WACHOVIA MUNICIPAL FUNDS, 485BPOS, 1999-02-23

WACHOVIA MUNICIPAL FUNDS
485BPOS, 1999-02-23

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1933 Act File No. 33-37525
1940 Act File No. 811-6201

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

Form N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 X
-----

Pre-Effective Amendment No. ............................

Post-Effective Amendment No. 18 ............................ X
------- -----

and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
-----

Amendment No. 18 ............................................ X
------ -----

THE WACHOVIA MUNICIPAL FUNDS

(Exact Name of Registrant as Specified in Charter)

Federated Investors Tower, Pittsburgh, Pennsylvania 15222-3779
(Address of Principal Executive Offices)

(412) 288-1900
(Registrant's Telephone Number)

John W. McGonigle, Esquire,
Federated Investors Tower,
Pittsburgh, Pennsylvania 15222-3779
(Name and Address of Agent for Service)

It is proposed that this filing will become effective:

X immediately upon filing pursuant to paragraph (b)
_ on pursuant to paragraph (b)
60 days after filing pursuant to paragraph (a) (i) on pursuant to paragraph
(a) (i). 75 days after filing pursuant to paragraph (a)(ii) on
_________________ pursuant to paragraph (a)(ii) of Rule 485.

If appropriate, check the following box:

This post-effective amendment designates a new effective date for a
previously filed post-effective amendment.

Copies to:

Donald W. Smith, Esquire Alan C. Porter, Esquire
Kirkpatrick & Lockhart LLP Piper & Marbury L.L.P.
1800 Massachusetts Avenue, N.W. 1200 Nineteenth Street, N.W.
Washington, D.C. 20036-1800 Washington, D.C. 20036-2430

THE WACHOVIA FUNDS
The Wachovia Municipal Funds
Class A Shares
All Portfolios
Class B Shares
Equity Funds
Quantitative Equity Fund
Balanced Fund
Fixed Income Fund

Prospectus
February 28, 1999

The Wachovia Funds

CLASS A SHARES AND CLASS B SHARES CLASS A SHARES

Wachovia Equity Fund Wachovia Growth & Income Fund

Wachovia Quantitative Equity Fund Wachovia Equity Index Fund

Special Values Fund Wachovia Emerging Markets Fund

Wachovia Balanced Fund Wachovia Intermediate Fixed Income Fund

Wachovia Fixed Income Fund Wachovia Short-Term Fixed Income Fund

Prospectus

The Wachovia Municipal Funds

CLASS A SHARES

Wachovia Georgia Municipal Bond Fund

Wachovia North Carolina Municipal Bond Fund

Wachovia South Carolina Municipal Bond Fund

Wachovia Virginia Municipal Bond Fund

As with all mutual funds, the Securities and Exchange Commission has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.

CONTENTS
Fund Goals, Strategies, Performance and Risk 1
What are the Funds' Fees and Expenses? 11
What are the Funds' Main Investments and Investment Techniques? 13
What are the Risks of Investing in the Fund? 14
What do Shares Cost? 16
How are the Funds Sold? 17
How to Purchase Shares 17
How to Exchange Shares 18
How to Redeem Shares 18
Account and Share Information 19
Who Manages the Funds? 20
Financial Information 22

FEBRUARY __, 1999

Fund Goals, Strategies, Performance and Risk

EQUITY FUNDS

WACHOVIA EQUITY FUND

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.

Total Return Bar Chart And Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

The Fund's Class A shares are sold subject to a sales charge (load). The impact
of the sales charges are not reflected in the total returns above, and if these
amounts were reflected, total returns would be less than those shown.

Within the period shown in the Chart, the Fund's Class A Shares 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

The table shows the Fund's Class A and Class B Shares average annual total
returns (reduced to reflect applicable sales charges) compared to the S&P 500
Index (S&P 500), a broad-based market index.

Calendar Period Class A Class B S&P 500
1 Year 17.35% 17.02% 28.58%
5 Years 18.52% N/A 24.06%
Life of Fund1 17.35% 25.15% 22.55%

1 The start of performance dates for Class A and Class B Shares 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
rewards.

WACHOVIA QUANTITATIVE EQUITY FUND

Goal
Seeks to provide 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 holdings in stocks. Stocks are selected using a quantitative
computer valuation model provided by the Fund's sub-adviser. The model combines
multiple factors believed to have predictive power in determining future stock
price performance.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 23.16% (quarter ended December 31, 1998). Its lowest
quarterly return was (10.56)% (quarter ended September 30, 1998).

Average Annual Total Return

The table shows the Fund's Class A and Class B Shares average annual total
returns (reduced to reflect applicable sales charges) compared to the S&P 500
Index (S&P 500), a broad-based market index.

Calendar Period Class A Class B S&P 500
1 Year 18.62% 18.31% 28.58%
Life of Fund1 22.32% 30.15% 25.52%

1 The start of performance dates for Class A and Class B Shares were March 25,
1994 and July 23, 1996, respectively.

WACHOVIA GROWTH & INCOME FUND

Goal
Seeks to provide total return through growth of capital and current 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 holdings 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

have the potential for growth of capital and/or income.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 21.16% (quarter ended December 31, 1998). Its lowest
quarterly return was (9.79)% (quarter ended September 30, 1998).

Average Annual Total Return
The table shows the Fund's Class A Shares average annual total returns (reduced
to reflect applicable sales charges) compared to the S&P 500 Index (S&P 500), a
broad-based market index.

Calendar Period Class A S&P 500
1 Year 18.73% 28.58%
5 Years 21.02% 24.06%
Life of Fund1 18.27% 21.76%

1 The start of performance date for Class A Shares was January 29, 1993.

WACHOVIA EQUITY INDEX FUND

Goal
Seeks to provide a total return that approximates that of the stock market as
measured by the S&P 500.

Strategy

The Fund pursues its investment objective by investing in a broadly diversified
portfolio of common stocks that make up the S&P 500. The Fund normally aims to
invest in all the stocks in the Index and closely match the performance of the
Index. The Fund is managed using a computer program that identifies which stocks
should be purchased or sold in order to approximate, as much as possible, the
investment return of the stocks in the S&P 500. Under normal circumstances, at
least 95% of the value of the Fund's holdings will be invested in stocks in the
Index and S&P 500 futures contracts. However, the Fund is not required to sell
securities if the 95% investment level changes due to increases or decreases in
the market value of portfolio securities.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 21.17% (quarter ended December 31, 1998). Its lowest
quarterly return was (10.05)% (quarter ended September 30, 1998).

Average Annual Total Return

The table shows the Fund's Class A Shares average annual total returns (reduced
to reflect applicable sales charges) compared to the S&P 500 Index (S&P 500), a
broad-based market index.

Calendar Period Class A S&P 500
1 Year 22.08% 28.58%
5 Years 22.21% 24.06%
Life of Fund1 20.84% 22.55%

1 The start of performance date for Class A Shares were May 7, 1993.

WACHOVIA SPECIAL VALUES FUND

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 billion or less. The
Fund may invest up to 20% of total assets in foreign securities.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

The Fund's Class A Shares are sold subject to a sales charge (load). The impact
of the sales charges are not reflected in the total returns above, and if these
amounts were reflected, total returns would be less than those shown.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 14.08% (quarter ended September 30, 1997). Its lowest
quarterly return was (18.00)% (quarter ended September 30, 1998).

Average Annual Total Return

The table shows the Fund's Class A Shares average annual total returns (reduced
to reflect applicable sales charges) compared to the Russell 2000 Small Stock
Index (Russell 2000), a broad-based market index.

Calendar Period Class A Russell 2000
1 Year (5.94)% (2.55)%
5 Years 15.93% 11.87%
Life of Fund1 15.17% 13.10%

1 The start of performance date for Class A Shares was May 7, 1993.

WACHOVIA EMERGING MARKETS FUND

Goal
Seeks to produce long-term capital appreciation.

Strategy

The Fund pursues its investment objective by investing primarily in a portfolio
of securities of issuers located in countries that are generally considered to
be developing or emerging countries by the International Bank for Reconstruction
and Development (more commonly known as the World Bank) and the International
Finance Corporation, as well as countries that are classified by the United
Nations or otherwise regarded by their authorities as developing. The investment
adviser uses a value-oriented approach and selects companies in countries where
political and economic factors, including currency movements, are likely to
produce above average capital appreciation. Under normal market conditions, the
Fund intends to invest at least 65% of its holdings in securities of issuers
located in emerging market countries. Although the Fund will focus its
investment on the common stocks of foreign companies located in emerging market
countries, the Fund may also invest in other types of securities, including debt
securities.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 18.76% (quarter ended December 31, 1998). Its lowest
quarterly return was (26.63)% (quarter ended September 30, 1998).

Average Annual Total Return

The table shows the Fund's Class A Shares average annual total returns (reduced
to reflect applicable sales charges) compared to the International Finance
Corporation Investable Index (Total Return Series) (IFCI), a broad-based market
index of foreign securities used to measure the performance of certain emerging
markets.

Calendar Period Class A IFCI
1 Year (28.20)% (22.01)%
Life of Fund1 (4.78)% (9.66)%

1 The start of performance dates for Class A Shares was December 23, 1994.

WACHOVIA BALANCED FUND

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.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

Within the period shown in the Chart, the Fund's Class A Shares 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

The table shows the Fund's Class A and Class B Shares average annual total
returns (reduced to reflect applicable sales charges) compared to the S&P 500
Index (S&P 500) and the Lehman Aggregate Bond Index (LABI), two broad-based
market indices.

Calendar Period Class A Class B S&P 500 LABI
1 Year 12.11% 13.05% 28.58% 8.69%
5 Years 14.02% N/A 24.06% 7.27%
Life of Fund1 13.47% 19.06% 22.55% 7.24%

1 The start of performance dates for Class A and Class B Shares were May 7,
1993 and July 23, 1996, respectively.

INCOME FUNDS

WACHOVIA FIXED INCOME FUND

Goal
Seeks a high level of total return.

Strategy

As a secondary investment objective, the Fund attempts to minimize volatility of
principal relative to the fixed income markets. Total return consists of income
and capital gains (both realized and unrealized). The Fund pursues its
investment objectives by investing primarily in a diversified portfolio of fixed
income securities that, at the time of purchase, are rated in the top four
investment categories by a nationally recognized statistical rating organization
(NRSRO) or, if unrated, are of comparable quality to securities with such
ratings. The Fund invests in corporate bonds, asset- and mortgage-backed
securities and U.S. government securities. The investment adviser changes the
Fund's weighting in these types of investments as it thinks appropriate and use
fundamental macroeconomic, credit and market analysis to select portfolio
securities. Normally, the Fund will maintain an average dollar-weighted maturity
of between 6 to 10 years. The Fund will invest, under normal circumstances, at
least 65% of the value of its holdings in fixed income securities.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 5.97% (quarter ended June 30, 1995). Its lowest quarterly
return was (3.12)% (quarter ended March 31, 1994).

Average Annual Total Return

The table shows the Fund's Class A and Class B Shares average annual total
returns (reduced to reflect applicable sales charges) compared to the Lehman
Aggregate Bond Index (LABI), a broad- based market index.

Calendar Period Class A Class B LABI
1 Year 3.42% 2.55% 8.69%
5 Years 5.47% NA% 7.27%
Life of Fund1 5.44% 6.91% 7.24%

1 The start of performance dates for Class A and Class B Shares were May 7,
1993 and July 23, 1996, respectively.

WACHOVIA INTERMEDIATE FIXED INCOME FUND

Goal
Seeks current income consistent with preservation of capital.

Strategy

The Fund pursues it investment objective by investing primarily in a portfolio
of fixed income securities, that, at the time of purchase, are rated in the top
four investment categories by an NRSRO or, if unrated, are of comparable quality
to securities with such ratings. The investment adviser changes the Fund's
weighting in these types of investments as it thinks appropriate and uses
fundamental macroeconomic, credit and market analysis to select portfolio
securities. Normally, the Fund will maintain an average dollar-weighted maturity
of between 3 to 10 years. The Fund will invest, under normal circumstances, at
least 65% of the value of its holdings in fixed income securities with stated
maturities or estimated average lives of 10 years or less.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 5.25% (quarter ended June 30, 1995). Its lowest quarterly
return was (3.26)% (quarter ended March 31, 1994).

Average Annual Total Return

The table shows the Fund's Class A Shares average annual total returns (reduced
to reflect applicable sales charges) compared to the Lehman Aggregate Bond Index
(LABI), a broad-based market index.

Calendar Period Class A LABI
1 Year 3.90% 8.69%
5 Years 5.07% 7.27%
Life of Fund1 5.24% 7.24%

1 The start of performance date for Class A Shares was January 29, 1993

WACHOVIA SHORT-TERM FIXED INCOME FUND Goal Seeks to produce a high level of
current income.

Strategy
The Fund pursues its investment objective by investing primarily in a portfolio
of short-term

fixed income securities that, at the time of purchase, are rated in the top for
investment categories by an NRSRO or, if unrated, are of comparable quality to
securities with such ratings. Under normal market circumstances, the Fund will
invest at least 65% of its holdings in such securities. The investment adviser
changes the Fund's weighting in these types of investments as it thinks
appropriate and use fundamental macroeconomic, credit and market analysis to
select portfolio securities. The Fund will maintain an average dollar-weighted
maturity of between one to three years.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 3.23% (quarter ended September 30, 1998). Its lowest
quarterly return was (0.27)% (quarter ended March 31, 1994).

Average Annual Total Return

The table shows the Fund's Class A Shares average annual total returns (reduced
to reflect applicable sales charges) compared to the Merrill Lynch 1-3 Year U.S.
Treasury Index (MLUST), a broad-based market index.

Calendar Period Class A MLUST
1 Year 4.08% 7.00%
5 Years 4.93% 5.99%
Life of Fund1 4.71% 5.71%

1 The start of performance date for Class A Shares was May 7, 1993.

MUNICIPAL FUNDS

WACHOVIA GEORGIA MUNICIPAL BOND FUND

Goal
Seeks to provide current income which is exempt from federal regular income tax
and the income taxes imposed by the State of Georgia.

Strategy

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 5.69% (quarter ended March 31, 1995). Its lowest quarterly
return was (1.29)% (quarter ended March 31, 1996).

Average Annual Total Return

The table shows the Fund's Class A Shares average annual total returns (reduced
to reflect applicable sales charges) compared to the Lehman State General
Obligation Bond Index (LSGOBI), a broad-based market index comprised of all
state general obligation debt issues.

Calendar Period Class A LSGOBI
1 Year 0.35% 6.48%
Life of Fund1 6.37% 8.82%

1 The start of performance date for Class A Shares was December 23, 1994.

WACHOVIA NORTH CAROLINA MUNICIPAL BOND FUND

Goal
Seeks to provide current income which is exempt from federal regular income tax
and the income tax imposed by the State of North Carolina.

Strategy

The Fund normally invests at least 80% of its total assets in debt obligations,
the interest income from which is exempt from federal regular income tax and the
income tax imposed by the State of North Carolina. The investment adviser
selects investments after assessing factors such as trends in interest rates,
credit worthiness, the supply of appropriate municipal bonds, and portfolio
diversification.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 5.48% (quarter ended March 31, 1995). Its lowest quarterly
return was (1.72)% (quarter ended March 31, 1996).

Average Annual Total Return

Calendar Period Class A LSGOBI
1 Year 0.68% 6.48%
Life of Fund1 6.67% 8.82%

1 The start of performance date for Class A Shares was December 23, 1994.

WACHOVIA SOUTH CAROLINA MUNICIPAL BOND FUND

Goal
Seeks to provide current income which is exempt from federal regular income tax
and the South Carolina state income taxes.

Strategy

The Fund normally invests its assets so that at least 80% of its interest income
is exempt from federal regular income tax and South Carolina state income taxes
or that at least 80% of its total assets are invested in debt obligations, the
interest income from which is exempt from federal regular income tax and South
Carolina state income taxes. The investment adviser selects investments after
assessing factors such as trends in interest rates, credit worthiness, the
supply of appropriate municipal bonds, and portfolio diversification.

Total Return Bar Chart And Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 5.96% (quarter ended March 31, 1995). Its lowest quarterly
return was (4.32)% (quarter ended March 31, 1994).

Average Annual Total Return

Calendar Period Class A LSGOBI
1 Year 0.69% 6.48%
5 Years 4.68% 6.00%
Life of Fund1

1 The start of performance date for Class A Shares was January 11, 1991.

WACHOVIA VIRGINIA MUNICIPAL BOND FUND

Goal
Seeks to provide a high level of current income that is exempt from federal
regular income tax and the income tax imposed by the Commonwealth of Virginia as
is consistent with the preservation of capital.

Strategy

The Fund normally invests at least 80% of its total assets in debt obligations,
the interest income from which is exempt from federal regular income tax and the
personal income taxed imposed by the Commonwealth of Virginia. The investment
adviser selects investments after assessing factors such as trends in interest
rates, credit worthiness, the supply of appropriate municipal bonds, and
portfolio diversification. At least 65% of the value of the Fund's total assets
will be invested in obligations issued by or on behalf of the state of Virginia,
its political subdivisions, or agencies.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class A Shares total returns
on a yearly basis.

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 5.23% (quarter ended December 31, 1995). Its lowest
quarterly return was (5.59)% (quarter ended March 31, 1994).

Average Annual Total Return

Calendar Period Class A LSGOBI
1 Year 0.80% 6.48%
5 Years 3.45% 6.00%
Life of Fund1 4.25% 6.80%

1 The start of performance date for Class A Shares was February 1, 1993.

PRINCIPAL INVESTMENT RISKS

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Funds.
An investment in a 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 description of these risks can be found in "What
are the Risks of Investing in
the Funds?" herein.
<TABLE>
<CAPTION>
Fund Market Equity Risks of Debt Emerging
Municipal Diversification
Risks Securities Investing Securities Markets
Securities Risks
Risks for Growth Risks Risks
Risks
& Value
<S> <C> <C> <C> <C> <C>
<C> <C>
Equity Fund X X X
Quantitative Equity Fund X X X
Growth & Income Fund X X X
Equity Index Fund X X X
Special Values Fund X X X
Emerging Markets Fund X X X X
Balanced Fund X X X X
Fixed Income Fund X X
Intermediate Fixed Income Fund X X
Short-Term Fixed Income Fund X X
Georgia Municipal Bond Fund X X
X X
North Carolina Municipal Bond Fund X X
X X
South Carolina Municipal Bond Fund X X
X X
Virginia Municipal Bond Fund X X
X X
</TABLE>

What are the Funds' Fees and Expenses?

These tables describe the fees and expenses that you may pay when you buy, hold
and redeem shares of the Funds' Class A Shares.
<TABLE>
<CAPTION>
Shareholder Fees Equity Quantitative Growth & Equity
Special Emerging Balanced
Fees Paid Directly From Your Investment Fund Equity Fund Income Fund Index Fund Values
Fund Markets Fund Fund
<S> <C> <C> <C> <C>
<C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) 4.50% 4.50% 4.50% 4.50%
4.50% 4.50% 4.50%
Maximum Deferred Sales Charge (Load) (as a
percentage of original purchase price
or
redemption proceeds, as applicable) None None None None
None None None
Maximum Sales Charge (Load) Imposed on Reinvested
Dividends (and other Distributions) (as
a
percentage of offering price) None None None None
None None None
Redemption Fee (as a percentage of amount
redeemed, if applicable) None None None None
None None None
Exchange Fee None None None None
None None None

Annual Fund Operating Expenses1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 0.70% 0.70% 0.70% 0.30%
0.80% 1.00% 0.70%
Distribution (12b-1) Fee None None None None
None None None
Shareholder Services Fee 0.25% 0.25% 0.25% 0.25%
0.25% 0.25% 0.25%
Other Expenses 0.52% 0.49% 0.66% 0.40%
0.45% 0.69% 0.47%
Total Annual Class A Shares
Operating
Expenses (Before Waiver)1 1.47% 1.44% 1.61% 0.95%
1.50% 1.94% 1.42%

Waiver of Fund Expenses 0.32% 0.32% 0.50% 0.25%
0.25% 0.25% 0.41%
Total Actual Annual Fund Operating Expenses
(AfterWaiver) 1.15% 1.12% 1.11% 0.70%
1.25% 1.69% 1.01%
1 Pursuant to an agreement between the Adviser and the Trusts, the Adviser agrees during the period from
December 15, 1998 through
January 31, 2000 to waive its fees, and/or make reimbursements to the Funds, so
that each Fund's net operating expenses do not
exceed, in the aggregate, the Fund's Total Actual Annual Operating Expenses listed above. The Adviser
agrees that this obligation
shall constitute a contractual commitment enforceable by the Trusts and that the Adviser shall not
assert any right to
reimbursement of amounts so waived or reimbursed.
</TABLE>

<TABLE>
<CAPTION>
Shareholder Fees Fixed Intermediate Short-Term Georgia North Carolina South
Carolina Virginia
Fees Paid Directly From Your Investment Income Fixed Income Fixed Income Municipal Municipal Bond
Municipal Bond Municipal
Fund Fund Fund Bond Fund Fund
Fund Bond Fund

<S> <C> <C> <C> <C> <C>
<C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of
offering price) 4.50% 4.50% 2.50% 4.50% 4.50%
4.50% 4.50%
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase
price or redemption proceeds, as
applicable) None None None None None
None None
Maximum Sales Charge (Load) Imposed
on Reinvested Dividends (and other
Distributions) (as a percentage of
offering price) None None None None None
None None
Redemption Fee (as a percentage of
amount redeemed, if applicable) None None None None None
None None
Exchange Fee None None None None None
None None

Annual Fund Operating Expenses1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 0.60% 0.60% 0.55% 0.75% 0.75%
0.75% 0.74%
Distribution (12b-1) Fee None None None None None
None None
Shareholder Services Fee 0.25% 0.25% 0.25% 0.25% 0.25%
0.25% 0.25%
Other Expenses 0.48% 0.51% 0.52% 0.77% 0.79%
0.56% 0.48%
Total Annual Class A Shares 1.33% 1.36% 1.32% 1.77% 1.79%
1.56% 1.47%
Operating Expenses (Before Waiver)1
Waiver of Fund Expenses 0.36% 0.37% 0.44% 0.61% 0.69%
0.73% 0.54%
Total Actual Annual Fund Operating
Expenses (AfterWaiver) 0.97% 0.99% 0.88% 1.16% 1.10%
0.83% 0.93%
1 Pursuant to an agreement between the Adviser and the Trusts, the Adviser agrees during the period from
December 15, 1998 through
January 31, 2000 to waive its fees, and/or make reimbursements to the Funds, so
that each Fund's net operating expenses do not
exceed, in the aggregate, the Fund's Total Actual Annual Operating Expenses listed above. The Adviser
agrees that this obligation
shall constitute a contractual commitment enforceable by the Trusts and that the Adviser shall not
assert any right to
reimbursement of amounts so waived or reimbursed.
</TABLE>

EXAMPLE

The following Example is intended to help you compare the cost of investing in
each Fund's Class A Shares with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in each Fund's Class A Shares for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that each Fund's operating expenses are based upon current expense
limitation as shown above in the table. Although your actual costs may be higher
or lower, based on these assumptions your costs would be:
<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Equity Fund $117 $365 $633
$1,398
Quantitative Equity Fund $114 $356 $617
$1,363
Growth & Income Fund $113 $353 $612
$1,352
Equity Index Fund $ 72 $224 $390 $
871
Special Values Fund $127 $397 $686
$1,511
Emerging Markets Fund $172 $533 $918
$1,998
Balanced Fund $103 $322 $558
$1,236
Fixed Income Fund $ 99 $309 $536
$1,190
Intermediate Fixed Income Fund $101 $315 $547
$1,213
Short-Term Fixed Income Fund $ 90 $281 $488
$1,084
Georgia Municipal Bond Fund $118 $368 $638
$1,409
North Carolina Municipal Bond Fund $112 $350 $606
$1,340
South Carolina Municipal Bond Fund $ 85 $265 $460
$1,025
Virginia Municipal Bond Fund $ 95 $296 $515
$1,143
</TABLE>

These tables describe the fees and expenses that you may pay when you buy, hold
and redeem shares of the Funds' Class B Shares

<TABLE>
<CAPTION>
Shareholder Fees Equity Quantitative Special Balanced
Fixed
Fees Paid Directly From Your Investment Fund Equity Fund Values Fund
Income Fund
Fund

<S> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) None None None None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, as applicable) 5.00% 5.00% 5.00% 5.00%
5.00%

Maximum Sales Charge (Load) Imposed on
Reinvested Dividends (and other
Distributions) (as a percentage
of offering price) None None None None
None
Redemption Fee (as a percentage of
amount redeemed, if applicable) None None None None None
Exchange Fee None None None None None

Annual Fund Operating Expenses1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 0.70% 0.70% 0.80% 0.70%
0.60%
Distribution (12b-1) Fee 0.75% 0.75% 0.75% 0.75%
0.75%
Shareholder Services Fee 0.25% 0.25% 0.25% 0.25%
0.25%
Other Expenses 0.27% 0.24% % 0.22%
0.23%
Total Annual Class B Shares Operating
Expenses (Before Waiver)1 1.97% 1.94% % 1.92%
1.83%
Waiver of Fund Expenses 0.07% 0.07% % 0.16%
0.11%
Total Actual Annual Fund Operating
Expenses (After Waiver) 1.90% 1.87% % 1.76%
1.72%

1 Pursuant to an agreement between the Adviser and the Trusts, the Adviser
agrees during the period from December 15, 1998 through
January 31, 2000 to waive its fees, and/or make reimbursements to the Funds, so
that each Fund's net operating expenses do not
exceed, in the aggregate, the Fund's Total Actual Annual Operating Expenses listed above. The Adviser
agrees that this obligation
shall constitute a contractual commitment enforceable by the Trusts and that the Adviser shall not
assert any right to
reimbursement of amounts so waived or reimbursed.
</TABLE>

EXAMPLE

The following Example is intended to help you compare the cost of investing in
the Funds' Class B Shares with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in the Funds' Class B Shares for the
time periods indicated and then redeem all of your shares at the end of those
periods. Expenses assuming no redemption are also shown. The Example also
assumes that your investment has a 5% return each year and that each Fund's
operating expenses are based upon its contractually imposed expense limitation
as shown above in the table. Although your actual costs may be higher or lower,
based on these assumptions your costs would be: <TABLE> <CAPTION>
1 Year 3 Years 5 Years 10 Years
Equity Fund
<S> <C> <C> <C> <C>
Expenses assuming redemption $708 $926 $1,259
Expenses assuming no redemption $193 $597 $1,026 $2,222
Quantitative Equity Fund
Expenses assuming redemption $706 $917 $1,244
Expenses assuming no redemption $190 $588 $1,011 $2,190
Balanced Fund
Expenses assuming redemption $695 $884 $1,189
Expenses assuming no redemption $179 $554 $ 954 $2,073
Fixed Income Fund
Expenses assuming redemption $691 $872 $1,168
Expenses assuming no redemption $175 $542 $ 933 $2,030
</TABLE>

What are the Funds' Main Investments and Investment Techniques?

EQUITY SECURITIES

The Equity Funds invest 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 a Fund invests.

Common Stocks

Common Stocks are the most prevalent type of equity security. Common
stockholders receive the residual value of the issuer's earnings and assets
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 payment of dividends or distributions on common stock. Some preferred
stocks also participate in dividends and distributions paid on common stock.
Preferred stocks may provide for the issuer to redeem the stock on a specified
date. A Fund may treat such redeemable preferred stock as a fixed income
security.

Warrants

Warrants give a Fund the option to buy the issuer's stock or other equity
securities at a specified price. A Fund may buy the designated shares by paying
the exercise price before the warrant expires. Warrants may become worthless if
the price of the stock does not rise above the exercise price by the expiration
date. Rights are similar to warrants, but are typically issued to existing
stockholders.

FIXED INCOME SECURITIES

The Income Funds invest primarily in fixed income securities. Fixed income
securities pay interest, dividends or distributions at a specified rate. The
rate may be fixed or adjusted periodically. The issuer must also 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.

MUNICIPAL SECURITIES

The Municipal Funds invest primarily in municipal securities. Municipal
securities are fixed income securities issued by states, counties, cities and
other political subdivisions and authorities. Although most municipal securities
are exempt from federal income tax, municipalities may also issue taxable
securities. The Municipal Funds may invest in such taxable municipal securities.

TAX EXEMPT SECURITIES

The Municipal Funds invest primarily in tax exempt securities. Tax exempt
securities are fixed income securities that pay interest exempt from regular
federal income taxes. States, counties, cities and other political subdivisions
and authorities typically issue tax exempt securities. Tax exempt securities are
generally differentiated by their source of repayment. Interest from the
Municipal Funds' investments may be subject to the federal alternative minimum
tax for individuals and corporations.

PORTFOLIO TURNOVER

Instead of a buy-and-hold strategy, the Funds (except Equity Index Fund)
actively trade their portfolio securities in an attempt to achieve each Fund's
investment objective. This means each Fund will have a higher portfolio turnover
rate, and is likely to generate shorter-term gains or losses for its
shareholders, which are taxed at a higher rate than longer-term gains (losses).
Actively trading portfolio securities increases a Fund's trading costs and may
impact the Fund's performance.

RISKS RELATED TO INVESTING FOR GROWTH AND VALUE

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 than do
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.

CREDIT QUALITY AND INVESTMENT RATINGS

When a 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 Funds may temporarily depart from their principal investment strategies by
investing assets in cash, cash items, and shorter-term, higher quality debt
securities. The Funds may do this to minimize potential losses and maintain
liquidity to meet shareholder redemptions during adverse market conditions. This
may cause a Fund to forego greater investment returns for the safety of
principal. S&P 500 INDEX

The S&P 500 Index consists of 500 selected common stocks, most of which are
listed on the New York Stock Exchange. S&P designates the stocks to be included
in the Index on a statistical basis. A particular stock's weighting in the Index
is based on its relative total market value; that is, its market price per share
times the number of shares outstanding. From time to time, S&P may add or delete
stocks from the Index. The Index represents approximately 70% of the total
market value of all common stocks. In addition, it is familiar to investors, and
is recognized as a barometer of common stock investment returns. Inclusion of a
particular security in the Index in no way implies an opinion by S&P as to the
stock's appropriateness as an investment. The Funds are not sponsored, endorsed,
sold or promoted by or affiliated with S&P.

What are the Risks of Investing in the Funds?

MARKET RISK
The market value of securities fluctuate daily.

EQUITY SECURITIES RISKS

Each 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 Equity Funds invest primarily in stocks they are more subject to
equity risks. 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 Special Values Fund will be more volatile than
broad stock market indices such as the S&P 500 or than funds that invest in
large-capitalization companies, such as Quantitative Equity Fund or Equity Fund.

DEBT SECURITIES RISKS

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 a 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 Income Funds and Municipal Funds.

MUNICIPAL SECURITIES RISKS

Local political and economic factors may adversely affect the value and
liquidity of municipal securities held by each of the Municipal Funds. The value
of municipal securities can be affected more by supply and demand factors or the
creditworthiness of the issuer than market interest rates. Repayment of
municipal securities depends on the ability of the issuer or project backing
such securities to generate taxes or revenues. Because the Funds invest
primarily in Georgia, North Carolina, South Carolina and Virginia, respectively,
they may be adversely affected by the factors or events particular to that
state. ISSUER DIVERSIFICATION

The Municipal Funds are not diversified. Compared to diversified mutual funds,
they may invest a higher percentage of each Funds assets among fewer issuers of
portfolio securities. This increases each Fund's risk by magnifying the impact
(positively or negatively) that any one issuer has on a Fund's share price and
performance.

PREPAYMENT RISK

The Income Funds are 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
Interest on a municipal security may be subject to regular federal income tax.
Since

any investment can be adversely affected by changes in tax laws, all of the
Funds are 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. The Equity and Income Funds are subject to this risk.

FOREIGN SECURITIES RISKS

The Equity Funds may invest in foreign securities. Foreign securities pose
additional risks over domestic securities because foreign economic,
governmental, and political systems may be less favorable than those of the
United States. Other risk factors related to foreign securities include: rates
of inflation, structure and regulation of financial markets, liquidity and
volatility of investments, taxation policies, and accounting standards. In
addition, a Fund may incur higher costs and expenses when making foreign
investments, which could impact the Fund's performance. Exchange rates for
currency fluctuate daily. The combination of currency risk and market risks
tends to make securities traded in foreign markets more volatile than securities
traded exclusively in the United States.

EMERGING MARKET SECURITIES RISKS

Investing in the Emerging Markets Fund entails a substantial degree of risk.
Because of the special risks associated with investing in emerging markets, an
investment in the Emerging Markets Fund should be considered speculative.
Investors are strongly advised to carefully consider the special risks involved
in emerging markets, which are in addition to the usual risks of investing in
domestic markets and in developed markets around the world. By itself, an
investment in the Emerging Markets Fund does not constitute a balanced
investment plan. Investors should be willing to assume a higher degree of risk
and accept a higher level of volatility than is generally associated with
investment in more developed markets.
Investments in developing or emerging markets securities are subject to higher
risks than those in developed market countries because there is greater
uncertainty in less established markets and economies. These risks include the
possibility of expropriation, nationalization or confiscatory taxation, unstable
political, social or economic systems, smaller securities markets, lower trading
volume, and substantial rates of inflation. 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 an Income 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 an Equity 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 Funds may lend securities. When a 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.

YEAR 2000 READINESS

The "Year 2000" problem is the potential for computer errors or failures because
certain computer systems may be unable to interpret dates after December 31,
1999. The Year 2000 problem may cause systems to process information incorrectly
and could disrupt businesses that rely on computers, like the Funds.

While it is impossible to determine in advance all of the risks to the Funds,
the Funds could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.
The Funds' service providers are making changes to their computer systems to
attempt to fix any Year 2000 problems. In addition, they are working to gather
information from third-party providers to determine their Year 2000 readiness.

The Adviser believes that its standard process for selecting securities
generally reduces the Funds' exposure to Year 2000 related problems. In
addition, to assess the potential effect of the Year 2000 problem, the Adviser
is reviewing available information regarding the Year 2000 readiness of issuers
of securities the Funds may purchase.
Year 2000 problems would also increase the risks of the Funds' investments.
The financial impact of these issues for the Funds is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Funds. What do Shares Cost? You can
purchase, redeem, or exchange Class A Shares and Class B Shares (Shares) 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 your
transaction request in proper form, it is processed at the next determined net
asset value (NAV) plus any applicable sales charge (the public offering price).

NAV is determined at the end of regular trading (normally 4 p.m. Eastern time)
each day the NYSE is open. The value of Fund Shares is generally determined
based upon the market value of portfolio securities. However, the Funds' Board
may determine in good faith that another method of valuing investments is
necessary to appraise their fair market value. Securities held by the Emerging
Markets Fund may trade on foreign exchanges on days (such as weekends) when the
Fund does not calculate its NAV. As a result, the NAV of the Fund's shares may
change on days when you cannot purchase or sell the Fund's Shares.

The following table summarizes the minimum investment amount required for an
investment in a Fund. The maximum sales charge that you will pay on an
investment in Class A Shares of a Fund is 4.50% of average daily net assets,
except for Short-Term Fixed Income Fund, which has a maximum sales charge of
2.50%. The maximum contingent deferred sales charge that you will pay on an
investment in Class B Shares of a Fund is 5.00%. Keep in mind that investment
professionals may charge you fees for their services in connection with your
share transactions. <TABLE> <CAPTION>
Minimum Initial /
Subsequent Investment
Required
<S> <C>
The Wachovia Funds $ 250/$50
The Wachovia Municipal Funds $500/$100
</TABLE>

Minimum initial investments may be waived from time to time for purchases by the
Trust Division of Wachovia Bank for its fiduciary or custodial accounts. An
institutional investor's minimum investment will be calculated by combining all
accounts it maintains with the Funds.

SALES CHARGE WHEN YOU PURCHASE-CLASS A SHARES
Class A Shares of all Funds except Short-Term Fixed Income Fund are sold at
their NAV next determined after an order is received, plus a sales charge as
follows: <TABLE> <CAPTION> Purchase Amount Sales Charge as a Sales Charge as
a
Percentage of Percentage of NAV
Public Offering
Price
<S> <C> <C>
Less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $750,000 2.00% 2.04%
$750,000 but less than $1 million 1.00% 1.01%
$1 million or greater 0.25% 0.25%
</TABLE>

Class A Shares of Short-Term Fixed Income Fund are sold at their NAV next
determined after an order is received, plus a sales charge as follows:

<TABLE>
<CAPTION>
Purchase Amount Sales Charge as a Sales Charge as a
Percentage of Percentage of NAV
Public Offering
Price
<S> <C> <C>
Less than $100,000 2.50% 2.56%
$100,000 but less than $250,000 1.75% 1.78%
$250,000 but less than $500,000 1.25% 1.27%
$500,000 but less than $750,000 0.75% 0.76%
$750,000 but less than $1 million 0.50% 0.50%
$1 million or greater 0.25% 0.25%
</TABLE>

The sales charge at purchase may be reduced by:

. quantity purchases of Shares;
. combining concurrent purchases of Fund Shares made by you, your spouse, or
your children under age 21

. accumulating purchases (in calculating the sales charge on an additional
purchase, you may count the current value of previous Share purchases still
invested in the Fund); or

. signing a letter of intent to purchase at least $100,000 in Shares within 13
months (call the Fund for an application and more information).

The sales charge will be eliminated when you purchase Shares:

. using the reinvestment privilege;
. by exchanging Shares from the same share class of another Fund; or
. through wrap accounts or other investment programs where you pay an
investment professional a fee for services.

If your investment qualifies, you should notify the Funds' distributor at the
time of purchase to reduce or eliminate the sales charge. You will receive the
reduced sales charge only on the additional purchases, and not retroactively on
previous purchases.

SALES CHARGE WHEN YOU REDEEM-CLASS B SHARES

Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC). Class B Shares are only offered by
the Equity Fund, the Quantitative Equity Fund, Special Values Fund, Balanced
Fund and the Fixed Income Fund. Shares Held Up To: CDSC 1 year 5.00% 2
years 4.00% 3 years 3.00% 4 years 3.00% 5 years 2.00% 6 years 1.00% 7 years or
more 0.00% Class B Shares will convert to Class A Shares at NAV
approximately eight years after purchase.

You will not be charged a CDSC when redeeming Shares:

. purchased with reinvested dividends or capital gains;
. purchased within 90 days of redeeming Shares of an equal or lesser amount;
. representing the portion of redemption proceeds attributable to increases in
the value of your account due to increases in the NAV;
. that you exchange into the same share class of another Fund (or into
Investment Shares of the Wachovia U.S. Treasury Money Market Fund);
. representing up to 10% of the value of Shares subject to a systematic
withdrawal plan;
. where the original shares were held for seven years or more; or
. if you have certain disabilities as defined by the IRS.

In addition, you will not be charged a CDSC:

. when the Fund redeems your Shares and closes your account for failing to meet
the minimum balance requirement;
. if your redemption is a required retirement plan distribution;
. upon the death of the shareholder(s) of the account or the redemption of
Shares by a designated beneficiary.

If your redemption qualifies the Distributor should be notified at the time of
redemption to eliminate the CDSC. To keep the sales charge as low as possible,
the Funds will sell your shares in the following order:

. Shares that are not subject to a CDSC;
. Shares held the longest; and
. then, the CDSC is calculated using the share price at the time of purchase or
redemption, whichever is lower.

How are the Funds Sold?

The Funds offer two share classes: Class A Shares and Class Y Shares, each
representing interests in a single portfolio of securities. The Equity Fund,
Quantitative Equity Fund, Special Values Fund, Balanced Fund and Fixed Income
Fund also offer a third class of shares, Class B Shares.

This prospectus relates only to Class A Shares and Class B Shares of the
Funds. Each share class has different sales charges and other expenses, which
affect their performance. Call 1-800-994- 4414 or contact your investment
professional for more information concerning the other classes.

The Fund's Distributor, Federated Securities Corp., (Distributor) markets the
Shares described in this prospectus to institutions or individuals, directly or
through an investment professional that has an agreement with the Distributor
(Authorized Dealer). When the Distributor receives sales charges and 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 Equity Fund, Quantitative Equity Fund, Special Values Fund, Balanced Fund
and Fixed Income Fund have adopted a Rule 12b-1 Plan, which allows each Fund to
pay marketing fees to the Distributor and investment professionals for the sale,
distribution and customer servicing of the Fund's Class B Shares at an annual
rate of up to 0.75% of the average daily NAV of the Fund's Class B Shares.
Because you pay marketing fees on an ongoing basis, your investment cost for
Class B Shares may be higher over time than for shares with different sales
charges and marketing fees.

How to Purchase Shares

You may purchase Shares through an through the Trust Division of Wachovia Bank,
through Wachovia Investments, Inc., or through an Authorized Dealer.

Where the Fund offers more than one Share Class and you do not specify your
Class choice on your form of payment, you automatically will receive Class A
Shares.
Each Fund and the Distributor reserve the right to reject any request to
purchase Shares.

THROUGH THE TRUST DIVISION OF WACHOVIA BANK

Trust customers of Wachovia Bank may purchase Shares of a Fund in accordance
with the procedures set forth in your account agreement.

Orders must be received by 3:00 p.m. (Eastern time) in order to receive that
day's public offering price. Orders received after 3:00 p.m. (Eastern time) will
be purchased at the next determined public offering price.

THROUGH WACHOVIA INVESTMENTS, INC.

Customers of Wachovia Investments, Inc. or Wachovia Brokerage Service may
purchase shares by mail, by telephone, or in person.

All purchase orders must be received by 3:00 p.m. (Eastern time) in order for
Shares to receive that day's public offering price. Orders received after 3:00
p.m. (Eastern time) will be purchased at the next determined public offering
price. By Mail To purchase Shares of a Fund by mail, send a check made
payable to (Name of Fund) to:
P.O. Box 8612
Boston, MA 02266-8612

Orders by mail are considered received after payment by check is converted into
federal funds which is normally the next business day after Wachovia
Investments, Inc. receives the check.

By Telephone

Once you have opened an account and completed the appropriate sections of the
account application, you may purchase Shares by telephone. For more information
call 1-800-994-4414. THROUGH AN AUTHORIZED DEALER Call your Authorized
Dealer for specific instructions. Purchase orders must be received before
3:00 p.m. (Eastern time) in order to receive that day's public offering price.
Orders received after 3:00 p.m. will be purchased at the next determined public
offering price. THROUGH AN EXCHANGE You may purchase Shares through an
exchange from the same Share class of another Fund. You must meet the minimum
initial investment requirement for purchasing Shares.

SYSTEMATIC INVESTMENT PROGRAM

Once you have opened a Fund account, you may add to your investment on a regular
basis in amounts of at least $25. Under this program, funds may be automatically
withdrawn from your checking account and invested in Fund shares at NAV next
determined after an order is received by a Fund. Investments in Class A Shares
will include the applicable sales charge. You may apply for participation in
this program through Wachovia Bank or through the Distributor.

How to Exchange Shares

EXCHANGE PRIVILEGE
You may exchange Shares of a Wachovia Fund into Shares of the same class of
another Wachovia Fund at NAV and without a sales charge. To do this, you must:

. meet any minimum initial investment requirements; and
. receive a prospectus for the Fund 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 an exchange
into another Fund 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 Funds.

Shareholders contemplating exchanges into The Wachovia Municipal Funds should
consult their tax advisers since the tax advantages of each Fund may vary.

By Telephone
You may exchange Shares by telephone by calling 1-800-994-4414.

Telephone exchange instructions must be received by 4:00 p.m. (Eastern time) for
Shares to be exchanged that day.

Your telephone instructions may be recorded. If a Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Funds will notify you if it changes
telephone transaction privileges.

If you are not able to make your exchange by telephone, an exchange request
may be made in writing and sent by overnight mail to:

The Wachovia Funds
1099 Hingham Street
Rockland, MA 02370-3317

How to Redeem Shares

Each Fund redeems shares at its NAV next determined after the Fund receives the
redemption request in proper form plus any applicable sales charge. Shares may
be redeemed by telephone or by mail through the trust department of Wachovia
Bank, through Wachovia Investments, Inc., through an Authorized Dealer, or
directly from the Fund. All redemption requests must be received before 3:00
p.m. (Eastern time) in order for Shares to be redeemed at that day's NAV.
By Mail You may redeem shares by sending a written request to Wachovia Bank or
Wachovia Investments, Inc., as appropriate.
Send your written redemption request including your name, the Fund's name,
your account number and the Share or dollar amount requested to:

Wachovia Funds
P.O. Box 8612
Boston, MA 02266-8612

By Telephone
You may redeem Shares of a Fund by calling the Funds at 1-800- 994-4414.
Shareholders who are trust customers of Wachovia Bank may also contact their
trust officer.
Shareholders who have an Authorized Dealer should contact their Authorized
Dealer for specific instructions on how to redeem by telephone.

SIGNATURE GUARANTEES Signatures must be guaranteed if:
. your redemption is to be sent to an address other than the address of record;
. your redemption is to be sent to an address of record that was changed within
the last thirty days; or
. a redemption is payable to someone other than the shareholder(s) of record.

. Your signature can be guaranteed by any federally insured financial
institution (such as a bank or credit union) or a broker/ dealer that is a
domestic stock exchange member, but not by a notary public.

LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds normally are mailed within one business day after receiving
a request in proper form. However, payment may be delayed up to seven days:
. to allow your purchase payment to clear;
. during periods of market volatility; or
. when a shareholder's trade activity or amount adversely impacts the Fund's
ability to manage its assets.

REDEMPTION IN KIND

Although the Funds intend to pay Share redemptions in cash, they reserve the
right to pay the redemption price in whole or in part by a distribution of a
Fund's portfolio securities.

RETIREMENT DISTRIBUTIONS
A minimum of 10% of the value of your retirement distribution (redemption) will
be withheld for taxes in the absence of your specific instructions.

SYSTEMATIC WITHDRAWAL PROGRAM

The Systematic Withdrawal Program allows you to automatically redeem Shares
monthly or quarterly at a minimum of $100. Your account value must be at least
$10,000 at the time the program is established. This program may reduce, and
eventually deplete, your account, and the payments should not be considered
yield or income. You may apply for participation in this program through your
financial institution.

Due to the Fact that Class A Shares are sold with an initial sales charge, it
is not advisable for you to purchase Class A Shares while participating in this
program. A CDSC may be imposed on systematic redemptions of Class B Shares.

SHARE CERTIFICATES

The Funds no longer issue Share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by the Fund, you must
return the certificates with your written redemption request. For your
protection, send your certificates by registered or certified mail, but do not
endorse them. Account and Share Information CONFIRMATIONS AND ACCOUNT
STATEMENTS

You will receive confirmation of purchases, redemptions and exchanges (except
for systematic transactions). In addition, you will receive periodic statements
reporting all account activity, including systematic transactions, dividends and
capital gains paid.

DIVIDENDS AND CAPITAL GAINS
<TABLE>
<CAPTION>
Fund Dividends Declared and Paid
<S> <C>
Equity Fund
Quantitative Equity Fund
Growth & Income Fund quarterly
Equity Index Fund
Balanced Fund
Fixed Income Fund
Intermediate Fixed Income Fund monthly
Short-Term Fixed Income Fund
Emerging Markets Fund annually
Special Values Fund
The Wachovia Municipal Funds Declared daily/Paid monthly
</TABLE>

Dividends are declared and paid to shareholders invested in a Fund on the record
date.

In addition, each Fund pays any capital gains at least annually. Your
dividends and capital gains distributions will be automatically reinvested in
additional Shares without a sales charge, unless you elect cash payments.

If you purchase Shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a distribution, whether or not you
reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before the Fund declares a dividend or
capital gain. Contact your investment professional or the Fund for information
concerning when dividends and capital gains will be paid.

ACCOUNTS WITH LOW BALANCES

Non-retirement accounts may be closed if redemptions or exchanges cause the
account balance to fall below the minimum initial investment amount. Before an
account is closed, the shareholder will be notified and allowed 30 days to
purchase additional Shares to meet the minimum.

THE WACHOVIA FUNDS TAX INFORMATION

The Funds send you an annual statement of your account activity to assist you in
completing your federal, state and local tax returns. Fund distributions of
dividends and capital gains are taxable to you whether paid in cash or
reinvested in the Fund. Capital gains distributions are taxable at different
rates depending upon the length of time a Fund holds its assets.

Fund distributions are expected to be both dividends and capital gains.
Redemptions and exchanges are taxable sales.
Please consult your tax adviser regarding your federal, state, and local tax
liability.

THE WACHOVIA MUNICIPAL FUNDS TAX INFORMATION

The Funds send you a timely statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of each Fund's dividends may not be exempt.
Whether or not dividends are exempt from federal income tax, they may be subject
to state and local taxes, although the each Fund's dividends will be exempt from
their respective state's personal income tax (i.e. Georgia, North Carolina,
South Carolina or Virginia) to the extent they are derived from interest on
obligations exempt from that state's personal income taxes. Capital gains and
non-exempt dividends are taxable whether paid in cash or reinvested in a Fund.
Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state and local tax liability.

Who Manages the Funds?

The Board of Trustees governs the Funds. The Board selects and oversees the
investment adviser for the Funds, 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 Bank has been managing trust assets for over 100 years, with over $42
billion in managed assets as of December 31, 1998.
Quantitative Equity Fund is sub-advised by Twin Capital Management, Inc.,
McMurray, Pennsylvania, which is paid by the adviser and not by the Fund.

The investment adviser is entitled to receive annual investment advisory fees
equal to a percentage of each Fund's average daily net assets. The investment
adviser may voluntarily choose to waive a portion of its fees or reimburse a
Fund for certain expenses. <TABLE> <CAPTION> Fund Annual Investment
Advisory
Fee paid to Investment
Adviser as a percentage of
average daily net assets
<S> <C>
Equity Fund 0.70%
Quantitative Equity Fund 0.70%
Growth & Income Fund 0.70%
Equity Index Fund 0.30%
Special Values Fund 0.80%
Emerging Markets Fund 1.00%
Balanced Fund 0.70%
Fixed Income Fund 0.60%
Intermediate Fixed Income Fund 0.60%
Short-Term Fixed Income Fund 0.55%
Georgia Municipal Bond Fund 0.75%
North Carolina Municipal Bond Fund 0.75%
South Carolina Municipal Bond Fund 0.75%
Virginia Municipal Bond Fund 0.74%
</TABLE>

Pursuant to an agreement between the Adviser and the Trusts, the Adviser agrees
during the period from December 15, 1998 through January 31, 2000 to waive its
fees and/or make reimbursements to the Funds, so that each Fund's net operating
expenses do not exceed, in the aggregate, the Fund's total actual operating
expenses. The Adviser agrees that this obligation shall constitute a contractual
commitment enforceable by the Trusts and that the Adviser shall not assert any
right to reimbursement of amounts so waived or reimbursed.

PORTFOLIO MANAGERS

<TABLE>
<CAPTION>
Portfolio Manager Funds Managed Biography
<S> <C> <C>
Jerry D. Burton Quantitative Equity Fund Mr. Burton is a Chartered Financial
Analyst and Vice President
and Portfolio Manager for Personal
Financial Services for the
investment adviser. In 1971, Mr.
Burton joined South Carolina
National Bank, which was acquired by
Wachovia Bank in 1991. Mr.
Burton received a bachelors degree
from Clemson University and
an MBA from the College of William
and Mary.

Daniel S. Earthman Balanced Fund Growth & Income Fund Mr. Earthman is a Chartered Financial
Analyst, Portfolio
Equity Fund Manager, and a Senior Vice President
of the investment adviser.
Prior to joining Wachovia Bank in
1988, Mr. Earthman was a Vice
President and Investment Manager with
Richland Asset Management
in Nashville, and an Assistant Vice
President and Portfolio
Manager with North Carolina National
Bank in Charlotte. Mr.
Earthman received a bachelors degree
in business from Southern
Methodist University and a MBA from
the University of North
Carolina at Chapel Hill.

Samuel M. Gibbs, II Short-Term Income Fund Fixed Income Mr. Gibbs is a Senior Vice President
and Manager of Fixed Income
Fund Intermediate Fixed Income Fund Investments for the investment
adviser. Mr. Gibbs joined
Wachovia Bank in 1969 as a portfolio
manager. He became a bond
trader and fixed income portfolio
manager in 1975 and assumed
his current position in 1977. Mr.
Gibbs is a graduate of
Davidson College and has an MBA from
the University of South
Carolina.
Roger L. Glenski Special Values Fund Mr. Glenski is a Certified Public
Accountant, Portfolio Manager
and Assistant Vice President of the
investment adviser. Mr.
Glenski joined Wachovia Bank in 1996,
specializing in the
valuation of closely-held businesses
and small companies.
Previously, Mr. Glenski was a staff
accountant employed by the
accounting firms of KPMG and Deloitte
& Touche LLP in Chicago.
Mr. Glenski received a bachelors
degree from the University of
Missouri-Kansas City and a MBA from
the University of Chicago.

John F. Hageman Equity Fund Balanced Fund Growth & John F. Hageman is a Chartered
Financial Analyst and a Senior
Income Fund Vice President and Institutional
Portfolio Manager for the
investment adviser. Mr. Hageman is
responsible for managing
employee benefit, foundation and
endowment portfolios. Prior to
joining Wachovia Bank in 1986, Mr.
Hageman was Vice President
and head of Institutional Investment
Management at Michigan
National Investment Corporation from
1977 to 1986, and an
account executive with Merrill Lynch
from 1975 to 1977. Mr.
Hageman received his B.A. from Wabash
College.

Paige C. Henderson Emerging Markets Fund Ms. Henderson is a Chartered
Financial Analyst and a Vice
President of the investment adviser.
Ms. Henderson joined
Wachovia Bank in 1991 as an Equity
Analyst. She has managed the
Emerging Market Fund since 1996. Ms.
Henderson received a
bachelors of science in Business
Administration and an MBA from
the University of North Carolina at
Chapel Hill. Ms. Henderson
is a Certified Public Accountant.

Michael W. Holt Fixed Income Fund Intermediate Fixed Mr. Holt is a Chartered Financial
Analyst and Fixed Income
Income Fund Portfolio Manager of the investment
adviser. Mr. Holt joined
Wachovia Bank in 1991. He is a
graduate of the University of
Tennessee where he majored in
economics and received a MBA in
Finance.

Russell L. Kimbro, Jr. Equity Fund Balanced Fund Growth & Mr. Kimbro is a Chartered Financial
Analyst and Senior Vice
Income Fund President and Portfolio Manager for
Personal Financial Services
for the investment adviser. Mr.
Kimbro joined Wachovia Bank in
1985. Mr. Kimbro is an instructor of
corporate finance an the
University of North Carolina at
Greensboro. He received his
bachelors degree in economics from
Virginia Polytechnical
Institute and State University and a
MBA from the University of
North Carolina at Greensboro.

F. Stanley King Equity Fund Balanced Fund Growth & Mr. King is a Chartered Financial
Analyst and a Senior Vice
Income Fund President of the investment adviser.
Mr. King serves as manager
of institutional portfolio management
for the investment
adviser. Mr. King joined Wachovia
Bank in 1985 as a securities
analyst and assumed his current
position in 1991. He has both
his bachelors and masters of science
degrees from North Carolina
State University.

George E. McCall Quantitative Equity Fund Mr. McCall is a Certified Financial
Planner, Portfolio Manager
and Vice President of the investment
adviser. In 1981, Mr.
McCall joined South Carolina National
Bank, which was acquired
by Wachovia Bank in 1991. Mr. McCall
is a graduate of
Presbyterian College and received an
MBA from the University of
South Carolina.

Matthew J. McGuinness Equity Fund Balanced Fund Growth & Mr. McGuinness is a Chartered
Financial Analyst and Vice
Income Fund President and Portfolio Manager for
Personal Financial Services
for the investment adviser. Mr.
McGuinness joined Wachovia Bank
in 1991 in the Estates/Closely-Held
Unit. He received an MBA
from the University of North Carolina
at Chapel Hill.

Michael O. Mercer Equity Fund Balanced Fund Growth & Mr. Mercer is a Senior Vice President
of Wachovia and manages
Income Fund the Wachovia Equity Investment Fund
and other large
institutional accounts. Mr. Mercer
joined Wachovia Bank in 1983
and is a Chartered Financial Analyst.
Mr. Mercer is a graduate
of Catawba College and received an
MBA from Florida State
University.

Wayne F. Morgan Fixed Income Fund Intermediate Fixed Mr. Morgan is a Chartered Financial
Analyst and Senior Vice
Income Fund President of the investment adviser.
Prior to joining Wachovia
Bank in June, 1997 as a senior fixed
income portfolio manager,
Mr. Morgan served as the Director of
Investments at the
University of North Carolina at
Chapel Hill, where he oversaw
the management of the University's
endowment fund. Mr. Morgan
received both a bachelors degree and
his MBA from the University
of North Carolina at Chapel Hill.

J. Joseph Muster The Wachovia Municipal Funds Mr. Muster is a Vice President and
Portfolio Manager of Money
Market and Municipal Investments in
the Fixed Income Section of
the investment adviser. Mr. Muster
joined Wachovia Bank in 1992
and worked as a credit analyst until
January of 1998 when he was
promoted to portfolio manager. Mr.
Muster is a graduate of the
University of Georgia and received
his MBA from Duke University.

Harold (Rick) Nelson III Fixed Income Fund Intermediate Fixed Mr. Nelson III is a Senior Vice
President and fixed income
Income Fund portfolio manager of the investment
adviser. Mr. Nelson joined
Wachovia Bank in 1985 as a fixed
income portfolio manager. He
received his bachelors of science
degree in management from St.
Francis College and his MBA in
Finance from Mercer University.

B. Scott Sadler Emerging Markets Fund Mr. Sadler is a Chartered Financial
Analyst, Portfolio Manager
and Vice President of the investment
adviser. Mr. Sadler joined
Wachovia Bank in 1987. Mr. Sadler is
a graduate of the
University of Virginia's McIntire
School of Commerce with a
bachelors degree in commerce.

Michael G. Sebesta Fixed Income Fund Intermediate Fixed Mr. Sebesta is a Vice President and
Fixed Income Portfolio
Income Fund Manager for the investment adviser.
Mr. Sebesta joined Wachovia
Bank in 1989. Mr. Sebesta has a
bachelors degree in economics
from Wake Forest University.

Michael J. Tierney Emerging Markets Fund Special Values Mr. Tierney is an Executive Vice
President of Wachovia Bank and
Fund Chief Investment Officer and
Portfolio Manager with the
investment adviser. Mr. Tierney
joined Wachovia Bank in 1981.
Mr. Tierney is a graduate of the
University of Connecticut, and
has more than 25 years of experience
managing equity and fixed
income investments.

Joseph H. Waterfill Balanced Fund Equity Fund Mr. Waterfill is a Senior Vice
President and Portfolio Manager
Quantitative Equity Fund Growth & of the investment adviser. Mr.
Waterfill joined Wachovia Bank in
Income Fund 1976. Mr. Waterfill received his
bachelors of science degree
from the U.S. Naval Academy and his
MBA from Vanderbilt
University.
</TABLE>

Financial Information

The following financial highlights are intended to help you understand each
Fund's financial performance for its past five fiscal years, or since inception,
if the life of the Fund is shorter. Some of the information is presented on a
per share basis. Total returns represent the rate an investor would have earned
(or lost) on an investment in a Fund, assuming reinvestment of all dividends and
distributions.

This information has been audited by Ernst & Young LLP whose report, along
with the Fund's audited financial statements, is included in the Annual Report.

The Wachovia Funds and The Wachovia Municipal Funds

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGH EACH PERIOD)

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report dated January 20, 1998 is included in the
Annual Report for the Fund, which is incorporated by reference. This table
should read in conjunction with the Fund's Financial Statements and notes
thereto, which may be obtained free of charge from the Fund.

Further information about the performance of the Funds is contained in the
Fund's Annual Report dated November 30, 1998 which may be obtained free of
charge.
<TABLE>
<CAPTION>
Period Ended Net Asset Net Net Realized and Total from Distributions
Distributions Total
November 30, Value, Investment Unrealized Gain/(Loss) Investment from Net from
Net Distributions
beginning Income/ on Investments, Futures Operations Investment Realized
Gain
of period (Operating Loss) Contracts, and Foreign Income on
Investment
Currency Transactions
Transactions,
Futures
Contracts
and
Foreign Currency

Transactions
<S> <C> <C> <C> <C> <C>
<C> <C>
Wachovia Equity Fund
1994 $10.28 0.20 0.12 0.32 (0.20)
(0.08) (0.28)
1995 $10.32 0.23 2.64 2.87 (0.25)
(0.23) (0.48)
1996 $12.71 0.22(e) 2.83 3.05 (0.22)
(0.73) (0.95)
1997 $14.81 0.14(e) 2.43 2.57 (0.13)
(1.86) (1.99)
1998 $15.39 0.13(e) 2.21 2.34 (0.14)
(1.68) (1.82)
Wachovia Quantitative Equity Fund
1994(a) $10.00 0.12 (0.43) (0.31) (0.09)
- - (0.09)
1995 $ 9.60 0.22 3.51 3.73 (0.22)
- - (0.22)
1996 $13.11 0.24(e) 2.77 3.01 (0.21)
(0.24) (0.45)
1997 $15.67 0.18(e) 4.14 4.32 (0.20)
(0.79) (0.99)
1998 $19.00 0.11(e) 3.12 3.23 (0.19)
(1.75) (1.94)
Wachovia Growth & Income Fund
1994 $10.20 0.17 (0.40) (0.23) (0.17)
- - (0.17)
1995 $ 9.80 0.17 3.09 3.26 (0.17)
- - (0.18)
1996 $12.88 0.15 3.67 3.82 (0.15)
(0.14) (0.29)
1997 $16.41 0.13 4.44 4.57 (0.13)
(0.25) (0.38)
1998** $20.60 0.11 3.94 4.05 (0.10)
(1.01) (1.11)
Wachovia Equity Index Fund
1994 $10.47 0.25 (0.19) 0.06 (0.24)
(0.02) (0.26)
1995 $10.27 0.28 3.37 3.65 (0.27)
(0.03) (0.30)
1996 $13.62 0.32(e) 3.13 3.45 (0.31)
(0.78) (1.09)
1997 $15.98 0.25(e) 3.85 4.10 (0.28)
(0.91) (1.19)
1998 $18.89 0.26(e) 3.90 4.16 (0.24)
(0.40) (0.64)
Wachovia Special Values Fund
1994 $10.24 0.06 (0.22) (0.16) (0.05)
(0.28) (0.33)
1995 $ 9.75 0.09 2.42 2.51 (0.02)
(0.06) (0.08)
1996 $12.18 0.35 4.13 4.48 (0.08)
(0.91) (0.99)
1997 $15.67 0.13(e) 4.53 4.66 (0.08)
(1.61) (1.69)
1998 $18.64 0.19(e) (0.87) (0.68) (0.12)
(1.71) (1.83)
Wachovia Emerging Markets Fund
1995(b) $10.00 0.05 0.36 0.41 -
- - -
1996 $10.41 0.09(e) 1.20 1.29 (0.03)
- - (0.03)
1997 $11.67 0.03(e) (0.47) (0.44) (0.11)
- - (0.11)
1998 $11.12 0.09(e) (2.68) (2.59) (0.10)
- - (0.10)
</TABLE>

* Computed on an annualized basis.
** Effective March 29, 1998, the fund changed investment advisers from Central
Fidelity National Bank to Wachovia Asset Management.

(a) Reflects operations for the period from March 28, 1994 (date of initial
public investment) to November 30, 1994.
(b) Reflects operations for the period from December 26, 1994 (date of initial
public investment) to November 30, 1995.
(c) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(d) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(e) Per share information is based on average shares outstanding.

The Wachovia Funds and The Wachovia Municipal Funds

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
Ratios to Average Net Assets
Period Ended Net Asset Total Return(c) Expenses Net Expense Waiver/ Net Assets,
end Portfolio
November 30, Value, end Investment Reimbursement(d) of period
(000 Turnover Rate
of period Income omitted)
<S> <C> <C> <C> <C> <C>
<C> <C>
Wachovia Equity Fund
1994 $10.32 3.10% 0.87% 1.98% 0.16% $
87,022 35%
1995 $12.71 28.74% 0.90% 1.99% 0.07%
$130,150 65%
1996 $14.81 25.56% 0.90% 1.62% 0.15% $
20,774 64%
1997 $15.39 20.22% 1.14% 0.95% 0.07% $
39,494 124%
1998 $15.91 17.34% 1.12% 0.91% - $
53,103 150%
Wachovia Quantitative Equity Fund
1994(a) $ 9.60 (3.08%) 0.90%* 1.83%* 0.10%* $
91,979 64%
1995 $13.11 39.33% 0.87% 1.93% 0.10%
$131,895 63%
1996 $15.67 23.74% 0.87% 1.70% 0.15% $
15,742 44%
1997 $19.00 29.38% 1.11% 1.09% 0.07% $
35,413 74%
1998 $20.29 18.98% 1.11% 0.95% - $
82,682 38%
Wachovia Growth & Income Fund
1994 $ 9.80 (2.26%) 1.35% 1.75% 0.40%
$103,140 30%
1995 $12.88 33.59% 1.35% 1.58% 0.36%
$119,484 30%
1996 $16.41 30.10% 1.35% 1.04% 0.31%
$186,147 12%
1997 $20.60 28.50% 1.30% 0.70% 0.30%
$338,724 13%
1998** $23.54 20.77% 1.21% 0.59% 0.08%
$130,306 24%
Wachovia Equity Index Fund
1994 $10.27 0.56% 0.46% 2.44% 0.08%
$183,852 9%
1995 $13.62 36.15% 0.48% 2.39% 0.05%
$186,841 60%
1996 $15.98 27.19% 0.46% 2.23% 0.13% $
18,154 12%
1997 $18.89 27.55% 0.72% 1.46% 0.02% $
50,917 4%
1998 $22.41 22.74% 0.70% 1.23% -
$131,594 29%
Wachovia Special Values Fund
1994 $ 9.75 (1.61%) 1.13% 0.63% 1.09% $
17,431 62%
1995 $12.18 25.91% 1.29% 0.80% 0.58% $
24,093 57%
1996 $15.67 39.78% 1.21% 047% 0.29% $
6,642 38%
1997 $18.64 33.08% 1.35% 0.74% 0.01% $
37,766 46%
1998 $16.13 (3.86%) 1.25% 0.98% - $
59,408 20%
Wachovia Emerging Markets Fund
1995(b) $10.41 4.10% 1.80%* 0.28%* 0.28%* $
71,276 17%
1996 $11.67 12.45% 1.69% 0.73% 0.09% $
5,488 30%
1997 $11.12 (3.82%) 1.79% 0.26% - $
7,996 60%
1998 $ 8.43 (23.46%) 1.68% 0.90% - $
8,677 51%
</TABLE>

* Computed on an annualized basis.
** Effective March 29, 1998, the fund changed investment advisers from Central
Fidelity National Bank to Wachovia Asset Management.

The Wachovia Funds and The Wachovia Municipal Funds

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGH EACH PERIOD)
<TABLE>
<CAPTION>
Period Ended Net Asset Net Net Realized and Total from Distributions
Distributions Total
November 30, Value, Investment Unrealized Gain/(Loss) Investment from Net from
Net Distributions
beginning Income/ on Investments, Futures Operations Investment Realized
Gain
of period (Operating Loss) Contracts, and Foreign Income on
Investment
Currency Transactions
Transactions,
Futures
Contracts
and
Foreign Currency

Transactions
<S> <C> <C> <C> <C> <C>
<C> <C>
Wachovia Balanced Fund
1994 $10.33 0.35 (0.38) (0.03) (0.33)
(0.04) (0.37)
1995 $ 9.93 0.40 2.13 2.53 (0.38)
(0.16) (0.54)
1996 $11.92 0.38(e) 1.72 2.10 (0.38)
(0.34) (0.72)
1997 $13.30 0.34(e) 1.40 1.74 (0.34)
(1.44) (1.78)
1998 $13.26 0.24(e) 1.50 1.74 (0.38)
(0.90) (1.28)
Wachovia Fixed Income Fund
1994 $10.00 0.56 (0.98) (0.42) (0.55)
(0.06) (0.61)
1995 $ 8.97 0.58 0.92 1.50 (0.57)
- - (0.57)
1996 $ 9.90 0.61(e) (0.09) 0.52 (0.59)
- - (0.59)
1997 $ 9.83 0.54(e) 0.04 0.58 (0.56)
- - (0.56)
1998 $ 9.85 0.53(e) 0.30 0.83 (0.54)
- - (0.54)
Wachovia Intermediate Fixed Income Fund
1994 $10.20 0.44 (0.79) (0.35) (0.43)
- - (0.54)
1995 $ 9.31 0.55 0.76 1.31 (0.54)
- - (0.55)
1996 $10.07 0.55 (0.11) 0.44 (0.55)
- - (0.55)
1997 $ 9.96 0.54 0.06 0.60 (0.53)
- - (0.53)
1998** $10.03 0.47 0.40 0.87 (0.52)
- - (0.52)
Wachovia Short-Term Fixed Income Fund
1994 $ 9.91 0.45 (0.33) 0.12 (0.45)
- - (0.45)
1995 $ 9.58 0.59 0.24 0.83 (0.52)
- - (0.52)
1996 $ 9.89 0.56(e) (0.06) 0.50 (0.60)
- - (0.60)
1997 $ 9.79 0.50(e) (0.01) 0.49 (0.51)
- - (0.51)
1998 $ 9.77 0.52(e) 0.14 0.66 (0.51)
- - (0.51)
Wachovia Georgia Municipal Bond Fund
1995(b) $10.00 0.41 0.96 1.37 (0.41)
- - (0.41)
1996 $10.96 0.47 0.05 0.52 (0.47)
(0.01) (0.48)
1997 $11.00 0.44 0.13 0.57 (0.44)
(0.02) (0.46)
1998 $11.11 0.42 0.27 0.69 (0.42)
+ (0.42)
Wachovia North Carolina Municipal Bond Fund
1995(b) $10.00 0.43 0.99 1.42 (0.43)
- - (0.43)
1996 $10.99 0.45 0.09 0.54 (0.45)
(0.05) (0.50)
1997 $11.03 0.43 0.14 0.57 (0.43)
(0.02) (0.45)
1998 $11.15 0.43 0.32 0.75 (0.43)
(0.01) (0.44)
Wachovia South Carolina Municipal Bond Fund
1994 $11.12 0.56 (1.04) (0.48) (0.56)
(0.03) (0.59)
1995 $10.05 0.56 1.10 1.66 (0.56)
(0.10) (0.66)
1996 $11.05 0.55 0.03 0.58 (0.55)
(0.03) (0.58)
1997 $11.05 0.53 0.11 0.64 (0.52)
(0.05) (0.57)
1998 $11.12 0.51 0.24 0.75 (0.51)
+ (0.51)
Wachovia Virginia Municipal Bond Fund
1994 $10.31 0.38 (0.90) (0.52) (0.38)
- - (0.39)
1995 $ 9.40 0.42 0.85 1.27 (0.42)
- - (0.42)
1996 $10.25 0.44 (0.10) 0.34 (0.44)
- - (0.44)
1997 $10.15 0.46 0.13 0.59 (0.45)
- - (0.45)
1998** $10.29 0.48 0.14 0.62 (0.48)
- - (0.42)
</TABLE>

* Computed on an annualized basis.
** Effective March 29, 1998, the fund changed investment advisers from Central
Fidelity National Bank to Wachovia Asset Management.
+ Less than $0.01 per share.

The Wachovia Funds and The Wachovia Municipal Funds

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGH EACH PERIOD)
<TABLE>
<CAPTION>
Ratios to Average Net Assets
Period Ended Net Asset Total Return(c) Expenses Net Expense Waiver/ Net Assets,
end Portfolio
November 30, Value, end Investment Reimbursement(d) of period
(000 Turnover Rate
of period Income omitted)
<S> <C> <C> <C> <C> <C>
<C> <C>
Wachovia Balanced Fund
1994 $ 9.93 (0.39%) 0.75% 3.46% 0.17%
$194,430 74%
1995 $11.92 26.32% 0.76% 3.58% 0.16%
$207,421 102%
1996 $13.30 18.55% 0.76% 3.05% 0.24% $
18,619 99%
1997 $13.26 15.17% 1.02% 2.77% 0.16% $
50,968 143%
1998 $13.72 14.36% 1.01% 2.88% 0.09%
$119,093 124%
Wachovia Fixed Income Fund
1994 $ 8.97 (4.30%) 0.71% 5.90% 0.13%
$148,751 148%
1995 $ 9.90 17.20% 0.74% 6.07% 0.10%
$169,846 155%
1996 $ 9.83 5.51% 0.74% 6.05% 0.18% $
4,853 181%
1997 $ 9.85 6.14% 0.98% 5.65% 0.11% $
10,039 174%
1998 $10.14 8.65% 0.97% 5.30% 0.05% $
24,624 111%
Wachovia Intermediate Fixed Income Fund
1994 $ 9.31 (3.51%) 1.09% 4.46% 0.40% $
48,730 55%
1995 $10.07 14.44% 1.10% 5.60% 0.41% $
35,796 44%
1996 $ 9.96 4.46% 1.09% 5.62% 0.31% $
43,277 84%
1997 $10.03 6.32% 1.04% 5.50% 0.30% $
96,626 81%
1998** $10.38 9.39% 1.06% 5.39% 0.14% $
4,759 57%
Wachovia Short-Term Fixed Income Fund
1994 $ 9.58 1.27% 0.60% 4.62% 0.18%
$148,326 151%
1995 $ 9.89 8.82% 0.63% 5.83% 0.18%
$124,720 147%
1996 $ 9.79 5.29% 0.63% 5.50% 0.27% $
1,675 145%
1997 $ 9.77 5.10% 0.87% 5.49% 0.19% $
7,233 215%
1998 $ 9.92 6.93% 0.88% 5.22% 0.10% $
10,437 135%
Wachovia Georgia Municipal Bond Fund
1995(b) $10.96 13.93% 0.92%* 4.30%* 1.88%* $
10,220 14%
1996 $11.00 4.97% 0.89% 4.40% 1.61% $
7,531 14%
1997 $11.11 5.41% 1.14% 4.03% 1.11% $
6,531 25%
1998 $11.38 6.35% 1.17% 3.72% 0.34% $
6,900 14%
Wachovia North Carolina Municipal Bond Fund
1995(b) $10.99 14.40% 0.85%* 4.40%* 1.19%* $
18,679 19%
1996 $11.03 5.17% 0.84% 4.24% 0.77% $
13,752 7%
1997 $11.15 5.36% 1.07% 3.91% 0.44% $
11,563 17%
1998 $11.46 6.82% 1.10% 3.80% 0.16% $
9,533 9%
Wachovia South Carolina Municipal Bond Fund
1994 $10.05 (4.52%) 0.60% 5.22% 0.59% $
75,995 23%
1995 $11.05 16.97% 0.58% 5.23% 0.55% $
93,725 15%
1996 $11.05 5.54% 0.57% 5.10% 0.59% $
65,981 20%
1997 $11.12 6.01% 0.81% 4.79% 0.48% $
64,696 12%
1998 $11.36 6.88% 0.83% 4.52% 0.36% $
67,458 6%
Wachovia Virginia Municipal Bond Fund
1994 $ 9.40 (5.17%) 1.04% 3.90% 0.52% $
39,978 87%
1995 $10.25 13.79% 1.05% 4.33% 0.46% $
54,041 78%
1996 $10.15 3.50% 1.04% 4.45% 0.40% $
70,378 37%
1997 $10.30 5.97% 0.96% 4.50% 0.40%
$111,160 15%
1998** $10.49 6.76% 0.95% 4.35% 0.33% $
8,835 15%
</TABLE>

* Computed on an annualized basis.
** Effective March 29, 1998, the fund changed investment advisers from Central
Fidelity National Bank to Wachovia Asset Management.

The Wachovia Funds and The Wachovia Municipal Funds

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGH EACH PERIOD)
<TABLE>
<CAPTION>
Period Ended Net Asset Net Net Realized and Total from Distributions
Distributions Total
November 30, Value, Investment Unrealized Gain/(Loss) Investment from Net from
Net Distributions
beginning Income/ on Investments, Futures Operations Investment Realized
Gain
of period Contracts, and Foreign Income on
Investment
Currency Transactions
Transactions,
Futures
Contracts
and
Foreign Currency

Transactions
<S> <C> <C> <C> <C> <C>
<C> <C>
WACHOVIA EQUITY FUND
1996(A) $12.43 0.02 2.37 2.39 (0.03)
- - (0.03)
1997 $14.79 0.04 2.42 2.46 (0.04)
(1.86) (1.90)
1998 $15.35 0.03 2.20 2.23 (0.03)
(1.68) (1.71)
WACHOVIA QUANTITATIVE EQUITY FUND
1996(A) $13.09 0.04 2.56 2.60 (0.04)
- - (0.04)
1997 $15.65 0.08 4.10 4.18 (0.09)
(0.79) (0.88)
1998 $18.95 0.05 3.04 3.09 (0.06)
(1.75) (1.81)
WACHOVIA BALANCED FUND
1996(A) $11.68 0.09 1.59 1.68 (0.07)
- - (0.07)
1997 $13.29 0.26 1.38 1.64 (0.26)
(1.44) (1.70)
1998 $13.23 0.28 1.37 1.65 (0.29)
(0.90) (1.19)
WACHOVIA FIXED INCOME FUND
1996(A) $ 9.45 0.15 0.40 0.55 (0.17)
- - (0.17)
1997 $ 9.83 0.48 0.01 0.49 (0.48)
- - (0.48)
1998 $ 9.84 0.47 0.30 0.77 (0.47)
- - (0.47)
</TABLE>

* Computed on an annualized basis.

(a) Reflects operations for the period from July 22, 1996 (date of initial
public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

The Wachovia Funds and The Wachovia Municipal Funds

Financial Highlights-Class B Shares

(FOR A SHARE OUTSTANDING THROUGH EACH PERIOD)

The following tabel has been audited by Ernst & Young LLP, the independent
auditors. Their dated January 20, 1998 is included in the Annual Report for the
Fund, which is incorporated by reference. This table should read in conjunction
with the Fund's Financial Statements and notes thereto, which may be obtained
free of charge from the Fund.

Further information about the performance of the Funds is contained in the
Fund's Annual Report dated November 30, 1998 which may be obtained free of
charge. <TABLE> <CAPTION>
Ratios to Average Net Assets
Period Ended Net Asset Total Return(b) Expenses Net Expense Waiver/ Net Assets,
end Portfolio
November 30, Value, end Investment Reimbursement(c) of period
(000 Turnover Rate
of period Income omitted)
<S> <C> <C> <C> <C> <C>
<C> <C>
Wachovia Equity Fund
1996(a) $14.79 19.25% 1.90% 0.02% 0.20% $
976 64%
1997 $15.35 19.27% 1.90% 0.18% 0.06% $
3,448 124%
1998 $15.87 16.52% 1.87% 0.17% - $
5,725 150%
Wachovia Quantitative Equity Fund
1996(a) $15.65 19.90% 1.87%* 0.46%* 0.11%* $
1,414 44%
1997 $18.95 28.33% 1.85% 0.31% 0.07% $
6,564 74%
1998 $20.23 18.15% 1.86% 0.20% -
$19,532 38%
Wachovia Balanced Fund
1996(a) $13.29 14.47% 1.76%* 1.93%* 0.16%* $
1,821 99%
1997 $13.23 14.19% 1.78% 2.01% 0.16% $
5,916 143%
1998 $13.69 13.56% 1.76% 2.13% 0.09%
$13,963 124%
Wachovia Fixed Income Fund
1996(a) $ 9.83 5.83% 1.74%* 5.20%* 0.13%* $
113 181%
1997 $ 9.84 5.21% 1.75% 4.89% 0.11% $
140 174%
1998 $10.14 7.97% 1.72% 4.55% 0.05% $
533 111%
</TABLE>

* Computed on an annualized basis.

The Wachovia Funds

The Wachovia Municipal Funds

CLASS A SHARES
CLASS B SHARES

FEBRUARY 28, 1999

The following documents contain further details about the Funds and are
available upon request and without charge:

Statement of Additional Information (SAI)--The SAI includes additional
information about the Funds. The SAI is incorporated by reference into this
prospectus, making it legally a part of this prospectus.

Shareholder Reports--The Funds publish annual and semi-annual reports to
shareholders which include information about the Funds' 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 investment professional or the Fund at 1-800-994-4414.

You can obtain information about the Funds by visiting or writing the Public
Reference Room of the Securities and Exchange Commission in Washington, DC
20549-6009 or from the Commission's Internet site at http://www.sec.gov. You can
call 1-800-SEC-0330 for information on the Public Reference Room's operations
and copying charges.

The Wachovia Funds &
The Wachovia Municipal Funds
Class A Shares
All Portfolios
Class B Shares
Equity Funds
Quantitative Equity Fund
Balanced Fund
Fixed Income Fund

Addresses

WACHOVIA EQUITY FUND 101 Greystone Boulevard
WACHOVIA QUANTITATIVE EQUITY FUND SC-9215
WACHOVIA GROWTH & INCOME FUND Columbia, SC 29226
WACHOVIA EQUITY INDEX FUND
WACHOVIA SPECIAL VALUES FUND
WACHOVIA EMERGING MARKETS FUND
WACHOVIA BALANCED FUND
WACHOVIA FIXED INCOME FUND
WACHOVIA INTERMEDIATE FIXED INCOME FUND
WACHOVIA SHORT-TERM FIXED INCOME FUND
WACHOVIA GA MUNICIPAL BOND FUND
WACHOVIA NC MUNICIPAL BOND FUND
WACHOVIA SC MUNICIPAL BOND FUND
WACHOVIA VA MUNICIPAL BOND FUND

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 Federated Shareholder Services Company
PORTFOLIO RECORDKEEPER Federated Shareholder Services Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

COUNSEL TO THE WACHOVIA
FUNDS AND THE WACHOVIA Kirkpatrick & Lockhart LLP
MUNICIPAL FUNDS 1800 Massachusetts Avenue, N.W.
Washington, DC 20036-1800

COUNSEL TO THE INDEPENDENT
TRUSTEES Piper & Marbury L.L.P.
1200 Nineteenth Street, N.W.
Washington, DC 20036-2430

INDEPENDENT AUDITORS Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219
February 28, 1999
822-27 (2/99)
G01513-01 (2/99)

THE WACHOVIA FUNDS &
THE WACHOVIA MUNICIPAL FUNDS
CLASS Y SHARES
Prospectus

February 28, 1999

The Wachovia Funds

Wachovia Equity Fund Wachovia Emerging Markets Fund

Wachovia Quantitative Equity Fund Wachovia Balanced Fund

Wachovia Growth & Income Fund Wachovia Fixed Income Fund

Wachovia Equity Index Fund Wachovia Intermediate Fixed Income Fund

Wachovia Special Values Fund Wachovia Short-Term Fixed Income Fund

The Wachovia Municipal Funds

Wachovia Georgia Municipal Bond Fund

Wachovia North Carolina Municipal Bond Fund

Wachovia South Carolina Municipal Bond Fund

Wachovia Virginia Municipal Bond Fund

CLASS Y SHARES

<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Fund Goals, Strategies, Performance and Risk 1
What are the Funds' Fees and Expenses? 9
What are the Funds' Main Investments and Investment Techniques? 10
What are the Risks of Investing in the Funds? 11
What do Shares Cost? 13
How are the Funds Sold? 13
How to Purchase Shares 13
How to Exchange Shares 14
How to Redeem Shares 14
Account and Share Information 15
Who Manages the Funds? 15
Financial Information 18
</TABLE>
FEBRUARY 28, 1999

Fund Goals, Strategies, Performance and Risk

EQUITY FUNDS

WACHOVIA EQUITY FUND

Goal
Seeks to produce growth of principal and income.

Strategy

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class Y Shares total returns
on a yearly basis.

The Fund's Class Y shares are not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value.

Within the period shown in the Chart, the Fund's Class Y Shares highest
quarterly return was 22.04% (quarter ended December 31, 1998). Its lowest
quarterly return was (11.31)% (quarter ended September 30, 1998).

Average Annual Total Return
The table shows the Fund's Class Y Shares average annual total returns compared
to the S&P 500 Index (S&P 500), a broad- based market index.

<TABLE>
<CAPTION>
Calendar Period Class Y S&P 500
<S> <C> <C>
1 Year 27.17% 28.58%
Life of Fund1 23.15% 34.09%
</TABLE>

1 The start of performance date for Class Y Shares was July 23, 1996. 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 rewards.

WACHOVIA QUANTITATIVE EQUITY FUND

Goal
Seeks to provide growth of principal and income.

Strategy

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class Y Shares total returns
on a yearly basis.

The Fund's Class Y shares are not sold subject to a sales charge (load). The
total returns displayed above are based upon net asset value.

Within the period shown in the Chart, the Fund's Class Y Shares highest
quarterly return was 23.29% (quarter ended December 31, 1998). Its lowest
quarterly return was (10.55)% (quarter ended September 30, 1998).

Average Annual Total Return
The table shows the Fund's Class Y Shares average annual total returns compared
to the S&P 500 Index (S&P 500), a broad- based market index.

<TABLE>
<CAPTION>
Calendar Period Class Y S&P 500
<S> <C> <C>
1 Year 24.59% 28.58%
Life of Fund1 32.35% 34.09%
</TABLE>

WACHOVIA GROWTH & INCOME FUND

Goal
Seeks to provide total return through growth of capital and current 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 holdings 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 have potential for growth of capital and/or income.

Total Return Bar Chart and Table

The total return bar chart and table for the Fund's Class Y Shares are not
provided since the Class Y Shares have not been in operation for a full calendar
year. The total return for the Fund's Class Y Shares from inception through
November 30, 1998, is provided under the section "Financial Highlights" herein.

WACHOVIA EQUITY INDEX FUND

Goal

Seeks to provide a total return that approximates that of the stock market as
measured by the S&P 500.

Strategy

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class Y Shares total returns
on a yearly basis. The Fund's Class Y shares are not sold subject to a sales
charge (load). The total returns displayed above are based upon net asset value.

Within the period shown in the Chart, the Fund's Class Y Shares highest
quarterly return was 21.28% (quarter ended December 31, 1998). Its lowest
quarterly return was (10.03)% (quarter ended September 30, 1998).

Average Annual Total Return
The table shows the Fund's Class Y Shares average annual total returns compared
to the S&P 500 Index (S&P 500), a broad- based market index.
<TABLE>
<CAPTION>
Calendar Period Class Y S&P 500
<S> <C> <C>
1 Year 28.15% 28.58%
Life of Fund1 32.85% 34.09%
</TABLE>

WACHOVIA SPECIAL VALUES FUND

Goal
Seeks to produce growth of principal.

Strategy

Total Return Bar Chart and Table

[Graph appears here-see appendix]

The bar chart shows the variability of the Fund's Class Y Shares total returns
on a yearly basis. The Fund's Class Y Shares are not sold subject to a sales
charge (load). The total returns displayed above are based upon net asset value.

Within the period shown in the Chart, the Fund's Class Y Shares highest
quarterly return was 14.13% (quarter ended September 30, 1997). Its lowest
quarterly return was (17.97)% (quarter ended September 30, 1998).

Average Annual Total Return
The table shows the Fund's Class Y Shares average annual total returns compared
to the Russell 2000 Small Stock Index (Russell 2000), a broad-based market
index.

<TABLE>
<CAPTION>
Calendar Period Class Y Russell 2000
<S> <C> <C>
1 Year (1.26)% (2.55)%
Life of Fund1 18.56% 14.73%
</TABLE>

WACHOVIA EMERGING MARKETS FUND

Goal
Seeks to produce long-term capital appreciation.

Strategy

The Fund pursues its investment objective by investing primarily in a portfolio
of securities of issuers located in countries that are generally considered to
be developing or emerging countries by the International Bank for Reconstruction
and Development (more commonly known as the World Bank) and the International
Finance Corporation, as well as countries that are classified by the United
Nations or otherwise regarded by their authorities as developing. The investment
adviser uses a value-oriented approach and selects companies in countries where
political and economic factors, including currency movements, are likely to
produce above average capital appreciation. Under normal market conditions, the
Fund intends to invest at least 65% of its holdings in securities of issuers
located emerging market countries. Although the Fund will focus its investment
on the common stocks of foreign companies located in emerging market countries,
the Fund may also invest in other types of securities, including debt
securities.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

Within the period shown in the Chart, the Fund's Class Y Shares highest
quarterly return was 18.76% (quarter ended December 31, 1998). Its lowest
quarterly return was (26.53)% (quarter ended September 30, 1998).

Average Annual Total Return

The table shows the Fund's Class Y Shares average annual total returns compared
to the International Finance Corporation Investable Index (Total Return Series)
(IFCI), a broad-based market index of foreign securities used to measure the
performance of certain emerging markets.

<TABLE>
<CAPTION>
Calendar Period Class Y IFCI
<S> <C> <C>
1 Year (24.62)% (22.01)%
Life of Fund1 (12.50)% (15.18)%
</TABLE>

WACHOVIA BALANCED FUND

Goal
Seeks to provide 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.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

Within the period shown in the Chart, the Fund's Class Y Shares highest
quarterly return was 12.91% (quarter ended December 31, 1998). Its lowest
quarterly return was (5.17)% (quarter ended September 30, 1998).

Average Annual Total Return

The table shows the Fund's Class Y Shares average annual total returns compared
to the S&P 500 Index (S&P 500) and the Lehman Aggregate Bond Index (LABI), each
a broad-based market index.

<TABLE>
<CAPTION>
Calendar Period Class Y S&P 500 LABI
<S> <C> <C> <C>
1 Year 17.60% 28.08% 8.09%
Life of Fund1 20.47% 34.09% 9.55%
</TABLE>

INCOME FUNDS

WACHOVIA FIXED INCOME FUND

Goal
Seeks a high level of total return.

Strategy

As a secondary investment objective, the Fund attempts to minimize volatility of
principal relative to the fixed income markets. Total return consists of income
and capital gains (both realized and unrealized). The Fund pursues its
investment objectives by investing primarily in a diversified portfolio of fixed
income securities that, at the time of purchase, are rated in the top four
investment categories by a nationally recognized statistical rating organization
(NRSRO) or, if unrated, are of comparable quality to securities with such
ratings. The Fund invests in corporate bonds, asset- and mortgage-backed
securities and U.S. government securities. The investment adviser changes the
Fund's weighting in these types of investments as it thinks appropriate. The
Fund attempts to add value by focusing on four primary areas: duration,
management, yield curve management, sector weighting and security selection.
Normally, the Fund will maintain an average dollar-weighted maturity of between
6 to 10 years. The Fund will invest, under normal circumstances, at least 65% of
the value of its holdings in fixed income securities.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

Within the period shown in the Chart, the Fund's Class Y Shares highest
quarterly return was 3.92% (quarter ended September 30, 1998). Its lowest
quarterly return was (1.01)% (quarter ended March 31, 1997).

Average Annual Total Return
The table shows the Fund's Class Y Shares average annual total returns compared
to the Lehman Aggregate Bond Index (LABI), a broad-based market index.

<TABLE>
<CAPTION>
Calendar Period Class Y LABI
<S> <C> <C>
1 Year 8.61% 8.09%
Life of Fund1 9.05% 9.55%
</TABLE>

WACHOVIA INTERMEDIATE FIXED INCOME FUND

Goal
Seeks current income consistent with preservation of capital.

Strategy

The Fund pursues it investment objective by investing primarily in a portfolio
of fixed income securities, that, at the time of purchase, are rated in the top
four investment categories by an NRSRO or, if unrated, are of comparable quality
to securities with such ratings. The investment adviser changes the Fund's
weighting in these types of investments as it thinks appropriate. The Fund
attempts to add value by focusing on four primary areas: duration, management,
yield curve management, sector weighting and security selection. Normally, the
Fund will maintain an average dollar-weighted maturity of between 3 to 10 years.
The Fund will invest, under normal circumstances, at least 65% of the value of
its holdings in fixed income securities with stated maturities or estimated
average lives of 10 years or less.

Total Return Bar Chart and Table

WACHOVIA SHORT-TERM FIXED INCOME FUND

Goal
Seeks to produce a high level of current income.

Strategy

The Fund pursues its investment objective by investing primarily in a portfolio
of short-term fixed income securities that, at the time of purchase, are rated
in the top four investment categories by an NRSRO or, if unrated, are of
comparable quality to securities with such ratings. Under normal market
circumstances, the Fund will invest at least 65% of its holdings in such
securities. The investment adviser changes the Fund's weighting in these types
of investments as it thinks appropriate and use fundamental macroeconomic,
credit and market analysis to select portfolio securities. The Fund will
maintain an average dollar-weighted maturity of between one to three years.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

Within the period shown in the Chart, the Fund's Class Y Shares highest
quarterly return was 3.29% (quarter ended September 30, 1998). Its lowest
quarterly return was 0.57% (quarter ended March 31, 1997).

Average Annual Total Return
The table shows the Fund's Class Y Shares average annual total returns compared
to the Merrill Lynch 1-3 Year U.S. Treasury Index (MLUST), a broad-based market
index.

<TABLE>
<CAPTION>
Calendar Period Class Y MLUST
<S> <C> <C>
1 Year 7.12% 7.00%
Life of Fund1 6.58% 7.00%
</TABLE>

MUNICIPAL FUNDS

WACHOVIA GEORGIA MUNICIPAL BOND FUND

Goal
Seeks to provide current income which is exempt from federal regular income tax
and the income taxes imposed by the State of Georgia.

Strategy

Total Return Bar Chart and Table

[Graph appears here-see appendix]

Within the period shown in the Chart, the Fund's Class Y Shares highest
quarterly return was 3.17% (quarter ended June 30, 1997). Its lowest quarterly
return was (0.66)% (quarter ended March 31, 1997).

Average Annual Total Return

The table shows the Fund's Class Y Shares average annual total returns compared
to the Lehman State General Obligation Bond Index (LSGOBI), a broad-based market
index comprised of all state general obligation debt issues.

<TABLE>
<CAPTION>
Calendar Period Class Y LSGOBI
<S> <C> <C>
1 Year 5.35% 6.48%
Life of Fund1 6.88% 7.71%
</TABLE>

WACHOVIA NORTH CAROLINA MUNICIPAL BOND FUND

Goal
Seeks to provide current income which is exempt from federal regular income tax
and the income tax imposed by the State of North Carolina.

Strategy

Total Return Bar Chart and Table

[Graph appears here-see appendix]

Within the period shown in the Chart, the Fund's Class Y Shares highest
quarterly return was 3.39% (quarter ended September 30, 1998). Its lowest
quarterly return was (0.51)% (quarter ended March 31, 1997).

Average Annual Total Return

<TABLE>
<CAPTION>
Calendar Period Class Y LSGOBI
<S> <C> <C>
1 Year 5.67% 6.48%
Life of Fund1 7.21% 7.71%
</TABLE>

WACHOVIA SOUTH CAROLINA MUNICIPAL BOND FUND

Goal
Seeks to provide current income which is exempt from federal regular income tax
and the South Carolina state income taxes.

Strategy

Total Return Bar Chart and Table

[Graph appears here-see appendix]

Within the period shown in the Chart, the Fund's Class Y Shares highest
quarterly return was 3.34% (quarter ended June 30, 1997). Its lowest quarterly
return was (0.31)% (quarter ended March 31, 1997).

Average Annual Total Return

<TABLE>
<CAPTION>
Calendar Period Class Y LSGOBI
<S> <C> <C>
1 Year 5.70% 6.48%
Life of Fund1 7.56% 7.51%
</TABLE>

1 The start of performance date for Class Y Shares was January 11, 1991. 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 rewards.

WACHOVIA VIRGINIA MUNICIPAL BOND FUND

Strategy

Total Return Bar Chart and Table

PRINCIPAL INVESTMENT RISKS
All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Funds. An investment in a 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 description of these
risks can be found in "What are the Risks of Investing in the Funds?" herein.

<TABLE>
<CAPTION>
Risks
of
Equity Investing Debt Emerging
Municipal
Market Securities for Growth Securities Markets
Securities Diversification
Fund Risks Risks & Value Risks Risks
Risks Risks
<S> <C> <C> <C> <C> <C>
<C> <C>
Equity Fund X X
X
Quantitative Equity Fund X X
X
Growth & Income Fund X X
X
Equity Index Fund X X
X
Special Values Fund X X
X
Emerging Markets Fund X X X
X
Balanced Fund X X X
X
Fixed Income Fund X
X
Intermediate Fixed Income Fund X
X
Short-Term Fixed Income Fund X
X
Georgia Municipal Bond Fund X X
X X
North Carolina Municipal Bond Fund X X
X X
South Carolina Municipal Bond Fund X X
X X
Virginia Municipal Bond Fund X X
X X
</TABLE>

What are the Funds' Fees and Expenses?

These tables describe the fees and expenses that you may pay when you buy, hold
and redeem shares of the Funds' Class Y Shares.

<TABLE>
<CAPTION>
Shareholder Fees Equity Quantitative Growth & Equity
Special Emerging Balanced
Fees Paid Directly From Your Investment Fund Equity Fund Income Fund Index Fund Values
Fund Markets Fund Fund
<S> <C> <C> <C> <C>
<C> <C> <C>
Maximum Sales Charge (Load) Imposed
on
Purchases (as a percentage
of
offering price) None None None None
None None None
Maximum Deferred Sales Charge
(Load)
(as a percentage of original
purchase
price or redemption
proceeds,
as applicable) None None None None
None None None
Maximum Sales Charge (Load) Imposed
on
Reinvested Dividends (and
other
Distributions) (as a percentage
of
offering price) None None None None
None None None
Redemption Fee (as a percentage of
amount
redeemed, if applicable) None None None None
None None None
Exchange Fee None None None None
None None None

Annual Fund Operating Expenses 1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)

Management Fee 0.70% 0.70% 0.70% 0.30%
0.80% 1.00% 0.70%
Distribution (12b-1) Fee None None None None
None None None
Shareholder Services Fee None None None None
None None None
Other Expenses 0.27% 0.24% 0.41% 0.15%
0.20% 0.44% 0.22%
Total Annual Class Y Shares
Operating Expenses (Before Waiver)1 0.97% 0.94% 1.11% 0.45%
1.00% 1.44% 0.92%
Waiver of Fund Expenses 0.07% 0.07% 0.25% 0.00%
0.00% 0.00% 0.16%
Total Actual Annual
Fund
Operating Expenses (After Waiver) 0.90% 0.87% 0.86% 0.45%
1.00% 1.44% 0.76%
</TABLE>
1 Pursuant to an agreement between the Adviser and the Trusts, the Adviser
agrees during the period from December 15, 1998 through January 31, 2000 to
waive its fees, and/or make reimbursements to the Funds, so that each Fund's
net operating expenses do not exceed, in the aggregate, the Fund's Total
Actual Annual Operating Expenses listed above. The Adviser agrees that this
obligation shall constitute a contractual commitment enforceable by the
Trusts and that the Adviser shall not assert any right to reimbursement of
amounts so waived or reimbursed.

North South
Fixed Intermediate Short-Term Georgia
Carolina Carolina Virginia
Shareholder Fees Income Fixed Income Fixed Income Municipal
Municipal Municipal Municipal
Fees Paid Directly From Your Investment Fund Fund Fund Bond Fund Bond
Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C>
<C> <C> <C>
Maximum Sales Charge (Load) Imposed
on
Purchases (as a percentage
of
offering price) None None None None
None None None
Maximum Deferred Sales Charge
(Load)
(as a percentage of original
purchase
price or redemption
proceeds,
as applicable) None None None None
None None None
Maximum Sales Charge (Load)
Imposed
on Reinvested Dividends (and
other
Distributions) (as a percentage
of
offering price) None None None None
None None None
Redemption Fee (as a percentage
of
amount redeemed, if applicable) None None None None
None None None
Exchange Fee None None None None
None None None

Annual Fund Operating Expenses1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
<S> <C> <C> <C> <C>
<C> <C> <C>
Management Fee 0.60% 0.60% 0.55% 0.75%
0.75% 0.75% 0.74%
Distribution (12b-1) Fee None None None None
None None None
Shareholder Services Fee None None None None
None None None
Other Expenses 0.23% 0.26% 0.27% 0.52%
0.54% 0.31% 0.23%
Total Annual Class Y
Shares
Operating Expenses
(Before
Waiver)1 0.83% 0.86% 0.82% 1.27%
1.29% 1.06% 0.97%
Waiver of Fund Expenses 0.11% 0.12% 0.19% 0.36%
0.44% 0.48% 0.29%
Total Actual Annual
Fund
Operating Expenses (After Waiver) 0.72% 0.74% 0.63% 0.91%
0.85% 0.58% 0.68%
</TABLE>
1 Pursuant to an agreement between the Adviser and the Trusts, the Adviser
agrees during the period from December 15, 1998 through January 31, 2000 to
waive its fees, and/or make reimbursements to the Funds, so that each Fund's
net operating expenses do not exceed, in the aggregate, the Fund's Total
Actual Annual Operating Expenses listed above. The Adviser agrees that this
obligation shall constitute a contractual commitment enforceable by the
Trusts and that the Adviser shall not assert any right to reimbursement of
amounts so waived or reimbursed.

EXAMPLE

The following Example is intended to help you compare the cost of investing in
each Fund's Class Y Shares with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in each Fund's Class Y Shares for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that each Fund's operating expenses are based upon its contractually imposed
expense limitation as shown above in the table. Although your actual costs may
be higher or lower, based on these assumptions your costs would be:

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Equity Fund $ 92 $287 $498
$1,108
Quantitative Equity Fund $ 89 $278 $482
$1,073
Growth & Income Fund $ 88 $274 $477
$1,061
Equity Index Fund $ 46 $144 $252 $
567
Special Values Fund $102 $318 $552
$1,225
Emerging Markets Fund $147 $456 $787
$1,724
Balanced Fund $ 78 $243 $422 $
942
Fixed Income Fund $ 74 $230 $401 $
894
Intermediate Fixed Income Fund $ 76 $237 $411 $
918
Short-Term Fixed Income Fund $ 64 $202 $351 $
786
Georgia Municipal Bond Fund $ 93 $290 $504
$1,120
North Carolina Municipal Bond Fund $ 87 $271 $471
$1,049
South Carolina Municipal Bond Fund $ 59 $186 $324 $
726
Virginia Municipal Bond Fund $ 69 $218 $379 $
847
</TABLE>

What are the Funds' Main Investments and Investment Techniques?

EQUITY SECURITIES

The Equity Funds invest 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 a Fund invests. Common Stocks

Preferred Stocks

Warrants

Warrants give a Fund the option to buy the issuer's stock or other equity
securities at a specified price. A Fund may buy the designated shares by paying
the exercise price before the warrant expires. Warrants may become worthless if
the price of the stock does not rise above the exercise price by the expiration
date. Rights are the similar to warrants, but are typically issued to existing
stockholders.

FIXED INCOME SECURITIES

MUNICIPAL SECURITIES

TAX EXEMPT SECURITIES

PORTFOLIO TURNOVER

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 than do 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.

CREDIT QUALITY AND INVESTMENT RATINGS

Securities rated BBB by Standard and Poor's or Baa by Moody's Investors
Service have speculative characteristics.

TEMPORARY DEFENSIVE INVESTMENTS

The Funds may temporarily depart from their principal investment strategies by
investing assets in cash, cash items, and shorter- term, higher quality debt
securities. The Funds may do this to minimize potential losses and maintain
liquidity to meet shareholder redemptions during adverse market conditions. This
may cause a Fund to forego greater investment returns for the safety of
principal.

S&P 500 INDEX

What are the Risks of Investing in the Funds?

MARKET RISK
The market value of securities fluctuate daily.

EQUITY SECURITIES RISKS

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 any of the Income
Fund's or Municipal 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 declines, the 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 Income Funds and Municipal Funds.

MUNICIPAL SECURITIES RISKS

ISSUER DIVERSIFICATION

PREPAYMENT RISK

The Income Funds are subject to prepayment risk. 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
Interest on a municipal security may be subject to regular federal income tax.
Since, any investment can be adversely affected by changes in tax laws, all of
the Funds are subject to this risk. For example, the value of stocks can by
affected by changes in capital gains tax rates.

LEVERAGING

FOREIGN SECURITIES RISKS

EMERGING MARKET SECURITIES RISKS

Investments in developing or emerging markets securities are subject to higher
risks than those in developed market countries because there is greater
uncertainty in less established markets and economies. These risks include the
possibility of expropriation, nationalization or confiscatory taxation, unstable
political, social or economic systems, smaller securities markets, lower trading
volume, and substantial rates of inflation.

ASSET-BACKED/MORTGAGE-BACKED SECURITIES RISKS

FUTURES AND OPTIONS RISKS

SECURITIES LENDING RISKS

YEAR 2000 READINESS

The Funds' service providers are making changes to their computer systems to
attempt to fix any Year 2000 problems. In addition, they are working to gather
information from third-party providers to determine their Year 2000 readiness.

What do Shares Cost?

You can purchase, redeem, or exchange Class Y Shares (Shares) 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 a Fund receives your transaction
request in proper form, it is processed at the next determined net asset value
(NAV).
NAV is determined at the end of regular trading (normally 4:00 p.m. Eastern
time) each day the NYSE is open. The value of Fund Shares is generally
determined based upon the market value of portfolio securities. However, the
Funds' Board may determine in good faith that another method of valuing
investments is necessary to appraise their fair market value. Securities held by
the Emerging Markets Fund may trade on foreign exchanges on days (such as
weekends) when the Fund does not calculate its NAV. As a result, the NAV of the
Fund's shares may change on days when you cannot purchase or sell the Fund's
shares.
The following table summarizes the minimum required investment amount required
for an investment in a Fund.

<TABLE>
<CAPTION>
Minimum Initial/
Subsequent Investment
Required
<S> <C>
The Wachovia Funds $ 250/$50
The Wachovia Municipal Funds $500/$100
</TABLE>

How are the Funds Sold?

This prospectus relates only to Class Y Shares of the Funds. Each share class
has different sales charges and other expenses, which affect their performance.
Call 1-800-994-4414 or contact your investment professional for more information
concerning the other classes.

The Fund's distributor, Federated Securities Corp., (Distributor) markets the
Shares described in this prospectus to certain accounts held by Wachovia Bank
and its affiliates in a fiduciary, advisory, agency, custodial, or similar
capacity. In connection with the sale of Shares the distributor may from time to
time offer certain items of nominal value to any shareholder or investor. The
Distributor is a subsidiary of Federated Investors, Inc. (Federated).

How to Purchase Shares

You may purchase Shares through an through the Trust Division of Wachovia Bank
in accordance with the procedures set forth in your account agreement. Payment
may be made by check, by wire of federal funds, or by debiting a customer's
account with Wachovia Bank.

Purchase orders must be received by 3:00 p.m. (Eastern time) in order to
receive that day's public offering price. Orders received after 3:00 p.m.
(Eastern time) will be purchased at the next determined public offering price.

Each Fund and the Distributor reserve the right to reject any request to
purchase Shares.

THROUGH AN EXCHANGE
You may purchase Shares through an exchange from the same Share class of another
Fund. You must meet the minimum initial investment requirement for purchasing
Shares.

SYSTEMATIC INVESTMENT PROGRAM

Once you have opened a Fund account, you may add to your investment on a
regular basis in amounts of at least $25. Under this program, funds may be
automatically withdrawn from your checking account and invested in Fund shares
at NAV next determined after an order is received by a Fund. You may apply for
participation in this program through Wachovia Bank or through the Distributor.

How to Exchange Shares

EXCHANGE PRIVILEGE
You may exchange Shares of a Wachovia Fund into Shares of the same class of
another Wachovia Fund at NAV. To do this, you must:
. meet any minimum initial investment requirements; and
. receive a prospectus for the Fund into which you wish to exchange.

Shareholders contemplating exchanges into The Wachovia Municipal Funds should
consult their tax advisers since the tax advantages of each Fund may vary.

By Telephone

You may exchange Shares by telephone by calling 1-800-994-4414.

Telephone exchange instructions must be received by 4:00 p.m. (Eastern time)
for Shares to be exchanged that day.

If you are not able to make your exchange by telephone, an exchange request
may be made in writing and sent by overnight mail to:

The Wachovia Funds
1099 Hingham Street
Rockland, MA 02370-3317

How to Redeem Shares

Each Fund redeems shares at its NAV next determined after the Fund receives the
redemption request in proper form. Shares may be redeemed by telephone or by
mail through the trust department of Wachovia Bank or directly from the Fund.

All redemption requests must be received before 3:00 p.m. (Eastern time) in
order for Shares to be redeemed at that day's NAV.

Shareholders who are trust customers of Wachovia Bank may contact their trust
officer by telephone or mail for assistance with redemptions. You may redeem
Shares by calling the Wachovia Funds Service Center for assistance at 1-800-994-
4414.

Your telephone instructions may be recorded. If a Fund does not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions.

SIGNATURE GUARANTEES
Signatures must be guaranteed if:
. your redemption is to be sent to an address other than the address of record;
. your redemption is to be sent to an address of record that was changed within
the last thirty days; or
. a redemption is payable to someone other than the shareholder(s) of record.

Your signature can be guaranteed by any federally insured financial institution
(such as a bank or credit union) or a broker/ dealer that is a domestic stock
exchange member, but not by a notary public.

REDEMPTION IN KIND

Although the Funds intend to pay Share redemptions in cash, they reserve the
right to pay the redemption price in whole or in part by a distribution of a
Fund's portfolio securities.

SYSTEMATIC WITHDRAWAL PROGRAM

SHARE CERTIFICATES

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

DIVIDENDS AND CAPITAL GAINS

<TABLE>
<CAPTION>
Dividends Declared
Fund and Paid
<S> <C>
Equity Fund
Quantitative Equity Fund
Growth & Income Fund quarterly
Equity Index Fund
Balanced Fund

Fixed Income Fund
Intermediate Fixed Income Fund monthly
Short-Term Fixed Income Fund

Emerging Markets Fund annually
Special Values Fund

The Wachovia Municipal Funds Declared daily/Paid monthly
</TABLE>

Dividends are declared and paid to shareholders invested in a Fund on the record
date.

In addition, each Fund pays any capital gains at least annually. Your
dividends and capital gains distributions will be automatically reinvested in
additional Shares unless you elect cash payments.

ACCOUNTS WITH LOW BALANCES

THE WACHOVIA FUNDS TAX INFORMATION

THE WACHOVIA MUNICIPAL FUNDS TAX INFORMATION

The Funds send you a timely statement of your account activity to assist you in
completing your federal, state and local tax returns. It is anticipated that
Fund distributions will be primarily dividends that are exempt from federal
income tax, although a portion of each Fund's dividends may not be exempt.
Whether or not dividends are exempt from federal income tax, they may be subject
to state and local taxes, although the each Fund's dividends will be exempt from
their respective state's personal income tax (i.e. Georgia, North Carolina,
South Carolina or Virginia) to the extent they are derived from interest on
obligations exempt from that state's personal income taxes. Capital gains and
non- exempt dividends are taxable whether paid in cash or reinvested in a Fund.
Redemptions and exchanges are taxable sales. Please consult your tax adviser
regarding your federal, state and local tax liability. Who Manages the
Funds? The Board of Trustees governs the Funds. The Board selects and
oversees the investment adviser for the Funds, 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 Bank has been managing trust assets for over 100 years, with over $33
billion in managed assets as of December 31, 1998.
Quantitative Equity Fund is sub-adviserd by Twin Capital Management, Inc.,
McMurray, Pennsylvania, which is paid by the investment adviser and not by the
Fund.

<TABLE>
<CAPTION>
Annual Investment Advisory
Fee paid to Investment
Adviser as a percentage of
Fund average daily net assets
<S> <C>
Equity Fund 0.70%
Quantitative Equity Fund 0.70%
Growth & Income Fund 0.70%
Equity Index Fund 0.30%
Special Values Fund 0.80%
Emerging Markets Fund 1.00%
Balanced Fund 0.70%
Fixed Income Fund 0.60%
Intermediate Fixed Income Fund 0.60%
Short-Term Fixed Income Fund 0.55%
Georgia Municipal Bond Fund 0.75%
North Carolina Municipal Bond Fund 0.75%
South Carolina Municipal Bond Fund 0.75%
Virginia Municipal Bond Fund 0.74%
</TABLE>

Pursuant to an agreement between the Adviser and the Trusts, the Adviser agrees
during the period from December 15, 1998 through January 31, 2000 to waive its
fees and/or make reimbursements to the Funds, so that each Fund's net operating
expenses do not exceed, in the aggregate, the Fund's Total Actual Operating
Expenses. The Adviser agrees that this obligation shall constitute a contractual
commitment enforceable by the Trusts and that the Adviser shall not assert any
right to reimbursement of amounts so waived or reimbursed.

PORTFOLIO MANAGERS

<TABLE>
<CAPTION>
Portfolio Manager Funds Managed Biography
<S> <C> <C>
Jerry D. Burton Quantitative Equity Fund Mr. Burton is a Chartered Financial Analyst and
a Vice President and
Portfolio Manager for Personal Financial
Services for the investment
adviser. In 1971, Mr. Burton joined South
Carolina National Bank, which
was acquired by Wachovia Bank in 1991. Mr.
Burton received a bachelors
degree from Clemson University and an MBA from
the College of William and
Mary.
- ------------------------------------------------------------------------------------------------------------------------------------
Daniel S. Earthman Balanced Fund Mr. Earthman is a Chartered Financial Analyst,
Portfolio Manager and a
Growth & Income Fund Senior Vice President of the investment
adviser. Prior to joining
Equity Fund Wachovia Bank in 1988, Mr. Earthman was a Vice
President and Investment
Manager with Richland Asset Management in
Nashville, and an Assistant Vice
President and Portfolio Manager with North
Carolina National Bank in
Charlotte. Mr. Earthman received a bachelors
degree in business from
Southern Methodist University and a MBA from
the University of North
Carolina at Chapel Hill.
- ------------------------------------------------------------------------------------------------------------------------------------
Samuel M. Gibbs, II Short-Term Income Fund Mr. Gibbs is a Senior Vice President and
Manager of Fixed Income
Fixed Income Fund Investments for the investment adviser. Mr.
Gibbs joined Wachovia Bank
Intermediate Fixed Income Fund in 1969 as a portfolio manager. He became a
bond trader and fixed income
portfolio manager in 1975 and assumed his
current position in 1977. Mr.
Gibbs is a graduate of Davidson College and has
an MBA from the University
of South Carolina.
- -----------------------------------------------------------------------------------------------------------------------------------
Roger L. Glenski Special Values Fund Mr. Glenski is a Certified Public Accountant,
Portfolio Manager and
Assistant Vice President of the investment
adviser. Mr. Glenski joined
Wachovia Bank in 1996, specializing in the
valuation of closely-held
businesses and small companies. Previously, Mr.
Glenski was a staff
accountant by the accounting firms of KPMG and
Deloitte & Touche LLP in
Chicago. Mr.Glenski received a bachelors degree
from the University of
Missouri-Kansas City and a MBA from the
University of Chicago.
- ------------------------------------------------------------------------------------------------------------------------------------
John F. Hageman Equity Fund John F. Hageman is a Chartered Financial
Analyst and a Senior Vice
Balanced Fund President and Institutional Portfolio Manager
for the investment adviser.
Growth & Income Fund Mr. Hageman is responsible for managing
employee benefit, foundation and
endowment portfolios. Prior to joining Wachovia
Bank in 1986, Mr. Hageman
was Vice President and head of Institutional
Investment Management at
Michigan National Investment Corporation from
1977 to 1986, and an account
executive with Merrill Lynch from 1975 to 1977.
Mr. Hageman received his
B.A. from Wabash College.
- ------------------------------------------------------------------------------------------------------------------------------------
Paige C. Henderson Emerging Markets Fund Ms. Henderson is a Chartered Financial Analyst
and a Vice President of the
investment adviser. Ms. Henderson joined
Wachovia Bank in 1991 as an
Equity Analyst. She has managed the Emerging
Markets Fund since 1996. Ms.
Henderson received a bachelors of science in
Business Administration and
an MBA from the University of North Carolina at
Chapel Hill. Ms.Henderson
is a Certified Public Accountant.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael W. Holt Fixed Income Fund Mr. Holt is a Chartered Financial Analyst and
Fixed Income Portfolio
Intermediate Fixed Income Fund Manager of the investment adviser. Mr. Holt
joined Wachovia Bank in 1991.
He is a graduate of the University of Tennessee
where he majored in
economics and received a MBA in Finance.
- ------------------------------------------------------------------------------------------------------------------------------------
Russell L. Kimbro, Jr. Equity Fund Balanced Fund Mr. Kimbro is a Chartered Financial Analyst and
Senior Vice President
Growth & Income Fund and Portfolio Manager for Personal Financial
Services for the investment
adviser. Mr. Kimbro joined Wachovia Bank in
1985. Mr. Kimbro is an
instructor of corporate finance an the
University of North Carolina at
Greensboro. He received his bachelors degree in
economics from Virginia
Polytechnical Institute and State University
and a MBA from the University
of North Carolina at Greensboro.
- ------------------------------------------------------------------------------------------------------------------------------------
F. Stanley King Equity Fund Balanced Fund Mr. King is a Chartered Financial Analyst and a
Senior Vice President of
Growth & Income Fund the investment adviser. Mr. King serves as
manager of institutional
portfolio management for the investment
adviser. Mr. King joined Wachovia
Bank in 1985 as a securities analyst and
assumed his current position in
1991. He has both his bachelors and masters of
science degrees from North
Carolina State University.
- ------------------------------------------------------------------------------------------------------------------------------------
George E. McCall Quantitative Equity Fund Mr. McCall is a Certified Financial Planner,
Portfolio Manager and Vice
President of the investment adviser. In 1981,
Mr. McCall joined South
Carolina National Bank, which was acquired by
Wachovia Bank in 1991. Mr.
McCall is a graduate of Presbyterian College
and received an MBA from the
University of South Carolina.
- ------------------------------------------------------------------------------------------------------------------------------------
Matthew J. McGuinness Equity Fund Balanced Fund Mr. McGuinness is a Chartered Financial Analyst
and Vice President and
Growth & Income Fund Portfolio Manager for Personal Financial
Services for the investment
adviser. Mr. McGuinness joined Wachovia Bank in
1991 in the
Estates/Closely-Held Unit. He received an MBA
from the University of North
Carolina at Chapel Hill.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael O. Mercer Equity Fund Balanced Fund Mr. Mercer is a Senior Vice President of
Wachovia and manages the
Growth & Income Fund Wachovia Equity Investment Fund and other large
institutional accounts.
Mr. Mercer joined Wachovia Bank in 1983 and is
a Chartered Financial
Analyst. Mr. Mercer is a graduate of Catawba
College and received an MBA
from Florida State University.

- ------------------------------------------------------------------------------------------------------------------------------------
Wayne F. Morgan Fixed Income Fund Intermediate Mr. Morgan is a Chartered Financial Analyst and
Senior Vice President of
Fixed Income Fund the investment adviser. Prior to joining
Wachovia Bank in June, 1997 as a
senior fixed income portfolio manager, Mr.
Morgan served as the Director
of Investments at the University of North
Carolina at Chapel Hill, where
he oversaw the management of the University's
endowment fund. Mr.Morgan
received both a bachelors degree and his MBA
from the University of North
Carolina at Chapel Hill.
- ------------------------------------------------------------------------------------------------------------------------------------
J. Joseph Muster The Wachovia Municipal Funds Mr. Muster is a Vice President and Portfolio
Manager of Money Market and
Municipal Investments in the Fixed Income
Section of the investment
adviser. Mr. Muster joined Wachovia Bank in
1992 and worked as a credit
analyst until January 1998 when he was promoted
to portfolio manager. Mr.
Muster is a graduate of the University of
Georgia and received his MBA
from Duke University.
- ------------------------------------------------------------------------------------------------------------------------------------
Harold (Rick) Nelson III Fixed Income Fund Intermediate Mr. Nelson III is a Senior Vice President and
fixed income portfolio
Fixed Income Fund manager of the investment adviser. Mr. Nelson
joined Wachovia Bank in 1985
as a fixed income portfolio manager. He
received his bachelors of science
degree in management from St. Francis College
and his MBA in Finance from
Mercer University.
- ------------------------------------------------------------------------------------------------------------------------------------
B. Scott Sadler Emerging Markets Fund Mr. Sadler is a Chartered Financial Analyst,
Portfolio Manager and Vice
President of the investment adviser. Mr. Sadler
joined Wachovia Bank in
1987. Mr. Sadler is a graduate of the
University of Virginia's McIntire
School of Commerce with a bachelors degree in
commerce.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael G. Sebesta Fixed Income Fund Mr. Sebesta is a Vice President and Fixed
Income Portfolio Manager for
Intermediate Fixed Income Fund the investment adviser. Mr. Sebesta joined
Wachovia Bank in 1989. Mr.
Sebesta has a bachelors degree in economics
from Wake Forest University.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael J. Tierney Emerging Markets Fund Mr. Tierney is an Executive Vice President of
Wachovia Bank and Chief
Special Values Fund Investment Officer and Portfolio Manager with
the investment adviser. Mr.
Tierney joined
Wachovia Bank in 1981.
Mr.Tierney is a graduate of the
University of Connecticut, and has more than 25
years of experience
managing equity and fixed income investments.
- ------------------------------------------------------------------------------------------------------------------------------------
Joseph H. Waterfill Balanced Fund Mr. Waterfill is a Senior Vice President and
Portfolio Manager of the
Equity Fund investment adviser. Mr.Waterfill joined
Wachovia Bank in 1976.
Quantitative Equity Fund Mr. Waterfill received his bachelors of science
degree from the
Growth & Income Fund U.S. Naval Academy and his MBA from Vanderbilt
University.

- ------------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Financial Information

FINANCIAL HIGHLIGHTS

The Wachovia Funds and The Wachovia Municipal Funds

Financial HighlightsClass Y Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report dated January 20, 1998 is included in the
Annual Report for the Fund, which is incorporated by reference. This table
should be read in conjunction with the Fund's Financial Statements and notes
thereto, which may be obtained free of charge from the Fund.

Further information about the performance of the Fund is contained in the
Fund's Annual Report dated November 30, 1998 which may be obtained free of
charge. <TABLE> <CAPTION>
Net Realized and Distributions
from
Unrealized Gain/ Net Realized
Gain on
Net Asset (Loss) on Investments, Distributions Investment
Transactions,
Value Net Futures Contracts, and Total from from Net Futures
Contracts
Period Ended beginning Investment Foreign Currency Invesment Investment and Foreign
Currency Total
November 30, of period Income Transactions Operations Income
Transactions Distributions
<S> <C> <C> <C> <C> <C>
<C> <C>
Wachovia Equity Fund
1996(a) $12.43 0.03 2.40 2.43 (0.05)
- -- (0.05)
1997 $14.81 0.17 2.43 2.50 (0.16)
(1.86) (2.02)
1998 $15.39 0.17 2.21 2.38 (0.17)
(1.68) (1.85)
Wachovia Quantitative Equity
Fund
1996(a) $13.09 0.04 2.60 2.64 (0.06)
- -- (0.06)
1997 $15.67 0.23 4.12 4.35 (0.23)
(0.79) (1.02)
1998 $19.00 0.23 3.06 3.29 (0.23)
(1.75) (1.98)
Wachovia Growth & Income
Fund
1998(c) $22.31 0.09 1.24 1.33 (0.09)
- -- (0.09)
Wachovia Equity Index Fund
1996(a) $13.37 0.09(d) 2.60 2.69 (0.08)
- -- (0.08)
1997 $15.98 0.29 3.86 4.15 (0.31)
(0.91) (1.22)
1998 $18.91 0.30 3.92 4.22 (0.29)
(0.40) (0.69)
Wachovia Special Values Fund
1996(a) $13.62 0.03 2.02 2.05 --
- -- --
1997 $15.67 0.16 4.53 4.69 (0.08)
(1.61) (1.69)
1998 $18.67 0.21 (0.84) (0.63) (0.15)
(1.71) (1.86)
Wachovia Emerging Markets Fund
1996(a) $11.92 0.01(d) (0.26) (0.25) --
- -- --
1997 $11.67 0.07 (0.50) (0.43) (0.11)
- -- (0.11)
1998 $11.13 0.13 (2.69) (2.56) (0.13)
- -- (0.13)
Wachovia Balanced Fund
1996(a) $11.68 0.08 1.63 1.71 (0.09)
- -- (0.09)
1997 $13.30 0.38 1.39 1.77 (0.37)
(1.44) (1.81)
1998 $13.26 0.42 1.37 1.79 (0.41)
(0.90) (1.31)
Wachovia Fixed Income Fund
1996(a) $ 9.45 0.17 0.40 0.57 (0.19)
- -- (0.19)
1997 $ 9.83 0.57 0.03 0.60 (0.58)
- -- (0.58)
1998 $ 9.85 0.56 0.29 0.85 (0.56)
- -- (0.56)
Wachovia Intermediate Fixed Income Fund
1998(c) $10.12 0.42 0.25 0.67 (0.41)
- -- (0.41)
Wachovia Short-Term Fixed Income Fund
1996(a) $ 9.67 0.11(d) 0.18 0.29 (0.17)
- -- (0.17)
1997 $ 9.79 0.56 (0.05) 0.51 (0.53)
- -- (0.53)
1998 $ 9.77 0.54 0.14 0.68 (0.53)
- -- (0.53)
Wachovia Georgia Municipal Bond Fund
1996(a) $10.71 0.17 0.29 0.46 (0.17)
- -- (0.17)
1997 $11.00 0.47 0.13 0.60 (0.47)
(0.20) (0.49)
1998 $11.11 0.45 0.27 0.72 (0.45)
+ (0.45)
Wachovia North Carolina Municipal Bond Fund
1996(a) $10.71 0.16 0.32 0.48 (0.16)
- -- (0.16)
1997 $11.03 0.46 0.13 0.59 (0.45)
(0.02) (0.47)
1998 $11.15 0.46 0.32 0.78 (0.46)
(0.01) (0.47)
Wachovia South Carolina Municipal Bond
Fund
1996(a) $10.73 0.20 0.32 0.52 (0.20)
- -- (0.20)
1997 $11.05 0.55 0.12 0.67 (0.55)
(0.05) (0.60)
1998 $11.12 0.54 0.24 0.78 (0.54)
+ (0.54)
Wachovia Virginia Municipal Bond Fund
1998(c) $10.34 0.32 0.15 0.47 (0.32)
- -- (0.32)
</TABLE>

* Computed on an annualized basis.
+ Less than $0.01 per share.
(a) Reflects operations for the period from July 22, 1996 (date of initial
public investment) to November 30, 1996.
(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(c) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.
(d) Per share information is based on average shares outstanding. (e) Reflects
operations for the period from March 29, 1998 (date of initial
public offering) to November 30, 1998.

The Wachovia Funds and The Wachovia Municipal Funds

Financial HighlightsClass Y Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD).
<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
NET ASSET NET
EXPENSE NET ASSETS, PORTFOLIO
PERIOD ENDED VALUE, END TOTAL INVESTMENT
WAIVER/ END OF PERIOD TURNOVER
NOVEMBER 30, OF PERIOD RETURN(B) EXPENSES INCOME
REIMBURSMENT(C) (000 OMITTED) RATE
<S> <C> <C> <C> <C>
<C> <C> <C>
WACHOVIA EQUITY
FUND
1996(A) $14.81 19.57% 0.90%* 0.91%*
0.19%* $129,205 65%
1997 $15.39 20.44% 0.90% 1.18%
0.07% $156,238 124%
1998 $15.92 17.69% 0.90% 1.13%
- -- $200,324 150%
WACHOVIA QUANTITATIVE EQUITY FUND
1996(A) $15.67 20.19% 0.87%* 1.19%*
0.11%* $152,571 44%
1997 $19.00 29.60% 0.87% 1.35%
0.08% $183,019 74%
1998 $20.31 19.38% 0.87% 1.21%
- -- $207,343 38%
WACHOVIA GROWTH & INCOME FUND
1998(E) $23.55 6.03% 0.86%* 0.90%*
0.08%* $206,176 24%
WACHOVIA EQUITY INDEX
FUND
1996(A) $15.98 20.14% 0.48%* 1.92%*
0.06%* $213,833 12%
1997 $18.91 27.91% 0.47% 1.72%
0.02% $248,030 4%
1998 $22.44 23.05% 0.45% 1.46%
- -- $291,708 29%
WACHOVIA SPECIAL VALUES
FUND
1996(A) $15.67 15.05% 1.15%* 1.76%*
0.24%* $ 58,697 38%
1997 $18.67 33.29% 1.11% 0.88%
0.02% $ 84,501 46%
1998 $16.18 (3.59%) 1.00% 1.26%
- -- $ 90,550 20%
WACHOVIA EMERGING MARKETS
FUND
1996(A) $11.67 0.00% 0.63%* 0.45%*
0.13%* $123,036 30%
1997 $11.13 (3.73%) 1.54% 0.54%
- -- $139,700 60%
1998 $ 8.44 (23.34%) 1.44% 1.04%
- -- $130,898 51%
WACHOVIA BALANCED FUND
1996(A) $13.30 14.69% 0.76%* 2.85%*
0.16%* $235,791 99%
1997 $13.26 15.37% 0.77% 3.02%
0.16% $250,083 143%
1998 $13.74 14.77% 0.76% 3.15%
0.09% $290,833 124%
WACHOVIA FIXED INCOME
FUND
1996(A) $ 9.83 6.12% 0.75%* 6.33%*
0.14%* $175,836 181%
1997 $ 9.85 6.38% 0.74% 5.91%
0.11% $185,398 174%
1998 $10.14 8.92% 0.72% 5.55%
0.05% $212,886 111%
WACHOVIA INTERMEDIATE FIXED INCOME FUND
1998(E) $10.38 7.11% 0.74%* 5.39%*
0.14%* $ 87,831 57%
WACHOVIA SHORT-TERM FIXED INCOME
FUND
1996(A) $ 9.79 3.00% 0.64%* 5.77%*
0.19%* $116,138 145%
1997 $ 9.77 5.33% 0.63% 5.63%
0.20% $ 91,063 215%
1998 $ 9.92 7.19% 0.63% 5.47%
0.10% $ 98,433 135%
WACHOVIA GEORGIA MUNICIPAL BOND
FUND
1996(A) $11.00 4.31% 0.89%* 4.84%*
1.57%* $ 6,803 14%
1997 $11.11 5.63% 0.92% 4.24%
1.06% $ 12,308 25%
1998 $11.38 6.62% 0.91% 3.96%
0.34% $ 17,030 14%
WACHOVIA NORTH CAROLINA MUNICIPAL BOND
FUND
1996(A) $11.03 4.55% 0.84%* 4.16%*
0.65%* $ 28,283 7%
1997 $11.15 5.57% 0.85% 4.16%
0.42% $ 44,104 17%
1998 $11.46 7.09% 0.85% 4.05%
0.16% $ 56,760 9%
WACHOVIA SOUTH CAROLINA MUNICIPAL BOND
FUND
1996(A) $11.05 4.86% 0.57%* 5.56%*
0.54%* $ 36,511 20%
1997 $11.12 6.23% 0.58% 5.01%
0.48% $ 43,881 12%
1998 $11.36 7.15% 0.58% 4.77%
0.36% $ 54,770 6%
WACHOVIA VIRGINIA MUNICIPAL BOND FUND
1998(E) $10.49 4.16% 0.68%* 4.62%*
0.33%* $ 99,154 15%
</TABLE>

The Wachovia Funds

The Wachovia Municipal Funds

CLASS Y SHARES
FEBRUARY 28, 1999

The following documents contain further details about the Funds and are
available upon request and without charge:

Shareholder Reports--The Funds publish annual and semi- annual reports to
shareholders which include information about the Funds' 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 investment professional or the Fund at 1-800-994-4414.

Addresses

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 Federated Shareholder Services Company
AGENT, AND PORTFOLIO RECORDKEEPER Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

COUNSEL TO THE WACHOVIA FUNDS AND Kirkpatrick & Lockhart LLP THE WACHOVIA
MUNICIPAL FUNDS 1800 Massachusetts Avenue, N.W.
Washington, DC 20036-1800

COUNSEL TO THE INDEPENDENT TRUSTEES Piper & Marbury L.L.P.
1200 Nineteenth Street, N.W.
Washington, DC 20036-2430

INDEPENDENT AUDITORS Ernst & Young LLP
One Oxford Centre
Pittsburgh, PA 15219

February 28, 1999
822-28 (2/99)
G01689-01-IS (2/99)

THE WACHOVIA FUNDS
Class A Shares, Class B Shares, Class Y Shares

<PAGE>

Wachovia Equity Fund
Wachovia Quantitative Equity Fund
Wachovia Growth & Income Fund
Wachovia Equity Index Fund
Wachovia Special Values Fund

Wachovia Emerging Markets Fund
Wachovia Balanced Fund
Wachovia Fixed Income Fund
Wachovia Intermediate Fixed Income Fund
Wachovia Short-Term Fixed Income Fund

<PAGE>

THE WACHOVIA MUNICIPAL FUNDS

Class A Shares and Class Y Shares

Wachovia Georgia Municipal Bond Fund

Wachovia North Carolina Municipal Bond Fund

Wachovia South Carolina Municipal Bond Fund

Wachovia Virginia Municipal Bond Fund

Statement of Additional Information
February 28, 1999

This Statement of Additional Information (SAI) is not a prospectus. Read
this SAI in conjunction with the prospectuses of The Wachovia Funds and The
Wachovia Municipal Funds, dated February 28, 1999.

This SAI incorporates by reference the Funds' Annual Report. Obtain the
prospectus or the Annual Report without charge by calling 1-800-994-4414.

Contents

How Are the Funds Organized?..................................1
Securities in Which the Funds Invest..........................1
What do Shares Cost?..........................................17
How Are the Funds Sold?.......................................18
How to Buy Shares.............................................18
How to Exchange Shares........................................19
How to Redeem Shares..........................................18
Account and Share Information.................................19
Tax Information...............................................20
Who Manages and Provides Services to the Funds................22
How do the Funds Measure Performance?.........................26
Financial Information.........................................32
Investment Ratings............................................33
Addresses.....................................................37

Federated Securities Corp., Distributor,
subsidiary of Federated Investors
3012917B (2/99)

<PAGE>

HOW ARE THE FUNDS ORGANIZED?

The Wachovia Funds and The Wachovia Municipal Funds (each a Trust and together
the Trusts) are open-end, management investment companies that established under
the laws of the Commonwealth of Massachusetts on November 19, 1991 and August
15, 1990. The Trusts may offer separate series of shares representing interests
in separate portfolios of securities. The Trusts changed their name from The
Biltmore Funds and The Biltmore Municipal Funds, respectively on July 31, 1997.
Each Board of Trustees (together, the Board) has established three classes of
shares of the Funds, known as Class A Shares, Class B Shares and Class Y Shares
(Shares). This SAI relates to all three classes of Shares.

- ----------------------------------------------------------- -------------------------------------------------------------
The Wachovia Funds currently offer the Shares The Wachovia Municipal Funds currently offer Shares
following professionally managed, diversified the following professionally managed,
portfolios: non-diversified portfolios:
- ----------------------------------------------------------- -------------------------------------------------------------
Wachovia Equity Fund A,B,Y Wachovia Georgia Municipal Bond Fund A,Y
(Equity Fund) (Georgia Municipal Bond Fund)
- ----------------------------------------------------------- -------------------------------------------------------------
- ----------------------------------------------------------- -------------------------------------------------------------
Wachovia Quantitative Equity Fund A,B,Y Wachovia North Carolina Municipal Bond Fund A,Y
(Quantitative Equity Fund) (North Carolina Municipal Bond Fund)
- ----------------------------------------------------------- -------------------------------------------------------------
- ----------------------------------------------------------- -------------------------------------------------------------
Wachovia Growth & Income Fund A,Y Wachovia South Carolina Municipal Bond Fund A,Y
(Growth & Income Fund) (South Carolina Municipal Bond Fund)
- ----------------------------------------------------------- -------------------------------------------------------------
- ----------------------------------------------------------- -------------------------------------------------------------
Wachovia Equity Index Fund A,Y Wachovia Virginia Municipal Bond Fund A,Y
(Equity Index Fund) (Virginia Municipal Bond Fund)
- ----------------------------------------------------------- -------------------------------------------------------------
- -----------------------------------------------------------
Wachovia Special Values Fund A,B,Y
(Special Values Fund)
- -----------------------------------------------------------
- -----------------------------------------------------------
Wachovia Emerging Markets Fund A,Y
(Emerging Markets Fund)
- -----------------------------------------------------------
- -----------------------------------------------------------
Wachovia Balanced Fund A,B,Y
(Balanced Fund)
- -----------------------------------------------------------
- -----------------------------------------------------------
Wachovia Fixed Income Fund A,B,Y
(Fixed Income Fund)
- -----------------------------------------------------------
- -----------------------------------------------------------
Wachovia Intermediate Fixed Income Fund A,Y
(Intermediate Fixed Income Fund
- -----------------------------------------------------------
- -----------------------------------------------------------
Wachovia Short-Term Income Fund A,Y
(Short-Term Income Fund)
- -----------------------------------------------------------

SECURITIES IN WHICH THE FUNDS INVEST
Following tables indicate which types of securities are a:
o P = Principal investment of a Fund; (shaded in chart)
o A = Acceptable (but not principal) investment of a Fund; or
o N = Not an acceptable investment of a Fund.
Municipal Funds
- -----------------------------------------------------------------------------------------------------------------------------
Securities Georgia Municipal North Carolina South Carolina Virginia Municipal
Bond Fund Municipal Bond Fund Municipal Bond Fund Bond Fund
- ---------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Bank Instruments A A A A
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Commercial Paper7 A A A A
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Demand Mater Notes A A A A
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Lending of Portfolio Securities A A A A
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Money Market Instruments A A A A
- ---------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Municipal Securities9 P P P P
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Repurchase Agreements A A A A
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Restricted and Illiquid Securities12 A A A A
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Securities of Other Investment Companies A A A A
--------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
U.S. Government Obligations A A A A
--------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Variable Rate Demand Notes A A A A
- ---------------------------------------------
--------------------------------------------------------------------------------
When-Issued Transactions A A A A
- -----------------------------------------------------------------------------------------------------------------------------

<PAGE>

Equity Funds
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Securities Equity Fund Quantitative Growth & Equity Special Emerging
Equity Fund Income Fund Index Fund Values Fund Markets
Fund8
- ---------------------------------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
American Depository Receipts1 A A A A A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Banking Instruments A A A A A A
- ---------------------------------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Commercial Paper7 A A A A A A
- --------------------------------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Common Stocks P P P P P A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- -------------
Convertible Securities A A A A A A
- --------------------------------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Corporate Debt Obligations6 A A A N A A
- --------------------------------------- ------------- ----------------- ------------ ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Emerging Market Securities N N N N N P
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ----------------- ------------ ------------- -------------
European Depository Receipts A A A N A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Foreign Currency Transactions4 N N N N N A
- --------------------------------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Foreign Securities1 A A A A A P
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Futures and Options Transactions A A A A A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ----------------- ------------ ------------- ------------- -------------
Global Depository Receipts A A A N A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
High-Yield Securities2 N N N N A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ----------------- ------------ ------------- ------------- -------------
Index Participation Contracts5 N N N A N N
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Lending of Portfolio Securities A A A A A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Master Limited Partnerships N N N N A N
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Money Market Instruments A A A A A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Mortgage-Backed Securities10 N N N N N A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Options on Financial Futures A A A N A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Over-the-Counter Options A A A N A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Preferred Stocks A A A A A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Repurchase Agreements A A A A A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Restricted and Illiquid Securities12 A A A A A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Reverse Repurchase Agreements A A A A A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Securities of Other Investment A A A A A A
Companies
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Stock Index Futures and Options3 A A A A A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
Temporary Investments A A A A A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
U.S. Government Obligations A A A A A A
- --------------------------------------- ----------------- ------------ ------------- -------------
- --------------------------------------- ------------- ------------- -------------
Variable Rate Demand Notes A A A A A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
- --------------------------------------- ------------- -------------
Warrants A A A A A A
-------------
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------
When-Issued Transactions A A A A A A
- --------------------------------------- ------------- ----------------- ------------ ------------- ------------- -------------

Income Funds
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Securities Balanced Fund Fixed Income Fund Intermediate Short-Term Fixed
Fixed Income Fund Income Fund
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
American Depository Receipts1 A N N N
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Asset-Backed Securities11 A A A A
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Bank Instruments A A A A
- ------------------------------------------------- ------------------ ------------------ -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Commercial Paper7 A A A A
- ------------------------------------------------- ------------------ ------------------ -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Common Stocks P N N N
- -------------------------------------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Convertible Securities A A A A
- -------------------------------------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Corporate Debt Obligations6 P P P P
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- -------------------------------------------------
Demand Master Notes A A A A
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- -------------------------------------------------
Foreign Securities1 A A A A
- -------------------------------------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Futures and Options Transactions A A A A
- -------------------------------------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Futures on Foreign Government Debt Obligations A A A A
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- -------------------------------------------------
Preferred Stocks A N N N
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Repurchase Agreements A A A A
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------

<PAGE>

- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Securities Balanced Fund Fixed Income Fund Intermediate Short-Term Fixed
Fixed Income Fund Income Fund
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Restricted and Illiquid Securities12 A A A A
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Reverse Repurchase Agreements A A A A
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Securities of Other Investment Companies A A A A
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Stock Index Futures and Options3 A N N N
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Stripped Mortgage-Backed Securities A A A A
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Temporary Investments A A A A
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
U.S. Government Obligations A A A A
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Variable Rate Demand Notes A A A A
- ------------------------------------------------- -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
Warrants A A A A
- ------------------------------------------------- -------------------
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
When-Issued Transactions A A A A
- ------------------------------------------------- ------------------ ------------------ ------------------ -------------------
</TABLE>

1. Each of the Equity Fund, Quantitative Equity Fund, Special Values Fund, and
Balanced Fund 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.
Securities are rated Baa or lower by Moody's or BBB or lower by S&P. Each Fund
will not invest more than 35% of its total assets in such securities. 3. Not
more than 20% of each Funds assets will be invested. The Funds will not purchase
options to the extent that more than 5% of the value of a Fund's total assets
would be invested in premiums on open put option positions or margin deposits on
open positions as applicable. 4. No more than 30% of the Fund's assets will be
committed to forward contracts at any time. This restriction does not include
forward contracts entered into to settle securities transactions. 5. The value
of these contracts together with the value of the Fund's investment in stock
index futures contracts, options and options on futures contracts will not
exceed 20% of the Fund's total assets. 6. Rated A or better by Moody's or S&P or
of comparable quality as determined by the investment adviser. Each of the
Balanced Fund, Fixed Income Fund, Intermediate Fixed Income Fund and Short-Term
Index Fund 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.
7. Rated Prime-1 by Moody's or A-1 by S&P or of comparable quality as determined
by the investment adviser. 8. The fixed income and equity securities in which
the Fund invests will be rated B or better by Moody's or S&P at the time of
purchase. 9. State Municipal Securities are subject to one or more of the
following quality standards: rated A or better by Moody's or S&P; up to 5% of
total assets rated Baa by Moody's or BBB by S&P; insured by a municipal bond
insurance company rated AAA by S&P or Aaa by Moody's; secured by an irrevocable
escrow of direct obligations of the U.S. government; or of comparable quality as
determined by the investment adviser. 10. Collateralized Mortgage Obligations
must be rated AAA or better or of comparable quality as determined by the
investment adviser. Fixed Income Fund, Intermediate Fixed Income Fund and
Short-Term Income Fund each may invest up to 5% of its assets in CMOs rated Baa
or better by Moody's or Baa or better by S&P. 11. Rated A or better by Moody's
or S&P. Each Fund (except the Balanced Fund) may also invest up to 5% of its
assets in securities rated Baa or better by Moody's or BBB by S&P. 12. Each Fund
will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, non-negotiable time
deposits, over-the-counter options, and repurchase agreements providing for
settlement in more than seven days after notice, to 15% of its net assets.

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.

<PAGE>

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.

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 market 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 borrowings from 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 know 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.

Collateralized Mortgage Obligations (CMOs)
CMOs, including interests in real estate mortgage investment conduits
(REMICs), allocate payments and prepayments from an underlying pass-through
certificate among holders of different classes of mortgage backed
securities. This creates different prepayment and market risks for each CMO
class. For example, in a sequential pay CMO, one class of CMOs receives all
principal payments and prepayments. The next class of CMOs receives all
principal payments after the first class is paid off. This process repeats
for each sequential class of CMO. As a result, each class of sequential pay
CMOs reduces the prepayment risks of subsequent classes.

More sophisticated CMOs include planned amortization classes (PACs) and
targeted amortization classes (TACs). PACs and TACs are issued with
companion classes. PACs and TACs receive principal payments and prepayments
at a specified rate. The companion classes receive principal payments and
prepayments in excess of the specified rate. In addition, PACs will receive
the companion classes' share of principal payments, if necessary, to cover
a shortfall in the prepayment rate. This helps PACs and TACs to control
prepayment risks by increasing the risks to their companion classes.

CMOs may allocate interest payments to one class (Interest Only or IOs) and
principal payments to another class (Principal Only or POs). POs increase
in value when prepayment rates increase. In contrast, IOs decrease in value
when prepayments increase, because the underlying mortgages generate less
interest payments. However, IOs tend to increase in value when interest
rates rise (and prepayments decrease), making IOs a useful hedge against
market risks.

Another variant allocates interest payments between two classes of CMOs.
One class (Floaters) receives a share of interest payments based upon a
market index such as LIBOR. The other class (Inverse Floaters) receives any
remaining interest payments from the underlying mortgages. Floater classes
receive more interest (and Inverse Floater classes receive correspondingly
less interest) as interest rates rise. This shifts prepayment and market
risks from the Floater to the Inverse Floater class, reducing the price
volatility of the Floater class and increasing the price volatility of the
Inverse Floater class.

CMOs must allocate all payments received from the underlying mortgages to
some class. To capture any unallocated payments, CMOs generally have an
accrual (Z) class. Z classes do not receive any payments from the
underlying mortgages until all other CMO classes have been paid off. Once
this happens, holders of Z class CMOs receive all payments and prepayments.
Similarly, REMICs have residual interests that receive any mortgage
payments not allocated to another REMIC class.

The degree of increased or decreased prepayment risks depends upon the
structure of the CMOs. IOs, POs, and Inverse Floaters are among the most
volatile investment grade fixed income securities currently traded in the
United States. However, the actual returns on any type of mortgage backed
security depend upon the performance of the underlying pool of mortgages,
which no one can predict and will vary among pools.

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 may also resemble some types of CMOs, such as Floaters, Inverse
Floaters, IOs and POs.

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 market and credit risks of a
zero coupon security.

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. Treasury
STRIPs, IOs and POs are the most common forms of stripped zero coupon
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.

General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its charter
or state law.

Special Revenue Bonds
Special revenue bonds are payable solely from specific revenues received by
the issuer such as specific taxes, assessments, tolls, or fees. Bondholders
may not collect from the municipality's general taxes or revenues. For
example, a municipality may issue bonds to build a toll road, and pledge
the tolls to repay the bonds. Therefore, any shortfall in the tolls
normally would result in a default on the bonds.

Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The municipality
would lend the proceeds from its bonds to the company using the
factory, and the company would agree to make loan payments sufficient
to repay the bonds. The bonds would be payable solely from the
company's loan payments, not from any other revenues of the
municipality. Therefore, any default on the loan normally would result
in a default on the bonds.

The interest on many types of private activity bonds is subject to the
federal alternative minimum tax (AMT).

Tax Increment Financing Bonds
Tax increment financing (TIF) bonds are payable from increases in taxes or
other revenues attributable to projects financed by the bonds. For example,
a municipality may issue TIF bonds to redevelop a commercial area. The TIF
bonds would be payable solely from any increase in sales taxes collected
from merchants in the area. The bonds could default if merchants' sales,
and related tax collections, failed to increase as anticipated.

Municipal Notes
Municipal notes are short-term tax exempt securities. Many municipalities
issue such notes to fund their current operations before collecting taxes
or other municipal revenues. Municipalities may also issue notes to fund
capital projects prior to issuing long-term bonds. The issuers typically
repay the notes at the end of their fiscal year, either with taxes, other
revenues or proceeds from newly issued notes or bonds.

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. The 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.

Municipal Leases
Municipalities frequently enter into leases for equipment or facilities. In
order to comply with state public financing laws, these leases are
typically subject to annual appropriation. In other words, a municipality
may end a lease, without penalty, by failing to include the lease payments
in its annual budget. However, upon such an event, the lessor may repossess
and resell the equipment or facility.

The Fund typically invests in securities supported by pools of municipal
leases. The most common type of lease backed securities are certificates of
participation (COPs). However, the Fund may also invest directly in
individual leases.

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 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, the 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 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.

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, except the Wachovia Municipal Funds may engage in one or more of
the following:

Buy put options on their portfolio securities in anticipation of a decrease
in the value of the underlying asset or buy put options on financial futures
contracts to protect portfolio securities .

Write call options on securities either held in its portfolio or which it
has the right to obtain without payment of further consideration or for
which it has segregated cash in the amount of any additional consideration
in order 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.

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 market 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.

When Issued Transactions
When issued 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, when issued transactions create market risks for the
Fund. When issued 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 market risks because the underlying mortgages may be less
favorable than anticipated by the Fund.

Dollar Rolls
Dollar rolls are transactions where a Fund sells mortgage-backed securities
with a commitment to buy similar, but not identical, mortgage-backed
securities on a future date at a lower price. Normally, one or both
securities involved are TBA mortgage backed securities. Dollar rolls are
subject to market risks and credit risks.

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 market risks and credit 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.

<PAGE>

A substantial part of a Fund's portfolio may be comprised of securities
issued or credit enhanced by companies in similar businesses, by issuers
located in the same state, or with other similar characteristics. As a
result, the Fund will be more susceptible to any economic, business,
political, or other developments which generally affect these issuers.

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 larger, well capitalized companies.

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 Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable that those of the United States.
Foreign financial markets may also have fewer investor protections.
Securities in foreign markets may also be subject to taxation policies that
reduce returns for U.S. investors.

o Due to these risk factors, foreign securities may be more volatile and less
liquid than similar securities traded in the U.S.

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.

Bond Market Risks

o Prices of fixed income securities rise and fall in response to interest
rate changes for similar securities. Generally, when interest rates rise,
prices of fixed income securities fall.

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 Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate
mortgages when mortgage rates fall. This results in the prepayment of
mortgage backed securities with higher interest rates. Conversely,
prepayments due to refinancings decrease when mortgage rates increase. This
extends the life of mortgage backed securities with lower interest rates.
As a result, increases in prepayments of high interest rate mortgage backed
securities, or decreases in prepayments of lower interest rate mortgage
backed securities, may reduce their yield and price. This relationship
between interest rates and mortgage prepayments makes the price of mortgage
backed securities more volatile than most other types of fixed income
securities with comparable credit risks.

Risks Associated with Noninvestment Grade Securities o Securities rated below
investment grade, 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.

Tax Risks

o In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest
received and distributed by the Fund to shareholders to be taxable.

o Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall.

Investing in the S&P 500 Index-Equity Index Fund
The Equity Index Fund is managed passively, in the sense that the traditional
management functions of economic, financial and market analysis are limited to
the extend that the Fund seeks to duplicate the composition of the S&P 500
Index. Furthermore, a company's adverse financial circumstance will not require
its elimination from the Fund's portfolio, unless the company's stock is removed
from the Index by S&P. The Fund is managed by utilizing a computer program that
identifies which stocks should be purchased or sold in order to approximate, as
much as possible, the investment return of the securities that comprise the
index. The Fund will select a stock for purchase into its investment portfolio
based on the stock's inclusion and weighting in the Index, starting with the
heaviest-weighted stock. Thus, the proportion of Fund assets invested in any one
stock comprising the Index may not be identical to the percentage the particular
stock represents in the Index.

On occasion, so as to respond to changes in the Index's composition, as well as
corporate mergers, tender offers, and other circumstances, additional
adjustments will be made in the Fund's portfolio. However, it is anticipated
that these adjustments will occur infrequently, and the costs will be minimized.
As a result, portfolio turnover is expected to be below that encountered in
other investment company portfolios. Therefore, the accompanying costs,
including accounting costs, brokerage fees, custodial expenses, and transfer
taxes, are expected to be relatively low. While the cash flows into and out of
the Fund will impact the Fund's portfolio turnover rate and the Fund's ability
to duplicate the composition of the Index and approximate its performance,
investment adjustments will be made, as practicably as possible, to account for
these circumstances.

Since the Fund will seek to duplicate the Index's stock composition precisely,
it is anticipated that the Fund's performance will approximate the performance
of the Index. Factors such as the size of the Fund's portfolio, the size and
timing of cash flows into and out of the Fund, changes in the securities markets
and the Index itself, and the normal costs of a mutual fund will account for the
difference between the performances of the Fund and the Index.

Investment Limitations

Selling Short and Buying On Margin
The Equity Fund, Quantitative Equity Fund, Growth & Income Fund, Equity
Index Fund, Special Values Fund, Emerging Markets Fund, and Balanced
Fund will not sell any securities short or purchase any securities on
margin, other than in connection with buying stock index futures
contracts, put options on stock index futures, put options on financial
futures and portfolio securities, and writing covered call options, but
may obtain such short-term credits as are necessary for the clearance
of purchases and sales of portfolio securities.

The Short-Term Fixed Income Fund will not sell any securities short or
purchase any securities on margin, other than in connection with put
options on financial futures, put options on portfolio securities, and
writing covered call options, but may obtain such short-term credits as
may be necessary for clearance of purchases and sales of securities.

The Fixed Income Fund, Intermediate Fixed Income Fund, Georgia
Municipal Bond Fund, North Carolina Municipal Bond Fund, South Carolina
Municipal Bond Fund, and Virginia Municipal Bond Fund will not sell any
securities short or purchase any securities on margin but may obtain
such short-term credits as may be necessary for clearance of purchases
and sales of 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 Equity Index Fund,
Balanced Fund, Fixed Income Fund, Intermediate Fixed Income Fund and
Short-Term Fixed Income Fund, as permitted by its investment objective
and policies..

The Funds (except for the Growth & Income Fund, the Intermediate Fixed
Income Fund and the Virginia Municipal Bond Fund) 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. A Fund will not purchase
any securities while borrowings in excess of 5% of the value of its
total assets are outstanding.

Pledging Assets
The Equity Fund, Growth & Income Fund, Quantitative Equity Fund, and
Special Values Fund, Equity Index Fund, Balanced Fund, Fixed Income
Fund, Intermediate Fixed Income Fund and Short-term Fixed Income Fund
will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, the Fund may mortgage, pledge, or
hypothecate assets to secure such borrowings having a market value not
exceeding the lesser of the dollar amounts borrowed or 15% of the value
of total assets at the time of the borrowing. For purposes of this
limitation, the following are not deemed to be pledges: margin deposits
for the purchase and sale of futures contracts and related options, and
segregation or collateral arrangements made in connection with options
activities or the purchase of securities on a when-issued basis.

The Emerging Markets Fund will not mortgage, pledge, or hypothecate any
assets except to secure permitted borrowings. For purposes of this
limitation, the following will not be deemed to be pledges of the
Fund's assets: (a) the deposit of assets in escrow in connection with
the writing of covered put or call options and the purchase of
securities on a when-issued basis; and (b) collateral arrangements with
respect to (i) the purchase and sale of stock options (and options on
stock indices) and (ii) initial or variation margin for futures
contracts.

The Georgia Municipal Bond Fund, North Carolina Municipal Bond Fund,
South Carolina Municipal Bond Fund, and Virginia Municipal Bond Fund
will not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, South Carolina Municipal Bond
Fund may mortgage, pledge, or hypothecate assets having a market value
not exceeding 10% of the value of its total assets at the time of the
pledge.

Investing in Real Estate
The Funds (except the Georgia Municipal Bond Fund, North Carolina
Municipal Bond Fund, South Carolina Municipal Bond Fund, and Virginia
Municipal Bond Fund) 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.

The Georgia Municipal Bond Fund, North Carolina Municipal Bond Fund,
South Carolina Municipal Bond Fund, and Virginia Municipal Bond Fund
will not buy or sell real estate, although a Fund may invest in
municipal bonds 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 the
Wachovia 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, the Funds (except Georgia Municipal Bond Fund, North Carolina
Municipal Bond Fund, South Carolina Municipal Bond Fund, and Virginia
Municipal Bond 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 each 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 Wachovia 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.

The Wachovia Municipal Funds will not purchase securities if, as a
result of such purchase, 25% or more of the value of its total assets
would be invested in industrial development bonds or other securities,
the interest upon which is paid from revenues of similar type projects.
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 government of the
United States or its agencies, or instrumentalities and repurchase
agreements collateralized by such U.S. government securities.

Lending Cash or Securities
The Equity Fund, Growth & Income Fund and Special Values Fund, Balanced
Fund, Fixed Income Fund, Intermediate Fixed Income Fund and Short-Term
Fixed Income Fund will not lend any of their assets except portfolio
securities, the market value of which do not exceed one-third of the
value of a Fund's total assets.

The Quantitative Equity Fund and Emerging Markets Fund will not lend
any of their assets except portfolio securities.

This shall not prevent the above 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 Equity Index Fund will not lend any of its assets except portfolio
securities, the market value of which does not exceed one-third of the
value of the Fund's total assets. This shall not prevent the purchase
or holding of corporate or government bonds, debentures, notes,
certificates of indebtedness or other debt securities of an issuer,
repurchase agreements, or engaging in other transactions where
permitted by the Fund's investment objective, policies and limitations.

The Georgia Municipal Bond Fund, North Carolina Municipal Bond Fund,
and Virginia Municipal Bond Fund will not lend any assets except
portfolio securities The South Carolina Municipal Bond Fund may not
lend any assets except portfolio securities up to one-third of the
value of its total assets. The Funds may, however, acquire publicly or
non-publicly issued municipal bonds or temporary investments or enter
into repurchase agreements in accordance with each Fund's investment
objective, policies, limitations and the Trust's Declaration of Trust.

Investing in Restricted Securities
The South Carolina Municipal Bond Fund will not invest more than 10% of
the value of its net assets in securities subject to restrictions on resale
under the Securities Act of 1933.

Dealing in Puts and Calls
The South Carolina Municipal Bond Fund will not buy or sell puts,
calls, straddles, spreads, or any combination of these.

The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.

Investing in Securities of Other Investment Companies The 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.

However, the Equity Index Fund may invest in Standard & Poor's
Depository Receipts (SPDRs), which represent interests in the portfolio
of securities held by a unit investment trust, a type of investment
company. SPDRs trade like shares of common stock on the American Stock
Exchange and are intended to provide investment results that generally
correspond to the price and yield performance of the S&P 500 Index. The
Fund's purchase of SPDRs are subject to the 3%, 5% and 10% limitations
described above and secondary market purchases and sales are subject to
ordinary brokerage commissions.

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 (except Georgia Municipal Bond Fund, North Carolina Municipal
Bond Fund, South Carolina Municipal Bond Fund, and Virginia Municipal
Bond Fund) 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.

The Georgia Municipal Bond Fund, North Carolina Municipal Bond Fund,
South Carolina Municipal Bond Fund, and Virginia Municipal Bond Fund
will not buy or sell puts, calls, straddles, spreads, or any
combination of these.

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."

<PAGE>

The Funds did not borrow money in excess of 5% of the value of their total
assets during the last fiscal year and has no present intent to do so in the
coming fiscal year.

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.

WHAT DO SHARES COST?

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.

Reducing or Eliminating the Front-End Sales Charge
You can reduce or eliminate the applicable front-end sales charge, as follows.

Quantity Discounts. Larger purchases of the same Share class reduce the sales
charge you pay. You can combine purchases of Shares made on the same day by you,
your spouse, and your children under age 21. In addition, purchases made at one
time by a trustee or fiduciary for a single trust estate or a single fiduciary
account can be combined.

Accumulated Purchases. If you make an additional purchase of Shares, you
can count previous Share purchases still invested in the Fund in calculating the
applicable sales charge on the additional purchase.

Concurrent Purchases. You can combine concurrent purchases of the
corresponding Share class of two Funds in calculating the applicable sales
charge.

Letter of Intent. You can sign a letter of intent committing to purchase a
certain amount of the same or corresponding class of Shares within a 13 month
period in order to combine such purchases in calculating the applicable sales
charge. The Fund's custodian will hold Shares in escrow equal to the maximum
applicable sales charge. If you complete your commitment, the escrowed Shares
will be released to your account. If you do not complete your commitment within
13 months, the custodian will redeem an appropriate number of escrowed Shares to
pay for the applicable sales charge.

Reinvestment Privilege. You may reinvest, within 90 days, your Share
redemption proceeds at the next determined NAV, without any sales charge. This
sales charge elimination is offered because a sales charge was previously
assessed.

Reducing or Eliminating the Contingent Deferred Sales Charge These reductions or
eliminations are offered because no sales commissions have been advanced to the
selling financial intermediary, the shareholder has already paid a Contingent
Deferred Sales Charge (CDSC), or nominal sales efforts are associated with the
original purchase of Shares.

Upon notification to the Distributor or the Fund's transfer agent, no CDSC will
be imposed on redemptions:

following the death or disability, as defined in Section 72(m)(7) of
the Internal Revenue Code of 1986, of the last surviving shareholder;
representing minimum required distributions from an Individual
Retirement Account or other retirement plan to a shareholder who has
attained the age of 70-1/2; which are involuntary redemptions of
shareholder accounts that do not comply with the minimum balance
requirements; representing up to 10% of the value of Class B Shares
subject to a Systematic Withdrawal Program; of Shares that represent a
reinvestment within 90 days of a previous redemption that was assessed
a CDSC; of Shares held by the Trustees, employees, and sales
representatives of the Fund, the investment adviser, the Distributor
and their affiliates; employees of any financial intermediary that
sells
Shares pursuant to a sales agreement with the Distributor; and the
immediate family members of the foregoing persons; and
of Shares originally purchased through a bank trust department, a
registered investment adviser or retirement plans where the third party
administrator has entered into certain arrangements with the Distributor or
its affiliates, or any other financial intermediary, to the extent that no
payments were advanced for purchases made through such entities.

HOW ARE THE FUNDS SOLD?

Under the Distributor's Contract with the Fund, the Distributor
(Federated Securities Corp.) offers Shares on a continuous,
best-efforts basis.

Front-End Sales Charge Reallowances
The Distributor receives a front-end sales charge on certain Share sales. The
Distributor generally pays up to 90% (and as much as 100%) of this charge to
investment professional for sales and/or administrative services. Any payments
to investment professional in excess of 90% of the front-end sales charge are
considered supplemental payments. The Distributor retains any portion not paid
to a financial intermediary.

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 Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. Also, the
Fund's 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.

Federated Investors and its subsidiaries may benefit from arrangements
where the Rule 12b-1 Plan fees related to Class B Shares may be paid
to third-parties who have advanced commissions to investment
professional.

HOW TO BUY SHARES

Purchases at Net Asset Value
Class A Shares of a Fund may be purchased at NAV, without an initial sales
charge, by investment advisers registered under the Investment Adviser's act of
1940, purchasing on behalf of their clients, by Wachovia Bank, or affiliates for
funds which are held in fiduciary, advisory, agency, custodial, or similar
capacity, and for which Wachovia Bank, or an affiliate or a third party will
provide shareholder services for a fee paid by one of the Funds, and by
trustees, officers, directors and retired directors, advisory board members,
employees and spouses and children under the age of 21 of such persons, and any
trusts, or individual retirement accounts operated for such persons.

<PAGE>

Through A Retirement Program
Class A Shares may be purchased at NAV by participants in qualified retirement
plans for which Wachovia Bank, or an affiliate, had previously, but no longer,
serves in an administrative or fiduciary capacity. Purchases made by or through
a Qualified Retirement Plan (Retirement Plan) that has in excess of an aggregate
investment of $500,000 in certain Delaware Group Funds and any portfolios of The
Wachovia Funds and purchases made by companies participating in a Retirement
Plan that has at least 100 employees will be made at NAV, without the imposition
of the sales charge. Purchases made by any Retirement Plan that has an aggregate
investment of over $500,000 in the Wachovia Funds may also purchase at NAV.

Class Y Shares are also offered to participants in qualified retirement plans
that offer a Wachovia Fund as an investment option through a program known as
"Institutional Solutions" marketed by Delaware Investment and Retirement
Services, Inc.

Exchanging Securities For Shares
You may contact the Distributor to request a purchase of Shares in an exchange
for securities you own. The Funds reserve the right to determine whether to
accept your securities and the minimum market value to accept. Each Fund will
value your securities in the same manner as it values its assets. This exchange
is treated as a sale of your securities for federal tax purposes.

Subaccounting Services
Investment professionals are encouraged to open single master accounts. However,
certain investment professionals 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. Investment professionals 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 they provide that may be related to the ownership
of Shares. This information should, therefore, be read together with any
agreement between the customer and the financial intermediary with regard to the
services provided, the fees charged for those services, and any restrictions and
limitations imposed.

Conversion to Federal Funds
It is each Fund's policy to be as fully invested as possible so that maximum
interest may be earned. To this end, all payments from shareholders must be in
federal funds or be converted into federal funds. Wachovia Bank acts as the
shareholders' agent in depositing checks and converting them to federal funds.

HOW TO EXCHANGE SHARES

Qualified Retirement Plan Participants
Participants in a Delaware/Wachovia Qualified Retirement Plan are permitted to:

exchange all or part of their Class A Shares of other eligible Delaware
Funds, as well as Eligible Wachovia Funds at NAV; and exchange all or
part of their Eligible Wachovia Fund shares into Class A Shares of the
Eligible Delaware Funds, at NAV.

However, a participant in any Retirement Plan that has an aggregate investment
of $1 million or less in the Eligible Funds who exchanges into an Eligible Fund
from the Money Fund must pay the applicable front-end sales charge at the time
of the exchange (unless the Money Fund shares were acquired in an exchange from
an Eligible Fund subject to a front-end sales charge or by reinvestment of
dividends).

HOW TO REDEEM SHARES

Redemption In Kind
Although the Funds intend to pay Share redemptions in cash, it reserves 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 Fund'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
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 a
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 each Trust's
outstanding shares of all series entitled to vote.

As of February 5, 1999, the following shareholders owned of record,
beneficially, or both, 5% or more of outstanding Shares of the Funds. Unless
otherwise noted, the address of the shareholder is 301 North Main Street,
Winston-Salem, NC 27101.

- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Shareholder Name Fund Share Percentage
Address Class Owned
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Bank, N.A. Equity Fund A 15.56%
Quantitative Equity Fund A 9.20%
Equity Index Fund A 39.22%
Balanced Fund A 10.70%
Fixed Income Fund A 39.52%
Short-Term Fixed Income Fund A 59.05%
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Bank, N.A. Equity Fund Y 25.11%
Trustee for the Wachovia RSPSP Plan Equity Index Fund Y 47.39%
Fixed Income Fund Y 21.78
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Bank of North Carolina Equity Fund Y 7.53%
P.O. Box 3099-Mail Code 32213
Winston-Salem, NC 27150
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Bank of Georgia for the benefit of Fieldale Farms Equity Fund Y 5.27%
Corp. EMP Retirement Savings Plan
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Bank of North Carolina Retirement Income Plan of Quantitative Equity Fund Y 60.45%
Wachovia Growth & Income Fund A 35.81%
Special Values Fund Y 25.50%
Emerging Markets Fund Y 10.62%
Equity Index Fund Y 14.34%
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Bull & Co. Growth & Income Fund Y 98.00%
Intermediate Fixed Income Fund Y 96.47%
Virginia Municipal Bond Fund Y 93.69%
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Bank of North Carolina Trustee for Kate B. Reynolds Special Values Fund Y 22.50%
Charitable Trust Emerging Markets Fund Y 19.63

- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Custodian for Spartan Mills Employees 401k Plan and Trust Emerging Markets Fund A 10.13%
Balanced Fund A 5.76%
Fixed Income Fund A 10.57%

- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Bank of South Carolina for Mayfair Mills Profit Balanced Fund Y 7.82%
Sharing Plan

- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Securities Inc. Fixed Income Fund B 38.37%
Fixed Income Fund A 5.58%
Georgia Municipal Bond Fund A 6.90%

- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Bank of North Carolina fiscal agent with Wachovia Fixed Income Fund Y 28.09%
Foundation, Inc. Short-Term Fixed Income Fund Y 11.62%

- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Bank, of North Carolina for Charlotte Pipe and Short-Term Fixed Income Fund Y 16.19%
Foundry Pension Trust

- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Bank, of North Carolina for VB Hook & Company Profit Short-Term Fixed Income Fund Y 15.10%
Sharing Plan

- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Bank, N.A. and G. Gray Jr. Trustees for Bernard Gray Georgia Municipal Bond Fund Y 8.87%

- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Bank of Georgia Trustee for Carlton C. McCamy Georgia Municipal Bond Fund Y 8.43%

- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
Wachovia Bank of Georgia as Agent for Evelyn T. Carter Georgia Municipal Bond Fund Y 5.33%
- ---------------------------------------------------------------- ----------------------------------- --------- ----------------
</TABLE>

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.

Foreign Investments
If the Fund purchases foreign securities, their 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 the 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.

The Wachovia Municipal Funds Tax Information
Shareholders of The Wachovia Municipal Funds are not required to pay federal
regular income tax on any dividends received from these Funds that represent net
interest on tax-exempt municipal bonds ("exempt-interest dividends"). However,
dividends representing net interest income earned on some municipal bonds may be
included in calculating the federal alternative minimum tax.

<PAGE>

The alternative minimum tax, equal to up to 28% of alternative minimum taxable
income for individuals and 20% for corporations, applies when it exceeds the
regular tax for the taxable year. Alternative minimum taxable income is equal to
the regular taxable income of the taxpayer increased by certain "tax preference"
items not included in regular taxable income and increased or reduced by certain
alternative minimum tax adjustments.

Interest on certain "private activity" bonds issued after August 7, 1986, is a
tax preference item for both individuals and corporations. Unlike traditional
governmental purpose municipal bonds, which finance roads, schools, libraries,
prisons, and other public facilities, private activity bonds provide benefits to
private parties. A Fund may purchase all types of municipal bonds, including
private activity bonds. If a Fund purchases any such bonds, a portion of its
dividends may be treated as a tax preference item.

In addition, in the case of a corporate shareholder, exempt-interest dividends
may become subject to the 20% corporate alternative minimum tax because the
dividends are included in a corporation's "adjusted current earnings." The
corporate alternative minimum tax treats 75% of the excess of the taxpayer's
"adjusted current earnings" over the taxpayer's preadjustment alternative
minimum taxable income as an alternative minimum tax adjustment. "Adjusted
current earnings" is based upon the concept of a corporation's "earnings and
profits." Since "earnings and profits" generally includes the full amount of any
Fund dividend (including exempt-interest dividends), and preadjustment
alternative minimum taxable income does not include exempt-interest dividend to
municipal bonds which are not private activity bonds, 75% of the difference will
be included in the calculation of the corporation's alternative minimum tax.

Shareholders should consult with their tax advisers to determine whether they
are subject to the alternative minimum tax and, if so, the tax treatment of
dividends paid by a Fund.

Dividends of a Fund representing net interest income earned on some taxable
temporary investments and any realized net short-term gains are taxed as
ordinary income. Distributions representing net long-term capital gains realized
by a Fund, if any, will be taxable to its shareholders as long-term capital
gains regardless of the length of time the shareholders have held their shares.

These tax consequences apply whether dividends are received in cash or as
additional shares. Information on the tax status of dividends and other
distributions is provided annually.

Georgia And North Carolina Taxes
Under existing Georgia and North Carolina laws, shareholders of the Georgia
Municipal Bond Fund and North Carolina Municipal Bond Fund will not be subject
to Georgia or North Carolina income taxes, respectively, on Fund dividends to
the extent that such dividends represent exempt-interest dividends as defined in
the Code, which are directly attributable to (i) interest on obligations issued
by or on behalf of the States of Georgia or North Carolina, respectively, or
their respective political subdivisions; or (ii) interest on obligations of the
United States or any other issuer whose obligations are exempt from state income
taxes under federal law.

To the extent that Fund dividends are attributable to other sources, such
dividends will be subject to the relevant state's income taxes.

South Carolina Taxes
Under current South Carolina law, shareholders of the South Carolina Municipal
Bond Fund who are subject to South Carolina individual or corporate income taxes
will not be subject to such taxes on Fund dividends to the extent that such
dividends qualify as either (1) exempt-interest dividends under the Code, which
are derived from interest on obligations of the state of South Carolina or any
of its political subdivisions; (2) dividends derived from interest on certain
obligations of the United States; and (3) dividends derived from interest on
obligations of any agency or instrumentality of the United States that is
prohibited by federal law from being taxed by a state or any political
subdivision of a state. To the extent that Fund dividends are attributable to
other sources, such dividends will be subject to South Carolina taxes.

Virginia Taxes
Distributions by the Virginia Municipal Bond Fund to a shareholder will not be
subject to the Virginia income tax to the extent that the distributions are
attributable to income received by the Fund as interest from Virginia Municipal
Securities. Additionally, distributions by the Virginia Municipal Bond Fund to a
shareholder will not be subject to the Virginia income tax to the extent that
the distributions are attributable to interest income from United States
obligations exempted from state taxation by the United States Constitution,
treaties, and statutes. These Virginia income tax exemptions will be available
only if the Fund complies with the requirement that at least 50% of the Fund's
assets consist of obligations the interest on which is exempt from federal
income tax at the close of each taxable quarter.

Other State And Local Taxes
Income from The Wachovia Municipal Funds is not necessarily free from state
income taxes in states other than Georgia, North Carolina, or South Carolina, or
the Commonwealth of Virginia, respectively, or from personal property taxes.
State laws differ on this issue, and shareholders are urged to consult their own
tax advisers regarding the status of their accounts under state and local tax
laws.

WHO MANAGES AND PROVIDES SERVICES TO THE FUNDS?

Boards Of Trustees
The Boards are responsible for managing the Trusts' business affairs and for
exercising all the Trusts' powers except those reserved for the shareholders.
Information about each Board member is provided below and includes the following
data: name, address, birthdate, present position(s) held with the Trusts,
principal occupations for the past five years, total compensation received as a
Trustee from the Trusts for their most recent fiscal year. The Wachovia Funds
are comprised of fourteen Funds and The Wachovia Municipal Funds are comprised
of four funds, together they form the Fund Complex.

As of February 1, 1999, the Funds' Boards and Officers as a group owned
less than 1% of the Funds' outstanding Class A, B and Y Shares. An asterisk (*)
denotes a Trustee who is deemed to be an interested person as defined in the
Investment Company Act of 1940.

<PAGE>

- ---------------------------------- ---------------------------------------------------------------------- -------------------
Name Occupations for past 5 Years Aggregate
Birthdate Compensation from
Address Fund Complex
Position with Trusts
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
James A. Hanley Retired; Vice President and Treasurer, Abbott Laboratories (health $26,400
August 13, 1931 care products) (until 1992).
4272 Sanctuary Way
Bonita Springs, FL
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Samuel E. Hudgins Hudgins Consulting, LLC (independent consultant); President, $26,400
March 4, 1929 Percival Hudgins & Company, LLC (investment bankers/financial
715 Whitemere Court, N.W. consultants) (until September 1997); Director, Atlantic American
Atlanta, GA Corporation (insurance holding company).
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
J. Berkely Ingram, Jr. Real estate investor and partner; formerly, Vice Chairman, $24,000
April 17, 1924 Massachusetts Mutual Life Insurance Company.
114-L Reynolda Village
Winston-Salem, NC
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
D. Dean Kaylor Retired; Executive Vice President and Chief Financial Officer, NBD $24,000
June 29, 1930 Bank, N.A. and NBD Bancorp, Inc. (bank and bank holding company)
2835 Greenbriar (until 1990).
Harbor Springs, MI
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Alvin J. Schexnider, Ph.D. Chancellor, Winston-Salem State University $12,000
May 26, 1945
5005 Marble Arch Road
Winston-Salem, NC 27104
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Charles S. Way, Jr.* PresidentChairman and CEO, The Beach Company and its various $24,000
December 18, 1937 affiliated companies and partnerships.
211 King Street
Suite 300
Charleston, SC
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------

<PAGE>

- ---------------------------------- ---------------------------------------------------------------------- -------------------
John W. McGonigle President and Chief Executive Officer, Federated Investors $0
October 26, 1938 Management Company; Executive Vice President, Secretary, General
Federated Investors Tower Counsel, and Trustee, Federated Investors; Trustee, Federated
Pittsburgh, PA Advisers, Federated Management, Federated Research, and Federated
President and Treasurer Services Company; and Director, Federated Securities Corp.
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Charles L. Davis, Jr. Vice President, Federated Services Company. $0
March 23, 1960
Federated Investors Tower
Pittsburgh, PA
Vice President and Assistant
Treasurer
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Peter J. Germain Senior Vice President and Director of Proprietary Funds Services, $0
September 3, 1959 Federated Services Company; formerly, Senior Corporate Counsel,
Federated Investors Tower Federated Services Company.
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 Trusts, 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
Trusts.

Sub Adviser. The Quantitative Equity Fund is sub-advised by Twin Capital
Management, Inc., McMurray, Pennsylvania. Pursuant to the terms of an investment
sub-advisory agreement between the investment adviser and Twin Capital
Management, Inc. (Twin Capital or the Sub-Adviser), Twin Capital furnishes
certain investment advisory services to the investment adviser, including
investment research, quantitative analysis, statistical and other factual
information, and recommendations, based on Twin Capital's analysis, and assists
the investment adviser in identifying securities for potential purchase and/or
sale on behalf of the Fund's portfolio. For the services provided and the
expenses incurred by the Sub-Adviser, Twin Capital is entitled to receive an
annual fee of $55,000 payable by the investment adviser in quarterly
installments. Twin Capital may elect to waive some or all of its fee. In no
event shall the Fund be responsible for any fees due to the Sub-Adviser for its
services to the investment adviser. Twin Capital provides investment counsel to
both individuals and institutions, including banks, thrift institutions and
pension and profit-sharing plans. As of December 31, 1998, Twin Capital
furnished services, substantially similar to the services to the investment
adviser, to other accounts with assets in excess of $1 billion. The Sub-Adviser
is controlled by Geoffrey Gerber, its President.

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 Fund 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 Fund'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 Investors 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 Fund are made independently from those of other
accounts managed by the investment adviser. When the 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 Fund, it is possible that this procedure could adversely impact the price
paid or received and/or the position obtained or disposed of by the Fund.

For the fiscal year ended November 30, 1998, the Funds' adviser directed
brokerage transactions to certain brokers due to research services they
provided. The total amount of these transactions was $1,459,473,866 for which
the Funds paid $2,127,834 in brokerage commissions.

Administrator
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services Company
provides these at the following annual rate of the average aggregate daily net
assets of the Funds in the Trusts (excluding Wachovia Prime Cash Management
Fund) 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 Trusts
pursuant to the Custodian Agreement, the Trusts pay the Custodian an annual fee
based upon the average daily net assets of the Funds and which is payable
monthly. The Custodian will also charge transaction fees and out-of-pocket
expenses.

Transfer Agent 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
Ernst & Young LLP is the independent auditors for the Funds.

Shareholder Services
The Fund 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.

<PAGE>

Fees Paid By the Funds for Services
- ------------------------- -------------------------------------- -------------------------------- --------------------------------
Fund Advisory Fee Paid/ Brokerage Commissions Paid Administrative Fee Paid
Advisory Fee Waived
-------------------------------- --------------------------------
-------------------------------------- -------------------------------- --------------------------------
For the fiscal year ended For the fiscal year ended For the fiscal year ended
November 30, November 30, November 30,
-------------------------------------- -------------------------------- --------------------------------
---------------------------------------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996 1998 1997 1996
- -------------------------
---------------------------------------------------------------------------------------------------------
Equity Fund $1,619,632 $1,230,414 $1,003,098 $304,185 $197,705 $252,493 $222,320 $147,147 $124,288
$0 $119,625 $107,888
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Quantitative Equity Fund $1,910,495 $1,345,445 $984,868 $229,054 $136,576 $165,434 $257,215 $160,933 $121,949
$4,564 $146,406 $100,131
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Growth & Income Fund(a) $1,519,361 N/A N/A $232,217 N/A N/A $199,855 N/A N/A
$26,405
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Equity Index Fund $1,068,950 $808,170 $616,302 $18,157 $12,595 $15,333 $336,704 $225,519 $178,161
$0 $61,816 $88,233
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Special Values Fund $1,184,902 $766,650 $324,764 $202,171 $206,032 $155,248 $139,710 $80,170 $35,122
$0 $15,052 $76,655
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Emerging Markets Fund $1,525,827 $1,604,745 $1,006,829 $831,106 $846,113 $538,172 $144,378 $134,379 $87,231
$3,334 $0 $1,057
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Balanced Fund $2,727,915 $1,986,263 $1,588,214 $310,944 $238,931 $269,729 $364,455 $237,616 $196,750
$368,451 $446,571 $352,189
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Fixed Income Fund $1,314,978 $1,123,245 $1,047,666 $0 $0 $0 $206,835 $156,900 $151,450
$113,808 $205,339 $177,507
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Intermediate Fixed $381,349 N/A N/A $0 N/A N/A $58,542 N/A N/A
Income Fund(a) $43,716
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Short-Term Fixed Income $$572,413 $632,994 $649,181 $0 $0 $0 $98,371 $96,093 $102,429
Fund $106,855 $224,696 $211,508
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Georgia Municipal Bond $$159,236 $113,578 $84,212 $0 $0 $0 $20,037 $12,683 $9,732
Fund $71,319 $113,578 $78,762
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
North Carolina $$456,438 $365,397 $210,288 $0 $0 $0 $57,431 $40,794 $24,266
Municipal Bond Fund $99,381 $208,414 $176,041
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
South Carolina $$868,899 $767,628 $743,153 $0 $0 $0 $108,509 $85,740 $86,019
Municipal Bond Fund $421,145 489,271 $500,413
- ----------------------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Virginia Municipal Bond $535,046 N/A N/A $0 N/A N/A $66,597 N/A N/A
Fund(a) $177,141
- ----------------------------------------------------------------------------------------------------------------------------------
- ------------------------------------------------- ----------------------------------------------------

- ------------------------------------------------- ----------------------------------------------------
</TABLE>

<PAGE>

Funds For the fiscal year ended November 30, 1998
----------------------------------------------------
---------------- -----------------------------------
12b-1 Fee Shareholder Services Fee
---------------- -----------------------------------
---------------- ----------------- -----------------
Class B Shares Class A Shares Class B Shares
- ------------------------------------------------- ---------------- ----------------- -----------------
- ------------------------------------------------- ---------------- ----------------- -----------------
Equity Fund $35,043 $119,232 $11,681
- ------------------------------------------------- ---------------- ----------------- -----------------
- ------------------------------------------------- ---------------- ----------------- -----------------
Quantitative Equity Fund $99,494 $147,227 $33,165
- ------------------------------------------------- ---------------- ----------------- -----------------
- ------------------------------------------------- ---------------- ----------------- -----------------
Growth & Income Fund(a) N/A $180,103 N/A
- ------------------------------------------------- ---------------- ----------------- -----------------
- ------------------------------------------------- ---------------- ----------------- -----------------
Equity Index Fund N/A $210,577 N/A
- ------------------------------------------------- ---------------- ----------------- -----------------
- ------------------------------------------------- ---------------- ----------------- -----------------
Special Values Fund N/A $147,629 N/A
- ------------------------------------------------- ---------------- ----------------- -----------------
- ------------------------------------------------- ---------------- ----------------- -----------------
Emerging Markets Fund N/A $22,255 N/A
- ------------------------------------------------- ---------------- ----------------- -----------------
- ------------------------------------------------- ---------------- ----------------- -----------------
Balanced Fund $74,564 $211,238 $24,855
- ------------------------------------------------- ---------------- ----------------- -----------------
- ------------------------------------------------- ---------------- ----------------- -----------------
Fixed Income Fund $2,607 $43,784 $869
- ------------------------------------------------- ---------------- ----------------- -----------------
- ------------------------------------------------- ---------------- ----------------- -----------------
Intermediate Fixed Income Fund(a) N/A $7,091 N/A
- ------------------------------------------------- ---------------- ----------------- -----------------
- ------------------------------------------------- ---------------- ----------------- -----------------
Short-Term Fixed Income Fund N/A $24,810 N/A
- ------------------------------------------------- ---------------- ----------------- -----------------
- ------------------------------------------------- ---------------- ----------------- -----------------
Georgia Municipal Bond Fund N/A $16,789 N/A
- ------------------------------------------------- ---------------- ----------------- -----------------
- ------------------------------------------------- ---------------- ----------------- -----------------
North Carolina Municipal Bond Fund N/A $25,947 N/A
- ------------------------------------------------- ---------------- ----------------- -----------------
- ------------------------------------------------- ---------------- ----------------- ------------------
South Carolina Municipal Bond Fund N/A $164,454 N/A
- ------------------------------------------------- ---------------- ----------------- ------------------
- ------------------------------------------------- ---------------- ----------------- ------------------
Virginia Municipal Bond Fund(a) N/A $12,835 N/A
- ------------------------------------------------- ---------------- ----------------- ------------------
</TABLE>

(a) Figures for the period from March 27, 1998 to November 30, 1998.

Fees are allocated among Classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable Class of Shares. Class Y Shares do not incur 12b-1
fees or shareholder services 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 tax- equivalent
yield of Shares is calculated similarly to the yield, but is adjusted to reflect
the taxable yield that Shares would have had to earn to equal the actual yield,
assuming a specific tax rate. The yield and tax-equivalent yield do 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 Information for Predecessor Mutual Funds
The Growth & Income Fund, Intermediate Fixed Income Fund and Virginia Municipal
Bond Fund (Successor Funds) are the successors to portfolios of the MarketWatch
Funds, which were previously managed by the investment adviser. On March 27,
1998, the assets and liabilities of the respective MarketWatch Funds were
transferred to the Successor Funds in exchange for each Fund's shares,
respectively. The investment adviser has represented that each Successor Fund's
investment objective, policies and limitations are in all material respects
equivalent to those of the respective MarketWatch Fund.

Quoted performance data for the Successor Funds includes past performance of the
MarketWatch Funds and is not necessarily indicative of the Successor Funds'
future performance. The MarketWatch Funds did not offer separate classes of
shares and were subject to different expenses, and therefore, performance may
vary.

<PAGE>

- --------------------------- ------------------------------------------------------- ------------------------------------------------
Fund Average Annual Total Return Yield
for the following periods ended November 30, 1998 for the 30-day period ended November 30, 1998
------------------------------------------------------- ------------------------------------------------
------------------ ----------------- ------------------ --------------- ---------------- ---------------
Class A Shares Class B Shares Class Y Shares Class A Shares Class B Shares Class Y Shares
One Year One Year One Year
Five Year Five Year Five Years
Since Inception Since Inception Since Inception
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
Equity Fund 12.02% 11.52% 17.69% 0.80% 0.15% 1.07%
17.57% N/A N/A
16.38%(a) 22.96%(g) 25.06%(g)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
Quantitative Equity Fund 13.60% 13.15% 19.38% 0.71% 0.05% 0.98%
N/A N/A N/A
21.14%(b) 27.93%(g) 30.08%(g)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
Growth & Income Fund 15.34% N/A N/A 0.58% N/A 0.85%
20.28% N/A
17.80%(c) 6.03%(h)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
Equity Index Fund 17.21% N/A 23.05% 1.20% N/A 1.49%
21.10% N/A
19.95%(a) 31.01%(g)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
Special Values Fund (8.20)% N/A (3.59)% 0.62% N/A 0.90%
16.17% N/A
14.89%(a) 18.03%(g)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
Emerging Markets Fund (26.88)% N/A (23.34)% N/A N/A N/A
N/A N/A
(4.82)%(d) (12.84)%(g)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
Balanced Fund 9.25% 8.56% 14.77% 1.81% 1.17% 2.14%
13.41% N/A N/A
12.93%(a) 17.21%(g) 19.38%(g)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
Fixed Income Fund 3.80% 2.97% 8.92% 4.75% 4.38% 5.23%
5.44% N/A N/A
5.43%(a) 6.97%(g) 9.16%(g)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
Intermediate Fixed Income 4.48% N/A N/A 4.13% N/A 4.62%
Fund 5.08% N/A
5.24%(c) 7.11%(h)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
Short-Term Fixed Income 4.26% N/A 7.19% 4.30% N/A 4.67%
Fund 4.93% N/A
4.71%(a) 6.61%(g)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
Georgia Municipal Bond 1.60% N/A 6.62% 3.21% N/A 3.61%
Fund N/A N/A
6.48%(d) 7.07%(g)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
North Carolina Municipal 1.97% N/A 7.09% 3.51% N/A 3.93%
Bond Fund N/A N/A
6.75%(d) 7.34%(g)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
South Carolina Municipal 2.11% N/A 7.15% 3.75% N/A 4.00%
Bond Fund 4.99% N/A
6.75%(e) 7.79%(g)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
Virginia Municipal Bond 2.01% N/A N/A 3.57% N/A 3.99%
Fund 3.82% N/A
4.28%(f) 4.61%(h)
- --------------------------- ------------------ ----------------- ------------------ --------------- ---------------- ---------------
</TABLE>

(a) May 10, 1993; (b) March 28, 1994; (c) January 29, 1993; (d) December 26,
1994; (e) January 11, 1991; (f) February 1, 1993; (g) July 22, 1996; (h)
March 29, 1998

<PAGE>

Tax Equivalency Tables-The Wachovia Municipal Funds Set forth below are sample
tax-equivalency tables that may be used in advertising and sales literature. The
tables are for illustrative purposes only and is not representative of past or
future performance of a Fund. The interest earned by the municipal securities
owned by a Fund generally remains free from federal regular income tax and is
often free from state and local taxes as well. However, some of a Fund's income
may be subject to the federal alternative minimum tax and state and/or local
taxes.

Taxable Yield Equivalent for 1999 - STATE OF GEORGIA

Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%

Combined Federal and State: 21.000% 34.000% 37.000% 42.000% 45.600%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,050 $43,051-104,050 $104,051-158,550 $158,551-283,150 Over 283,150
Single Return $1-25,750 $25,751-62,450 $62,451-130,250 $130,251-283,150 Over 283,150
Tax Exempt Yield: Taxable Yield Equivalent:
1.50% 1.90% 2.27% 2.38% 2.59% 2.76%
2.00% 2.53% 3.03% 3.17% 3.45% 3.68%
2.50% 3.16% 3.79% 3.97% 4.31% 4.60%
3.00% 3.80% 4.55% 4.76% 5.17% 5.51%
3.50% 4.43% 5.30% 5.56% 6.03% 6.43%
4.00% 5.06% 6.06% 6.35% 6.90% 7.35%
4.50% 5.70% 6.82% 7.14% 7.76% 8.27%
5.00% 6.33% 7.58% 7.94% 8.62% 9.19%
5.50% 6.96% 8.33% 8.73% 9.48% 10.11%
6.00% 7.59% 9.09% 9.52% 10.34% 11.03%
6.50% 8.23% 9.85% 10.32% 11.21% 11.95%
7.00% 8.86% 10.61% 11.11% 12.07% 12.87%
</TABLE>

Note: The maximum marginal tax rate for each bracket was used in calculating the
taxable yield equivalent. Furthermore, additional state and local taxes paid on
comparable taxable investments were not used to increase federal deductions.

Taxable Yield Equivalent for 1999 - STATE OF NORTH CAROLINA

Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%

Combined Federal and State 22.00% 35.75% 38.75% 43.75% 47.35%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,050 $43,051-104,050 $104,051-158,880 $158,881-283,150 Over 283,150
Single Return $1-25,750 $25,751-62,450 $62,451-130,250 $130,251-283,150 Over 283,150
Tax Exempt Yield: Taxable Yield Equivalent:
1.50% 1.92% 2.33% 2.45% 2.67% 2.85%
2.00% 2.56% 3.11% 3.27% 3.56% 3.80%
2.50% 3.21% 3.89% 4.08% 4.44% 4.75%
3.00% 3.85% 4.67% 4.90% 5.33% 5.70%
3.50% 4.49% 5.45% 5.71% 6.22% 6.65%
4.00% 5.13% 6.23% 6.53% 7.11% 7.60%
4.50% 5.77% 7.00% 7.35% 8.00% 8.55%
5.00% 6.41% 7.78% 8.16% 8.89% 9.50%
5.50% 7.05% 8.56% 8.98% 9.78% 10.45%
6.00% 7.69% 9.34% 9.80% 10.67% 11.40%
Note: The maximum marginal tax rate for each bracket was used in calculating
the taxable yield equivalent. Furthermore, additional state and local taxes
paid on comparable taxable investments were not used
to increase federal deductions.

<PAGE>

Taxable Yield Equivalent for 1999 - STATE OF SOUTH CAROLINA

Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%

Combined Federal and State: 22.000% 35.000% 38.000% 43.000% 46.600%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,050 $43,051-104,050 $104,051-158,550 $158,551-283,150 Over 283,150
Single Return $1-25,750 $25,751-62,450 $62,451-130,250 $130,251-283,150 Over 283,150
Tax Exempt Yield: Taxable Yield Equivalent:
2.50% 3.21% 3.85% 4.03% 4.39% 4.68%
3.00% 3.85% 4.62% 4.84% 5.26% 5.62%
3.50% 4.49% 5.38% 5.65% 6.14% 6.55%
4.00% 5.13% 6.15% 6.45% 7.02% 7.49%
4.50% 5.77% 6.92% 7.26% 7.89% 8.43%
5.00% 6.41% 7.69% 8.06% 8.77% 9.36%
5.50% 7.05% 8.46% 8.87% 9.65% 10.30%
6.00% 7.69% 9.23% 9.68% 10.53% 11.24%
6.50% 8.33% 10.00% 10.48% 11.40% 12.17%
7.00% 8.97% 10.77% 11.29% 12.28% 13.11%
Note: The maximum marginal tax rate for each bracket was used in calculating
the taxable yield equivalent. Furthermore, additional state and local taxes
paid on comparable taxable investments were not used
to increase federal deductions.

Taxable Yield Equivalent for 1999 - STATE OF VIRGINIA

Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%

Combined Federal and State 20.750% 33.750% 36.750% 41.750% 45.2350%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,050 $43,051-104,050 $104,051-158,880 $158,881-283,150 Over 283,150
Single Return $1-25,750 $25,751-62,450 $62,451-130,250 $130,251-283,150 Over 283,150
Tax Exempt Yield: Taxable Yield Equivalent:
1.50% 1.89% 2.26% 2.37% 2.58% 2.74%
2.00% 2.52% 3.02% 3.16% 3.43% 3.66%
2.50% 3.15% 3.77% 3.95% 4.29% 4.57%
3.00% 3.79% 4.53% 4.74% 5.15% 5.49%
3.50% 4.42% 5.28% 5.53% 6.01% 6.40%
4.00% 5.05% 6.04% 6.32% 6.87% 7.32%
4.50% 5.68% 6.79% 7.11% 7.73% 8.23%
5.00% 6.31% 7.55% 7.91% 8.58% 9.15%
5.50% 6.94% 8.30% 8.70% 9.44% 10.06%
6.00% 7.57% 9.06% 9.49% 10.30% 10.98%
Note: The maximum marginal tax rate for each bracket was used in calculating the taxable yield equivalent. Furthermore,
additional state and local taxes paid on comparable taxable investments were not used
to increase federal deductions.

- ---------------------------------- ------------------- ------------------- --------------------- ---------------------
Tax Equivalent Yield Georgia Municipal North Carolina South Carolina Virginia Municipal
for the 30-day period ended Bond Fund Municipal Bond Municipal Bond Fund Bond Fund
November 30, 1998 Fund
- ---------------------------------- ------------------- ------------------- --------------------- ---------------------
Class A Shares 4.46% 4.88% 5.21% 4.96%
- ---------------------------------- ------------------- ------------------- --------------------- ---------------------
Class Y Shares 5.01% 5.46% 5.56% 5.54%
- ---------------------------------- ------------------- ------------------- --------------------- ---------------------
</TABLE>

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.

<PAGE>

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.

Europe, Australia, and Far East ("EAFE") is a market capitalization weighted
foreign securities index, which is widely used to measure the performance of
European, Australian, New Zealand and Far Eastern stock markets. The index
covers approximately 1,020 companies drawn from 18 countries in the above
regions. The index values its securities daily in both U.S. dollars and local
currency and calculates total returns monthly. EAFE U.S. dollar total return is
a net dividend figure less Luxembourg withholding tax. The EAFE is monitored by
Capital International, S.A., Geneva, Switzerland.

International Finance Corporation ("IFC") Emerging Market Indices are market
capitalization-weighted foreign securities indices, which are used to measure
the performance of emerging markets (as defined by the World Bank) in Europe,
Asia, Latin America and the Middle East/Africa. The IFC calculates both a
"Global" and an "Investable" version of its index. The "Global" version includes
companies and countries with regard to their access to foreign investors. The
"Investable" Index adjusts company and market weights to reflect their
accessibility to foreign investors. The IFC Global Index currently covers
approximately 1,200 securities in 25 markets; the IFC Investable Index currently
covers approximately 900 securities in 24 markets. Both indices are presently
calculated in local currency and in US dollars, without dividends and with gross
dividends reinvested (e.g., before withholding taxes). The IFC is a subsidiary
of the World Bank, and has been collecting data on emerging markets since 1975.

Morgan Stanley Capital International ("MSCI") Emerging Markets Indices are
market capitalization-weighted foreign securities indices, which are used to
measure the performance of emerging markets (as defined by the World Bank) in
Europe, Asia, Latin America and the Middle East/Africa. MSCI calculates a
"Global" and a "Free" version of its index. The "Global" version includes
companies and countries without regard to their access to foreign investors. The
"Free" Index adjusts company and market weights to reflect their accessibility
to foreign investors. The MSCI Global Index currently covers approximately 630
securities in 20 markets; the MSCI Free Index currently covers approximately 560
securities in 19 markets. Both indices are presently calculated in local
currency and in US dollars, without dividends and with gross dividends
reinvested (e.g., before withholding taxes).

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.

<PAGE>

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.

Lehman Brothers State General Obligations Index is an index comprised of all
state general obligation debt issues and is compiled without regard to
maturities. These bonds are rated A or better and represent a variety of coupon
ranges. Index figures are total returns calculated for one, three, and twelve
month periods as well as year-to-date. Total returns are also calculated as of
the inception of the index, December 31, 1979.

Lehman Brothers Five-Year State General Obligations Bonds is an index comprised
of all state general obligation debt issues with maturities between four and six
years. These bonds are rated A or better and represent a variety of coupon
ranges. Index figures are total returns calculated for one, three, and twelve
month periods as well as year-to-date. Total returns are also calculated as of
the inception of the index, December 31, 1979.

Lehman Brothers Three-Year State General Obligations Bonds is an index comprised
of the same issues noted above except that the maturities range between two and
four years. Index figures are total returns calculated for the same periods as
listed above.

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.

FINANCIAL INFORMATION

The Financial Statements for the Fund for the fiscal year ended November 30,1998
are incorporated herein by reference to the Annual Report to Shareholders of the
Funds dated November 30, 1998.

<PAGE>

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.

Standard & Poor's Municipal Bond Ratings
AAA--Debt rated "AAA" has the highest rating assigned by S&P. Capacity to pay
interest and repay principal is extremely strong.

AA--Debt rated "AA" has a very strong capacity to pay interest and repay
principal and differs from the higher rated issues only in small degree.

A--Debt rated "A" has a strong capacity to pay interest and repay principal
although it is somewhat more susceptible to the adverse effect of changes in
circumstances and economic conditions than debt in higher rated categories.

BB, B, CCC, CC--Debt rated "BB," "B," "CCC" and "CC" is regarded, on balance, as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligation. "BB" indicates the
lowest degree of speculation and "CC" the highest degree of speculation. While
such debt will likely have some quality and protective characteristics, these
outweighed by large uncertainties of major risk exposure to adverse conditions.

C--The rating "C" is reversed for income bonds on which no interest is being
paid.

D--Debt rated "D" is in default, and payment of interest and/or repayment of
principal is in arrears.

<PAGE>

Standard & Poor's Municipal Note Ratings
SP-1--Very strong or strong capacity to pay principal and interest. Those issues
determined to possess overwhelming safety characteristics will be given a plus
sign (+) designation.

SP-2--Satisfactory capacity to pay principal and interest.

SP-3--Speculative capacity to pay principal and interest.

Moody's Investors Service Municipal Bond Ratings
Aaa--Bonds which are rated "Aaa" are judged to be of the best quality. They
carry the smallest degree of investment risk and are generally referred to as
"gilt edged." Interest payments are protected by a large or by an exceptionally
stable margin and principal is secure. While the various protective elements are
likely to change, such changes as can be visualized are most unlikely to impair
the fundamentally strong position of such issues.

Aa--Bonds which are rated "Aa" are judged to be of high quality by all
standards. Together with the "Aaa" group they comprise what are generally known
as high grade bonds. They are rated lower than the best bonds because margins of
protection may not be as large as in "Aaa" securities or fluctuation of
protective elements may be of greater amplitude or there may be other elements
present which make the long term risks appear somewhat larger than in "Aaa"
securities.

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.

B--Bonds which are rated "B" generally lack characteristics of the desirable
investment. Assurance of interest and principal payments or of maintenance of
other terms of the contract over any long period of time may be small.

Caa--Bonds which are rated "Caa" are of poor standing. Such issues may be in
default or there may be present elements of danger with respect to principal or
interest.

Ca--Bonds which are rated "Ca" represent obligations which are speculative in a
high degree. Such issues are often in default or have other marked shortcomings.

C--Bonds which are rated "C" are the lowest rated class of bonds and issues so
rated can be regarded as having extremely poor prospects of ever attaining any
real investment standing.

Moody's Investors Service 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.

<PAGE>

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.

<PAGE>

ADDRESSES

The Wachovia Funds
The Wachovia Municipal Funds
Class A Shares, Class B Shares, Class Y Shares 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

Item 23. Financial Statements and Exhibits:
(a) Conformed Copy of Declaration of Trust of the Registrant (1);
(i) Conformed copies of Amendment Nos. 1 through 4 to the
Declaration of Trust
dated August 15, 1990 (8);
(ii) Conformed Copy of Amendment No. 6 to the Declaration of Trust
dated August 15,1990 (9);
(b) Copy of By-Laws of the Registrant (1);
(i) Copy of Amendment 1 to the By-Laws of the Registrant;(14)
(c) Copy of Specimen Certificate for Shares of Beneficial Interest of the
Registrant (2);
(i) Wachovia Georgia Municipal Bond Fund;(12)
(ii) Wachovia North Carolina Municipal Bond Fund;(12)
(iii) Wachovia South Carolina Municipal Bond;(12)
(d) (i) Conformed Copy of Investment Advisory Contract of the
Registrant and Exhibit A
thereto (to file the executed version of the Investment
advisory Contract
between the Trust and Wachovia Bank of South Carolina, N.A.
on behalf of South
Carolina Municipal Bond Fund) (8);
(ii) Conformed copy of Investment Advisory Contract of the
Registrant between the
Trust and Wachovia Bank of Georgia, N.A. on behalf of
Wachovia Georgia
Municipal Bond Fund (9);
(iii) Conformed copy of Investment Advisory Contract of the
Registrant between the
Trust and Wachovia Bank of North Carolina, N.A. on behalf of
Wachovia North
Carolina Municipal Bond Fund (9.);
(iv) Conformed copy Exhibit A to Investment Advisory ...............
Contract;(13)
(v) Conformed copy of Investment Advisory agreement between The Wachovia
Municipal Funds and the
Adviser; +
(e) (i) Conformed Copy of Distributor's Contract of the
Registrant and Exhibit A thereto (8);
(ii) Conformed Copy of Exhibit B to the Distributor's Contract
(9.); (iii)Conformed copy of Exhibits E & F to the Distributors
Contract;(13)
(f) Not applicable;
(g) (i) Conformed copy of new Custodian Agreement of the
Registrant and Exhibits A-C thereto (8);
(ii) Amendment to Exhibit A to Custody Agreement;(13)
..................
+ All exhibits have been filed electronically.

1. Response is incorporated by reference to Registrant's Initial Registration
Statement filed October 29, 1990. (File Nos. 33-37525 and 811-6201)

2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 filed November 30, 1990. (File Nos. 33-37525 and 811-6201)

8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on filed October 6, 1994. (File Nos. 33-37525 and 811-6201)

9. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 7 on filed January 27, 1995. (File Nos. 33-37525 and
811-6201)

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No.14 filed December 22, 1997. (File Nos. 33-37525 and 811-6201)

13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No.15 filed February 4, 1998. (File Nos. 33-37525 and 811-6201).

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 filed March 12, 1998. (File Nos. 33-37525 and 811-6201).

<PAGE>

(h) Conformed copy of Transfer Agency and Service Agreement of
the Registrant (5);
(i) Conformed copy of new Portfolio Accounting
and Shareholder Recordkeeping Agreement of
Registrant and Schedule F thereto (8);
(ii) Copy of Schedule G to new Portfolio Accounting and Recordkeeping
Agreement (8); (iii) Conformed Copy of Administrative Services
Agreement(8); (iv) Conformed copy of Amendment No. 1 to the
Administrative Services Agreemtnt(11); (v) Conformed copy of Portfolio
Accounting and Shareholder Recordkeeping Agreement
Amendment No. 1 to Schedule B;(12)
(vi) Amendment to Shareholder Services;(13)
(vii) Conformed copy of Shareholder Services Plan;(12)
(viii) Amendment to Exhibit A of the Shareholder
Services Agreement; (14) (i) Conformed copy of Opinion and
Consent of Counsel as to legality of shares being
registered (2);
(j) (i) Conformed Copy of Consent of Independent Auditors; +
(ii) Conformed copy of Opinion and Consent of Special Tax
Counsel for South Carolina Municipal Bond Fund (4);
(k) Not Applicable;
(l) Conformed copy of Initial Capital Understanding (2);
(m) Not Applicable;
(n) Copy of Financial Data Schedules; +
(o) Copy of The Wachovia Municipal Funds Multiple Class Plan;(12);
(i) Amendment to Exhibit A to Multiple Class Plan;(13)
(p) Conformed Copy of Power of Attorney;(11)

+ All exhibits have been filed electronically.

2. Response is incorporated by reference to Registrant's Pre-Effective
Amendment No. 1 on Form N-1A filed November 30, 1990. (File Nos. 33-37525
and 811-6201)

4. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 2 on Form N-1A filed November 27, 1991. (File Nos. 33-37525
and 811-6201)

5. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 3 on Form N-1A filed November 23, 1992. (File Nos. 33-37525
and 811-6201)

8. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 5 on Form N-1A filed October 6, 1994. (File Nos. 33-37525 and
811-6201)

11. Response is incorporated by reference to Registrant's Post-Effective
Amendment No.11 filed June 21, 1996. (File Nos. 33-37525 and 811-6201)

12. Response is incorporated by reference to Registrant's Post-Effective
Amendment No.14 filed December 22, 1997. (File Nos. 33-37525 and 811-6201)

13. Response is incorporated by reference to Registrant's Post-Effective
Amendment No.15 filed February 4, 1998. (File Nos. 33-37525 and 811-6201)

14. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 16 filed March 12, 1998. (File Nos. 33-37525 and 811-6201).

<PAGE>

Item 24. Persons Controlled by or Under Common Control with Registrant

None

Item 25. Indemnification: (1)

Item 26. Business and Other Connections of Investment Adviser:

(a) For a description of the other business of the investment advisers, see
the section entitled "Who Manages and Provides Services to the Funds?" in Part
A.

The Officers of Wachovia Bank of South Carolina, N.A. are: Will B. Spence,
President and Chief Executive Officer; Charles T. Cole, Jr., Executive Vice
President; David Q. Soutter, Executive Vice President; David H. Parker, Regional
Executive Officer; and G. Joseph Prendergast, Chairman. The business address of
each of the Officers of Wachovia Bank of South Carolina, N.A. is 1401 Main
Street, Columbia, South Carolina, 29226.

The Officers of Wachovia Bank of North Carolina, N.A. are: Chairman of the
Board, L. M. Baker, Jr.; President and Chief Executive Officer, J. Walter
McDowell; Executive Vice President, Robert S. McCoy, Jr.; Executive Vice
President, Robert L. Alphin; Executive Vice President, Robert G. Brookby;
Executive Vice President, Hugh M. Durden; Executive Vice President, Mickey W.
Dry; Executive Vice President, Walter E. Leonard, Jr.; Executive Vice President,
Richard B. Roberts; and Executive Vice President, Robert G. Brookly. The
business address of each of the Officers of Wachovia Bank of North Carolina,
N.A. is 100 North Main Street, Winston-Salem, N.C. 27101.

The Officers of Wachovia Bank of Georgia, N.A. are: Chairman, G. Joseph
Prendergast; President and Chief Executive Officer, D. Gary Thompson; and
Executive Vice Presidents: George W.P. Atkins; Donald P. Carson; John M. Chalk;
William T. Deyo, Jr.; Thomas D. Hills; Eric L. Stone; and David C. Swann. The
business address of each of the Officers of Wachovia Bank of Georgia, N.A. is
191 Peachtree Street, NE, Atlanta, Georgia, 30303.

1. Response is incorporated by reference to Registrant's Initial
Registration Statement on Form N-1A filed October 29, 1990. (File Nos. 33-37525
and 811-6201)

<PAGE>

The Directors of Wachovia Bank of South Carolina, N.A. are: L.M. Baker, Jr,
President and Chief Executive Officer, Wachovia Corporation; Charles J.
Bradshaw, President, Bradshaw Investments, Inc.; Frank W. Brumley, President,
The Brumley Company; W.T. Cassels, Jr, Chairman, Southeastern Freight Lines
Inc.; Thomas C. Coxe, III, Executive Vice President, Sonoco Products Company;
Frederick B. Dent, Jr., President, Mayfair Mills, Inc.; James G. Lindley,
Chairman Emeritus, South Carolina National Corporation; Joe A. Padgett; G.
Joseph Prendergast, Chairman, Wachovia Bank of South Carolina, N.A.; W.M. Self,
President and Chief Executive Officer, Greenwood Mills, Inc.; Robert S. Small,
Jr., President, AVTEX Commercial Properties, Inc.; Will B. Spence, President and
Chief Executive Officer, Wachovia Bank of South Carolina, N.A.; J. Guy Steenrod,
President, Roche Carolina Inc.; William G. Taylor, President, The Springs
Company; and Beatrice R. Thompson, Coordinator of Psychological Services,
Anderson County School District.

The Directors of Wachovia Bank of North Carolina, N.A. are: L.M. Baker,
Jr., Chairman of the Board, Wachovia Bank of NC, N.A.; Thomas M. Belk, Jr.,
Senior Vice-President, Belk Stores Services, Inc.; Howard C. Bissell, Chairman
of the Board, The Bissell Companies, Inc.; Felton J. Capel, Chairman and
President, Century Associates of North Carolina; William Cavanaugh, III,
President and Chief Operating Officer; Bert Collins, President and Chief
Executive Officer, N.C. Mutual Life Insurance Company; Richard L. Daugherty,
Retired Vice President and Consultant, IBM Corporation; George W. Henderson,
President and Chief Executive Officer, Burlington Industries, Inc.; Estell C.
Lee, Chairman and President, The Lee Company; J. Walter McDowell, III, President
and Chief Executive Officer, Wachovia Bank of NC, N.A.; G. Joseph Prendergast,
Executive Vice President, Wachovia Corporation; Andrew J. Schindler, President
and Chief Executive Officer, R.J. Reynolds Tobacco Company; Robert L. Tillman,
Chief Operating Officer, Lowe's Companies, Inc.; John F. Ward, Senior Vice
President, Sara Lee Corporation; Anderson D. Warlick, President and Chief
Operating Officer, Parkdale Mills, Inc.; David J. Whihard, II, The Daily
Reflector; and John C. Whitaker, Jr., Chairman of the Board and Chief Executive
Officer, Inmar Enterprises, Inc.

The Directors of Wachovia Bank of Georgia, N.A. are: F. Duane Ackerman,
Vice Chairman and Chief Operating Officer,BellSouth Corporation; L.M. Baker,
Jr., President and Chief Executive Officer, Wachovia Corporation; Carl E. Bolch,
Jr., Chairman and Chief Executive Officer, Race Track Petroleum, Inc.; James E.
Bostic, Jr., Senior Vice President, Environmental, Government Affairs and
Communiciaton, Georgia-Pacific Corporation; Dan T. Cathy, President, Chick-Fil-A
International; Michael C. Carlos, Chairman and Chief Executive Officer, National
Distributing Co., Inc.; G. Stephen Felker, Chairman and Chief Executive Officer,
Avondale Mills, Inc.; Bryan D. Langton, Chairman and Chief Executive Officer,
Holiday Inn Worldwide; Bernard Marcus, Chairman and Chief Executive Officer, The
Home Depot, Inc.; James F. McDonald, President and Chief Executive Officer,
Scientific-Atlanta, Inc.; Daniel W. McGlaughlin, President and Chief Operating
Officer, Equifax Inc.; G. Joseph Prendergast, Chairman of the Board, Wachovia
Bank of Georgia, N.A.; D. Raymond Riddle, Chairman of the Board and Chief
Executive Officer, National Service Industries, Inc.; S. Stephen Selig, III,
Chairman of the Board and President, Selig Enterprises, Inc.; Alana S. Shepherd,
Secretary of the Board, Shepherd Spinal Center; and D. Gary Thompson, President
and Chief Executive Officer, Wachovia Bank of Georgia, N.A..

Item 27. Principal Underwriters:

(a)......Federated Securities Corp. the Distributor for shares of the
Registrant, acts as principal underwriter for the following ..........open-end
investment companies, including the Registrant:

Automated Government Money Trust; 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 Fund for U.S. Government Securities, Inc.;
Federated GNMA Trust; Federated Government Income Securities, Inc.; Federated
Government Trust; Federated High Income Bond Fund, Inc.; Federated High Yield
Trust; Federated Income Securities Trust; Federated Income Trust; Federated
Index Trust; Federated Institutional Trust; Federated Insurance Series;
Federated Master Trust; Federated Municipal Opportunities Fund, Inc.; Federated
Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated Short-Term
Municipal Trust; Federated Short-Term U.S. Government Trust; Federated Stock and
Bond Fund, Inc.; Federated Stock Trust; Federated Tax-Free Trust; Federated
Total Return Series, Inc.; Federated U.S. Government Bond Fund; Federated U.S.
Government Securities Fund: 1-3 Years; Federated U.S. Government Securities
Fund: 2-5 Years; Federated U.S. Government Securities Fund: 5-10 Years;
Federated Utility Fund, Inc.; Fixed Income Securities, Inc.; ; Hibernia Funds;
Independence One Mutual Funds; Intermediate Municipal Trust; International
Series, Inc.; Investment Series Funds, Inc.; Liberty U.S. Government Money
Market Trust; Liquid Cash Trust; Managed Series Trust; Marshall Funds, Inc.;
Money Market Management, Inc.; Money Market Obligations Trust; Money Market
Obligations Trust II; Money Market Trust; Municipal Securities Income Trust;
Newpoint Funds; Regions Funds; RIGGS Funds; SouthTrust Funds; Tax-Free
Instruments Trust; The Planters Funds; The Wachovia Funds; The Wachovia
Municipal FundsTrust for Government Cash Reserves; Trust for Short-Term U.S.
Government Securities; Trust for U.S. Treasury Obligations; Vision Group of
Funds, Inc.; World Investment Series, Inc.; Blanchard Funds; Blanchard Precious
Metals Fund, Inc.; DG Investor Series; High Yield Cash Trust; Investment Series
Trust; Star Funds; Targeted Duration Trust; The Virtus Funds; Trust for
Financial Institutions;

Federated Securities Corp. also acts as principal underwriter for the
following closed-end investment company: Liberty Term Trust, Inc.- 1999.

(b)

(1) (2) (3)
Name and Principal Positions and Offices Positions and Offices
Business Address With Distributor With Registrant

Richard B. Fisher Director, Chairman, Chief
Federated Investors Tower Executive Officer, Chief
1001 Liberty Avenue Operating Officer, Asst.
Pittsburgh, PA 15222-3779 Secretary and Asst.
Treasurer, Federated
Securities Corp.

Edward C. Gonzales Director, Executive Vice
Federated Investors Tower President,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

Thomas R. Donahue Director, Assistant Secretary
Federated Investors Tower and Assistant Treasurer
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779

James F. Getz President-Broker/Dealer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

John B. Fisher President-Institutional Sales, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
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

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

David J. Callahan 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

William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Jill Ehrenfeld 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

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

Raymond Hanley 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

Beth A. Hetzel 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

Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

<PAGE>

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

J. Michael Miller 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. Peters 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

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

John F. Wallin 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

Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Terri E. Bush 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

David L. Immonen 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

Robert M. Rossi Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Matthew S. Hardin Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Denis McAuley Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Leslie K. Ross Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
</TABLE>

Item 28. Location of Accounts and Records:

<S> <C>

The Wachovia Municipal Funds Federated Investors Tower
....................Pittsburgh, PA 15222-3779

Federated Services Company Federated Investors Tower
("Transfer Agent, Dividend Pittsburgh, PA 15222-3779
Disbursing Agent and Portfolio
Recordkeeper")

Federated Services Company Federated Investors Tower
("Administrator") Pittsburgh, PA 15222-3779

Wachovia Bank of North Carolina, N.A...........301 North Main Street
("Investment Adviser" to North Winston-Salem, NC 21750
Carolina Municipal Bond Fund)

Wachovia Bank of Georgia, N.A. 191 Peachtree Street, N.E.
("Investment Adviser" to Atlanta, Georgia 30303
Georgia Municipal Bond Fund)

Wachovia Bank of South Carolina, N.A...........1426 Main Street
("Investment Adviser" to South Columbia, South Carolina 29226
Carolina Municipal Bond Fund)

Wachovia Bank of North Carolina, N.A. Wachovia Trust Operations
("Custodian") 301 North Main Street
..................Winston-Salem, NC 21750
</TABLE>

Item 29. Management Services: Not applicable.

Item 30. Undertakings:

Registrant hereby undertakes to comply with the provisions of
Section 16(c) of the l940 Act with respect to the removal of
Trustees and the calling of special shareholder meetings by
shareholders on behalf of each of its portfolios.

<PAGE>

SIGNATURES

Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, THE WACHOVIA MUNICIPAL FUNDS,
has duly caused this Amendment to its Registration Statement to be signed on its
behalf by the undersigned, thereunto duly authorized, all in the City of
Pittsburgh and Commonwealth of Pennsylvania, on the 22nd day of February, 1999.

THE WACHOVIA MUNICIPAL FUNDS

BY: /s/ Gail Cagney
Gail Cagney, Assistant Secretary
Attorney in Fact for John W. McGonigle
February 22, 1999

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 February 22, 1999
ASSISTANT 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

J. Berkley Ingram, Jr.* Trustee

D. Dean Kaylor* Trustee

Charles S. Way, Jr.* Trustee

* By Power of Attorney

Item (j)(i) under Form N-1A
Item 23 under Item 601/Reg. S-K

Consent of Ernst & Young LLP, Independent Auditors

We consent to the reference to our firm under the captions "Financial
Highlights" and "Independent Auditor" in Post-Effective Amendment Number 18 to
the Registration Statement (Form N-1A No. 33-37525) and the related Prospectus
and to the incorporation therein of our report dated January 22, 1999 with
respect to the financial statements included in the Annual Report of The
Wachovia Municipal Funds (Wachovia North Carolina Municipal Bond Fund, Wachovia
Georgia Municipal Bond Fund, Wachovia Virginia Municipal Bond Fund, and Wachovia
South Carolina Municipal Bond Fund).

Ernst & Young LLP

Pittsburgh, Pennsylvania
February 22, 1999

The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Wachovia Georgia Municipal Bond Fund Class A Shares as
of the calendar year-end for each of four years. The `y' axis reflects the "%
Total Return" beginning with "0" and increasing in increments of 4% up to 16%.
The `x' axis represents calculation periods (from the earliest calendar year end
of the Fund's start of business through the calendar year ended December 31,
1998. The light gray shaded chart features four 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 Class for each calendar year is stated directly
at the top of each respective bar, for the calendar years 1995 through 1998, The
percentages noted are: 14.66%, 3.46%, 7.36%, 5.09%. The total returns displayed
for the Fund 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 5.69%. Its lowest quarterly return was
- -1.29%. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia North Carolina Municipal Bond
Fund Class A Shares as of the calendar year-end for each of four years. The `y'
axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 4% up to 16%. The `x' axis represents calculation periods (from
the earliest calendar year end of the Fund's start of business through the
calendar year ended December 31, 1998. The light gray shaded chart features four
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 Class for each calendar
year is stated directly at the top of each respective bar, for the calendar
years 1995 through 1998, The percentages noted are: 15.22%, 3.37%, 7.73%, 5.41%
The total returns displayed for the Fund 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 5.48%. Its lowest quarterly
return was -1.72%. The graphic presentation displayed here consists of a bar
chart representing the annual total returns of Wachovia South Carolina Municipal
Bond Fund Class A Shares as of the calendar year-end for each of seven years.
The `y' axis reflects the "% Total Return" beginning with "-4" and increasing in
increments of 4% up to 16%. The `x' axis represents calculation periods (from
the earliest calendar year end of the Fund's start of business through the
calendar year ended December 31, 1998. The light gray shaded chart features
seven 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 Class for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1992through 1998, The percentages noted are: 8.73%, 12.01%,
- -3.72%, 15.33%, 3.94%, 8.14%, 5.14% The total returns displayed for the Fund 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 5.96%. Its lowest quarterly return was -4.32%. The graphic
presentation displayed here consists of a bar chart representing the annual
total returns of Wachovia Virginia Municipal Bond Fund Class A Shares as of the
calendar year-end for each of five years. The `y' axis reflects the "% Total
Return" beginning with "0" and increasing in increments of 5% up to 25%. The `x'
axis represents calculation periods (from the earliest calendar year end of the
Fund's start of business through the calendar year ended December 31, 1998. The
light gray shaded chart features five 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 Class for each calendar year is stated directly at the top of
each respective bar, for the calendar years 1995 through 1998, The percentages
noted are: -5.95%, 13.80%, 1.67%, 7.97%, 5.57%. The total returns displayed for
the Fund 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 5.23%. Its lowest quarterly return was
- -5.59%. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Georgia Municipal Bond Fund
Class Y Shares as of the calendar year-end for each of two years. The `y' axis
reflects the "% Total Return" beginning with "0" and increasing in increments of
2% up to 10%. The `x' axis represents calculation periods (from the earliest
calendar year end of the Fund's start of business through the calendar year
ended December 31, 1998. The light gray shaded chart features two 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 Class for each calendar year is
stated directly at the top of each respective bar, for the calendar years 1997
through 1998, The percentages noted are: 7.61% and 5.35%. Within the period
shown in the Chart, the Fund's highest quarterly return was 3.17%. Its lowest
quarterly return was -0.66%. The graphic presentation displayed here consists of
a bar chart representing the annual total returns of Wachovia North Carolina
Municipal Bond Fund Class Y Shares as of the calendar year-end for each of two
years. The `y' axis reflects the "% Total Return" beginning with "0" and
increasing in increments of 2% up to 10%. The `x' axis represents calculation
periods (from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded chart
features two 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 Class for
each calendar year is stated directly at the top of each respective bar, for the
calendar years 1997 through 1998, The percentages noted are: 7.97% and 5.67%.
Within the period shown in the Chart, the Fund's highest quarterly return was
3.39%. Its lowest quarterly return was -0.51%. The graphic presentation
displayed here consists of a bar chart representing the annual total returns of
Wachovia South Carolina Municipal Bond Fund Class Y Shares as of the calendar
year-end for each of two years. The `y' axis reflects the "% Total Return"
beginning with "0" and increasing in increments of 2% up to 10%. The `x' axis
represents calculation periods (from the earliest calendar year end of the
Fund's start of business through the calendar year ended December 31, 1998. The
light gray shaded chart features two 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 Class for each calendar year is stated directly at the top of
each respective bar, for the calendar years 1997 through 1998, The percentages
noted are: 8.39% and 5.70%. Within the period shown in the Chart, the Fund's
highest quarterly return was 3.34%. Its lowest quarterly return was -0.31%.

Exhibit (d)(v) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K

THE WACHOVIA MUNICIPAL FUNDS

January 15, 1999

Wachovia Bank, N.A.
100 North Main Street
Winston-Salem, North Carolina 27101

Dear Ladies and Gentlemen:

Each fund listed on Schedule A ("Fund"), is a series of The Wachovia
Municipal Funds, a Massachusetts business trust ("Trust"). The Trust has entered
into an Investment Advisory Contract ("Advisory Contract") with Wachovia Bank,
N.A. ("Wachovia") whereby Wachovia may from time to time reduce its fees for
advisory services.

Wachovia hereby agrees during the period from December 15, 1998 through
January 31, 2000, to waive its fees, and/or make reimbursements to the Funds, so
that each Fund's operating expenses (excluding interest, taxes, brokerage
commissions, and extraordinary expenses of the Fund) do not exceed, in the
aggregate, the rate per annum of the Fund's average daily net assets specified
with respect that Fund in Schedule A ("Expense Limitation"). Wachovia agrees
that this obligation shall constitute a contractual commitment enforceable by
the Trust and that Wachovia shall not assert any right to reimbursement of
amounts so waived or reimbursed.

The Trust agrees to furnish or otherwise make available to you such
copies of its financial statements, reports, and other information relating to
its business and affairs as you may, at any time or from time to time,
reasonably request in connection with this Agreement.

You understand that you shall look only to the assets of a Fund for
performance of this agreement as it relates to that Fund and for payment of any
claim you may have hereunder relating to that Fund, and neither any other series
of the Trust, nor any of the Trust's trustees, officers, employees, agents or
shareholders, whether past, present or future shall be personally liable
therefor.

This agreement is effective as of December 15, 1998, and it will
terminate upon the earlier of the termination of the Advisory Contract or
January 31, 2000. This agreement was approved by the Trustees of the Trust at
their meeting on December 3, 1998.

This agreement is made and to be performed principally in the State of
North Carolina, and except insofar as the Investment Company Act of 1940, as
amended ("1940 Act"), or other federal laws and regulations may be controlling,
this agreement shall be governed by, and construed and enforced in accordance
with, the internal laws of the State of North Carolina. Any amendment to this
agreement shall be in writing signed by the parties hereto.

<PAGE>

If you are in agreement with the foregoing, please sign the form of
acceptance on the enclosed counterpart hereof and return the same to us.

Very truly yours,

THE WACHOVIA MUNICIPAL FUNDS,
on behalf of the Funds listed on Schedule A

By:/s/ Charles L. Davis, Jr.
Title: Vice President and Assistant
Treasurer

The foregoing agreement is hereby
accepted as of December 15, 1998

WACHOVIA BANK, N.A.

By:/s/ Michael J. Tierney
Michael J. Tierney
Executive Vice President, Wachovia Corporation

<PAGE>

Schedule A
Wachovia Funds Schedule of Expenses

1999
Total Expenses

Georgia Municipal Bond Fund
Class Y 0
Class A 25

North Carolina Municipal Bond Fund
Class Y 0
Class A 25

South Carolina Municipal Bond Fund
Class Y 0
Class A 25

Virginia Municipal Bond Fund
Class Y 0
Class A 25

<ARTICLE> 6
<CIK> 0000867502
<NAME> The Wachovia Municipal Funds
<SERIES>
<NUMBER> 032
<NAME> Wachovia Georgia Municipal Bond Fund - Class A Shares

<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Nov-30-1998
<PERIOD-END> Nov-30-1998
<INVESTMENTS-AT-COST> 22,584,004
<INVESTMENTS-AT-VALUE> 23,769,505
<RECEIVABLES> 497,252
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 6,102
<TOTAL-ASSETS> 24,272,859
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 342,450
<TOTAL-LIABILITIES> 342,450
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,697,357
<SHARES-COMMON-STOCK> 606,561
<SHARES-COMMON-PRIOR> 587,886
<ACCUMULATED-NII-CURRENT> 497
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 47,054
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,185,501
<NET-ASSETS> 6,899,698
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,036,252
<OTHER-INCOME> 0
<EXPENSES-NET> (210,998)
<NET-INVESTMENT-INCOME> 825,254
<REALIZED-GAINS-CURRENT> 61,857
<APPREC-INCREASE-CURRENT> 428,018
<NET-CHANGE-FROM-OPS> 1,315,129
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (251,879)
<DISTRIBUTIONS-OF-GAINS> (2,076)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 65,313
<NUMBER-OF-SHARES-REDEEMED> (65,246)
<SHARES-REINVESTED> 18,608
<NET-CHANGE-IN-ASSETS> 5,091,502
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (8,226)
<GROSS-ADVISORY-FEES> 159,236
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 282,317
<AVERAGE-NET-ASSETS> 6,715,522
<PER-SHARE-NAV-BEGIN> 11.110
<PER-SHARE-NII> 0.420
<PER-SHARE-GAIN-APPREC> 0.270
<PER-SHARE-DIVIDEND> (0.420)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.380
<EXPENSE-RATIO> 1.17
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<ARTICLE> 6
<CIK> 0000867502
<NAME> The Wachovia Municipal Funds
<SERIES>
<NUMBER> 031
<NAME> Wachovia Georgia Municipal Bond Fund - Class Y Shares

<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Nov-30-1998
<PERIOD-END> Nov-30-1998
<INVESTMENTS-AT-COST> 22,584,004
<INVESTMENTS-AT-VALUE> 23,769,505
<RECEIVABLES> 497,252
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 6,102
<TOTAL-ASSETS> 24,272,859
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 342,450
<TOTAL-LIABILITIES> 342,450
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 22,697,357
<SHARES-COMMON-STOCK> 1,497,185
<SHARES-COMMON-PRIOR> 1,107,977
<ACCUMULATED-NII-CURRENT> 497
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 47,054
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 1,185,501
<NET-ASSETS> 56,760,473
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 1,036,252
<OTHER-INCOME> 0
<EXPENSES-NET> (210,998)
<NET-INVESTMENT-INCOME> 825,254
<REALIZED-GAINS-CURRENT> 61,857
<APPREC-INCREASE-CURRENT> 428,018
<NET-CHANGE-FROM-OPS> 1,315,129
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (573,430)
<DISTRIBUTIONS-OF-GAINS> (3,949)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 514,361
<NUMBER-OF-SHARES-REDEEMED> (130,688)
<SHARES-REINVESTED> 5,535
<NET-CHANGE-IN-ASSETS> 5,091,502
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (8,226)
<GROSS-ADVISORY-FEES> 159,236
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 282,317
<AVERAGE-NET-ASSETS> 14,515,968
<PER-SHARE-NAV-BEGIN> 11.110
<PER-SHARE-NII> 0.450
<PER-SHARE-GAIN-APPREC> 0.270
<PER-SHARE-DIVIDEND> (0.450)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.380
<EXPENSE-RATIO> 0.91
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<ARTICLE> 6
<CIK> 0000867502
<NAME> The Wachovia Municipal Funds
<SERIES>
<NUMBER> 022
<NAME> Wachovia North Carolina Municipal
Bond Fund - Class A Shares

<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Nov-30-1998
<PERIOD-END> Nov-30-1998
<INVESTMENTS-AT-COST> 62,150,038
<INVESTMENTS-AT-VALUE> 65,700,734
<RECEIVABLES> 1,109,556
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 14,652
<TOTAL-ASSETS> 66,824,942
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 119,038
<TOTAL-LIABILITIES> 119,038
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 62,426,951
<SHARES-COMMON-STOCK> 832,230
<SHARES-COMMON-PRIOR> 1,038,756
<ACCUMULATED-NII-CURRENT> 48
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 316,064
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,550,696
<NET-ASSETS> 9,533,286
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,980,857
<OTHER-INCOME> 0
<EXPENSES-NET> (543,521)
<NET-INVESTMENT-INCOME> 2,437,336
<REALIZED-GAINS-CURRENT> 327,825
<APPREC-INCREASE-CURRENT> 1,360,515
<NET-CHANGE-FROM-OPS> 4,125,676
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (393,274)
<DISTRIBUTIONS-OF-GAINS> (6,494)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 73,195
<NUMBER-OF-SHARES-REDEEMED> (308,552)
<SHARES-REINVESTED> 28,831
<NET-CHANGE-IN-ASSETS> 10,626,432
<ACCUMULATED-NII-PRIOR> 11,268
<ACCUMULATED-GAINS-PRIOR> 8,497
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 456,438
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 643,167
<AVERAGE-NET-ASSETS> 10,378,943
<PER-SHARE-NAV-BEGIN> 11.150
<PER-SHARE-NII> 0.430
<PER-SHARE-GAIN-APPREC> 0.320
<PER-SHARE-DIVIDEND> (0.430)
<PER-SHARE-DISTRIBUTIONS> (0.010)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.460
<EXPENSE-RATIO> 1.10
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<ARTICLE> 6
<CIK> 0000867502
<NAME> The Wachovia Municipal Funds
<SERIES>
<NUMBER> 021
<NAME> Wachovia North Carolina
Municipal Bond Fund - Class Y Shares

<S> <C>
<PERIOD-TYPE> 12-mos
<FISCAL-YEAR-END> Nov-30-1998
<PERIOD-END> Nov-30-1998
<INVESTMENTS-AT-COST> 62,150,038
<INVESTMENTS-AT-VALUE> 65,700,734
<RECEIVABLES> 1,109,556
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 14,652
<TOTAL-ASSETS> 66,824,942
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 119,038
<TOTAL-LIABILITIES> 119,038
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 62,426,951
<SHARES-COMMON-STOCK> 4,954,746
<SHARES-COMMON-PRIOR> 3,951,904
<ACCUMULATED-NII-CURRENT> 48
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 316,064
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 3,550,696
<NET-ASSETS> 56,760,473
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 2,980,857
<OTHER-INCOME> 0
<EXPENSES-NET> (543,521)
<NET-INVESTMENT-INCOME> 2,437,336
<REALIZED-GAINS-CURRENT> 327,825
<APPREC-INCREASE-CURRENT> 1,360,515
<NET-CHANGE-FROM-OPS> 4,125,676
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,044,014)
<DISTRIBUTIONS-OF-GAINS> (25,032)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,450,528
<NUMBER-OF-SHARES-REDEEMED> (465,404)
<SHARES-REINVESTED> 17,718
<NET-CHANGE-IN-ASSETS> 10,626,432
<ACCUMULATED-NII-PRIOR> 11,268
<ACCUMULATED-GAINS-PRIOR> 8,497
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 456,438
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 643,167
<AVERAGE-NET-ASSETS> 50,479,415
<PER-SHARE-NAV-BEGIN> 11.150
<PER-SHARE-NII> 0.460
<PER-SHARE-GAIN-APPREC> 0.320
<PER-SHARE-DIVIDEND> (0.460)
<PER-SHARE-DISTRIBUTIONS> (0.010)
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.460
<EXPENSE-RATIO> 0.85
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<ARTICLE> 6
<CIK> 0000867502
<NAME> The Wachovia Municipal Funds
<SERIES>
<NUMBER> 012
<NAME> Wachovia South Carolina
Municipal Fund A shares

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 112,803,697
<INVESTMENTS-AT-VALUE> 120,716,744
<RECEIVABLES> 1,991,789
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 122,708,533
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 480,816
<TOTAL-LIABILITIES> 480,816
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114,102,476
<SHARES-COMMON-STOCK> 5,940,020
<SHARES-COMMON-PRIOR> 5,816,382
<ACCUMULATED-NII-CURRENT> 3,008
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 209,186
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,913,047
<NET-ASSETS> 67,457,739
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,198,908
<OTHER-INCOME> 0
<EXPENSES-NET> (832,204)
<NET-INVESTMENT-INCOME> 5,366,704
<REALIZED-GAINS-CURRENT> 209,185
<APPREC-INCREASE-CURRENT> 2,123,645
<NET-CHANGE-FROM-OPS> 7,699,534
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,984,948)
<DISTRIBUTIONS-OF-GAINS> (5,753)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 742,299
<NUMBER-OF-SHARES-REDEEMED> (786,074)
<SHARES-REINVESTED> 167,413
<NET-CHANGE-IN-ASSETS> 13,650,807
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 10,431
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 868,897
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,253,349
<AVERAGE-NET-ASSETS> 65,781,657
<PER-SHARE-NAV-BEGIN> 11.120
<PER-SHARE-NII> 0.510
<PER-SHARE-GAIN-APPREC> 0.240
<PER-SHARE-DIVIDEND> (0.510)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.360
<EXPENSE-RATIO> 0.83
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<ARTICLE> 6
<CIK> 0000867502
<NAME> The Wachovia Municipal Funds
<SERIES>
<NUMBER> 011
<NAME> Wachovia South Carolina
Municipal Fund Y shares

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 112,803,697
<INVESTMENTS-AT-VALUE> 120,716,744
<RECEIVABLES> 1,991,789
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 122,708,533
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 480,816
<TOTAL-LIABILITIES> 480,816
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 114,102,476
<SHARES-COMMON-STOCK> 4,822,801
<SHARES-COMMON-PRIOR> 3,944,866
<ACCUMULATED-NII-CURRENT> 3,008
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 209,186
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 7,913,047
<NET-ASSETS> 54,769,978
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 6,198,908
<OTHER-INCOME> 0
<EXPENSES-NET> (832,204)
<NET-INVESTMENT-INCOME> 5,366,704
<REALIZED-GAINS-CURRENT> 209,185
<APPREC-INCREASE-CURRENT> 2,123,645
<NET-CHANGE-FROM-OPS> 7,699,534
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,379,402)
<DISTRIBUTIONS-OF-GAINS> (4,021)
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 1,382,049
<NUMBER-OF-SHARES-REDEEMED> (517,410)
<SHARES-REINVESTED> 13,296
<NET-CHANGE-IN-ASSETS> 13,650,807
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 10,431
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 868,897
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,253,349
<AVERAGE-NET-ASSETS> 55,071,283
<PER-SHARE-NAV-BEGIN> 11.120
<PER-SHARE-NII> 0.540
<PER-SHARE-GAIN-APPREC> 0.240
<PER-SHARE-DIVIDEND> (0.540)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 11.360
<EXPENSE-RATIO> 0.58
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<ARTICLE> 6
<CIK> 0000867502
<NAME> THE WACHOVIA MUNICIPAL FUNDS
<SERIES>
<NUMBER> 042
<NAME> WACHOVIA VIRGINIA MUNICIPAL
BOND FUND - CLASS A

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 98,940,178
<INVESTMENTS-AT-VALUE> 106,222,742
<RECEIVABLES> 2,228,170
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 100
<TOTAL-ASSETS> 108,451,012
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 461,658
<TOTAL-LIABILITIES> 461,658
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 102,318,540
<SHARES-COMMON-STOCK> 842,310
<SHARES-COMMON-PRIOR> 10,802,057
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (7,257)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1,604,493)
<ACCUM-APPREC-OR-DEPREC> 7,282,564
<NET-ASSETS> 8,835,423
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,776,156
<OTHER-INCOME> 0
<EXPENSES-NET> 869,767
<NET-INVESTMENT-INCOME> 4,906,389
<REALIZED-GAINS-CURRENT> 723,926
<APPREC-INCREASE-CURRENT> 1,656,976
<NET-CHANGE-FROM-OPS> 7,287,291
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (2,135,085)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 293,734
<NUMBER-OF-SHARES-REDEEMED> (10,282,763)
<SHARES-REINVESTED> 29,282
<NET-CHANGE-IN-ASSETS> (3,170,619)
<ACCUMULATED-NII-PRIOR> 248,239
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (2,328,419)
<GROSS-ADVISORY-FEES> 800,745
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,178,378
<AVERAGE-NET-ASSETS> 42,551,327
<PER-SHARE-NAV-BEGIN> 10.290
<PER-SHARE-NII> 0.480
<PER-SHARE-GAIN-APPREC> 0.140
<PER-SHARE-DIVIDEND> (0.420)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.490
<EXPENSE-RATIO> 0.95
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>

<ARTICLE> 6
<CIK> 0000867502
<NAME> THE WACHOVIA MUNICIPAL FUNDS
<SERIES>
<NUMBER> 041
<NAME> WACHOVIA VIRGINIA MUNICIPAL
BOND FUND - CLASS Y

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> NOV-30-1998
<PERIOD-END> NOV-30-1998
<INVESTMENTS-AT-COST> 98,940,178
<INVESTMENTS-AT-VALUE> 106,222,742
<RECEIVABLES> 2,228,170
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 100
<TOTAL-ASSETS> 108,451,012
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 461,658
<TOTAL-LIABILITIES> 461,658
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 102,318,540
<SHARES-COMMON-STOCK> 9,448,676
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> (7,257)
<ACCUMULATED-NET-GAINS> 0
<OVERDISTRIBUTION-GAINS> (1,604,493)
<ACCUM-APPREC-OR-DEPREC> 7,282,564
<NET-ASSETS> 99,153,931
<DIVIDEND-INCOME> 0
<INTEREST-INCOME> 5,776,156
<OTHER-INCOME> 0
<EXPENSES-NET> 869,767
<NET-INVESTMENT-INCOME> 4,906,389
<REALIZED-GAINS-CURRENT> 723,926
<APPREC-INCREASE-CURRENT> 1,656,976
<NET-CHANGE-FROM-OPS> 7,287,291
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> (3,026,800)
<DISTRIBUTIONS-OF-GAINS> 0
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 10,356,070
<NUMBER-OF-SHARES-REDEEMED> (910,974)
<SHARES-REINVESTED> 3,580
<NET-CHANGE-IN-ASSETS> (3,170,619)
<ACCUMULATED-NII-PRIOR> 248,239
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> (2,328,419)
<GROSS-ADVISORY-FEES> 800,745
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 1,178,378
<AVERAGE-NET-ASSETS> 66,128,991
<PER-SHARE-NAV-BEGIN> 10.340
<PER-SHARE-NII> 0.320
<PER-SHARE-GAIN-APPREC> 0.150
<PER-SHARE-DIVIDEND> (0.320)
<PER-SHARE-DISTRIBUTIONS> 0.000
<RETURNS-OF-CAPITAL> 0.000
<PER-SHARE-NAV-END> 10.490
<EXPENSE-RATIO> 0.68
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0.000

</TABLE>