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
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Pre-Effective Amendment No. ....................
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Post-Effective Amendment No. 19 .................... X
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and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 X
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Amendment No. 19 .................................... X
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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:
immediately upon filing pursuant to paragraph (b) X_ on January 31, 2000
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 Fund
Quantitative Equity Fund
Special Values Fund
Balanced Fund
Fixed Income Fund
Prospectus
January 31, 2000
[WACHOVIA LOGO]
www.wachoviafunds.com
PROSPECTUS
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
Wachovia Special Values Fund Wachovia Emerging Markets Fund
Wachovia Balanced Fund Wachovia Personal Equity Fund
Wachovia Fixed Income Fund Wachovia Intermediate Fixed Income Fund
Wachovia Short-Term Fixed Income Fund
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 (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
CONTENTS
<S> <C>
Fund Goals, Strategies, Performance and Risk 1
What are the Funds' Fees and Expenses? 17
What are the Funds' Main Investments and Investment Techniques? 19
What are the Risks of Investing in the Fund? 20
What do Shares Cost? 21
How are the Funds Sold? 23
How to Purchase Shares 23
How to Exchange Shares 24
How to Redeem Shares 24
Account and Share Information 25
Who Manages the Funds? 26
Financial Information 28
</TABLE>
JANUARY 31, 2000
Fund Goals, Strategies,
Performance and Risk
EQUITY FUNDS
WACHOVIA EQUITY FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to produce growth of principal and income.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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. The investment adviser uses a combination of fundamental analysis,
quantitative modeling, strategic outlook, and relative price performance trends
is used to select stocks that it perceives to be undervalued with prospects for
improving fundamentals.
Total Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's 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 Table
The following table represents the Fund's Class A and Class B Shares Average
Annual Total Returns, reduced to reflect applicable sales charges, for the
calendar period ended December 31, 1999. The table shows the Fund's Class A
Shares and Class B Shares total returns averaged over a period of years relative
to the S&P 500 Index (S&P 500), a broad based market index. Total returns for
the index shown do not reflect sales charges, expenses or other fees that the
SEC requires to be reflected in the Fund's performance. Indexes are unmanaged,
and it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class A Class B
S&P 500
<S> <C> <C> <C>
1 Year 20.40% 20.06%
21.05%
5 Years 23.64% N/A
28.56%
Start of Performance1 18.62% 25.22%
22.33%
</TABLE>
1 The Fund's Class A Shares and Class B Shares start of performance dates were
May 7, 1993 and July 23, 1996, respectively.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
WACHOVIA QUANTITATIVE EQUITY FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to provide growth of principal and income.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's 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 Table
The following table represents the Fund's Class A Shares and Class B Shares
Average Annual Total Returns, reduced to reflect applicable sales charges, for
the calendar period ended December 31, 1999. The table shows the Fund's Class A
Shares and Class B Shares total returns averaged over a period of years relative
to the S&P 500 Index (S&P 500), a broad based market index. Total returns for
the index shown do not reflect sales charges, expenses or other fees that the
SEC requires to be reflected in the Fund's performance. Indexes are unmanaged,
and it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class A Class B S&P 500
<S> <C> <C> <C>
1 Year 10.36% 9.82% 21.05%
5 Years 25.38% N/A 28.56%
Start of Performance/1/ 21.12% 25.58% 24.83%
</TABLE>
1 The Fund's Class A Shares and Class B Shares start of performance dates were
March 25, 1994 and July 23, 1996, respectively.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
WACHOVIA GROWTH & INCOME FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to provide total return through growth of capital and current income.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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. The investment adviser uses a combination of fundamental analysis,
quantitative modeling, strategic outlook, and relative price performance trends
is used to select stocks that it perceives to have the potential for growth of
capital and/or income.
Total Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 21.14% (quarter ended December 31, 1998). Its lowest
quarterly return was (9.79%) (quarter ended September 30, 1998).
Average Annual Total Return Table
The following table represents the Fund's Class A Shares Average Annual Total
Returns, reduced to reflect applicable sales charges, for the calendar period
ended December 31, 1999. The table shows the Fund's Class A Shares total returns
averaged over a period of years relative to the S&P 500 Index (S&P 500), a
broad- based market index. Total returns for the index shown do not reflect
sales charges, expenses or other fees that the SEC requires to be reflected in
the Fund's performance. Indexes are unmanaged, and it is not possible to invest
directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class A S&P 500
<S> <C> <C>
1 Year 17.52% 21.05%
5 Years 26.41% 28.56%
Start of Performance/1/ 18.95% 21.66%
</TABLE>
1 The Fund's Class A Shares start of performance date was January 29, 1993.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
WACHOVIA EQUITY INDEX FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to provide a total return that approximates that of the stock market as
measured by the S&P 500 Index (S&P 500).
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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 S&P 500 and closely match the performance of the
S&P 500. 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 S&P 500 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
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's 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 Table
The following table represents the Fund's Class A Shares Average Annual Total
Returns, reduced to reflect applicable sales charges, for the calendar period
ended December 31, 1999. The table shows the Fund's Class A Shares total returns
averaged over a period of years relative to the S&P 500, a broad based market
index. Total returns for the index shown do not reflect sales charges, expenses
or other fees that the SEC requires to be reflected in the Fund's performance.
Indexes are unmanaged, and it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class A S&P
500
<S> <C> <C>
1 Year 14.49%
21.05%
5 Years 26.51%
28.56%
Start of Performance1 20.70%
22.33%
</TABLE>
1 The Fund's Class A Shares start of performance date was May 7, 1993.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
WACHOVIA SPECIAL VALUES FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to produce growth of principal.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
The Fund pursues its investment objective by investing primarily in a portfolio
of stocks of small U.S. companies. The investment adviser looks for
significantly undervalued companies that it believes have the potential for
above-average growth commensurate with increased risk. Typical investments are
in stocks of companies that have low price-to-earnings ratios, are generally out
of favor in the marketplace, are selling significantly below their stated or
replacement book value or are undergoing a reorganization or other corporate
action that may create above- average price appreciation. Under normal market
conditions, the Fund intends to invest at least 65% of its assets in stocks of
companies that have a market value capitalization of $1.5 billion or less. The
Fund may invest up to 20% of total assets in foreign securities.
Total Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 16.56% (quarter ended June 30, 1999). Its lowest quarterly
return was (18.00%) (quarter ended September 30, 1998).
Average Annual Total Return Table
The following table represents the Fund's Class A Shares and Class B Shares
Average Annual Total Returns, reduced to reflect applicable sales charges, for
the calendar period ended December 31, 1999. The table shows the Fund's Class A
Shares and Class B Shares total returns averaged over a period of years relative
to the Russell 2000 Small Stock Index (Russell 2000), a broad based market index
consisting of 2,000 small capitalization common stocks. Total returns for the
index shown do not reflect sales charges, expenses or other fees that the SEC
requires to be reflected in the Fund's performance. Indexes are unmanaged, and
it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class A Class B
Russell 2000
<S> <C> <C> <C>
1 Year 1.57%
N/A 21.26%
5 Years 18.18%
N/A 16.69%
Start of Performance/1/ 13.81%
8.32% 14.29%
</TABLE>
1 The Fund's Class A Shares and Class B Shares start of performance date were
May 7, 1993 and March 26, 1999, respectively.
Past performance does not necessarily predict future performance. This
Information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
WACHOVIA EMERGING MARKETS FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to produce long-term capital appreciation.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 32.37% (quarter ended December 31, 1999). Its lowest
quarterly return was (26.63%) (quarter ended September 30, 1998).
Average Annual Total Return Table
The following table represents the Fund's Class A Shares Average Annual Total
Returns, reduced to reflect applicable sales charges, for the calendar period
ended December 31, 1999. The table shows the Fund's Class A Shares total returns
averaged over a period of years relative to the International Finance
Corporation Investable Index (Total Return Series) (IFCI), a broad based market
index of over 1,000 securities in 26 emerging market countries. Total returns
for the index shown do not reflect sales charges, expenses or other fees that
the SEC requires to be reflected in the Fund's performance. Indexes are
unmanaged, and it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class A
IFCI
<S> <C> <C>
1 Year 58.09%
67.11%
5 Years 6.32%
2.17%
Start of Performance/1/ 6.29%
2.06%
</TABLE>
1 The Fund's Class A Shares start of performance date was December 23, 1994.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
WACHOVIA PERSONAL EQUITY FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks growth of principal and income, while minimizing the impact of taxes on
shareholder returns.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
The Fund pursues its goal by investing in a portfolio of common stocks of
companies traded in an established market. The Fund's investment adviser
indentifies the most attractive securities based on a disciplined analysis of
investment criteria that considers both growth and value opportunities. The Fund
is managed with a long-term time horizon, and is anticipated to have a lower
turnover ratio than a typical equity mutual fund. With the goal of maximizing
after-tax returns, the Fund's investment adviser will seek to minimize realized
capital gains in general, and short-term capital gains in particular. For
example, it will generally buy securities that it intends to hold over the long
term, and avoid short- term trading. In deciding which securities to sell, the
Fund's investment adviser will consider their capital gain or loss situation,
and may attempt to off-set capital gains by selling securities that have gone
down in value or that have the highest cost basis. Also, the Fund's investment
adviser generally will consider selling any security that has not met its
expectations for growth, in which case the capital gain generally would be
relatively small. Successful application of this strategy will result in
shareholders incurring capital gains when they ultimately sell their Fund
shares.
Total Return Bar Chart and Table
The total return bar chart and table for the Fund's Class A Shares are not
provided since the Class A Shares have not been in operation for a full calendar
year. The total return for the Fund's Class A Shares from inception through
November 30, 1999 is provided under the section "Financial Information."
WACHOVIA BALANCED FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to produce long-term growth of principal and current income.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's 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 Table
The following table represents the Fund's Class A and Class B Shares Average
Annual Total Returns, reduced to reflect applicable sales charges, for the
calendar period ended December 31, 1999. The table shows the Fund's Class A
Shares and Class B Shares total returns averaged over a period of years relative
to the Standard & Poor's 500 Index (S&P 500) and the Lehman Brothers Aggregate
Bond Index (LBABI), each a broad based market index. LBABI measures both the
capital price changes and the income provided by the underlying universe of
securities, comprised of U.S. Treasury obligations, U.S. agency obligations,
foreign obligations, U.S. investment-grade corporate debt and mortgage-backed
obligations. Total returns for the index shown do not reflect sales charges,
expenses or other fees that the SEC requires to be reflected in the Fund's
performance. Indexes are unmanaged, and it is not possible to invest directly in
an index.
<TABLE>
<CAPTION>
Calendar Period Class A Class B S&P
500 LBABI
<S> <C> <C>
<C> <C>
1 Year 9.61% 9.01%
21.05% (0.82%)
5 Years 17.34% N/A
28.56% 7.73%
Start of Performance/1/ 13.67% 17.16%
22.33% 5.99%
</TABLE>
1 The Fund's Class A Shares and Class B Shares start of performance dates were
May 7, 1993 and July 23, 1996, respectively.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
INCOME FUNDS
WACHOVIA FIXED INCOME FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks a high level of total return.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's 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 Table
The following table represents the Fund's Class A Shares and Class B Shares
Average Annual Total Returns, reduced to reflect applicable sales charges, for
the calendar period ended December 31, 1999. The table shows the Fund's Class A
Shares and Class B Shares total returns averaged over a period of years relative
to the Lehman Brothers Aggregate Bond Index (LBABI), a broad based market index.
LBABI measures both the capital price changes and the income provided by the
underlying universe of securities, comprised of U.S. Treasury obligations, U.S.
agency obligations, foreign obligations, U.S. investment-grade corporate debt
and mortgage-backed obligations. Total returns for the index shown do not
reflect sales charges, expenses or other fees that the SEC requires to be
reflected in the Fund's performance. Indexes are unmanaged, and it is not
possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class A Class
B LBABI
<S> <C>
<C> <C>
1 Year (6.14%)
(7.07%) (0.82%)
5 Years 5.95%
N/A 7.73%
Start of Performance/1/ 4.34%
4.10% 5.99%
</TABLE>
1 The Fund's Class A Shares and Class B Shares start of performance dates were
May 7, 1993 and July 23, 1996, respectively.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
WACHOVIA INTERMEDIATE FIXED INCOME FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks current income consistent with preservation of capital.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's 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 Table
The following table represents the Fund's Class A Shares Average Annual Total
Returns, reduced to reflect applicable sales charges, for the calendar period
ended December 31, 1999. The table shows the Fund's Class A Shares total returns
averaged over a period of years relative to the Lehman Brothers Government/
Corporate Intermediate Index (LBGCII), a broad based market index. LBGCII is
comprised of all issues by the Lehman Brothers Government/Corporate Bond Index
with maturities between 1 and 9.99 years. Total returns for the index shown do
not reflect sales charges, expenses or other fees that the SEC requires to be
reflected in the Fund's performance. Indexes are unmanaged, and it is not
possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class A
LBGCII
<S> <C>
<C>
1 Year (6.27
%) 0.39%
5 Years
5.40% 7.10%
Start of Performance/1/
4.19% 6.07%
</TABLE>
1 The Fund's Class A Shares start of performance date was January 29, 1993.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
WACHOVIA SHORT-TERM FIXED INCOME FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to produce a high level of current income.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's 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 Table
The following table represents the Fund's Class A Shares Average Annual Total
Returns, reduced to reflect applicable sales charges, for the calendar period
ended December 31, 1999. The table shows the Fund's Class A Shares total returns
averaged over a period of years relative to the Merrill Lynch 1-3 Year U.S.
Treasury Index (MLUST), a broad based market index tracking short- term U.S.
government securities with maturities between 1 and 2.99 years. Total returns
for the index shown do not reflect sales charges, expenses or other fees that
the SEC requires to be reflected in the Fund's performance. Indexes are
unmanaged, and it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class A
MLUST
<S> <C> <C>
1 Year
(0.52%) 3.06%
5 Years
5.08% 6.51%
Start of Performance/1/
4.29% 5.31%
</TABLE>
1 The Fund's Class A Shares start of performance date was May 7, 1993.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
MUNICIPAL FUNDS
WACHOVIA GEORGIA MUNICIPAL BOND FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to provide current income which is exempt from federal regular income tax
and the income taxes imposed by the State of Georgia.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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 taxes imposed by the State of Georgia. 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
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 5.69% (quarter ended March 31, 1995). Its lowest quarterly
return was (2.21%) (quarter ended June 30, 1999).
Average Annual Total Return Table
The following table represents the Fund's Class A Shares Average Annual Total
Returns, reduced to reflect applicable sales charges, for the calendar period
ended December 31, 1999. The table shows the Fund's Class A Shares total returns
averaged over a period of years relative to the Lehman Brothers State General
Obligation Bond Index (LSGOBI and the Lehman Brothers Aggregate Municipal Bond
Index (LBMBI), both broad based market indexes. LSGOBI is comprised of all state
general obligation debt issues. LBMBI is a benchmark for the tax-exempt bond
market. The Fund's investment adviser has elected to change the benchmark from
the LSGOBI to LBMBI because LBMBI is more representative of the securities in
which the Fund invests. Total returns for the index shown do not reflect sale
expenses or other fees that the SEC requires to be reflected in the Fund's
performance. Indexes are unmanaged, and it is not possible to invest directly in
an index.
<TABLE>
<CAPTION>
Calendar Period Class A
LSGOBI LBMBI
<S> <C>
<C> <C>
1 Year (7.99 %) (1.13%
) (2.06% )
5 Years 4.25%
6.76% 6.91%
Start of Performance1 4.29%
6.76% 7.34%
</TABLE>
1 The Fund's Class A Shares start of performance date was December 23, 1994.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
WACHOVIA NORTH CAROLINA MUNICIPAL BOND FUND
WHAT IS THE FUND'S INVESTMENT 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.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 5.48% (quarter ended March 31, 1995). Its lowest quarterly
return was (2.30%) (quarter ended June 30, 1999).
Average Annual Total Return Table
The following table represents the Fund's Class A Shares Average Annual Total
Returns, reduced to reflect applicable sales charges, for the calendar period
ended December 31, 1999. The table shows the Fund's Class A Shares total returns
averaged over a period of years relative to the Lehman Brothers State General
Obligation Bond Index (LSGOBI) and the Lehman Brothers Aggregate Municipal Bond
Index (LBMBI), both broad-based market indexes. LSGOBI is comprised of all state
general obligation debt issues. LBMBI is a benchmark for the tax-exempt bond
market. The Fund's investment adviser has elected to change the benchmark from
the LSGOBI to LBMBI because LBMBI is more representative of the securities in
which the Fund invests. Total returns for the index shown do not reflect sale
expenses or other fees that the SEC requires to be reflected in the Fund's
performance. Indexes are unmanaged, and it is not possible to invest directly in
an index.
<TABLE>
<CAPTION>
Calendar Period Class A LSGOBI
LBMBI
<S> <C> <C>
<C>
1 Year (7.77%)
(1.13%) (2.06%)
5 Years 4.53%
6.76% 6.91%
Start of Performance/1/ 4.59%
6.76% 7.34%
</TABLE>
1 The Fund's Class A Shares start of performance date was December 23, 1994.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
WACHOVIA SOUTH CAROLINA MUNICIPAL BOND FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to provide current income which is exempt from federal regular income tax
and the South Carolina state income taxes.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's 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 Table
The following table represents the Fund's Class A Shares Average Annual Total
Returns, reduced to reflect applicable sales charges, for the calendar period
ended December 31, 1999. The table shows the Fund's Class A Shares total returns
averaged over a period of years relative to the Lehman Brothers State General
Obligation Bond Index (LSGOBI) and the Lehman Brothers Aggregate Municipal Bond
Index (LBMBI), both broad-based market indexes. LSGOBI is comprised of all state
general obligation debt issues. LBMBI is a benchmark for the tax-exempt bond
market. The Fund's investment adviser has elected to change the benchmark from
the LSGOBI to LBMBI because LBMBI is more representative of the securities in
which the Fund invests. Total returns for the index shown do not reflect sale
expenses or other fees that the SEC requires to be reflected in the Fund's
performance. Indexes are unmanaged, and it is not possible to invest directly in
an index.
<TABLE>
<CAPTION>
Calendar Period Class A
LSGOBI LBMBI
<S> <C> <C>
<C>
1 Year (7.72%)
(1.13%) (2.06%)
5 Years 4.74%
6.76% 6.91%
Start of Performance/1/ 5.52%
6.49% 7.34%
</TABLE>
1 The Fund's Class A Shares start of performance date 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
returns.
WACHOVIA VIRGINIA MUNICIPAL BOND FUND
WHAT IS THE FUND'S INVESTMENT 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.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class A Shares total returns
on a calendar year-end basis.
The total returns displayed for the Fund's Class A Shares do not reflect the
payment of any sales charges or recurring shareholder account fees. If these
charges or fees had been included, the returns shown would have been lower.
Within the period shown in the Chart, the Fund's 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 Table
The following table represents the Fund's Class A Shares Average Annual Total
Returns, reduced to reflect applicable sales charges, for the calendar period
ended December 31, 1999. The table shows the Fund's Class A Shares total returns
averaged over a period of years relative to the Lehman Brothers State General
Obligation Bond Index (LSGOBI) and the Lehman Brothers Aggregate Municipal Bond
Index (LBMBI), both broad-based market indexes. LSGOBI is comprised of all state
general obligation debt issues. LBMBI is a benchmark for the tax-exempt bond
market. The Fund's investment adviser has elected to change the benchmark from
the LSGOBI to LBMBI because LBMBI is more representative of the securities in
which the Fund invests. Total returns for the index shown do not reflect sale
expenses or other fees that the SEC requires to be reflected in the Fund's
performance. Indexes are unmanaged, and it is not possible to invest directly in
an index.
<TABLE>
<CAPTION>
Calendar Period Class A LSGOBI
LBMBI
<S> <C> <C>
<C>
1 Year (7.23%)
(1.13%) (2.06%)
5 Years 4.10%
6.76% 6.91%
Start of Performance/1/ 3.19%
6.58% 5.73%
</TABLE>
1 The Fund's Class A Shares start of performance date was February 1, 1993.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?
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>
Debt
Emerging Municipal
Market Securities
Markets Securities Diversification
Fund Risk (a) Risks (b) Risks
(c) Risks (d) Risks (e)
<S> <C> <C>
<C> <C> <C>
Equity Fund X
Quantitative Equity Fund X
Growth & Income Fund X
Equity Index Fund X
Special Values Fund X
Emerging Markets Fund X X
Personal Equity Fund X
Balanced Fund 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>
(a) 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. Stocks have greater volatility than debt securities.
(b) 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 a Fund's net asset value may go down.
(c) 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.
(d) Local political and economic factors may adversely affect the value and
liquidity of municipal securities held by a Fund. The value of municipal
securities can be affected more by supply and demand factors or the
creditworthiness of the issuer than market interest rates.
(e) Compared to diversified mutual funds, they may invest a higher percentage of
a Fund's assets among fewer issuers of portfolio securities. This increases
a Fund's risk by magnifying the impact (positively or negatively) that any
one issuer has on a Fund's share price and performance.
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>
Quanti
-Tative Growth
& Equity Special Emerging Personal
Shareholder Fees Equity Equity
Income Index Values Markets Equity Balanced
Fees Paid Directly From Your Investment Fund Fund
Fund Fund Fund Fund Fund Fund
<S> <C> <C> <C>
<C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a 5.75% 5.75%
5.75% 5.75% 5.75% 5.75% 5.75% 5.75%
percentage of offering
price)
Maximum Deferred Sales Charge (Load) (as a percentage None None
None None None None None None
of original purchase price or redemption proceeds,
as
applicable)
Maximum Sales Charge (Load) Imposed on Reinvested None None
None None None None None None
Dividends (and other Distributions) (as a
percentage
of offering
price)
Redemption Fee (as a percentage of amount redeemed, if None None
None None None None None None
applicable)
Exchange Fee None 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% 0.70%
Distribution (12b-1) Fee None None
None None None None None None
Shareholder Services Fee 0.25% 0.25%
0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses 0.14% 0.16%
0.14% 0.14% 0.18% 0.35% 0.21% 0.14%
Total Annual Class A Shares Operating Expenses (Before 1.09% 1.11%
1.09% 0.69% 1.23% 1.60% 1.16% 1.09%
Waiver)/1/
Waiver of Fund Expenses 0.00% 0.00%
0.00% 0.00% 0.00% 0.00% 0.01% 0.08%
Total Actual Annual Fund Operating Expenses 1.09% 1.11%
1.09% 0.69% 1.23% 1.60% 1.15% 1.01%
(After Waiver)
</TABLE>
<TABLE>
<CAPTION>
Inter-
Short- North South
mediate Term
Georgia Carolina Carolina Virginia
Shareholder Fees Fixed Fixed Fixed
Municipal Municipal Municipal Municipal
Fees Paid Directly From Your Investment Income Income Income
Bond Bond Bond Bond
Fund Fund Fund
Fund Fund Fund Fund
<S> <C> <C> <C>
<C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a 4.50% 4.50% 2.50%
4.50% .50% 4.50% 4.50%
percentage of offering
price)
Maximum Deferred Sales Charge (Load) (as a percentage None None None
None None None None
of original purchase price or redemption proceeds,
as
applicable)
Maximum Sales Charge (Load) Imposed on Reinvested None None None
None None None None
Dividends (and other Distributions) (as a
percentage
of offering
price)
Redemption Fee (as a percentage of amount redeemed, if None None None
None None None None
applicable)
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 0.60% 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 0.15% 0.18% 0.22%
0.30% 0.21% 0.18% 0.20%
Total Annual Class A Shares Operating Expenses (Before 1.00% 1.03% 1.02%
1.30% 1.21% 1.18% 1.19%
Waiver)/1/
Waiver of Fund Expenses 0.03% 0.04% 0.14%
0.45% 0.36% 0.35% 0.34%
Total Actual Annual Fund Operating Expenses 0.97% 0.99% 0.88%
0.85%/2/ 0.85%/2/ 0.83%/2/ 0.85%/2/
(After Waiver)
</TABLE>
1 Pursuant to an agreement between the Adviser and The Wachovia Funds and The
Wachovia Municipal Funds (collectively, the Trusts), the Adviser agrees
during the period from December 15, 1998 through January 31, 2001 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.
2 The Total Actual Annual Fund Operating Expenses for the fiscal year ending
November 30, 2000 are expected to be 0.85% for Georgia Municipal Bond Fund,
North Carolina Municipal Bond Fund and Virginia Municipal Bond Fund,
respectively.
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 the 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 $680 $ 902
$1,141 $1,827
Quantitative Equity Fund $682 $ 908
$1,151 $1,849
Growth & Income Fund $680 $ 902
$1,141 $1,827
Equity Index Fund $641 $ 783 $
937 $1,384
Special Values Fund $693 $ 943
$1,212 $1,978
Emerging Markets Fund $728 $1,051
$1,396 $2,366
Personal Equity Fund $686 $ 922
$1,177 $1,903
Balanced Fund $680 $ 902
$1,141 $1,827
Fixed Income Fund $547 $ 754 $
978 $1,620
Intermediate Fixed Income Fund $550 $ 763 $
993 $1,653
Short-Term Fixed Income Fund $351 $ 567 $
799 $1,467
Georgia Municipal Bond Fund $576 $ 844
$1,131 $1,947
North Carolina Municipal Bond Fund $568 $ 817
$1,085 $1,850
South Carolina Municipal Bond Fund $565 $ 808
$1,070 $1,817
Virginia Municipal Bond Fund $566 $ 811
$1,075 $1,828
</TABLE>
What are the Funds' Fees and Expenses?
These tables describe the fees and expenses that you may pay if you buy and hold
shares of the Funds' Class B Shares.
<TABLE>
<CAPTION>
Special Fixed
Shareholder Fees Equity
Quantitative Values Balanced Income
Fees Paid Directly From Your Investment Fund Equity
Fund Fund 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, 5.00%
5.00% 5.00% 5.00% 5.00%
as applicable)
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 Expenses/1/
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 0.14%
0.16% 0.18% 0.14% 0.15%
Total Annual Class B Shares Operating
Expenses
(Before Waiver)/1/ 1.84%
1.86% 1.98% 1.84% 1.75%
Waiver of Fund Expenses 0.00%
0.00% 0.00% 0.08% 0.03%
Total Actual Annual Fund Operating Expenses (After Waiver) 1.84%
1.86% 1.98% 1.76% 1.72%
</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, 2001 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 B Shares with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in each Fund's Class B 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 the 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
Equity Fund
<S> <C> <C> <C>
<C>
Expenses assuming redemption $687 $879
$1,196 $1,962
Expenses assuming no redemption $187 $579 $
996 $1,962
Quantitative Equity Fund
Expenses assuming redemption $689 $885
$1,206 $1,983
Expenses assuming no redemption $189 $585
$1,003 $1,983
Special Values Fund
Expenses assuming redemption $701 $921
$1,268 $2,047
Expenses assuming no redemption $201 $621
$1,068 $2,047
Balanced Fund
Expenses assuming redemption $687 $879
$1,196 $1,962
Expenses assuming no redemption $187 $579 $
996 $1,962
Fixed Income Fund
Expenses assuming redemption $678 $851
$1,149 $1,864
Expenses assuming no redemption $178 $551 $
949 $1,864
</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 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 treat such
redeemable preferred stock as a fixed income security.
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). A Fund may buy the designated securities by paying the exercise price
before the expiration date. Warrants may become worthless if the price of the
stock does not rise above the exercise price by the expiration date. This
increases the market risks of warrants as compared to the underlying security.
Rights are the same as warrants, except companies typically issue rights to
existing stockholders.
FIXED INCOME SECURITIES
The Income Funds invest primarily in fixed income securities. Fixed income
securities pay interest, dividends or distributions at a specified rate. The
rate may be a fixed percentage of the principal or adjusted periodically. In
addition, the issuer of a fixed income security must repay the principal amount
of the security, normally within a specified time. Fixed income securities
provide more regular income than equity securities. However, the returns on
fixed income securities are limited and normally do not increase with the
issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
MUNICIPAL SECURITIES
The Municipal Funds invest primarily in municipal securities. Municipal
securities are issued by states, counties, cities and other political
subdivisions and authorities. Although many municipal securities are exempt from
federal income tax, the Municipal Funds may invest in 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 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. 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 and
Personal Equity Fund) actively trade their portfolio securities in an attempt to
achieve each Fund's investment objective. Active trading will cause a Fund to
have an increased portfolio turnover rate, which is likely to generate shorter-
term gains (losses) for its shareholders, which are taxed at a higher rate than
longer-term gains (losses). Actively trading portfolio securities increases a
Fund's trading costs and may have an adverse impact on the Fund's performance.
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 (S&P) or Baa or better by Moody's
Investors Service (Moody's) 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 S&P or Baa by Moody's have speculative characteristics.
TEMPORARY DEFENSIVE INVESTMENTS
The Funds may temporarily depart from their principal investment strategies by
investing their assets in cash and shorter-term debt securities and similar
obligations. A Fund may do this to minimize potential losses and maintain
liquidity to meet shareholder redemptions during adverse market conditions. This
may cause a Fund to give up greater investment returns to maintain the safety of
principal, that is, the original amount invested by shareholders.
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 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
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
Funds' or Municipal Funds' 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 a 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.
DIVERSIFICATION RISKS
The Municipal Funds are not diversified. Compared to diversified mutual funds,
they may invest a higher percentage of each Fund's 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 a Fund to reinvest the prepayment at a lower yield.
In addition, a 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 a Fund has invested in the
underlying securities or currencies. The excess exposure increases the risks
associated with the underlying securities or currencies on a 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 because foreign economic or political conditions may be less
favorable than those of the United States. Securities in foreign markets may
also be subject to taxation policies that reduce returns for U.S. investors.
Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States.
Foreign companies may also receive less coverage than United States companies by
market analysts and the financial press. In addition, foreign countries may lack
uniform accounting, auditing and financial reporting standards or regulatory
requirements comparable to those applicable to U.S. companies. These factors may
prevent a Fund and its investment adviser from obtaining information concerning
foreign companies that is as frequent, extensive and reliable as the information
available concerning companies in the United States.
Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of a Fund's investments.
EMERGING MARKET SECURITIES RISKS
Investing in the Emerging Markets Fund entails a substantial degree of risk.
Securities issued or traded in emerging markets generally entail greater risks
than securities issued or traded in developed markets. For example, their prices
may be significantly more volatile than prices in developed countries. Emerging
market economies may also experience more severe downturns (with corresponding
currency devaluations) than developed economies.
Emerging market countries may have relatively unstable governments and may
present the risk of nationalization of businesses, expropriation, confiscatory
taxation or, in certain instances, reversion to closed market, centrally planned
economies.
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.
What do Shares Cost?
You can purchase, redeem, or exchange Class A Shares and Class B Shares (Shares)
any day the New York Stock Exchange (NYSE) is open for business. When the Fund
receives your transaction request in proper form (as described in the
prospectus), 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 4:00 p.m. Eastern
time) each day the NYSE is open. The Equity Funds generally value equity
securities according to the last sale price in the market in which they are
primarily traded (either a national securities exchange or the over-the-counter
market). The Income Funds generally value fixed income securities at the last
sale price on a national securities exchange if available, otherwise, as
determined by an independent pricing service. However, the Funds' Board may
determine in good faith that another method of valuing investments is necessary
to appraise their fair market value when a market price is unavailable.
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 5.75% 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, N.A. (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.
The maximum contingent deferred sales charge that you will pay on an
investment in Class B Shares of a Fund is 5.00%. Orders for more than $250,000
of Class B Shares will automatically be invested in Class A Shares.
Sales Charge When You Purchase-Class A Shares
Class A Shares of Equity Funds are sold at their NAV next determined after an
order is received, plus a sales charge as follows:
<TABLE>
<CAPTION>
Sales Charge
as a Percentage Sales
Charge
of Public as a
Percentage
Purchase Amount Offering Price of NAV
<S> <C> <C>
Less than $50,000 5.75% 6.10%
$50,000 but less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.63%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $1 million 2.00% 2.04%
$1 million or greater 0.00% 0.00%
</TABLE>
Class A Shares of Income Funds, except the 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>
Sales Charge
as a Percentage Sales Charge
of Public as a Percentage
Purchase Amount Offering Price of NAV
<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 0.00% 0.00%
</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>
Sales Charge
as a Percentage Sales Charge
of Public as a Percentage
Purchase Amount Offering Price of NAV
<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 0.00% 0.00%
</TABLE>
If your investment qualifies for a reduction or elimination of the sales charge
as described below, you or your investment professional should notify the Fund's
Distributor, Federated Securities Corp. (Distributor), at the time of purchase.
If the Distributor is not notified, you will receive the reduced sales charge
only on additional purchases, and not retroactively on previous purchases.
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.
<TABLE>
<CAPTION>
Shares Held Up To: CDSC
<S> <C>
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%
</TABLE>
Class B Shares will convert to Class A Shares at NAV approximately eight years
after purchase.
If your investment qualifies, for a reduction or elimination of the CDSC as
described below, you or your investment professional should notify the
Distributor at the time of redemption. If the Distributor is not notified, the
CDSC will apply.
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?
Each Fund offers 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 its performance. Call 1-800-994-4414 or contact your investment
professional for more information concerning the other classes.
The Fund's 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
Each of the Equity Fund, Quantitative Equity Fund, Special Values Fund, Balanced
Fund and Fixed Income Fund has 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 the Trust Division of Wachovia Bank, through
Wachovia Investments or through an Authorized Dealer.
Where a 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
Customers of Wachovia Investments 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) 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) and send 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
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. 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.
A Fund may modify or terminate the exchange privilege at any time.
Shareholders will be notified of the modification or termination of the exchange
privilege. A 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 telephone
transaction privileges change.
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, 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 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:
The 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.
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 telephone
transaction privileges change.
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>
Dividends Declared
Fund and Paid
<S> <C>
Equity Fund
Quantitative Equity Fund
Growth & Income Fund
Equity Index Fund quarterly
Personal Equity 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 to receive 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 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
approximately $44 billion in managed assets as of December 31, 1999.
Quantitative Equity Fund is sub-advised by Twin Capital Management, Inc.,
McMurray, Pennsylvania, which is paid by the investment 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>
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% Personal Equity Fund 0.70% 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 investment
adviser and the Trusts, the investment adviser agrees during the period from
December 15, 1998 through January 31, 2001 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
investment adviser agrees that this obligation shall constitute a contractual
commitment enforceable by the Trusts and that the investment 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,
Equity Fund Personal Equity Fund Portfolio
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 an MBA
from the University of North Carolina at
Chapel Hill.
- --------------------------------------------------------------------------------------------------------------------------------
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 an MBA from the University
of Chicago.
- --------------------------------------------------------------------------------------------------------------------------------
John F. Hageman Equity Fund Balanced Fund John F.
Hageman is a Chartered Financial Analyst and
Growth & Income Fund Personal Equity a Senior
Vice President and Institutional Portfolio
Fund 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 Fund Short-Term Fixed Income Income
Portfolio Manager of the investment adviser.
Fund Mr. Holt
joined Wachovia Bank in 1991. He is a
graduate of
the University of Tennessee where he
majored in
economics and received an MBA in Finance.
- --------------------------------------------------------------------------------------------------------------------------------
J. Wesley Jordan Emerging Markets Fund Mr. Jordan
is an Investment Officer and Portfolio
Manager of
the investment adviser. Mr. Jordan joined
Wachovia in
1998 as an emerging markets analyst and
assumed his
current position in January 2000. He is a
graduate of
the University of North Carolina in
Chapel Hill
and received a Masters of International
Affairs
degree in economics from Columbia University,
where he
was Managing Editor of the Journal of
International Affairs.
- --------------------------------------------------------------------------------------------------------------------------------
Russell L. Kimbro, Jr. Equity Fund Balanced Fund Mr. Kimbro
is a Chartered Financial Analyst and
Growth & Income Fund Personal Equity Senior Vice
President and Portfolio Manager for
Fund Personal
Financial Services for the investment
adviser.
Mr. Kimbro joined Wachovia Bank in 1985. Mr.
Kimbro is
an instructor of corporate finance at the
University
of North Carolina at Greensboro. He
received
his bachelors degree in economics from
Virginia
Polytechnical Institute and State University
and an 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
Growth & Income Fund Personal Equity Senior Vice
President of the investment adviser. Mr.
Fund 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
Growth & Income Fund Personal Equity Vice
President and Portfolio Manager for Personal
Fund 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
Growth & Income Fund Personal Equity manages the
Wachovia Equity Investment Fund and other
Fund 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
Income Fund Short-Term Fixed Income Senior Vice
President of the investment adviser.
Fund 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 Fund Short-Term Fixed Income income
portfolio manager of the investment adviser.
Fund 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 Senior 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
Income Fund Short-Term Fixed Income Portfolio
Manager for the investment adviser. Mr.
Fund Sebesta
joined Wachovia Bank in 1989. Mr. Sebesta has
a bachelors
degree in economics from Wake Forest
University.
- --------------------------------------------------------------------------------------------------------------------------------
James M. Tringas Special Values Fund Mr. Tringas
is a Chartered Financial Analyst and is a
Portfolio
Manager and Vice President of the
investment
adviser. Mr. Tringas joined Wachovia in
1994 as a
security analyst and assumed his current
position in
1999. Prior to joining Wachovia he was
employed by
Ernst & Young, LLP in Atlanta. He holds a
bachelors
degree in accounting and a masters degree
in tax from
the University of Florida. Mr. Tringas is
a Certified
Public Accountant.
- --------------------------------------------------------------------------------------------------------------------------------
Joseph H. Waterfill Balanced Fund Equity Fund Mr.
Waterfill is a Senior Vice President and
Quantitative Equity Fund Portfolio
Manager of the investment adviser.
Growth & Income Fund Personal Equity
Mr.Waterfill joined Wachovia Bank in 1976. Mr.
Fund 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 each 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 THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Net
Realized Distributions
and
Unrealized from Net Realized
Net Asset Gain/(Loss) on
Distributions Gain on Investment
Value, Net Investments, Futures Total from from
Net Transactions, Futures
Year Ended beginning Investment Contracts, and Foreign Investment
Investment Contracts and Total
November 30, of period Income Currency Transactions Operations
Income Foreign Currency Distributions
<S> <C> <C> <C> <C>
<C> <C> <C>
Wachovia Equity Fund
1995 $10.32 0.23 2.64 2.87
(0.25) (0.23) (0.48)
1996 $12.71 0.22(4) 2.83 3.05
(0.22) (0.73) (0.95)
1997 $14.81 0.14(4) 2.43 2.57
(0.13) (1.86) (1.99)
1998 $15.39 0.13(4) 2.21 2.34
(0.14) (1.68) (1.82)
1999 $15.91 0.06 3.41 3.47
(0.07) (1.89) (1.96)
Wachovia Quantitative Equity Fund
1995 $9.60 0.22 3.51 3.73
(0.22) -- (0.22)
1996 $13.11 0.24(4) 2.77 3.01
(0.21) (0.24) (0.45)
1997 $15.67 0.18(4) 4.14 4.32
(0.20) (0.79) (0.99)
1998 $19.00 0.11(4) 3.12 3.23
(0.19) (1.75) (1.94)
1999 $20.29 0.09 3.16 3.25
(0.12) (2.42) (2.54)
Wachovia Growth & Income
Fund
1995 $9.80 0.17 3.09 3.26
(0.18) -- (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)
1999 $23.54 0.05 4.24 4.29
(0.08) (2.89) (2.97)
Wachovia Equity Index
Fund
1995 $10.27 0.28 3.37 3.65
(0.27) (0.03) (0.30)
1996 $13.62 0.32(4) 3.13 3.45
(0.31) (0.78) (1.09)
1997 $15.98 0.25(4) 3.85 4.10
(0.28) (0.91) (1.19)
1998 $18.89 0.26(4) 3.90 4.16
(0.24) (0.40) (0.64)
1999 $22.41 0.27 4.13 4.40
(0.26) (0.37) (0.63)
Wachovia Special Values
Fund
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(4) 4.53 4.66
(0.08) (1.61) (1.69)
1998 $18.64 0.19(4) (0.87) (0.68)
(0.12) (1.71) (1.83)
1999 $16.13 0.25 0.56 0.81
(0.16) (0.75) (0.91)
Wachovia Emerging Markets
Fund
1995(1) $10.00 0.05 0.36 0.41
- -- -- --
1996 $10.41 0.09(4) 1.20 1.29
(0.03) -- (0.03)
1997 $11.67 0.03(4) (0.47) (0.44)
(0.11) -- (0.11)
1998 $11.12 0.09(4) (2.68) (2.59)
(0.10) -- (0.10)
1999 $ 8.43 0.04(4) 3.32 3.36
(0.05) -- (0.05)
Wachovia Personal Equity
Fund
1999(6) $10.00 0.01 0.67 0.68
(0.01) -- (0.01)
Wachovia Balanced
Fund
1995 $9.93 0.40 2.13 2.53
(0.38) (0.16) (0.54)
1996 $11.92 0.38(4) 1.72 2.10
(0.38) (0.34) (0.72)
1997 $13.30 0.34(4) 1.40 1.74
(0.34) (1.44) (1.78)
1998 $13.26 0.24(4) 1.50 1.74
(0.38) (0.90) (1.28)
1999 $13.72 0.29 1.44 1.73
(0.31) (1.69) (2.00)
</TABLE>
(1) Reflects operations for the period from December 26, 1994 (date of initial
public investment) to November 30, 1995.
(2) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(3) This contractual expense decrease is reflected in both the expense and net
investment income ratios shown above.
(4) Per share information is based on average shares outstanding.
(5) Computed on an annualized basis.
(6) Reflects operations for the period from July 30, 1999 (date of initial
public investment) to November 30, 1999.
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
Net
Asset Net
Assets,
Value,
Net end Portfolio
Year Ended end of Total Investment Expense
Waiver/ of period Turnover
November 30, period Return(2) Expenses Income
Reimbursement(3) (000 omitted) Rate
<S> <C> <C> <C> <C>
<C> <C> <C>
Wachovia Equity Fund
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%
1999 $17.42 24.31% 1.09% 0.49%
- -- $118,967 45%
Wachovia Quantitative Equity Fund
1995 $13.11 39.33% 0.87% 1.93%
0.10% $121,895 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%
1999 $21.00 16.60% 1.11% 0.48%
- -- $ 89,140 34%
Wachovia Growth & Income Fund
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%
1999 $24.86 20.40% 1.09% 0.24%
- -- $ 94,674 44%
Wachovia Equity Index Fund
1995 $13.62 36.15% 0.48% 2.39%
0.05% $186,841 60%
1996 $15.98 27.19% 0.48% 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%
1999 $26.18 19.97% 0.69% 1.07%
- -- $182,697 11%
Wachovia Special Values Fund
1995 $12.18 25.91% 1.29% 0.80%
0.58% $ 24,093 57%
1996 $15.67 39.78% 1.21% 0.47%
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%
1999 $16.03 5.40% 1.23% 1.61%
0.00%(7) $ 65,348 44%
Wachovia Emerging Markets Fund
1995(1) $10.41 4.10% 1.80%(5) 0.85%(5)
0.28%(5) $ 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%
1999 $11.74 40.07% 1.60% 0.37%
- -- $ 16,007 56%
Wachovia Personal Equity Fund
1999(6) $10.67 6.75% 1.15%(5) 0.39%(5)
0.01%(5) $ 110 11%
Wachovia Balanced Fund
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%
1999 $13.45 13.95% 1.01% 2.26%
0.08% $205,167 66%
</TABLE>
(1) Reflects operations for the period from December 26, 1994 (date of initial
public investment) to November 30, 1995.
(2) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(3) This contractual expense decrease is reflected in both the expense and net
investment income ratios shown above.
(4) Per share information is based on average shares outstanding.
(5) Computed on an annualized basis.
(6) Reflects operations for the period from July 30, 1999 (date of initial
public investment) to November 30, 1999.
(7) Less than 0.01%.
The Wachovia Funds and The Wachovia Municipal Funds
Financial Highlights-Class A Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Net
Realized Distributions
and
Unrealized from Net Realized
Net Asset Gain/(Loss) on
Distributions Gain on Investment
Value, Net Investments, Futures Total from from
Net Transactions, Futures
Year Ended beginning Investment Contracts, and Foreign Investment
Investment Contracts and Total
November 30, of period Income Currency Transactions Operations
Income Foreign Currency Distributions
<S> <C> <C> <C> <C>
<C> <C> <C>
Wachovia Fixed Income Fund
1995 $8.97 0.58 0.92 1.50
(0.57) -- (0.57)
1996 $9.90 0.61(3) (0.09) 0.52
(0.59) -- (0.59)
1997 $9.83 0.54(3) 0.04 0.58
(0.56) -- (0.56)
1998 $9.85 0.53(3) 0.30 0.83
(0.54) -- (0.54)
1999 $10.14 0.51 (0.58) (0.07)
(0.51) (0.04) (0.55)
Wachovia Intermediate Fixed Income Fund
1995 $9.31 0.55 0.76 1.31
(0.55) -- (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)
1999 $10.38 0.50 (0.61) (0.11)
(0.50) (0.20) (0.70)
Wachovia Short-Term Fixed Income Fund
1995 $9.58 0.59 0.24 0.83
(0.52) -- (0.52)
1996 $9.89 0.56(3) (0.06) 0.50
(0.60) -- (0.60)
1997 $9.79 0.50(3) (0.01) 0.49
(0.51) -- (0.51)
1998 $9.77 0.52(3) 0.14 0.66
(0.51) -- (0.51)
1999 $9.92 0.48 (0.25) 0.23
(0.52) -- (0.52)
Wachovia Georgia Municipal Bond Fund
1995(4) $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) (0.00)(5) (0.42)
1999 $11.38 0.43 (0.74) (0.31)
(0.43) (0.03) (0.46)
Wachovia North Carolina Municipal Bond Fund
1995(4) $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)
1999 $11.46 0.42 (0.68) (0.26)
(0.42) (0.06) (0.48)
Wachovia South Carolina Municipal Bond Fund
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) (0.00)(5) (0.51)
1999 $11.36 0.50 (0.77) (0.27)
(0.50) (0.02) (0.52)
Wachovia Virginia Municipal Bond Fund
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)
1999 $10.49 0.45 (0.65) (0.20)
(0.45) -- (0.45)
</TABLE>
(1) Based on net asset value which does not reflect the sales charge or
contingent deferred sales charge if applicable.
(2) Computed on an annualized basis.
(3) Per share information based on average shares outstanding.
(4) Reflects operations for the period from December 26, 1994 (date of initial
public investment) to November 30, 1995.
(5) Less than $0.01 per share.
(6) This contractual 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 A Shares
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Ratios to Average Net Assets
Net
Asset Net
Assets,
Value,
Net end Portfolio
Year Ended end of Total Investment Expense
Waiver/ of period Turnover
November 30, period Return(2) Expenses Income
Reimbursement(3) (000 omitted) Rate
<S> <C> <C> <C> <C>
<C> <C> <C>
Wachovia Fixed Income Fund
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%
1999 $ 9.52 (0.77%) 0.97% 5.34%
0.03% $ 69,475 49%
Wachovia Intermediate Fixed Income Fund
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%
1999 $ 9.57 (1.03%) 0.99% 5.16%
0.04% $ 3,205 89%
Wachovia Short-Term Fixed Income Fund
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%
1999 $ 9.63 2.44% 0.88% 4.97%
0.14% $ 10,409 25%
Wachovia Georgia Municipal Bond Fund
1995(4) $10.96 13.93% 0.92%(2) 4.30%(2)
1.88%(2) $ 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%
1999 $10.61 (2.83%) 1.07% 3.87%
0.30% $ 5,450 48%
Wachovia North Carolina Municipal Bond Fund
1995(4) $10.99 14.40% 0.85%(2) 4.40%(2)
1.19%(2) $ 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%
1999 $10.72 (2.34%) 1.02% 3.73%
0.20% $ 8,644 11%
Wachovia South Carolina Municipal Bond Fund
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%
1999 $10.57 (2.49%) 0.83% 4.50%
0.35% $ 59,655 9%
Wachovia Virginia Municipal Bond Fund
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%
1999 $ 9.84 (2.01%) 0.90% 4.36%
0.29% $ 7,682 29%
</TABLE>
(1) Based on net asset value which does not reflect the sales charge or
contingent deferred sales charge if applicable.
(2) Computed on an annualized basis.
(3) Per share information based on average shares outstanding.
(4) Reflects operations for the period from December 26, 1994 (date of initial
public investment) to November 30, 1995.
(5) Less than $0.01 per share.
(6) This contractual 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 THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Net
Realized Distributions
and
Unrealized from Net Realized
Net Asset Gain/(Loss) on
Distributions Gain on Investment
Value, Net Investments, Futures Total from from
Net Transactions, Futures
Year Ended beginning Investment Contracts, and Foreign Investment
Investment Contracts and Total
November 30, of period Income Currency Transactions Operations
Income Foreign Currency Distributions
<S> <C> <C> <C> <C>
<C> <C> <C>
Wachovia Equity Fund
1996(1) $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)
1999 $15.87 (0.04) 3.38 3.34
(0.00)(3) (1.89) (1.89)
Wachovia Quantitative Equity Fund
1996(1) $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)
1999 $20.23 (0.05) 3.16 3.11
(0.01) (2.42) (2.43)
Wachovia Special Values Fund
1999(5) $14.60 0.17 1.22
1.39 -- -- --
Wachovia Balanced Fund
1996(1) $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)
1999 $13.69 0.20 1.42 1.62
(0.21) (1.69) (1.90)
Wachovia Fixed Income Fund
1996(1) $ 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)
1999 $10.14 0.43 (0.58) (0.15)
(0.43) (0.04) (0.47)
</TABLE>
(1) Reflects operations for the period from July 22, 1996 (date of initial
public investment) to November 30, 1996.
(2) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(3) Less than $0.01 per share.
(4) Computed on an annualized basis.
(5) Reflects operations for the period from March 26, 1999 (date of initial
public investment) to November 30, 1999.
(6) This contractual 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 THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Net
Asset
Value,
Net Net Assets, Portfolio
Year Ended end of Total Investment Expense
Waiver/ end of period Turnover
November 30, period Return(2) Expenses Income
Reimbursement(3) (000 omitted) Rate
<S> <C> <C> <C> <C>
<C> <C> <C>
Wachovia Equity Fund
1996(1) $14.79 19.25% 1.90%(4) 0.02%(4)
0.20%(4) $ 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%
1999 $17.32 23.37% 1.84% (0.26%)
- -- $8,992 45%
Wachovia Quantitative Equity Fund
1996(1) $15.65 19.90% 1.87%(4) 0.46%(4)
0.11%(4) $ 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%
1999 $20.91 15.85% 1.86% (0.27%)
- -- $24,652 34%
Wachovia Special Values Fund
1999(5) $15.99 9.52% 1.98%(4) 0.93%(4)
0.01%(4) $350 44%
Wachovia Balanced Fund
1996(1) $13.29 14.47% 1.76%(4) 1.93%(4)
0.16%(4) $ 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%
1999 $13.41 13.08% 1.76% 1.50%
0.08% $20,927 66%
Wachovia Fixed Income Fund
1996(1) $ 9.83 5.83% 1.74%(4) 5.20%(4)
0.13%(4) $ 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%
1999 $9.52 (1.51)% 1.72% 4.57%
0.03% $ 819 49%
</TABLE>
(1) Reflects operations for the period from July 22, 1996 (date of initial
public investment) to November 30, 1996.
(2) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
(3) Less than $0.01 per share.
(4) Computed on an annualized basis.
(5) Reflects operations for the period from March 26, 1999 (date of initial
public investment) to November 30, 1999.
(6) This contractual expense decrease is reflected in both the expense and net
investment income ratios shown above.
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 Fund (including the SAI) by writing to or
visiting the Public Reference Room in Washington, DC. You may also access fund
information from the EDGAR Database on the SEC's Internet site at
http://www.sec.gov. You can purchase copies of this information by contacting
the SEC by email at [email protected] or by writing to the SEC's Public
Reference Section, Washington, DC 20549-0102. Call 1-202-942-8090 for
information on the Public Reference Room's operations and copying fees.
THE WACHOVIA FUNDS &
THE WACHOVIA MUNICIPAL FUNDS
CLASS A SHARES
ALL PORTFOLIOS
CLASS B SHARES
EQUITY FUND
QUANTITATIVE EQUITY FUND
SPECIAL VALUES 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 Personal Equity 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 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 Rudnick & Wolfe LLP
1200 Nineteenth Street, N.W.
Washington, DC 20036-2412
Independent Auditors Ernst & Young LLP
200 Clarendon Street
Boston, MA 02116
January 31, 2000
822-27 (1/00) G01513-01 (1/00)
THE WACHOVIA FUNDS &
THE WACHOVIA MUNICIPAL FUNDS
CLASS Y SHARES
PROSPECTUS
JANUARY 31, 2000
WWW.WACHOVIAFUNDS.COM
PROSPECTUS
The Wachovia Funds
CLASS Y SHARES
Wachovia Equity Fund Wachovia Personal Equity 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
Wachovia Emerging Markets 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
As with all mutual funds, the Securities and Exchange Commission (SEC) has not
approved or disapproved these securities or passed upon the adequacy of this
prospectus. Any representation to the contrary is a criminal offense.
<TABLE>
<CAPTION>
Contents
<S> <C>
Fund Goals, Strategies, Performance and Risk 1
What are the Funds' Fees and Expenses? 17
What are the Funds' Main Investments and Investment Techniques? 18
What are the Risks of Investing in the Funds? 19
What do Shares Cost? 20
How are the Funds Sold? 21
How to Purchase Shares 21
How to Exchange Shares 21
How to Redeem Shares 22
Account and Share Information 22
Who Manages the Funds? 23
Financial Information 25
JANUARY 31, 2000
</TABLE>
FUND GOALS, STRATEGIES, PERFORMANCE AND RISK
EQUITY FUNDS
WACHOVIA EQUITY FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to produce growth of principal and income.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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. The investment adviser uses a combination of fundamental analysis,
quantitative modeling, strategic outlook, and relative price performance trends
is used to select stocks that it perceives to be undervalued with prospects for
improving fundamentals.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's Class Y Shares total returns averaged over a period of years relative to
the S&P 500 Index (S&P 500), a broad-based market index. Total returns for the
index shown do not reflect sales charges, expenses or other fees that the SEC
requires to be reflected in the Fund's performance. Indexes are unmanaged, and
it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class Y S&P
500
<S> <C> <C>
1 Year 26.36%
21.05%
Start of Performance/1/ 26.94%
30.17%
</TABLE>
1 The Fund's Class Y Shares start of performance date 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
returns.
WACHOVIA QUANTITATIVE EQUITY FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to provide growth of principal and income.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's Class Y Shares total returns averaged over a period of years relative to
the S&P 500 Index (S&P 500), a broad-based market index. Total returns for the
index shown do not reflect sales charges, expenses or other fees that the SEC
requires to be reflected in the Fund's performance. Indexes are unmanaged, and
it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class Y S&P
500
<S> <C> <C>
1 Year 15.93%
21.05%
Start of Performance/1/ 27.29%
30.17%
</TABLE>
1 The Fund's Class Y Shares start of performance date 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
returns.
WACHOVIA GROWTH & INCOME FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to provide total return through growth of capital and current income.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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. The investment adviser uses a combination of fundamental analysis,
quantitative modeling, strategic outlook, and relative price performance trends
is used to select stocks that it perceives to have potential for growth of
capital and/or income.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 21.20% (quarter ended December 31, 1998). Its lowest
quarterly return was (9.73%) (quarter ended September 30, 1998).
Average Annual Total Return
The following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's Class Y Shares total returns averaged over a period of years relative to
the S&P 500 Index (S&P 500), a broad-based market index. Total returns for the
index shown do not reflect sales charges, expenses or other fees that the SEC
requires to be reflected in the Fund's performance. Indexes are unmanaged, and
it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class Y S&P
500
<S> <C> <C>
1 Year 23.47%
21.05%
Start of Performance/1/ 19.05%
24.74%
</TABLE>
1 The Fund's Class Y Shares start of performance date was March 30, 1998.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
WACHOVIA EQUITY INDEX FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to provide a total return that approximates that of the stock market as
measured by the S&P 500 Index (S&P 500).
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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 S&P 500 and closely match the performance of the
S&P 500. 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 S&P 500 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.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's Class Y Shares total returns averaged over a period of years relative to
the S&P 500 Index (S&P 500), a broad-based market index. Total returns for the
index shown do not reflect sales charges, expenses or other fees that the SEC
requires to be reflected in the Fund's performance. Indexes are unmanaged, and
it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class Y S&P 500
<S> <C> <C>
1 Year 20.22%
21.05%
Start of Performance/1/ 29.05%
30.17%
</TABLE>
1 The Fund's Class Y Shares start of performance date 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
returns.
WACHOVIA SPECIAL VALUES FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to produce growth of principal.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
The Fund pursues its investment objective by investing primarily in a portfolio
of stocks of small U.S. companies. The investment adviser looks for
significantly undervalued companies that it believes have the potential for
above-average growth commensurate with increased risk. Typical investments are
in stocks of companies that have low price-to-earnings ratios, are generally out
of favor in the marketplace, are selling significantly below their stated or
replacement book value or are undergoing a reorganization or other corporate
action that may create above-average price appreciation. Under normal market
conditions, the Fund intends to invest at least 65% of its assets in stocks of
companies that have a market value capitalization of $1.5 billion or less. The
Fund may invest up to 20% of total assets in foreign securities.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 16.61% (quarter ended June 30, 1999). Its lowest quarterly
return was (17.97%) (quarter ended September 30, 1998).
Average Annual Total Return
The following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's Class Y Shares total returns averaged over a period of years relative to
the Russell 2000 Small Stock Index (Russell 2000), a broad-based market index
consisting of 2,000 small capitalization common stocks. Total returns for the
index shown do not reflect sales charges, expenses or other fees that the SEC
requires to be reflected in the Fund's performance. Indexes are unmanaged, and
it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class Y Russell
2000
<S> <C> <C>
1 Year 6.66%
21.26%
Start of Performance/1/ 14.97%
16.59%
</TABLE>
1 The Fund's Class Y Shares start of performance date 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
returns.
WACHOVIA EMERGING MARKETS FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to produce long-term capital appreciation.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 32.51% (quarter ended December 31, 1999). Its lowest
quarterly return was (26.53%) (quarter ended September 30, 1998).
Average Annual Total Return
The following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's Class Y Shares total returns averaged over a period of years relative to
the International Finance Corporation Investable Index (Total Return Series)
(IFCI), a broad-based market index of over 1,000 securities in 26 emerging
market countries. Total returns for the index shown do not reflect sales
charges, expenses or other fees that the SEC requires to be reflected in the
Fund's performance. Indexes are unmanaged, and it is not possible to invest
directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class Y
IFCI
<S> <C>
<C>
1 Year 66.00%
67.11%
Start of Performance/1/
5.38% 3.30%
</TABLE>
1 The Fund's Class Y Shares start of performance date 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
returns.
WACHOVIA PERSONAL EQUITY FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks growth of principal and income, while minimizing the impact of taxes on
shareholder returns.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
The Fund pursues its goal by investing in a portfolio of common stocks of
companies traded in an established market. The Fund's investment adviser
identifies the most attractive securities based on a disciplined analysis of
investment criteria that considers both growth and value opportunities. The Fund
is managed with a long-term time horizon, and is anticipated to have a lower
turnover ratio than a typical equity mutual fund. With the goal of maximizing
after-tax returns, the Fund's investment adviser will seek to minimize realized
capital gains in general, and short-term capital gains in particular. For
example, it will generally buy securities that it intends to hold over the long
term, and avoid short- term trading. In deciding which securities to sell, the
Fund's investment adviser will consider their capital gain or loss situation,
and may attempt to off-set capital gains by selling securities that have gone
down in value or that have the highest cost basis. Also, the Fund's investment
adviser generally will consider selling any security that has not met its
expectations for growth, in which case the capital gain generally would be
relatively small. Successful application of this strategy will result in
shareholders incurring capital gains when they ultimately sell their Fund
shares.
Risk/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, 1999 is provided under the section "Financial Information."
WACHOVIA BALANCED FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to provide long-term growth of principal and current income.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 12.91% (quarter ended December 31, 1998). Its lowest
quarterly return was (5.17%) (quarter ended September 30, 1998).
Average Annual Total Return
The following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's Class Y Shares total returns averaged over a period of years relative to
the Standard & Poor's 500 Index (S&P 500) and the Lehman Brothers Aggregate Bond
Index (LABI), each a broad-based market index. LABI measures both the capital
price changes and income provided by the underlying universe of securities,
comprised of U.S. Treasury obligations, U.S. agency obligations, foreign
obligations, U.S. investment-grade corporate debt and mortgage-backed
obligations. Total returns for the indexes shown do not reflect sales charges,
expenses or other fees that the SEC requires to be reflected in the Fund's
performance. Indexes are unmanaged, and it is not possible to invest directly in
an index.
<TABLE>
<CAPTION>
Calendar Period Class Y S&P 500
LABI
<S> <C>
<C> <C>
1 Year 15.05% 21.05%
(0.82%)
Start of Performance/1/ 18.87% 30.17%
6.45%
</TABLE>
1 The Fund's Class Y Shares start of performance date 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
returns.
INCOME FUNDS
WACHOVIA FIXED INCOME FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks a high level of total return.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 3.92% (quarter ended September 30, 1998). Its lowest
quarterly return was (1.20%) (quarter ended June 30, 1999).
Average Annual Total Return
The following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's Class Y Shares total returns averaged over a period of years relative to
the Lehman Brothers Aggregate Bond Index (LABI), a broad-based market index.
LABI measures both the capital price changes and income provided by the
underlying universe of securities, comprised of U.S. Treasury obligations, U.S.
agency obligations, foreign obligations, U.S. investment-grade corporate debt
and mortgage-backed obligations. Total returns for the index shown do not
reflect sales charges, expenses or other fees that the SEC requires to be
reflected in the Fund's performance. Indexes are unmanaged, and it is not
possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class Y
LABI
<S> <C> <C>
1 Year (1.44%)
(0.82%)
Start of Performance/1/ 5.90%
6.45%
</TABLE>
1 The Fund's Class Y Shares start of performance date 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
returns.
WACHOVIA INTERMEDIATE FIXED INCOME FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks current income consistent with preservation of capital.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 4.22% (quarter ended September 30, 1998). Its lowest
quarterly return was (1.30%) (quarter ended June 30, 1999).
Average Annual Total Return
The following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's Class Y Shares total returns averaged over a period of years relative to
the Lehman Brothers Government/Corporate Intermediate Index (LBGCII), a broad-
based market index. LBGCII is comprised of all issues by the Lehman Brothers
Government/Corporate Bond Index with maturities between 1 and 9.99 years. Total
returns for the index shown do not reflect sales charges, expenses or other fees
that the SEC requires to be reflected in the Fund's performance. Indexes are
unmanaged, and it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class Y
LBGCII
<S> <C>
<C>
1 Year
(1.49%) 0.39%
Start of Performance/1/
3.37% 4.22%
</TABLE>
1 The Fund's Class Y Shares start of performance date was March 30, 1998.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns.
Wachovia Short-Term Fixed Income Fund
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to produce a high level of current income.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 3.29% (quarter ended September 30, 1998). Its lowest
quarterly return was 0.16% (quarter ended June 30, 1999).
Average Annual Total Return
The following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's Class Y Shares total returns averaged over a period of years relative to
the Merrill Lynch 1-3 Year U.S. Treasury Index (MLUST), a broad-based market
index tracking short-term U.S. government securities with maturities between 1
and 2.99 years. Total returns for the index shown do not reflect sales charges,
expenses or other fees that the SEC requires to be reflected in the Fund's
performance. Indexes are unmanaged, and it is not possible to invest directly in
an index.
<TABLE>
<CAPTION>
Calendar Period Class Y MLUST
<S> <C> <C>
1 Year 2.16%
3.06%
Start of Performance/1/ 5.28%
5.84%
</TABLE>
1 The Fund's Class Y start of performance date 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
returns.
MUNICIPAL FUNDS
WACHOVIA GEORGIA MUNICIPAL BOND FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to provide current income which is exempt from federal regular income tax
and the income taxes imposed by the State of Georgia.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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 taxes imposed by the State of Georgia. 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.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 3.17% (quarter ended June 30, 1997). Its lowest quarterly
return was (2.15%) (quarter ended June 30, 1999).
Average Annual Total Return
The following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's Class Y Shares total returns averaged over a period of years relative to
the Lehman Brothers State General Obligation Bond Index (LSGOBI) and the Lehman
Brothers Aggregate Municipal Bond Index (LBMBI), both broad- based market
indexes. LSGOBI is comprised of all state general obligation debt issues. LBMBI
is a benchmark for the tax-exempt bond market. The Fund's investment adviser has
elected to change the benchmark from LSGOBI to LBMBI because LBMBI is more
representative of the securities in which the Fund invests. Total returns for
the index shown do not reflect sales charges, expenses or other fees that the
SEC requires to be reflected in the Fund's performance. Indexes are unmanaged,
and it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class Y
LSGOBI LBMBI
<S> <C>
<C> <C>
1 Year (3.45%)
(1.13%) (2.06%)
Start of Performance/1/ 3.77%
5.29% 5.30%
</TABLE>
1 The Fund's Class Y Shares start of performance date 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
returns.
WACHOVIA NORTH CAROLINA MUNICIPAL BOND FUND
WHAT IS THE FUND'S INVESTMENT 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.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 3.39% (quarter ended September 30, 1998). Its lowest
quarterly return was (2.23%) (quarter ended June 30, 1999).
Average Annual Total Return
The following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's Class Y Shares total returns averaged over a period of years relative to
the Lehman Brothers State General Obligation Bond Index (LSGOBI) and Lehman
Brothers Aggregate Municipal Bond Index (LBMBI), both broad-based market
indexes. LSGOBI is comprised of all state general obligation debt issues. LBMBI
is a benchmark for the tax-exempt bond market. The Fund's investment adviser has
elected to change the benchmark from LSGOBI to LBMBI because LBMBI is more
representative of the securities in which the Fund invests. Total returns for
the index shown do not reflect sales charges, expenses or other fees that the
SEC requires to be reflected in the Fund's performance. Indexes are unmanaged,
and it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class Y
LSGOBI LBMBI
<S> <C>
<C> <C>
1 Year (3.16%)
(1.13%) (2.06%)
Start of Performance/1/ 4.09%
5.84% 5.30%
</TABLE>
1 The Fund's Class Y Shares start of performance date 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
returns.
WACHOVIA SOUTH CAROLINA MUNICIPAL BOND FUND
WHAT IS THE FUND'S INVESTMENT GOAL?
Seeks to provide current income which is exempt from federal regular income tax
and the South Carolina state income taxes.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 3.34% (quarter ended June 30, 1997). Its lowest quarterly
return was (1.88%) (quarter ended June 30, 1999).
Average Annual Total Return
The following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's total returns averaged over a period of years relative to the Lehman
State General Obligation Bond Index (LSGOBI) and Lehman Brothers Aggregate
Municipal Bond Index (LBMBI), both broad-based market indexes. LSGOBI is
comprised of all state general obligation debt issues. LBMBI is a benchmark for
the tax-exempt bond market. The Fund's investment adviser has elected to change
the benchmark from LSGOBI to LBMBI because LBMBI is more representative of the
securities in which the Fund invests. Total returns for the index shown do not
reflect sales charges, expenses or other fees that the SEC requires to be
reflected in the Fund's performance. Indexes are unmanaged, and it is not
possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class Y
LSGOBI LBMBI
<S> <C>
<C> <C>
1 Year (3.16%)
(1.13%) (2.06%)
Start of Performance/1/ 4.33%
5.84% 5.30%
</TABLE>
1 The Fund's Class Y Shares start of performance date 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
returns.
WACHOVIA VIRGINIA MUNICIPAL BOND FUND
WHAT IS THE FUND'S INVESTMENT 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.
WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?
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.
Risk/Return Bar Chart and Table
[CHART APPEARS HERE - SEE APPENDIX]
The bar chart shows the variability of the Fund's Class Y Shares total returns
on a calendar year-end 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 2.90% (quarter ended September 30, 1998). Its lowest
quarterly return was (1.76%) (quarter ended June 30, 1999).
Average Annual Total Return
The following table represents the Fund's Class Y Shares Average Annual Total
Returns for the calendar period ended December 31, 1999. The table shows the
Fund's Class Y Shares total returns averaged over a period of years relative to
the Lehman Brothers State General Obligation Bond Index (LSGOBI) and Lehman
Brothers Aggregate Municipal Bond Index (LBMBI), both broad-based market
indexes. LSGOBI is comprised of all state general obligation debt issues. LBMBI
is a benchmark for the tax-exempt bond market. The Fund's investment adviser has
elected to change the benchmark from LSGOBI to LBMBI because LBMBI is more
representative of the securities in which the Fund invests. Total returns for
the index shown do not reflect sales charges, expenses or other fees that the
SEC requires to be reflected in the Fund's performance. Indexes are unmanaged,
and it is not possible to invest directly in an index.
<TABLE>
<CAPTION>
Calendar Period Class Y
LSGOBI LBMBI
<S> <C>
<C> <C>
1 Year (2.64%)
(1.13%) (2.06%)
Start of Performance/1/ 1.15%
2.50% 1.80%
</TABLE>
1 The Fund's Class Y Shares start of performance date was March 30, 1998.
Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
returns
WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUNDS?
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>
Debt
Emerging Municipal
Market Securities
Markets Securities Diversification
Fund Risks/1/ Risks/2/
Risks/3/ Risks/4/ Risks/5/
<S> <C> <C>
<C> <C> <C>
Equity Fund
Quantitative Equity Fund .
Growth & Income Fund .
Equity Index Fund .
Special Values Fund .
Emerging Markets Fund . .
Personal Equity Fund .
Balanced Fund . .
Fixed Income Fund . .
Intermediate Fixed Income Fund . .
Short-Term Fixed Income Fund . .
Georgia Municipal Bond Fund .
. . .
North Carolina Municipal Bond Fund .
. . .
South Carolina Municipal Bond Fund .
. . .
Virginia Municipal Bond Fund .
. . .
</TABLE>
1 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.
Stocks have greater volatility than debt securities.
2 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 a
Fund's net asset value may go down.
3 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.
4 Local political and economic factors may adversely affect the value and
liquidity of municipal securities held by a Fund. The value of municipal
securities can be affected more by supply and demand factors or the
creditworthiness of the issuer than market interest rates.
5 Compared to diversified mutual funds, they may invest a higher percentage of
a Fund's assets among fewer issuers of portfolio securities. This increases a
Fund's risk by magnifying the impact (positively or negatively) that any one
issuer has on a Fund's share price and performance.
WHAT ARE THE FUNDS' FEES AND EXPENSES?
These tables describe the fees and expenses that you may pay when you buy and
hold shares of the Funds' Class Y Shares.
<TABLE>
<CAPTION>
Shareholder Fees Fees Paid Directly From Your Equity
Quantitative Growth & Income Equity Index
Investment Fund Equity
Fund Fund Fund
<S> <C>
<C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases None
None None None
(as a percentage of offering
price)
Maximum Deferred Sales Charge (Load) (as a None
None None None
percentage of original purchase price
or
redemption proceeds, as
applicable)
Maximum Sales Charge (Load) Imposed on Reinvested None
None None None
Dividends (and other Distributions) (as
a
percentage of offering
price)
Redemption Fee (as a percentage of amount redeemed, None
None None None
if
applicable)
Exchange Fee 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%
Distribution (12b-1) Fee None
None None None
Shareholder Services Fee None
None None None
Other Expenses 0.14%
0.16% 0.14% 0.14%
Total Annual Class Y Shares Operating Expenses 0.84%
0.86% 0.84% 0.44%
(Before
Waiver)1
Waiver of Fund Expenses 0.00%
0.00% 0.00% 0.00%
Total Actual Annual Fund Operating Expenses 0.84%
0.86% 0.84% 0.44%
(AfterWaiver)
<CAPTION>
Shareholder Fees Fees Paid Directly From Your Special
Emerging Personal Balanced
Investment Values Fund Markets
Fund Equity Fund Fund
<S> <C>
<C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases None
None None None
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a None
None None None
percentage of original purchase price or
redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested None
None None None
Dividends (and other Distributions) (as a
percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, None
None None None
if applicable)
Exchange Fee 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 0.80%
1.00% 0.70% 0.70%
Distribution (12b-1) Fee None
None None None
Shareholder Services Fee None
None None None
Other Expenses 0.18%
0.35% 0.21% 0.14%
Total Annual Class Y Shares Operating Expenses 0.98%
1.35% 0.91% 0.84%
(Before Waiver)1
Waiver of Fund Expenses 0.00%
0.00% 0.01% 0.08%
Total Actual Annual Fund Operating Expenses 0.98%
1.35% 0.90% 0.76%
(AfterWaiver)
</TABLE>
<TABLE>
<CAPTION>
Intermediate Short-Term Georgia
Shareholder Fees Fees Paid Directly From Your Fixed Income
Fixed Income Fixed Income Municipal
Investment Fund
Fund Fund Bond Fund
<S> <C>
<C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases None
None None None
(as a percentage of offering
price)
Maximum Deferred Sales Charge (Load) (as a None
None None None
percentage of original purchase price
or
redemption proceeds, as
applicable)
Maximum Sales Charge (Load) Imposed on Reinvested None
None None None
Dividends (and other Distributions) (as
a
percentage of offering
price)
Redemption Fee (as a percentage of amount redeemed, None
None None None
if
applicable)
Exchange Fee 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 0.60%
0.60% 0.55% 0.75%
Distribution (12b-1) Fee None
None None None
Shareholder Services Fee None
None None None
Other Expenses 0.15%
0.18% 0.22% 0.30%
Total Annual Class Y Shares Operating Expenses 0.75%
0.78% 0.77% 1.05%
(Before
Waiver)/1/
Waiver of Fund Expenses 0.03%
0.04% 0.14% 0.45%
Total Actual Annual Fund Operating Expenses 0.72%
0.74% 0.63% 0.60%/2/
(AfterWaiver)
<CAPTION>
North
South
Carolina
Carolina Virginia
Shareholder Fees Fees Paid Directly From Your Municipal
Municipal Municipal
Investment Bond Fund
Bond Fund Bond Fund
<S> <C>
<C> <C>
Maximum Sales Charge (Load) Imposed on Purchases None
None None
(as a percentage of offering price)
Maximum Deferred Sales Charge (Load) (as a None
None None
percentage of original purchase price or
redemption proceeds, as applicable)
Maximum Sales Charge (Load) Imposed on Reinvested None
None None
Dividends (and other Distributions) (as a
percentage of offering price)
Redemption Fee (as a percentage of amount redeemed, None
None None
if applicable)
Exchange Fee None
None None
Annual Fund Operating Expenses/1/
Expenses That are Deducted From Fund Assets
(as a percentage of average net assets)
Management Fee 0.75%
0.75% 0.74%
Distribution (12b-1) Fee None
None None
Shareholder Services Fee None
None None
Other Expenses 0.21%
0.18% 0.20%
Total Annual Class Y Shares Operating Expenses 0.96%
0.93% 0.94%
(Before Waiver)/1/
Waiver of Fund Expenses 0.36%
0.35% 0.34%
Total Actual Annual Fund Operating Expenses 0.60%/2/
0.58%/2/ 0.60%/2/
(AfterWaiver)
</TABLE>
1 Pursuant to an agreement between the Adviser and The Wachovia Funds and The
Wachovia Municipal Funds (collectively, the Trusts), the Adviser agrees during
the period from December 15, 1998 through January 31, 2001 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
orreimbursed.
2 The Total Actual Annual Fund Operating Expenses for the fiscal year ending
November 30, 2000 are expected to be 0.60% for Georgia Municipal Bond Fund,
North Carolina Municipal Bond Fund and Virginia Municipal Bond Fund,
respectively.
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 the 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 $ 86 $268
$466 $1,037
Quantitative Equity Fund $ 88 $274
$477 $1,061
Growth & Income Fund $ 86 $268
$466 $1,037
Equity Index Fund $ 45 $141
$246 $ 555
Special Values Fund $100 $312
$542 $1,201
Emerging Markets Fund $137 $428
$739 $1,624
Personal Equity Fund $ 93 $290
$504 $1,120
Balanced Fund $ 86 $268
$466 $1,037
Fixed Income Fund $ 77 $240
$417 $ 930
Intermediate Fixed Income Fund $ 80 $249
$433 $ 966
Short-Term Fixed Income Fund $ 79 $246
$428 $ 954
Georgia Municipal Bond Fund $107 $334
$579 $1,283
North Carolina Municipal Bond Fund $ 98 $306
$531 $1,178
South Carolina Municipal Bond Fund $ 95 $296
$515 $1,143
Virginia Municipal Bond Fund $ 96 $300
$520 $1,155
</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 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 treat such
redeemable preferred stock as a fixed income security.
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). A Fund may buy the designated shares by paying the exercise price before
the expiration date. Warrants may become worthless if the price of the stock
does not rise above the exercise price by the expiration date. This increases
the market risks of warrants as compared to the underlying security. Rights are
the same as warrants, except companies typically issue rights to existing
stockholders.
FIXED INCOME SECURITIES
The Income Funds invest primarily in fixed income securities. Fixed income
securities pay interest, dividends or distributions at a specified rate. The
rate may be a fixed percentage of the principal or adjusted periodically. In
addition, the issuer of a fixed income security must repay the principal amount
of the security, normally within a specified time. Fixed income securities
provide more regular income than equity securities. However, the returns on
fixed income securities are limited and normally do not increase with the
issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields.
MUNICIPAL SECURITIES
The Municipal Funds invest primarily in municipal securities. Municipal
securities are issued by states, counties, cities and other political
subdivisions and authorities. Although many municipal securities are exempt from
federal income tax, the Municipal Funds may invest in 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 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. 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 and
Personal Equity Fund) actively trade their portfolio securities in an attempt to
achieve each Fund's investment objective. Active trading will cause a Fund to
have an increased portfolio turnover rate, which is likely to generate shorter-
term gains (losses) for its shareholders, which are taxed at a higher rate than
longer-term gains (losses). Actively trading portfolio securities increases a
Fund's trading costs and may have an adverse impact on the Fund's performance.
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 their assets in cash and shorter-term debt securities and similar
obligations. A Fund may do this to minimize potential losses and maintain
liquidity to meet shareholder redemptions during adverse market conditions. This
may cause a Fund to give up greater investment returns to maintain the safety of
principal, that is, the original amount invested by shareholders.
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
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
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
Funds' or Municipal Funds' 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 a 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
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.
DIVERSIFICATION RISKS
The Municipal Funds are not diversified. Compared to diversified mutual funds,
they may invest a higher percentage of each Fund's 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 risk. Principal on a fixed income
security may be repaid before its scheduled maturity. This may reduce the
security's value and require a Fund to reinvest the prepayment at a lower yield.
In addition, a 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
Various investment strategies involve agreements to purchase or sell securities
or currencies in amounts that exceed the amount a Fund has invested in the
underlying securities or currencies. The excess exposure increases the risks
associated with the underlying securities or currencies on a 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 because foreign economic or political conditions may be less
favorable than those of the United States. Securities in foreign markets may
also be subject to taxation policies that reduce returns for U.S. investors.
Foreign companies may not provide information (including financial statements)
as frequently or to as great an extent as companies in the United States.
Foreign companies may also receive less coverage than United States companies by
market analysts and the financial press. In addition, foreign countries may lack
uniform accounting, auditing and financial reporting standards or regulatory
requirements comparable to those applicable to U.S. companies. These factors may
prevent a Fund and its investment adviser from obtaining information concerning
foreign companies that is as frequent, extensive and reliable as the information
available concerning companies in the United States.
Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of a Fund's investments.
EMERGING MARKET SECURITIES RISKS
Investing in the Emerging Markets Fund entails a substantial degree of risk.
Securities issued or traded in emerging markets generally entail greater risks
than securities issued or traded in developed markets. For example, their prices
may be significantly more volatile than prices in developed countries. Emerging
market economies may also experience more severe downturns (with corresponding
currency devaluations) than developed economies.
Emerging market countries may have relatively unstable governments and may
present the risk of nationalization of businesses, expropriation, confiscatory
taxation or, in certain instances, reversion to closed market, centrally planned
economies.
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.
WHAT DO SHARES COST?
You can purchase, redeem, or exchange Class Y Shares (Shares) any day the New
York Stock Exchange (NYSE) is open for business. When a Fund receives your
transaction request in proper form (as described in the prospectus), 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 Equity Funds generally value equity
securities according to the last sale price in the market in which they are
primarily traded (either a national securities exchange or the over-the-counter
market). The Income Funds generally value fixed income securities at the last
sale price on a national securities exchange, if available, otherwise, as
determined by an independent pricing service. However, the Funds' Board may
determine in good faith that another method of valuing investments is necessary
to appraise their fair market value when a market price is unavailable.
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>
Minimum initial investments may be waived from time to time for purchases by the
Trust Division of Wachovia Bank, N.A. (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.
HOW ARE THE FUNDS SOLD?
Each Fund offers 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 Y Shares of the Funds. Each share class
has different sales charges and other expenses, which affect its performance.
Call 1-800-922-9008 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 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 the 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.
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 Funds may modify or terminate the exchange privilege at any time.
Shareholders will be notified of the modification or termination of the exchange
privilege. The Funds' 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 a 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 1-800-922-9008.
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 telephone
transaction privileges change.
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 1-800-922-
9008.
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.
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 a 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.
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.
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>
Dividends Declared
Fund and Paid
<S> <C>
Equity Fund
Quantitative Equity Fund
Growth & Income Fund
Equity Index Fund quarterly
Personal Equity 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 to receive 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 a 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
approximately $44 billion in managed assets as of December 31, 1999.
Quantitative Equity Fund is sub-advised by Twin Capital Management, Inc.,
McMurray, Pennsylvania, which is paid by the investment 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>
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%
Personal Equity Fund 0.70%
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 investment adviser and the Trusts, the
investment adviser agrees during the period from December 15, 1998 through
January 31, 2001 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 investment adviser agrees that this
obligation shall constitute a contractual commitment enforceable by the Trusts
and that the investment 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
Growth & Income Fund a Senior Vice President
of the investment adviser. Prior to joining
Equity Fund Wachovia Bank in 1988,
Mr. Earthman was a Vice President and
Personal Equity Fund 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 an MBA from the
University of North
Carolina at Chapel Hill.
- ------------------------------------------------------------------------------------------------------------------------------------
Roger L. Glenski Special Values Fund Mr. Glenski is a
Certified Public Accountant, Portfolio Manager and
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 an 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
Growth & Income Fund adviser. Mr. Hageman is
responsible for managing employee benefit,
Personal Equity Fund 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
Short-Term Fixed Income Fund 1991. He is a graduate
of the University of Tennessee where he
majored in economics
and received an MBA in Finance.
- ------------------------------------------------------------------------------------------------------------------------------------
J. Wesley Jordan Emerging Markets Fund Mr. Jordan is an
Investment Officer and Portfolio Manager of the
investment adviser. Mr.
Jordan joined Wachovia in 1998 as an emerging
markets analyst and
assumed his current position in January 2000. He
is a graduate of the
University of North Carolina in Chapel Hill and
received a Masters of
International Affairs degree in economics from
Columbia University,
where he was Managing Editor of the Journal of
International Affairs.
- ------------------------------------------------------------------------------------------------------------------------------------
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
Personal Equity Fund 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 an MBA from the
University of North Carolina at Greensboro.
- ------------------------------------------------------------------------------------------------------------------------------------
F. Stanley King Equity Fund Mr. King is a Chartered
Financial Analyst and a Senior Vice President
Balanced Fund of the investment
adviser. Mr. King serves as manager of
Growth & Income Fund institutional portfolio
management for the investment adviser. Mr.
Personal Equity Fund 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 Mr. McGuinness is a
Chartered Financial Analyst and Vice President
Balanced Fund and Portfolio Manager
for Personal Financial Services for the
Growth & Income Fund investment adviser. Mr.
McGuinness joined Wachovia Bank in 1991 in
Personal Equity Fund the
Estates/Closely-Held Unit. He received an MBA from the University
of North Carolina at
Chapel Hill.
- ------------------------------------------------------------------------------------------------------------------------------------
Michael O. Mercer Equity Fund Mr. Mercer is a Senior
Vice President of Wachovia and manages the
Balanced Fund Wachovia Equity
Investment Fund and other large institutional
Growth & Income Fund accounts. Mr. Mercer
joined Wachovia Bank in 1983 and is a Chartered
Personal Equity Fund 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
Fixed Income Fund of the investment
adviser. Prior to joining Wachovia Bank in June,
Short-Term Fixed Income Fund 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
Short-Term Fixed Income Fund 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
Senior 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
Intermediate Fixed Income Fund for the investment
adviser. Mr. Sebesta joined Wachovia Bank in 1989.
Short-Term Fixed Income Fund Mr. Sebesta has a
bachelors degree in economics from Wake Forest
University.
- ------------------------------------------------------------------------------------------------------------------------------------
James M. Tringas Special Values Fund Mr. Tringas is a
Chartered Financial Analyst and is a Portfolio
Manager and Vice
President of the investment adviser. Mr. Tringas
joined Wachovia in 1994
as a security analyst and assumed his current
position in 1999. Prior
to joining Wachovia he was employed by Ernst
& Young, LLP in
Atlanta. He holds a bachelors degree in accounting
and a masters degree in
tax from the University of Florida. Mr.
Tringas is a Certified
Public Accountant.
- ------------------------------------------------------------------------------------------------------------------------------------
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. Mr.
Quantitative Equity Fund Waterfill received his
bachelors of science degree from the U.S.
Growth & Income Fund Personal Naval Academy and his
MBA from Vanderbilt University.
Equity Fund
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
FINANCIAL INFORMATION
FINANCIAL HIGHLIGHTS
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 each Fund's audited financial statements, is included in the Annual Report.
Financial Highlights-The Wachovia Funds and The Wachovia Municipal Funds
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Net
Realized
and Distributions
Unrealized from Net Realized
Gain/(Loss)
on Gain on
Investments, Investments
Futures Transactions
Net Asset Contracts,
Distributions Futures Contracts,
Value, Net and Foreign Total from from
Net and Foreign
Year Ended beginning Investment Currency Investment
Investment Currency
November 30, of period Income Transactions Operations
Income Transactions
Wachovia Equity
Fund
<C> <S> <C> <C> <C>
<C> <C>
1996/1/ $12.43 0.03 2.40 2.43
(0.05) -
1997 $14.81 0.17 2.43 2.60
(0.16) (1.86)
1998 $15.39 0.17 2.21 2.38
(0.17) (1.68)
1999 $15.92 0.12 3.38 3.50
(0.11) (1.89)
Wachovia Quantitative Equity
Fund
1996/1/ $13.09 0.04 2.60 2.64
(0.06) -
1997 $15.67 0.23 4.12 4.35
(0.23) (0.79)
1998 $19.00 0.23 3.06 3.29
(0.23) (1.75)
1999 $20.31 0.18 3.14 3.32
(0.17) (2.42)
Wachovia Growth & Income
Fund
19986 $22.31 0.09 1.24 1.33
(0.09) -
1999 $23.55 0.12 4.24 4.36
(0.14) (2.89)
Wachovia Equity Index
Fund
1996/1/ $13.37 0.095 2.60 2.69
(0.08) -
1997 $15.98 0.29 3.86 4.15
(0.31) (0.91)
1998 $18.91 0.30 3.92 4.22
(0.29) (0.40)
1999 $22.44 0.33 4.13 4.46
(0.32) (0.37)
Wachovia Special Values
Fund
1996/1/ $13.62 0.03 2.02 2.05
- - -
1997 $15.67 0.16 4.53 4.69
(0.08) (1.61)
1998 $18.67 0.21 (0.84) (0.63)
(0.15) (1.71)
1999 $16.18 0.30 (0.54 0.84
(0.20) (0.75)
Wachovia Emerging Markets
Fund
1996/1/ $11.92 0.015 (0.26) (0.25)
- - -
1997 $11.67 0.07 (0.50) (0.43)
(0.11) -
1998 $11.13 0.13 (2.69) (2.56)
(0.13) -
1999 $8.44 0.04 3.34 3.38
(0.07) -
Wachovia Personal Equity
Fund
19993 $10.00 0.02 0.67 0.69
(0.01) -
Wachovia Balanced
Fund
1996/1/ $11.68 0.08 1.63 1.71
(0.09) -
1997 $13.30 0.38 1.39 1.77
(0.37) (1.44)
1998 $13.26 0.42 1.37 1.79
(0.41) (0.90)
1999 $13.74 0.32 1.44 1.76
(0.34) (1.69)
</TABLE>
1 Reflects operations for the period from July 22, 1996 (date of initial public
investment) to November 30, 1996.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 Reflects operations for the period from July 30, 1999 (date of initial public
investment) to November 30, 1999.
4 Computed on an annualized basis.
5 Per share information is based on average shares outstanding.
6 Reflects operations for the period from March 30, 1998 (date of initial
public investment) to November 30, 1998.
7 This contractual expense decrease is reflected in both the expense and net
investment income ratios shown above.
8 Less than 0.01%.
See Notes which are an integral part of the Financial Statements
<TABLE>
<CAPTION>
Ratios to Average Net Assets
- ------------------------------------------------
Net Asset
Value, Net
Expense Net Assets, Portfolio
Total end of Total Investment
Waiver/ end of period Turnover
Distributions period Return/2/ Expenses Income
Reimbursement/7/ (000 omitted) Rate
<S> <C> <C> <C> <C>
<C> <C> <C>
(0.05) $14.81 19.57% 0.90%/4/ 0.91%/4/
0.19%/4/ $129,205 64%
(2.02) $15.39 20.44% 0.90% 1.18%
0.07% $156,238 124%
(1.85) $15.92 17.69% 0.90% 1.13%
- - $200,324 150%
(2.00) $17.42 24.52% 0.84% 0.73%
- - $223,878 45%
(0.06) $15.67 20.19% 0.87%/4/ 1.19%/4/
0.11%/4/ $152,571 44%
(1.02) $19.00 29.60% 0.87% 1.35%
0.08% $183,019 74%
(1.98) $20.31 19.38% 0.87% 1.21%
- - $207,343 38%
(2.59) $21.04 16.97% 0.86% 0.67%
- - $598,420 34%
(0.09) $23.55 6.03% 0.86%/4/ 0.90%/4/
0.08%/4/ $206,176 24%
(3.03) $24.88 20.73% 0.84% 0.49%
- - $254,919 44%
(0.08) $15.98 20.14% 0.48%/4/ 1.92%/4/
0.06%/4/ $213,833 12%
(1.22) $18.91 27.91% 0.47% 1.72%
0.02% $248,030 4%
(0.69) $22.44 23.05% 0.45% 1.46%
- - $291,708 29%
(0.69) $26.21 20.24% 0.44% 1.32%
- - $361,934 11%
- $15.67 15.05% 1.15%/4/ 1.76%/4/
0.24%/4/ $58,697 38%
(1.69) $18.67 33.29% 1.11% 0.88%
0.02% $84,501 46%
(1.86) $16.18 (3.59%) 1.00% 1.26%
- - $90,550 20%
(0.95) $16.07 5.61% 0.98% 1.85%
0.00%/8/ $109,969 44%
- $11.67 0.00% 0.63%/4/ 0.45%/4/
0.13%/4/ $123,036 30%
(0.11) $11.13 (3.73%) 1.54% 0.54%
- - $139,700 60%
(0.13) $ 8.44 (23.34%) 1.44% 1.04%
- - $130,898 51%
(0.07) $11.75 40.39% 1.35% 0.61%
- - $178,443 56%
(0.01) $10.68 6.85% 0.90%/4/ 0.33%/4/
0.01%/4/ $444,453 11%
(0.09) $13.30 14.69% 0.76%/4/ 2.85%/4/
0.16%/4/ $235,791 99%
(1.81) $13.26 15.37% 0.77% 3.02%
0.16% $250,083 143%
(1.31) $13.74 14.77% 0.76% 3.15%
0.09% $290,833 124%
(2.03) $13.47 14.21% 0.76% 2.50%
0.08% $424,506 66%
</TABLE>
Financial Highlights-The Wachovia Funds and
The Wachovia Municipal Funds-continued
(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
Net
Realized
and Distributions
Unrealized from Net Realized
Gain/(Loss)
on Gain on
Investments, Investments
Futures Transactions
Net Asset Contracts,
Distributions Futures Contracts,
Value, Net and Foreign Total from from
Net and Foreign
Year Ended beginning Investment Currency Investment
Investment Currency
November 30, of period Income Transactions Operations
Income Transactions
1996/1/ $ 9.45 0.17 0.40 0.57
(0.19) -
1997 $ 9.83 0.57 0.03 0.60
(0.58) -
1998 $ 9.85 0.56 0.29 0.85
(0.56) -
1999 $10.14 0.53 (0.58) (0.05)
(0.53) (0.04)
Wachovia Intermediate Fixed Income Fund
1998/5/ $10.12 0.42 0.25 0.67
(0.41) -
1999 $10.38 0.53 (0.61) (0.08)
(0.53) (0.20)
Wachovia Short-Term Fixed Income Fund
1996/1/ $ 9.67 0.114 0.18 0.29
(0.17) -
1997 $ 9.79 0.56 (0.05) 0.51
(0.53) -
1998 $ 9.77 0.54 0.14 0.68
(0.53) -
1999 $ 9.92 0.51 (0.25) 0.26
(0.55) -
Wachovia Georgia Municipal Bond Fund
1996/1/ $10.71 0.17 0.29 0.46
(0.17) -
1997 $11.00 0.47 0.13 0.60
(0.47) (0.02)
1998 $11.11 0.45 0.27 0.72
(0.45) (0.00)/6/
1999 $11.38 0.45 (0.74) (0.29)
(0.45) (0.03)
Wachovia North Carolina Municipal Bond Fund
1996/1/ $10.71 0.16 0.32 0.48
(0.16) -
1997 $11.03 0.46 0.13 0.59
(0.45) (0.02)
1998 $11.15 0.46 0.32 0.78
(0.46) (0.01)
1999 $11.46 0.45 (0.68) (0.23)
(0.45) (0.06)
Wachovia South Carolina Municipal Bond Fund
1996/1/ $10.73 0.20 0.32 0.52
(0.20) -
1997 $11.05 0.55 0.12 0.67
(0.55) (0.05)
1998 $11.12 0.54 0.24 0.78
(0.54) (0.00)/6/
1999 $11.36 0.52 (0.77) (0.25)
(0.52) (0.02)
Wachovia Virginia Municipal Bond Fund
1998/5/ $10.34 0.32 0.15 0.47
(0.32) -
1999 $10.49 0.47 (0.65) (0.18)
(0.47) -
1 Reflects operations for the period from July 22, 1996 (date of initial public
investment) to November 30, 1996.
2 Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.
3 Computed on an annualized basis.
4 Per share information is based on average shares outstanding.
5 Reflects operation for the period from March 30, 1998 (date of initial public
investment) to November 30, 1998.
6 Less than $0.01 per share.
7 This contractual expense decrease is reflected in both the expense and net
investment income ratios shown above.
See Notes which are an integral part of the Financial Statements
<TABLE>
<CAPTION>
Ratios to Average Net Assets
- ------------------------------------------------
Net Asset
Value, Net
Expense Net Assets, Portfolio
Total end of Total Investment
Waiver/ end of period Turnover
Distributions period Return/2/ Expenses Income
Reimbursement/7/ (000 omitted) Rate
<S> <C> <C> <C> <C>
<C> <C> <C>
(0.19) $ 9.83 6.12% 0.75%/3/ 6.33%/3/
0.14%/3/ $175,836 181%
(0.58) $ 9.85 6.38% 0.74% 5.91%
0.11% $185,398 174%
(0.56) $10.14 8.92% 0.72% 5.55%
0.05% $212,886 111%
(0.57) $ 9.52 (0.53%) 0.72% 5.65%
0.03% $487,982 49%
(0.41) $10.38 7.11% 0.74%/3/ 5.39%/3/
0.14%/3/ $ 87,831 57%
(0.73) $ 9.57 (0.77%) 0.74% 5.46%
0.04% $138,508 89%
(0.17) $ 9.79 3.00% 0.64%/3/ 5.77%/3/
0.19%/3/ $116,138 145%
(0.53) $ 9.77 5.33% 0.63% 5.63%
0.20% $ 91,063 215%
(0.53) $ 9.92 7.19% 0.63% 5.47%
0.10% $ 98,433 135%
(0.55) $ 9.63 2.70% 0.63% 5.26%
0.14% $ 38,323 25%
(0.17) $11.00 4.31% 0.89%/3/ 4.84%/3/
1.57%/3/ $ 6,803 14%
(0.49) $11.11 5.63% 0.92% 4.24%
1.06% $ 12,308 25%
(0.45) $11.38 6.62% 0.91% 3.96%
0.34% $ 17,030 14%
(0.48) $10.61 (2.59%) 0.68% 4.43%
0.37% $108,755 48%
(0.16) $11.03 4.55% 0.84%/3/ 4.16%/3/
0.65%/3/ $ 28,283 7%
(0.47) $11.15 5.57% 0.85% 4.16%
0.42% $ 44.104 17%
(0.47) $11.46 7.09% 0.85% 4.05%
0.16% $ 56,760 9%
(0.51) $10.72 (2.09%) 0.66% 4.27%
0.30% $434,523 11%
(0.20) $11.05 4.86% 0.57%/3/ 5.56%/3/
0.54%/3/ $ 36,511 20%
(0.60) $11.12 6.23% 0.58% 5.01%
0.48% $ 43,881 12%
(0.54) $11.36 7.15% 0.58% 4.77%
0.36% $ 54,770 6%
(0.54) $10.57 (2.24%) 0.58% 4.85%
0.35% $288,800 9%
(0.32) $10.49 4.61% 0.68%/3/ 4.62%/3/
0.33%/3/ $ 99,154 15%
(0.47) $ 9.84 (1.76%) 0.65% 4.64%
0.29% $129,811 29%
</TABLE>
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 Fund (including the SAI) by writing to or
visiting the Public Reference Room of the Securities and Exchange Commission in
Washington, DC. You may also access fund information from the EDGAR Database on
the SEC's Internet site at http:// www.sec.gov. You can purchase copies of this
information by contacting the SEC by email at [email protected] or by writing
to the SEC's Public Reference Section, Washington, DC 20549-0102. Call 1-202-
942-8090 for information on the Public Reference Room's operations and copying
fees.
THE WACHOVIA FUNDS &
THE WACHOVIA MUNICIPAL FUNDS
CLASS Y SHARES
Addresses
WACHOVIA EQUITY FUND WACHOVIA QUANTITATIVE EQUITY FUND WACHOVIA GROWTH & INCOME
FUND WACHOVIA EQUITY INDEX FUND WACHOVIA SPECIAL VALUES FUND WACHOVIA EMERGING
MARKETS FUND WACHOVIA PERSONAL EQUITY FUND WACHOVIA BALANCED 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
INVESTMENT ADVISER
TRANSFER AGENT, DIVIDEND DISBURSING
AGENT, AND PORTFOLIO RECORDKEEPER
COUNSEL TO THE WACHOVIA FUNDS AND
THE WACHOVIA MUNICIPAL FUNDS
COUNSEL TO THE INDEPENDENT TRUSTEES
INDEPENDENT AUDITORS
101 Greystone Boulevard
SC-9215
Columbia, SC 29226
Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Wachovia Asset Management
100 North Main Street
Winston-Salem, NC 27101
Federated Shareholder Services Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, DC 20036-1800
Piper Marbury Rudnick & Wolfe LLP
1200 Nineteenth Street, NW
Washington, DC 20036-2412
Ernst & Young LLP
200 Clarendon Street
Boston,MA 02116
January 31, 2000
822-28 (1/00)
Cusip 929901817 Cusip 929901759 Cusip 929901700 Cusip 929901668 Cusip 929901775
Cusip 929901858 Cusip 929901502 Cusip 929901619 Cusip 929901726 Cusip 929901643
Cusip 929901874 Cusip 929902302 Cusip 929902609 Cusip 929902203 Cusip 929902807
G01689-01-IS (1/00)
THE WACHOVIA FUNDS
Class A Shares, Class B Shares, Class Y Shares
WACHOVIA EQUITY FUND
WACHOVIA QUANTITATIVE EQUITY FUND
WACHOVIA GROWTH & INCOME FUND
WACHOVIA EQUITY INDEX FUND
WACHOVIA SPECIAL VALUES FUND
WACHOVIA EMERGING MARKETS FUND
WACHOVIA PERSONAL EQUITY FUND
WACHOVIA BALANCED FUND
WACHOVIA FIXED INCOME FUND
WACHOVIA INTERMEDIATE FIXED INCOME FUND
WACHOVIA SHORT-TERM FIXED INCOME FUND
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
JANUARY 31, 2000
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 January 31, 2000.
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?.......................................18
HOW ARE THE FUNDS SOLD?....................................19
HOW TO BUY SHARES..........................................19
HOW TO EXCHANGE SHARES.....................................20
HOW TO REDEEM SHARES.......................................20
ACCOUNT AND SHARE INFORMATION..............................20
TAX INFORMATION............................................21
WHO MANAGES AND PROVIDES SERVICES TO THE FUNDS.............23
HOW DO THE FUNDS MEASURE PERFORMANCE?......................27
FINANCIAL INFORMATION......................................34
INVESTMENT RATINGS.........................................35
ADDRESSES..................................................39
Federated Securities Corp., Distributor,
subsidiary of Federated Investors, Inc.
3012917B (1/00)
1
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.
<TABLE>
<CAPTION>
<S> <C> <C>
- ----------------------------------------- ------------------------------------------
THE WACHOVIA FUNDS CURRENTLY SHARES THE WACHOVIA MUNICIPAL FUNDS SHARES
OFFER THE FOLLOWING CURRENTLY OFFER THE FOLLOWING
PROFESSIONALLY MANAGED, PROFESSIONALLY MANAGED,
DIVERSIFIED PORTFOLIOS: NON-DIVERSIFIED PORTFOLIOS:
- ----------------------------------------- ------------------------------------------
Wachovia Equity Fund A,B,Y Wachovia Georgia Municipal Bond A,Y
(Equity Fund) Fund
(Georgia Municipal Bond Fund)
- ----------------------------------------- ------------------------------------------
- ----------------------------------------- ------------------------------------------
Wachovia Quantitative Equity Fund A,B,Y Wachovia North Carolina A,Y
(Quantitative Equity Fund) Municipal Bond Fund
(North Carolina Municipal Bond
Fund)
- ----------------------------------------- ------------------------------------------
- ----------------------------------------- ------------------------------------------
Wachovia Growth & Income Fund A,Y Wachovia South Carolina A,Y
(Growth & Income Fund) Municipal Bond Fund
(South Carolina Municipal Bond
Fund)
- ----------------------------------------- ------------------------------------------
- ----------------------------------------- ------------------------------------------
Wachovia Equity Index Fund A,Y Wachovia Virginia Municipal Bond A,Y
(Equity Index Fund) 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 Personal Equity Fund A,Y
(Personal Equity Fund)
- -----------------------------------------
- -----------------------------------------
Wachovia Balanced Fund A,B,Y
(Balanced Fund)
- -----------------------------------------
- -----------------------------------------
Wachovia Fixed Income Fund A,B,Y
(Fixed Income Fund)
- -----------------------------------------
- -----------------------------------------
Wachovia Intermediate Fixed A,Y
Income Fund
(Intermediate Fixed Income Fund
- -----------------------------------------
- -----------------------------------------
Wachovia Short-Term Income Fund A,Y
(Short-Term Income Fund)
- -----------------------------------------
</TABLE>
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.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
MUNICIPAL FUNDS
- --------------------------------------------------------------------------------------
SECURITIES GEORGIA NORTH SOUTH VIRGINIA
MUNICIPAL CAROLINA CAROLINA MUNICIPAL
BOND FUND MUNICIPAL MUNICIPAL BOND FUND
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 A A A A
SECURITIES
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS A A A A
- -------------------------------
- --------------------------------------------------------------------------------------
MUNICIPAL SECURITIES9 P P P P
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS A A A A
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
RESTRICTED AND ILLIQUID A A A A
SECURITIES12
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
SECURITIES OF OTHER A A A A
INVESTMENT COMPANIES
-------------------------------------------------------
- --------------------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS A A A A
-------------------------------------------------------
- --------------------------------------------------------------------------------------
VARIABLE RATE DEMAND NOTES A A A A
- -------------------------------
-------------------------------------------------------
WHEN-ISSUED TRANSACTIONS A A A A
- --------------------------------------------------------------------------------------
EQUITY FUNDS
- ------------------------------------------------------------------------------------------
SECURITIES EQUITY QUANTITATIVGROWTH & EQUITY SPECIAL EMERGING PERSONAL
FUND EQUITY INCOME INDEX VALUES MARKETS EQUITY
FUND FUND FUND FUND FUND FUND
- -------------------------
- ------------------------------------------------------------------------------------------
AMERICAN DEPOSITORY A A A A A A A
RECEIPTS1
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
BANKING INSTRUMENTS A A A A A A A
- -------------------------
- ------------------------------------------------------------------------------------------
COMMERCIAL PAPER7 A A A A A A A
- ------------------------- ----------
- ------------------------------------------------------------------------------------------
COMMON STOCKS P P P P P A P
- ------------------------------------------------------------------------------------------
- ------------------------- -------------------
CONVERTIBLE SECURITIES A A A A A A A
- ------------------------- -------------------
- ------------------------------------------------------------------------------------------
CORPORATE DEBT A A A N A A A
OBLIGATIONS6
- -------------------------------------------------------------- ---------
- ------------------------------------------------------------------------------------------
EMERGING MARKET N N N N N P N
SECURITIES
- ------------------------------------------------------------------------------------------
- ------------------------- ---------------------------- -------------------
EUROPEAN DEPOSITORY A A A N A A A
RECEIPTS
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
FOREIGN CURRENCY N N N N N A N
TRANSACTIONS4
- ------------------------- ------------------------------------- ---------
- ------------------------------------------------------------------------------------------
FOREIGN SECURITIES1 A A A A A P A
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
FUTURES AND OPTIONS A A A A A A A
TRANSACTIONS
- ------------------------------------------------------------------------------------------
- ------------------------- --------------------------------------------------------
GLOBAL DEPOSITORY A A A N A A A
RECEIPTS
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
HIGH-YIELD SECURITIES2 N N N N A A N
- ------------------------------------------------------------------------------------------
- ------------------------- --------------------------------------------------------
INDEX PARTICIPATION N N N A N N N
CONTRACTS5
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
LENDING OF PORTFOLIO A A A A A A A
SECURITIES
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
MASTER LIMITED N N N N A N N
PARTNERSHIPS
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
MONEY MARKET INSTRUMENTS A A A A A A A
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
MORTGAGE-BACKED N N N N N A N
SECURITIES10
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
OPTIONS ON FINANCIAL A A A N A A A
FUTURES
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
OVER-THE-COUNTER OPTIONS A A A N A A A
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
PREFERRED STOCKS A A A A A A A
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS A A A A A A A
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
RESTRICTED AND ILLIQUID A A A A A A A
SECURITIES12
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
REVERSE REPURCHASE A A A A A A A
AGREEMENTS
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SECURITIES OF OTHER A A A A A A A
INVESTMENT COMPANIES
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
STOCK INDEX FUTURES AND A A A A A A A
OPTIONS3
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
TEMPORARY INVESTMENTS A A A A A A A
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
U.S. GOVERNMENT A A A A A A A
OBLIGATIONS
- ------------------------- ---------------------------- -------------------
- ---------------------------------- ----------------------------
VARIABLE RATE DEMAND A A A A A A A
NOTES
- ------------------------------------------------------------------------------------------
- ------------------------- ----------------------------
WARRANTS A A A A A A A
-------------------
- ------------------------------------------------------------------------------------------
WHEN-ISSUED TRANSACTIONS A A A A A A A
- ------------------------------------------------------------------------------------------
EQUITY FUND AND INCOME FUNDS
- --------------------------------------------------------------------------------------
SECURITIES BALANCED FIXED INTERMEDIATE SHORT-TERM
FUND INCOME FUND 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 A A A A
DEBT OBLIGATIONS
- --------------------------------------------------------------------------------------
- ----------------------------------
PREFERRED STOCKS A N N N
- --------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS A A A A
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
SECURITIES BALANCED FIXED INTERMEDIATE SHORT-TERM
FUND INCOME FUND FIXED FIXED
INCOME FUND INCOME FUND
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
RESTRICTED AND ILLIQUID A A A A
SECURITIES12
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
REVERSE REPURCHASE AGREEMENTS A A A A
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
SECURITIES OF OTHER INVESTMENT A A A A
COMPANIES
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
STOCK INDEX FUTURES AND OPTIONS3 A N N N
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
STRIPPED MORTGAGE-BACKED A A A A
SECURITIES
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
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,
Balanced Fund and Personal Equity 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.
INTERESTS IN OTHER LIMITED LIABILITY COMPANIES
Entities such as limited partnerships, limited liability companies, business
trusts and companies organized outside the United States may issue securities
comparable to common or preferred stock.
REAL ESTATE INVESTMENT TRUSTS (REITS)
REITs are real estate investment trusts that lease, operate and finance
commercial real estate. REITs are exempt from federal corporate income tax if
they limit their operations and distribute most of their income. Such tax
requirements limit a REIT's ability to respond to changes in the commercial
real estate market. WARRANTS Warrants give a Fund the option to buy the
issuer's equity securities at a specified price (the exercise price) at a
specified future date (the expiration date). The Fund may buy the designated
securities by paying the exercise price before the expiration date. Warrants
may become worthless if the price of the stock does not rise above the
exercise price by the expiration date. This increases the market risks of
warrants as compared to the underlying security. Rights are the same as
warrants, except companies typically issue rights to existing stockholders.
MASTER LIMITED PARTNERSHIPS
A master limited partnership is a publicly owned limited partnership whose
shares are bought and sold on an organized stock exchange. FIXED INCOME
SECURITIES Fixed income securities pay interest, dividends or distributions at a
specified rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.
A security's yield measures the annual income earned on a security as a
percentage of its price. A security's yield will increase or decrease depending
upon whether it costs less (a discount) or more (a premium) than the principal
amount. If the issuer may redeem the security before its scheduled maturity, the
price and yield on a discount or premium security may change based upon the
probability of an early redemption. Securities with higher risks generally have
higher yields. The following describes the types of fixed income securities in
which a Fund may invest.
TREASURY SECURITIES
Treasury securities are direct obligations of the federal government of the
United States. Investors regard treasury securities as having the lowest
credit risks. AGENCY SECURITIES Agency securities are issued or guaranteed by
a federal agency or other government sponsored entity acting under federal
authority (a GSE). The United States supports some GSEs with its full, faith
and credit. Other GSEs receive support through federal subsidies, loans or
other benefits. A few GSEs have no explicit financial support, but are
regarded as having implied support because the federal government sponsors
their activities. Investors regard agency securities as having low credit
risks, but not as low as treasury securities.
The Fund treats mortgage backed securities guaranteed by GSEs as agency
securities. Although a GSE guarantee protects against credit risks, it does
not reduce the interest rate and prepayment risks of these mortgage backed
securities. CORPORATE DEBT SECURITIES Corporate debt securities are fixed
income securities issued by businesses. Notes, bonds, debentures and
commercial paper are the most prevalent types of corporate debt securities. A
Fund may also purchase interests in bank loans to companies. The credit risks
of corporate debt securities vary widely amount issuers.
The credit risk of an issuer's debt security may also vary based on its
priority for repayment. For example, higher ranking (senior) debt securities
have a higher priority than lower ranking (subordinated) securities. This
means that the issuer might not make payments on subordinated securities
while continuing to make payments on senior securities. In addition, in the
event of bankruptcy, holders of senior securities may receive amounts
otherwise payable to the holders of subordinated securities. Some
subordinated securities, such as trust preferred and capital securities
notes, also permit the issuer to defer payments under certain circumstances.
For example, insurance companies issue securities known as surplus notes that
permit the insurance company to defer any payment that would reduce its
capital below regulatory requirements.
COMMERCIAL PAPER
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for current
expenditures. Most issuers constantly reissue their commercial paper and
use the proceeds (or bank loans) to repay maturing paper. If the issuer
cannot continue to obtain liquidity in this fashion, its commercial paper
may default. The short maturity of commercial paper reduces both the
market and credit risks as compared to other debt securities of the same
issuer. DEMAND INSTRUMENTS Demand instruments are corporate debt
securities that the issuer must repay upon demand. Other demand
instruments require a third party, such as a dealer or bank, to repurchase
the security for its face value upon demand. The Fund treats demand
instruments as short-term securities, even though their stated maturity
may extend beyond one year.
MORTGAGE BACKED SECURITIES
Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates,
maturities and other terms. Mortgages may have fixed or adjustable interest
rates. Interests in pools of adjustable rate mortgages are 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 interest rate risks for each CMO class.
SEQUENTIAL CMOS
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.
PACS, TACS AND COMPANION 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.
IOS AND POS
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.
FLOATERS AND INVERSE FLOATERS 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.
Z CLASSES AND RESIDUAL CLASSES
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 have prepayment risks. Like CMOs, asset backed securities may be
structured like 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
interest rate and credit risks of a zero coupon security. A zero coupon
step-up security converts to a coupon security before final maturity. There
are many forms of zero coupon securities. Some are issued at a discount and
are referred to as zero coupon or capital appreciation bonds. Others are
created from interest bearing bonds by separating the right to receive the
bond's coupon payments from the right to receive the bond's principal due at
maturity, a process known as coupon stripping. 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). The Municipal Funds may invest in
bonds subject to 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. After the lease ends, the lessor can resell the equipment or
facility but may lose money on the sale.
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 not traded in the United States. ADRs provide a way to
buy shares of foreign-based companies in the United States rather than in
overseas markets. ADRs are also traded in U.S. dollars, eliminating the need
for foreign exchange transactions. The foreign securities underlying European
Depositary Receipts (EDRs), Global Depositary Receipts (GDRs), and
International Depositary Receipts (IDRs), are traded globally or outside the
United States. Depositary Receipts involve many of the same risks of
investing directly in foreign securities, including currency risks and risks
of foreign investing. FOREIGN EXCHANGE CONTRACTS In order to convert U.S.
dollars into the currency needed to buy a foreign security, or to convert
foreign currency received from the sale of a foreign security into U.S.
dollars, 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 interest
rate and currency risks, and may also expose the Fund to liquidity and leverage
risks. OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract.
A Fund may trade in the following types of derivative contracts.
FUTURES CONTRACTS
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset is
commonly referred to as buying a contract or holding a long position in the
asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts. Futures contracts
traded OTC are frequently referred to as forward contracts.
OPTIONS
Options are rights to buy or sell an underlying asset for a specified price
(the exercise price) during, or at the end of, a specified period. A call
option gives the holder (buyer) the right to buy the underlying asset from
the seller (writer) of the option. A put option gives the holder the right to
sell the underlying asset to the writer of the option. The writer of the
option receives a payment, or premium, from the buyer, which the writer keeps
regardless of whether the buyer uses (or exercises) the option.
A Fund, except the Wachovia Municipal Funds may engage in one or more of the
following: Buy call options on securities, securities indices and futures
contracts in anticipation of an increase in the value of the underlying
asset. Buy put options on securities, securities indices and futures
contracts in anticipation of a decrease in the value of the underlying asset.
Write call options on securities, securities indices and futures contracts to
generate income from premiums, and in anticipation of a decrease or only
limited increase in the value of the underlying asset. If a call written by
the Fund is exercised, the Fund foregoes any possible profit from an increase
in the market price of the underlying asset over the exercise price plus the
premium received. Write put options on securities, securities indices and
futures contracts (to generate income from premiums, and in anticipation of
an increase or only limited decrease in the value of the underlying asset).
In writing puts, there is a risk that the Fund may be required to take
delivery of the underlying asset when its current market price is lower than
the exercise price.
When the Fund writes options on futures contracts, it will be subject to
margin requirements similar to those applied to futures contracts. Buy or
write options to close out existing options positions. HYBRID INSTRUMENTS
Hybrid instruments combine elements of derivative contracts with those of
another security (typically a fixed income security). All or a portion of the
interest or principal payable on a hybrid security is determined by reference
to changes in the price of an underlying asset or by reference to another
benchmark (such as interest rates, currency exchange rates or indices).
Hybrid instruments also include convertible securities with conversion terms
related to an underlying asset or benchmark.
The risks of investing in hybrid instruments reflect a combination of the
risks of investing in securities, options, futures and currencies, and depend
upon the terms of the instrument. Thus, an investment in a hybrid instrument
may entail significant risks in addition to those associated with traditional
fixed income or convertible securities. Hybrid instruments are also
potentially more volatile and carry greater interest rate risks than
traditional instruments. Moreover, depending on the structure of the
particular hybrid, it may expose the Fund to leverage risks or carry
liquidity risks.
SPECIAL TRANSACTIONS
REPURCHASE AGREEMENTS
Repurchase agreements are transactions in which a Fund buys a security from a
dealer or bank and agrees to sell the security back at a mutually agreed upon
time and price. The repurchase price exceeds the sale price, reflecting the
Fund's return on the transaction. This return is unrelated to the interest
rate on the underlying security. The Fund will enter into repurchase
agreements only with banks and other recognized financial institutions, such
as securities dealers, deemed creditworthy by the investment adviser.
The Funds' custodian or subcustodian will take possession of the securities
subject to repurchase agreements. The investment adviser or subcustodian will
monitor the value of the underlying security each day to ensure that the
value of the security always equals or exceeds the repurchase price.
Repurchase agreements are subject to credit risks.
REVERSE REPURCHASE AGREEMENTS
Reverse repurchase agreements are repurchase agreements in which the Fund is
the seller (rather than the buyer) of the securities, and agrees to
repurchase them at an agreed upon time and price. A reverse repurchase
agreement may be viewed as a type of borrowing by the Fund. Reverse
repurchase agreements are subject to credit risks. In addition, reverse
repurchase agreements create leverage risks because the Fund must repurchase
the underlying security at a higher price, regardless of the market value of
the security at the time of repurchase. DELAYED DELIVERY TRANSACTIONS Delayed
delivery transactions are arrangements in which the Fund buys securities for
a set price, with payment and delivery of the securities scheduled for a
future time. During the period between purchase and settlement, no payment is
made by the Fund to the issuer and no interest accrues to the Fund. The Fund
records the transaction when it agrees to buy the securities and reflects
their value in determining the price of its shares. Settlement dates may be a
month or more after entering into these transactions so that the market
values of the securities bought may vary from the purchase prices. Therefore,
delayed delivery transactions create interest rate risks for the Fund.
Delayed deliverytransactions also involve credit risks in the event of a
counterparty default.
TO BE ANNOUNCED SECURITIES (TBAS)
As with other when issued transactions, a seller agrees to issue a TBA
security at a future date. However, the seller does not specify the
particular securities to be delivered. Instead, the Fund agrees to accept
any security that meets specified terms. For example, in a TBA mortgage
backed transaction, the Fund and the seller would agree upon the issuer,
interest rate and terms of the underlying mortgages. However, the seller
would not identify the specific underlying mortgages until it issues the
security. TBA mortgage backed securities increase interest rate risks
because the underlying mortgages may be less favorable than anticipated by
the Fund.
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 interest rate 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 interest rate risks and credit
risks. These transactions create leverage risks.
ASSET COVERAGE
In order to secure its obligations in connection with derivatives contracts or
special transactions, a Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions. INVESTMENT RISKS STOCK MARKET RISKS o The value of equity
securities in a Fund's portfolio will rise and fall. These
fluctuations could be a sustained trend or a drastic movement. A Fund's
portfolio will reflect changes in prices of individual portfolio stocks or
general changes in stock valuations. Consequently, the Fund's share price may
decline and you could lose money.
o The investment adviser attempts to manage market risk by limiting the amount
a Fund invests in each company's equity securities. However, diversification
will not protect the Fund against widespread or prolonged declines in the
stock market.
SECTOR RISKS
O Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain
sector may underperform other sectors or the market as a whole. As the
investment adviser allocates more of the Fund's portfolio holdings to a
particular sector, the Fund's performance will be more susceptible to any
economic, business or other developments which generally affect that sector.
O 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 companies with larger market capitalizations.
CURRENCY RISKS
o Exchange rates for currencies fluctuate daily. The combination of currency
risk and market risk tends to make securities traded in foreign markets more
volatile than securities traded exclusively in the U.S.
O The investment adviser attempts to manage currency risk by limiting the
amount the Fund invests in securities denominated in a particular currency.
However, diversification will not protect the Fund against a general increase
in the value of the U.S. dollar relative to other currencies.
RISKS OF FOREIGN INVESTING
o The Equity Funds may invest in foreign securities. Foreign securities pose
additional risks because foreign economic or political conditions may be less
favorable than those of the United States. Securities in foreign markets may
also be subject to taxation policies that reduce returns for U.S. investors.
o Foreign companies may not provide information (including financial
statements) as frequently or to as great an extent as companies in the United
States. Foreign companies may also receive less coverage than United States
companies by market analysts and the financial press. In addition, foreign
countries may lack uniform accounting, auditing and financial reporting
standards or regulatory requirements comparable to those applicable to U.S.
companies. These factors may prevent the Fund and its Adviser from obtaining
information concerning foreign companies that is as frequent, extensive and
reliable as the information available concerning companies in the United
States.
o Foreign countries may have restrictions on foreign ownership of securities or
may impose exchange controls, capital flow restrictions or repatriation
restrictions which could adversely affect the liquidity of the Fund's
investments.
EMERGING MARKET SECURITIES RISKS
o Investing in the Emerging Markets Fund entails a substantial degree of risk.
Securities issued or traded in emerging markets generally entail greater
risks than securities issued or traded in developed markets. For example,
their prices may be significantly more volatile than prices in developed
countries. Emerging market economies may also experience more severe
downturns (with corresponding currency devaluations) than developed
economies.
o Emerging market countries may have relatively unstable governments and may
present the risk of nationalization of businesses, expropriation,
confiscatory taxation or, in certain instances, reversion to closed market,
centrally planned economies.
LEVERAGE RISKS
o Leverage risk is created when an investment exposes the Fund to a level of
risk that exceeds the amount invested. Changes in the value of such an
investment magnify the Fund's risk of loss and potential for gain.
o Investments can have these same results if their returns are based on a
multiple of a specified index, security, or other benchmark.
INTEREST RATE RISKS
o Prices of fixed income securities rise and fall in response to interest rate
changes in the interest rate paid by similar securities. Generally, when
interest rates rise, prices of fixed income securities fall. However, market
factors, such as the demand for particular fixed income securities, may cause
the price of certain fixed income securities to fall while the prices of
other securities rise or remain unchanged.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity of
a fixed income security to changes in interest rates.
CREDIT RISKS
o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, a Fund
will lose money.
o Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investors Service. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not
received a rating, the Fund must rely entirely upon the investment adviser's
credit assessment.
o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable maturity
(the spread) measures the additional interest paid for risk. Spreads may
increase generally in response to adverse economic or market conditions. A
security's spread may also increase if the security's rating is lowered, or
the security is perceived to have an increased credit risk. An increase in
the spread will cause the price of the security to decline.
o Credit risk includes the possibility that a party to a transaction involving
the Fund will fail to meet its obligations. This could cause the Fund to lose
the benefit of the transaction or prevent the Fund from selling or buying
other securities to implement its investment strategy.
CALL RISKS
o Call risk is the possibility that an issuer may redeem a fixed income
security before maturity (a call) at a price below its current market price.
An increase in the likelihood of a call may reduce the security's price.
o If a fixed income security is called, the Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.
PREPAYMENT RISKS
o Unlike traditional fixed income securities, which pay a fixed rate of
interest until maturity (when the entire principal amount is due) payments on
mortgage backed securities include both interest and a partial payment of
principal. Partial payment of principal may be comprised of scheduled
principal payments as well as unscheduled payments from the voluntary
prepayment, refinancing, or foreclosure of the underlying loans. These
unscheduled prepayments of principal create risks that can adversely affect a
Fund holding mortgage backed securities. For example, when interest rates
decline, the values of mortgage backed securities generally rise. However,
when interest rates decline, unscheduled prepayments can be expected to
accelerate, and the Fund would be required to reinvest the proceeds of the
prepayments at the lower interest rates then available. Unscheduled
prepayments would also limit the potential for capital appreciation on
mortgage backed securities.
Conversely, when interest rates rise, the values of mortgage backed
securities generally fall. Since rising interest rates typically result in
decreased prepayments, this could lengthen the average lives of mortgage
backed securities, and cause their value to decline more than traditional
fixed income securities.
o Generally, mortgage backed securities compensate for the increased risk
associated with prepayments by paying a higher yield. The additional interest
paid for risk is measured by the difference between the yield of a mortgage
backed security and the yield of a U.S. Treasury security with a comparable
maturity (the spread). An increase in the spread will cause the price of the
mortgage backed security to decline. Spreads generally increase in response
to adverse economic or market conditions. Spreads may also increase if the
security is perceived to have an increased prepayment risk or is perceived to
have less market demand.
RISKS ASSOCIATED WITH NONINVESTMENT GRADE SECURITIES
o 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.
The Personal Equity Fund may borrow money, directly or indirectly, and
issue senior securities, to the maximum extent permitted under the 1940
Act, any rule or order thereunder, or any SEC staff interpretation
thereof. 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, Personal
Equity 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 BY THE BOARD OF TRUSTEES
(BOARD) UNLESS AUTHORIZED BY THE "VOTE OF A MAJORITY OF ITS OUTSTANDING VOTING
SECURITIES," AS DEFINED BY THE INVESTMENT COMPANY ACT. THE FOLLOWING
LIMITATIONS, HOWEVER, MAY BE CHANGED BY THE BOARD WITHOUT SHAREHOLDER APPROVAL.
SHAREHOLDERS WILL BE NOTIFIED BEFORE ANY MATERIAL CHANGE IN THESE LIMITATIONS
BECOMES EFFECTIVE. INVESTING IN SECURITIES OF OTHER INVESTMENT COMPANIES
The Funds will limit their investment in other investment companies to not
more than 3% of the total outstanding voting stock of any investment
company, will invest no more than 5% of their total assets in any one
investment company, and will invest no more than 10% of their total assets
in investment companies in general, unless, they are permitted to exceed
these limitations by action of the SEC. The Funds will purchase securities
of closed-end investment companies only in open market transactions
involving only customary brokers' commissions. However, these limitations
are not applicable if the securities are acquired in a merger,
consolidation, reorganization, or acquisition of assets. It should be
noted that investment companies incur certain expenses such as custodian
and transfer agency fees, and therefore, any investment by a Fund in
shares of another investment company would be subject to such duplicate
expenses. The Funds will invest in other investment companies primarily
for the purpose of investing their short-term cash on a temporary basis.
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. PURCHASES ON MARGIN The Personal Equity Fund will not
purchase securities on margin, provided that the Fund may obtain
short-term credits necessary for the clearance of purchases and sales of
securities, and further provided that the Fund may make margin deposits in
connection with its use of financial options and futures, forward and spot
currency contracts, and other financial contracts or derivative
instruments.
PLEDGING ASSETS
The Personal Equity Fund will not mortgage, pledge, or hypothecate any of
its assets, provided that this shall not apply to the transfer of
securities in connection with any permissible borrowing or to collateral
arrangements in connection with permissible activities.
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." 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:
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;
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;
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
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:
o following the death or disability, as defined in Section 72(m)(7) of the
Internal Revenue Code of 1986, of the last surviving shareholder;
o 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;
o which are involuntary redemptions of shareholder accounts that do not
comply with the minimum balance requirements;
o representing up to 10% of the value of Class B Shares subject to a
Systematic Withdrawal Program;
o of Shares that represent a reinvestment within 90 days of a previous
redemption that was assessed a CDSC;
o 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
o 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.
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. In addition, the Distributor may pay investment
professionals 0.25% of the purchase price of $1 million or more of Class A
Shares that its customer has not redeemed over the first year. The Adviser may
reimburse the Distributor for amounts paid under this program.
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, Inc. (Federated) 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.
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.
FORMER TRUST CUSTOMERS
Former trust customers of Wachovia Bank, N.A. whose trust relationship
transferred to State Street Bank & Trust Company during the period September 3,
1999 through June 30, 2000 may continue to hold the Class Y Shares of The
Wachovia Funds. 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:
o exchange all or part of their Class A Shares of other eligible Delaware
Funds, as well as Eligible Wachovia Funds at NAV; and
o 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 January 4, 2000, 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.
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SHAREHOLDER NAME FUND SHARE PERCENTAGE
ADDRESS CLASS OWNED
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Wachovia Bank, N.A. Equity Fund A 48.65%
Equity Fund Y 32.57%
Growth & Income Fund Y 24.26%
Quantitative Equity Fund A 9.73%
Quantitative Equity Fund Y 22.87%
Equity Index Fund A 48.09%
Equity Index Fund Y 63.83%
Balanced Fund A 52.89%
Balanced Fund Y 5.58%
Fixed Income Fund A 80.79%
Fixed Income Fund B 38.28%
Fixed Income Fund Y 8.22%
Short-Term Fixed Income A 55.03%
Fund A 5.07%
Special Values Fund B 7.08%
Special Values Fund Y 42.65%
Special Values Fund A 37.50%
Emerging Markets Fund Y 36.06%
Emerging Markets Fund A 97.30%
Personal Equity Fund Y 35.02%
Short-Term Fixed Income A 9.93%
Fund A 5.01%
Georgia Municipal Bond
Fund A 5.44%
North Carolina Y 5.28%
Municipal
Bond Fund
Virginia Municipal Bond
Fund
Virginia Municipal Bond
Fund
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Mahlon B. Dewey Intermediate Fixed A 6.10%
P.O. Box 971 Income Fund
Arlington, VA 22216-0971
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.
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 15 Funds and The Wachovia Municipal Funds are comprised of four
funds, together they form the Fund Complex.
As of January 4, 2000, 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. An ^ denotes retiring as a member of the Board of Trustees
on February 23, 2000.
<TABLE>
<CAPTION>
<S> <C> <C>
- ------------------------------------------------------------------------ --------------
NAME OCCUPATIONS FOR PAST 5 YEARS AGGREGATE
BIRTHDATE COMPENSATION
ADDRESS FROM FUND
POSITION WITH TRUSTS COMPLEX
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
JAMES A. HANLEY Retired; Vice President and Treasurer, Abbott $33,200 August 13,
1931 Laboratories (health care products) (until 4272 Sanctuary Way 1992).
Bonita Springs, FL
Trustee
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
SAMUEL E. HUDGINS Hudgins Consulting, LLC (independent $33,200
March 4, 1929 consultant); President, Percival Hudgins &
715 Whitemere Court, Company, LLC (investment bankers/financial
N.W. consultants) (until September 1997); Director,
Atlanta, GA Atlantic American Corporation (insurance
Trustee holding company).
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
J. BERKELY INGRAM, JR.^ Real estate investor and partner; formerly, $26,000
April 17, 1924 Vice Chairman, Massachusetts Mutual Life
114-L Reynolda Village Insurance Company.
Winston-Salem, NC
Trustee
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
D. DEAN KAYLOR Retired; Executive Vice President and Chief $26,000
June 29, 1930 Financial Officer, NBD Bank, N.A. and NBD
2835 Greenbriar Bancorp, Inc. (bank and bank holding company)
Harbor Springs, MI (until 1990).
Trustee
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
ALVIN J. SCHEXNIDER, Director, Office of Health Policy Development, $26,000
PH.D. Wake Forest University School of Medicine
May 26, 1945 (since February 2000); Chancellor,
3174 Turkey Hill Road Winston-Salem State University (1996 to
Winston-Salem, NC 27106 January 2000); Formerly, Vice Provost,
Trustee Virginia Commonwealth University (1987 to
1996).
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
CHARLES S. WAY, JR.* President and CEO, The Beach Company and its $26,000
December 18, 1937 various affiliated companies and partnerships.
211 King Street
Suite 300
Charleston, SC
Trustee
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
JOHN W. MCGONIGLE Executive Vice President and Secretary of the $0
October 26, 1938 Federated Fund Complex; Executive Vice
Federated Investors President, Secretary and Director, Federated
Tower Investors, Inc.; Trustee, Federated Investment
Pittsburgh, PA Management Company and Federated Investment
President and Treasurer Counseling; Director, Federated Global
Investment Management Corp, Federated Services
Company and Federated Securities Corp.
- ------------------------------------------------------------------------ --------------
- ------------------------------------------------------------------------ --------------
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 Mutual $0
September 3, 1959 Funds Services, Federated Services Company;
Federated Investors formerly, Senior Corporate Counsel, Federated
Tower 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 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.
ADMINISTRATOR
Federated Services Company, a subsidiary of Federated 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 $3.5 billion to $5.0 billion
.04 of 1% on $5.0 billion to $10 billion
.03 of 1% on $10.0 billion to $20.0 billion
.02 of 1% on assets in excess of $20.0 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. Foreign instruments purchased by the Funds are held by foreign banks
participating in a network coordinated by State Street Bank.
TRANSFER AGENT AND DIVIDEND DISBURSING AGENT
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, also provides certain accounting and
recordkeeping services with respect to the Funds' portfolio investments.
INDEPENDENT AUDITORS
The independent auditors for the Fund, Ernst & Young LLP, plans and performs its
audit so that it may provide an opinion as to whether the Fund's financial
statements and financial highlights are free of material misstatement.
SHAREHOLDER SERVICES
The Fund may pay Federated Administrative Services, a subsidiary of Federated,
for providing shareholder services and maintaining shareholder accounts.
Federated Services Company may select others to perform these services for their
customers and may pay them fees.
FEES PAID BY THE FUNDS FOR SERVICES
<TABLE>
<CAPTION>
<S> <C> <C> <C>
- -----------------------------------------------------------------------------------------
FUND ADVISORY FEE PAID/ BROKERAGE COMMISSIONS ADMINISTRATIVE FEE
ADVISORY FEE WAIVED PAID PAID
---------------------------------------------
------------------------------------------------------------------------
FOR THE FISCAL YEAR ENDED FOR THE FISCAL YEAR FOR THE FISCAL YEAR
NOVEMBER 30, ENDED ENDED
NOVEMBER 30, NOVEMBER 30,
------------------------------------------------------------------------
-------------------------------------------------------------------------
1999 1998 1997 1999 1998 1997 1999 1998 1997
- -----------------
-------------------------------------------------------------------------
EQUITY FUND $2,103,35$1,619,63$1,230,41$215,427$304,18$197,705$250,356$222,32$147,147
$0 $0 $119,625
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
QUANTITATIVE $3,185,11$1,910,49$1,345,44$315,385$229,05$136,576$370,36$257,215$160,933
EQUITY FUND $0 $4,564 $146,406
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
GROWTH & INCOME $2,356,48$1,519,36N/A $265,064$232,21N/A $281,89$199,855N/A
FUND $0 $26,405
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
EQUITY INDEX $1,507,84$1,068,95$808,170 $37,596 $18,157$12,595 $419,62$336,704$225,519
FUND $0 $0 $61,816
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SPECIAL VALUES $1,322,70$1,184,90$766,650 $288,501$202,17$206,032$137,84$139,710$80,170
FUND $3,432 $0 $15,052
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
EMERGING $1,655,47$1,525,82$1,604,74$626,976$831,10$846,113$137,80$144,378$134,379
MARKETS FUND $0 $3,334 $0
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
PERSONAL EQUITY $990,713 N/A N/A $102,637$ N/A $104,03$ N/A
FUND $15,909
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
BALANCED FUND $3,422,03$2,727,91$1,986,26$240,357$310,94$238,931$402,34$364,455$237,616
$372,597 $368,451 $446,571
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
FIXED INCOME $2,163,98$1,314,97$1,123,24$42,239 $0 $0 $291,78$206,835$156,900
FUND $110,201 $113,808 $205,339
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
INTERMEDIATE $635,402 $381,349 N/A $12,134 $0 N/A $86,913$58,542 N/A
FIXED INCOME $42,003 $43,716
FUND
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SHORT-TERM $310,181 $$572,413$632,994 $0 $0 $0 $47,798$98,371 $96,093
FIXED INCOME $78,764 $106,855 $224,696
FUND
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
GEORGIA $418,853 $$159,236$113,578 $0 $0 $0 $43,476$20,037 $12,683
MUNICIPAL BOND $198,440 $71,319 $113,578
FUND
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
NORTH CAROLINA $1,466,79$$456,438$365,397 $0 $0 $0 $151,11$57,431 $40,794
MUNICIPAL BOND $568,554 $99,381 $208,414
FUND
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
SOUTH CAROLINA $1,507,18$$868,899$767,628 $0 $0 $0 $160,81$108,509$85,740
MUNICIPAL BOND $709,176 $421,145 489,271
FUND
- ------------------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------
VIRGINIA $876,247 $535,046 N/A $0 $0 N/A $98,127$66,597 N/A
MUNICIPAL BOND $344,472 $177,141
FUND
- ------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------
</TABLE>
FUNDS FOR THE FISCAL YEAR ENDED NOVEMBER
30, 1999
------------------------------------
------------------------------------
12B-1 FEE SHAREHOLDER SERVICES
FEE
------------------------------------
------------------------------------
CLASS B CLASS A CLASS B
SHARES SHARES SHARES
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
EQUITY FUND $54,300 $236,058 $18,100
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
QUANTITATIVE EQUITY FUND $171,432 $217,413 $57,144
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
GROWTH & INCOME FUND N/A $340,460 N/A
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
EQUITY INDEX FUND N/A $411,379 N/A
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
SPECIAL VALUES FUND $940 $164,684 $313
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
EMERGING MARKETS FUND N/A $33,617 N/A
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
PERSONAL EQUITY FUND (A) $0 $16 N/A
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
BALANCED FUND $134,080 $480,755 $44,693
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
FIXED INCOME FUND $5,854 $139,078 $1,951
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
INTERMEDIATE FIXED INCOME FUND N/A $9,931 N/A
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
SHORT-TERM FIXED INCOME FUND N/A $25,565 N/A
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
GEORGIA MUNICIPAL BOND FUND N/A $15,941 N/A
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
NORTH CAROLINA MUNICIPAL BOND N/A $23,325 N/A
FUND
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
SOUTH CAROLINA MUNICIPAL BOND N/A $162,729 N/A
FUND
- ---------------------------------------------------------------------
- ---------------------------------------------------------------------
VIRGINIA MUNICIPAL BOND FUND N/A $21,071 N/A
- ---------------------------------------------------------------------
(a) Figures for the period from July 30, 1999 to November 30, 1999.
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 AND TAX-EQUIVALENT 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 tax-equivalent yield of Shares is calculated
similarly to yield, but is adjusted to reflect the taxable yield that Shares
would have had to earn to equal the actual yield, assuming the maximum combined
federal and state 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.
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------------
FUND AVERAGE ANNUAL TOTAL RETURN YIELD
for the following periods ended for the 30-day period ended
November 30, 1999 November 30, 1999
-------------------------------------------------------------------------
-------------------------------------------------------------------------
CLASS A CLASS B CLASS Y CLASS A CLASS B CLASS Y
SHARES SHARES SHARES SHARES SHARES SHARES
One Year One Year One Year
Five Year Five Year Five Years
Start of Start of Start of
Performance Performance Performance
<S> <C> <C> <C> <C> <C> <C>
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
EQUITY FUND 18.71% 18.37% 24.52% 0.49% 0.00% 0.76%
22.03% N/A N/A
17.55%(a) 23.19%(g) 24.90%(g)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
QUANTITATIVE 11.33% 10.85% 16.97% 0.19% 0.00% 0.44%
EQUITY FUND 20.68% N/A N/A
20.33%(b) 24.29%(g) 26.03%(g)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
GROWTH & INCOME 14.98% N/A 20.73% 0.13% N/A 0.38%
FUND N/A N/A
12.47%(c) 15.90%(h)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
EQUITY INDEX FUND 14.56% N/A 20.24% 0.93% N/A 1.23%
25.45% N/A
19.96%(a) 27.71%(g)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
SPECIAL VALUES 0.66% N/A 5.61% 1.29% 0.62% 1.61%
FUND 17.78% N/A N/A
13.39%(a) 4.52% 14.19%(g)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
EMERGING MARKETS 33.72% N/A 40.39% N/A N/A N/A
FUND N/A N/A
2.92%(d) 0.45%(g)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
PERSONAL EQUITY N/A N/A N/A 0.04% N/A 0.29%
FUND N/A N/A
1.96% (i) 6.85%(i)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
BALANCED FUND 8.80% 8.18% 14.21% 2.07% 1.42% 2.42%
16.50% N/A N/A
13.08%(a) 16.05%(g) 17.82%(g)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
FIXED INCOME FUND (5.26%) (6.21%) (0.53%) 5.49% 4.99% 6.00%
6.21% N/A N/A
4.46%(a) 4.36%(g) 6.18%(g)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
INTERMEDIATE (5.50%) N/A (0.77%) 4.99% N/A 5.48%
FIXED INCOME FUND N/A N/A
0.66%(c) 3.71%
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
SHORT-TERM FIXED (0.08%) N/A (2.70%) 4.96% N/A 5.35%
INCOME FUND 5.15% N/A
4.36%(a) 5.43%
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
GEORGIA MUNICIPAL (7.23%) N/A (2.59%) 4.25% N/A 4.49%
BOND FUND N/A N/A
4.52%(d) 4.10%(g)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
NORTH CAROLINA (7.35%) N/A (2.09%) 4.22% N/A 4.68%
MUNICIPAL BOND N/A N/A
FUND 4.84%(d) 4.44%(g)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
SOUTH CAROLINA (6.91%) N/A (2.24%) 4.40% N/A 4.87%
MUNICIPAL BOND 5.44% N/A
FUND 5.67%(e) 4.70%(g)
- --------------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------------
VIRGINIA (6.38%) N/A (1.76%) 4.12% N/A 4.56%
MUNICIPAL BOND N/A N/A
FUND 1.35%(f) 1.64%(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 (i) July 13, 1999
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.
TAX EQUIVALENCY TABLE
TAXABLE YIELD EQUIVALENT FOR 2000 - STATE OF GEORGIA
TAX BRACKET:
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND 21.000% 34.000% 37.000% 42.000% 45.600%
STATE:
- --------------------------------------------------------------------------------
Joint Return $1-43,85$43,851-105,$105,951-161,$161,451-288Over
288,350
Single Return $1-26,25$26,251-63,5$63,551-132,6$132,601-288Over
288,350
TAX EXEMPT YIELD: TAXABLE YIELD EQUIVALENT:
1.00% 1.27% 1.52% 1.59% 1.72% 1.84%
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%
7.50% 9.49% 11.36% 11.90% 12.93% 13.79%
8.00% 10.13% 12.12% 12.70% 13.79% 14.71%
8.50% 10.76% 12.88% 13.49% 14.66% 15.63%
9.00% 11.39% 13.64% 14.29% 15.52% 16.54%
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 2000 - 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 $1-43,85$43,851-105,$105,951-161,$161,451-288,Over
288,350
Single Return $1-26,25$26,251-63,5$63,551-132,6$132,601-288,Over
288,350
TAX EXEMPT YIELD: TAXABLE YIELD EQUIVALENT:
1.00% 1.28% 1.56% 1.63% 1.78% 1.90%
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%
6.50% 8.33% 10.12% 10.61% 11.56% 12.35%
7.00% 8.97% 10.89% 11.43% 12.44% 13.30%
7.50% 9.62% 11.67% 12.24% 13.33% 14.25%
8.00% 10.265 12.455 13.06% 14.22% 15.19%
8.50% 10.90% 13.23% 13.88% 15.11% 16.14%
9.00% 11.54% 14.01% 14.69% 16.00% 17.09%
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 2000 - STATE OF SOUTH CAROLINA
TAX BRACKET:
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND 22.000% 35.000% 38.000% 43.000% 46.600%
STATE:
- -------------------------------------------------------------------------------
Joint Return $1-43,85$43,851-105,$105,951-161,$161,451-288,Over
288,350
Single Return $1-26,25$26,251-63,5$63,551-132,6$132,601-288,Over
288,350
TAX EXEMPT YIELD: TAXABLE YIELD EQUIVALENT:
1.00% 1.28% 1.54% 1.61% 1.75% 1.87%
1.50% 1.92% 2.31% 2.42% 2.63% 2.81%
2.00% 2.56% 3.08% 3.23% 3.51% 3.75%
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%
7.50% 9.62% 11.54% 12.10% 13.16% 14.04%
8.00% 10.26% 12.31% 12.90% 14.04% 14.98%
8.50% 10.90% 13.08% 13.71% 14.91% 15.92%
9.00% 11.54% 13.85% 14.52% 15.79% 16.85%
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 2000 - STATE OF VIRGINIA
TAX BRACKET:
FEDERAL 15.00% 28.00% 31.00% 36.00% 39.60%
COMBINED FEDERAL AND STATE20.750% 33.750% 36.750% 41.750% 45.2350%
- --------------------------------------------------------------------------------
Joint Return $1-43,85$43,851-105,$105,951-161,$161,451-288,Over 288,350
Single Return $1-26,25$26,251-63,5$63,551-132,6$132,601-288,Over
288,350
TAX EXEMPT YIELD: TAXABLE YIELD EQUIVALENT:
1.00% 1.26% 1.51% 1.58% 1.72% 1.83%
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%
6.50% 8.20% 9.81% 10.28% 11.16% 11.89%
7.00% 8.83% 10.57% 11.07% 12.02% 12.81%
7.50% 9.46% 11.32% 11.86% 12.88% 13.72%
8.00% 10.09% 12.08% 12.65% 13.73% 14.64%
8.50% 10.73% 12.83% 13.44% 14.59% 15.55%
9.00% 11.36% 13.58% 14.23% 15.45% 16.47%
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 NORTH SOUTH VIRGINIA
for the 30-day period MUNICIPAL CAROLINA CAROLINA MUNICIPAL
ended November 30, 1999 BOND FUND MUNICIPAL MUNICIPAL BOND FUND
BOND FUND BOND FUND
- -----------------------------------------------------------------------------
CLASS A SHARES 7.81% 8.02% 8.24% 7.52%
- -----------------------------------------------------------------------------
CLASS Y SHARES 8.25% 8.89% 9.12% 8.33%
- -----------------------------------------------------------------------------
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.
PERFORMANCE COMPARISONS
Advertising and sales literature may include:
o references to ratings, rankings, and financial publications and/or
performance comparisons of Shares to certain indices;
o charts, graphs and illustrations using the Fund's returns, or returns in
general, that demonstrate investment concepts such as tax-deferred
compounding, dollar-cost averaging and systematic investment;
o discussions of economic, financial and political developments and their
impact on the securities market, including the portfolio manager's views on
how such developments could impact the Funds; and
o information about the mutual fund industry from sources such as the
Investment Company Institute.
A Fund may compare its performance, or performance for the types of securities
in which it invests, to a variety of other investments, including federally
insured bank products such as bank savings accounts, certificates of deposit,
and Treasury bills.
A Fund may quote information from reliable sources regarding individual
countries and regions, world stock exchanges, and economic and demographic
statistics.
You may use financial publications and/or indices to obtain a more complete view
of Share performance. When comparing performance, you should consider all
relevant factors such as the composition of the index used, prevailing market
conditions, portfolio compositions of other funds, and methods used to value
portfolio securities and compute offering price. The financial publications
and/or indices which the Fund uses in advertising may include:
LIPPER ANALYTICAL SERVICES, INC. ranks funds in various fund categories by
making comparative calculations using total return. Total return assumes the
reinvestment of all capital gains distributions and income dividends and takes
into account any change in maximum offering price over a specific period of
time. From time to time, a Fund will quote its Lipper ranking in advertising and
sales literature. DOW JONES INDUSTRIAL AVERAGE ("DJIA") represents share prices
of selected blue-chip industrial corporations. The DJIA indicates daily changes
in the average price of stock of these corporations. Because it represents the
top corporations of America, the DJIA index is a leading economic indicator for
the stock market as a whole. STANDARD & POOR'S DAILY STOCK PRICE INDEX OF 500
COMMON STOCKS (THE "S&P INDEX"), is a composite index of common stocks in
industry, transportation, and financial and public utility companies. In
addition, the S&P Index assumes reinvestment of all dividends paid by stocks
listed on the S&P Index. Taxes due on any of these distributions are not
included, nor are brokerage or other fees calculated in the S&P Index figures.
RUSSELL 2000 INDEX is a broadly diversified index consisting of approximately
2,000 small capitalization common stocks that can be used to compare the total
returns of funds whose portfolios are invested primarily in small capitalization
common stocks. 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.
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 AGGREGATE MUNICIPAL BOND INDEX are broad market performance
benchmarks for the tax-exempt bond market. As of December 1995, approximately
29,300 bonds were included in the Municipal Bond Index with a market value of
$443 billion. To be included in the Lehman Brothers Aggregate Municipal Bond
Index, bonds must have a minimum credit rating of at least Baa. They must have
an outstanding par value of at least $3 million and be issued as part of a
transaction of at least $50 million. The index includes both zero coupon bonds
and bonds subject to the Alternative Minimum tax.
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 Funds for the fiscal year ended November
30,1999 are incorporated herein by reference to the Annual Reports to
Shareholders of the Funds dated November 30, 1999.
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.
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
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.
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.
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 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. MOODY'S INVESTORS SERVICE SHORT TERM LOAN RATINGS MIG 1/VMIG 1--This
designation denotes best quality. There is present strong protection by
established cash flows, superior liquidity support or demonstrated broad based
access to the market for refinancing.
MIG 2/VMIG 2--This designation denotes high quality. Margins of protection are
ample although not so large as in the preceding group. MIG 3/VMIG 3--This
designation denotes favorable quality. All security elements are accounted for
but there is lacking the undeniable strength of the preceding grades. Liquidity
and cash flow protection may be narrow and market access for refinancing is
likely to be less well established.
ADDRESSES
THE WACHOVIA 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, PA 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
APPENDIX - CLASS A AND B SHARES PROSPECTUS
WACHOVIA GEORGIA MUNICIPAL BOND FUND
RISK/RETURN BAR CHART AND TABLE
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class A Shares of Wachovia Georgia Municipal Bond Fund
as of the calendar year-end for each of five years.
The `y' axis reflects the "% Total Return" beginning with "-4.00%" and
increasing in increments of 4.00% up to 16.00%. 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, 1999. 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 A Shares for each calendar year is stated directly at
the bottom of each respective bar, for the calendar years 1995 through 1999. The
percentages noted are 14.66%, 3.46%, 7.36%, 5.09% and (3.69%), respectively.
WACHOVIA NORTH CAROLINA MUNICIPAL BOND FUND
RISK/RETURN BAR CHART AND TABLE
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class A Shares of Wachovia North Carolina Municipal Bond
Fund as of the calendar year-end for each of five years.
The `y' axis reflects the "% Total Return" beginning with "-4.00%" and
increasing in increments of 4.00% up to 16.00%. 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, 1999. 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 A Shares for each calendar year is stated directly at
the bottom of each respective bar, for the calendar years 1995 through 1999. The
percentages noted are 15.22%, 3.37%, 7.73%, 5.41% and (3.40%), respectively.
WACHOVIA SOUTH CAROLINA MUNICIPAL BOND FUND
RISK/RETURN BAR CHART AND TABLE
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class A Shares of Wachovia South Carolina Municipal Bond
Fund as of the calendar year-end for each of eight years.
The `y' axis reflects the "% Total Return" beginning with "-4.00%" and
increasing in increments of 4.00% up to 16.00%. 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, 1999. The light gray
shaded chart features eight 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 A Shares for each calendar year is stated directly at
the bottom of each respective bar, for the calendar years 1992 through 1999. The
percentages noted are 8.73%, 12.01%, (3.72%), 15.33%, 3.94%, 8.14%, 5.44% and
(3.40%), respectively.
WACHOVIA VIRGINIA MUNICIPAL BOND FUND
RISK/RETURN BAR CHART AND TABLE
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class A Shares of Wachovia Virginia Municipal Bond Fund
as of the calendar year-end for each of six years.
The `y' axis reflects the "% Total Return" beginning with "-4.00%" and
increasing in increments of 4.00% up to 16.00%. 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, 1999. The light gray
shaded chart features six distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class A Shares for each calendar year is stated directly at
the bottom of each respective bar, for the calendar years 1994 through 1999. The
percentages noted are (5.95%), 13.80%, 1.67%, 7.97%, 5.57% and (2.89%),
respectively.
APPENDIX - CLASS Y SHARES PROSPECTUS
WACHOVIA GEORGIA MUNICIPAL BOND FUND
RISK/RETURN BAR CHART AND TABLE
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class Y Shares of Wachovia Georgia Municipal Bond Fund
as of the calendar year-end for each of three years.
The `y' axis reflects the "% Total Return" beginning with "-4.00%" and
increasing in increments of 4.00% up to 8.00%. 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, 1999. The light gray
shaded chart features three 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 Y Shares for each calendar year is stated directly at
the bottom of each respective bar, for the calendar years 1997 through 1999. The
percentages noted are 7.61%, 5.35% and (3.45%), respectively.
WACHOVIA NORTH CAROLINA MUNICIPAL BOND FUND
RISK/RETURN BAR CHART AND TABLE
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class Y Shares of Wachovia North Carolina Municipal Bond
Fund as of the calendar year-end for each of three years.
The `y' axis reflects the "% Total Return" beginning with "0.00%" and increasing
in increments of 2.00% up to 10.00%. 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, 1999. The light gray shaded chart features
three 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 Y
Shares for each calendar year is stated directly at the bottom of each
respective bar, for the calendar years 1997 through 1999. The percentages noted
are 7.97%, 5.67% and _____%, respectively.
WACHOVIA SOUTH CAROLINA MUNICIPAL BOND FUND
RISK/RETURN BAR CHART AND TABLE
The graphic presentation displayed here consists of a bar chart representing the
annual total returns of Class Y Shares of Wachovia South Carolina Municipal Bond
Fund as of the calendar year-end for each of three years.
The `y' axis reflects the "% Total Return" beginning with "-5.00%" and
increasing in increments of 5.00% up to 10.00%. 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, 1999. The light gray
shaded chart features three 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 Y Shares for each calendar year is stated directly at
the bottom of each respective bar, for the calendar years 1997 through 1999. The
percentages noted are 8.39%, 5.70% and (3.16%), respectively.
WACHOVIA VIRGINIA MUNICIPAL BOND FUND
RISK/RETURN BAR CHART AND TABLE
The graphic presentation displayed here consists of a bar chart representing the
annual total return of Class Y Shares of Wachovia Virginia Municipal Bond Fund
as of the calendar year-end for one year.
The `y' axis reflects the "% Total Return" beginning with "-3.00%" and
increasing in increments of 1.00% up to 1.00%. 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, 1999. The light gray
shaded chart features one distinct vertical bar, shaded in charcoal, and
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 Y Shares for each calendar year is stated directly at the bottom of the
bar, for the calendar year 1999. The percentage noted is (2.64%).
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; (15)
(vi) Form of Amendment #1 to Letter Agreement; +
(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).
15. Response is incorporated by reference to Registrant's Post-Effective
Amendment No. 18 filed February 23, 1999. (File Nos. 33-37525 and 811-
6201).
(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) (ix) Amendment to Exhibit A to the Shareholder
Services Agreement; + (x) Conformed copy of Agreement for Fund
Accounting Services,
Administrative Service and Transfer Agency Services; +
(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) Not Applicable;
(o) Conformed copy of The Wachovia Municipal Funds Multiple
Class Plan (12);
(i) Amendment to Exhibit A to Multiple Class Plan;+
(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).
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 adviser, see the
section entitled "Who Manages the Funds?" in Part A. The Officers of the
investment adviser are: Chief Executive Officer, L. M. Baker, Jr.;
President and Chief Operating Officer, G. Joseph Prendergast; Vice
Chairman, Robert S. McCoy, Jr.; Vice Chairman, Walter E. Leonard, Jr.;
State Chief Executive Officer, Lewis N. Miller, Jr. (Virginia); State Chief
Executive Officer, Will B. Spence (North Carolina/South Carolina); State
Chief Executive Officer, D. Gary Thompson (Florida/Georgia); State
President, James C. Cherry (Virginia Banking); State President, J. Kenneth
Coppedge (Florida Banking); State President, Isaiah Tidwell (Georgia
Banking); Senior Executive Vice President, Jean E. Davis; Senior Executive
Vice President, Mickey W. Dry; Senior Executive Vice President, Stanhope A.
Kelly; Senior Executive Vice President, Kenneth W. McAllister; Senior
Executive Vice President, John C. McLean, Jr.; and Senior Executive Vice
President, Donald K. Truslow. The business address of each of the Officers
of the investment adviser is Wachovia Bank, N.A., 100 North Main Street,
Winston-Salem, N.C. 27101.
The Directors of the investment adviser are: L.M. Baker, Jr.; James S.
Balloun; Peter C. Browning; John T. Casteen, III; John L. Clendenin; Thomas K.
Hearn, Jr.; George W. Henderson, III; W. Hayne Hipp; Robert A. Ingram; George R.
Lewis; Elizabeth Valk Long; John G. Medlin, Jr.; Lloyd U. Noland, III; Morris W.
Offit; G. Joseph Prendergast; Sherwood H. Smith, Jr.; and John C. Whitaker, Jr.
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)
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:
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 Municipal Opportunities Fund, Inc.;
Federated Municipal Securities Fund, Inc.; Federated Municipal Trust; Federated
Short-Term Municipal Trust; Federated Stock and Bond Fund, Inc.; Federated Stock
Trust; Federated Tax-Free Trust; Federated Total Return Series, Inc.; Federated
U.S. Government Bond Fund; Federated U.S. Government Securities Fund: 1-3 Years;
Federated U.S. Government Securities Fund: 2-5 Years; Federated U.S. Government
Securities Fund: 5-10 Years; Federated Utility Fund, Inc.; Fixed Income
Securities, Inc.; ; Hibernia Funds; Independence One Mutual Funds; Intermediate
Municipal Trust; International Series, Inc.; Investment Series Funds, Inc.;
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 Funds; 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 Chairman, Chief Executive
Federated Investors Tower Officer, Chief Operating
1001 Liberty Avenue Officer,
Pittsburgh, PA 15222-3779 Federated Securities Corp.
Arthur L. Cherry Director,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Fisher President-Institutional
Federated Investors Tower Sales and Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
Thomas R. Donahue Director, Assistant
Federated Investors Tower Secretary and Treasurer,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
James F. Getz President-Broker/Dealer and
Federated Investors Tower Director,
1001 Liberty Avenue Federated Securities Corp.
Pittsburgh, PA 15222-3779
David M. Taylor Executive Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark W. Bloss Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard W. Boyd Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Laura M. Deger Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Theodore Fadool, Jr. Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bryant R. Fisher Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher T. Fives Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James S. Hamilton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James M. Heaton Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Keith Nixon Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Solon A. Person, IV Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ronald M. Petnuch Senior Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy C. Pillion Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas E. Territ Senior Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest G. Anderson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Teresa M. Antoszyk Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John B. Bohnet Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jane E. Broeren-Lambesis Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Matthew W. Brown Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David J. Callahan Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark Carroll Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Steven R. Cohen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mary J. Combs Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Edmond Connell, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
R. Leonard Corton, Jr. Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kevin J. Crenny Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Daniel T. Culbertson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Michael Cullen Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Marc C. Danile Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert J. Deuberry Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Doyle Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
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
Mark A. Gessner Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Joseph D. Gibbons Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John K. Goettlicher Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Craig S. Gonzales Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
G. Tad Gullickson Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dayna C. Haferkamp Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Bruce E. Hastings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
James E. Hickey Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Charlene H. Jennings Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
H. Joseph Kennedy Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael W. Koenig Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dennis M. Laffey Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Christopher A. Layton Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael H. Liss Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael R. Manning Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Amy Michalisyn Vice President,
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Mark J. Miehl Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard C. Mihm Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Alec H. Neilly Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Thomas A. 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
Larry Sebbens Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Segura Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward L. Smith Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David W. Spears Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John A. Staley Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Colin B. Starks Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Jeffrey A. Stewart Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
William C. Tustin Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Paul A. Uhlman Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Miles J. Wallace Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Richard B. Watts Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward J. Wojnarowski Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Michael P. Wolff Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Robert W. Bauman Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Edward R. Bozek Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Beth C. Dell Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Donald C. Edwards Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
David L. Immonen Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
John T. Glickson Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Ernest L. Linane Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Renee L. Martin Assistant Vice President, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Kirk A. Montgomery Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Timothy S. Johnson Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Victor R. Siclari Assistant Secretary, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Dennis McAuley Assistant Treasurer, --
Federated Investors Tower Federated Securities Corp.
1001 Liberty Avenue
Pittsburgh, PA 15222-3779
Item 28. LOCATION OF ACCOUNTS AND RECORDS:
--------------------------------
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, N.A.............. 301 North Main Street
("Investment Adviser") Winston-Salem, NC 21750
Wachovia Bank, N.A. ............ Wachovia Trust Operations
("Custodian") 301 North Main Street
Winston-Salem, NC 21750
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.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant, THE WACHOVIA MUNICIPAL FUNDS,
certifies that it meets all of the requirements for effectiveness of this
Amendment to its Registration Statement pursuant to Rule 485(b) under the
Securities Act of 1933 and has duly caused this Amendment to its Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Pittsburgh and Commonwealth of Pennsylvania, on the
28th day of January, 2000.
THE WACHOVIA MUNICIPAL FUNDS
BY: /s/ Gail Cagney
Gail Cagney, Assistant Secretary
Attorney in Fact for John W. McGonigle
January 28, 2000
Pursuant to the requirements of the Securities Act of 1933, this Amendment
to its Registration Statement has been signed below by the following person in
the capacity and on the date indicated:
NAME TITLE DATE
---- ------ ----
By: /s/ Gail Cagney
Gail Cagney Attorney In Fact January 28, 2000
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
Exhibit h(x) under Form N-1A
......Exhibit 10 under Item 601/Reg. S-K
THE WACHOVIA FUNDS
THE WACHOVIA MUNICIPAL FUNDS
AGREEMENT
FOR
FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES
AND
TRANSFER AGENCY SERVICES
AGREEMENT made as of June 3, 1999, by and among THE WACHOVIA FUNDS and THE
WACHOVIA MUNICIPAL FUNDS, each having its principal office and place of business
at 5800 Corporate Drive, Pittsburgh, Pennsylvania 15237-7010 (together, the
"Investment Company"), on behalf of their respective separate investment
portfolios (individually referred to herein as a "Fund" and collectively as
"Funds"), listed on Exhibit 1 as may be amended from time to time, and FEDERATED
SERVICES COMPANY, a Pennsylvania corporation, having its principal office and
place of business at Federated Investors Tower, Pittsburgh, Pennsylvania
15222-3779 on behalf of itself and its subsidiaries (the "Company").
WHEREAS, the Investment Company is registered as an open-end management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"), with authorized and issued shares of beneficial interest
("Shares");
WHEREAS, the Investment Company desires to retain the Company as fund
accountant to provide fund accounting services (as herein defined) including
certain pricing, accounting and recordkeeping services for each of the Funds,
including any classes of shares issued by any Fund ("Classes"), and the Company
desires to accept such appointment;
WHEREAS, the Investment Company desires to appoint the Company as its
administrator to provide it with administrative services (as herein defined),
and the Company desires to accept such appointment; and
WHEREAS, the Investment Company desires to appoint the Company as its
transfer agent and dividend disbursing agent to provide it with transfer agency
services (as herein defined), and agent in connection with certain other
activities, and the Company desires to accept such appointment;
NOW THEREFORE, in consideration of the premises and mutual covenants herein
contained, and intending to be legally bound hereby, the parties hereto agree as
follows:
SECTION ONE: FUND ACCOUNTING.
ARTICLE 1. APPOINTMENT.
The Investment Company hereby appoints the Company to provide certain pricing
and accounting services to the Funds, and/or the Classes, for the period and on
the terms set forth in this Agreement. The Company accepts such appointment and
agrees to furnish the services herein set forth in return for the compensation
set forth in Exhibit 1 to this Agreement.
ARTICLE 2. THE COMPANY'S DUTIES.
Subject to the supervision and control of the Investment Company's Board of
Trustees ("Board"), the Company will assist the Investment Company with regard
to fund accounting for the Investment Company, and/or the Funds, and/or the
Classes, and in connection therewith undertakes to perform the following
specific services;
A. Value the assets of the Funds using: primarily, market quotations,
including the use of matrix pricing, supplied by the independent pricing
services selected by the Company in consultation with the Investment
Company's investment adviser ("Adviser") and/or investment sub-adviser
("Sub-Adviser"), or sources selected by the Adviser and/or Sub-Adviser, and
reviewed by the Board; secondarily, if a designated pricing service does
not provide a price for a security which the Company believes should be
available by market quotation, the Company may obtain a price by calling
brokers designated by the Adviser and/or Sub-Adviser of the Fund holding
the security, or if the Adviser and/or Sub-Adviser does not supply the
names of such brokers, the Company will attempt on its own to find brokers
to price those securities; thirdly, for securities for which no market
price is available, the Investment Company's Pricing Committee (or, in the
absence of a Pricing Committee, the Board) will determine a fair value in
good faith. Consistent with Rule 2a-4 under the 1940 Act, estimates may be
used where necessary or appropriate. The Company's obligations with regard
to the prices received from outside pricing services and designated brokers
or other outside sources, is to exercise reasonable care in the supervision
of the pricing agents. The Company is not the guarantor of the securities
prices received from such agents and the Company is not liable to the Fund
for potential errors in valuing a Fund's assets or calculating the net
asset value per share of such Fund or Class attributable to such prices.
All of the above sources of prices used as described are deemed by the
Company to be authorized sources of security prices. The Company provides
daily to the Adviser and/or Sub-Adviser the securities prices used in
calculating the net asset value of the Fund, for its use in preparing
exception reports for those prices on which the Adviser and/or Sub-Adviser
has comment. Further, upon receipt of the exception reports generated by
the Adviser and/or Sub-Adviser, the Company diligently pursues
communication regarding exception reports with the designated pricing
agents;
B. Determine the net asset value per share of each Fund and/or Class, at the
time and in the manner from time to time determined by the Board and as set
forth in the Prospectus and Statement of Additional Information
("Prospectus") of each Fund;
C. Calculate the net income of each Fund, if any;
D. Calculate realized capital gains or losses of each Fund resulting from sale
or disposition of assets, if any;
E. Maintain the general ledger and other accounts, books and financial records
of the Investment Company, including for each Fund and/or Class, as
required under Section 31(a) of the 1940 Act and the rules thereunder in
connection with the services provided by the Company;
F. Preserve for the periods prescribed by Rule 31a-2 under the 1940 Act the
records to be maintained by Rule 31a-1 under the 1940 Act in connection
with the services provided by the Company. The Company further agrees that
all such records it maintains for the Investment Company are the property
of the Investment Company and further agrees to surrender promptly to the
Investment Company such records upon the Investment Company's request;
G. At the request of the Investment Company, prepare various reports or other
financial documents in accordance with generally accepted accounting
principles as required by federal, state and other applicable laws and
regulations; and
H. Such other similar services as may be reasonably requested by the
Investment Company.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section One,
shall hereafter be referred to as "Fund Accounting Services."
SECTION TWO: ADMINISTRATIVE SERVICES.
ARTICLE 3. APPOINTMENT.
The Investment Company hereby appoints the Company as Administrator for the
period on the terms and conditions set forth in this Agreement. The Company
hereby accepts such appointment and agrees to furnish the services herein set
forth in return for the compensation set forth in Exhibit 1 to this Agreement.
ARTICLE 4. THE COMPANY'S DUTIES.
As Administrator, and subject to the supervision and control of the Board and
in accordance with Proper Instructions (as defined hereafter) from the
Investment Company, the Company will provide facilities, equipment, and
personnel to carry out the following administrative services for operation of
the business and affairs of the Investment Company and each of its Funds:
A. Prepare, file, and maintain the Investment Company's governing documents
and any amendments thereto, including the declaration of trust (which has
already been prepared and filed), the by-laws and minutes of meetings of
the Board and shareholders;
B. Prepare and file with the Securities and Exchange Commission ("SEC") and
the appropriate state securities authorities the registration statements
for the Investment Company and the Investment Company's Shares and all
amendments thereto, reports to regulatory authorities and shareholders,
prospectuses, proxy statements, and such other documents all as may be
necessary to enable the Investment Company to make a continuous offering of
its Shares;
C. Prepare, negotiate, and administer contracts (if any) on behalf of the
Investment Company with, among others, the Adviser and/or Sub-Adviser and
the Investment Company's distributor(s), subject to any applicable
restrictions of the Board or the 1940 Act;
D. Calculate performance data of the Investment Company for dissemination to
information services covering the investment company industry;
E. Prepare and file the Investment Company's tax returns;
F. Coordinate the layout and printing of publicly disseminated prospectuses
and reports;
G. Perform internal audit examinations in accordance with a charter adopted by
the Company and the Investment Company;
H. Assist with the design, development, and operation of the Investment
Company and the Funds;
I. Provide individuals reasonably acceptable to the Board for nomination,
appointment, or election as officers of the Investment Company, who will be
responsible for the management of certain of the Investment Company's
affairs as determined by the Investment Company's Board; and
J. Consult with the Investment Company and its Board on matters concerning the
Investment Company and its affairs.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Two,
shall hereafter be referred to as "Administrative Services."
ARTICLE 5. RECORDS.
The Company shall create and maintain all necessary books and records in
accordance with all applicable laws, rules and regulations, including but not
limited to records required by Section 31(a) of the 1940 Act and the rules
thereunder, as the same may be amended from time to time, pertaining to the
Administrative Services performed by it and not otherwise created and maintained
by another party pursuant to contract with the Investment Company. Where
applicable, such records shall be maintained by the Company for the periods and
in the places required by Rule 31a-2 under the 1940 Act. The books and records
pertaining to the Investment Company which are in the possession of the Company
shall be the property of the Investment Company. The Investment Company, or the
Investment Company's authorized representatives, shall have access to such books
and records at all times during the Company's normal business hours. Upon the
reasonable request of the Investment Company, copies of any such books and
records shall be provided promptly by the Company to the Investment Company or
the Investment Company's authorized representatives.
ARTICLE 6. EXPENSES.
Notwithstanding the Company's duties as set forth in Article 4 of this
Agreement, the Investment Company assumes full responsibility for the
preparation, contents and distribution of its own offering documents and for
complying with all applicable requirements the 1940 Act, the Internal Revenue
Code, and any other laws, rules and regulations of government authorities having
jurisdiction.
A. The Company shall be responsible for expenses incurred in providing office
space, equipment, and personnel as may be necessary or convenient to
provide the Administrative Services to the Investment Company, including
the compensation of the Company employees who serve as officers of the
Investment Company. The Investment Company shall be responsible for all
other expenses incurred by the Company on behalf of the Investment Company,
including without limitation postage and courier expenses, printing
expenses, travel expenses, registration fees, filing fees, fees of outside
counsel and independent auditors, or other professional services,
organizational expenses, insurance premiums, fees payable to persons who
are not the Company's employees, trade association dues, and other expenses
properly payable by the Funds and/or the Classes.
ARTICLE 7. STANDARD OF CARE AND INDEMNIFICATION.
A. The Company shall not be liable for any error of judgment or mistake of law
or for any loss suffered by the Investment Company in connection with the
matters to which Section Two of this Agreement relates, except a loss
resulting from willful misfeasance, bad faith or gross negligence on its
part in the performance of its duties or from reckless disregard by it of
its obligations and duties under this Agreement. The Company shall be
entitled to rely on and may act upon advice of counsel (who may be counsel
for the Investment Company) on all matters, and shall be without liability
for any action reasonably taken or omitted pursuant to such advice provided
that such action is not in violation of applicable federal or state laws or
regulations, and is in good faith and without negligence. Any person, even
though also an officer, director, trustee, partner, employee or agent of
the Company, who may be or become an officer, director, trustee, partner,
employee or agent of the Investment Company, shall be deemed, when
rendering services to the Investment Company or acting on any business of
the Investment Company (other than services or business in connection with
the duties of the Company hereunder) to be rendering such services to or
acting solely for the Investment Company and not as an officer, director,
trustee, partner, employee or agent or one under the control or direction
of the Company even though paid by the Company.
B. Subject to the conditions set forth below; the Investment Company agrees to
indemnify and hold harmless the Company against any and all loss,
liability, claim, damage or expense whatsoever (including the reasonable
cost of investigating or defending any alleged loss, liability, damages,
claim or expense and reasonable counsel fees incurred in connection
therewith) arising by reason of any action taken or thing done by the
Company in performing Administrative Services pursuant to Section Two of
this Agreement if not resulting from the Company's willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or
from reckless disregard by it of its obligations and duties under this
Agreement.
If any action is brought against the Company to which indemnity may be
sought against the Investment Company pursuant to the foregoing paragraph, The
Company shall promptly notify the Investment Company in writing of the
institution of such action and, if provided such notice has been given, the
Investment Company shall assume the defense of such action, including the
employment of counsel selected by the Investment Company and payment of
expenses. The Company shall have the right to employ separate counsel in any
such case, but the fees and expenses of such counsel shall be at the expense of
the Company unless the employment of such counsel shall have been authorized in
writing by the Investment Company in connection with the defense of such action
or the Investment Company shall not have employed counsel to have charge of the
defense of such action, in any of which events such fees and expenses shall be
borne by the Company. Anything in this paragraph to the contrary
notwithstanding, the Investment Company shall not be liable for any settlement
of any such claim or action effected without its written consent. The Investment
Company agrees promptly to notify the Company of the commencement of any
litigation or proceedings against the Investment Company or any of its officers
or Trustees in connection with the Administrative Services.
C. The Company agrees to indemnify and hold harmless the Investment Company,
each of its Trustees and each of its officers against any loss, liability,
damages, claim or expense (including the reasonable cost of investigating
or defending any alleged loss, liability, damages, claim or expense and
reasonable counsel fee incurred in connection therewith) arising by reason
of any action taken or thing done by the Company in performing
Administrative Services pursuant to Section Two of this Agreement if
resulting from the Company's willful misfeasance, bad faith or gross
negligence on its part in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement. In case
any action shall be brought against the Investment Company or any other
person so indemnified based on the foregoing at described in this
subsection (C), and with respect to which indemnity may be sought against
the Company, the Company shall have the rights and duties given to the
Investment Company, and the Investment Company and each other person so
indemnified shall have the rights and duties given to the Company by the
provisions of subsection B above.
SECTION THREE: TRANSFER AGENCY SERVICES.
ARTICLE 8. TERMS OF APPOINTMENT.
Subject to the terms and conditions set forth in this Agreement, the
Investment Company hereby appoints the Company to act as Transfer Agent and
Dividend Disbursing Agent for each Fund's Shares, and agent in connection with
any accumulation, open-account or similar plans provided to the shareholders of
any Fund ("Shareholder(s)"), including without limitation any periodic
investment plan or periodic withdrawal program.
ARTICLE 9. DUTIES OF THE COMPANY.
The Company shall perform the following services in accordance with Proper
Instructions as may be provided from time to time by the Investment Company as
to any Fund:
A. Purchases
(1) The Company shall receive orders and payment for the purchase of
Shares and promptly deliver payment and appropriate documentation
therefor to the custodian of the relevant Fund, (the "Custodian").
The Company shall notify the Fund the Custodian on a daily basis
of the total amount of orders and payments so delivered.
(2) Pursuant to purchase orders and in accordance with the Fund's
current Prospectus, the Company shall compute and issue the
appropriate number of Shares of each Fund and/or Class and hold
such Shares in the appropriate Shareholder accounts.
(3) For certificated Funds and/or Classes, if a Shareholder or its
agent requests a certificate, the Company, as Transfer Agent,
shall countersign and mail by first class mail, a certificate to
the Shareholder at its address as set forth on the transfer books
of the Funds, and/or Classes, subject to any Proper Instructions
regarding the delivery of certificates.
(4) In the event that any check or other order for the purchase of
Shares of a Fund and/or Class is returned unpaid for any reason,
the Company shall debit the Share account of the Shareholder by
the number of Shares that had been credited to its account upon
receipt of the check or other order, promptly mail a debit advice
to the Shareholder, and notify the Fund and/or Class of its
action. In the event that the amount paid for such Shares exceeds
proceeds of the redemption of such Shares plus the amount of any
dividends paid with respect to such Shares, the Fund and/or Class
or its distributor will reimburse the Company in the amount of
such excess.
B. Distribution
(1) Upon notification by a Fund of the declaration of any distribution
to Shareholders, the Company shall act as Dividend Disbursing
Agent for the Fund in accordance with the provisions of its
governing document and the then-current Prospectus of the Fund.
The Company shall prepare and mail or credit income, capital gain,
or any other payments to Shareholders. As the Dividend Disbursing
Agent, the Company shall, on or before the payment date of any
such distribution, notify the Custodian of the estimated amount
required to pay any portion of said distribution which is payable
in cash and request the Custodian to make available sufficient
funds for the cash amount to be paid out. The Company shall
reconcile the amounts so requested and the amounts actually
received by the Custodian on a daily basis. If a Shareholder is
entitled to receive additional Shares by virtue of any such
distribution or dividend, appropriate credits shall be made to the
Shareholder's account, or for certificated Funds and/or Classes,
certificates for such Shares shall be delivered where requested;
and
(2) The Company shall maintain records of account for each Fund and
Class and advise the Investment Company, each Fund and Class and
its Shareholders as to the foregoing.
C. Redemptions and Transfers
(1) The Company shall receive redemption requests and redemption
directions and, if such redemption requests comply with the
procedures as may be described in the Fund Prospectus or set forth
in Proper Instructions, deliver the appropriate instructions
therefor to the Custodian. The Company shall notify the Funds on a
daily basis of the total amount of redemption requests processed
and monies paid to the Company by the Custodian for redemptions.
(2) At the appropriate time upon receiving redemption proceeds from
the Custodian with respect to any redemption, the Company shall
pay or cause to be paid the redemption proceeds in the manner
instructed by the redeeming Shareholders, pursuant to procedures
described in the then-current Prospectus of the Fund.
(3) If any certificate returned for redemption or other request for
redemption does not comply with the procedures for redemption
approved by the Fund, the Company shall promptly notify the
Shareholder of such fact, together with the reason therefor, and
shall effect such redemption at the price applicable to the date
and time of receipt of documents complying with said procedures.
(4) The Company shall effect transfers of Shares by the registered
owners thereof.
(5) The Company shall identify and process abandoned accounts and
uncashed checks for state escheat requirements on an annual basis
and report such actions to the Fund.
D. Recordkeeping
(1) The Company shall record the issuance of Shares of each Fund,
and/or Class, and maintain pursuant to applicable rules of the SEC
a record of the total number of Shares of the Fund and/or Class
which are authorized, based upon data provided to it by the Fund,
and issued and outstanding. The Company shall also provide the
Fund on a regular basis or upon reasonable request with the total
number of Shares which are authorized and issued and outstanding.
(2) The Company shall establish and maintain records pursuant to
applicable rules of the SEC relating to the services to be
performed under this Section Three in the form and manner as
agreed to by the Investment Company to include a record for each
Shareholder's account of the following:
(a) Name, address and tax identification number (and whether such
number has been certified);
(b) Number of Shares held;
(c) Historical information regarding the account, including dividends
paid and date and price for all transactions;
(d) Any stop or restraining order placed against the account;
(e) Information with respect to withholding in the case of a foreign
account or an account for which withholding is required by the
Internal Revenue Code;
(f) Any dividend reinvestment order, plan application, dividend
address and correspondence relating to the current maintenance of
the account;
(g) Certificate numbers and denominations for any Shareholder holding
certificates (if share certificates are issued);
(h) Any information required in order for the Company to perform the
calculations contemplated or required by this Agreement.
(3) The Company shall preserve any such records required to be
maintained pursuant to the rules of the SEC for the periods
prescribed in said rules as specifically noted below. Such record
retention shall be at the expense of the Company, and such records
may be inspected by the Fund at reasonable times. The Company may,
at its option at any time, and shall forthwith upon the Fund's
demand, turn over to the Fund and cease to retain in the Company's
files, records and documents created and maintained by the Company
pursuant to this Agreement, which are no longer needed by the
Company in performance of its services or for its protection. If
not so turned over to the Fund, such records and documents will be
retained by the Company for six years from the year of creation,
during the first two of which such documents will be in readily
accessible form. At the end of the six year period, such records
and documents will either be turned over to the Fund or destroyed
in accordance with Proper Instructions.
E. Confirmations/Reports
(1) The Company shall furnish to the Fund periodically the following
information:
(a) A copy of the transaction register;
(b) Dividend and reinvestment blotters;
(c) The total number of Shares issued and outstanding in each state
for "blue sky" purposes as determined according to Proper
Instructions delivered from time to time by the Fund to the
Company;
(d) Shareholder lists and statistical information;
(e) Payments to third parties relating to distribution agreements,
allocations of sales loads, redemption fees, or other
transaction- or sales-related payments;
(f) Such other information as may be agreed upon from time to time.
(2) The Company shall prepare in the appropriate form, file with the
Internal Revenue Service and appropriate state agencies, and, if
required, mail to Shareholders, such notices for reporting
dividends and distributions paid as are required to be so filed
and mailed and shall withhold such sums as are required to be
withheld under applicable federal and state income tax laws, rules
and regulations.
(3) In addition to and not in lieu of the services set forth above,
the Company shall:
(a) Perform all of the customary services of a transfer agent,
dividend disbursing agent and, as relevant, agent in connection
with accumulation, open-account or similar plans (including
without limitation any periodic investment plan or periodic
withdrawal program), including but not limited to: maintaining
all Shareholder accounts, mailing Shareholder reports and
Prospectuses to current Shareholders, withholding taxes on
accounts subject to back-up or other withholding (including
non-resident alien accounts), preparing and filing reports on
U.S. Treasury Department Form 1099 and other appropriate forms
required with respect to dividends and distributions by federal
authorities for all Shareholders, preparing and mailing
confirmation forms and statements of account to Shareholders for
all purchases and redemptions of Shares and other conformable
transactions in Shareholder accounts, preparing and mailing
activity statements for Shareholders, and providing Shareholder
account information; and
(b) Provide a system which will enable the Fund to monitor the total
number of Shares of each Fund (and/or Class) sold in each state
("blue sky reporting"). The Fund shall by Proper Instructions (i)
identify to the Company those transactions and assets to be
treated as exempt from the blue sky reporting for each state and
(ii) verify the classification of transactions for each state on
the system prior to activation and thereafter monitor the daily
activity for each state. The responsibility of the Company for
each Fund's (and/or Class's) state blue sky reporting status is
limited to the recording of the classification of transactions or
accounts with regard to blue sky compliance and the reporting of
such transactions and accounts to the Fund as provided above.
F. Other Duties
(1) The Company shall answer correspondence from Shareholders relating
to their Share accounts and such other correspondence as may from
time to time be addressed to the Company;
(2) The Company shall prepare Shareholder meeting lists, mail proxy
cards and other material supplied to it by the Fund in connection
with Shareholder meetings of each Fund; receive, examine and
tabulate returned proxies, and certify the vote of the
Shareholders; and
(3) The Company shall establish and maintain facilities and procedures
for safekeeping of Share certificates (if issued), check forms and
facsimile signature imprinting devices, if any; and for the
preparation or use, and for keeping account of, such certificates,
forms and devices.
The foregoing, along with any additional services that the Company shall
agree in writing to perform for the Investment Company under this Section Three,
shall hereafter be referred to as "Transfer Agency Services."
ARTICLE 10. DUTIES OF THE INVESTMENT COMPANY.
A. Compliance
Notwithstanding, the duties of the Company as set forth in Article 9 of
this Agreement, the Investment Company or Fund assume full
responsibility for the preparation, contents and distribution of their
own and/or their classes' Prospectus and for complying with all
applicable requirements of the Securities Act of 1933, as amended (the
"1933 Act"), the 1940 Act and any laws, rules and regulations of
government authorities having jurisdiction.
B. Share Certificates
If Share certificates are issued, the Investment Company shall supply
the Company with a sufficient supply of blank Share certificates and
from time to time shall renew such supply upon request of the Company.
Such blank Share certificates shall be properly signed, manually or by
facsimile, if authorized by the Investment Company and shall bear the
seal of the Investment Company or facsimile thereof; and notwithstanding
the death, resignation or removal of any officer of the Investment
Company authorized to sign certificates, the Company may continue to
countersign certificates which bear the manual or facsimile signature of
such officer until otherwise directed by the Investment Company.
C. Distributions
The Fund shall promptly inform the Company of the declaration of any
dividend or distribution on account of any Fund's Shares.
SECTION FOUR: GENERAL PROVISIONS.
ARTICLE 11. PROPER INSTRUCTIONS.
As used throughout this Agreement, a "Proper Instruction" means a writing
signed or initialed by one or more persons as the Board shall have from time to
time authorized. Each such writing shall set forth the specific transaction or
type of transaction involved. Oral instructions will be deemed to be Proper
Instructions if (a) the Company reasonably believes them to have been given by a
person previously authorized in Proper Instructions to give such instructions
with respect to the transaction involved, and (b) the Investment Company, or the
Fund, and the Company promptly cause such oral instructions to be confirmed in
writing. Proper Instructions may include communications effected directly
between electro-mechanical or electronic devices provided that the Investment
Company, or the Fund, and the Company are satisfied that such procedures afford
adequate safeguards for the Fund's assets. Proper Instructions may only be
amended in writing.
ARTICLE 12. ASSIGNMENT.
Except as provided below, neither this Agreement nor any of the rights or
obligations under this Agreement may be assigned by either party without the
written consent of the other party.
A. This Agreement shall inure to the benefit of and be binding upon the
parties and their respective permitted successors and assigns.
B. With regard to Transfer Agency Services, the Company may, without further
consent of the Investment Company, subcontract for the performance of
Transfer Agency Services with
(1) its subsidiary, Federated Shareholder Service Company, a Delaware
business trust, which is duly registered as a transfer agent
pursuant to Section 17A(c)(1) of the Securities Exchange Act of
1934, as amended, or any succeeding statute ("Section 17A(c)(1)");
or
(2) such other provider of services duly registered as a transfer
agent under Section 17A(c)(1) as Company shall select.
C. With regard to Fund Accounting Services and Administrative Services, the
Company may, without further consent of the Investment Company, subcontract
for the performance of such services with Federated Administrative
Services, a wholly-owned subsidiary of the Company, or such other service
provider as Company may select.
D. Except as provided in E below, the Company shall be as fully responsible to
the Investment Company for the acts and omissions of any subcontractor as
it is for its own acts and omissions. The compensation of such person or
persons shall be paid by the Company and no obligation shall be incurred on
behalf of the Investment Company, the Funds, or the Classes in such
respect.
E. The Company shall upon instruction from the Investment Company subcontract
for the performance of services under this Agreement with an agent selected
by the Investment Company, other than as described in B. and C. above;
provided, however, that the Company shall in no way be responsible to the
Investment Company for the acts and omissions of the agent.
F. Either party may assign all of or a substantial portion of its business to
a successor, or to a party controlling, controlled by, or under common
control with such party.
Nothing in this Article 12 shall prevent the Company from delegating its
responsibilities to another entity to the extent provided herein.
ARTICLE 13. DOCUMENTS.
A. In connection with the appointment of the Company under this Agreement, the
Investment Company shall file with the Company the following documents:
(1) A copy of the declaration of trust and by-laws of the Investment
Company and all amendments thereto;
(2) A copy of the resolution of the Board of the Investment Company
authorizing this Agreement;
(3) Specimens of all forms of outstanding Share certificates of the
Investment Company or the Funds in the forms approved by the Board of
the Investment Company with a certificate of the Secretary of the
Investment Company as to such approval;
(4) All account application forms and other documents relating to
Shareholders accounts; and
(5) A copy of the current Prospectus for each Fund.
B. The Fund will also furnish from time to time the following documents:
(1) Each resolution of the Board of the Investment Company authorizing the
original issuance of each Fund's and/or Class's Shares;
(2) Each registration statement filed with the SEC and amendments thereof
and orders relating thereto in effect with respect to the sale of
Shares of any Fund, and/or Class;
(3) A certified copy of each amendment to the declaration of trust and the
by-laws of the Investment Company;
(4) Certified copies of each vote of the Board authorizing officers to
give Proper Instructions to the Custodian and agents for fund
accounting and shareholder recordkeeping or transfer agency services;
(5) If issued, specimens of all new Share certificates representing Shares
of any Fund, accompanied by Board resolutions approving such forms;
(6) Such other certificates, documents or opinions which the Company may,
in its discretion, deem necessary or appropriate in the proper
performance of its duties; and
(7) Revisions to the Prospectus of each Fund.
ARTICLE 14. REPRESENTATIONS AND WARRANTIES.
A. Representations and Warranties of the Company
The Company represents and warrants to the Fund that:
(1) it is a corporation duly organized and existing and in good standing
under the laws of the Commonwealth of Pennsylvania;
(2) It is duly qualified to carry on its business in each jurisdiction
where the nature of its business requires such qualification, and in
the Commonwealth of Pennsylvania;
(3) it is empowered under applicable laws and by its articles of
incorporation and by-laws to enter into and perform this Agreement;
(4) all requisite corporate proceedings have been taken to authorize it to
enter into and perform its obligations under this Agreement;
(5) it has and will continue to have access to the necessary facilities,
equipment and personnel to perform its duties and obligations under
this Agreement; and
(6) it is in compliance with federal securities law requirements and in
good standing as an administrator, fund accountant and transfer agent.
B. Representations and Warranties of the Investment Company
The Investment Company represents and warrants to the Company that:
(1) It is an investment company duly organized and existing and in good
standing under the laws of its state of organization;
(2) It is empowered under applicable laws and by its declaration of trust
and by-laws to enter into and perform its obligations under this
Agreement;
(3) All corporate proceedings required by said declaration of trust and
by-laws have been taken to authorize it to enter into and perform its
obligations under this Agreement;
(4) The Investment Company is an open-end management investment company
registered under the 1940 Act; and
(5) A registration statement under the 1933 Act will be effective, and
appropriate state securities law filings have been made and will
continue to be made, with respect to all Shares of each Fund being
offered for sale.
ARTICLE 15. STANDARD OF CARE AND INDEMNIFICATION.
- --------------------------------------------------
A. Standard of Care
With regard to Sections One and Three, the Company shall be held to a
standard of reasonable care in carrying out the provisions of this
Agreement, provided however, that the Company shall be held to any
higher standard of care that would be imposed upon the Company, by an
applicable law or regulation even though such stated standard of care
was not part of this Agreement. The Company shall be entitled to rely on
and may act upon advice of counsel (who may be counsel for the
Investment Company) on all matters, and shall be without liability for
any action reasonably taken or omitted pursuant to such advice, provided
that such action is not in violation of applicable federal or state laws
or regulations, and is in good faith and without negligence. Any person,
even though also an officer, trustee, partner, employee or agent of the
Company, who may be or become an officer, trustee, partner, employee or
agent of the Investment Company, shall be deemed, when rendering
services to the Investment Company or acting on any business of the
Investment Company (other than services or business in connection with
the duties of the Company hereunder) to be rendering such services to or
acting solely for the Investment Company and not as an officer,
director, trustee, partner, employee or agent or one under the control
or direction of the Company even though paid by the Company.
B. Indemnification by Investment Company
The Company shall not be responsible for and the Investment Company or
Fund shall indemnify and hold the Company, including its officers,
directors, shareholders and their agents, employees and affiliates,
harmless against any and all losses, damages, costs, charges, counsel
fees, payments, expenses and liabilities arising out of or attributable
to:
(1) The Investment Company's refusal or failure to comply with the
terms of this Agreement, or which arise out of the Investment
Company's lack of good faith, gross negligence or willful
misconduct or which arise out of the breach of any representation
or warranty of the Investment Company hereunder;
(2) The acts or omissions of any Custodian, Adviser, Sub-Adviser or
other party contracted or approved by the Investment Company or
Fund;
(3) The reliance on or use by the Company or its agents or
subcontractors of information, records and documents in proper
form which:
(a) are received by the Company or its agents or subcontractors
and furnished to it by or on behalf of the Investment
Company or Fund, its Shareholders or investors regarding the
purchase, redemption or transfer of Shares and Shareholder
account information;
(b) are received by the Company from independent pricing
services or sources for use in valuing the assets of the
Investment Company or Fund; or
(c) are received by the Company or its agents or subcontractors
from Advisers, Sub-Advisers or other third parties
contracted or approved by the Investment Company or Fund for
use in the performance of services under this Agreement; or
(d) have been prepared and/or maintained by the Investment
Company or Fund or its affiliates or any other person or
firm on behalf of the Investment Company.
(4) The reliance on, or the carrying out by the Company or its agents
or subcontractors of, Proper Instructions of the Investment
Company or the Fund.
(5) The offer or sale of Shares in violation of any requirement under
the federal securities laws or regulations or the securities laws
or regulations of any state that such Shares be registered in such
state or in violation of any stop order or other determination or
ruling by any federal agency or any state with respect to the
offer or sale of such Shares in such state.
Provided, however, that the Company shall not be protected by this
Article 15.B. from liability for any act or omission resulting
from the Company's willful misfeasance, bad faith, negligence or
reckless disregard of its duties or failure to meet the standard
of care set forth in Article 15.A. above.
C. Indemnification by the Company
The Company shall indemnify and hold the Investment Company and each
Fund harmless from and against any and all losses, damages, costs,
charges, counsel fees, payments, expenses and liability arising out of
or attributed to the Company's lack of good faith, negligence, willful
misconduct, or failure to meet the standard of care set forth in Article
15A above.
D. Reliance
At any time the Company may apply to any officer of the Investment
Company or Fund for instructions, and may consult with legal counsel
with respect to any matter arising in connection with the services to be
performed by the Company under this Agreement, and the Company and its
agents or subcontractors shall not be liable and shall be indemnified by
the Investment Company or the appropriate Fund for any action reasonably
taken or omitted by it in reliance upon such instructions or upon the
opinion of such counsel provided such action is not in violation of
applicable federal or state laws or regulations and is taken in good
faith and without negligence. The Company, its agents and subcontractors
shall be protected and indemnified in recognizing Share certificates
which are reasonably believed to bear the proper manual or facsimile
signatures of the officers of the Investment Company or the Fund, and
the proper countersignature of any former transfer agent or registrar,
or of a co-transfer agent or co-registrar.
E. Notification
In order that the indemnification provisions contained in this Article
15 shall apply, upon the assertion of a claim for which either party may
be required to indemnify the other, the party seeking indemnification
shall promptly notify the other party in writing of such assertion, and
shall keep the other party advised with respect to all developments
concerning such claim. The party who may be required to indemnify shall
have the option to participate with the party seeking indemnification in
the defense of such claim. The party seeking indemnification shall in no
case confess any claim or make any compromise or settlement in any case
in which the other party may be required to indemnify it except with the
other party's prior written consent.
ARTICLE 16. TERM AND TERMINATION OF AGREEMENT.
This Agreement shall be effective from the date first written above and shall
continue through November 30, 2001 ("Initial Term"). Thereafter, this Agreement
shall be automatically renewed each year for an additional term of one year
("Additional Term") provided that either party may terminate this Agreement by
written notice delivered at least six months prior to the expiration of the
Initial or any Additional Term. In the event, however, of a material breach by
the Company of its obligations under this Agreement, including a failure by the
Company to meet the applicable standard of care set forth herein, the Investment
Company shall promptly notify the Company in writing of such breach and, upon
receipt of such notice, the Company shall promptly cure the breach, and, if the
breach is not so cured within 30 days after the Company's receipt of notice
thereof, the Investment Company may terminate this Agreement on not less than 30
days' written notice. The termination date for all original or after-added Funds
which are, or become, a party to this Agreement shall be coterminous. Investment
Companies that merge or dissolve during the Initial Term or Additional Term
shall cease to be a party on the effective date of such merger or dissolution.
Upon the termination of this Agreement by the Investment Company, the
Investment Company shall pay to the Company such compensation as may be payable
prior to the effective date of such termination. In the event that the
Investment Company designates a successor to any of the Company's obligations
hereunder, the Company shall, at the expense and direction of the Investment
Company, transfer to such successor all relevant books, records and other data
established or maintained by the Investment Company under the foregoing
provisions. Additionally, the Company reserves the right to charge for any other
reasonable expenses associated with such termination. The provisions of Articles
7 and 15 shall survive the termination of this Agreement.
ARTICLE 17. AMENDMENT.
This Agreement may be amended or modified by a written agreement executed by
both parties.
ARTICLE 18. INTERPRETIVE AND ADDITIONAL PROVISIONS.
In connection with the operation of this Agreement, the Company and the
Investment Company may from time to time agree on such provisions interpretive
of or in addition to the provisions of this Agreement as may in their joint
opinion be consistent with the general tenor of this Agreement. Any such
interpretive or additional provisions shall be in a writing signed by both
parties and shall be annexed hereto, provided that no such interpretive or
additional provisions shall contravene any applicable federal or state
regulations or any provision of the Investment Company's declaration of trust.
ARTICLE 19. GOVERNING LAW.
This Agreement shall be construed and the provisions hereof interpreted under
and in accordance with the laws of the Commonwealth of Pennsylvania, provided
however, that nothing herein shall be construed in a manner inconsistent with
the 1940 Act or any rule or regulation promulgated by the SEC thereunder.
ARTICLE 20. NOTICES.
Except as otherwise specifically provided herein, notices and other writings
delivered or mailed postage prepaid to the Investment Company at 5800 Corporate
Drive, Pittsburgh, Pennsylvania 15237-7010 or to the Company at Federated
Investors Tower, Pittsburgh, Pennsylvania, 15222-3779 or to such other address
as the Investment Company or the Company may hereafter specify, shall be deemed
to have been properly delivered or given hereunder to the respective address.
ARTICLE 21. COUNTERPARTS.
This Agreement may be executed simultaneously in two or more counterparts,
each of which shall be deemed an original.
ARTICLE 22. MERGER OF AGREEMENT.
This Agreement constitutes the entire agreement between the parties hereto
and supersedes any prior agreement with respect to the subject hereof whether
oral or written.
ARTICLE 23. SUCCESSOR AGENT.
If a successor agent for the Investment Company shall be appointed by the
Investment Company, the Company shall upon termination of this Agreement deliver
to such successor agent at the office of the Company all properties of the
Investment Company held by it hereunder. If no such successor agent shall be
appointed, the Company shall at its office upon receipt of Proper Instructions
deliver such properties in accordance with such instructions.
In the event that no written order designating a successor agent or Proper
Instructions shall have been delivered to the Company on or before the date when
such termination shall become effective, then the Company shall have the right
to deliver to a bank or trust company, which is a "bank" as defined in the 1940
Act, of its own selection, having an aggregate capital, surplus, and undivided
profits, as shown by its last published report, of not less than $2,000,000, all
properties held by the Company under this Agreement. Thereafter, such bank or
trust company shall be the successor of the Company under this Agreement.
ARTICLE 24. FORCE MAJEURE.
The Company shall have no liability for cessation of services hereunder or
any damages resulting therefrom to the Fund as a result of work stoppage, power
or other mechanical failure, natural disaster, governmental action,
communication disruption or other impossibility of performance.
ARTICLE 25. SEVERABILITY.
In the event any provision of this Agreement is held illegal, void or
unenforceable, the balance shall remain in effect.
ARTICLE 26. LIMITATIONS OF LIABILITY OF TRUSTEES AND SHAREHOLDERS OF THE
INVESTMENT COMPANY.
The execution and delivery of this Agreement have been authorized by the
trustees of the Investment Company and signed by an authorized officer of the
Investment Company, acting as such, and neither such authorization by such
trustees nor such execution and delivery by such officer shall be deemed to have
been made by any of them individually or to impose any liability on any of them
personally, and the obligations of this Agreement are not binding upon any of
the trustees or shareholders of the Investment Company, but bind only the
property of the Fund, or Class, as provided in the declaration of trust of the
Investment Company.
ARTICLE 27. COMPENSATION.
A. The Funds will compensate the Company for the services described herein in
accordance with the fees agreed upon from time to time between the parties
hereto. Such fees do not include out-of-pocket disbursements of the Company
for which the Funds shall reimburse the Company. Out-of-pocket
disbursements shall include, but shall not be limited to, the items agreed
upon between the parties from time to time, including those items listed on
Exhibit 1 attached hereto.
B. The Fund and/or the Classes, and not the Company, shall bear the cost of:
custodial fees and expenses; membership dues in the Investment Company
Institute or any similar organization; transfer agency fees and expenses;
investment advisory fees; costs of printing and mailing Share certificates
(if issued); Prospectuses, reports and notices; administrative fees and
expenses; interest on borrowed money; brokerage commissions; taxes and fees
payable to federal, state and other governmental agencies; fees and
expenses of the trustees of the Investment Company who are not employees of
the Company; independent auditors fees and expenses; legal and audit
department expenses billed to the Company for work performed related to the
Investment Company, the Funds, or the Classes; law firm fees and expenses;
organizational expenses; or other expenses not specified in this Article 27
which may be properly payable by the Funds and/or Classes.
C. The compensation and out-of-pocket expenses attributable to the Fund shall
be accrued by the Fund and shall be paid to the Company no less frequently
than monthly, and shall be paid daily upon request of the Company. The
Company will maintain detailed information about the compensation and
out-of-pocket expenses by Fund and Class.
D. Any schedule of compensation agreed to hereunder, as may be adjusted from
time to time, shall be dated and signed by a duly authorized officer of the
Investment Company and/or the Funds and a duly authorized officer of the
Company.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of the day and year first above written.
THE WACHOVIA FUNDS
THE WACHOVIA MUNICIPAL FUNDS
By: /S/ CHARLES L. DAVIS, JR.
---------------------------
Name: Charles Davis
Title: Vice President
FEDERATED SERVICES COMPANY
By: /S/ LAWRENCE CARACCIOLO
Name: Lawrence Caracciolo
Title: Senior Vice President
EXHIBIT 1
TO THE AGREEMENT FOR
FUND ACCOUNTING SERVICES,
ADMINISTRATIVE SERVICES
AND
TRANSFER AGENCY SERVICES
The Agreement for Fund Accounting Services, Administrative Services and
Transfer Agency Services dated June 3, 1999, among THE WACHOVIA FUNDS, THE
WACHOVIA MUNICIPAL FUNDS and FEDERATED SERVICES COMPANY shall apply to the
following Portfolios:
Wachovia Money Market Fund
Investment Shares
Institutional Shares
Wachovia Tax-Free Money Market Fund
Investment Shares
Institutional Shares
Wachovia U.S. Treasury Money Market Fund
Institutional Shares
Investment Shares
Wachovia Prime Cash Management Fund
Institutional Shares
Wachovia Balanced Fund
Class A Shares*
Class B Shares
Class Y Shares
Wachovia Equity Fund
Class A Shares*
Class B Shares
Class Y Shares
Wachovia Equity Index Fund
Class A Shares*
Class B Shares
Class Y Shares
Wachovia Executive Equity Fund
Class A Shares
Class B Shares
Class Y Shares
Wachovia Executive Fixed Income Fund
Class A Shares
Class B Shares
Class Y Shares
Wachovia Fixed Income Fund
Class A Shares*
Class B Shares
Class Y Shares
Wachovia Short-Term Fixed Income Fund
Class A Shares*
Class B Shares
Class Y Shares
Wachovia Special Values Fund
Class A Shares*
Class B Shares
Class Y Shares
Wachovia Quantitative Equity Fund
Class A Shares*
Class B Shares
Class Y Shares
Wachovia Emerging Markets Fund
Class A Shares*
Class B Shares
Class Y Shares
Wachovia Georgia Municipal Bond Fund
Class A Shares
Class B Shares
Class Y Shares
Wachovia North Carolina Municipal Bond Fund
Class A Shares
Class B Shares
Class Y Shares
Wachovia South Carolina Municipal Bond Fund
Class A Shares
Class B Shares
Class Y Shares
Wachovia Growth & Income Fund
Class A Shares
Class B Shares
Class Y Shares
Wachovia Virginia Municipal Bond Fund
Class A Shares
Class B Shares
Class Y Shares
Wachovia Intermediate Fixed Income Fund
Class A Shares
Class B Shares
Class Y Shares
Wachovia Personal Equity Fund
Class A Shares
Class B Shares
Class Y Shares
*Existing Shares were redesignated as Class A Shares
I. GENERAL FEE
For all Fund Accounting, Administrative, and Transfer Agency Services provided
pursuant to this Agreement, the Investment Company agrees to pay and the Company
hereby agrees to accept as full compensation for its services rendered hereunder
a fee as follows:
With respect to Wachovia Prime Money Market Fund ... 5 basis points on
average daily net assets of Wachovia Prime Money Market Fund.
With respect to all other Funds:
10.0 basis points on average daily net assets* up to $3.5 billion 6.0 basis
points on average daily net assets* of $3.5 to $5.0 billion 4.0 basis points on
average daily net assets* of $5.0 to $10.0 billion 3.0 basis points on average
daily net assets* of $10.0 to $20.0 billion 2.0 basis points on average daily
net assets* over $20.0 billion
*Of all Funds, excluding Wachovia Prime Money Market Fund
II. FUND ACCOUNTING SERVICES OUT-OF-POCKET EXPENSES
Out-of-pocket expenses include, but are not limited to, the following:
postage (including overnight courier service), statement stock, envelopes,
telephones, telecommunication charges (including Fax), travel, duplicating,
forms, supplies, microfiche, computer access charges, client specific system
enhancements ,access to the shareholder recordkeeping system, security pricing
services, variable rate change notification services, paydown factor
notification services
III. TRANSFER AGENCY SERVICES OUT-OF-POCKET EXPENSES
Out-of-pocket expenses include but are not limited to postage (including
overnight courier service), statement stock, envelopes, telecommunication
charges (including Fax), travel, duplicating, forms, supplies, microfiche,
computer access charges, client specific enhancements, disaster recovery, closed
account fees, processing fees (including check encoding), and expenses incurred
at the specific direction of the Fund. Postage for mass mailings is due seven
days in advance of the mailing date. IV. PAYMENT
Payment is due thirty days after the date of the invoice.
IN WITNESS WHEREOF, the parties hereto have caused this Schedule to be
executed in their names and on their behalf under their seals by and through
their duly authorized officers, as of June 3, 1999.
THE WACHOVIA FUNDS
THE WACHOVIA MUNICIPAL FUNDS
By: /S/ CHARLES L. DAVIS, JR.
---------------------------
Name: Charles Davis
Title: Vice President
FEDERATED SERVICES COMPANY
By: /S/ LAWRENCE CARACCIOLO
Name: Lawrence Caracciolo
Title: Senior Vice President
Exhibit h(ix) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
AMENDMENT TO EXHIBIT A
TO THE
SHAREHOLDER SERVICES AGREEMENT
CLASS A SHARES
Wachovia Balanced Fund
Wachovia Emerging Markets Fund
Wachovia Equity Fund
Wachovia Equity Index Fund
Wachovia Executive Equity Fund
Wachovia Executive Fixed Income Fund
Wachovia Fixed Income Fund
Wachovia Georgia Municipal Bond Fund
Wachovia Growth & Income Fund
Wachovia Intermediate Fixed Income Fund
Wachovia North Carolina Municipal Bond Fund
Wachovia Personal Equity Fund
Wachovia Quantitative Equity Fund
Wachovia Short-Term Fixed Income Fund
Wachovia South Carolina Municipal Bond Fund
Wachovia Special Values Fund
Wachovia Virginia Municipal Bond Fund
CLASS B SHARES
Wachovia Balanced Fund
Wachovia Equity Fund
Wachovia Executive Equity Fund
Wachovia Executive Fixed Income Fund
Wachovia Fixed Income Fund
Wachovia Personal Equity Fund
Wachovia Quantitative Equity Fund
Wachovia Special Values Fund
Shareholder Service Fees
1. During the term of this Agreement, the Funds will pay Provider a
quarterly fee. This fee will be computed at the annual rate of .25 of 1% of the
average net asset value of shares of the Funds held during the quarter in
accounts for which the Provider provides Services under this Agreement, so long
as the average net asset value of Shares in the Funds during the quarter equals
or exceeds such minimum amount as the Funds shall from time to time determine
and communicate in writing to the Provider.
2. For the quarterly period in which the Shareholder Services Agreement
becomes effective or terminates, there shall be an appropriate proration of any
fee payable on the basis of the number of days that this Agreement is in effect
during the quarter.
As revised: July 1, 1999
Exhibit j under N-1A
Exhibit 23 under Item 601/Reg SK
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 19 to
the Registration Statement (Form N-1A No. 33-37525) and the related Prospectus
and to the incorporation therein of our reports dated January 17, 2000 with
respect to the financial statements included in the Annual Reports of The
Wachovia Municipal Funds (Wachovia Georgia Municipal Bond Fund, Wachovia North
Carolina Municipal Bond Fund, Wachovia South Carolina Municipal Bond Fund, and
Wachovia Virginia Municipal Bond Fund).
Ernst & Young LLP
/s/Ernst & Young LLP
Boston, Massachusetts
January 26, 2000
Exhibit o (i) under Form N-1A
Exhibit 99 under Item 601/Reg. S-K
EXHIBIT A
to the
Multiple Class Plan
THE BILTMORE FUNDS
INVESTMENT SHARES
INSTITUTIONAL SHARES
Biltmore Money Market Fund
Biltmore Tax-Free Money Market Fund
Biltmore U.S. Treasury Money Mary Fund
This Multiple Class Plan is adopted by THE BILTMORE FUNDS with respect to
the Class(es) of Shares of the portfolios of THE BILTMORE FUNDS set forth above.
Witness the due execution here of this June 1, 1995.
THE BILTMORE FUNDS
By: /S/ JOHN W. MCGONIGLE
Title: PRESIDENT
Date: JUNE 1, 1995
AMENDMENT TO
EXHIBIT A
to the
Multiple Class Plan
THE BILTMORE FUNDS
THE BILTMORE MUNICIPAL FUNDS
Biltmore Balanced Fund
Biltmore Emerging Markets Fund
Biltmore Equity Fund
Biltmore Equity Index Fund
Biltmore Fixed Income Fund
Biltmore Georgia Municipal Bond Fund
Biltmore North Carolina Municipal Bond Fund
Biltmore Quantitative Equity Fund
Biltmore Short-Term Fixed Income Fund
Biltmore South Carolina Municipal Bond Fund
Biltmore Special Values Fund
CLASS A SHARES
CLASS B SHARES
CLASS Y SHARES
Biltmore Money Market Fund
Biltmore Tax-Free Money Market Fund
Biltmore U.S. Treasury Money Market Fund
CLASS Y SHARES (INSTITUTIONAL SHARES)
CLASS A SHARES (INVESTMENT SHARES)
Biltmore Prime Cash Management Fund
CLASS Y SHARES (INSTITUTIONAL SHARES)
This Multiple Class Plan is adopted by THE BILTMORE FUNDS AND THE BILTMORE
MUNICIPAL FUNDS with respect to the Class(es) of Shares of the portfolios of the
FUNDS set forth above.
Witness the due execution here of this June 6, 1996.
THE BILTMORE FUNDS
THE BILTMORE MUNICIPAL FUNDS
By: /S/ JOHN W. MCGONIGLE
Title: PRESIDENT
Date: JUNE 6, 1996
AMENDMENT TO
EXHIBIT A
to the
Multiple Class Plan
THE WACHOVIA FUNDS
THE WACHOVIA MUNICIPAL FUNDS
CLASS A SHARES, CLASS B SHARES & CLASS Y SHARES OF THE FOLLOWING:
Wachovia Balanced Fund
Wachovia Emerging Markets Fund
Wachovia Equity Fund
Wachovia Equity Index Fund
Wachovia Fixed Income Fund
Wachovia Georgia Municipal Bond Fund
Wachovia Growth & Income Fund
Wachovia Intermediate Fixed Income Fund
Wachovia North Carolina Municipal Bond Fund
Wachovia Quantitative Equity Fund
Wachovia Short-Term Fixed Income Fund
Wachovia South Carolina Municipal Bond Fund
Wachovia Special Values Fund
Wachovia Virginia Municipal Bond Fund
INSTITUTIONAL SHARES OF THE FOLLOWING:
Wachovia Prime Cash Management Fund
INSTITUTIONAL SHARES AND INVESTMENT SHARES OF THE FOLLOWING:
Wachovia Money Market Fund
Wachovia Tax-Free Money Market Fund
Wachovia U.S. Treasury Money Market Fund
This Multiple Class Plan is adopted by The Wachovia Funds and The Wachovia
Municipal Funds with respect to the Class(es) of Shares of the portfolios of the
FUNDS set forth above.
Witness the due execution here of this 4th day of March, 1998.
THE WACHOVIA FUNDS
THE WACHOVIA MUNICIPAL FUNDS
By: /S/ JOHN W. MCGONIGLE
Name: John W. McGonigle
Title: President
AMENDMENT TO
EXHIBIT A
to the
Multiple Class Plan
THE WACHOVIA FUNDS
THE WACHOVIA MUNICIPAL FUNDS
CLASS A SHARES, CLASS B SHARES & CLASS Y SHARES OF THE FOLLOWING:
Wachovia Balanced Fund
Wachovia Emerging Markets Fund
Wachovia Equity Fund
Wachovia Equity Index Fund
Wachovia Fixed Income Fund
Wachovia Georgia Municipal Bond Fund
Wachovia Growth & Income Fund
Wachovia Intermediate Fixed Income Fund
Wachovia North Carolina Municipal Bond Fund
Wachovia Personal Equity Fund
Wachovia Quantitative Equity Fund
Wachovia Short-Term Fixed Income Fund
Wachovia South Carolina Municipal Bond Fund
Wachovia Special Values Fund
Wachovia Virginia Municipal Bond Fund
INSTITUTIONAL SHARES OF THE FOLLOWING:
Wachovia Prime Cash Management Fund
INSTITUTIONAL SHARES AND INVESTMENT SHARES OF THE FOLLOWING:
Wachovia Money Market Fund
Wachovia Tax-Free Money Market Fund
Wachovia U.S. Treasury Money Market Fund
This Multiple Class Plan is adopted by The Wachovia Funds and The Wachovia
Municipal Funds with respect to the Class(es) of Shares of the portfolios of the
FUNDS set forth above.
Witness the due execution here of this 1st day of July, 1999.
THE WACHOVIA FUNDS
THE WACHOVIA MUNICIPAL FUNDS
By: /S/ CHARLES L. DAVIS, JR.
---------------------------
Name: Charles L. Davis, Jr.
Title: Vice President
AMENDMENT TO
EXHIBIT A
to the
Multiple Class Plan
THE WACHOVIA FUNDS
THE WACHOVIA MUNICIPAL FUNDS
CLASS A SHARES, CLASS B SHARES & CLASS Y SHARES OF THE FOLLOWING:
Wachovia Balanced Fund
Wachovia Emerging Markets Fund
Wachovia Equity Fund
Wachovia Equity Index Fund
Wachovia Executive Equity Fund
Wachovia Executive Fixed Income Fund
Wachovia Fixed Income Fund
Wachovia Georgia Municipal Bond Fund
Wachovia Growth & Income Fund
Wachovia Intermediate Fixed Income Fund
Wachovia North Carolina Municipal Bond Fund
Wachovia Personal Equity Fund
Wachovia Quantitative Equity Fund
Wachovia Short-Term Fixed Income Fund
Wachovia South Carolina Municipal Bond Fund
Wachovia Special Values Fund
Wachovia Virginia Municipal Bond Fund
INSTITUTIONAL SHARES OF THE FOLLOWING:
Wachovia Prime Cash Management Fund
INSTITUTIONAL SHARES AND INVESTMENT SHARES OF THE FOLLOWING:
Wachovia Money Market Fund
Wachovia Tax-Free Money Market Fund
Wachovia U.S. Treasury Money Market Fund
This Multiple Class Plan is adopted by The Wachovia Funds and The Wachovia
Municipal Funds with respect to the Class(es) of Shares of the portfolios of the
FUNDS set forth above.
Witness the due execution here of this 3rd day of June, 1999.
THE WACHOVIA FUNDS
THE WACHOVIA MUNICIPAL FUNDS
By: /S/ CHARLES L. DAVIS, JR.
--------------------------
Name: Charles L. Davis, Jr.
Title: Vice President
Exhibit d(vi) under Form N-1A
Exhibit 10 under Item 601/Reg. S-K
Amendment #1
to Letter Agreement
between
The Wachovia Municipal Funds and
Wachovia Bank, N.A.
This Amendment No. 1 to Letter Agreement ("Agreement") dated January 15,
1999, by and between The Wachovia Municipal Funds (the "Trust") and Wachovia
Bank, N.A. ("Wachovia").
WHEREAS, the Trust and Wachovia have agreed to amend the Agreement in
certain respects;
NOW THEREFORE, the parties intending to be legally bound agree as follows:
The first sentence of the fifth paragraph is hereby deleted and replaced
with the following:
"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, 2001."
WITNESS the due execution hereof this 31st day of January, 2000.
THE WACHOVIA MUNICIPAL FUNDS
By:
Name:
Title:
WACHOVIA BANK. N.A.
By:
Name:
Title:
