term of
this contract) for two years from the date of this contract set forth above,
provided that this Contract has first been approved by a vote of a majority of
(a) those Trustees who are not parties to this Contract or interested persons of
any such party, cast in person at a meeting called for the purpose of voting on
such approval and (b) the Portfolio's outstanding voting securities. Thereafter,
this Contract shall continue for successive periods of one year, subject to the
provisions for termination and all of the other terms and conditions hereof, but
only so long as such continuance is specifically approved at least annually (a)
by the vote of a majority of the Trustees who are not parties to this Contract
or interested persons of any such party, cast in person at a meeting called for
the purpose of voting on such approval and (b) by the Board of Trustees or with
respect to any given Series by vote of a majority of the outstanding voting
securities. If a Portfolio is added after the first approval by the Trustees as
described above, this Contract will be effective as to that Portfolio upon
execution of the applicable exhibit and will continue in effect until the next
annual approval of this Contract by the Trustees and thereafter for successive
periods of one year, subject to approval as described above.
8. TERMINATION. Notwithstanding any provision in this Contract, it may be
terminated at any time with respect to any Portfolio, without the payment of any
penalty, by the Trustees of the Trust or by a vote of the majority of the
outstanding voting securities of that Portfolio on sixty (60) days' written
notice to the Adviser, or by the Adviser on sixty (60) days' written notice to
the Trust. Termination of this Contract with respect to any given Portfolio
shall in no way affect the continued validity of this Contract or the
performance thereunder with respect to any other Portfolio. This Contract will
terminate automatically in the event of its assignment.
9. ASSIGNMENT. This Contract may not be assigned by the Adviser and
----------
shall automatically terminate in the event of any assignment. The Adviser
shall notify the Trust in writing in advance of any proposed change of
control of the Adviser to enable the Trust to take the steps necessary to
enter into a new advisory contract.
10. LIABILITIES OF THE ADVISER.
--------------------------
(a) Except as provided below, in the absence of willful misfeasance, bad
faith, gross negligence, or reckless disregard of the obligations or duties
under this Contract on the part of the Adviser, the Adviser shall not be liable
to the Trust or to any of the Portfolios or to any shareholder for any act or
omission in the course of or connected in any way with rendering services or for
any losses that may be sustained in the purchase, holding, or sale of any
security or the making of any investment for or on behalf of the Trust.
(b) No provision of this Contract shall be construed to protect any
Trustee or officer of the Trust, or the Adviser, from liability in violation of
Sections 17(h), 17(i) or 36(b) of the 1940 Act.
11. AMENDMENT. This Contract may be amended at any time by agreement of
the parties provided that the amendment shall be approved both by the vote of a
majority of the Trustees of the Trust, including a majority of the Trustees who
are not parties to this Contract or interested persons of any such party to this
Contract (other than as Trustees of the Trust) cast in person at a meeting
called for that purpose, and, where required by the 1940 Act, on behalf of a
Portfolio by a majority of the outstanding voting securities of such Portfolio.
12. LIMITATION OF LIABILITY. The Adviser is expressly put on notice of the
limitation of liability as set forth in the Trust's Declaration of Trust and
agrees that the obligations assumed by the Trust or any Portfolio pursuant to
this Agreement shall be limited in any case to the Trust and its assets and that
the Adviser 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.
13. DEFINITIONS. As used in this Contract, the terms "affiliated person,"
"assignment," "control," "interested person" and "vote of a majority of the
outstanding voting securities" shall have the meanings set forth in the 1940 Act
and the rules and regulations thereunder, subject to any applicable orders of
exemption issued by the Securities and Exchange Commission.
14. GOVERNING LAW. This Contract shall be construed in accordance with and
governed by the laws of the State of North Carolina, 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.
EXHIBIT A
to the
Investment Advisory Contract
WACHOVIA BALANCED FUND II
For all services rendered by the Adviser hereunder, the above-named
Portfolio of the Trust shall pay to the Adviser and the Adviser agrees to accept
as full compensation for all services rendered hereunder, an annual investment
advisory fee equal to 0.70% of the average daily net assets of the Portfolio.
The portion of the fees based upon the average daily net assets of the
Portfolio shall be accrued daily at the annual rate of 0.70% applied to the
daily net assets of the Portfolio.
The advisory fee so accrued shall be paid to the Adviser daily.
Witness the due execution hereof this 3RD day of MARCH, 2000.
WACHOVIA BANK, N.A.
By:
Name:
Title:
WACHOVIA VARIABLE INSURANCE FUNDS
By:
Name:
Title:
EXHIBIT B
to the
Investment Advisory Contract
WACHOVIA EQUITY FUND II
For all services rendered by the Adviser hereunder, the above-named
Portfolio of the Trust shall pay to the Adviser and the Adviser agrees to accept
as full compensation for all services rendered hereunder, an annual investment
advisory fee equal to 0.70% of the average daily net assets of the Portfolio.
The portion of the fees based upon the average daily net assets of the
Portfolio shall be accrued daily at the annual rate of 0.70% applied to the
daily net assets of the Portfolio.
The advisory fee so accrued shall be paid to the Adviser daily.
Witness the due execution hereof this 3RD day of MARCH, 2000.
WACHOVIA BANK, N.A.
By:
Name:
Title:
WACHOVIA VARIABLE INSURANCE FUNDS
By:
Name:
Title:
EXHIBIT C
to the
Investment Advisory Contract
WACHOVIA SPECIAL VALUES FUND II
For all services rendered by the Adviser hereunder, the above-named
Portfolio of the Trust shall pay to the Adviser and the Adviser agrees to accept
as full compensation for all services rendered hereunder, an annual investment
advisory fee equal to 0.80% of the average daily net assets of the Portfolio.
The portion of the fees based upon the average daily net assets of the
Portfolio shall be accrued daily at the annual rate of 0.80% applied to the
daily net assets of the Portfolio.
The advisory fee so accrued shall be paid to the Adviser daily.
Witness the due execution hereof this 3RD day of MARCH, 2000.
WACHOVIA BANK, N.A.
By:
Name:
Title:
WACHOVIA VARIABLE INSURANCE FUNDS
By:
Name:
Title:
Exhibit (b) under Form N-1A
Exhibit 3(ii) under Item 601/Reg. S-K
WACHOVIA VARIABLE INSURANCE FUNDS
BY-LAWS
ARTICLE I
OFFICERS AND THEIR ELECTION
Section 1. OFFICERS. The Officers of the Trust shall be a President, one or more
Vice Presidents, a Treasurer, and a Secretary. The Board of Trustees, in its
discretion, may also elect or appoint a Chairman of the Board of Trustees (who
must be a Trustee) and other Officers or agents, including one or more Assistant
Vice Presidents, one or more Assistant Secretaries, and one or more Assistant
Treasurers. A Vice President, the Secretary or the Treasurer may appoint an
Assistant Vice President, an Assistant Secretary or an Assistant Treasurer,
respectively, to serve until the next election of Officers. Two or more offices
may be held by a single person except the offices of President and Vice
President may not be held by the same person concurrently. It shall not be
necessary for any Trustee or any Officer to be a holder of shares in any Series
or Class of the Trust.
Section 2. ELECTION OF OFFICERS. The Officers shall be elected annually by the
Trustees. Each Officer shall hold office for one year and until the election and
qualification of his successor, or until earlier resignation or removal. The
Chairman of the Board of Trustees, if there is one, shall be elected annually by
and from the Trustees, and serve until a successor is so elected and qualified,
or until earlier resignation or removal.
Section 3. RESIGNATIONS AND REMOVALS AND VACANCIES. Any Officer of the Trust may
resign at any time by filing a written resignation with the Board of Trustees
(or Chairman of the Trustees, if there is one), with the President, or with the
Secretary. Any such resignation shall take effect at the time specified therein
or, if no time is specified, at the time of receipt. Unless otherwise specified
therein, the acceptance of such resignation shall not be necessary to make it
effective. Any Officer elected by the Board of Trustees or whose appointment has
been ratified by the Board of Trustees may be removed with or without cause at
any time by a majority vote of all of the Trustees. Any other employee of the
Trust may be removed or dismissed at any time by the President. Any vacancy in
any of the offices, whether by resignation, removal or otherwise, may be filled
for the unexpired portion of the term by the President. A vacancy in the office
of Assistant Vice President may be filled by a Vice President; in the office of
Assistant Secretary by the Secretary; or in the office of Assistant Treasurer by
the Treasurer. Any appointment to fill any vacancy shall serve subject to
ratification by the Board of Trustees at its next regular meeting.
ARTICLE II
POWERS AND DUTIES OF TRUSTEES AND OFFICERS
Section 1. TRUSTEES. The business and affairs of the Trust shall be
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managed by the Trustees, and they shall have all powers necessary and
desirable to carry out that responsibility.
Section 2. CHAIRMAN OF THE TRUSTEES ("CHAIRMAN"). The Chairman, if there be a
Chairman, shall preside at the meetings of Shareholders and of the Board of
Trustees. He shall have general supervision over the business of the Trust and
policies of the Trust. He shall employ and define the duties of all employees of
the Trust, shall have power to discharge any such employees, shall exercise
general supervision over the affairs of the Trust and shall perform such other
duties as may be assigned to him from time to time by the Trustees. The Chairman
shall appoint a Trustee or officer to preside at such meetings in his absence.
Section 3. PRESIDENT. The President shall be the chief executive officer of the
Trust. The President, in the absence of the Chairman, or if there is no
Chairman, shall perform all duties and may exercise any of the powers of the
Chairman subject to the control of the Trustees. He shall counsel and advise the
Chairman and shall perform such other duties as may be assigned to him from time
to time by the Trustees, the Chairman or the Executive Committee. The President
shall have the power to appoint one or more Assistant Secretaries or other
junior officers, subject to ratification of such appointments by the Board. The
President shall have the power to sign, in the name of and on behalf of the
Trust, powers of attorney, proxies, waivers of notice of meeting, consents and
other instruments relating to securities or other property owned by the Trust,
and may, in the name of and on behalf of the Trust, take all such action as the
President may deem advisable in entering into agreements to purchase securities
or other property in the ordinary course of business, and to sign representation
letters in the course of buying securities or other property.
Section 4. VICE PRESIDENT. The Vice President (or if more than one, the senior
Vice President) in the absence of the President shall perform all duties and may
exercise any of the powers of the President subject to the control of the
Trustees. Each Vice President shall perform such other duties as may be assigned
to him from time to time by the Trustees, the Chairman, the President, or the
Executive Committee. Each Vice President shall be authorized to sign documents
on behalf of the Trust. The Vice President shall have the power to sign, in the
name of and on behalf of the Trust and subject to Article VIII, Section 1,
powers of attorney, proxies, waivers of notice of meeting, consents and other
instruments relating to securities or other property owned by the Trust, and
may, in the name of and on behalf of the Trust, take all such action as the Vice
President may deem advisable in entering into agreements to purchase securities
or other property in the ordinary course of business, and to sign representation
letters in the course of buying securities or other property.
Section 5. SECRETARY. The Secretary shall keep or cause to be kept in books
provided for that purpose the Minutes of the Meetings of Shareholders and of the
Trustees; shall see that all Notices are duly given in accordance with the
provisions of these By-Laws and as required by law; shall be custodian of the
records and of the Seal of the Trust (if there be a Seal) and see that the Seal
is affixed to all documents, the execution of which on behalf of the Trust under
its Seal is duly authorized; shall keep directly or through a transfer agent a
register of the post office address of each shareholder of each Series or Class
of the Trust, and make all proper changes in such register, retaining and filing
his authority for such entries; shall see that the books, reports, statements,
certificates and all other documents and records required by law are properly
kept and filed; and in general shall perform all duties incident to the Office
of Secretary and such other duties as may from time to time be assigned to him
by the Trustees, Chairman, the President, or the Executive Committee.
Section 6. TREASURER. The Treasurer shall be the principal financial and
accounting officer of the Trust responsible for the preparation and maintenance
of the financial books and records of the Trust. He shall deliver all funds and
securities belonging to any Series or Class to such custodian or sub-custodian
as may be employed by the Trust for any Series or Class. The Treasurer shall
perform such duties additional to the foregoing as the Trustees, Chairman, the
President or the Executive Committee may from time to time designate.
Section 7. ASSISTANT VICE PRESIDENT. The Assistant Vice President or Vice
Presidents of the Trust shall have such authority and perform such duties as may
be assigned to them by the Trustees, the Executive Committee, the President, or
the Chairman.
Section 8. ASSISTANT SECRETARIES AND ASSISTANT TREASURERS. The Assistant
Secretary or Secretaries and the Assistant Treasurer or Treasurers shall perform
the duties of the Secretary and of the Treasurer, respectively, in the absence
of those Officers and shall have such further powers and perform such other
duties as may be assigned to them respectively by the Trustees or the Executive
Committee, the President, or the Chairman. Section 9. SALARIES. The salaries of
the Officers shall be fixed from time to time by the Trustees. No officer shall
be prevented from receiving such salary by reason of the fact that he is also a
Trustee.
ARTICLE III
POWERS AND DUTIES OF THE EXECUTIVE AND OTHER COMMITTEES
Section 1. EXECUTIVE AND OTHER COMMITTEES. The Trustees may elect from their own
number an Executive Committee to consist of not less than two members. The
Executive Committee shall be elected by a resolution passed by a vote of at
least a majority of the Trustees then in office. The Trustees may also elect
from their own number other committees from time to time, the number composing
such committees and the powers conferred upon the same to be determined by vote
of the Trustees. Any committee may make rules for the conduct of its business.
Section 2. VACANCIES IN EXECUTIVE COMMITTEE. Vacancies occurring in the
Executive Committee from any cause shall be filled by the Trustees by a
resolution passed by the vote of at least a majority of the Trustees then in
office.
Section 3. EXECUTIVE COMMITTEE TO REPORT TO TRUSTEES. All action by the
Executive Committee shall be reported to the Trustees at their meeting next
succeeding such action.
Section 4. PROCEDURE OF EXECUTIVE COMMITTEE. The Executive Committee shall fix
its own rules of procedure not inconsistent with these By-Laws or with any
directions of the Trustees. It shall meet at such times and places and upon such
notice as shall be provided by such rules or by resolution of the Trustees. The
presence of a majority shall constitute a quorum for the transaction of
business, and in every case an affirmative vote of a majority of all the members
of the Committee present shall be necessary for the taking of any action.
Section 5. POWERS OF EXECUTIVE COMMITTEE. During the intervals between the
Meetings of the Trustees, the Executive Committee, except as limited by the
By-Laws of the Trust or by specific directions of the Trustees, shall possess
and may exercise all the powers of the Trustees in the management and direction
of the business and conduct of the affairs of the Trust in such manner as the
Executive Committee shall deem to be in the best interests of the Trust, and
shall have power to authorize the Seal of the Trust (if there is one) to be
affixed to all instruments and documents requiring same. Notwithstanding the
foregoing, the Executive Committee shall not have the power to elect or remove
Trustees, increase or decrease the number of Trustees, elect or remove any
Officer, declare dividends, issue shares or recommend to shareholders any action
requiring shareholder approval.
Section 6. COMPENSATION. The members of any duly appointed committee
------------
shall receive such compensation and/or fees as from time to time may be
fixed by the Trustees.
Section 7. ACTION BY CONSENT OF THE BOARD OF TRUSTEES, EXECUTIVE COMMITTEE OR
OTHER COMMITTEE. Subject to Article V, Section 2 of these By-Laws, any action
required or permitted to be taken at any meeting of the Trustees, Executive
Committee or any other duly appointed Committee may be taken without a meeting
if consents in writing setting forth such action are signed by all members of
the Board or such committee and such consents are filed with the records of the
Trust. In the event of the death, removal, resignation or incapacity of any
Board or committee member prior to that Trustee signing such consent, the
remaining Board or committee members may re-constitute themselves as the entire
Board or committee until such time as the vacancy is filled in order to fulfill
the requirement that such consents be signed by all members of the Board or
committee.
ARTICLE IV
SHAREHOLDERS' MEETINGS
Section 1. SPECIAL MEETINGS. A special meeting of the shareholders of the Trust
or of a particular Series or Class shall be called by the Secretary whenever
ordered by the Trustees, the Chairman or requested in writing by the holder or
holders of at least one-tenth of the outstanding shares of the Trust or of the
relevant Series or Class, entitled to vote. If the Secretary, when so ordered or
requested, refuses or neglects for more than two days to call such special
meeting, the Trustees, Chairman or the shareholders so requesting may, in the
name of the Secretary, call the meeting by giving notice thereof in the manner
required when notice is given by the Secretary.
Section 2. NOTICES. Except as above provided, notices of any special meeting of
the shareholders of the Trust or a particular Series or Class, shall be given by
the Secretary by delivering or mailing, postage prepaid, to each shareholder
entitled to vote at said meeting, a written or printed notification of such
meeting, at least seven business days before the meeting, to such address as may
be registered with the Trust by the shareholder. No notice of any meeting to
shareholders need be given to a shareholder if a written waiver of notice,
executed before or after the meeting by such shareholder or his or her attorney
that is duly authorized, is filed with the records of the meeting. Notice may be
waived as provided in Article XIII of these By-Laws. Section 3. PLACE OF
MEETING. Meetings of the shareholders of the Trust or a particular Series or
Class shall be held at such place within or without The Commonwealth of
Massachusetts as may be fixed from time to time by resolution of the Trustees.
Section 4. ACTION BY CONSENT. Any action required or permitted to be taken at
any meeting of shareholders may be taken without a meeting, if a consent in
writing, setting forth such action, is signed by a majority of the shareholders
entitled to vote on the subject matter thereof, and such consent is filed with
the records of the Trust.
Section 5. PROXIES. Any shareholder entitled to vote at any meeting of
shareholders may vote either in person, by telephone, by electronic means
including facsimile, or by proxy, but no proxy which is dated more than six
months before the meeting named therein shall be accepted unless otherwise
provided in the proxy. Every proxy shall be in writing, subscribed by the
shareholder or his duly authorized agent or be in such other form as may be
permitted by law, including documents conveyed by electronic transmission. Every
proxy shall be dated, but need not be sealed, witnessed or acknowledged. The
placing of a shareholder's name on a proxy or authorizing another to act as the
shareholder's agent, pursuant to telephone or electronically transmitted
instructions obtained in accordance with procedures reasonably designed to
verify that such instructions have been authorized by such shareholder, shall
constitute execution of a proxy by or on behalf of such shareholder. Where
Shares are held of record by more than one person, any co-owner or co-fiduciary
may execute the proxy or give authority to an agent, unless the Secretary of the
Trust is notified in writing by any co-owner or co-fiduciary that the joinder of
more than one is to be required. All proxies shall be filed with and verified by
the Secretary or an Assistant Secretary of the Trust, or the person acting as
Secretary of the Meeting. Unless otherwise specifically limited by their term,
all proxies shall entitle the holders thereof to vote at any adjournment of such
meeting but shall not be valid after the final adjournment of such meeting.
ARTICLE V
TRUSTEES' MEETINGS
Section 1. NUMBER AND QUALIFICATIONS OF TRUSTEES. The number of Trustees can be
changed from time to time by a majority of the Trustees to not less than three
nor more than twenty. The term of office of a Trustee shall not be affected by
any decrease in the number of Trustees made by the Trustees pursuant to the
foregoing authorization. Each Trustee shall hold office for the life of the
Trust, or as otherwise provided in the Declaration of Trust.
Section 2. SPECIAL MEETINGS. Special meetings of the Trustees shall be called by
the Secretary at the written request of the Chairman, the President, or any
Trustee, and if the Secretary when so requested refuses or fails for more than
twenty-four hours to call such meeting, the Chairman, the President, or such
Trustee may in the name of the Secretary call such meeting by giving due notice
in the manner required when notice is given by the Secretary.
Section 3. REGULAR MEETINGS. Regular meetings of the Trustees may be held
without call or notice at such places and at such times as the Trustees may from
time to time determine, provided that any Trustee who is absent when such
determination is made shall be given notice of the determination.
Section 4. QUORUM AND VOTE. A majority of the Trustees shall constitute a quorum
for the transaction of business. The act of a majority of the Trustees present
at any meeting at which a quorum is present shall be the act of the Trustees
unless a greater proportion is required by the Declaration of Trust or these
By-Laws or applicable law. In the absence of a quorum, a majority of the
Trustees present may adjourn the meeting from time to time until a quorum shall
be present. Notice of any adjourned meeting need not be given.
Section 5. NOTICES. The Secretary or any Assistant Secretary shall give, at
least two days before the meeting, notice of each meeting of the Board of
Trustees, whether Annual, Regular or Special, to each member of the Board by
mail, telegram, telephone or electronic facsimile to his last known address. It
shall not be necessary to state the purpose or business to be transacted in the
notice of any meeting unless otherwise required by law. Personal attendance at
any meeting by a Trustee other than to protest the validity of said meeting
shall constitute a waiver of the foregoing requirement of notice. In addition,
notice of a meeting need not be given if a written waiver of notice executed by
such Trustee before or after the meeting is filed with the records of the
meeting. Section 6. PLACE OF MEETING. Meetings of the Trustees shall be held at
such place within or without The Commonwealth of Massachusetts as fixed from
time to time by resolution of the Trustees, or as the person or persons
requesting said meeting to be called may designate, but any meeting may adjourn
to any other place.
Section 7. TELECONFERENCE MEETINGS; ACTION BY CONSENT. Except as otherwise
provided herein or from time to time in the 1940 Act or in the Declaration of
Trust, any action to be taken by the Trustees may be taken by a majority of the
Trustees within or without Massachusetts, including any meeting held by means of
a conference telephone or other communications equipment by means of which all
persons participating in the meeting can communicate with each other
simultaneously, and participation by such means shall constitute presence in
person at a meeting. Any action by the Trustees may be taken without a meeting
if a written consent thereto is signed by all the Trustees and filed with the
records of the Trustees' meetings. Such consent shall be treated as a vote of
the Trustees for all purposes. Written consents may be executed in counterparts,
which when taken together, constitute a validly executed consent of the
Trustees.
Section 8. SPECIAL ACTION. When all the Trustees shall be present at any
meeting, however called, or whenever held, or shall assent to the holding of the
meeting without notice, or after the meeting shall sign a written assent thereto
on the record of such meeting, the acts of such meeting shall be valid as if
such meeting had been regularly held. Section 9. COMPENSATION OF TRUSTEES. The
Trustees may receive a stated salary for their services as Trustees, and by
resolution of Trustees a fixed fee and expenses of attendance may be allowed for
attendance at each Meeting. Nothing herein contained shall be construed to
preclude any Trustee from serving the Trust in any other capacity, as an
officer, agent or otherwise, and receiving compensation therefor.
ARTICLE VI
SHARES
Section 1. CERTIFICATES. If certificates for shares are issued, all certificates
for shares shall be signed by the Chairman, President or any Vice President and
by the Treasurer or Secretary or any Assistant Treasurer or Assistant Secretary
and sealed with the seal of the Trust, if the Trust has a seal. The signatures
may be either manual or facsimile signatures and the seal, if there is one, may
be either facsimile or any other form of seal. Certificates for shares for which
the Trust has appointed an independent Transfer Agent and Registrar shall not be
valid unless countersigned by such Transfer Agent and registered by such
Registrar. In case any officer who has signed any certificate ceases to be an
officer of the Trust before the certificate is issued, the certificate may
nevertheless be issued by the Trust with the same effect as if the officer had
not ceased to be such officer as of the date of its issuance. Share certificates
of each Series or Class shall be in such form not inconsistent with law or the
Declaration of Trust or these By-Laws as may be determined by the Trustees.
Section 2. TRANSFER OF SHARES. The shares of each Series and Class of the Trust
shall be transferable, so as to affect the rights of the Trust or any Series or
Class, only by transfer recorded on the books of the Trust or its transfer
agent, in person or by attorney. Section 3. EQUITABLE INTEREST NOT RECOGNIZED.
The Trust shall be entitled to treat the holder of record of any share or shares
of a Series or Class as the absolute owner thereof and shall not be bound to
recognize any equitable or other claim or interest in such share or shares of a
Series or Class on the part of any other person except as may be otherwise
expressly provided by law.
Section 4. LOST, DESTROYED OR MUTILATED CERTIFICATES. In case any certificate
for shares is lost, mutilated or destroyed, the Trustees may issue a new
certificate in place thereof upon indemnity to the relevant Series or Class
against loss and upon such other terms and conditions as the Trustees may deem
advisable.
Section 5. TRANSFER AGENT AND REGISTRAR: REGULATIONS. The Trustees shall have
power and authority to make all such rules and regulations as they may deem
expedient concerning the issuance, transfer and registration of certificates for
shares and may appoint a Transfer Agent and/or Registrar of certificates for
shares of each Series or Class, and may require all such share certificates to
bear the signature of such Transfer Agent and/or of such Registrar.
ARTICLE VII
INSPECTION OF BOOKS
The Trustees shall from time to time determine whether and to what extent, and
at what times and places, and under what conditions and regulations the accounts
and books of the Trust maintained on behalf of each Series and Class or any of
them shall be open to the inspection of the shareholders of any Series or Class;
and no shareholder shall have any right of inspecting any account or book or
document of the Trust except that, to the extent such account or book or
document relates to the Series or Class in which he is a Shareholder or the
Trust generally, such Shareholder shall have such right of inspection as
conferred by laws or authorized by the Trustees or by resolution of the
Shareholders of the relevant Series or Class.
ARTICLE VIII
AGREEMENTS, CHECKS, DRAFTS, ENDORSEMENTS, ETC.
Section 1. AGREEMENTS, ETC. The Trustees or the Executive Committee may
authorize any Officer or Agent of the Trust to enter into any Agreement or
execute and deliver any instrument in the name of the Trust on behalf of any
Series or Class, and such authority may be general or confined to specific
instances; and, unless so authorized by the Trustees or by the Executive
Committee or by the Declaration of Trust or these By-Laws, no Officer, Agent or
Employee shall have any power or authority to bind the Trust by any Agreement or
engagement or to pledge its credit or to render it liable pecuniarily for any
purpose or for any amount. Section 2. CHECKS, DRAFTS, ETC. All checks, drafts,
or orders for the payment of money, notes and other evidences of indebtedness
shall be signed by such Officers, Employees, or Agents, as shall from time to
time be designated by the Trustees or the Executive Committee, or as may be
specified in or pursuant to the agreement between the Trust on behalf of any
Series or Class and the custodian appointed, pursuant to the provisions of the
Declaration of Trust.
Section 3. ENDORSEMENTS, ASSIGNMENTS AND TRANSFER OF SECURITIES. All
endorsements, assignments, stock powers, other instruments of transfer or
directions for the transfer of portfolio securities or other property, whether
or not registered in nominee form, shall be made by such Officers, Employees, or
Agents as may be authorized by the Trustees or the Executive Committee.
Section 4. EVIDENCE OF AUTHORITY. Anyone dealing with the Trust shall be fully
justified in relying on a copy of a resolution of the Trustees or of any
committee thereof empowered to act in the premises which is certified as true by
the Secretary or an Assistant Secretary under the seal of the Trust.
ARTICLE IX
INDEMNIFICATION OF TRUSTEES AND OFFICERS
Section 1. GENERAL. The Trust shall indemnify each of its Trustees and officers
(including persons who serve at the Trust's request as directors, officers or
trustees of another organization in which the Trust has any interest as a
shareholder, creditor or otherwise) (hereinafter referred to as a "Covered
Person") against all liabilities and expenses, including but not limited to
amounts paid in satisfaction of judgments, in compromise or as fines and
penalties, and counsel fees reasonably incurred by any Covered Person in
connection with the defense or disposition of any action, suit or other
proceeding, whether civil, criminal, administrative, or investigative, and any
appeal therefrom, before any court or administrative or legislative body, in
which such Covered Person may be or may have been involved as a party or
otherwise or with which such person may be or may have been threatened, while in
office or thereafter, by reason of being or having been such a Covered Person,
except that no Covered Person shall be indemnified against any liability to the
Trust or its Shareholders to which such Covered Person would otherwise be
subject by reason of willful misfeasance, bad faith, gross negligence or
reckless disregard of the duties involved in the conduct of such Covered
Person's office.
Expenses, including counsel fees so incurred by any such Covered Person (but
excluding amounts paid in satisfaction of judgments, in compromise or as fines
or penalties), may be paid from time to time by the Trust in advance of the
final disposition of any such action, suit or proceeding upon receipt of an
undertaking by or on behalf of such Covered Person to repay amounts so paid to
the Trust if it is ultimately determined that indemnification of such expenses
is not authorized under this Article, provided that (a) such Covered Person
shall provide security for his undertaking, (b) the Trust shall be insured
against losses arising by reason of such Covered Person's failure to fulfill his
undertaking or (c) a majority of the non-party Trustees who are not interested
persons of the Trust (provided that a majority of such Trustees then in office
act on the matter), or independent legal counsel in a written opinion, shall
determine, based on a review of readily available facts (but not a full
trial-type inquiry), that there is reason to believe such Covered Person
ultimately will be entitled to indemnification.
Section 2. COMPROMISE PAYMENT. As to any matter disposed of (whether by a
compromise payment, pursuant to a consent decree or otherwise) without an
adjudication in a decision on the merits by a court, or by any other body before
which the proceeding was brought, that such Covered Person is liable to the
Trust or its Shareholders by reason of willful misfeasance, bad faith, gross
negligence or reckless disreagrd of the duties involved in the conduct of such
Covered Person's office, indemnification shall be provided if (a) approved as in
the best interest of the Trust, after notice that it involves such
indemnification, by at least a majority of non-party Trustees who are not
interested persons of the Trust (provided that a majority of such Trustees then
in office act on the matter), upon a determination, based upon a review of
readily available facts (but not a full trial-type inquiry) that such Covered
Person is not liable to the Trust or its Shareholders by reason of willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of such Covered Person's office, or (b) there has been
obtained an opinion in writing of independent legal counsel, based upon a review
of readily available facts (but not a full trial-type inquiry) to the effect
that such indemnification would not protect such Covered Person against any
liability to the Trust to which such Covered Person would otherwise be subject
by reason of willful misfeasance, bad faith, gross negligence or reckless
disregard of the duties involved in the conduct of his office. Any approval
pursuant to this Section shall not prevent the recovery from any Covered Person
of any amount paid to such Covered Person in accordance with this Section as
indemnification if such Covered Person is subsequently adjudicated by a court of
competent jurisdiction to have been liable to the Trust or its Shareholders by
reason of willful misfeasance, bad faith, gross negligence or reckless disregard
of the duties involved in the conduct of such Covered Person's office.
Section 3. INDEMNIFICATION NOT EXCLUSIVE; DEFINITIONS. The right of
indemnification hereby provided shall not be exclusive of or affect any other
rights to which any such Covered Person may be entitled. As used in this Article
IX, the term "Covered Person" shall include such person's heirs, executors and
administrators. For purposes of this Article IX, the term "non-party Trustee" is
a Trustee against whom none of the actions, suits or other proceedings in
question or another action, suit or other proceeding on the same or similar
grounds is then or has been pending. Nothing contained in this Article IX shall
affect any rights to indemnification to which personnel of the Trust, other than
Trustees and officers, and other persons may be entitled by contract or
otherwise under law, nor the power of the Trust to purchase and maintain
liability insurance on behalf of such persons.
ARTICLE X
SEAL
The seal of the Trust, if there is one, shall consist either of a flat-faced die
with the word "Massachusetts", together with the name of the Trust and the year
of its organization cut or engraved thereon, or any other indication that the
Trust has a seal that has been approved by the Trustees, but, unless otherwise
required by the Trustees, the seal shall not be necessary to be placed on, and
its absence shall not impair the validity of, any document, instrument or other
paper executed and delivered by or on behalf of the Trust.
ARTICLE XI
FISCAL YEAR
The fiscal year of the Trust and each Series or Class shall be as designated
from time to time by the Trustees.
ARTICLE XII
AMENDMENTS
These By-Laws may be amended by a majority vote of all of the Trustees.
ARTICLE XIII
WAIVERS OF NOTICE
Whenever any notice whatever is required to be given under the provisions of any
statute of The Commonwealth of Massachusetts, or under the provisions of the
Declaration of Trust or these By-Laws, a waiver thereof in writing, signed by
the person or persons entitled to said notice, whether before or after the time
stated therein, or presence at a meeting to which such person was entitled
notice of, shall be deemed equivalent thereto. A notice shall be deemed to have
been given if telegraphed, cabled, or sent by wireless when it has been
delivered to a representative of any telegraph, cable or wireless company with
instructions that it be telegraphed, cabled, or sent by wireless. Any notice
shall be deemed to be given if mailed at the time when the same shall be
deposited in the mail.
ARTICLE XIV
REPORT TO SHAREHOLDERS
The Trustees, so long as required by applicable law, shall at least
semi-annually submit to the shareholders of each Series or Class a written
financial report of the transactions of that Series or Class including financial
statements which shall at least annually be certified by independent public
accountants.
ARTICLE XV
BOOKS AND RECORDS
The books and records of the Trust and any Series or Class, including the stock
ledger or ledgers, may be kept in or outside the Commonwealth of Massachusetts
at such office or agency of the Trust as may from time to time be determined by
the Secretary of the Trust, as set forth in Article II, Section 5 of these
By-Laws.
ARTICLE XVI
TERMS
Terms defined in the Declaration of Trust and not otherwise defined herein are
used herein with the meanings set forth or referred to in the Declaration of
Trust.
Exhibit (g) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
CUSTODY AGREEMENT
THIS AGREEMENT, is made effective as of March 3, 2000, by and between
WACHOVIA VARIABLE INSURANCE FUNDS (the "Trust"), a business trust organized
under the laws of the Commonwealth of Massachusetts and WACHOVIA BANK, N.A. a
national banking association (the "Custodian").
WITNESSETH:
WHEREAS, the Trust is an open-end management series investment company
registered under the Investment Company Act of 1940, as amended (the "1940
Act"); and
WHEREAS, the Trust desires to retain the Custodian to serve as the Trust's
custodian to its existing series: WACHOVIA BALANCED FUND II, WACHOVIA EQUITY
FUND II, AND WACHOVIA SPECIAL VALUES FUND II (such series, together with all
other series subsequently established by the Trust and made subject to this
Agreement in accordance with Section 3.22 being herein referred to as the
"Funds") and the Custodian is willing to furnish such services;
NOW THEREFORE, in consideration of the mutual agreements herein made, the
Trust and the Custodian hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
Whenever used in this Agreement, the following words and phrases, unless
the context otherwise requires, shall have the following meanings:
1.1 "AUTHORIZED PERSON" means any Officer or other person duly authorized
by resolution of the Board of Trustees to give Proper Instructions on behalf of
the Funds and named in Exhibit B hereto or in such resolutions of the Board of
Trustees, certified by an Officer, as may be received by the Custodian from time
to time. The Trust will provide the Custodian with authenticated specimen
signatures of each Authorized Person.
1.2 "BOARD OF TRUSTEES" means the Trustees from time to time serving under
the Trust's Agreement and Declaration of Trust, dated March 3, 2000, as from
time to time amended.
1.3 "SECURITIES SYSTEM" means a federal book-entry system as provided in
Subpart O of Treasury Circular No. 300, CFR 306, in Subpart B of 31 CFR Part
350, or in such book-entry regulations of federal agencies as are substantially
in the form of such Subpart O, the Depository Trust Company ("DTC"),
Participants Trust Company and (provided that Custodian shall have received a
copy of a resolution of the Board of Trustees, certified by an Officer,
specifically approving the use of such clearing agency as a depository for the
Funds) any other clearing agency registered with the Securities and Exchange
Commission ("SEC") under Section 17A of the Securities Exchange Act of 1934
("1934 Act"), which acts as a system for the central handling of Securities
where all securities of any particular class or series of an issuer deposited
within the system are treated as fungible and may be transferred or pledged by
bookkeeping entry without physical delivery of the Securities.
1.4 "BUSINESS DAY" means any day recognized as a settlement day by
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The New York Stock Exchange, Inc. and any other day for which the Trust
computes the net asset value of a Fund.
1.5 "NASD" means The National Association of Securities Dealers,
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Inc.
1.6 "OFFICER" means the Chairman, President, any Vice President,
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the Secretary, any Assistant Secretary, the Treasurer, or any Assistant
Treasurer of the Trust.
1.7 "FUND CUSTODY ACCOUNT" means any of the accounts in the name of the
Trust, which are provided for in Section 3.2 below.
1.8 "PROPER INSTRUCTIONS" means:
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(i) a writing (including, without limitation, a facsimile transmission or
tested telex) constituting a request, direction, instruction or
certification signed or initiated by or on behalf of a Fund by one or more
Authorized Persons or reasonably believed by the Custodian to have been
signed by such Authorized Persons;
(ii) a telephonic or other oral communication by one or more Authorized
Persons or reasonably believed by the Custodian to have been communicated
by such Authorized Persons; or
(iii) communications transmitted electronically through the Institutional
Delivery System (IDS), or any other similar electronic instruction system
acceptable to Custodian and approved by resolutions of the Board of
Trustees, a copy of which, certified by an Officer, shall have been
delivered to the Custodian.
The Trust shall cause all Proper Instructions in the form of oral communications
to be promptly confirmed in writing, as specified in clause (i) of this
paragraph. In the event that an oral communication is not so confirmed, or in
the event that a written confirmation differs from the related oral
communication, the Trust will hold the Custodian harmless and without liability
for any claims or losses in connection with such oral communication. Proper
Instructions may be in the form of standing instructions. In respect of trades
reported on the Trust's behalf through DTC, instructions from DTC (whether in a
DTC report or otherwise), shall be Proper Instructions.
1.9 "SECURITIES" include, without limitation, common and preferred stocks,
bonds, call options, put options, debentures, notes, bank certificates of
deposit, bankers' acceptances, mortgage-backed securities, other money market
instruments or other obligations, and any certificates, receipts, warrants or
other instruments or documents representing rights to receive, purchase or
subscribe for the same, or evidencing or representing any other rights or
interests therein, or any similar property or assets that the Custodian has the
facilities to clear and to service.
1.10 "SHARES" means, with respect to a Fund, the units of beneficial
interest issued by the Trust on account of such Fund.
ARTICLE II
APPOINTMENT OF CUSTODIAN
2.1 APPOINTMENT. The Trust hereby constitutes and appoints the Custodian
as custodian for the term and subject to the provisions of this Agreement.
2.2 ACCEPTANCE. The Custodian hereby accepts appointment as such custodian
and agrees to perform the duties thereof as hereinafter set forth.
ARTICLE III
CUSTODY OF CASH AND SECURITIES
3.1 SEGREGATION. All Securities and non-cash property held by the
Custodian for the account of a Fund, except Securities maintained in a
Securities System pursuant to Section 3.6 herein, shall be physically segregated
from other Securities and non-cash property in the possession of the Custodian
(including the Securities and non-cash property of another Fund) and shall be
identified as subject to this Agreement.
3.2 FUND CUSTODY ACCOUNTS. As to each Fund, the Custodian shall open and
maintain in its trust department a custody account or accounts in the name of
the Trust coupled with the name of such Fund, subject only to draft or order of
the Custodian, in which the Custodian shall enter and carry all Securities, cash
and other assets of such Fund which are delivered to it.
3.3 APPOINTMENT OF SUB-CUSTODIANS. In its discretion, the Custodian may
appoint, and at any time remove, any domestic bank or trust company, which has
been approved by the Board of Trustees and is qualified to act as a custodian
under the 1940 Act, as sub-custodian to hold Securities and cash of the Funds
and to carry out such other provisions of this Agreement as it may determine,
and may also open and maintain one or more banking accounts with such a bank or
trust company (any such accounts to be in the name of the Custodian on behalf of
its customers and subject only to its draft or order pursuant to the terms of
this Agreement), provided, however, that the Custodian shall have no more or
less responsibility or liability to the Trust on account of any actions or
omissions of such Sub-custodian so employed than any such sub-custodian has to
the Custodian.
3.4 APPOINTMENT OF AGENTS. The Custodian may at any time or times in its
discretion appoint (and may at any time remove) any other bank or trust company
which is itself qualified under the Investment Company Act of 1940, as amended,
to act as a custodian, as its agent to carry out such of the provisions of this
Article 2 as the Custodian may from time to time direct; PROVIDED, however, that
the appointment of any agent shall not relieve the Custodian of its
responsibilities or liabilities hereunder.
3.5 DELIVERY OF ASSETS TO CUSTODIAN. The Trust shall deliver, or cause to
be delivered, to the Custodian all of the Funds' Securities, cash and other
assets, including (a) all payment of income, payments of principal and capital
distributions received by the Funds with respect to such Securities, cash or
other assets owned by the Funds at any time during the period of this Agreement,
and (b) all cash received by the Funds for the issuance, at any time during such
period, of Shares. The Custodian shall not be responsible for such Securities,
cash or other assets until actually received by it.
3.6 SECURITIES SYSTEMS. The Custodian may deposit and/or maintain
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Securities of the Funds in a Securities System, subject to the following
provisions:
(a) Prior to a deposit of Securities of the Funds in any Securities
System, the Trust shall deliver to the Custodian a resolution of the
Board of Trustees, certified by an Officer, authorizing and
instructing the Custodian on an on-going basis to deposit in such
Securities System all Securities eligible for deposit therein and to
make use of such Securities System to the extent possible and
practical in connection with its performance hereunder, including,
without limitation, in connection with settlements of purchases and
sales of Securities, loans of Securities, and deliveries and returns
of collateral consisting of Securities. So long as such Securities
System shall continue to be employed for the deposit of Securities of
the Funds, the Trust shall annually re-adopt such resolution and
deliver a copy thereof, certified by an Officer, to the Custodian.
(b) Securities of the Funds kept in a Securities System shall be kept
in an account ("Depository Account") of the Custodian in such
Securities System which includes only assets held by the Custodian as
a fiduciary, custodian or otherwise for customers.
(c) The records of the Custodian with respect to Securities of a Fund
maintained in a Securities System shall, by book-entry, identify such
Securities as belonging to such Fund.
(d) If Securities purchased by a Fund are to be held in a Securities
System, the Custodian shall pay for such Securities upon (i) receipt
of advice from the Securities System that such Securities have been
transferred to the Depository Account, and (ii) the making of any
entry on the records of the Custodian to reflect such payment and
transfer for the account of such Fund. If Securities sold by a Fund
are held in a Securities System, the Custodian shall transfer such
Securities upon (i) receipt of advice from the Securities System that
payment for such Securities has been transferred to the Depository
Account, and (ii) the making of an entry on the records of the
custodian to reflect such transfer and payment for the account of such
Fund.
(e) Upon request, the Custodian shall provide the Trust with copies of
any report (obtained by the Custodian from a Securities System in
which Securities of the Funds are kept) on the internal accounting
controls and procedures for safeguarding Securities deposited in such
Securities System.
(f) Anything to the contrary in this Agreement notwithstanding, the
Custodian shall not be liable to the Trust for any loss or damage to a
Fund resulting from the use by the Custodian of a Securities System,
unless such loss or damage is caused by or results from the negligence
or willful misconduct on the part of Custodian or its agents or any of
its (or their) employees, provided, however, that in the event of any
such loss or damage the Custodian shall take reasonable steps to
enforce effectively such rights as it may have against the Securities
System. At its election, the Trust shall be subrogated to the rights
of the Custodian with respect to any claim against a Securities System
or any other person for any loss or damage to the Funds arising from
the use of such Securities System, if and to the extent that the Funds
have not been made whole for any such loss or damage.
3.7 COLLECTION OF INCOME. Subject to the provisions of Section 3.15, the
Custodian shall collect on a timely basis all income and other payments with
respect to registered securities held hereunder to which each Fund shall be
entitled either by law or pursuant to custom in the securities business, and
shall collect on a timely basis all income and other payments with respect to
bearer securities if, on the date of payment by the issuer, such securities are
held by the custodian or its agent thereof and shall credit some income, as
collected, to each Fund's custodian account. Without limiting the generality of
the foregoing, the Custodian shall detach and present for payment all coupons
and other income items requiring presentation as and when they become due and
shall collect interest when due on securities held hereunder. The collection of
income due the Funds on Securities loaned pursuant to the provisions of Section
3.9(j) shall be the responsibility of the Trust. The Custodian will have no duty
or responsibility in connection therewith, other than to provide the Trust with
such information or data as may be necessary to assist the Trust in arranging
for the timely delivery to the Custodian of the income of which each Fund is
properly entitled.
The Custodian shall promptly notify the Trust whenever income due on
Securities is not collected in due course and will provide the Trust with
monthly reports of the status of past due income. Except as set forth herein,
the Custodian shall not be required to enforce collection, by legal means or
otherwise, of any money or property due and payable with respect to Securities
held for a Fund if such Securities are in default or payment is not made after
due demand or presentation.
3.8 DISBURSEMENT OF MONEYS FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall disburse moneys from a Fund Custody
Account but only in the following cases:
(a) For the purchase of Securities for the Fund but only (i) in the
case of Securities (other than options on Securities, futures
contracts and options on future contracts), against the delivery to
the Custodian (or any sub-custodian or agent appointed pursuant to
Sections 3.3 and 3.4, respectively, above) of such Securities to be
registered as provided in Section 3.15 below in proper form for
transfer, or if the purchase of such Securities is effected through a
Securities System, in accordance with the conditions set forth in
Section 3.6 above; (ii) in the case of options on Securities, against
delivery to the Custodian (or such sub-custodian) of such receipts as
are required by the customs prevailing among dealers in such options;
(iii) in the case of futures contracts and options on futures
contracts, against delivery to the Custodian (or such sub-custodian)
of evidence of title thereto in favor of the Fund or any nominee
referred to in Section 3.15 below; and (iv) in the case of repurchase
or reverse repurchase agreements entered into between the Trust and
any other party, against delivery of the purchased Securities either
in certificate form or through an entry crediting the Custodian's
account at a Securities System with such Securities;
(b) In connection with the conversion, exchange or surrender,
as set forth in Section 3.9(f) below, of Securities owned by the
Fund;
(c) For the payment of any dividends or capital gain
distributions declared by the Fund;
(d) In payment of the redemption price of Shares as provided in
Section 5.1 below;
(e) For the payment of any expense or liability incurred by the Fund,
including but not limited to the following payments for the account of
the Fund: interest; taxes; administration, investment management,
investment advisory, accounting, auditing, transfer agent, custodian,
trustee and legal fees; and other operating expenses of the Fund; in
all cases, whether or not such expenses are to be in whole or in part
capitalized or treated as deferred expenses;
(f) For transfer in accordance with the provisions of any agreement
among the Trust, the Custodian and a broker- dealer registered under
the 1934 Act and a member of the NASD, relating to compliance with
rules of The Options Clearing Corporation and of any registered
national securities exchange (or of any similar organization or
organizations) regarding escrow or other arrangements in connection
with transactions by the Fund;
(g) For transfer in accordance with the provisions of any agreement
among the Trust, the Custodian, and a futures commission merchant
registered under the Commodity Exchange Act, relating to compliance
with the rules of the Commodity Futures Trading Commission and/or any
contract market (or any similar organization or organizations)
regarding account deposits in connection with transactions by the
Fund;
(h) For the funding of any uncertificated time deposit or other
interest-bearing account with any banking institution (including the
Custodian), which deposit or account has a term of one year or less;
and
(i) For any other proper purposes, but only upon receipt, in addition
to Proper Instructions, of a copy of a resolution of the Board of
Trustees, certified by an Officer, specifying the amount and purpose
of such payment, declaring such purpose to be a proper corporate
purpose, and naming the person or persons to whom such payment is to
be made.
3.9 DELIVERY OF SECURITIES FROM FUND CUSTODY ACCOUNTS. Upon receipt of
Proper Instructions, the Custodian shall release and delivery Securities from a
Fund Custody Account but only in the following cases:
(a) Upon the sale of Securities for the account of the Fund but
only against receipt of payment therefor;
(b) In the case of a sale effected through a Securities System,
in accordance with the provisions of Section 3.6 above;
(c) To an Offeror's depository agent in connection with tender
or other similar offers for Securities of the Fund;
(d) To the issuer thereof or its agent when such securities are
called, redeemed, retired, or otherwise become payable; provided that,
in any such case, the cash or other consideration is to be delivered
to the Custodian;
(e) To the issuer thereof or its agent (i) for transfer into the name
of the Fund, the Custodian or any sub- custodian or agent appointed
pursuant to Sections 3.3 and 3.4, respectively, above, or of any
nominee or nominees of any of the foregoing, or (ii) for exchange for
a different number of certificates or other evidence representing the
same aggregate face amount or number of units; provided that, in any
such case, the new Securities are to be delivered to the Custodian;
(f) To the broker selling Securities or its clearing agent, for
examination in accordance with the "street delivery" custom; provided
that in any such case, the Custodian shall have no responsibility or
liability for any loss arising from the delivery of such securities
prior to receiving payment for such securities except as may arise
from the Custodian's own negligence or willful misconduct;
(g) For exchange or conversion pursuant to any plan of merger,
consolidation, recapitalization, readjustment of the securities,
reorganization or readjustment of the issuer of such Securities, or
pursuant to any deposit agreement, including surrender or receipt of
underlying Securities in connection with the issuance or cancellation
of depository receipts; provided that, in any such case, the new
Securities and cash, if any, are to be delivered to the Custodian;
(h) Upon receipt of payment therefor pursuant to any repurchase
or reverse repurchase agreement entered into by a Fund;
(i) In the case of warrants, rights or similar Securities, upon the
exercise thereof, the surrender thereof in the exercise of such
warrants, rights or similar securities or the surrender of interim
receipts or temporary securities; provided that, in any such case, the
new Securities and cash, if any, are to be delivered to the Custodian;
(j) For delivery in connection with any loans of Securities of the
Fund, but only against receipt of such collateral as the Trust shall
have specified to the Custodian in Proper Instructions; except that in
connection with any loans for which collateral is to be credited to
the Custodian's account in the book-entry system authorized by the
U.S. Department of the Treasury, the Custodian will not be held liable
or responsible for the delivery of securities owned by the Fund prior
to the receipt of such collateral;
(k) For delivery as security in connection with any borrowings by the
Fund requiring a pledge of assets by such Fund, but only against
receipt by the Custodian of the amounts borrowed;
(l) Pursuant to any authorized plan of liquidation,
reorganization, merger, consolidation or recapitalization of the
Trust or a Fund;
(m) For delivery in accordance with the provisions of any agreement
among the Trust on behalf of a Fund, the Custodian and a broker-dealer
registered under the 1934 Act and a member of the NASD, relating to
compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or of any similar
organization or organizations) regarding escrow or other arrangements
in connection with transactions by the Fund;
(n) For delivery in accordance with the provisions of any agreement
among the Trust on behalf of a Fund, the Custodian, and a futures
commission merchant registered under the Commodity Exchange Act,
relating to compliance with the rules of the Commodity Futures Trading
commission and/or any contract market (or any similar organization or
organizations) regarding account deposits in connection with
transactions by the Fund; or
(o) Upon receipt of instructions from the transfer agent for a Fund,
for delivery to such transfer agent or to the holders of Shares in
connection with distributions in kind, in satisfaction of requests by
holders of Shares for repurchase redemption;
(p) For any other proper corporate purposes, but only upon receipt, in
addition to Proper Instructions, of a copy of a resolution of the
Board of Trustees, certified by an Officer, specifying the Securities
to be delivered, setting forth the purpose for which such delivery is
to be made, declaring such purpose to be a proper corporate purpose,
and naming the person or persons to whom delivery of such Securities
shall be made.
3.10 BANK ACCOUNTS. The Custodian may open and maintain a separate bank
account or accounts in the name of each Fund, subject only to draft or order by
the Custodian acting pursuant to the terms of this Agreement, and shall hold in
such account or accounts, subject to the provisions hereof, all cash received by
it from or for the account of each Fund, other than cash maintained in a joint
repurchase account with other affiliated funds or by a particular Fund in a bank
account established and used in accordance with Rule 17f-3 under the 1940 Act.
Funds held by the Custodian for a Fund may be deposited by it to its credit as
Custodian in the Banking Department of the Custodian or in such other banks or
trust companies as it may in its discretion deem necessary or desirable;
provided, however, that every such bank or trust company shall be qualified to
act as a custodian under the 1940 Act and that each such bank or trust company
and the funds to be deposited with each such bank or trust company shall be
approved by the vote of a majority of the Board of Trustees of the Trust. Such
funds shall be deposited by the Custodian in its capacity as Custodian for the
Fund and shall be withdrawable by the Custodian only in that capacity. If
requested by the Trust, the Custodian shall furnish the Trust, not later than
twenty (20) days after the last business day of each month, an internal
reconciliation of the closing balance as of that day in all accounts described
in this section to the balance shown on the daily cash report for that day
rendered to the Trust.
3.11 PAYMENTS FOR SHARES. The Custodian shall make such arrangements with
the transfer agent of each Fund, as will enable the Custodian to receive the
cash consideration due to each Fund and will deposit into each Fund's Custody
Account such payments as are received from the transfer agent. The Custodian
will provide timely notification to the Trust and the transfer agent of any
receipt by it of payments for Shares of the respective Fund.
3.12 AVAILABILITY OF FEDERAL FUNDS. Upon mutual agreement between the
Trust and the Custodian, the Custodian shall make federal funds available to the
Funds as of specified times agreed upon from time to time by the Trust and the
Custodian in the amount of checks, clearing house funds, and other non-federal
funds received in payment for Shares of the Funds which are deposited into the
Funds' Custody Accounts.
3.13 ACTIONS NOT REQUIRING PROPER INSTRUCTIONS. The Custodian may,
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in its discretion and without express authority from the Trust or any Fund:
(a) Make payments to itself or others for minor expenses of handling
Securities or other similar items relating to its duties under this
Agreement, PROVIDED that all such payments shall be accounted for to
the Fund;
(b) Endorse for collection, in the name of the Fund, checks,
drafts and other negotiable instruments;
(c) Surrender interim receipts or Securities in temporary form
for Securities in definitive form; and
(d) In general, and except as otherwise directed in Proper
Instructions, attend to all non-discretionary details in connection
with sale, exchange, substitution, purchase, transfer and other
dealings with Securities and assets of the Fund.
3.14 OWNERSHIP CERTIFICATES FOR TAX PURPOSES. The Custodian shall execute
any necessary declarations certificates of ownership under the federal income
tax laws or the laws or regulations of any other taxing authority now or
hereafter in effect, and prepare and submit reports to the Internal Revenue
Service ("IRS") and to the Trust at such time, in such manner and containing
such information as is prescribed by the IRS.
3.15 REGISTRATION AND TRANSFER OF SECURITIES. All Securities held for a
Fund that are issued or issuable only in bearer form shall be held by the
Custodian in that form, provided that any such Securities shall be held in a
Securities System if eligible therefor. All other Securities held for a Fund may
be registered in the name of such Fund, the Custodian, or any sub- custodian or
agent appointed pursuant to Sections 3.3 and 3.4, respectively, above, or in the
name of any nominee of any of them, or in the name of a Securities System or any
nominee thereof. All securities accepted by the Custodian on behalf of the Fund
under the terms of this Agreement shall be in "street name" or other good
delivery form. If, however, the Fund directs the Custodian to maintain
securities in "street name", the Custodian shall utilize its best efforts only
to timely collect income due the Fund on such securities and to notify the Fund
on a best efforts basis only of relevant corporate actions including, without
limitation, pendency of calls, maturities, tender or exchange offers. The Trust
shall furnish to the Custodian appropriate instruments to enable the Custodian
to hold or deliver in proper form for transfer, or to register in the name of
any of the nominees hereinabove referred to or in the name of a Securities
System, any Securities registered in the name of a Fund.
3.16 RECORDS. The Custodian shall create and maintain all records relating
to its activities and obligations under this Contract in such manner as will
meet the obligations of the Fund under the 1940 Act, with particular attention
to Section 31 thereof and Rules 31a-1 and 31a-2 thereunder. All such records
shall be the property of the Fund and shall at all times during the regular
business hours of the Custodian be open for inspection by duly authorized
officers, employees or agents of the Fund and employees and agents of the SEC.
The Custodian shall, at the Fund's request, supply the Fund with a tabulation of
securities owned by the Fund and held by the Custodian and shall, when requested
to do so by the Fund and for such compensation as shall be agreed upon between
the Fund and the Custodian, include certificate numbers in such tabulations.
3.17 FUND REPORTS BY CUSTODIAN. The Custodian shall furnish the Trust with
a daily activity statement by Fund and a summary of all transfers to or from
each Fund Custody Account on the day following such transfers. At least monthly
and from time to time, the Custodian shall furnish the Trust with a detailed
statement, by Fund, of the Securities and moneys held for the Funds under this
Agreement.
3.18 OTHER REPORTS BY CUSTODIAN. The Custodian shall provide the Trust, at
such times as the Trust may reasonably require, with reports by independent
public accountants for each Fund on the accounting system, internal accounting
control and procedures for safeguarding securities, future contracts and options
on future contracts including securities deposited and/or maintained in a
Securities System, relating to the services provided by the Custodian for the
Fund under this Agreement; such reports shall be of sufficient scope and in
sufficient detail as may reasonably be required by the Trust to provide
reasonable assurance that any material inadequacies would be disclosed by such
examination, and, if there are no such inadequacies, the reports shall so state.
3.19 PROXIES AND OTHER MATERIALS. The Custodian shall cause all proxies
relating to Securities which are not registered in the name of a Fund, to be
promptly executed by the registered holder of such Securities, without
indication of the manner in which such proxies are to be voted, and shall
promptly deliver to the trust such proxies, all proxy soliciting materials and
all notices to such Securities.
3.20 INFORMATION ON CORPORATE ACTIONS. Subject to the provisions of
Section 3.15, the Custodian shall transmit promptly to the Trust all written
information (including, without limitation, pendency of calls and maturities of
securities and expirations of rights in connection therewith and notices of
exercise of call and put options written by the Trust, on behalf of a Fund and
the maturity of futures contracts purchased or sold by the Trust on behalf of a
Fund) received by the Custodian from issuers of the Securities being held for
the Funds. With respect to tender or exchange offers, the Custodian shall
transmit promptly to the Trust all written information received by the Custodian
from the issuers of the Securities whose tender or exchange offer is sought from
the party (or his agents) making the tender offer. If the Trust on behalf of a
Fund desires to take action with respect to any tender offer, exchange offer, or
any other similar transaction, the Trust shall notify the Custodian at least
three business days prior to the date on which the Custodian is to take such
action.
3.22 ADDITIONAL SERIES. In the event that the Trust establishes one or
more series in addition to and with respect to which it desires to have the
Custodian render services as Custodian under the terms set forth in this
Agreement, it shall so notify the Custodian in writing, and if the Custodian
shall agree in writing to provide such services, such series shall become a Fund
hereunder, subject to such fees as the parties may agree.
ARTICLE IV
PURCHASE AND SALE OF INVESTMENTS OF THE FUND
4.1 PURCHASE OF SECURITIES. Promptly upon each purchase of Securities for
a Fund, Proper Instructions shall be delivered to the Custodian, specifying (a)
the Fund for which the purchase was made, (b) the name of the issuer or writer
of such Securities, and the title or other description thereof, (c) the number
of shares, principal amount (and accrued interest if any) or other units
purchased, (d) the date of purchase and settlement, (e) the purchase price per
unit, (f) the total amount payable upon such purchase, and (g) the name of the
person to whom such amount is payable. The Custodian shall, upon receipt of such
Securities purchased by a Fund, pay out of the moneys held for the Fund in the
relevant Fund Custody Account the total amount specified in such Proper
Instructions to the person named therein. The Custodian shall not be under any
obligation to pay out moneys to cover the cost of a purchase of Securities for a
Fund, if in the relevant Fund Custody Account there is insufficient cash
available to the Fund for which such purchase was made.
4.2 LIABILITY FOR PAYMENT IN ADVANCE OF RECEIPT OF SECURITIES PURCHASED.
Except as provided in this Agreement, in any and every case where payment for
the purchase of Securities for a Fund is made by the Custodian in advance of
receipt of the securities purchased but in the absence of Proper Instructions to
so pay in advance, the Custodian shall be liable to the Trust, on behalf of the
Fund, for such Securities to the same extent as if the Securities had been
received by the Custodian.
4.3 SALE OF SECURITIES. Promptly upon each sale of Securities by a Fund,
Proper Instructions shall be delivered to the Custodian, specifying (a) the Fund
for which the sale was made, (b) the name of the issuer or writer of such
Securities, and the title or other description thereof, (c) the number of
shares, principal amount (and accrued interest, if any), or other units sold,
(d) the date of sale and settlement (e) the sale price per unit, (f) the total
amount payable upon such sale, and (g) the person to whom such Securities are to
be delivered. Upon receipt of the total amount payable to the Fund as specified
in such Proper Instructions, the Custodian shall deliver such Securities to the
person specified in such Proper Instructions. Subject to the foregoing, the
Custodian may accept payment in such form as shall be satisfactory to it, and
may deliver Securities and arrange for payment in accordance with the customs
prevailing among dealers in Securities.
4.4 PAYMENT FOR SECURITIES SOLD. In its sole discretion and from time to
time, the Custodian may credit the relevant Fund Custody Account, prior to
actual receipt of final payment thereof, with (i) proceeds from the sale of
Securities which it has been instructed to deliver against payment, (ii)
proceeds from the redemption of Securities or other assets of the Fund, and
(iii) income from cash, Securities or other assets of the Fund. Any such credit
shall be conditional upon actual receipt by Custodian of final payment and may
be reversed if final payment is not actually received in full. The Custodian
may, in its sole discretion and from time to time, permit a Fund to use funds so
credited to its Fund Custody Account in anticipation of actual receipt of final
payment. Any such funds shall be repayable immediately upon demand made by the
Custodian at any time prior to the actual receipt of all final payments in
anticipation of which funds were credited to the Fund Custody Account.
4.5 ADVANCES BY CUSTODIAN FOR SETTLEMENT. The Custodian may, in its sole
discretion and from time to time, advance funds to the Trust to facilitate the
settlement of a Fund's transactions in its Fund Custody Account. Any such
advance shall be repayable immediately upon demand made by Custodian.
ARTICLE V
REDEMPTION OF FUND SHARES
5.1 TRANSFER OF FUNDS. From such funds as may be available for the purpose
in the relevant Fund Custody Account, and upon receipt of Proper Instructions
specifying that the funds are required to redeem Shares of a Fund, the Custodian
shall wire each amount specified in such Proper Instructions to or through such
bank as the Trust may designate with respect to such amount in such Proper
Instructions.
5.2 NO DUTY REGARDING PAYING BANKS. The Custodian shall not be under any
obligation to effect payment or distribution by any bank designated in Proper
Instructions given pursuant to Section 5.1 above of any amount paid by the
Custodian to such bank in accordance with such Proper Instructions.
ARTICLE VI
SEGREGATED ACCOUNTS
Upon receipt of Proper Instructions, the Custodian shall establish and
maintain a segregated account or accounts for and on behalf of a Fund, into
which account or accounts may be transferred cash and/or Securities, including
Securities maintained in a Depository Account,
(a) in accordance with the provisions of any agreement among the Trust
on behalf of a Fund, the Custodian and a broker-dealer registered
under the 1934 Act and a member of the NASD (or any futures commission
merchant registered under the Commodity Exchange Act), relating to
compliance with the rules of The Options Clearing Corporation and of
any registered national securities exchange (or the Commodity Futures
Trading commission or any registered contract market), or of any
similar organization or organizations, regarding escrow or other
arrangements in connection with transactions by a Fund,
(b) for purposes of segregating cash or Securities in connection with
securities options purchased or written by the Trust, on behalf of a
Fund or in connection with financial futures contracts (or options
thereon) purchased or sold by a Fund,
(c) which constitute collateral for loans of Securities made by
a Fund,
(d) for purposes of compliance by the Funds with requirements under
the 1940 Act for the maintenance of segregated accounts by registered
investment companies in connection with reverse repurchase agreements,
and when-issued, delayed delivery and firm commitment transactions,
and other similar transactions, and
(e) for other proper corporate purposes, but only upon receipt of, in
addition of Proper Instructions, a certified copy of a resolution of
the Board of Trustees, certified by an Officer, setting forth the
purpose of purposes of such segregated account and declaring such
purposes to be proper corporate purposes.
Each segregated account established under this Article VI shall be
established and maintained for a single Fund only. All Proper Instructions
relating to a segregated account shall specify the Fund involved.
ARTICLE VII
CONCERNING THE CUSTODIAN
7.1 STANDARD OF CARE. The Custodian shall be held to a standard of
reasonable care in carrying out the provisions of this Agreement. The Custodian
shall be entitled to rely on and may act upon advice of counsel (who may be
counsel for the Trust) on all matters, and shall be without liability for any
action reasonably taken or omitted pursuant to such advice. Subject to the
limitations set forth in this Agreement, the Custodian shall be kept indemnified
by the Trust and be without liability for any action taken or omitted to be
taken by it in carrying out the terms and provisions of this Agreement in
accordance with the above standards.
7.2 NO RESPONSIBILITY FOR TITLE. So long as and to the extent that it is
in the exercise of reasonable care, the Custodian shall not be responsible for
the title, validity or genuineness of any property or evidence of title thereto
received for delivered by it pursuant to this Agreement.
7.3 RELIANCE UPON DOCUMENTS AND INSTRUCTIONS. The Custodian shall be
entitled to rely upon any certificate, notice or other instrument in writing
received by it and reasonably believed by it to be genuine. The Custodian shall
be entitled to rely upon any Proper Instructions actually received by it
pursuant to this Agreement.
7.4 EXPRESS DUTIES ONLY. The Custodian shall have no duties or obligations
whatsoever except such duties and obligations as are specifically set forth in
this Agreement, and no covenant or obligation shall be implied in this Agreement
against the Custodian.
7.5 CO-OPERATION. The Custodian shall cooperate with and supply necessary
information, by Fund, to the entity or entities appointed by the Trust to keep
the books of account of the Funds and/or compute the value of the assets of the
Funds. The Custodian shall take all such reasonable actions as the Trust may
from time to time request to enable the Trust to obtain, from year to year,
favorable opinions from the Trust's independent accountants with respect to the
Custodian's activities hereunder in connection with (a) the preparation of the
Trust's report on Form N-1A and Form N-SAR and any other reports required by the
Securities and Exchange Commission, and (b) the fulfillment by the Trust of any
other requirements of the SEC.
ARTICLE VIII
INDEMNIFICATION
8.1 INDEMNIFICATION. The Trust shall indemnify and hold harmless the
Custodian, any sub-custodian appointed pursuant to Section 3.3 above, or any
agent, and any nominee of the Custodian or of such sub-custodian from and
against any loss, damage, cost, expense (including attorneys' fees and
disbursements), liability (including, without limitation, liability arising
under the Securities Act of 1933, the 1934 Act, the 1940 Act, and any state
securities and/or banking laws) or claim arising directly or indirectly (a) from
the fact that Securities are registered in the name of any such nominee, or (b)
from any action or inaction by the Custodian or such sub-custodian (i) at the
request or direction of or in reliance on the advice of the Trust, or (ii) upon
Proper Instructions, or (c) generally, from the performance of its obligations
under this Agreement or any sub-custody agreement with a sub-custodian appointed
pursuant to Section 3.3 above or, in the case of any such sub-custodian, from
the performance of its obligations under such sub-custody agreement, provided
that neither the Custodian nor any such sub-custodian shall be indemnified and
held harmless from and against any such loss, damage, cost, expense, liability
or claim arising from the Custodian's or such sub-custodian's failure to act in
accordance with the standard of reasonable care set forth in Section 7.1.
8.2 INDEMNITY TO BE PROVIDED. If the Trust requests the Custodian to take
any action with respect to Securities, which action involves the payment of
money or which action may, in the opinion of the Custodian, result in the
Custodian or its nominee becoming liable for the payment of money or incurring
liability of some other form, the Custodian shall not be required to take such
action until the Trust shall have provided indemnity therefor to the Custodian
in an amount and form satisfactory to the Custodian.
8.3 SECURITY. If the Custodian advances cash or Securities to a Fund for
any purpose, either at the Trust's request or as otherwise contemplated in this
Agreement, or in the event that the Custodian or its nominee incurs, in
connection with its performance under this Agreement, any loss, damage, cost
expense (including attorneys' fees and disbursements), liability or claim
(except such as may arise from its or its nominee's negligence, bad faith and
willful misconduct), then, in any such event, any property at any time held for
the account of such Fund shall be security therefor, and should such Fund fail
promptly to repay or indemnify the Custodian, the Custodian shall be entitled to
utilize available cash of such Fund and to dispose of other assets of such Fund
to the extent necessary to obtain reimbursement or indemnification.
ARTICLE IX
EFFECTIVE PERIOD; TERMINATION
9.1 EFFECTIVE PERIOD. This Agreement shall become effective as of
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its execution and shall continue in full force and effect until terminated
as hereinafter provided.
9.2 TERMINATION. Either party hereto may terminate this Agreement, with
respect to one or more Funds, by giving to the other party a notice in writing
specifying the date of such termination, which shall be not less than ninety
(90) days after the date of the giving of such notice. The notice shall specify
the Funds to which the termination relates ("Terminated Funds"). If a successor
custodian for one or more Terminated Funds shall have been appointed by the
Board of Trustees, the Custodian shall, upon receipt of a notice of acceptance
by the successor custodian, on such specified date of termination (a) deliver
directly to the successor custodian all Securities (other than Securities held
in a Securities System) and cash then owned by the Terminated Funds and held by
the Custodian as custodian, and (b) transfer any Securities held in a Securities
System to an account of or for the benefit of the Funds at the successor
custodian, provided that the Trust on behalf of the Terminated Funds shall have
paid to the Custodian all fees, expenses and other amounts to the payment or
reimbursement of which it shall then be entitled. Upon such delivery and
transfer, the Custodian shall be relieved of all obligations under this
Agreement with respect to the Terminated Funds. The Trust may at any time
immediately terminate this Agreement in the event of the appointment of a
conservator or receiver for the Custodian by regulatory authorities in the State
of NORTH CAROLINA or upon the happening of a like event at the direction of an
appropriate regulatory agency or court of competent jurisdiction.
9.3 FAILURE TO APPOINT SUCCESSOR CUSTODIAN. If a successor custodian is
not designated by the Trust on or before the date of termination specified
pursuant to Section 9.2 above, then the Custodian shall have the right to
deliver to a bank or trust company of its own selection, which is (a) a "Bank"
as defined in the 1940 Act, (b) has aggregate capital, surplus and undivided
profits as shown on its then most recent published report of not less than $25
million, and (c) is doing business in New York, New York, all Securities, cash
and other property held by Custodian under this Agreement and to transfer to an
account of or for the identified Funds at such bank or trust company all
Securities of the Funds held in a Securities System. Upon such delivery and
transfer, such bank or trust company shall be the successor custodian for the
Terminated Funds under this Agreement and the Custodian shall be relieved of all
obligations with respect to such Funds under this Agreement. If, after
reasonable inquiry, Custodian cannot find a successor custodian as contemplated
in this Section 9.3, then Custodian shall have the right to deliver to the Trust
all Securities and cash of the Terminated Funds and to transfer any Securities
held in a Securities System to an account of or for the Trust. Thereafter, the
Trust shall be deemed to be its own custodian with respect to the Securities,
cash and other assets of the Terminated Funds and the Custodian shall be
relieved of all obligations under this Agreement.
9.4 CONTINUING OBLIGATIONS. Nothing contained in this Article IX shall be
construed to excuse the Trust from payment of all charges due and payable to the
Custodian. The provisions of section 13.2, "References to Custodian", Article
VII, "Concerning the Custodian" and Article VIII, "Indemnification" shall
survive the termination or expiration of this Agreement for any reason.
ARTICLE X
COMPENSATION OF CUSTODIAN
The Custodian shall be entitled to compensation as agreed upon from time
to time by the Trust and the Custodian. The fees and other charges in effect on
the date hereof and applicable to the Funds are set forth in Exhibit C attached
hereto.
ARTICLE XI
LIMITATION OF LIABILITY
It is expressly agreed that the obligations of the Trust hereunder shall
not be binding upon any of the Trustees, shareholders, nominees, officers,
agents or employees of the Trust personally, but shall bind only the trust
property of the Trust as provided in the Trust's Agreement and Declaration of
Trust, dated MARCH 3, 2000, as from time to time amended. The execution and
delivery of this Agreement have been authorized by the Trustees, and this
Agreement has been signed and delivered by an authorized officer of the Trust,
acting as such, and neither such authorization by the Trustees nor such
execution and delivery by such officer shall be deemed to have been made by any
of them individually or to impose any liability on any of them personally, but
shall bind only the trust property of the Trust as provided in the
above-mentioned Agreement and Declaration of Trust.
ARTICLE XII
NOTICES
Unless otherwise specified herein, all demands, notices, instructions, and
other communications to be given hereunder shall be in writing and shall be sent
or delivered to The receipt at the address set forth after its name herein
below:
TO THE TRUST:
------------
WACHOVIA VARIABLE INSURANCE FUNDS
Federated Investors Tower
Pittsburgh, PA 15222-3779
Attention: Secretary
TO THE CUSTODIAN:
----------------
WACHOVIA BANK, N.A.
301 North Main Street
Winston-Salem, NC 27150
Attn:
Telephone:
Facsimile:
or at such other address as either party shall have provided to the other by
notice given in accordance with this Article XII. Writing shall include
transmission by or through teletype, facsimile, central processing unit
connection, on-line terminal and magnetic tape.
ARTICLE XIII
MISCELLANEOUS
13.1 GOVERNING LAW. This Agreement shall be governed by and
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construed in accordance with the laws of the State of North Carolina.
13.2 REFERENCES TO CUSTODIAN. The Trust shall not circulate any printed
matter which contains any reference to Custodian without the prior written
approval of Custodian, excepting printed matter contained in the prospectus or
statement of additional information for a Fund and such other printed matter as
merely identifies Custodian as custodian for a Fund. The Trust shall submit
printed matter requiring approval to Custodian in draft form, allowing
sufficient time for review by Custodian and its counsel prior to any deadline
for printing.
13.3 NO WAIVER. No failure by either party hereto to exercise, and no
delay by such party in exercising, any right hereunder shall operate as a waiver
thereof. The exercise by either party hereto of any right hereunder shall not
preclude the exercise of any other right, and the remedies provided herein are
cumulative and not exclusive of any remedies provided at law or in equity.
13.4 AMENDMENTS. This Agreement cannot be changed orally and no amendment
to this Agreement shall be effective unless evidenced by an instrument in
writing executed by the parties hereto.
13.5 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, and by the parties hereto on separate counterparts, each of which
shall be deemed an original but all of which together shall constitute but one
and the same instrument.
13.6 SEVERABILITY. If any provision of this Agreement shall be invalid,
illegal or unenforceable in any respect under any applicable law, the validity,
legality and enforceability of the remaining provisions shall not be affected or
impaired thereby.
13.7 SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective successors
and assigns; provided, however, that this Agreement shall not be assignable by
either party hereto without the written consent of the other party hereto.
13.8 HEADINGS. The headings of sections in this Agreement are for
convenience of reference only and shall not affect the meaning or construction
of any provision of this Agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement
to be executed an delivered in its name and on its behalf by its representatives
thereunto duly authorized, all as of the day and year first above written.
WACHOVIA VARIABLE INSURANCE FUNDS
By:
Name:
Title:
WACHOVIA BANK, N.A.
By:
Name:
Title:
Exhibit (a) under Form N-1A
Exhibit 3(i) under Item 601/Reg. S-K
DECLARATION OF TRUST
WACHOVIA VARIABLE INSURANCE FUNDS
DATED MARCH 3, 2000
THIS DECLARATION OF TRUST made MARCH 3, 2000, by JAMES A. HANLEY,
CHARLES S. WAY, JR., SAMUEL E. HUDGINS, D. DEAN KAYLOR, AND DR. ALVIN J.
SCHEXNIDER.
WHEREAS, the Trustees desire to establish a trust fund for the
investment and reinvestment of funds contributed thereto;
NOW, THEREFORE, the Trustees declare that all money and property
contributed to the trust fund hereunder shall be held and managed under this
Declaration of Trust (hereinafter referred to as the "Declaration of Trust") IN
TRUST as herein set forth below.
ARTICLE I
NAMES AND DEFINITIONS
Section 1. Name.
This Trust shall be known as WACHOVIA VARIABLE INSURANCE FUNDS.
Section 2. Definitions.
Wherever used herein, unless otherwise required by the context or
specifically provided:
(a) The terms "Affiliated Person," "Assignment," "Commission," "Interested
Person," "Majority Shareholder Vote" (the 67% or 50% requirement of
Section 2(a)(42) of the 1940 Act, whichever may be applicable) and
"Principal Underwriter" shall have the meanings given them in the 1940
Act, as amended from time to time;
(b) The "Trust" refers to WACHOVIA VARIABLE INSURANCE FUNDS.
(c) "Class" refers to a class of Shares established and designated
under or in accordance with the provisions of Article III;
(d) "Series" refers to a series of Shares established and
designated under or in accordance with the provisions of Article III;
(e) "Series Company" refers to the form of a registered open-end
investment company described in Section 18(f)(2) of the 1940 Act or in any
successor statutory provision;
(f) "Shareholder" means a record owner of Shares of any Series or
Class;
(g) The "Trustees" refer to the individual Trustees in their capacity as
Trustees hereunder of the Trust and their successor or successors for the
time being in office as such Trustees;
(h) "Shares" means the equal proportionate units of interest into which
the beneficial interest in the Trust shall be divided from time to time,
or if more than one Series or Class of Shares is authorized by the
Trustees, the equal proportionate units into which each Series or Class of
Shares shall be divided from time to time and includes fractions of Shares
as well as whole Shares; and
(i) The "1940 Act" refers to the Investment Company Act of 1940, and the
Rules and Regulations thereunder, (including any exemptions granted
thereunder) as amended from time to time.
ARTICLE II
PURPOSE OF TRUST
The purpose of this Trust is to provide investors a continuous source of
managed investments by investing primarily in securities (including options) and
also in debt instruments, commodities, commodity contracts and options thereon.
ARTICLE III
BENEFICIAL INTEREST
Section 1. Shares of Beneficial Interest.
The beneficial interest in the Trust shall at all times be divided into
transferable Shares, without par value. Subject to the provisions of Section 5
of this Article III, each Share shall have voting rights as provided in Article
VIII hereof, and holders of the Shares of any Series shall be entitled to
receive dividends, when and as declared with respect thereto in the manner
provided in Article X, Section 1 hereof. The Shares of any Series may be issued
in two or more Classes, as the Trustees may authorize pursuant to Article XII,
Section 8 hereof. Unless the Trustees have authorized the issuance of Shares of
a Series in two or more Classes, each Share of a Series shall represent an equal
proportionate interest in the assets and liabilities of the Series with each
other Share of the same Series, none having priority or preference over another.
If the Trustees have authorized the issuance of Shares of a Series in two or
more Classes, then the Classes may have such variations as to dividend,
redemption, and voting rights, net asset values, expenses borne by the Classes,
and other matters as the Trustees have authorized provided that each Share of a
Class shall represent an equal proportionate interest in the assets and
liabilities of the Class with each other Share of the same Class, none having
priority or preference over another. The number of Shares authorized shall be
unlimited. The Trustees may from time to time divide or combine the Shares of
any Series or Class into a greater or lesser number without thereby changing the
proportionate beneficial interests in the Series or Class.
Section 2. Ownership of Shares.
The ownership of Shares shall be recorded in the books of the Trust or a
transfer agent which books shall be maintained separately for the Shares of each
Series or Class. The Trustees may make such rules as they consider appropriate
for the transfer of Shares and similar matters. The record books of the Trust or
any transfer agent, as the case may be, shall be conclusive as to who are the
Shareholders of each Series or Class and as to the number of Shares of each
Series or Class held from time to time by each.
Section 3. Investment in the Trust.
The Trustees shall accept investments in the Trust from such persons and
on such terms as they may from time to time authorize. After the date of the
initial contribution of capital (which shall occur prior to the initial public
offering of Shares), the number of Shares to represent the initial contribution
shall be considered as outstanding and the amount received by the Trustees on
account of the contribution shall be treated as an asset of the Trust to be
allocated among any Series or Classes in the manner described in Section 5(a) of
this Article. Subsequent to such initial contribution of capital, Shares
(including Shares which may have been redeemed or repurchased by the Trust) may
be issued or sold at a price which will net the relevant Series or Class, as the
case may be, before paying any taxes in connection with such issue or sale, not
less than the net asset value (as defined in Article X, Section 3) thereof;
provided, however, that the Trustees may in their discretion impose a sales
charge upon investments in the Trust.
Section 4. No Pre-emptive Rights.
Shareholders shall have no pre-emptive or other right to subscribe to any
additional Shares or other securities issued by the Trust.
Section 5. Establishment and Designation of Series or Class.
Without limiting the authority of the Trustees set forth in Article XII,
Section 8, INTER ALIA, to establish and designate any additional series or class
or to modify the rights and preferences of any existing Series or Class, the
initial series shall be, and are established and designated as, WACHOVIA
BALANCED FUND II, WACHOVIA EQUITY FUND II, AND WACHOVIA SPECIAL VALUES FUND II.
Shares of any Series or Class established in this Section 5 shall have the
following relative rights and preferences:
(a) Assets belonging to Series or Class. All consideration received by the
Trust for the issue or sale of Shares of a particular Series or Class,
together with all assets in which such consideration is invested or
reinvested, all income, earnings, profits, and proceeds thereof from
whatever source derived, including, without limitation, any proceeds
derived from the sale, exchange or liquidation of such assets, and any
funds or payments derived from any reinvestment of such proceeds in
whatever form the same may be, shall irrevocably belong to that Series or
Class for all purposes, subject only to the rights of creditors, and shall
be so recorded upon the books of account of the Trust. Such consideration,
assets, income, earnings, profits and proceeds thereof, from whatever
source derived, including, without limitation, any proceeds derived from
the sale, exchange or liquidation of such assets, and any funds or
payments derived from any reinvestment of such proceeds, in whatever form
the same may be, are herein referred to as "assets belonging to" that
Series or Class. In the event that there are any assets, income, earnings,
profits and proceeds thereof, funds or payments which are not readily
identifiable as belonging to any particular Series or Class (collectively
"General Assets"), the Trustees shall allocate such General Assets to,
between or among any one or more of the Series or Classes established and
designated from time to time in such manner and on such basis as they, in
their sole discretion, deem fair and equitable, and any General Assets so
allocated to a particular Series or Class shall belong to that Series or
Class. Each such allocation by the Trustees shall be conclusive and
binding upon the Shareholders of all Series or Classes for all purposes.
(b) Liabilities Belonging to Series or Class. The assets belonging to each
particular Series or Class shall be charged with the liabilities of the
Trust in respect to that Series or Class and all expenses, costs, charges
and reserves attributable to that Series or Class, and any general
liabilities of the Trust which are not readily identifiable as belonging
to any particular Series or Class shall be allocated and charged by the
Trustees to and among any one or more of the Series or Classes established
and designated from time to time in such manner and on such basis as the
Trustees in their sole discretion deem fair and equitable. The
liabilities, expenses, costs, charges and reserves so charged to a Series
or Class are herein referred to as "liabilities belonging to" that Series
or Class. Each allocation of liabilities belonging to a Series or class by
the Trustees shall be conclusive and binding upon the Shareholders of all
Series or Classes for all purposes.
(c) Dividends, Distributions, Redemptions, Repurchases and
Indemnification. Notwithstanding any other provisions of this Declaration,
including, without limitation, Article X, no dividend or distribution
(including, without limitation, any distribution paid upon termination of
the Trust or of any Series or Class) with respect to, nor any redemption
or repurchase of the Shares of any Series or Class shall be effected by
the Trust other than from the assets belonging to such Series or Class,
nor except as specifically provided in Section 1 of Article XI hereof,
shall any Shareholder of any particular Series or Class otherwise have any
right or claim against the assets belonging to any other Series or Class
except to the extent that such Shareholder has such a right or claim
hereunder as a Shareholder of such other Series or Class.
(d) Voting. Notwithstanding any of the other provisions of this
Declaration, including, without limitation, Section 1 of Article VIII,
only Shareholders of a particular Series or Class shall be entitled to
vote on any matters affecting such Series or Class. Except with respect to
matters as to which any particular Series or Class is affected, all of the
Shares of each Series or Class shall, on matters as to which such Series
or Class is entitled to vote, vote with other Series or Classes so
entitled as a single class. Notwithstanding the foregoing, with respect to
matters which would otherwise be voted on by two or more Series or Classes
as a single class, the Trustees may, in their sole discretion, submit such
matters to the Shareholders of any or all such Series or Classes,
separately.
(e) Fraction. Any fractional Share of a Series or Class shall carry
proportionately all the rights and obligations of a whole Share of that
Series or Class, including rights with respect to voting, receipt of
dividends and distributions, redemption of Shares and termination of the
Trust or of any Series or Class.
(f) Exchange Privilege. The Trustees shall have the authority to provide
that the holders of Shares of any Series or Class shall have the right to
exchange said Shares for Shares of one or more other Series or Classes in
accordance with such requirements and procedures as may be established by
the Trustees.
(g) Combination of Series or Classes. The Trustees shall have the
authority, without the approval of the Shareholders of any Series or
Class, unless otherwise required by applicable law, to combine the assets
and liabilities belonging to a single Series or Class with the assets and
liabilities of one or more other Series or Classes.
(h) Elimination of Series or Classes. At any time that there are no Shares
outstanding of any particular Series or Class previously established and
designated, the Trustees may amend this Declaration of Trust to abolish
that Series or Class and to rescind the establishment and designation
thereof.
ARTICLE IV
THE TRUSTEES
Section 1. Management of the Trust.
The business and affairs of the Trust shall be managed by the Trustees,
and they shall have all powers necessary and desirable to carry out that
responsibility. A Trustee shall not be required to be a Shareholder of the
Trust.
Section 2. Election of Trustees at Meeting of Shareholders.
On a date fixed by the Trustees, which shall be subsequent to the
initial public offering of Shares, the Shareholders shall elect Trustees.
The number of Trustees shall be determined by the Trustees pursuant to
Article IV, Section 5. Until such election, the Trustees shall be JAMES
A. HANLEY, CHARLES S. WAY, JR., SAMUEL E. HUDGINS, D. DEAN KAYLOR, AND DR.
ALVIN SCHEXNIDER or such other persons as may be hereafter appointed
pursuant to Section 4 of this Article IV.
Section 3. Term of Office of Trustees.
The Trustees shall hold office during the lifetime of this Trust, and
until its termination as hereinafter provided; except (a) the term of office of
a Trustee shall expire when he shall have reached age seventy-two (72) and shall
have served in office as a Trustee for at least eight (8) years; (b) that any
Trustee may resign his office at any time by written instrument signed by him
and delivered to the other Trustees, which shall take effect upon such delivery
or upon such later date as is specified therein; (c) that any Trustee may be
removed at any time by written instrument signed by at least two-thirds of the
number of Trustees prior to such removal, specifying the date when such removal
shall become effective; (d) that any Trustee who requests in writing to be
retired or who has become mentally or physically incapacitated may be retired by
written instrument signed by a majority of the other Trustees, specifying the
date of his retirement; and (e) a Trustee may be removed at any special meeting
of Shareholders of the Trust by a vote of two-thirds of the outstanding Shares.
Section 4. Termination of Service and Appointment of Trustees.
In case of the death, resignation, retirement, expiration of term of
office, removal or mental or physical incapacity of any of the Trustees, or in
case a vacancy shall, by reason of an increase in number, or for any other
reason, exist, the remaining Trustees shall fill such vacancy
by appointing such other person as they in their discretion shall see
fit. Such appointment shall be effected by the signing of a written instrument
by a majority of the Trustees in office. An appointment of a Trustee may be made
by the Trustees then in office in anticipation of a vacancy to occur by reason
of retirement, resignation or increase in number of Trustees effective at a
later date, provided that said appointment shall become effective only at or
after the effective date of said retirement, resignation or increase in number
of Trustees. As soon as any Trustee so appointed shall have accepted this Trust,
the trust estate shall vest in the new Trustee or Trustees, together with the
continuing Trustees, without any further act or conveyance, and he shall be
deemed a Trustee hereunder. Any appointment authorized by this Section 4 is
subject to the provisions of Section 16(a) of the 1940 Act.
Section 5. Number of Trustees.
The number of Trustees, not less than three (3) nor more than twenty (20)
serving hereunder at any time, shall be determined by the Trustees themselves.
Whenever a vacancy in the Board of Trustees shall occur, until such
vacancy is filled or while any Trustee is physically or mentally incapacitated,
the other Trustees shall have all the powers hereunder and the certificate
signed by a majority of the other Trustees of such vacancy, absence or
incapacity, shall be conclusive, provided, however, that no vacancy which
reduces the number of Trustees below three (3) shall remain unfilled for a
period longer than six calendar months.
Section 6. Effect of Death, Resignation, etc. of a Trustee.
The death, resignation, retirement, removal, expiration of term of office,
or mental or physical incapacity of the Trustees, or any one of them, shall not
operate to annul the Trust or to revoke any existing agency created pursuant to
the terms of this Declaration of Trust.
Section 7. Ownership of Assets.
The assets belonging to each Series or Class shall be held separate and
apart from any assets now or hereafter held in any capacity other than as
Trustee hereunder by the Trustees or any successor Trustee. All of the assets
belonging to each Series or Class or owned by the Trust shall at all times be
considered as vested in the Trustees. No Shareholder shall be deemed to have a
severable ownership interest in any individual asset belonging to any Series or
Class or owned by the Trust or any right of partition or possession thereof, but
each Shareholder shall have a proportionate undivided beneficial interest in a
Series or Class.
ARTICLE V
POWERS OF THE TRUSTEES
Section 1. Powers.
The Trustees in all instances shall act as principals, and are and shall
be free from the control of the Shareholders. The Trustees shall have full power
and authority to do any and all acts and to make and execute any and all
contracts and instruments that they may consider necessary or appropriate in
connection with the management of the Trust or a Series or Class. The Trustees
shall not be bound or limited by present or future laws or customs in regard to
trust investments, but shall have full authority and power to make any and all
investments which they, in their uncontrolled discretion, shall deem proper to
accomplish the purpose of this Trust. Without limiting the foregoing, the
Trustees shall have the following specific powers and authority, subject to any
applicable limitation in this Declaration of Trust or in the By-Laws of the
Trust:
(a) To buy, and invest funds in their hands in securities including, but
not limited to, common stocks, preferred stocks, bonds, debentures,
warrants and rights to purchase securities, options, certificates of
beneficial interest, money market instruments, notes or other evidences of
indebtedness issued by any corporation, trust or association, domestic or
foreign, or issued or guaranteed by the United States of America or any
agency or instrumentality thereof, by the government of any foreign
country, by any State of the United States, or by any political
subdivision or agency or instrumentality of any State or foreign country,
or in "when-issued" or "delayed-delivery" contracts for any such
securities, or in any repurchase agreement or reverse repurchase
agreement, or in debt instruments, commodities, commodity contracts and
options thereon, or to retain assets belonging to each and every Series or
Class in cash, and from time to time to change the investments of the
assets belonging to each Series or Class;
(b) To adopt By-Laws of the Trust not inconsistent with the Declaration of
Trust providing for the conduct of the business of the Trust and to amend
and repeal them to the extent that they do not reserve that right to the
Shareholders;
(c) To Elect and remove such officers of the Trust and appoint and
terminate such agents of the Trust as they consider appropriate;
(d) To appoint or otherwise engage a bank or trust company as custodian of
any assets belonging to any Series or Class subject to any conditions set
forth in this Declaration of Trust or in the By-Laws;
(e) To appoint or otherwise engage transfer agents, dividend disbursing
agents, Shareholder servicing agents, investment advisers, sub-investment
advisers, principal underwriters, administrative service agents, and such
other agents as the Trustees may from time to time appoint or otherwise
engage;
(f) To provide for the distribution of any Shares of any Series or Class
either through a principal underwriter in the manner hereinafter provided
for or by the Trust itself, or both;
(g) To set record dates in the manner hereinafter provided for;
(h) To delegate such authority as they consider desirable to a committee
or committees composed of Trustees, including without limitation, an
Executive Committee, or to any officers of the Trust and to any agent,
custodian or underwriter;
(i) To sell or exchange any or all of the assets belonging to one or more
Series or Classes, subject to the provisions of Article XII, Section 4(b)
hereof;
(j) To vote or give assent, or exercise any rights of ownership, with
respect to stock or other securities or property; and to execute and
deliver powers of attorney to such person or persons as the Trustees shall
deem proper, granting to such person or persons such power and discretion
with relation to securities or property as the Trustees shall deem proper;
(k) To exercise powers and rights of subscription or otherwise
which in any manner arise out of ownership of securities;
(l) To hold any security or property in a form not indicating any trust,
whether in bearer, unregistered or other negotiable form; or either in its
own name or in the name of a custodian or a nominee or nominees, subject
in either case to proper safeguards according to the usual practice of
Massachusetts trust companies or investment companies;
(m) To consent to or participate in any plan for the reorganization,
consolidation or merger of any corporation or concern, any security of
which belongs to any Series or Class; to consent to any contract, lease,
mortgage, purchase, or sale of property by such corporation or concern,
and to pay calls or subscriptions with respect to any security which
belongs to any Series or Class;
(n) To engage in and to prosecute, compound, compromise, abandon, or
adjust, by arbitration, or otherwise, any actions, suits, proceedings,
disputes, claims, demands, and things relating to the Trust, and out of
the assets belonging to any Series or Class to pay, or to satisfy, any
debts, claims or expenses incurred in connection therewith, including
those of litigation, upon any evidence that the Trustees may deem
sufficient (such powers shall include without limitation any actions,
suits, proceedings, disputes, claims, demands and things relating to the
Trust wherein any of the Trustees may be named individually and the
subject matter of which arises by reason of business for or on behalf of
the Trust);
(o) To make distributions of income and of capital gains to
Shareholders;
(p) To borrow money;
(q) From time to time to issue and sell the Shares of any Series or Class
either for cash or for property whenever and in such amounts as the
Trustees may deem desirable, but subject to the limitation set forth in
Section 3 of Article III.
(r) To purchase insurance of any kind, including, without limitation,
insurance on behalf of any person who is or was a Trustee, Officer,
employee or agent of the Trust, or is or was serving at the request of the
Trust as a Trustee, Director, Officer, agent or employee of another
corporation, partnership, joint venture, trust or other enterprise against
any liability asserted against him and incurred by him in any such
capacity or arising out of his status as such.
(s) To sell, exchange, lend, pledge, mortgage, hypothecate, lease, or
write options with respect to or otherwise deal in any property rights
relating to any or all of the assets belonging to any Series or Class.
The Trustees shall have all of the powers set forth in this Section 1 with
respect to all assets and liabilities of each Series and Class.
Section 2. Principal Transactions.
The Trustees shall not cause the Trust on behalf of any Series or Class to
buy any securities (other than Shares) from or sell any securities (other than
Shares) to, or lend any assets belonging to any Series or Class to any Trustee
or officer or employee of the Trust or any firm of which any such Trustee or
officer is a member acting as principal unless permitted by the 1940 Act, but
the Trust may employ any such other party or any such person or firm or company
in which any such person is an interested person in any capacity not prohibited
by the 1940 Act.
Section 3. Trustees and Officers as Shareholders.
Any Trustee, officer or other agent of the Trust or any Series or Class
may acquire, own and dispose of Shares of any Series or Class to the same extent
as if he were not a Trustee, officer or agent; and the Trustees may issue and
sell or cause to be issued or sold Shares of any Series or Class to and buy such
Shares from any such person or any firm or company in which he is an interested
person subject only to the general limitations herein contained as to the sale
and purchase of such Shares; and all subject to any restrictions which may be
contained in the By-Laws.
Section 4. Parties to Contract.
The Trustees may enter into any contract of the character described in
Article VII or in Article IX hereof or any other capacity not prohibited by the
1940 Act with any corporation, firm, trust or association, although one or more
of the shareholders, Trustees, officers, employees or agents of the Trust or any
Series or Class or their affiliates may be an officer, director, trustee,
shareholder or interested person of such other party to the contract, and no
such contract shall be invalidated or rendered voidable by reason of the
existence of any such relationship, nor shall any person holding such
relationship be liable merely by reason of such relationship for any loss or
expense to the Trust or any Series or Class under or by reason of said contract
or accountable for any profit realized directly or indirectly therefrom, in the
absence of actual fraud. The same person (including a firm, corporation, trust
or association) may be the other party to contracts entered into pursuant to
Article VII or Article IX or any other capacity not prohibited by the 1940 Act,
and any individual may be financially interested or otherwise an interested
person of persons who are parties to any or all of the contracts mentioned in
this Section 4.
ARTICLE VI
TRUSTEES' EXPENSES AND COMPENSATION
Section 1. Trustee Reimbursement.
The Trustees shall be reimbursed from the assets belonging to each
particular Series or Class for all of such Trustees' expenses as such expenses
are allocated to and among any one or more of the Series or Classes pursuant to
Article III, Section 5(b), including, without limitation, expenses of organizing
the Trust or any Series or Class and continuing its or their existence; fees and
expenses of Trustees and Officers of the Trust; fees for investment advisory
services, administrative services and principal underwriting services provided
for in Article VII, Sections 1, 2 and 3; fees and expenses of preparing and
printing Registration Statements under the Securities Act of 1933 and the 1940
Act and any amendments thereto; expenses of registering and qualifying the Trust
and any Series or Class and the Shares of any Series or Class under federal and
state laws and regulations; expenses of preparing, printing and distributing
prospectuses and any amendments thereto sent to shareholders, underwriters,
broker-dealers and to investors who may be considering the purchase of Shares;
expenses of registering, licensing or other authorization of the Trust or any
Series or Class as a broker-dealer and of its or their officers as agents and
salesmen under federal and state laws and regulations; interest expenses, taxes,
fees and commissions of every kind; expenses of issue (including cost of share
certificates), purchases, repurchases and redemptions of Shares, including
expenses attributable to a program of periodic issue; charges and expenses of
custodians, transfer agents, dividend disbursing agents, Shareholder servicing
agents and registrars; printing and mailing costs; auditing, accounting and
legal expenses; reports to Shareholders and governmental officers and
commissions; expenses of meetings of Shareholders and proxy solicitations
therefor; insurance expenses; association membership dues and nonrecurring items
as may arise, including all losses and liabilities by them incurred in
administering the Trust and any Series or Class, including expenses incurred in
connection with litigation, proceedings and claims and the obligations of the
Trust under Article XI hereof and the By-Laws to indemnify its Trustees,
Officers, employees, shareholders and agents, and any contract obligation to
indemnify principal underwriters under Section 3 of Article VII; and for the
payment of such expenses, disbursements, losses and liabilities, the Trustees
shall have a lien on the assets belonging to each Series or Class prior to any
rights or interests of the Shareholders of any Series or Class. This section
shall not preclude the Trust from directly paying any of the aforementioned fees
and expenses.
Section 2. Trustee Compensation.
The Trustees shall be entitled to compensation from the Trust from the
assets belonging to any Series or Class for their respective services as
Trustees, to be determined from time to time by vote of the Trustees, and the
Trustees shall also determine the compensation of all Officers, consultants and
agents whom they may elect or appoint. The Trust may pay out of the assets
belonging to any Series or Class any Trustee or any corporation, firm, trust or
other entity of which a Trustee is an interested person for services rendered in
any capacity not prohibited by the 1940 Act, and such payments shall not be
deemed compensation for services as a Trustee under the first sentence of this
Section 2 of Article VI.
ARTICLE VII
INVESTMENT ADVISER, ADMINISTRATIVE SERVICES,
PRINCIPAL UNDERWRITER AND TRANSFER AGENT
Section 1. Investment Adviser.
Subject to a Majority Shareholder Vote by the relevant Series or Class,
the Trustees may in their discretion from time to time enter into an investment
advisory contract whereby the other party to such contract shall undertake to
furnish the Trustees investment advisory services for such Series or Class upon
such terms and conditions and for such compensation as the Trustees may in their
discretion determine. Subject to a Majority Shareholder Vote by the relevant
Series or Class, the investment adviser may enter into a sub-investment advisory
contract to receive investment advice and/or statistical and factual information
from the sub-investment adviser for such Series or Class upon such terms and
conditions and for such compensation as the Trustees, in their discretion, may
agree. Notwithstanding any provisions of this Declaration of Trust, the Trustees
may authorize the investment adviser or sub-investment adviser or any person
furnishing administrative personnel and services as set forth in Article VII,
Section 2 (subject to such general or specific instructions as the Trustees may
from time to time adopt) to effect purchases, sales or exchanges of portfolio
securities belonging to a Series or Class on behalf of the Trustees or may
authorize any officer or Trustee to effect such purchases, sales, or exchanges
pursuant to recommendations of the investment adviser (and all without further
action by the Trustees). Any such purchases, sales and exchanges shall be deemed
to have been authorized by the Trustees. The Trustees may also authorize the
investment adviser to determine what firms shall be employed to effect
transactions in securities for the account of a Series or Class and to determine
what firms shall participate in any such transactions or shall share in
commissions or fees charged in connection with such transactions.
Section 2. Administrative Services.
The Trustees may in their discretion from time to time contract for
administrative personnel and services whereby the other party shall agree to
provide the Trustees administrative personnel and services to operate the Trust
or a Series or Class on a daily basis, on such terms and conditions as the
Trustees may in their discretion determine. Such services may be provided by one
or more entities.
Section 3. Principal Underwriter.
The Trustees may in their discretion from time to time enter into an
exclusive or nonexclusive contract or contracts providing for the sale of the
Shares of a Series or Class to net such Series or Class not less than the amount
provided in Article III, Section 3 hereof, whereby a Series or Class may either
agree to sell the Shares to the other party to the contract or appoint such
other party its sales agent for such shares. In either case, the contract shall
be on such terms and conditions (including indemnification of principal
underwriters allowable under applicable law and regulation) as the Trustees may
in their discretion determine not inconsistent with the provisions of this
Article VII; and such contract may also provide for the repurchase or sale of
Shares of a Series or Class by such other party as principal or as agent of the
Trust and may provide that the other party may maintain a market for shares of a
Series or Class.
Section 4. Transfer Agent.
The Trustees may in their discretion from time to time enter into transfer
agency and shareholder services contracts whereby the other party shall
undertake to furnish a transfer agency and shareholder services. The contracts
shall be on such terms and conditions as the Trustees may in their discretion
determine not inconsistent with the provisions of this Declaration of Trust or
of the By-Laws. Such services may be provided by one or more entities.
ARTICLE VIII
SHAREHOLDERS' VOTING POWERS AND MEETINGS
Section 1. Voting Powers.
Subject to the provisions set forth in Article III, Section 5(d), the
shareholders shall have power to vote, (i) for the election of Trustees as
provided in Article IV, Section 2; (ii) for the removal of Trustees as provided
in Article IV, Section 3(d); (iii) with respect to any investment adviser or
sub-investment adviser as provided in Article VII, Section 1; (iv) with respect
to the amendment of this Declaration of Trust as provided in Article XII,
Section 7; (v) to the same extent as the shareholders of a Massachusetts
business corporation as to whether or not a court action, proceeding or claim
should be brought or maintained derivatively or as a class action on behalf of
the Trust or the Shareholders; and (vi) with respect to such additional matters
relating to the Trust as may be required by law, by this Declaration of Trust,
or the By-Laws of the Trust or any regulation of the Trust or the Commission or
any State, or as the Trustees may consider desirable. Each whole Share shall be
entitled to one vote as to any matter on which it is entitled to vote, and each
fractional Share shall be entitled to a proportionate fractional vote. There
shall be no cumulative voting in the election of Trustees. Shares may be voted
in person or by proxy. Until Shares of a Series or Class are issued, the
Trustees may exercise all rights of Shareholders of such Series or Class with
respect to matters affecting such Series or Class, and may take any action with
respect to the Trust or such Series or Class required or permitted by law, this
Declaration of Trust or any By-Laws of the Trust to be taken by Shareholders.
Section 2. Meetings.
A Shareholders meeting shall be held as specified in Section 2 of Article
IV at the principal office of the Trust or such other place as the Trustees may
designate. Special meetings of the Shareholders may be called by the Trustees or
the Chief Executive Officer of the Trust and shall be called by the Trustees
upon the written request of Shareholders owning at least one-tenth of the
outstanding Shares of all Series and Classes entitled to vote. Shareholders
shall be entitled to at least fifteen days' notice of any meeting.
Section 3. Quorum and Required Vote.
Except as otherwise provided by law, to constitute a quorum for the
transaction of any business at any meeting of Shareholders there must be
present, in person or by proxy, holders of more than fifty percent of the total
number of outstanding Shares of all Series and Classes entitled to vote at such
meeting. When any one or more Series or Classes is entitled to vote as a single
Series or Class, more than fifty percent of the shares of each such Series or
Class entitled to vote shall constitute a quorum at a Shareholder's meeting of
that Series or Class. If a quorum shall not be present for the purpose of any
vote that may properly come before the meeting, the Shares present in person or
by proxy and entitled to vote at such meeting on such matter may, by plurality
vote, adjourn the meeting from time to time to such place and time without
further notice than by announcement to be given at the meeting until a quorum
entitled to vote on such matter shall be present, whereupon any such matter may
be voted upon at the meeting as though held when originally convened. Subject to
any applicable requirement of law or of this Declaration of Trust or the
By-Laws, a plurality of the votes cast shall elect a Trustee, and all other
matters shall be decided by a majority of the votes cast and entitled to vote
thereon.
Section 4. Additional Provisions.
The By-Laws may include further provisions for Shareholders' votes and
meetings and related matters.
ARTICLE IX
CUSTODIAN
The Trustees may, in their discretion, from time to time enter into
contracts providing for custodial and accounting services to the Trust or any
Series or Class. The contracts shall be on the terms and conditions as the
Trustees may in their discretion determine not inconsistent with the provisions
of this Declaration of Trust or of the By-Laws. Such services may be provided by
one or more entities, including one or more sub-custodians.
ARTICLE X
DISTRIBUTIONS AND REDEMPTIONS
Section 1. Distributions.
(a) The Trustees may from time to time declare and pay dividends to the
Shareholders of any Series or Class, and the amount of such dividends and
the payment of them shall be wholly in the discretion of the Trustees.
Such dividends may be accrued and automatically reinvested in additional
Shares (or fractions thereof) of the relevant Series or Class or paid in
cash or additional Shares of such Series or Class, all upon such terms and
conditions as the Trustees may prescribe.
(b) The Trustees may distribute in respect of any fiscal year as dividends
and as capital gains distributions, respectively, amounts sufficient to
enable any Series or Class to qualify as a regulated investment company to
avoid any liability for federal income taxes in respect of that year.
(c) The decision of the Trustees as to what constitutes income and what
constitutes principal shall be final, and except as specifically provided
herein the decision of the Trustees as to what expenses and charges of any
Series or Class shall be charged against principal and what against the
income shall be final. Any income not distributed in any year may be
permitted to accumulate and as long as not distributed may be invested
from time to time in the same manner as the principal funds of any Series
or Class.
(d) All dividends and distributions on Shares of a particular Series or
Class shall be distributed pro rata to the holders of that Series or Class
in proportion to the number of Shares of that Series or Class held by such
holders and recorded on the books of the Trust or its transfer agent at
the date and time of record established for that payment.
Section 2. Redemptions and Repurchases.
(a) In case any Shareholder of record of any Series or Class at any time
desires to dispose of Shares of such Series or Class recorded in his name,
he may deposit a written request (or such other form of request as the
Trustees may from time to time authorize) requesting that the Trust
purchase his Shares, together with such other instruments or
authorizations to effect the transfer as the Trustees may from time to
time require, at the office of the Transfer Agent, and the Trust shall
purchase his Shares out of assets belonging to such Series or Class. The
purchase price shall be the net asset value of his shares reduced by any
redemption charge as the Trustees from time to time may determine.
Payment for such Shares shall be made by the Trust to the Shareholder of
record within that time period required under the 1940 Act after the
request (and, if required, such other instruments or authorizations of
transfer) is deposited, subject to the right of the Trustees to postpone
the date of payment pursuant to Section 4 of this Article X. If the
redemption is postponed beyond the date on which it would normally occur
by reason of a declaration by the Trustees suspending the right of
redemption pursuant to Section 4 of this Article X, the right of the
Shareholder to have his Shares purchased by the Trust shall be similarly
suspended, and he may withdraw his request (or such other instruments or
authorizations of transfer) from deposit if he so elects; or, if he does
not so elect, the purchase price shall be the net asset value of his
Shares determined next after termination of such suspension (reduced by
any redemption charge), and payment therefor shall be made within the time
period required under the 1940 Act.
(b) The Trust may purchase Shares of a Series or Class by agreement with
the owner thereof at a purchase price not exceeding the net asset value
per Share (reduced by any redemption charge) determined (1) next after the
purchase or contract of purchase is made or (2) at some later time.
(c) The Trust may pay the purchase price (reduced by any redemption
charge) in whole or in part by a distribution in kind of securities from
the portfolio of the relevant Series or Class, taking such securities at
the same value employed in determining net asset value, and selecting the
securities in such manner as the Trustees may deem fair and equitable.
Section 3. Net Asset Value of Shares.
The net asset value of each Share of a Series or Class outstanding shall
be determined at such time or times as may be determined by or on behalf of the
Trustees. The power and duty to determine net asset value may be delegated by
the Trustees from time to time to one or more of the Trustees or Officers of the
Trust, to the other party to any contract entered into pursuant to Section 1 or
2 of Article VII or to the custodian or to a transfer agent or other person
designated by the Trustees.
The net asset value of each Share of a Series or Class as of any
particular time shall be the quotient (adjusted to the nearer cent) obtained by
dividing the value, as of such time, of the net assets belonging to such Series
or Class (i.e., the value of the assets belonging to such Series or Class less
the liabilities belonging to such Series or Class exclusive of capital and
surplus) by the total number of Shares outstanding of the Series or Class at
such time in accordance with the requirements of the 1940 Act and applicable
provisions of the By-Laws of the Trust in conformity with generally accepted
accounting practices and principles.
The Trustees may declare a suspension of the determination of net asset
value for the whole or any part of any period in accordance with the 1940 Act.
Section 4. Suspension of the Right of Redemption.
The Trustees may declare a suspension of the right of redemption or
postpone the date of payment for the whole or any part of any period in
accordance with the 1940 Act.
Section 5. Trust's Right to Redeem Shares.
The Trust shall have the right to cause the redemption of Shares of any
Series or Class in any Shareholder's account for their then current net asset
value and promptly make payment to the shareholder (which payment may be reduced
by any applicable redemption charge), if at any time the total investment in the
account does not have a minimum dollar value determined from time to time by the
Trustees in their sole discretion.
ARTICLE XI
LIMITATION OF LIABILITY AND INDEMNIFICATION
Section 1. Limitation of Personal Liability and Indemnification of
Shareholders.
The Trustees, officers, employees or agents of the Trust shall have no
power to bind any Shareholder of any Series or Class personally or to call upon
such Shareholder for the payment of any sum of money or assessment whatsoever,
other than such as the Shareholder may at any time agree to pay by way of
subscription to any Shares or otherwise.
No Shareholder or former Shareholder of any Series or Class shall be
liable solely by reason of his being or having been a Shareholder for any debt,
claim, action, demand, suit, proceeding, judgment, decree, liability or
obligation of any kind, against, or with respect to the Trust or any Series or
Class arising out of any action taken or omitted for or on behalf of the Trust
or such Series or Class, and the Trust or such Series or Class shall be solely
liable therefor and resort shall be had solely to the property of the relevant
Series or Class of the Trust for the payment or performance thereof.
Each Shareholder or former Shareholder of any Series or Class (or their
heirs, executors, administrators or other legal representatives or, in case of a
corporate entity, its corporate or general successor) shall be entitled to be
indemnified and reimbursed by the Trust to the full extent of such liability and
the costs of any litigation or other proceedings in which such liability shall
have been determined, including, without limitation, the fees and disbursements
of counsel if, contrary to the provisions hereof, such Shareholder or former
Shareholder of such Series or Class shall be held to be personally liable. Such
indemnification and reimbursement shall come exclusively from the assets of the
relevant Series or Class.
The Trust shall, upon request by a Shareholder or former Shareholder,
assume the defense of any claim made against any Shareholder for any act or
obligation of the Trust or any Series or Class and satisfy any judgment thereon.
Section 2. Limitation of Personal Liability of Trustees, Officers,
Employees or Agents of the Trust.
No Trustee, officer, employee or agent of the Trust shall have the power
to bind any other Trustee, officer, employee or agent of the Trust personally.
The Trustees, officers, employees or agents of the Trust incurring any debts,
liabilities or obligations, or in taking or omitting any other actions for or in
connection with the Trust are, and each shall be deemed to be, acting as
Trustee, officer, employee or agent of the Trust and not in his own individual
capacity.
Trustees and officers of the Trust shall be liable for their willful
misfeasance, bad faith, gross negligence or reckless disregard of the duties
involved in the conduct of the office of Trustee or officer, as the case may be,
and for nothing else.
Section 3. Express Exculpatory Clauses and Instruments.
The Trustees shall use every reasonable means to assure that all persons
having dealings with the Trust or any Series or Class shall be informed that the
property of the Shareholders and the Trustees, officers, employees and agents of
the Trust or any Series or Class shall not be subject to claims against or
obligations of the Trust or any other Series or Class to any extent whatsoever.
The Trustees shall cause to be inserted in any written agreement, undertaking or
obligation made or issued on behalf of the Trust or any Series or Class
(including certificates for Shares of any Series or Class) an appropriate
reference to the provisions of this Declaration, providing that neither the
Shareholders, the Trustees, the officers, the employees nor any agent of the
Trust or any Series or Class shall be liable thereunder, and that the other
parties to such instrument shall look solely to the assets belonging to the
relevant Series or Class for the payment of any claim thereunder or for the
performance thereof; but the omission of such provisions from any such
instrument shall not render any Shareholder, Trustee, officer, employee or agent
liable, nor shall the Trustee, or any officer, agent or employee of the Trust or
any Series or Class be liable to anyone for such omission. If, notwithstanding
this provision, any Shareholder, Trustee, officer, employee or agent shall be
held liable to any other person by reason of the omission of such provision from
any such agreement, undertaking or obligation, the Shareholder, Trustee,
officer, employee or agent shall be indemnified and reimbursed by the Trust.
ARTICLE XII
MISCELLANEOUS
Section 1. Trust is not a Partnership.
It is hereby expressly declared that a trust and not a partnership is
created hereby.
Section 2. Trustee Action Binding, Expert Advice, No Bond or Surety.
The exercise by the Trustees of their powers and discretions hereunder
shall be binding upon everyone interested. Subject to the provisions of Article
XI, the Trustees shall not be liable for errors of judgment or mistakes of fact
or law. The Trustees may take advice of counsel or other experts with respect to
the meaning and operation of this Declaration of Trust, and subject to the
provisions of Article XI, shall be under no liability for any act or omission in
accordance with such advice or for failing to follow such advice. The Trustees
shall not be required to give any bond as such, nor any surety if a bond is
required.
Section 3. Establishment of Record Dates.
The Trustees may close the Share transfer books of the Trust maintained
with respect to any Series or Class for a period not exceeding sixty (60) days
preceding the date of any meeting of Shareholders of the Trust or any Series or
Class, or the date for the payment of any dividend or the making of any
distribution to Shareholders, or the date for the allotment of rights, or the
date when any change or conversion or exchange of Shares of any Series or Class
shall go into effect; or in lieu of closing the Share transfer books as
aforesaid, the Trustees may fix in advance a date, not exceeding sixty (60) days
preceding the date of any meeting of Shareholders of the Trust or any Series or
Class, or the date for the payment of any dividend or the making of any
distribution to Shareholders of any Series or Class, or the date for the
allotment of rights, or the date when any change or conversion or exchange of
Shares of any Series or Class shall go into effect, or the last day on which the
consent or dissent of Shareholders of any Series or Class may be effectively
expressed for any purpose, as a record date for the determination of the
Shareholders entitled to notice of, and, to vote at, any such meeting and any
adjournment thereof, or entitled to receive payment of any such dividend or
distribution, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of shares, or to exercise the
right to give such consent or dissent, and in such case such Shareholders and
only such Shareholders as shall be Shareholders of record on the date so fixed
shall be entitled to such notice of, and to vote at, such meeting, or to receive
payment of such dividend or distribution, or to receive such allotment or
rights, or to exercise such rights, as the case may be, notwithstanding, after
such date fixed aforesaid, any transfer of any Shares on the books of the Trust
maintained with respect to any Series or Class. Nothing in the foregoing
sentence shall be construed as precluding the Trustees from setting different
record dates for different Series or Classes.
Section 4. Termination of Trust.
(a) This Trust shall continue without limitation of time but subject to
the provisions of paragraphs (b), (c) and (d) of this Section 4.
(b) The Trustees may, by majority action, with the approval of a majority
shareholder vote of the outstanding Shares of each Series or Class
entitled to vote and voting separately by Series or Class, sell and convey
the assets of the Trust or any Series or Class to another trust,
corporation, partnership or association. Upon making provision for the
payment of all liabilities, by assumption or otherwise, the Trustees shall
distribute the remaining proceeds belonging to each Series or Class
ratably among the holders of the Shares of that Series or Class then
outstanding.
(c) Subject to a Majority Shareholder Vote by such Series or Class, the
Trustees may at any time sell and convert into money all the assets of the
Trust or any Series or Class. Upon making provision for the payment of all
outstanding obligations, taxes and other liabilities, accrued or
contingent, belonging to each Series or Class, the Trustees shall
distribute the remaining assets belonging to each Series or Class ratably
among the holders of the outstanding Shares of that Series or Class.
(d) Upon completion of the distribution of the remaining proceeds of the
remaining assets as provided in paragraphs (b) and (c), the Trust or the
applicable Series or Class shall terminate and the Trustees shall be
discharged of any and all further liabilities and duties hereunder or with
respect thereto and the right, title and interest of all parties shall be
canceled and discharged.
Section 5. Offices of the Trust, Filing of Copies, Headings, Counterparts.
The Trust shall maintain a usual place of business in Massachusetts,
which, initially, shall be c/o Donnelly, Conroy & Gelhaar, One Post Office
Square, Boston, Massachusetts 02109-2105, and shall continue to maintain an
office at such address unless changed by the Trustees to another location in
Massachusetts. The Trust may maintain other offices as the Trustees may from
time to time determine. The original or a copy of this instrument and of each
declaration of trust supplemental hereto shall be kept at the office of the
Trust where it may be inspected by any Shareholder. A copy of this instrument
and of each supplemental declaration of trust shall be filed by the Trustees
with the Massachusetts Secretary of State and the Boston City Clerk, as well as
any other governmental office where such filing may from time to time be
required. Headings are placed herein for convenience of reference only and in
case of any conflict, the text of this instrument, rather than the headings
shall control. This instrument may be executed in any number of counterparts
each of which shall be deemed an original.
Section 6. Applicable Law.
The Trust set forth in this instrument is created under and is to be
governed by and construed and administered according to the laws of The
Commonwealth of Massachusetts. The Trust shall be of the type commonly called a
Massachusetts business trust, and without limiting the provisions hereof, the
Trust may exercise all powers which are ordinarily exercised by such a trust.
Section 7. Amendments -- General.
All rights granted to the Shareholders under this Declaration of Trust are
granted subject to the reservation of the right to amend this Declaration of
Trust as herein provided, except that no amendment shall repeal the limitations
on personal liability of any Shareholder or Trustee or repeal the prohibition of
assessment upon the Shareholders without the express consent of each Shareholder
or Trustee involved. Subject to the foregoing, the provisions of this
Declaration of Trust (whether or not related to the rights of Shareholders) may
be amended at any time, so long as such amendment does not adversely affect the
rights of any Shareholder with respect to which such amendment is or purports to
be applicable and so long as such amendment is not in contravention of
applicable law, including the 1940 Act, by an instrument in writing signed by a
majority of the then Trustees (or by an officer of the Trust pursuant to the
vote of a majority of such Trustees). Any amendment to this Declaration of Trust
that adversely affects the rights of Shareholders may be adopted at any time by
an instrument signed in writing by a majority of the then Trustees (or by any
officer of the Trust pursuant to the vote of a majority of such Trustees) when
authorized to do so by the vote of the Shareholders holding a majority of the
Shares entitled to vote. Subject to the foregoing, any such amendment shall be
effective as provided in the instrument containing the terms of such amendment
or, if there is no provision therein with respect to effectiveness, upon the
execution of such instrument and of a certificate (which may be a part of such
instrument) executed by a Trustee or officer to the effect that such amendment
has been duly adopted. Copies of the amendment to this Declaration of Trust
shall be filed as specified in Section 5 of this Article XII. A restated
Declaration of Trust, integrating into a single instrument all of the provisions
of the Declaration of Trust which are then in effect and operative, may be
executed from time to time by a majority of the Trustees and shall be effective
upon filing as specified in Section 5.
Section 8. Amendments -- Series.
The establishment and designation of any series or class of Shares in
addition to those established and designated in Section 5 of Article III hereof
shall be effective upon the execution by a majority of the then Trustees of an
amendment to this Declaration of Trust, taking the form of a complete
restatement or otherwise, setting forth such establishment and designation and
the relative rights and preferences of any such Series or Class, or as otherwise
provided in such instrument.
Without limiting the generality of the foregoing, the Declaration of the
Trust may be amended to:
(a) create one or more Series or Classes of Shares (in addition to any
Series or Classes already existing or otherwise) with such rights and
preferences and such eligibility requirements for investment therein as
the Trustees shall determine and reclassify any or all outstanding Shares
as Shares of particular Series or Classes in accordance with such
eligibility requirements;
(b) combine two or more Series or Classes of Shares into a single Series
or Class on such terms and conditions as the Trustees shall determine;
(c) change or eliminate any eligibility requirements for investment in
Shares of any Series or Class, including without limitation the power to
provide for the issue of Shares of any Series or Class in connection with
any merger or consolidation of the Trust with another trust or company or
any acquisition by the Trust of part or all of the assets of another trust
or company;
(d) change the designation of any Series or Class of Shares;
(e) change the method of allocating dividends among the various
Series and Classes of Shares;
(f) allocate any specific assets or liabilities of the Trust or any
specific items of income or expense of the Trust to one or more Series and
Classes of Shares;
(g) specifically allocate assets to any or all Series or Classes of Shares
or create one or more additional Series or Classes of Shares which are
preferred over all other Series or Classes of Shares in respect of assets
specifically allocated thereto or any dividends paid by the Trust with
respect to any net income, however determined, earned from the investment
and reinvestment of any assets so allocated or otherwise and provide for
any special voting or other rights with respect to such Series or Classes.
Section 9. Use of Name.
The Trust acknowledges that WACHOVIA BANK, N.A. has reserved the right to
grant the non-exclusive use of the name "WACHOVIA VARIABLE INSURANCE FUNDS" or
any derivative thereof to any other investment company, investment company
portfolio, investment adviser, distributor, or any other business enterprise,
and to withdraw from the Trust or one or more Series or Classes any right to the
use of the name "WACHOVIA VARIABLE INSURANCE FUNDS".
IN WITNESS WHEREOF, the undersigned have executed this instrument the day
and year first above written.
/S/ JAMES A HANLEY /S/ SAMUEL E. HUDGINS
- ------------------------------ ---------------------
James A. Hanley Samuel E. Hudgins
/S/ D. DEAN KAYLOR /S/ DR. ALVIN J. SCHEXNIDER
- ------------------------------ ---------------------------
D. Dean Kaylor Dr. Alvin J. Schexnider
/S/ CHARLES S. WAY, JR.
- -----------------------
Charles S. Way, Jr.
Exhibit (e)(i) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
WACHOVIA VARIABLE INSURANCE FUNDS
DISTRIBUTOR'S CONTRACT
AGREEMENT made this 3rd day of March, 2000, by and between WACHOVIA
VARIABLE INSURANCE FUNDS (the "Trust "), a Massachusetts business trust, and
FEDERATED SECURITIES CORP. ("FSC "), a Pennsylvania Corporation.
In consideration of the mutual covenants hereinafter contained, it is
hereby agreed by and between the parties hereto as follows:
1. The Trust hereby appoints FSC as its agent to sell and distribute
shares of the Trust which may be offered in one or more series (the "Funds")
consisting of one or more classes (the "Classes") of shares (the "Shares"), as
described and set forth on one or more exhibits to this Agreement, at the
current offering price thereof as described and set forth in the current
Prospectuses of the Trust. FSC hereby accepts such appointment and agrees to
provide such other services for the Trust, if any, and accept such compensation
from the Trust, if any, as set forth in the applicable exhibits to this
Agreement.
2. The sale of any Shares may be suspended without prior notice
whenever in the judgment of the Trust it is in its best interest to do
so.
3. Neither FSC nor any other person is authorized by the Trust to give any
information or to make any representation relative to any Shares other than
those contained in the Registration Statement, Prospectuses, or Statements of
Additional Information ("SAIs") filed with the Securities and Exchange
Commission, as the same may be amended from time to time, or in any supplemental
information to said Prospectuses or SAIs approved by the Trust. FSC agrees that
any other information or representations other than those specified above which
it or any dealer or other person who purchases Shares through FSC may make in
connection with the offer or sale of Shares, shall be made entirely without
liability on the part of the Trust. No person or dealer, other than FSC, is
authorized to act as agent for the Trust for any purpose. FSC agrees that in
offering or selling Shares as agent of the Trust, it will, in all respects, duly
conform to all applicable state and federal laws and the rules and regulations
of the National Association of Securities Dealers, Inc., including its Rules of
Fair Practice. FSC will submit to the Trust copies of all sales literature
before using the same and will not use such sales literature if disapproved by
the Trust.
4. This Agreement is effective with respect to each Class as of the date
of execution of the applicable exhibit and shall continue in effect with respect
to each Class presently set forth on an exhibit and any subsequent Classes added
pursuant to an exhibit during the initial term of this Agreement for one year
from the date set forth above, and thereafter for successive periods of one year
if such continuance is approved at least annually by the Trustees of the Trust
including a majority of the members of the Board of Trustees of the Trust who
are not interested persons of the Trust and have no direct or indirect financial
interest in the operation of any Distribution Plan relating to the Trust or in
any related documents to such Plan ("Disinterested Trustees") cast in person at
a meeting called for that purpose. If a Class is added after the first annual
approval by the Trustees as described above, this Agreement will be effective as
to that Class upon execution of the applicable exhibit and will continue in
effect until the next annual approval of this Agreement by the Trustees and
thereafter for successive periods of one year, subject to approval as described
above.
5. This Agreement may be terminated with regard to a particular Fund or
Class at any time, without the payment of any penalty, by the vote of a majority
of the Disinterested Trustees or by a majority of the outstanding voting
securities of the particular Fund or Class on not more than sixty (60) days'
written notice to any other party to this Agreement. This Agreement may be
terminated with regard to a particular Fund or Class by FSC on sixty (60) days'
written notice to the Trust.
6. This Agreement may not be assigned by FSC and shall automatically
terminate in the event of an assignment by FSC as defined in the Investment
Company Act of 1940, as amended, provided, however, that FSC may employ such
other person, persons, corporation or corporations as it shall determine in
order to assist it in carrying out its duties under this Agreement.
7. FSC shall not be liable to the Trust 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 by this Agreement.
8. This Agreement may be amended at any time by mutual agreement in
writing of all the parties hereto, provided that such amendment is approved by
the Trustees of the Trust including a majority of the Disinterested Trustees of
the Trust cast in person at a meeting called for that purpose.
9. This Agreement shall be construed in accordance with and
governed by the laws of the Commonwealth of Pennsylvania.
10. (a) Subject to the conditions set forth below, the Trust agrees to
indemnify and hold harmless FSC and each person, if any, who controls FSC within
the meaning of Section 15 of the Securities Act of 1933 and Section 20 of the
Securities Act of 1934, as amended, against any and all loss, liability, claim,
damage and expense whatsoever (including but not limited to any and all expenses
whatsoever reasonably incurred in investigating, preparing or defending against
any litigation, commenced or threatened, or any claim whatsoever) arising out of
or based upon any untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement, any Prospectuses or SAIs (as from
time to time amended and supplemented) or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to make
the statements therein not misleading, unless such statement or omission was
made in reliance upon and in conformity with written information furnished to
the Trust about FSC by or on behalf of FSC expressly for use in the Registration
Statement, any Prospectuses and SAIs or any amendment or supplement thereof.
If any action is brought against FSC or any controlling person thereof
with respect to which indemnity may be sought against the Trust pursuant to the
foregoing paragraph, FSC shall promptly notify the Trust in writing of the
institution of such action and the Trust shall assume the defense of such
action, including the employment of counsel selected by the Trust and payment of
expenses. FSC or any such controlling person thereof 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 FSC or such controlling person 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 of action effected without its written consent. The
Trust agrees promptly to notify FSC of the commencement of any litigation or
proceedings against the Trust or any of its officers or Trustees or controlling
persons in connection with the issue and sale of Shares or in connection with
the Registration Statement, Prospectuses, or SAIs.
(b) FSC agrees to indemnify and hold harmless the Trust, each of its
Trustees, each of its officers who have signed the Registration Statement
and each other person, if any, who controls the Trust within the meaning
of Section 15 of the Securities Act of 1933, but only with respect to
statements or omissions, if any, made in the Registration Statement or any
Prospectus, SAI, or any amendment or supplement thereof in reliance upon,
and in conformity with, information furnished to the Trust about FSC by or
on behalf of FSC expressly for use in the Registration Statement or any
Prospectus, SAI, or any amendment or supplement thereof. In case any
action shall be brought against the Trust or any other person so
indemnified based on the Registration Statement or any Prospectus, SAI, or
any amendment or supplement thereof, and with respect to which indemnity
may be sought against FSC, FSC 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 FSC by the provisions of subsection (a)
above.
(c) Nothing herein contained shall be deemed to protect any person
against liability to the Trust or its shareholders to which such person
would otherwise be subject by reason of willful misfeasance, bad faith or
gross negligence in the performance of the duties of such person or by
reason of the reckless disregard by such person of the obligations and
duties of such person under this Agreement.
(d) Insofar as indemnification for liabilities may be permitted
pursuant to Section 17 of the Investment Company Act of 1940, as amended,
for Trustees, officers, FSC and controlling persons of the Trust by the
Trustees pursuant to this Agreement, the Trust is aware of the position of
the Securities and Exchange Commission as set forth in the Investment
Company Act Release No. IC-11330. Therefore, the Trust undertakes that in
addition to complying with the applicable provisions of this Agreement, in
the absence of a final decision on the merits by a court or other body
before which the proceeding was brought, that an indemnification payment
will not be made unless in the absence of such a decision, a reasonable
determination based upon factual review has been made (i) by a majority
vote of a quorum of non-party Disinterested Trustees, or (ii) by
independent legal counsel in a written opinion that the indemnitee was not
liable for an act of willful misfeasance, bad faith, gross negligence or
reckless disregard of duties. The Trust further undertakes that
advancement of expenses incurred in the defense of a proceeding (upon
undertaking for repayment unless it is ultimately determined that
indemnification is appropriate) against an officer, Trustees, FSC or
controlling person of the Trust will not be made absent the fulfillment of
at least one of the following conditions: (i) the indemnitee provides
security for his undertaking; (ii) the Trust is insured against losses
arising by reason of any lawful advances; or (iii) a majority of a quorum
of non-party Disinterested Trustees or independent legal counsel in a
written opinion makes a factual determination that there is reason to
believe the indemnitee will be entitled to indemnification.
11. FSC is hereby expressly put on notice of the limitation of liability
as set forth in Article XI of 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 FSC shall not seek satisfaction of any
such obligation from the shareholders of the Trust, the Trustees, officers,
employees or agents of the Trust, or any of them.
12. This Agreement will become binding on the parties hereto upon
the execution of the attached exhibits to the Agreement.
Exhibit A
to the
Distributor's Contract
WACHOVIA VARIABLE INSURANCE FUNDS
WACHOVIA BALANCED FUND II
WACHOVIA EQUITY FUND II
WACHOVIA SPECIAL VALUES FUND II
The following provisions are hereby incorporated and made part of the
Distributor's Contract dated March 3, 2000, between Trust and FSC with respect
to the Class of shares set forth above.
1. The Trust hereby appoints FSC to engage in activities principally
intended to result in the sale of shares of the above-listed Portfolios
("Shares"). Pursuant to this appointment, FSC is authorized to select a group of
financial institutions ("Financial Institutions") to sell Shares at the current
offering price thereof as described and set forth in the respective prospectuses
of the Trust.
2. During the term of this Agreement, the Trust will pay FSC for services
pursuant to this Agreement, a monthly fee computed at the annual rate of 0.25%
of the average aggregate net asset value of the Shares held during the month.
For the month in which this 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.
3. FSC may from time-to-time and for such periods as it deems appropriate
reduce its compensation to the extent any Fund's expenses exceed such lower
expense limitation as FSC may, by notice to the Trust, voluntarily declare to be
effective.
4. FSC will enter into separate written agreements with various firms to
provide certain of the services set forth in Paragraph 1 herein. FSC, in its
sole discretion, may pay Financial Institutions a periodic fee in respect of
Shares owned from time to time by their clients or customers. The schedules of
such fees and the basis upon which such fees will be paid shall be determined
from time to time by FSC in its sole discretion.
5. FSC will prepare reports to the Board of Trustees of the Trust on a
quarterly basis showing amounts expended hereunder including amounts paid to
Financial Institutions and the purpose for such expenditures.
In consideration of the mutual covenants set forth in the Distributor's
Contract dated March 3, 2000, between the Trust and FSC, Trust executes and
delivers this Exhibit on behalf of the portfolios, first set forth in this
Exhibit.
Witness the due execution hereof this 3rd day of March, 2000.
WACHOVIA VARIABLE INSURANCE FUNDS
By:
Name:
Title:
FEDERATED SECURITIES CORP.
By:
Name:
Title:
Exhibit (h) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
WACHOVIA VARIABLE INSURANCE FUNDS
AGREEMENT
FOR
FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES
AND
TRANSFER AGENCY SERVICES
AGREEMENT made as of March 3, 2000, by and between WACHOVIA VARIABLE
INSURANCE FUNDS, having its principal office and place of business at 5800
Corporate Drive, Pittsburgh, Pennsylvania 15237-7010 (together, the
"Investment Company"), on behalf of its separate investment portfolios
(individually referred to herein as a "Fund" and collectively as "Funds"),
listed on Exhibit 1 as may be amended from time to time, and FEDERATED
SERVICES COMPANY, a Pennsylvania corporation, having its principal office
and place of business at Federated Investors Tower, Pittsburgh,
Pennsylvania 15222-3779 on behalf of itself and its subsidiaries (the
"Company").
WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended
(the "1940 Act"), with authorized and issued shares of beneficial interest
("Shares");
WHEREAS, the Investment Company desires to retain the Company as fund
accountant to provide fund accounting services (as herein defined)
including certain pricing, accounting and recordkeeping services for each
of the Funds, including any classes of shares issued by any Fund
("Classes"), and the Company desires to accept such appointment;
WHEREAS, the Investment Company desires to appoint the Company as its
administrator to provide it with administrative services (as herein
defined), and the Company desires to accept such appointment; and
WHEREAS, the Investment Company desires to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer
agency services (as herein defined), and agent in connection with certain
other activities, and the Company desires to accept such appointment;
NOW THEREFORE, in consideration of the premises and mutual covenants
herein contained, and intending to be legally bound hereby, the parties
hereto agree as follows:
SECTION ONE: FUND ACCOUNTING.
ARTICLE 1. APPOINTMENT.
The Investment Company hereby appoints the Company to provide certain
pricing and accounting services to the Funds, and/or the Classes, for the
period and on the terms set forth in this Agreement. The Company accepts
such appointment and agrees to furnish the services herein set forth in
return for the compensation set forth in Exhibit 1 to this Agreement.
ARTICLE 2. THE COMPANY'S DUTIES.
Subject to the supervision and control of the Investment Company's
Board of Trustees ("Board"), the Company will assist the Investment
Company with regard to fund accounting for the Investment Company, and/or
the Funds, and/or the Classes, and in connection therewith undertakes to
perform the following specific services;
A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent
pricing services selected by the Company in consultation with the
Investment Company's investment adviser ("Adviser") and/or
investment sub-adviser ("Sub-Adviser"), or sources selected by the
Adviser and/or Sub-Adviser, and reviewed by the Board;
secondarily, if a designated pricing service does not provide a
price for a security which the Company believes should be
available by market quotation, the Company may obtain a price by
calling brokers designated by the Adviser and/or Sub-Adviser of
the Fund holding the security, or if the Adviser and/or
Sub-Adviser does not supply the names of such brokers, the Company
will attempt on its own to find brokers to price those securities;
thirdly, for securities for which no market price is available,
the Investment Company's Pricing Committee (or, in the absence of
a Pricing Committee, the Board) will determine a fair value in
good faith. Consistent with Rule 2a-4 under the 1940 Act,
estimates may be used where necessary or appropriate. The
Company's obligations with regard to the prices received from
outside pricing services and designated brokers or other outside
sources, is to exercise reasonable care in the supervision of the
pricing agents. The Company is not the guarantor of the
securities prices received from such agents and the Company is not
liable to the Fund for potential errors in valuing a Fund's assets
or calculating the net asset value per share of such Fund or Class
attributable to such prices. All of the above sources of prices
used as described are deemed by the Company to be authorized
sources of security prices. The Company provides daily to the
Adviser and/or Sub-Adviser the securities prices used in
calculating the net asset value of the Fund, for its use in
preparing exception reports for those prices on which the Adviser
and/or Sub-Adviser has comment. Further, upon receipt of the
exception reports generated by the Adviser and/or Sub-Adviser, the
Company diligently pursues communication regarding exception
reports with the designated pricing agents;
B. Determine the net asset value per share of each Fund and/or Class,
at the time and in the manner from time to time determined by the
Board and as set forth in the Prospectus and Statement of
Additional Information ("Prospectus") of each Fund;
C. Calculate the net income of each Fund, if any;
D. Calculate realized capital gains or losses of each Fund resulting
from sale or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and financial
records of the Investment Company, including for each Fund and/or Class,
as required under Section 31(a) of the 1940 Act and the rules thereunder
in connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records to be maintained by Rule 31a-1 under the 1940 Act in connection
with the services provided by the Company. The Company further agrees
that all such records it maintains for the Investment Company are the
property of the Investment Company and further agrees to surrender
promptly to the Investment Company such records upon the Investment
Company's request;
G. At the request of the Investment Company, prepare various reports
or other financial documents in accordance with generally accepted
accounting principles as required by federal, state and other
applicable laws and regulations; and
H. Such other similar services as may be reasonably requested by the
Investment Company.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section One,
shall hereafter be referred to as "Fund Accounting Services."
SECTION TWO: ADMINISTRATIVE SERVICES.
ARTICLE 3. APPOINTMENT.
The Investment Company hereby appoints the Company as Administrator for the
period on the terms and conditions set forth in this Agreement. The Company
hereby accepts such appointment and agrees to furnish the services herein set
forth in return for the compensation set forth in Exhibit 1 to this Agreement.
ARTICLE 4. THE COMPANY'S DUTIES.
As Administrator, and subject to the supervision and control of the Board and
in accordance with Proper Instructions (as defined hereafter) from the
Investment Company, the Company will provide facilities, equipment, and
personnel to carry out the following administrative services for operation of
the business and affairs of the Investment Company and each of its Funds:
A. Prepare, file, and maintain the Investment Company's governing
documents and any amendments thereto, including the declaration of
trust (which has already been prepared and filed), the by-laws and
minutes of meetings of the Board and shareholders;
B. Prepare and file with the Securities and Exchange Commission ("SEC") the
registration statements for the Investment Company and the Investment
Company's Shares and all amendments thereto, reports to regulatory
authorities and shareholders, prospectuses, proxy statements, and such
other documents all as may be necessary to enable the Investment Company
to make a continuous offering of its Shares;
C. Prepare, negotiate, and administer contracts (if any) on behalf of
the Investment Company with, among others, the Adviser and/or
Sub-Adviser and the Investment Company's distributor(s), subject
to any applicable restrictions of the Board or the 1940 Act;
D. Calculate performance data of the Investment Company for
dissemination to information services covering the investment
company industry;
E. Prepare and file the Investment Company's tax returns;
F. Coordinate the layout and printing of publicly disseminated
prospectuses and reports;
G. Perform internal audit examinations in accordance with a charter
adopted by the Company and the Investment Company;
H. Assist with the design, development, and operation of the
Investment Company and the Funds;
I. Provide individuals reasonably acceptable to the Board for
nomination, appointment, or election as officers of the Investment
Company, who will be responsible for the management of certain of
the Investment Company's affairs as determined by the Investment
Company's Board; and
J. Consult with the Investment Company and its Board on matters
concerning the Investment Company and its affairs.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Two,
shall hereafter be referred to as "Administrative Services."
ARTICLE 5. RECORDS.
The Company 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 Investment Company. Where
applicable, such records shall be maintained by the Company for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The books and records
pertaining to the Investment Company which are in the possession of the Company
shall be the property of the Investment Company. The Investment Company, or the
Investment Company's authorized representatives, shall have access to such books
and records at all times during the Company's normal business hours. Upon the
reasonable request of the Investment Company, copies of any such books and
records shall be provided promptly by the Company to the Investment Company or
the Investment Company's authorized representatives.
ARTICLE 6. EXPENSES.
Notwithstanding the Company's duties as set forth in Article 4 of this
Agreement, the Investment Company assumes full responsibility for the
preparation, contents and distribution of its own offering documents and for
complying with all applicable requirements the 1940 Act, the Internal Revenue
Code, and any other laws, rules and regulations of government authorities having
jurisdiction.
A. The Company shall be responsible for expenses incurred in
providing office space, equipment, and personnel as may be
necessary or convenient to provide the Administrative Services to
the Investment Company, including the compensation of the Company
employees who serve as officers of the Investment Company. The
Investment Company shall be responsible for all other expenses
incurred by the Company on behalf of the Investment Company,
including without limitation postage and courier expenses,
printing expenses, travel expenses, registration fees, filing
fees, fees of outside counsel and independent auditors, or other
professional services, organizational expenses, insurance
premiums, fees payable to persons who are not the Company's
employees, trade association dues, and other expenses properly
payable by the Funds and/or the Classes.
ARTICLE 7. STANDARD OF CARE AND INDEMNIFICATION.
A. The Company shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Investment Company
in connection with the matters to which Section Two of 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. The Company shall be
entitled to rely on and may act upon advice of counsel (who may be
counsel for the Investment Company) on all matters, and shall be
without liability for any action reasonably taken or omitted
pursuant to such advice provided that such action is not in
violation of applicable federal or state laws or regulations, and
is in good faith and without negligence. Any person, even though
also an officer, director, trustee, partner, employee or agent of
the Company, who may be or become an officer, director, trustee,
partner, employee or agent of the Investment Company, shall be
deemed, when rendering services to the Investment Company or
acting on any business of the Investment Company (other than
services or business in connection with the duties of the Company
hereunder) to be rendering such services to or acting solely for
the Investment Company and not as an officer, director, trustee,
partner, employee or agent or one under the control or direction
of the Company even though paid by the Company.
B. Subject to the conditions set forth below; the Investment Company
agrees to indemnify and hold harmless the Company 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 the Company in performing
Administrative Services pursuant to Section Two of this Agreement
if not resulting from the Company'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 the Company to which indemnity may be
sought against the Investment Company pursuant to the foregoing
paragraph, The Company shall promptly notify the Investment Company in
writing of the institution of such action and, if provided such notice
has been given, the Investment Company shall assume the defense of such
action, including the employment of counsel selected by the Investment
Company and payment of expenses. The Company 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 the Company unless the
employment of such counsel shall have been authorized in writing by the
Investment Company in connection with the defense of such action or the
Investment Company 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 Company. Anything in this paragraph to the
contrary notwithstanding, the Investment Company shall not be liable for
any settlement of any such claim or action effected without its written
consent. The Investment Company agrees promptly to notify the Company of
the commencement of any litigation or proceedings against the Investment
Company or any of its officers or Trustees in connection with the
Administrative Services.
C. The Company agrees to indemnify and hold harmless the Investment
Company, 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 fee
incurred in connection therewith) arising by reason of any action
taken or thing done by the Company in performing Administrative
Services pursuant to Section Two of this Agreement if resulting
from the Company'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
Investment Company or any other person so indemnified based on the
foregoing at described in this subsection (C), and with respect to
which indemnity may be sought against the Company, the Company
shall have the rights and duties given to the Investment Company,
and the Investment Company and each other person so indemnified
shall have the rights and duties given to the Company by the
provisions of subsection B above.
SECTION THREE: TRANSFER AGENCY SERVICES.
ARTICLE 8. TERMS OF APPOINTMENT.
Subject to the terms and conditions set forth in this Agreement, the
Investment Company hereby appoints the Company to act as Transfer Agent
and Dividend Disbursing Agent for each Fund's Shares, and agent in
connection with any accumulation, open-account or similar plans provided
to the shareholders of any Fund ("Shareholder(s)"), including without
limitation any periodic investment plan or periodic withdrawal program.
ARTICLE 9. DUTIES OF THE COMPANY.
The Company shall perform the following services in accordance with
Proper Instructions as may be provided from time to time by the Investment
Company as to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
Shares and promptly deliver payment and appropriate documentation
therefor to the custodian of the relevant Fund, (the "Custodian").
The Company shall notify the Fund the Custodian on a daily basis
of the total amount of orders and payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate to
the Shareholder at its address as set forth on the transfer books
of the Funds, and/or Classes, subject to any Proper Instructions
regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of a Fund and/or Class is returned unpaid for any reason,
the Company shall debit the Share account of the Shareholder by
the number of Shares that had been credited to its account upon
receipt of the check or other order, promptly mail a debit advice
to the Shareholder, and notify the Fund and/or Class of its
action. In the event that the amount paid for such Shares exceeds
proceeds of the redemption of such Shares plus the amount of any
dividends paid with respect to such Shares, the Fund and/or Class
or its distributor will reimburse the Company in the amount of
such excess.
B. Distribution
(1) Upon notification by a Fund of the declaration of any distribution
to Shareholders, the Company shall act as Dividend Disbursing
Agent for the Fund in accordance with the provisions of its
governing document and the then-current Prospectus of the Fund.
The Company shall prepare and mail or credit income, capital gain,
or any other payments to Shareholders. As the Dividend Disbursing
Agent, the Company shall, on or before the payment date of any
such distribution, notify the Custodian of the estimated amount
required to pay any portion of said distribution which is payable
in cash and request the Custodian to make available sufficient
funds for the cash amount to be paid out. The Company shall
reconcile the amounts so requested and the amounts actually
received by the Custodian on a daily basis. If a Shareholder is
entitled to receive additional Shares by virtue of any such
distribution or dividend, appropriate credits shall be made to the
Shareholder's account, or for certificated Funds and/or Classes,
certificates for such Shares shall be delivered where requested;
and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Investment Company, each Fund and Class and
its Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set forth
in Proper Instructions, deliver the appropriate instructions
therefor to the Custodian. The Company shall notify the Funds on a
daily basis of the total amount of redemption requests processed
and monies paid to the Company by the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date
and time of receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual basis
and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the SEC
a record of the total number of Shares of the Fund and/or Class
which are authorized, based upon data provided to it by the Fund,
and issued and outstanding. The Company shall also provide the
Fund on a regular basis or upon reasonable request with the total
number of Shares which are authorized and issued and outstanding.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed under this Section Three in the form and manner as
agreed to by the Investment Company to include a record for each
Shareholder's account of the following:
(a) Name, address and tax identification number (and
whether such number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account,
including dividends paid and date and price for all
transactions;
(d) Any stop or restraining order placed against the
account;
(e) Information with respect to withholding in the case of a
foreign account or an account for which withholding is
required by the Internal Revenue Code;
(f) Any dividend reinvestment order, plan application,
dividend address and correspondence relating to the
current maintenance of the account;
(g) Certificate numbers and denominations for any
Shareholder holding certificates (if share
certificates are issued);
(h) Any information required in order for the Company to perform
the calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such record
retention shall be at the expense of the Company, and such records
may be inspected by the Fund at reasonable times. The Company may,
at its option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the Company's
files, records and documents created and maintained by the Company
pursuant to this Agreement, which are no longer needed by the
Company in performance of its services or for its protection. If
not so turned over to the Fund, such records and documents will be
retained by the Company for six years from the year of creation,
during the first two of which such documents will be in readily
accessible form. At the end of the six year period, such records
and documents will either be turned over to the Fund or destroyed
in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the
following information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each
state for "blue sky" purposes as determined according to
Proper Instructions delivered from time to time by the Fund
to the Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution
agreements, allocations of sales loads, redemption fees, or
other transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time
to time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting
dividends and distributions paid as are required to be so filed
and mailed and shall withhold such sums as are required to be
withheld under applicable federal and state income tax laws, rules
and regulations.
(3) In addition to and not in lieu of the services set forth
above, the Company shall:
(a) Perform all of the customary services of a transfer
agent, dividend disbursing agent and, as relevant,
agent in connection with accumulation, open-account or
similar plans (including without limitation any
periodic investment plan or periodic withdrawal
program), including but not limited to: maintaining
all Shareholder accounts, mailing Shareholder reports
and Prospectuses to current Shareholders, withholding
taxes on accounts subject to back-up or other
withholding (including non-resident alien accounts),
preparing and filing reports on U.S. Treasury
Department Form 1099 and other appropriate forms
required with respect to dividends and distributions
by federal authorities for all Shareholders, preparing
and mailing confirmation forms and statements of
account to Shareholders for all purchases and
redemptions of Shares and other conformable
transactions in Shareholder accounts, preparing and
mailing activity statements for Shareholders, and
providing Shareholder account information; and
(b) Provide a system which will enable the Fund to monitor
the total number of Shares of each Fund (and/or Class)
sold in each state ("blue sky reporting"). The Fund
shall by Proper Instructions (i) identify to the
Company those transactions and assets to be treated as
exempt from the blue sky reporting for each state and
(ii) verify the classification of transactions for
each state on the system prior to activation and
thereafter monitor the daily activity for each state.
The responsibility of the Company for each Fund's
(and/or Class's) state blue sky reporting status is
limited to the recording of the classification of
transactions or accounts with regard to blue sky
compliance and the reporting of such transactions and
accounts to the Fund as provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders relating
to their Share accounts and such other correspondence as may from
time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in connection
with Shareholder meetings of each Fund; receive, examine and
tabulate returned proxies, and certify the vote of the
Shareholders; and
(3) The Company shall establish and maintain facilities and procedures
for safekeeping of Share certificates (if issued), check forms and
facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates,
forms and devices.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Three,
shall hereafter be referred to as "Transfer Agency Services."
ARTICLE 10. DUTIES OF THE INVESTMENT COMPANY.
A. Compliance
Notwithstanding, the duties of the Company as set forth in Article 9 of
this Agreement, the Investment Company or Fund assume full
responsibility for the preparation, contents and distribution of their
own and/or their classes' Prospectus and for complying with all
applicable requirements of the Securities Act of 1933, as amended (the
"1933 Act"), the 1940 Act and any laws, rules and regulations of
government authorities having jurisdiction.
B. Share Certificates
If Share certificates are issued, the Investment Company shall supply
the Company with a sufficient supply of blank Share certificates and
from time to time shall renew such supply upon request of the Company.
Such blank Share certificates shall be properly signed, manually or by
facsimile, if authorized by the Investment Company and shall bear the
seal of the Investment Company or facsimile thereof; and notwithstanding
the death, resignation or removal of any officer of the Investment
Company authorized to sign certificates, the Company may continue to
countersign certificates which bear the manual or facsimile signature of
such officer until otherwise directed by the Investment Company.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's Shares.
SECTION FOUR: GENERAL PROVISIONS.
ARTICLE 11. PROPER INSTRUCTIONS.
As used throughout this Agreement, a "Proper Instruction" means a
writing signed or initialed by one or more persons as the Board shall have
from time to time authorized. Each such writing shall set forth the
specific transaction or type of transaction involved. Oral instructions
will be deemed to be Proper Instructions if (a) the Company reasonably
believes them to have been given by a person previously authorized in
Proper Instructions to give such instructions with respect to the
transaction involved, and (b) the Investment Company, or the Fund, and the
Company promptly cause such oral instructions to be confirmed in writing.
Proper Instructions may include communications effected directly between
electro-mechanical or electronic devices provided that the Investment
Company, or the Fund, and the Company are satisfied that such procedures
afford adequate safeguards for the Fund's assets. Proper Instructions may
only be amended in writing.
ARTICLE 12. ASSIGNMENT.
Except as provided below, neither this Agreement nor any of the rights
or obligations under this Agreement may be assigned by either party
without the written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon
the parties and their respective permitted successors and assigns.
B. With regard to Transfer Agency Services, the Company may, without
further consent of the Investment Company, subcontract for the
performance of Transfer Agency Services with
(1) its subsidiary, Federated Shareholder Service Company, a Delaware
business trust, which is duly registered as a transfer agent
pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended, or any succeeding statute ("Section 17A(c)(1)");
or
(2) such other provider of services duly registered as a transfer
agent under Section 17A(c)(1) as Company shall select.
C. With regard to Fund Accounting Services and Administrative Services, the
Company may, without further consent of the Investment Company,
subcontract for the performance of such services with Federated
Administrative Services, a wholly-owned subsidiary of the Company, or
such other service provider as Company may select.
D. Except as provided in E below, the Company shall be as fully responsible
to the Investment Company for the acts and omissions of any
subcontractor as it is for its own acts and omissions. The compensation
of such person or persons shall be paid by the Company and no obligation
shall be incurred on behalf of the Investment Company, the Funds, or the
Classes in such respect.
E. The Company shall upon instruction from the Investment Company
subcontract for the performance of services under this Agreement
with an agent selected by the Investment Company, other than as
described in B. and C. above; provided, however, that the Company
shall in no way be responsible to the Investment Company for the
acts and omissions of the agent.
F. Either party may assign all of or a substantial portion of its
business to a successor, or to a party controlling, controlled by,
or under common control with such party.
Nothing in this Article 12 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
ARTICLE 13. DOCUMENTS.
A. In connection with the appointment of the Company under this
Agreement, the Investment Company shall file with the Company the
following documents:
(1) A copy of the declaration of trust and by-laws of the
Investment Company and all amendments thereto;
(2) A copy of the resolution of the Board of the Investment
Company authorizing this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Investment Company or the Funds in the forms approved by the Board
of the Investment Company with a certificate of the Secretary of
the Investment Company as to such approval;
(4) All account application forms and other documents relating
to Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following
documents:
(1) Each resolution of the Board of the Investment Company authorizing
the original issuance of each Fund's and/or Class's Shares;
(2) Each registration statement filed with the SEC and amendments
thereof and orders relating thereto in effect with respect to the
sale of Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the declaration of
trust and the by-laws of the Investment Company;
(4) Certified copies of each vote of the Board authorizing officers to
give Proper Instructions to the Custodian and agents for fund
accounting and shareholder recordkeeping or transfer agency
services;
(5) If issued, specimens of all new Share certificates representing
Shares of any Fund, accompanied by Board resolutions approving
such forms;
(6) Such other certificates, documents or opinions which the Company
may, in its discretion, deem necessary or appropriate in the
proper performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
ARTICLE 14. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company
The Company represents and warrants to the Fund that:
(1) it is a corporation duly organized and existing and in good
standing under the laws of the Commonwealth of Pennsylvania;
(2) It is duly qualified to carry on its business in each jurisdiction
where the nature of its business requires such qualification, and
in the Commonwealth of Pennsylvania;
(3) it is empowered under applicable laws and by its articles of
incorporation and by-laws to enter into and perform this
Agreement;
(4) all requisite corporate proceedings have been taken to authorize
it to enter into and perform its obligations under this Agreement;
(5) it has and will continue to have access to the necessary
facilities, equipment and personnel to perform its duties and
obligations under this Agreement; and
(6) it is in compliance with federal securities law requirements and
in good standing as an administrator, fund accountant and transfer
agent.
B. Representations and Warranties of the Investment Company
The Investment Company represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and
in good standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its declaration of
trust and by-laws to enter into and perform its obligations under
this Agreement;
(3) All corporate proceedings required by said declaration of trust
and by-laws have been taken to authorize it to enter into and
perform its obligations under this Agreement;
(4) The Investment Company is an open-end management investment
company registered under the 1940 Act; and
(5) A registration statement under the 1933 Act will be effective, and
appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of each Fund being
offered for sale.
ARTICLE 15. STANDARD OF CARE AND INDEMNIFICATION.
- --------------------------------------------------
A. Standard of Care
With regard to Sections One and Three, the Company shall be held to a
standard of reasonable care in carrying out the provisions of this
Agreement, provided however, that the Company shall be held to any
higher standard of care that would be imposed upon the Company, by an
applicable law or regulation even though such stated standard of care
was not part of this Agreement. The Company shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the
Investment Company) on all matters, and shall be without liability for
any action reasonably taken or omitted pursuant to such advice, provided
that such action is not in violation of applicable federal or state laws
or regulations, and is in good faith and without negligence. Any person,
even though also an officer, trustee, partner, employee or agent of the
Company, who may be or become an officer, trustee, partner, employee or
agent of the Investment Company, shall be deemed, when rendering
services to the Investment Company or acting on any business of the
Investment Company (other than services or business in connection with
the duties of the Company hereunder) to be rendering such services to or
acting solely for the Investment Company and not as an officer,
director, trustee, partner, employee or agent or one under the control
or direction of the Company even though paid by the Company.
B. Indemnification by Investment Company
The Company shall not be responsible for and the Investment Company or
Fund shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents, employees and affiliates,
harmless against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or attributable
to:
(1) The Investment Company's refusal or failure to comply with the
terms of this Agreement, or which arise out of the Investment
Company's lack of good faith, gross negligence or willful
misconduct or which arise out of the breach of any representation
or warranty of the Investment Company hereunder;
(2) The acts or omissions of any Custodian, Adviser, Sub-Adviser or
other party contracted or approved by the Investment Company or
Fund;
(3) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which:
(a) are received by the Company or its agents or subcontractors
and furnished to it by or on behalf of the Investment
Company or Fund, its Shareholders or investors regarding the
purchase, redemption or transfer of Shares and Shareholder
account information;
(b) are received by the Company from independent pricing
services or sources for use in valuing the assets of
the Investment Company or Fund; or
(c) are received by the Company or its agents or subcontractors
from Advisers, Sub-Advisers or other third parties
contracted or approved by the Investment Company or Fund for
use in the performance of services under this Agreement; or
(d) have been prepared and/or maintained by the Investment
Company or Fund or its affiliates or any other person or
firm on behalf of the Investment Company.
(4) The reliance on, or the carrying out by the Company or its agents
or subcontractors of, Proper Instructions of the Investment
Company or the Fund.
(5) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in such
state or in violation of any stop order or other determination or
ruling by any federal agency or any state with respect to the
offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by this
Article 15.B. from liability for any act or omission resulting
from the Company's willful misfeasance, bad faith, negligence or
reckless disregard of its duties or failure to meet the standard
of care set forth in Article 15.A. above.
C. Indemnification by the Company
The Company shall indemnify and hold the Investment Company and each
Fund harmless from and against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of
or attributed to the Company's lack of good faith, negligence, willful
misconduct, or failure to meet the standard of care set forth in Article
15A above.
D. Reliance
At any time the Company may apply to any officer of the Investment
Company or Fund for instructions, and may consult with legal counsel
with respect to any matter arising in connection with the services to be
performed by the Company under this Agreement, and the Company and its
agents or subcontractors shall not be liable and shall be indemnified by
the Investment Company or the appropriate Fund for any action reasonably
taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel provided such action is not in violation of
applicable federal or state laws or regulations and is taken in good
faith and without negligence. The Company, its agents and subcontractors
shall be protected and indemnified in recognizing Share certificates
which are reasonably believed to bear the proper manual or facsimile
signatures of the officers of the Investment Company or the Fund, and
the proper countersignature of any former transfer agent or registrar,
or of a co-transfer agent or co-registrar.
E. Notification
In order that the indemnification provisions contained in this Article
15 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification
shall promptly notify the other party in writing of such assertion, and
shall keep the other party advised with respect to all developments
concerning such claim. The party who may be required to indemnify shall
have the option to participate with the party seeking indemnification in
the defense of such claim. The party seeking indemnification shall in no
case confess any claim or make any compromise or settlement in any case
in which the other party may be required to indemnify it except with the
other party's prior written consent.
ARTICLE 16. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall be effective from the date first written above and
shall continue through November 30, 2001 ("Initial Term").
Thereafter, this Agreement shall be automatically renewed each year for
an additional term of one year ("Additional Term") provided that either
party may terminate this Agreement by written notice delivered at least
six months prior to the expiration of the Initial or any Additional Term.
In the event, however, of a material breach by the Company of its
obligations under this Agreement, including a failure by the Company to
meet the applicable standard of care set forth herein, the Investment
Company shall promptly notify the Company in writing of such breach and,
upon receipt of such notice, the Company shall promptly cure the breach,
and, if the breach is not so cured within 30 days after the Company's
receipt of notice thereof, the Investment Company may terminate this
Agreement on not less than 30 days' written notice. The termination date
for all original or after-added Funds which are, or become, a party to
this Agreement shall be coterminous. Investment Companies that merge or
dissolve during the Initial Term or Additional Term shall cease to be a
party on the effective date of such merger or dissolution.
Upon the termination of this Agreement by the Investment Company, the
Investment Company shall pay to the Company such compensation as may be
payable prior to the effective date of such termination. In the event that
the Investment Company designates a successor to any of the Company's
obligations hereunder, the Company shall, at the expense and direction of
the Investment Company, transfer to such successor all relevant books,
records and other data established or maintained by the Investment Company
under the foregoing provisions. Additionally, the Company reserves the
right to charge for any other reasonable expenses associated with such
termination. The provisions of Articles 7 and 15 shall survive the
termination of this Agreement.
ARTICLE 17. AMENDMENT.
This Agreement may be amended or modified by a written agreement
executed by both parties.
ARTICLE 18. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions
interpretive of or in addition to the provisions of this Agreement as may
in their joint opinion be consistent with the general tenor of this
Agreement. Any such interpretive or additional provisions shall be in a
writing signed by both parties and shall be annexed hereto, provided that
no such interpretive or additional provisions shall contravene any
applicable federal or state regulations or any provision of the Investment
Company's declaration of trust.
ARTICLE 19. GOVERNING LAW.
This Agreement shall be construed and the provisions hereof interpreted
under and in accordance with the laws of the Commonwealth of Pennsylvania,
provided however, that nothing herein shall be construed in a manner
inconsistent with the 1940 Act or any rule or regulation promulgated by
the SEC thereunder.
ARTICLE 20. NOTICES.
Except as otherwise specifically provided herein, notices and other
writings delivered or mailed postage prepaid to the Investment Company at
5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7010 or to the
Company at Federated Investors Tower, Pittsburgh, Pennsylvania, 15222-3779
or to such other address as the Investment Company or the Company may
hereafter specify, shall be deemed to have been properly delivered or
given hereunder to the respective address.
ARTICLE 21. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original.
ARTICLE 22. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties
hereto and supersedes any prior agreement with respect to the subject
hereof whether oral or written.
ARTICLE 23. SUCCESSOR AGENT.
If a successor agent for the Investment Company shall be appointed by
the Investment Company, the Company shall upon termination of this
Agreement deliver to such successor agent at the office of the Company all
properties of the Investment Company held by it hereunder. If no such
successor agent shall be appointed, the Company shall at its office upon
receipt of Proper Instructions deliver such properties in accordance with
such instructions.
In the event that no written order designating a successor agent or
Proper Instructions shall have been delivered to the Company on or before
the date when such termination shall become effective, then the Company
shall have the right to deliver to a bank or trust company, which is a
"bank" as defined in the 1940 Act, of its own selection, having an
aggregate capital, surplus, and undivided profits, as shown by its last
published report, of not less than $2,000,000, all properties held by the
Company under this Agreement. Thereafter, such bank or trust company shall
be the successor of the Company under this Agreement.
ARTICLE 24. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder
or any damages resulting therefrom to the Fund as a result of work
stoppage, power or other mechanical failure, natural disaster,
governmental action, communication disruption or other impossibility of
performance.
ARTICLE 25. SEVERABILITY.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
ARTICLE 26. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF
THE INVESTMENT COMPANY.
The execution and delivery of this Agreement have been authorized by
the trustees of the Investment Company and signed by an authorized officer
of the Investment Company, acting as such, and neither such authorization
by such trustees nor such execution and delivery by such officer shall be
deemed to have been made by any of them individually or to impose any
liability on any of them personally, and the obligations of this Agreement
are not binding upon any of the trustees or shareholders of the Investment
Company, but bind only the property of the Fund, or Class, as provided in
the declaration of trust of the Investment Company.
ARTICLE 27. COMPENSATION.
A. The Funds will compensate the Company for the services described
herein in accordance with the fees agreed upon from time to time
between the parties hereto. Such fees do not include out-of-pocket
disbursements of the Company for which the Funds shall reimburse
the Company. Out-of-pocket disbursements shall include, but shall
not be limited to, the items agreed upon between the parties from
time to time, including those items listed on Exhibit 1 attached
hereto.
B. The Fund and/or the Classes, and not the Company, shall bear the
cost of: custodial fees and expenses; membership dues in the
Investment Company Institute or any similar organization; transfer
agency fees and expenses; investment advisory fees; costs of
printing and mailing Share certificates (if issued); Prospectuses,
reports and notices; administrative fees and expenses; interest on
borrowed money; brokerage commissions; taxes and fees payable to
federal, state and other governmental agencies; fees and expenses
of the trustees of the Investment Company who are not employees of
the Company; independent auditors fees and expenses; legal and
audit department expenses billed to the Company for work performed
related to the Investment Company, the Funds, or the Classes; law
firm fees and expenses; organizational expenses; or other expenses
not specified in this Article 27 which may be properly payable by
the Funds and/or Classes.
C. The compensation and out-of-pocket expenses attributable to the Fund
shall be accrued by the Fund and shall be paid to the Company no less
frequently than monthly, and shall be paid daily upon request of the
Company. The Company will maintain detailed information about the
compensation and out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted
from time to time, shall be dated and signed by a duly authorized
officer of the Investment Company and/or the Funds and a duly authorized
officer of the Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and
through their duly authorized officers, as of the day and year first above
written.
WACHOVIA VARIABLE INSURANCE FUNDS
By:
Name:
Title:
FEDERATED SERVICES COMPANY
By:
Name:
Title:
EXHIBIT 1
TO THE AGREEMENT FOR
FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES
AND
TRANSFER AGENCY SERVICES
The Agreement for Fund Accounting Services, Administrative Services and
Transfer Agency Services dated MARCH 3, 2000, between WACHOVIA VARIABLE
INSURANCE FUNDS, and FEDERATED SERVICES COMPANY shall apply to the following
Portfolios:
Wachovia Balanced Fund II
Wachovia Equity Fund II
Wachovia Special Values Fund II
I. GENERAL FEE
For all Fund Accounting, Administrative, and Transfer Agency Services provided
pursuant to this Agreement, the Investment Company agrees to pay and the Company
hereby agrees to accept as full compensation for its services rendered hereunder
a fee as follows:
10.0 basis points on average daily net assets* up to $3.5 billion 6.0 basis
points on average daily net assets* of $3.5 to $5.0 billion 4.0 basis points on
average daily net assets* of $5.0 to $10.0 billion 3.0 basis points on average
daily net assets* of $10.0 to $20.0 billion 2.0 basis points on average daily
net assets* over $20.0 billion
*Of Wachovia Variable Insurance Funds, The Wachovia Funds and The
Wachovia Municipal Funds, excluding Wachovia Prime Money Market Fund
II. FUND ACCOUNTING SERVICES OUT-OF-POCKET EXPENSES
Out-of-pocket expenses include, but are not limited to, the following: postage
(including overnight courier service), statement stock, envelopes, telephones,
telecommunication charges (including Fax), travel, duplicating, forms, supplies,
microfiche, computer access charges, client specific system enhancements ,access
to the shareholder recordkeeping system, security pricing services, variable
rate change notification services, paydown factor notification services
III. TRANSFER AGENCY SERVICES OUT-OF-POCKET EXPENSES
Out-of-pocket expenses include but are not limited to postage (including
overnight courier service), statement stock, envelopes, telecommunication
charges (including Fax), travel, duplicating, forms, supplies, microfiche,
computer access charges, client specific enhancements, disaster recovery,
closed account fees, processing fees (including check encoding), and
expenses incurred at the specific direction of the Fund. Postage for mass
mailings is due seven days in advance of the mailing date.
IV. PAYMENT
Payment is due thirty days after the date of the invoice.
IN WITNESS WHEREOF, the parties hereto have caused this Schedule to be
executed in their names and on their behalf under their seals by and
through their duly authorized officers, as of MARCH 3, 2000.
WACHOVIA VARIABLE INSURANCE FUNDS
By:
Name:
Title:
FEDERATED SERVICES COMPANY
By:
Name:
Title:
Exhibit (m)(ii) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
MUTUAL FUNDS
SALES AND SERVICE
AGREEMENT
This Agreement is entered into among the financial institution executing
this Agreement ("Financial Institution") and Federated Securities Corp. ("FSC"),
with respect to those investment companies listed in Exhibit A hereto (referred
to individually as the "Fund" and collectively as the "Funds") for whose shares
of beneficial interest or capital stock ("Shares") FSC serves as Distributor. A.
Financial Institution.
1. Status of Financial Institution as "Bank" or Registered
Broker-Dealer. Financial Institution represents and warrants to FSC:
(a)(i) that it is a broker or dealer as defined in Section 3(a)(4) or
3(a)(5) of the Securities Exchange Act of 1934 ("Exchange Act"); that it
is registered with the Securities and Exchange Commission pursuant to
Section 15 of the Exchange Act; that it is a member of the National
Association of Securities Dealers, Inc.; that its customers' accounts are
insured by the Securities Investors Protection Corporation ("SIPC"); and
that, during the term of this Agreement, it will abide by all of the rules
and regulations of the NASD including, without limitation, the NASD Rules
of Fair Practice. Financial Institution agrees to notify FSC immediately
in the event of (1) the termination of its coverage by the SIPC; (2) its
expulsion or suspension from the NASD, or (3) its being found to have
violated any applicable federal or state law, rule or regulation arising
out of its activities as a broker-dealer or in connection with this
Agreement, or which may otherwise affect in any material way its ability
to act in accordance with the terms of this Agreement. Financial
Institution's expulsion from the NASD will automatically terminate this
Agreement immediately without notice. Suspension of Financial Institution
from the NASD for violation of any applicable federal or state law, rule
or regulation will terminate this Agreement effective immediately upon
FSC's written notice of termination to Financial Institution; or
(a)(ii) that it is a "bank," as that term is defined in Section 3(a)(6) of
the Exchange Act and that, during the term of this Agreement, it will
abide by the rules and regulations of those state and federal banking
authorities with appropriate jurisdiction over the Financial Institution,
especially those regulations dealing with the activities of the
Institution as described under this Agreement. Financial Institution
agrees to notify FSC immediately of any action by or communication from
state or federal banking authorities, state securities authorities, the
Securities and Exchange Commission, or any other party which may affect
its status as a bank, or which may otherwise affect in any material way
its ability to act in accordance with the terms of this Agreement. Any
action or decision of any of the foregoing regulatory authorities or any
court of appropriate jurisdiction which affects Financial Institution's
ability to act in accordance with the terms of this agreement, including
the loss of its exemption from registration as a broker or dealer, will
terminate this Agreement effective upon FSC's written notice of
termination to Financial Institution; AND (b) that Financial Institution
is registered with the appropriate securities authorities in all states in
which its activities make such registration necessary.
2. Financial Institution Acts as Agent for its Customers. The parties agree that
in each transaction in the Shares of any Fund and with regard to any services
rendered pursuant to this Agreement: (a) Financial Institution is acting as
agent for the customer; (b) each transaction is initiated solely upon the order
of the customer; (c) as between Financial Institution and its customer, the
customer will have full beneficial ownership of all Shares of the Funds; (d)
each transaction shall be for the account of the customer and not for Financial
Institution's account; and (e) each transaction shall be without recourse to
Financial Institution provided that Financial Institution acts in accordance
with the terms of this Agreement. Financial Institution shall not have any
authority in any transaction to act as FSC's agent or as agent for the Funds.
B. Sales of Fund Shares.
3. Execution of Orders for Purchase and Redemption of Shares. (a) All orders
for the purchase of any Shares shall be executed at the then-current
public offering price per share (i.e., the net asset value per share plus
the applicable initial sales load, if any) and all orders for the
redemption of any Shares shall be executed at the net asset value per
share, in each case as described in the prospectus of the Fund. Any
applicable redemption fee or deferred sales charge will be deducted by the
Fund prior to the transmission of the redemption proceeds to Financial
Institution or its customer. FSC and the Funds reserve the right to reject
any purchase request in their sole discretion . If required by law, each
transaction shall be confirmed in writing on a fully disclosed basis and,
if confirmed by FSC, a copy of each confirmation shall be sent
simultaneously to Financial Institution if Financial Institution so
requests.
(b) The procedures relating to all orders will be subject to the terms of
the prospectus of each Fund and FSC's written instructions to Financial
Institution from time to time.
(c) Payments for Shares shall be made as specified in the applicable Fund
prospectus. If payment for any purchase order is not received in
accordance with the terms of the applicable Fund prospectus, FSC reserves
the right, without notice, to cancel the sale and to hold Financial
Institution responsible for any loss sustained as a result thereof.
4. Initial Sales Loads Payable to Financial Institution. (a) On each order
accepted by FSC, in exchange for the performance of sales and/or
distribution services, Financial Institution will be entitled to receive
the applicable percentage of the initial sales load, if any, as
established by FSC from the amount paid by Financial Institution's
customer . The initial sales loads for any Fund shall be those set forth
in its prospectus. The portion of the initial sales load payable to
Financial Institution may be changed at any time at FSC's sole discretion
upon written notice to Financial Institution.
(b) Transactions may be settled by Financial Institution: (1) by payment
of the full purchase price less an amount equal to Financial Institution's
applicable percentage of the initial sales load, or (2) by payment of the
full purchase price, in which case Financial Institution shall receive,
not less frequently than monthly, the aggregate fees due it on orders
received and settled. (c) It shall be the obligation of the Financial
Institution either: (i) to provide FSC with all necessary information
regarding the application of the appropriate initial sales load to each
transaction, or (ii) to assess the appropriate initial sales load for each
transaction and to forward the public offering price, net of the amount of
the initial sales load to be reallocated to the Financial Institution, to
the appropriate Fund. Neither the Fund nor FSC shall have any
responsibility to correct the payment or assessment of an incorrect
initial sales load due to the failure of the Financial Institution to
fulfill the foregoing obligation.
C. Distribution Services.
5. Agreement to Provide Distribution Services.
(a) With regard to those Funds which pay asset-based sales charges
(pursuant to Distribution Plans adopted under Investment Company Act Rule
12b-1), as noted on Exhibit A hereto (or, if more recently published, the
Fund's current prospectus), FSC hereby appoints Financial Institution to
render or cause to be rendered distribution and sales services to the
Funds and their shareholders. (b) The services to be provided under this
Paragraph (a) may include, but are not limited to, the following:
(i) reviewing the activity in Fund accounts; (ii) providing training
and supervision of its personnel; (iii) maintaining and distributing
current copies of prospectuses and shareholder reports; (iv)
advertising the availability of its services and products; (v)
providing assistance and review in designing materials to send to
customers and potential customers and developing methods of making
such materials accessible to customers and potential customers; and
(vi) responding to customers' and potential customers' questions
about the Funds.
6. Asset-Based Sales Loads Payable to Financial Institution. During the term of
this Agreement, FSC will pay Financial Institution asset-based sales charges
(also known as "Rule 12b-1 Fees") for each Fund as set forth in Exhibit A to
this Agreement (or, if more recently published, the Fund's current prospectus).
For the payment period in which this Agreement becomes effective or terminates,
there shall be an appropriate proration of the fee on the basis of the number of
days that this Agreement is in effect during the quarter.
D. Supplemental Payments.
7. Supplemental Payments to Financial Institution. During the term of this
Agreement, FSC, or its affiliates will make Supplemental Payments to Financial
Institution as set forth in Exhibit A to this Agreement (or, if more recently
published, the Fund's current prospectus) as additional compensation for
services described in Paragraph 5, above; such payments will be made from the
assets of FSC, or its affiliates, and not from assets of the Funds nor from fees
payable under applicable Distribution (Rule 12b-1) Plan. For the payment period
in which this Agreement becomes effective or terminates, there shall be an
appropriate proration of the payments on the basis of the number of days that
this Agreement is in effect during the quarter. E. Miscellaneous.
8. Delivery of Prospectuses to Customers.
Financial Institution will deliver or cause to be delivered to each customer, at
or prior to the time of any purchase of Shares, a copy of the current prospectus
of the Fund and, upon request by a customer or shareholder, a copy of the Fund's
current Statement of Additional Information. Financial Institution shall not
make any representations concerning any Shares other than those contained in the
prospectus or Statement of Additional Information of the Fund or in any
promotional materials or sales literature furnished to Financial Institution by
FSC or the Fund.
9. ERISA Assets.
(a) Financial Institution understands that the Department of Labor views
ERISA as prohibiting fiduciaries of discretionary ERISA assets from
receiving administrative service fees or other compensation from funds in
which the fiduciary's discretionary ERISA assets are invested. To date,
the Department of Labor has not issued any exemptive order or advisory
opinion that would exempt fiduciaries from this interpretation. Without
specific authorization from the Department of Labor, fiduciaries should
carefully avoid investing discretionary assets in any fund pursuant to an
arrangement where the fiduciary is to be compensated by the fund for such
investment. Receipt of such compensation could violate ERISA provisions
against fiduciary self-dealing and conflict of interest and could subject
the fiduciary to substantial penalties.
(b) Financial Institution will not perform or provide any duties which
would cause it to be a fiduciary under Section 4975 of the Internal
Revenue Code, as amended. For purposes of that Section, Financial
Institution understands that any person who exercises any discretionary
authority or discretionary control with respect to any individual
retirement account or its assets, or who renders investment advice for a
fee, or has any authority or responsibility to do so, or has any
discretionary authority or discretionary responsibility in the
administration of such an account, is a fiduciary.
10. Indemnification.
(a) Financial Institution shall indemnify and hold harmless FSC, each
Fund, the transfer agents of the Funds, and their respective subsidiaries,
affiliates, officers, directors, agents and employees from all direct or
indirect liabilities, losses or costs (including attorneys fees) arising
from, related to or otherwise connected with: (1) any breach by Financial
Institution of any provision of this Agreement; or (2) any actions or
omissions of FSC, any Fund, the transfer agents of the Funds, and their
subsidiaries, affiliates, officers, directors, agents and employees in
reliance upon any oral, written or computer or electronically transmitted
instructions believed to be genuine and to have been given by or on behalf
of Financial Institution.
(b) FSC shall indemnify and hold harmless Financial Institution and its
subsidiaries, affiliates, officers, directors, agents and employees from
and against any and all direct or indirect liabilities, losses or costs
(including attorneys fees) arising from, related to or otherwise connected
with: (1) any breach by FSC of any provision of this Agreement; or (2) any
alleged untrue statement of a material fact contained in any Fund's
Registration Statement or Prospectus, or as a result of or based upon any
alleged omission to state a material fact required to be stated therein or
necessary to make the statements contained therein not misleading. (c) The
agreement of the parties in this Paragraph to indemnify each other is
conditioned upon the party entitled to indemnification (Indemnified Party)
giving notice to the party required to provide indemnification
(Indemnifying Party) promptly after the summons or other first legal
process for any claim as to which indemnity may be sought is served on the
Indemnified Party. The Indemnified Party shall permit the Indemnifying
Party to assume the defense of any such claim or any litigation resulting
from it, provided that counsel for the Indemnifying Party who shall
conduct the defense of such claim or litigation shall be approved by the
Indemnified Party (which approval shall not unreasonably be withheld), and
that the Indemnified Party may participate in such defense at its expense.
The failure of the Indemnified Party to give notice as provided in this
subparagraph (d) shall not relieve the Indemnifying Party from any
liability other than its indemnity obligation under this Paragraph. No
Indemnifying Party, in the defense of any such claim or litigation, shall,
without the consent of the Indemnified Party, consent to entry of any
judgment or enter into any settlement that does not include as an
unconditional term the giving by the claimant or plaintiff to the
Indemnified Party of a release from all liability in respect to such claim
or litigation. (d) The provisions of this Paragraph 10 shall survive the
termination of this Agreement.
11. Customer Names Proprietary to Financial Institution. (a) The names of
Financial Institution's customers are and shall remain Financial
Institution's sole property and shall not be used by FSC, or its
affiliates for any purpose except the performance of their respective
duties and responsibilities under this Agreement and except for servicing
and informational mailings relating to the Funds. Notwithstanding the
foregoing, this Paragraph 14 shall not prohibit FSC, or any of its
affiliates from utilizing the names of Financial Institution's customers
for any purpose if the names are obtained in any manner other than from
Financial Institution pursuant to this Agreement.
(b) Neither party shall use the name of the other party in any manner
without the other party's written consent, except as required by any
applicable federal or state law, rule or regulation, and except pursuant
to any mutually agreed upon promotional programs. (c) The provisions of
this Paragraph 11 shall survive the termination of this Agreement.
12. Security Against Unauthorized Use of Funds' Recordkeeping Systems. Financial
Institution agrees to provide such security as is necessary to prevent any
unauthorized use of the Funds' recordkeeping system, accessed via any computer
hardware or software provided to Financial Institution by FSC.
13. Solicitation of Proxies.
Financial Institution agrees not to solicit or cause to be solicited directly,
or indirectly, at any time in the future, any proxies from the shareholders of
any or all of the Funds in opposition to proxies solicited by management of the
Fund or Funds, unless a court of competent jurisdiction shall have determined
that the conduct of a majority of the Board of Directors or Trustees of the Fund
or Funds constitutes willful misfeasance, bad faith, gross negligence or
reckless disregard of their duties. This Paragraph 13 will survive the
termination of this Agreement. 14. Certification of Customers' Taxpayer
Identification Numbers. Financial Institution agrees to obtain any taxpayer
identification number certification from its customers required under Section
3406 of the Internal Revenue Code, and any applicable Treasury regulations, and
to provide FSC, or its respective designee with timely written notice of any
failure to obtain such taxpayer identification number certification in order to
enable the implementation of any required backup withholding. 15. Notices.
Except as otherwise specifically provided in this Agreement, all notices
required or permitted to be given pursuant to this Agreement shall be given in
writing and delivered by personal delivery or by postage prepaid, registered or
certified United States first class mail, return receipt requested, overnight
courier services, or by facsimile or similar electronic means of delivery (with
a confirming copy by mail as provided herein). Unless otherwise notified in
writing, all notices to FSC shall be given or sent to FSC at its offices located
at Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779, and all
notices to Financial Institution shall be given or sent to it at its address
shown below. 16. Termination and Amendment.
(a) This Agreement shall become effective in this form as of the date set
forth below or as of the first date thereafter upon which Financial
Institution executes any transaction, performs any service, or receives
any payment pursuant hereto. This Agreement supersedes any prior sales,
distribution, shareholder service, or administrative service agreements
between the parties. (b) With respect to each Fund, this Agreement shall
continue in effect for one year from the date of its execution, and
thereafter for successive periods of one year if the form of this
Agreement is approved at least annually by the Directors or Trustees of
the Fund, including a majority of the members of the Board of Directors or
Trustees of the Fund who are not interested persons of the Fund and have
no direct or indirect financial interest in the operation of the Fund's
Distribution Plan or in any related documents to such Plan ("Independent
Directors or Trustees") cast in person at a meeting called for that
purpose.
(c) This Agreement, including Exhibit A hereto, may be amended by FSC from
time to time by the following procedure. FSC will mail a copy of the
amendment to Financial Institution's address, as shown below. If Financial
Institution does not object to the amendment within thirty (30) days after
its receipt, the amendment will become part of the Agreement. Financial
Institution's objection must be in writing and be received by FSC within
such thirty days. (d) Notwithstanding subparagraph 19(b) and in addition
to subparagraph 1(a), this Agreement may be terminated as follows:
(i) at any time, without the payment of any penalty, by the vote of
a majority of the Independent Directors or Trustees of the Fund or
by a vote of a majority of the outstanding voting securities of the
Fund as defined in the Investment Company Act of 1940 on not more
than sixty (60) days' written notice to the parties to this
Agreement;
(ii) automatically in the event of the Agreement's assignment as defined
in the Investment Company Act of 1940, upon the termination of the
"Distributor's Contract" between the Fund and FSC, or upon the
termination of the Distribution Plan to which this Agreement is
related; and (iii) by any party to the Agreement without cause by
giving the other party at least sixty (60) days' written notice of
its intention to terminate.
(e) The termination of this Agreement with respect to any one Fund will
not cause the Agreement's termination with respect to any other Fund.
17. Governing Law.
This Agreement shall be construed in accordance with the laws of the
Commonwealth of Pennsylvania.
FEDERATED SECURITIES CORP.
Federated Investors Tower
Pittsburgh, Pennsylvania 15222-3779
By: Date:
---------------------------
Name:
Title:
---------------------------------------
Financial Institution Name
(Please Print or Type)
---------------------------------------
Address
---------------------------------------
City State Zip Code
By:______________________________
Authorized Signature
---------------------------------------
Title
---------------------------------------
Print Name or Type Name
Dated:_____________________
Exhibit (m)(i) under Form N-1A
Exhibit 1 under Item 601/Reg. S-K
DISTRIBUTION PLAN
This Distribution Plan ("Plan") is adopted by the Board Trustees of Error!
Reference source not found.WACHOVIA VARIABLE INSURANCE FUNDS, (the "Trust"), a
Massachusetts business trust, with respect to certain portfolios of the Trusts
(the "Funds") set forth in exhibits hereto.
1. This Plan is adopted pursuant to Rule 12b-1 under the Investment Company
Act of 1940, as amended ("Act"), so as to allow the to make payments as
contemplated herein, in conjunction with the distribution of the Funds
("Shares").
2. This Plan is designed to finance activities of Federated Securities Corp.
("FSC") principally intended to result in the sale of Shares to include: (a)
providing incentives to financial institutions ("Financial Institutions") to
sell Shares; (b) advertising and marketing of Shares to include preparing,
printing and distributing prospectuses and sales literature to prospective
shareholders and with Financial Institutions; and (c) implementing and operating
the Plan. In compensation for services provided pursuant to this Plan, FSC will
be paid a fee in respect of the following Funds set forth on the applicable
exhibit.
3. Any payment to FSC in accordance with this Plan will be made pursuant to
the "Distributor's Agreement/Contract" entered into by the Trusts and FSC. Any
payments made by FSC to Financial Institutions with funds received as
compensation under this Plan will be made pursuant to the "Financial Institution
Agreement" entered into by FSC and the Institution.
4. FSC has the right (i) to select, in its sole discretion, the Financial
Institutions to participate in the Plan and (ii) to terminate without cause and
in its sole discretion any Financial Institution Agreement.
5. Quarterly in each year that this Plan remains in effect, FSC shall
prepare and furnish to the Board of Trustees of the Trusts and the Board of
Trustees shall review, a written report of the amounts expended under the Plan
and the purpose for which such expenditures were made.
6. This Plan shall become effective with respect to each Fund (i) after
approval by majority votes of: (a) the Trusts' Board of Trustees; (b) the
members of the Board of the Trusts who are not interested persons of the Trusts
and have no direct or indirect financial interest in the operation of the Plan
or in any related documents to the Plan ("Disinterested Trustees"), cast in
person at a meeting called for the purpose of voting on the Plan; and (c) the
outstanding voting securities of the particular Fund, as defined in Section
2(a)(42) of the Act and (ii) upon execution of an exhibit adopting this Plan
with respect to such Class.
7. This Plan shall remain in effect with respect to each Fund presently set
forth on an exhibit and any subsequent Funds added pursuant to an exhibit for
the period of one year from the date set forth on the initial exhibit and may be
continued thereafter if this Plan is approved with respect to each Fund at least
annually by a majority of the Trusts' Board of Trustees and a majority of the
Disinterested Trustees cast in person at a meeting called for the purpose of
voting on such Plan. If this Plan is adopted with respect to a Fund after the
first annual approval by the Trusts as described above, this Plan will be
effective as to that Fund upon execution of the applicable exhibit pursuant to
the provisions of paragraph 6(ii) above and will continue in effect until the
next annual approval of this Plan by the Trustees and thereafter for successive
periods of one year subject to approval as described above.
8. All material amendments to this Plan must be approved by a vote of the
Board of Trustees of the TRUSTS and of the Disinterested Trustees cast in person
at a meeting called for the purpose of voting on it.
9. This Plan may not be amended in order to increase materially the costs which
theFunds may bear for distribution pursuant to the Plan without being approved
by a majority vote of the outstanding voting securities of the Funds as defined
in Section 2(a)(42) of the Act.
10. This Plan may be terminated with respect to a particular Fund at any
time by: (a) a majority vote of the Disinterested or (b) a vote of a majority of
the outstanding voting securities of the particular Fund as defined in Section
2(a)(42) of the Act; or (c) by FSC on 60 days' notice to the.
11. While this Plan shall be in effect, the selection and nomination of
Disinterested Trustees of the Trust shall be committed to the discretion of the
Disinterested Trustees then in office.
12. All agreements with any person relating to the implementation of this Plan
shall be in writing and any agreement related to this Plan shall be subject to
termination, without penalty, pursuant to the provisions of Paragraph 10 herein.
13. This Plan shall be construed in accordance with and governed by
the laws of the Commonwealth of Pennsylvania.
EXHIBIT A
to the
Distribution Plan
WACHOVIA VARIABLE INSURANCE FUNDS
WACHOVIA BALANCED FUND II
WACHOVIA EQUITY FUND II
WACHOVIA SPECIAL VALUES FUND II
This Plan is adopted by WACHOVIA VARIABLE INSURANCE FUNDS with respect to
the Funds set forth above.
In compensation for the services provided pursuant to this Plan, FSC will
be paid a monthly fee computed at the annual rate of 0.25 of 1% of the average
aggregate net asset value of the Shares of each Fund held during the month.
Witness the due execution hereof this 3RD day of MARCH, 2000.
WACHOVIA VARIABLE INSURANCE FUNDS
By:
Name
Title:
Exhibit (o) under Form N-1A
Exhibit 24 under Item 601/Reg. S-K
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
the Secretary, Assistant Secretary(ies) of THE WACHOVIA VARIABLE INSURANCE FUNDS
and Senior Corporate Counsel, Mutual Fund Services and each of them, their true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for them and in their names, place and stead, in any and all
capacities, to sign any and all documents to be filed with the Securities and
Exchange Commission pursuant to the Securities Act of 1933, the Securities
Exchange Act of 1934 and the Investment Company Act of 1940, by means of the
Securities and Exchange Commission's electronic disclosure system known as
EDGAR; and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and Exchange Commission, granting unto
said attorneys-in-fact and agents, and each of them, full power and authority to
sign and perform each and every act and thing requisite and necessary to be done
in connection therewith, as fully to all intents and purposes as each of them
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agents, or any of them, or their or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.
SIGNATURES TITLE DATE
- ---------- ----- ----
/S/ JOHN W. MCGONIGLE President and Treasurer March 16, 2000
- ---------------------------------
John W. McGonigle (Chief Executive Officer
and Principal Financial
and Accounting Officer)
/S/ JAMES A. HANLEY Trustee March 16, 2000
- ---------------------------------
James A. Hanley
/S/ SAMUEL E. HUDGINS Trustee March 16, 2000
- ---------------------------------
Samuel E. Hudgins
/S/ D. DEAN KAYLOR Trustee March 16, 2000
- ---------------------------------
D. Dean Kaylor
/S/ ALVIN J. SCHEXNIDER, PH.D. Trustee March 16, 2000
- ---------------------------------
Alvin J. Schexnider, Ph.D.
/S/ CHARLES S. WAY, JR. Trustee March 16, 2000
- ---------------------------------
Charles S. Way, Jr.
Sworn to and subscribed before me this 16th day of March, 2000
/S/ JANICE L. VANDENBERG
Notarial Seal
Janice L. Vandenberg, Notary Public
Pittsburgh, Allegheny County
My Commission Expires July 4, 2002
Member, Pennsylvania Association of Notaries