WACHOVIA FUNDS, 497, 1999-03-01

WACHOVIA FUNDS
497, 1999-03-01

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

Prospectus
February 28, 1999

The Wachovia Funds

CLASS A SHARES AND CLASS B SHARES CLASS A SHARES

Wachovia Equity Fund Wachovia Growth & Income Fund

Wachovia Quantitative Equity Fund Wachovia Equity Index Fund

Wachovia Special Values Fund Wachovia Emerging Markets Fund

Wachovia Balanced Fund Wachovia Intermediate Fixed Income Fund

Wachovia Fixed Income Fund Wachovia Short-Term Fixed Income Fund

Prospectus

The Wachovia Municipal Funds

CLASS A SHARES

Wachovia Georgia Municipal Bond Fund

Wachovia North Carolina Municipal Bond Fund

Wachovia South Carolina Municipal Bond Fund

Wachovia Virginia Municipal Bond Fund

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

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

FEBRUARY 28, 1999

Fund Goals, Strategies, Performance and Risk

EQUITY FUNDS

WACHOVIA EQUITY FUND

Goal
Seeks to produce growth of principal and income.

Strategy

The Fund pursues its investment objective by investing primarily in a portfolio
of common stocks. Under normal market conditions, the Fund intends to invest at
least 65% of its assets in stocks. The Fund's investment adviser selects
securities based on a number of factors, incorporating both growth and value
measures. A combination of fundamental analysis, quantitative modeling,
strategic outlook, and relative price performance trends are used to select
stocks perceived to be undervalued with prospects for improving fundamentals.

Total Return Bar Chart And Table

[Graph appears here-see appendix]

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

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

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 21.97% (quarter ended December 31, 1998). Its lowest
quarterly return was (11.37)% (quarter ended September 30, 1998).

Average Annual Total Return

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

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

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

Past performance does not necessarily predict future performance. This
information provides you with historical performance information so that you
can analyze whether the Fund's investment risks are balanced by its potential
rewards.

WACHOVIA QUANTITATIVE EQUITY FUND

Goal
Seeks to provide growth of principal and income.

Strategy

The Fund pursues its investment objective by investing primarily in a portfolio
of common stocks. Under normal market conditions, the Fund intends to invest at
least 65% of its holdings in stocks. Stocks are selected using a quantitative
computer valuation model provided by the Fund's sub-adviser. The model combines
multiple factors believed to have predictive power in determining future stock
price performance.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

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

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

Average Annual Total Return

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

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

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

WACHOVIA GROWTH & INCOME FUND

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

Strategy

The Fund pursues its investment objective by investing primarily in a portfolio
of common stocks. Under normal market conditions, the Fund intends to invest at
least 65% of its holdings in stocks. The Fund's investment adviser selects
securities based on a number of factors, incorporating both growth and value
measures. A combination of fundamental analysis, quantitative modeling,
strategic outlook, and relative price performance trends are used to select
stocks perceived to

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

Total Return Bar Chart and Table

[Graph appears here-see appendix]

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

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

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

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

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

WACHOVIA EQUITY INDEX FUND

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

Strategy

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

Total Return Bar Chart and Table

[Graph appears here-see appendix]

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

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

Average Annual Total Return

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

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

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

WACHOVIA SPECIAL VALUES FUND

Goal
Seeks to produce growth of principal.

Strategy

The Fund pursues its investment objective by investing primarily in a portfolio
of stocks of small U.S. companies. The investment adviser looks for
significantly undervalued companies that it believes have the potential for
above-average growth commensurate with increased risk. Typical investments are
in stocks of companies that have low price-to-earnings ratios, are generally out
of favor in the marketplace, are selling significantly below their stated or
replacement book value or are undergoing a reorganization or other corporate
action that may create above-average price appreciation. Under normal market
conditions, the Fund intends to invest at least 65% of its assets in stocks of
companies that have a market value capitalization of $1 billion or less. The
Fund may invest up to 20% of total assets in foreign securities.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

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

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

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

Average Annual Total Return

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

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

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

WACHOVIA EMERGING MARKETS FUND

Goal
Seeks to produce long-term capital appreciation.

Strategy

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

Total Return Bar Chart and Table

[Graph appears here-see appendix]

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

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

Average Annual Total Return

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

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

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

WACHOVIA BALANCED FUND

Goal
Seeks to produce long-term growth of principal and current income.

Strategy

The Fund pursues its investment objective by investing primarily in a portfolio
of equity securities and debt securities. In selecting equity securities, the
investment adviser uses a combined growth and value approach, seeking
undervalued companies that it believes have improving prospects for growth. In
selecting debt securities, the investment adviser seeks to maximize total return
(which consists of capital gains and income) available from a diversified
portfolio of fixed income securities which provide relative stability of
principal and income as compared to other fixed income securities. Under normal
market circumstances, the Fund will invest at least 65% of its holdings in
equity securities and debt securities. As a matter of operating policy, the
asset mix of the Fund will normally range between 50-70% in common stocks and
convertible securities, 30-50% in preferred stocks and bonds, and 0-20% in money
market instruments. The Fund will maintain at least 25% of its holdings in fixed
income senior securities, including convertible senior securities.

Total Return Bar Chart and Table

[Graph appears here-see appendix]

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

Within the period shown in the Chart, the Fund's Class A Shares highest
quarterly return was 12.86% (quarter ended December 31, 1998). Its lowest
quarterly return was (5.22)% (quarter ended September 30, 1998).

Average Annual Total Return

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

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

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

INCOME FUNDS

WACHOVIA FIXED INCOME FUND

Goal
Seeks a high level of total return.

Strategy

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

Total Return Bar Chart and Table

[Graph appears here-see appendix]

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

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

Average Annual Total Return

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

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

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

WACHOVIA INTERMEDIATE FIXED INCOME FUND

Goal
Seeks current income consistent with preservation of capital.

Strategy

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

Total Return Bar Chart and Table

[Graph appears here-see appendix]

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

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

Average Annual Total Return

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

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

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

WACHOVIA SHORT-TERM FIXED INCOME FUND

Goal
Seeks to produce a high level of current income.

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

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

Total Return Bar Chart and Table

[Graph appears here-see appendix]

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

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

Average Annual Total Return

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

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

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

MUNICIPAL FUNDS

WACHOVIA GEORGIA MUNICIPAL BOND FUND

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

Strategy

Total Return Bar Chart and Table

[Graph appears here-see appendix]

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

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

Average Annual Total Return

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

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

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

WACHOVIA NORTH CAROLINA MUNICIPAL BOND FUND

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

Strategy

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

Total Return Bar Chart and Table

[Graph appears here-see appendix]

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

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

Average Annual Total Return

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

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

WACHOVIA SOUTH CAROLINA MUNICIPAL BOND FUND

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

Strategy

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

Total Return Bar Chart And Table

[Graph appears here-see appendix]

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

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

Average Annual Total Return

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

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

WACHOVIA VIRGINIA MUNICIPAL BOND FUND

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

Strategy

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

Total Return Bar Chart and Table

[Graph appears here-see appendix]

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

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

Average Annual Total Return

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

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

PRINCIPAL INVESTMENT RISKS

All mutual funds take investment risks. Therefore, it is possible to lose money
by investing in the Funds.
An investment in a Fund is not a deposit of a bank and is not insured or
guaranteed by Wachovia Bank, N.A., the Federal Deposit Insurance Corporation or
any other government agency. A description of these risks can be found in "What
are the Risks of Investing in
the Funds?" herein.
<TABLE>
<CAPTION>
Fund Market Equity Risks of Debt Emerging Municipal Diversification
Risks Securities Investing Securities Markets Securities Risks
Risks for Growth Risks Risks Risks
& Value
<S> <C> <C> <C> <C> <C> <C> <C>
Equity Fund X X X
Quantitative Equity Fund X X X
Growth & Income Fund X X X
Equity Index Fund X X X
Special Values Fund X X X
Emerging Markets Fund X X X X
Balanced Fund X X X X
Fixed Income Fund X X
Intermediate Fixed Income Fund X X
Short-Term Fixed Income Fund X X
Georgia Municipal Bond Fund X X X X
North Carolina Municipal Bond Fund X X X X
South Carolina Municipal Bond Fund X X X X
Virginia Municipal Bond Fund X X X X
</TABLE>

What are the Funds' Fees and Expenses?

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

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

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

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

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

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

EXAMPLE

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

<TABLE>
<CAPTION>
1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Equity Fund $117 $365 $633 $1,398
Quantitative Equity Fund $114 $356 $617 $1,363
Growth & Income Fund $113 $353 $612 $1,352
Equity Index Fund $ 72 $224 $390 $ 871
Special Values Fund $127 $397 $686 $1,511
Emerging Markets Fund $172 $533 $918 $1,998
Balanced Fund $103 $322 $558 $1,236
Fixed Income Fund $ 99 $309 $536 $1,190
Intermediate Fixed Income Fund $101 $315 $547 $1,213
Short-Term Fixed Income Fund $ 90 $281 $488 $1,084
Georgia Municipal Bond Fund $118 $368 $638 $1,409
North Carolina Municipal Bond Fund $112 $350 $606 $1,340
South Carolina Municipal Bond Fund $ 85 $265 $460 $1,025
Virginia Municipal Bond Fund $ 95 $296 $515 $1,143
</TABLE>

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

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

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

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

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

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

EXAMPLE

The following Example is intended to help you compare the cost of investing in
the Funds' Class B Shares with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in the Funds' Class B Shares for the
time periods indicated and then redeem all of your shares at the end of those
periods. Expenses assuming no redemption are also shown. The Example also
assumes that your investment has a 5% return each year and that each Fund's
operating expenses are based upon 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 $708 $926 $1,259
Expenses assuming no redemption $193 $597 $1,026 $2,222
Quantitative Equity Fund
Expenses assuming redemption $706 $917 $1,244
Expenses assuming no redemption $190 $588 $1,011 $2,190
Balanced Fund
Expenses assuming redemption $695 $884 $1,189
Expenses assuming no redemption $179 $554 $ 954 $2,073
Fixed Income Fund
Expenses assuming redemption $691 $872 $1,168
Expenses assuming no redemption $175 $542 $ 933 $2,030
</TABLE>

What are the Funds' Main Investments and Investment Techniques?

EQUITY SECURITIES

The Equity Funds invest primarily in equity securities. Equity securities are
the fundamental unit of ownership in a company. They represent a share of the
issuer's earnings and assets, after the issuer pays its liabilities. Generally,
issuers have discretion as to the payment of any dividends or distributions. As
a result, investors cannot predict the income they will receive from equity
securities. However, equity securities offer greater potential for appreciation
than many other types of securities, because their value increases directly with
the value of the issuer's business. the following describes the types of equity
securities in which a Fund invests.

Common Stocks

Common Stocks are the most prevalent type of equity security. Common
stockholders receive the residual value of the issuer's earnings and assets
after the issuer pays its creditors and any preferred stockholders. As a result,
changes in an issuer's earnings directly influence the value of its common
stock.

Preferred Stocks

Preferred Stocks have the right to receive specified dividends or distributions
before the payment of dividends or distributions on common stock. Some preferred
stocks also participate in dividends and distributions paid on common stock.
Preferred stocks may provide for the issuer to redeem the stock on a specified
date. A Fund may treat such redeemable preferred stock as a fixed income
security.

Warrants

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

FIXED INCOME SECURITIES

The Income Funds invest primarily in fixed income securities. Fixed income
securities pay interest, dividends or distributions at a specified rate. The
rate may be fixed or adjusted periodically. The issuer must also repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities.

MUNICIPAL SECURITIES

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

TAX EXEMPT SECURITIES

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

PORTFOLIO TURNOVER

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

RISKS RELATED TO INVESTING FOR GROWTH AND VALUE

Further, growth stocks may not pay dividends or may pay lower dividends than
value stocks. This means they depend more on price changes for returns than do
value stocks. Growth stocks may be more adversely affected in a down market
compared to value stocks that pay higher dividends and may lag behind growth
stocks in an up market.

CREDIT QUALITY AND INVESTMENT RATINGS

When a Fund invests in debt securities or convertible securities most will be
rated BBB or better by Standard & Poor's or Baa or better by Moody's Investors
Service at the time of purchase. Unrated securities will be determined by the
investment adviser to be of like quality and may have greater risk but a higher
yield than comparable rated securities.

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

TEMPORARY DEFENSIVE INVESTMENTS

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

S&P 500 INDEX

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

What are the Risks of Investing in the Funds?

MARKET RISK
The market value of securities fluctuate daily.

EQUITY SECURITIES RISKS

Each Fund is subject to fluctuations in the stock market which has periods of
increasing and decreasing values. These fluctuations can be caused by many
events, including changes to domestic or international economic conditions.
Because the Equity Funds invest primarily in stocks they are more subject to
equity risks. Stocks have greater volatility than debt securities. While greater
volatility increases risk, it offers the potential for greater reward.

Equity risk is also related to the size of the company issuing stock.
Companies may be categorized as having a small, medium, or large capitalization
(market value). The potential risks are higher with small capitalization
companies and lower with large capitalization companies. Therefore, you should
expect that investments in the Special Values Fund will be more volatile than
broad stock market indices such as the S&P 500 or than funds that invest in
large-capitalization companies, such as Quantitative Equity Fund or Equity Fund.

DEBT SECURITIES RISKS

Prices of fixed-rate debt securities generally move in the opposite direction of
the interest rates. The interest payments on fixed-rate debt securities do not
change when interest rates change. Therefore, the price of these securities can
be expected to decrease when interest rates increase and any of the Income
Fund's or Municipal Fund's net asset value may go down. While the investment
adviser attempts to anticipate interest rate movements, there is no guarantee
that it will be able to correctly predict them.

In addition, debt securities with longer maturities or durations will
experience greater price volatility than those with shorter maturities or
durations, and the Fund's net asset value can be expected to fluctuate
accordingly.

The credit quality of a debt security is based upon the ability of the issuer
to repay the security. If the credit quality of securities held by a Fund
declines, the Fund's net asset value could go down.

Principal and interest payments on a security may not be paid when due. If
interest rates are declining, an issuer may repay a debt security held in the
portfolio prior to its maturity. If this occurs, the investment adviser may have
to reinvest the proceeds in debt securities paying lower interest rates
resulting in lower yields to the Income Funds and Municipal Funds.

MUNICIPAL SECURITIES RISKS

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

ISSUER DIVERSIFICATION

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

PREPAYMENT RISK

The Income Funds are subject to prepayment risks. Principal on a fixed income
security may be repaid before its scheduled maturity. This may reduce the
security's value and require the Fund to reinvest the prepayment at a lower
yield. In addition, the Fund may buy a fixed income security with an expectation
of early prepayment. If the prepayment does not occur, the security will decline
in value. This is known as Extension Risk.

TAX RISK
Interest on a municipal security may be subject to regular federal income tax.
Since

any investment can be adversely affected by changes in tax laws, all of the
Funds are subject to this risk. For example, the value of stocks can be affected
by changes in capital gains tax rates.

LEVERAGING

Various investment strategies involve agreements to purchase or sell securities
or currencies in amounts that exceed the amount the Fund has invested in the
underlying securities or currencies. The excess exposure increases the risks
associated with the underlying securities or currencies on the Fund's investment
performance. The Equity and Income Funds are subject to this risk.

FOREIGN SECURITIES RISKS

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

EMERGING MARKET SECURITIES RISKS

Investing in the Emerging Markets Fund entails a substantial degree of risk.
Because of the special risks associated with investing in emerging markets, an
investment in the Emerging Markets Fund should be considered speculative.
Investors are strongly advised to carefully consider the special risks involved
in emerging markets, which are in addition to the usual risks of investing in
domestic markets and in developed markets around the world. By itself, an
investment in the Emerging Markets Fund does not constitute a balanced
investment plan. Investors should be willing to assume a higher degree of risk
and accept a higher level of volatility than is generally associated with
investment in more developed markets.

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

ASSET-BACKED/MORTGAGE-BACKED SECURITIES RISKS

Asset-backed and mortgage-backed securities are subject to risks of prepayment
which generally occurs when interest rates fall. Reinvesting these prepayments
in a lower interest rate environment reduces an Income Fund's income. Asset-
backed securities may have a higher level of default and recovery risk than
mortgage-backed securities.

FUTURES AND OPTIONS RISKS

The successful use of futures, options, and other derivative instruments is
based on the investment adviser's ability to correctly anticipate market
movements. When the direction of the prices of an Equity Fund's securities does
not correlate with the changes in the value of these transactions, or when the
trading market for derivatives becomes illiquid, the Fund could lose money.

SECURITIES LENDING RISKS

The Funds may lend securities. When a Fund lends its portfolio securities, it
may not be able to get them back from the borrower on a timely basis, thereby
exposing the Fund to a loss of investment opportunities.

YEAR 2000 READINESS

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

While it is impossible to determine in advance all of the risks to the Funds,
the Funds could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

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

The Adviser believes that its standard process for selecting securities
generally reduces the Funds' exposure to Year 2000 related problems. In
addition, to assess the potential effect of the Year 2000 problem, the Adviser
is reviewing available information regarding the Year 2000 readiness of issuers
of securities the Funds may purchase.

Year 2000 problems would also increase the risks of the Funds' investments.
The financial impact of these issues for the Funds is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Funds.

What do Shares Cost?

You can purchase, redeem, or exchange Class A Shares and Class B Shares (Shares)
any day Wachovia Bank, N.A. (Wachovia Bank), the New York Stock Exchange (NYSE)
and the Federal Reserve Wire System are open for business. When the Fund
receives your transaction request in proper form, it is processed at the next
determined net asset value (NAV) plus any applicable sales charge (the public
offering price).

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

The following table summarizes the minimum investment amount required for an
investment in a Fund. The maximum sales charge that you will pay on an
investment in Class A Shares of a Fund is 4.50% of average daily net assets,
except for Short-Term Fixed Income Fund, which has a maximum sales charge of
2.50%. The maximum contingent deferred sales charge that you will pay on an
investment in Class B Shares of a Fund is 5.00%. Keep in mind that investment
professionals may charge you fees for their services in connection with your
share transactions.

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

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

SALES CHARGE WHEN YOU PURCHASE-CLASS A SHARES
Class A Shares of all Funds except Short-Term Fixed Income Fund are sold at
their NAV next determined after an order is received, plus a sales charge as
follows:

<TABLE>
<CAPTION>
Purchase Amount Sales Charge as a Sales Charge as a
Percentage of Percentage of NAV
Public Offering
Price
<S> <C> <C>
Less than $100,000 4.50% 4.71%
$100,000 but less than $250,000 3.75% 3.90%
$250,000 but less than $500,000 2.50% 2.56%
$500,000 but less than $750,000 2.00% 2.04%
$750,000 but less than $1 million 1.00% 1.01%
$1 million or greater 0.25% 0.25%
</TABLE>

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

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

The sales charge at purchase may be reduced by:

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

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

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

The sales charge will be eliminated when you purchase Shares:

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

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

SALES CHARGE WHEN YOU REDEEM-CLASS B SHARES

Your redemption proceeds may be reduced by a sales charge, commonly referred to
as a contingent deferred sales charge (CDSC). Class B Shares are only offered by
the Equity Fund, the Quantitative Equity Fund, Special Values Fund, Balanced
Fund and the Fixed Income Fund.

Shares Held Up To: CDSC
1 year 5.00%
2 years 4.00%
3 years 3.00%
4 years 3.00%
5 years 2.00%
6 years 1.00%
7 years or more 0.00%

Class B Shares will convert to Class A Shares at NAV approximately eight years
after purchase.

You will not be charged a CDSC when redeeming Shares:

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

In addition, you will not be charged a CDSC:

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

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

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

How are the Funds Sold?

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

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

The Fund's Distributor, Federated Securities Corp., (Distributor) markets the
Shares described in this prospectus to institutions or individuals, directly or
through an investment professional that has an agreement with the Distributor
(Authorized Dealer). When the Distributor receives sales charges and marketing
fees, it may pay some or all of them to investment professionals. The
Distributor and its affiliates may pay out of their assets other amounts
(including items of material value) to investment professionals for marketing
and servicing Shares. The Distributor is a subsidiary of Federated Investors,
Inc. (Federated).

RULE 12B-1 PLAN

The Equity Fund, Quantitative Equity Fund, Special Values Fund, Balanced Fund
and Fixed Income Fund have adopted a Rule 12b-1 Plan, which allows each Fund to
pay marketing fees to the Distributor and investment professionals for the sale,
distribution and customer servicing of the Fund's Class B Shares at an annual
rate of up to 0.75% of the average daily NAV of the Fund's Class B Shares.
Because you pay marketing fees on an ongoing basis, your investment cost for
Class B Shares may be higher over time than for shares with different sales
charges and marketing fees.

How to Purchase Shares

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

Where the Fund offers more than one Share Class and you do not specify your
Class choice on your form of payment, you automatically will receive Class A
Shares.

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

THROUGH THE TRUST DIVISION OF WACHOVIA BANK

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

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

THROUGH WACHOVIA INVESTMENTS, INC.

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

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

By Mail
To purchase Shares of a Fund by mail, send a check made payable to (Name of
Fund) to:

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

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

By Telephone

Once you have opened an account and completed the appropriate sections of the
account application, you may purchase Shares by telephone. For more information
call 1-800-994-4414.

THROUGH AN AUTHORIZED DEALER
Call your Authorized Dealer for specific instructions.

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

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

SYSTEMATIC INVESTMENT PROGRAM

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

How to Exchange Shares

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

. meet any minimum initial investment requirements; and
. receive a prospectus for the Fund into which you wish to exchange.

An exchange is treated as a redemption and a subsequent purchase, and is a
taxable transaction. Signatures must be guaranteed if you request an exchange
into another Fund with a different shareholder registration.

The Fund may modify or terminate the exchange privilege at any time.
Shareholders will be notified of the modification or termination of the exchange
privilege. The Fund's management or investment adviser may determine from the
amount, frequency and pattern of exchanges that a shareholder is engaged in
excessive trading which is detrimental to the Fund and other shareholders. If
this occurs, the Fund may terminate the availability of exchanges to that
shareholder and may bar that shareholder from purchasing other Funds.

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

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

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

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

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

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

How to Redeem Shares

Each Fund redeems shares at its NAV next determined after the Fund receives the
redemption request in proper form plus any applicable sales charge. Shares may
be redeemed by telephone or by mail through the trust department of Wachovia
Bank, through Wachovia Investments, Inc., through an Authorized Dealer, or
directly from the Fund.

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

By Mail
You may redeem shares by sending a written request to Wachovia Bank or Wachovia
Investments, Inc., as appropriate.
Send your written redemption request including your name, the Fund's name,
your account number and the Share or dollar amount requested to:

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

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

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

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

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

REDEMPTION IN KIND

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

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

SYSTEMATIC WITHDRAWAL PROGRAM

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

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

SHARE CERTIFICATES

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

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

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

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

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

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

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

ACCOUNTS WITH LOW BALANCES

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

THE WACHOVIA FUNDS TAX INFORMATION

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

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

THE WACHOVIA MUNICIPAL FUNDS TAX INFORMATION

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

Who Manages the Funds?

The Board of Trustees governs the Funds. The Board selects and oversees the
investment adviser for the Funds, Wachovia Asset Management, a business unit of
Wachovia Bank. The investment adviser manages each Fund's assets, including
buying and selling portfolio securities. The investment adviser's address is 100
North Main Street, Winston-Salem, NC 27101. Wachovia Bank has been managing
trust assets for over 100 years, with over $42 billion in managed assets as of
December 31, 1998.
Quantitative Equity Fund is sub-advised by Twin Capital Management, Inc.,
McMurray, Pennsylvania, which is paid by the adviser and not by the Fund.

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

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

PORTFOLIO MANAGERS

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Financial Information

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

The Wachovia Funds and The Wachovia Municipal Funds

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGH EACH PERIOD)

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

Further information about the performance of the Funds is contained in the
Fund's Annual Report dated November 30, 1998 which may be obtained free of
charge.
<TABLE>
<CAPTION>
Period Ended Net Asset Net Net Realized and Total from Distributions Distributions Total
November 30, Value, Investment Unrealized Gain/(Loss) Investment from Net from Net Distributions
beginning Income/ on Investments, Futures Operations Investment Realized Gain
of period (Operating Loss) Contracts, and Foreign Income on Investment
Currency Transactions Transactions,
Futures Contracts
and Foreign Currency
Transactions
<S> <C> <C> <C> <C> <C> <C> <C>
Wachovia Equity Fund
1994 $10.28 0.20 0.12 0.32 (0.20) (0.08) (0.28)
1995 $10.32 0.23 2.64 2.87 (0.25) (0.23) (0.48)
1996 $12.71 0.22(e) 2.83 3.05 (0.22) (0.73) (0.95)
1997 $14.81 0.14(e) 2.43 2.57 (0.13) (1.86) (1.99)
1998 $15.39 0.13(e) 2.21 2.34 (0.14) (1.68) (1.82)
Wachovia Quantitative Equity Fund
1994(a) $10.00 0.12 (0.43) (0.31) (0.09) - (0.09)
1995 $ 9.60 0.22 3.51 3.73 (0.22) - (0.22)
1996 $13.11 0.24(e) 2.77 3.01 (0.21) (0.24) (0.45)
1997 $15.67 0.18(e) 4.14 4.32 (0.20) (0.79) (0.99)
1998 $19.00 0.11(e) 3.12 3.23 (0.19) (1.75) (1.94)
Wachovia Growth & Income Fund
1994 $10.20 0.17 (0.40) (0.23) (0.17) - (0.17)
1995 $ 9.80 0.17 3.09 3.26 (0.17) - (0.18)
1996 $12.88 0.15 3.67 3.82 (0.15) (0.14) (0.29)
1997 $16.41 0.13 4.44 4.57 (0.13) (0.25) (0.38)
1998** $20.60 0.11 3.94 4.05 (0.10) (1.01) (1.11)
Wachovia Equity Index Fund
1994 $10.47 0.25 (0.19) 0.06 (0.24) (0.02) (0.26)
1995 $10.27 0.28 3.37 3.65 (0.27) (0.03) (0.30)
1996 $13.62 0.32(e) 3.13 3.45 (0.31) (0.78) (1.09)
1997 $15.98 0.25(e) 3.85 4.10 (0.28) (0.91) (1.19)
1998 $18.89 0.26(e) 3.90 4.16 (0.24) (0.40) (0.64)
Wachovia Special Values Fund
1994 $10.24 0.06 (0.22) (0.16) (0.05) (0.28) (0.33)
1995 $ 9.75 0.09 2.42 2.51 (0.02) (0.06) (0.08)
1996 $12.18 0.35 4.13 4.48 (0.08) (0.91) (0.99)
1997 $15.67 0.13(e) 4.53 4.66 (0.08) (1.61) (1.69)
1998 $18.64 0.19(e) (0.87) (0.68) (0.12) (1.71) (1.83)
Wachovia Emerging Markets Fund
1995(b) $10.00 0.05 0.36 0.41 - - -
1996 $10.41 0.09(e) 1.20 1.29 (0.03) - (0.03)
1997 $11.67 0.03(e) (0.47) (0.44) (0.11) - (0.11)
1998 $11.12 0.09(e) (2.68) (2.59) (0.10) - (0.10)
</TABLE>

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

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

The Wachovia Funds and The Wachovia Municipal Funds

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

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

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

The Wachovia Funds and The Wachovia Municipal Funds

Financial Highlights-Class A Shares

(FOR A SHARE OUTSTANDING THROUGH EACH PERIOD)
<TABLE>
<CAPTION>
Period Ended Net Asset Net Net Realized and Total from Distributions Distributions Total
November 30, Value, Investment Unrealized Gain/(Loss) Investment from Net from Net Distributions
beginning Income/ on Investments, Futures Operations Investment Realized Gain
of period (Operating Loss) Contracts, and Foreign Income on Investment
Currency Transactions Transactions,
Futures Contracts
and Foreign Currency
Transactions
<S> <C> <C> <C> <C> <C> <C> <C>
Wachovia Balanced Fund
1994 $10.33 0.35 (0.38) (0.03) (0.33) (0.04) (0.37)
1995 $ 9.93 0.40 2.13 2.53 (0.38) (0.16) (0.54)
1996 $11.92 0.38(e) 1.72 2.10 (0.38) (0.34) (0.72)
1997 $13.30 0.34(e) 1.40 1.74 (0.34) (1.44) (1.78)
1998 $13.26 0.24(e) 1.50 1.74 (0.38) (0.90) (1.28)
Wachovia Fixed Income Fund
1994 $10.00 0.56 (0.98) (0.42) (0.55) (0.06) (0.61)
1995 $ 8.97 0.58 0.92 1.50 (0.57) - (0.57)
1996 $ 9.90 0.61(e) (0.09) 0.52 (0.59) - (0.59)
1997 $ 9.83 0.54(e) 0.04 0.58 (0.56) - (0.56)
1998 $ 9.85 0.53(e) 0.30 0.83 (0.54) - (0.54)
Wachovia Intermediate Fixed Income Fund
1994 $10.20 0.44 (0.79) (0.35) (0.43) - (0.54)
1995 $ 9.31 0.55 0.76 1.31 (0.54) - (0.55)
1996 $10.07 0.55 (0.11) 0.44 (0.55) - (0.55)
1997 $ 9.96 0.54 0.06 0.60 (0.53) - (0.53)
1998** $10.03 0.47 0.40 0.87 (0.52) - (0.52)
Wachovia Short-Term Fixed Income Fund
1994 $ 9.91 0.45 (0.33) 0.12 (0.45) - (0.45)
1995 $ 9.58 0.59 0.24 0.83 (0.52) - (0.52)
1996 $ 9.89 0.56(e) (0.06) 0.50 (0.60) - (0.60)
1997 $ 9.79 0.50(e) (0.01) 0.49 (0.51) - (0.51)
1998 $ 9.77 0.52(e) 0.14 0.66 (0.51) - (0.51)
Wachovia Georgia Municipal Bond Fund
1995(b) $10.00 0.41 0.96 1.37 (0.41) - (0.41)
1996 $10.96 0.47 0.05 0.52 (0.47) (0.01) (0.48)
1997 $11.00 0.44 0.13 0.57 (0.44) (0.02) (0.46)
1998 $11.11 0.42 0.27 0.69 (0.42) + (0.42)
Wachovia North Carolina Municipal Bond Fund
1995(b) $10.00 0.43 0.99 1.42 (0.43) - (0.43)
1996 $10.99 0.45 0.09 0.54 (0.45) (0.05) (0.50)
1997 $11.03 0.43 0.14 0.57 (0.43) (0.02) (0.45)
1998 $11.15 0.43 0.32 0.75 (0.43) (0.01) (0.44)
Wachovia South Carolina Municipal Bond Fund
1994 $11.12 0.56 (1.04) (0.48) (0.56) (0.03) (0.59)
1995 $10.05 0.56 1.10 1.66 (0.56) (0.10) (0.66)
1996 $11.05 0.55 0.03 0.58 (0.55) (0.03) (0.58)
1997 $11.05 0.53 0.11 0.64 (0.52) (0.05) (0.57)
1998 $11.12 0.51 0.24 0.75 (0.51) + (0.51)
Wachovia Virginia Municipal Bond Fund
1994 $10.31 0.38 (0.90) (0.52) (0.38) - (0.39)
1995 $ 9.40 0.42 0.85 1.27 (0.42) - (0.42)
1996 $10.25 0.44 (0.10) 0.34 (0.44) - (0.44)
1997 $10.15 0.46 0.13 0.59 (0.45) - (0.45)
1998** $10.29 0.48 0.14 0.62 (0.48) - (0.42)
</TABLE>

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

The Wachovia Funds and The Wachovia Municipal Funds

Financial Highlights-Class A Shares

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

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

The Wachovia Funds and The Wachovia Municipal Funds

Financial Highlights-Class A Shares

* Computed on an annualized basis.

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

The Wachovia Funds and The Wachovia Municipal Funds

Financial Highlights-Class B Shares

(FOR A SHARE OUTSTANDING THROUGH EACH PERIOD)

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

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

* Computed on an annualized basis.

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

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

Shareholder Reports--The Funds publish annual and semi-annual reports to
shareholders which include information about the Funds' investments. The annual
report discusses market conditions and investment strategies that significantly
affected each Fund's performance during its last fiscal year.

To obtain the SAI, the annual and semi-annual reports and other information
without charge call your investment professional or the Fund at 1-800-994-4414.

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

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

Addresses

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

DISTRIBUTOR Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER Wachovia Asset Management
100 North Main Street
Winston-Salem, NC 27101

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

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

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

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

THE WACHOVIA FUNDS &
THE WACHOVIA MUNICIPAL FUNDS
CLASS Y SHARES

Prospectus
February 28, 1999

[Logo of Wachovia]

Prospectus

The Wachovia Funds

Wachovia Equity Fund Wachovia Emerging Markets Fund
Wachovia Quantitative Equity Fund Wachovia Balanced Fund
Wachovia Growth & Income Fund Wachovia Fixed Income Fund
Wachovia Equity Index Fund Wachovia Intermediate Fixed Income Fund
Wachovia Special Values Fund Wachovia Short-Term Fixed Income Fund

The Wachovia Municipal Funds

Wachovia Georgia Municipal Bond Fund
Wachovia North Carolina Municipal Bond Fund
Wachovia South Carolina Municipal Bond Fund
Wachovia Virginia Municipal Bond Fund

CLASS Y SHARES

As with all mutual funds, the Securities and Exchange Commission has not
WV-4approved or disapproved these securities or passed upon the adequacy of this
prospectus, and any representation to the contrary is a criminal offense.

CONTENTS
Fund Goals, Strategies, Performance and Risk
What are the Funds' Fees and Expenses?
What are the Funds' Main Investments and Investment Techniques?
What are the Risks of Investing in the Funds?
What do Shares Cost?
How are the Funds Sold?
How to Purchase Shares
How to Exchange Shares
How to Redeem Shares
Account and Share Information
Who Manages the Funds?
Financial Information

FEBRUARY 28, 1999

Fund Goals, Strategies,
Performance and Risk

EQUITY FUNDS

WACHOVIA EQUITY FUND

Goal

Seeks to produce growth of principal and income.

Strategy

Total Return Bar Chart and Table

[Bar Chart Appears Here-see appendix]

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

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

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

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

<TABLE>
<CAPTION>
Calendar Period Class Y S&P 500
<S> <C> <C>

1 Year 27.17% 28.58%
Life of Fund/1/ 23.15% 34.09%

</TABLE>

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

WACHOVIA QUANTITATIVE EQUITY FUND

Goal

Seeks to provide growth of principal and income.

Strategy

Total Return Bar Chart and Table

[Bar Chart Appears Here-see appendix]

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

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

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

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

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

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

WACHOVIA GROWTH & INCOME FUND

Goal

Seeks to provide total return through growth of capital and current income.

Strategy

The Fund pursues its investment objective by investing primarily in a portfolio
of common stocks. Under normal market conditions, the Fund intends to invest at
least 65% of its holdings in stocks. The Fund's investment adviser selects
securities based on a number of factors, incorporating both growth and value
measures. A combination of fundamental analysis, quantitative modeling,
strategic outlook, and relative price performance trends are used to select
stocks perceived to have potential for growth of capital and/or income.

Total Return Bar Chart and Table

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

WACHOVIA EQUITY INDEX FUND

Goal

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

Strategy

Total Return Bar Chart and Table

[Bar Chart Apperas Here-see appendix]

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

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

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

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

<TABLE>
<CAPTION>
Calendar Period Class Y S&P 500
<S> <C> <C>
1 Year 28.15% 28.58%
Life of Fund/1/ 32.85% 34.09%
</TABLE>

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

WACHOVIA SPECIAL VALUES FUND

Goal

Seeks to produce growth of principal.

Strategy

Total Return Bar Chart and Table

[Bar Chart Appears Here-see appendix]

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

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

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

Average Annual Total Return

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

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

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

WACHOVIA EMERGING MARKETS FUND

Goal

Seeks to produce long-term capital appreciation.

Strategy

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

Total Return Bar Chart and Table

[Bar Chart Appears Here-see appendix]

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

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

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

Average Annual Total Return

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

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

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

WACHOVIA BALANCED FUND

Goal

Seeks to provide long-term growth of principal and current income.

Strategy

The Fund pursues its investment objective by investing primarily in a portfolio
of equity securities and debt securities. In selecting equity securities, the
investment adviser uses a combined growth and value approach, seeking
undervalued companies that it believes have improving prospects for growth. In
selecting, debt securities, the investment adviser seeks to maximize total
return (which consists of capital gains and income) available from a diversified
portfolio of fixed income securities which provide relative stability of
principal and income as compared to other fixed income securities. Under normal
market circumstances, the Fund will invest at least 65% of its holdings in
equity securities and debt securities. As a matter of operating policy, the
asset mix of the Fund will normally range between 50-70% in common stocks and
convertible securities, 30-50% in preferred stocks and bonds, and 0-20% in money
market instruments. The Fund will maintain at least 25% of its holdings in fixed
income senior securities, including convertible senior securities.

Total Return Bar Chart and Table

[Bar Chart Appears Here-see appendix]

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

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

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

Average Annual Total Return

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

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

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

INCOME FUNDS

WACHOVIA FIXED INCOME FUND

Goal

Seeks a high level of total return.

Strategy

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

Total Return Bar Chart and Table

[Bar Chart Appears Here-see appendix]

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

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

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

Average Annual Total Return

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

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

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

WACHOVIA INTERMEDIATE FIXED INCOME FUND

Goal

Seeks current income consistent with preservation of capital.

Strategy

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

Total Return Bar Chart and Table

WACHOVIA SHORT-TERM FIXED INCOME FUND

Goal

Seeks to produce a high level of current income.

Strategy

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

Total Return Bar Chart and Table

[Bar Chart Appears Here-see appendix]

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

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

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

Average Annual Total Return

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

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

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

MUNICIPAL FUNDS

WACHOVIA GEORGIA MUNICIPAL BOND FUND

Goal

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

Strategy

Total Return Bar Chart and Table

[Bar Chart Appears Here-see appendix]

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

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

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

Average Annual Total Return

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

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

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

WACHOVIA NORTH CAROLINA MUNICIPAL BOND FUND

Goal

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

Strategy

Total Return Bar Chart and Table

[Bar Chart Appears Here-see appendix]

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

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

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

Average Annual Total Return

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

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

WACHOVIA SOUTH CAROLINA MUNICIPAL BOND FUND

Goal

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

Strategy

Total Return Bar Chart and Table

[Bar Chart Appears Here-see appendix]

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

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

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

Average Annual Total Return

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

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

WACHOVIA VIRGINIA MUNICIPAL BOND FUND

Goal

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

Strategy

Total Return Bar Chart and Table

PRINCIPAL INVESTMENT RISKS

<TABLE>
<CAPTION>
Risks of
Equity Investing Debt Emerging Municipal
Market Securities for Growth Securities Markets Securities Diversification
Fund Risks Risks & Value Risks Risks Risks Risks

<S> <C> <C> <C> <C> <C> <C> <C>
Equity Fund x x x
Quantitative Equity Fund x x x
Growth & Income Fund x x x
Equity Index Fund x x x
Special Values Fund x x x
Emerging Markets Fund x x x x
Balanced Fund x x x x
Fixed Income Fund x x
Intermediate Fixed Income Fund x x
Short-Term Fixed Income Fund x x
Georgia Municipal Bond Fund x x x x
North Carolina Municipal Bond x x x x
Fund
South Carolina Municipal Bond x x x x
Fund
Virginia Municipal Bond Fund x x x x
</TABLE>

What are the Funds' Fees and Expenses?

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

<TABLE>
<CAPTION>
Equity Special Emerging
Shareholder Fees Equity Quantitative Growth & Index Values Markets Balanced
Fees Paid Directly From Your Investment Fund Equity Fund Income Fund Fund Fund Fund Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) None None None None None None None

Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, as applicable) None None None None None None None

Maximum Sales Charge (Load) Imposed on
Reinvested Dividends (and other Distributions)
(as a percentage of offering price) None None None None None None None

Redemption Fee (as a percentage of
amount redeemed, if applicable) None None None None None None None

Exchange Fee None None None None None None None
</TABLE>

Annual Fund Operating Expenses/1/

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

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee 0.70% 0.70% 0.70% 0.30% 0.80% 1.00% 0.70%

Distribution (12b-1) Fee None None None None None None None

Shareholder Services Fee None None None None None None None

Other Expenses 0.27% 0.24% 0.41% 0.15% 0.20% 0.44% 0.22%

Total Annual Class Y Shares Operating Expenses
(Before Waiver)/1/ 0.97% 0.94% 1.11% 0.45% 1.00% 1.44% 0.92%

Waiver of Fund Expenses 0.07% 0.07% 0.25% 0.00% 0.00% 0.00% 0.16%

Total Actual Annual Fund Operating Expenses
(After Waiver) 0.90% 0.87% 0.86% 0.45% 1.00% 1.44% 0.76%

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

<TABLE>
<CAPTION>
North South
Fixed Intermediate Short-Term Georgia Carolina Carolina Virginia
Shareholder Fees Income Fixed Income Fixed Income Municipal Municipal Municipal Municipal
Fees Paid Directly From Your Investment Fund Fund Fund Bond Fund Bond Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on
Purchases (as a percentage of offering price) None None None None None None None

Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price
or redemption proceeds, as applicable) None None None None None None None

Maximum Sales Charge (Load) Imposed on
Reinvested Dividends (and other Distributions)
(as a percentage of offering price) None None None None None None None

Redemption Fee (as a percentage of
amount redeemed, if applicable) None None None None None None None

Exchange Fee None None None None None None None

</TABLE>

Annual Fund Operating Expenses/1/

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

<TABLE>
<S> <C> <C> <C> <C> <C> <C> <C>
Management Fee 0.60% 0.60% 0.55% 0.75% 0.75% 0.75% 0.74%

Distribution (12b-1) Fee None None None None None None None

Shareholder Services Fee None None None None None None None

Other Expenses 0.23% 0.26% 0.27% 0.52% 0.54% 0.31% 0.23%

Total Annual Class Y Shares Operating Expenses
(Before Waiver)/1/ 0.83% 0.86% 0.82% 1.27% 1.29% 1.06% 0.97%

Waiver of Fund Expenses 0.11% 0.12% 0.19% 0.36% 0.44% 0.48% 0.29%

Total Actual Annual Fund Operating Expenses
(After Waiver) 0.72% 0.74% 0.63% 0.91% 0.85% 0.58% 0.68%
</TABLE>
1 Pursuant to an agreement between the Adviser and the Trusts, the Adviser
agrees during the period from December 15, 1998 through January 31, 2000 to
waive its fees, and/or make reimbursements to the Funds, so that each Fund's
net operating expenses do not exceed, in the aggregate, the Fund's Total
Actual Annual Operating Expenses listed above. The Adviser agrees that this
obligation shall constitute a contractual commitment enforceable by the Trusts
and that the Adviser shall not assert any right to reimbursement of amounts so
waived or reimbursed.

EXAMPLE

The following Example is intended to help you compare the cost of investing in
each Fund's Class Y Shares with the cost of investing in other mutual funds. The
Example assumes that you invest $10,000 in each Fund's Class Y Shares for the
time periods indicated and then redeem all of your shares at the end of those
periods. The Example also assumes that your investment has a 5% return each year
and that each Fund's operating expenses are based upon 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 $ 92 $287 $498 $1,108
Quantitative Equity Fund $ 89 $278 $482 $1,073
Growth & Income Fund $ 88 $274 $477 $1,061
Equity Index Fund $ 46 $144 $252 $ 567
Special Values Fund $102 $318 $552 $1,225
Emerging Markets Fund $147 $456 $787 $1,724
Balanced Fund $ 78 $243 $422 $ 942
Fixed Income Fund $ 74 $230 $401 $ 894
Intermediate Fixed Income Fund $ 76 $237 $411 $ 918
Short-Term Fixed Income Fund $ 64 $202 $351 $ 786
Georgia Municipal Bond Fund $ 93 $290 $504 $1,120
North Carolina Municipal Bond Fund $ 87 $271 $471 $1,049
South Carolina Municipal Bond Fund $ 59 $186 $324 $ 726
Virginia Municipal Bond Fund $ 69 $218 $379 $ 847
</TABLE>

What are the Funds' Main Investments and Investment Techniques?

EQUITY SECURITIES

The Equity Funds invest primarily in equity securities. Equity

securities are the fundamental unit of ownership in a company. They represent a
share of the issuer's earnings and assets, after the issuer pays its
liabilities. Generally, issuers have discretion as to the payment of any
dividends or distributions. As a result, investors cannot predict the income
they will receive from equity securities. However, equity securities offer
greater potential for appreciation than many other types of securities, because
their value increases directly with the value of the issuer's business. The
following describes the types of equity securities in which a Fund invests.

Common Stocks

Preferred Stocks

Warrants

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

FIXED INCOME SECURITIES

MUNICIPAL SECURITIES

TAX EXEMPT SECURITIES

PORTFOLIO TURNOVER

RISKS RELATED TO INVESTING FOR GROWTH AND VALUE

Due to their relatively high valuations, growth stocks are typically more
volatile than value stocks. For instance, the price of a growth stock may
experience a larger decline on a forecast of lower earnings, a negative
fundamental development, or an adverse market development. Further, growth
stocks may not pay dividends or may pay lower dividends than value stocks. This
means they depend more on price changes for returns than do value stocks. Growth
stocks may be more adversely affected in a down market compared to value stocks
that pay higher dividends and may lag behind growth stocks in an up market.

CREDIT QUALITY AND INVESTMENT RATINGS

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

TEMPORARY DEFENSIVE INVESTMENTS

S&P 500 INDEX

What are the Risks of Investing in the Funds?

MARKET RISK
The market value of securities fluctuate daily.

EQUITY SECURITIES RISKS

DEBT SECURITIES RISKS

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.

MUNICIPAL SECURITIES RISKS

ISSUER DIVERSIFICATION

PREPAYMENT RISK

The Income Funds are subject to prepayment risk. Principal on a fixed income
security may be repaid before its scheduled maturity. This may reduce the
security's value and require the Fund to reinvest the prepayment at a lower
yield. In addition, the Fund may buy a fixed income security with an expectation
of early prepayment. If the prepayment does not occur, the security will decline
in value. This is known as Extension Risk.

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

LEVERAGING

FOREIGN SECURITIES RISKS

EMERGING MARKET SECURITIES RISKS

ASSET-BACKED/MORTGAGE-BACKED SECURITIES RISKS

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

YEAR 2000 READINESS

The Adviser believes that its standard

process for selecting securities generally reduces the Funds' exposure to Year
2000 related problems. In addition, to assess the potential effect of the Year
2000 problem, the Adviser is reviewing available information regarding the Year
2000 readiness of issuers of securities the Funds may purchase.

What do Shares Cost?

You can purchase, redeem, or exchange Class Y Shares (Shares) any day Wachovia
Bank, N.A. (Wachovia Bank), the New York Stock Exchange (NYSE) and the Federal
Reserve Wire System are open for business.

When a Fund receives your transaction request in proper form, it is processed at
the next determined net asset value (NAV).

NAV is determined at the end of regular trading (normally 4:00 p.m. Eastern
time) each day the NYSE is open. The value of Fund Shares is generally
determined based upon the market value of portfolio securities. However, the
Funds' Board may determine in good faith that another method of valuing
investments is necessary to appraise their fair market value. Securities held by
the Emerging Markets Fund may trade on foreign exchanges on days (such as
weekends) when the Fund does not calculate its NAV. As a result, the NAV of the
Fund's shares may change on days when you cannot purchase or sell the Fund's
shares.

The following table summarizes the minimum required investment amount required
for an investment in a Fund.

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

How are the Funds Sold?

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

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

How to Purchase Shares

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

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

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

THROUGH AN EXCHANGE

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

SYSTEMATIC INVESTMENT PROGRAM

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

How to Exchange Shares

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

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

By Telephone

You may exchange Shares by telephone by calling 1-800-994-4414. Telephone
exchange instructions must be received by 4:00 p.m. (Eastern time) for Shares to
be exchanged that day.

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

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

How to Redeem Shares

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

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

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

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

SIGNATURE GUARANTEES

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

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

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.

SYSTEMATIC WITHDRAWAL PROGRAM

SHARE CERTIFICATES

Account and Share Information

CONFIRMATIONS AND ACCOUNT STATEMENTS

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

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

Emerging Markets Fund annually
Special Values Fund

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

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

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

ACCOUNTS WITH LOW BALANCES

THE WACHOVIA FUNDS TAX INFORMATION

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

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?

Wachovia Bank has been managing trust assets for over 100 years, with over $33
billion in managed assets as of December 31, 1998.

Quantitative Equity Fund is sub-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
average daily net assets
Fund

<S> <C>
Equity Fund 0.70%
Quantitative Equity Fund 0.70%
Growth & Income Fund 0.70%
Equity Index Fund 0.30%
Special Values Fund 0.80%
Emerging Markets Fund 1.00%
Balanced Fund 0.70%
Fixed Income Fund 0.60%
Intermediate Fixed Income Fund 0.60%
Short-Term Fixed Income Fund 0.55%
Georgia Municipal Bond Fund 0.75%
North Carolina Municipal Bond Fund 0.75%
South Carolina Municipal Bond Fund 0.75%
Virginia Municipal Bond Fund 0.74%
</TABLE>

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

PORTFOLIO MANAGERS
<TABLE>
<CAPTION>
Portfolio Manager Funds Managed Biography
<S> <C> <C>
Jerry D. Burton Quantitative Equity Fund Mr. Burton is a Chartered Financial Analyst and a Vice President and
Portfolio Manager for Personal Financial Services for the investment
adviser. In 1971, Mr. Burton joined South Carolina National Bank, which
was acquired by Wachovia Bank in 1991. Mr. Burton received a bachelors
degree from Clemson University and an MBA from the College of William and
Mary.
- -----------------------------------------------------------------------------------------------------------------------------------
Daniel S. Earthman Balanced Fund Mr. Earthman is a Chartered Financial Analyst, Portfolio Manager and a
Growth & Income Fund Senior Vice President of the investment adviser. Prior to joining
Equity Fund Wachovia Bank in 1988, Mr. Earthman was a Vice President and Investment
Manager with Richland Asset Management in Nashville, and an Assistant
Vice President and Portfolio Manager with North Carolina National Bank in
Charlotte. Mr. Earthman received a bachelors degree in business from
Southern Methodist University and a MBA from the University of North
Carolina at Chapel Hill.
- -----------------------------------------------------------------------------------------------------------------------------------
Samuel M. Gibbs, II Short-Term Income Fund Mr. Gibbs is a Senior Vice President and Manager of Fixed Income
Fixed Income Fund Investments for the investment adviser. Mr. Gibbs joined Wachovia Bank in
Intermediate Fixed Income Fund 1969 as a portfolio manager. He became a bond trader and fixed income
portfolio manager in 1975 and assumed his current position in 1977. Mr.
Gibbs is a graduate of Davidson College and has an MBA from the
University of South Carolina.
- -----------------------------------------------------------------------------------------------------------------------------------
Roger L. Glenski Special Values Fund Mr. Glenski is a Certified Public Accountant, Portfolio Manager and
Assistant Vice President of the investment adviser. Mr. Glenski joined
Wachovia Bank in 1996, specializing in the valuation of closely-held
businesses and small companies. Previously, Mr. Glenski was a staff
accountant by the accounting firms of KPMG and Deloitte & Touche LLP in
Chicago. Mr.Glenski received a bachelors degree from the University of
Missouri-Kansas City and a MBA from the University of Chicago.
- -----------------------------------------------------------------------------------------------------------------------------------
John F. Hageman Equity Fund John F. Hageman is a Chartered Financial Analyst and a Senior Vice
Balanced Fund President and Institutional Portfolio Manager for the investment adviser.
Growth & Income Fund Mr. Hageman is responsible for managing employee benefit, foundation and
endowment portfolios. Prior to joining Wachovia Bank in 1986, Mr. Hageman
was Vice President and head of Institutional Investment Management at
Michigan National Investment Corporation from 1977 to 1986, and an
account executive with Merrill Lynch from 1975 to 1977. Mr. Hageman
received his B.A. from Wabash College.
- -----------------------------------------------------------------------------------------------------------------------------------
Paige C. Henderson Emerging Markets Fund Ms. Henderson is a Chartered Financial Analyst and a Vice President of
the investment adviser. Ms. Henderson joined Wachovia Bank in 1991 as an
Equity Analyst. She has managed the Emerging Markets Fund since 1996. Ms.
Henderson received a bachelors of science in Business Administration and
an MBA from the University of North Carolina at Chapel Hill. Ms.Henderson
is a Certified Public Accountant.
- -----------------------------------------------------------------------------------------------------------------------------------
Michael W. Holt Fixed Income Fund Mr. Holt is a Chartered Financial Analyst and Fixed Income Portfolio
Intermediate Fixed Income Fund Manager of the investment adviser. Mr. Holt joined Wachovia Bank in 1991.
He is a graduate of
the University of
Tennessee where he
majored in economics
and received a MBA in
Finance.
- -----------------------------------------------------------------------------------------------------------------------------------
Russell L. Kimbro, Jr. Equity Fund Balanced Fund Mr. Kimbro is a Chartered Financial Analyst and Senior Vice President and
Growth & Income Fund Portfolio Manager for Personal Financial Services for the investment
adviser. Mr. Kimbro joined Wachovia Bank in 1985. Mr. Kimbro is an
instructor of corporate finance an the University of North Carolina at
Greensboro. He received his bachelors degree in economics from Virginia
Polytechnical Institute and State University and a MBA from the
University of North Carolina at Greensboro.
- -----------------------------------------------------------------------------------------------------------------------------------
F. Stanley King Equity Fund Balanced Fund Mr. King is a Chartered Financial Analyst and a Senior Vice President of
Growth & Income Fund the investment adviser. Mr. King serves as manager of institutional
portfolio management for the investment adviser. Mr. King joined Wachovia
Bank in 1985 as a securities analyst and assumed his current position in
1991. He has both his
bachelors and masters
of science degrees
from North Carolina
State University.
- -----------------------------------------------------------------------------------------------------------------------------------
George E. McCall Quantitative Equity Fund Mr. McCall is a Certified Financial Planner, Portfolio Manager and Vice
President of the investment adviser. In 1981, Mr. McCall joined South
Carolina National Bank, which was acquired by Wachovia Bank in 1991. Mr.
McCall is a graduate
of Presbyterian
College and received
an MBA from the
University of South
Carolina.
- -----------------------------------------------------------------------------------------------------------------------------------
Matthew J. McGuinness Equity Fund Balanced Fund Mr. McGuinness is a Chartered Financial Analyst and Vice President and
Growth & Income Fund Portfolio Manager for Personal Financial Services for the investment
adviser. Mr. McGuinness joined Wachovia Bank in 1991 in the
Estates/Closely-Held Unit. He received an MBA from the University of
North Carolina at Chapel Hill.
- -----------------------------------------------------------------------------------------------------------------------------------
Michael O. Mercer Equity Fund Balanced Fund Mr. Mercer is a Senior Vice President of Wachovia and manages the
Growth & Income Fund Wachovia Equity Investment Fund and other large institutional accounts.
Mr. Mercer joined Wachovia Bank in 1983 and is a Chartered Financial
Analyst. Mr. Mercer is a graduate of Catawba College and received an MBA
from Florida State University.
- -----------------------------------------------------------------------------------------------------------------------------------
Wayne F. Morgan Fixed Income Fund Intermediate Mr. Morgan is a Chartered Financial Analyst and Senior Vice President of
Fixed Income Fund the investment adviser. Prior to joining Wachovia Bank in June, 1997 as a
senior fixed income portfolio manager, Mr. Morgan served as the Director
of Investments at the University of North Carolina at Chapel Hill, where
he oversaw the management of the University's endowment fund. Mr.Morgan
received both a
bachelors degree and
his MBA from the
University of North
Carolina at Chapel
Hill.
- -----------------------------------------------------------------------------------------------------------------------------------
J. Joseph Muster The Wachovia Municipal Funds Mr. Muster is a Vice President and Portfolio Manager of Money Market and
Municipal Investments in the Fixed Income Section of the investment
adviser. Mr. Muster joined Wachovia Bank in 1992 and worked as a credit
analyst until January 1998 when he was promoted to portfolio manager. Mr.
Muster is a graduate of the University of Georgia and received his MBA
from Duke University.
- -----------------------------------------------------------------------------------------------------------------------------------
Harold (Rick) Nelson III Fixed Income Fund Intermediate Mr. Nelson III is a Senior Vice President and fixed income portfolio
Fixed Income Fund manager of the investment adviser. Mr. Nelson joined Wachovia Bank in
1985 as a fixed income portfolio manager. He received his bachelors of
science degree in management from St. Francis College and his MBA in
Finance from Mercer University.
- -----------------------------------------------------------------------------------------------------------------------------------
B. Scott Sadler Emerging Markets Fund Mr. Sadler is a Chartered Financial Analyst, Portfolio Manager and Vice
President of the investment adviser. Mr. Sadler joined Wachovia Bank in
1987. Mr. Sadler is a graduate of the University of Virginia's McIntire
School of Commerce with a bachelors degree in commerce.
- -----------------------------------------------------------------------------------------------------------------------------------
Michael G. Sebesta Fixed Income Fund Mr. Sebesta is a Vice President and Fixed Income Portfolio Manager for
Intermediate Fixed Income Fund the investment adviser. Mr. Sebesta joined Wachovia Bank in 1989. Mr.
Sebesta has a
bachelors degree in economics from Wake Forest University.
- -----------------------------------------------------------------------------------------------------------------------------------
Michael J. Tierney Emerging Markets Fund Mr. Tierney is an Executive Vice President of Wachovia Bank and Chief
Special Values Fund Investment Officer and Portfolio Manager with the investment adviser. Mr.
Tierney joined
Wachovia Bank in
1981. Mr.Tierney is a
graduate of the
University of
Connecticut, and has
more than 25 years of
experience managing
equity and fixed
income investments.
- -----------------------------------------------------------------------------------------------------------------------------------
Joseph H. Waterfill Balanced Fund Mr. Waterfill is a Senior Vice President and Portfolio Manager of the
Equity Fund investment adviser. Mr.Waterfill joined Wachovia Bank in 1976. Mr.
Quantitative Equity Fund Waterfill received his bachelors of science degree from the U.S. Naval
Growth & Income Fund Academy and his MBA from Vanderbilt University.
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

Financial Information

FINANCIAL HIGHLIGHTS

The Wachovia Funds and The Wachovia Municipal Funds
<R/.
Financial Highlights--Class Y Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

The following table has been audited by Ernst & Young LLP, the Funds'
independent auditors. Their report dated January 22, 1999 is included in the
Annual Report for the Funds, which is incorporated by reference. This table
should be read in conjunction with the Funds' Financial Statements and notes
thereto, which may be obtained free of chargefrom the Funds. Further information
about the performance of the Funds is contained in the Funds' Annual Report
dated November 30, 1998 which may be obtained free of charge.

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

- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Equity Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996(a) $12.43 0.03 2.40 2.43 (0.05)
1997 $14.81 0.17 2.43 2.60 (0.16)
1998 $15.39 0.17 2.21 2.38 (0.17)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Quantitative Equity Fund
1996(a) $13.09 0.04 2.60 2.64 (0.06)
1997 $15.67 0.23 4.12 4.35 (0.23)
1998 $19.00 0.23 3.06 3.29 (0.23)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Growth & Income Fund
1998(e) $22.31 0.09 1.24 1.33 (0.09)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Equity Index Fund
1996(a) $13.37 0.09(d) 2.60 2.69 (0.08)
1997 $15.98 0.29 3.86 4.15 (0.31)
1998 $18.91 0.30 3.92 4.22 (0.29)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Special Values Fund
1996(a) $13.62 0.03 2.02 2.05 --
1997 $15.67 0.16 4.53 4.69 (0.08)
1998 $18.67 0.21 0.84) 0.63) (0.15)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Emerging Markets Fund
1996(a) $11.92 0.01(d) 0.26) 0.25) --
1997 $11.67 0.07 0.50) 0.43) (0.11)
1998 $11.13 0.13 2.69) 2.56) (0.13)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Balanced Fund
1996(a) $11.68 0.08 1.63 1.71 (0.09)
1997 $13.30 0.38 1.39 1.77 (0.37)
1998 $13.26 0.42 1.37 1.79 (0.41)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Fixed Income Fund
1996(a) $ 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)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Intermediate Fixed Income Fund
1998(e) $10.12 0.42 0.25 0.67 (0.41)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Short-Term Fixed Income Fund
1996(a) $ 9.67 0.11(d) 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)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Georgia Municipal Bond Fund
1996(a) $10.71 0.17 0.29 0.46 (0.17)
1997 $11.00 0.47 0.13 0.60 (0.47)
1998 $11.11 0.45 0.27 0.72 (0.45)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia North Carolina Municipal Bond Fund
1996(a) $10.71 0.16 0.32 0.48 (0.16)
1997 $11.03 0.46 0.13 0.59 (0.45)
1998 $11.15 0.46 0.32 0.78 (0.46)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia South Carolina Municipal Bond Fund
1996(a) $10.73 0.20 0.32 0.52 (0.20)
1997 $11.05 0.55 0.12 0.67 (0.55)
1998 $11.12 0.54 0.24 0.78 (0.54)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Virginia Municipal Bond Fund
1998(e) $10.34 0.32 0.15 0.47 (0.32)
- -----------------------------------------------------------------------------------------------------------------------------------

</TABLE>

Distributions from
Net Realized Gain on
Investment Transactions,
Futures Contracts
Period Ended and Foreign Currency Transactions Total
November 30, Distributions
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Equity Fund
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1996(a) -- (0.05)
1997 (1.86) (2.02)
1998 (1.68) (1.85)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Quantitative Equity Fund
1996(a) -- (0.06)
1997 (0.79) (1.02)
1998 (1.75) (1.98)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Growth & Income Fund
1998(e) -- (0.09)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Equity Index Fund
1996(a) -- (0.08)
1997 (0.91) (1.22)
1998 (0.40) (0.69)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Special Values Fund
1996(a) -- --
1997 (1.61) (1.69)
1998 (1.71) (1.86)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Emerging Markets Fund
1996(a) -- --
1997 -- (0.11)
1998 -- (0.13)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Balanced Fund
1996(a) -- (0.09)
1997 (1.44) (1.81)
1998 (0.90) (1.31)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Fixed Income Fund
1996(a) -- (0.19)
1997 -- (0.58)
1998 -- (0.56)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Intermediate Fixed Income Fund
1998(e) -- (0.41)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Short-Term Fixed Income Fund
1996(a) -- (0.17)
1997 -- (0.53)
1998 -- (0.53)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Georgia Municipal Bond Fund
1996(a) -- (0.17)
1997 (0.02) (0.49)
1998 (0.45)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia North Carolina Municipal Bond
1996(a) -- (0.16)
1997 (0.02) (0.47)
1998 (0.01) (0.47)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia South Carolina Municipal Bond
1996(a) -- (0.20)
1997 (0.05) (0.60)
1998 (0.54)
- -----------------------------------------------------------------------------------------------------------------------------------
Wachovia Virginia Municipal Bond Fund
1998(e) -- (0.32)
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

The Wachovia Funds and The Wachovia Municipal Funds

Financial Highlights--Class Y Shares

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD).

<TABLE>
<CAPTION>
RATIOS TO AVERAGE NET ASSETS
----------------------------------------
NET ASSET NET EXPENSE
PERIOD ENDED VALUE, END TOTAL INVESTMENT WAIVER/
NOVEMBER 30, OF PERIOD RETURN(B) EXPENSES INCOME REIMBURSMENT(C)
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1996(A) $14.81 19.57% 0.90%* 0.91%* 0.19%*
1997 $15.39 20.44% 0.90% 1.18% 0.07%
1998 $15.92 17.69% 0.90% 1.13% --
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA QUANTITATIVE EQUITY FUND
1996(A) $15.67 20.19% 0.87%* 1.19%* 0.11%*
1997 $19.00 29.60% 0.87% 1.35% 0.08%
1998 $20.31 19.38% 0.87% 1.21% --
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA GROWTH & INCOME FUND
1998(E) $23.55 6.03% 0.86%* 0.90%* 0.08%*
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA EQUITY INDEX FUND
1996(A) $15.98 20.14% 0.48%* 1.92%* 0.06%*
1997 $18.91 27.91% 0.47% 1.72% 0.02%
1998 $22.44 23.05% 0.45% 1.46% --
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA SPECIAL VALUES FUND
1996(A) $15.67 15.05% 1.15%* 1.76%* 0.24%*
1997 $18.67 33.29% 1.11% 0.88% 0.02%
1998 $16.18 (3.59%) 1.00% 1.26% --
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA EMERGING MARKETS FUND
1996(A) $11.67 0.00% 0.63%* 0.45%* 0.13%*
1997 $11.13 (3.73%) 1.54% 0.54% --
1998 $ 8.44 (23.34%) 1.44% 1.04% --
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA BALANCED FUND
1996(A) $13.30 14.69% 0.76%* 2.85%* 0.16%*
1997 $13.26 15.37% 0.77% 3.02% 0.16%
1998 $13.74 14.77% 0.76% 3.15% 0.09%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA FIXED INCOME FUND
1996(A) $ 9.83 6.12% 0.75%* 6.33%* 0.14%*
1997 $ 9.85 6.38% 0.74% 5.91% 0.11%
1998 $10.14 8.92% 0.72% 5.55% 0.05%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA INTERMEDIATE FIXED INCOME FUND
1998(E) $10.38 7.11% 0.74%* 5.39%* 0.14%*
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA SHORT-TERM FIXED INCOME FUND
1996(A) $ 9.79 3.00% 0.64%* 5.77%* 0.19%*
1997 $ 9.77 5.33% 0.63% 5.63% 0.20%
1998 $ 9.92 7.19% 0.63% 5.47% 0.10%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA GEORGIA MUNICIPAL BOND FUND
1996(A) $11.00 4.31% 0.89%* 4.84%* 1.57%*
1997 $11.11 5.63% 0.92% 4.24% 1.06%
1998 $11.38 6.62% 0.91% 3.96% 0.34%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA NORTH CAROLINA MUNICIPAL BOND FUND
1996(A) $11.03 4.55% 0.84%* 4.16%* 0.65%*
1997 $11.15 5.57% 0.85% 4.16% 0.42%
1998 $11.46 7.09% 0.85% 4.05% 0.16%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA SOUTH CAROLINA MUNICIPAL BOND FUND
1996(A) $11.05 4.86% 0.57%* 5.56%* 0.54%*
1997 $11.12 6.23% 0.58% 5.01% 0.48%
1998 $11.36 7.15% 0.58% 4.77% 0.36%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA VIRGINIA MUNICIPAL BOND FUND
1998(E) $10.49 4.16% 0.68%* 4.62%* 0.33%*
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

NET ASSETS, PORTFOLIO
PERIOD ENDED END OF PERIOD TURNOVER
NOVEMBER 30, (000 OMITTED) RATE
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA EQUITY FUND
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
1996(A) $129,205 64%
1997 $156,238 124%
1998 $200,324 150%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA QUANTITATIVE EQUITY FUND
1996(A) $152,571 44%
1997 $183,019 74%
1998 $207,343 38%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA GROWTH & INCOME FUND
1998(E) $206,176 24%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA EQUITY INDEX FUND
1996(A) $213,833 12%
1997 $248,030 4%
1998 $291,708 29%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA SPECIAL VALUES FUND
1996(A) $ 58,697 38%
1997 $ 84,501 46%
1998 $ 90,550 20%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA EMERGING MARKETS FUND
1996(A) $123,036 30%
1997 $139,700 60%
1998 $130,898 51%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA BALANCED FUND
1996(A) $235,791 99%
1997 $250,083 143%
1998 $290,833 124%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA FIXED INCOME FUND
1996(A) $175,836 181%
1997 $185,398 174%
1998 $212,886 111%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA INTERMEDIATE FIXED INCOME FUND
1998(E) $ 87,831 57%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA SHORT-TERM FIXED INCOME FUND
1996(A) $116,138 145%
1997 $ 91,063 215%
1998 $ 98,433 135%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA GEORGIA MUNICIPAL BOND FUND
1996(A) $ 6,803 14%
1997 $ 12,308 25%
1998 $ 17,030 14%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA NORTH CAROLINA MUNICIPAL BOND FUND
1996(A) $ 28,283 7%
1997 $ 44,104 17%
1998 $ 56,760 9%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA SOUTH CAROLINA MUNICIPAL BOND FUND
1996(A) $ 36,511 20%
1997 $ 43,881 12%
1998 $ 54,770 6%
- -----------------------------------------------------------------------------------------------------------------------------------
WACHOVIA VIRGINIA MUNICIPAL BOND FUND
1998(E) $ 99,154 15%
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>

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

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.

the wachovia funds &
the wachovia municipal funds
class y shares

Addresses

DISTRIBUTOR Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

INVESTMENT ADVISER Wachovia Asset Management
100 North Main Street
Winston-Salem, NC 27101

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

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

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

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

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

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

<PAGE>

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

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

<PAGE>

THE WACHOVIA MUNICIPAL FUNDS

Class A Shares and Class Y Shares
Wachovia Georgia Municipal Bond Fund
Wachovia North Carolina Municipal Bond Fund
Wachovia South Carolina Municipal Bond Fund
Wachovia Virginia Municipal Bond Fund

Statement of Additional Information
February 28, 1999

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

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

Contents

How Are the Funds Organized?.......................1
Securities in Which the Funds Invest...............1
What do Shares Cost?...............................17
How Are the Funds Sold?............................18
How to Buy Shares..................................18
How to Exchange Shares.............................19
How to Redeem Shares...............................19
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..............................33
Investment Ratings.................................34
Addresses..........................................38

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

<PAGE>

HOW ARE THE FUNDS ORGANIZED?

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

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

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

<PAGE>

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

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

<PAGE>

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

1. Each of the Equity Fund, Quantitative Equity Fund, Special Values Fund, and
Balanced Fund may not invest more than 20% of its assets in ADRs and not more
than 10% of its assets in other securities of foreign issuers (non-ADRs). 2.
Securities are rated Baa or lower by Moody's or BBB or lower by S&P. Each Fund
will not invest more than 35% of its total assets in such securities. 3. Not
more than 20% of each Funds assets will be invested. The Funds will not purchase
options to the extent that more than 5% of the value of a Fund's total assets
would be invested in premiums on open put option positions or margin deposits on
open positions as applicable. 4. No more than 30% of the Fund's assets will be
committed to forward contracts at any time. This restriction does not include
forward contracts entered into to settle securities transactions. 5. The value
of these contracts together with the value of the Fund's investment in stock
index futures contracts, options and options on futures contracts will not
exceed 20% of the Fund's total assets. 6. Rated A or better by Moody's or S&P or
of comparable quality as determined by the investment adviser. Each of the
Balanced Fund, Fixed Income Fund, Intermediate Fixed Income Fund and Short-Term
Index Fund may invest up to 5% of its assets in obligations rated Baa by Moody's
or BBB by S&P or of comparable quality as determined by the investment adviser.
7. Rated Prime-1 by Moody's or A-1 by S&P or of comparable quality as determined
by the investment adviser. 8. The fixed income and equity securities in which
the Fund invests will be rated B or better by Moody's or S&P at the time of
purchase. 9. State Municipal Securities are subject to one or more of the
following quality standards: rated A or better by Moody's or S&P; up to 5% of
total assets rated Baa by Moody's or BBB by S&P; insured by a municipal bond
insurance company rated AAA by S&P or Aaa by Moody's; secured by an irrevocable
escrow of direct obligations of the U.S. government; or of comparable quality as
determined by the investment adviser. 10. Collateralized Mortgage Obligations
must be rated AAA or better or of comparable quality as determined by the
investment adviser. Fixed Income Fund, Intermediate Fixed Income Fund and
Short-Term Income Fund each may invest up to 5% of its assets in CMOs rated Baa
or better by Moody's or Baa or better by S&P. 11. Rated A or better by Moody's
or S&P. Each Fund (except the Balanced Fund) may also invest up to 5% of its
assets in securities rated Baa or better by Moody's or BBB by S&P. 12. Each Fund
will limit investments in illiquid securities, including certain restricted
securities not determined by the Trustees to be liquid, non-negotiable time
deposits, over-the-counter options, and repurchase agreements providing for
settlement in more than seven days after notice, to 15% of its net assets.
Securities Descriptions and Techniques Equity Securities Equity securities
represent a share of an issuer's earnings and assets, after the issuer pays its
liabilities. The Funds cannot predict the income they will receive from equity
securities because issuers generally have discretion as to the payment of any
dividends or distributions. However, equity securities offer greater potential
for appreciation than many other types of securities, because their value
increases directly with the value of the issuer's business. The following
describes the types of equity securities in which a Fund may invest.
Common Stocks
Common stocks are the most prevalent type of equity security. Common stocks
receive the issuer's earnings after the issuer pays its creditors and any
preferred stockholders. As a result, changes in an issuer's earnings
directly influence the value of its common stock. Preferred Stocks
Preferred stocks have the right to receive specified dividends or
distributions before the issuer makes payments on its common stock. Some
preferred stocks also participate in dividends and distributions paid on
common stock. Preferred stocks may also permit the issuer to redeem the
stock. A Fund may also treat such redeemable preferred stock as a fixed
income security.

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 market and prepayment risks of these mortgage backed securities.
Corporate Debt Securities Corporate debt securities are fixed income
securities issued by businesses. Notes, bonds, debentures and commercial
paper are the most prevalent types of corporate debt securities. A Fund may
also purchase interests in bank loans to companies. The credit risks of
corporate debt securities vary widely amount issuers. The credit risk of an
issuer's debt security may also vary based on its priority for repayment.
For example, higher ranking (senior) debt securities have a higher priority
than lower ranking (subordinated) securities. This means that the issuer
might not make payments on subordinated securities while continuing to make
payments on senior securities. In addition, in the event of bankruptcy,
holders of senior securities may receive amounts otherwise payable to the
holders of subordinated securities. Some subordinated securities, such as
trust preferred and capital securities notes, also permit the issuer to
defer payments under certain circumstances. For example, insurance
companies issue securities known as surplus notes that permit the insurance
company to defer any payment that would reduce its capital below regulatory
requirements.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or borrowings from bank loans) to repay
maturing paper. If the issuer cannot continue to obtain liquidity in
this fashion, its commercial paper may default. The short maturity of
commercial paper reduces both the market and credit risks as compared
to other debt securities of the same issuer. Demand Instruments Demand
instruments are corporate debt securities that the issuer must repay
upon demand. Other demand instruments require a third party, such as a
dealer or bank, to repurchase the security for its face value upon
demand. The Fund treats demand instruments as short-term securities,
even though their stated maturity may extend beyond one year.
Mortgage Backed Securities
Mortgage backed securities represent interests in pools of mortgages. The
mortgages that comprise a pool normally have similar interest rates,
maturities and other terms. Mortgages may have fixed or adjustable interest
rates. Interests in pools of adjustable rate mortgages are know as ARMs.
Mortgage backed securities come in a variety of forms. Many have extremely
complicated terms. The simplest form of mortgage backed securities are
pass-through certificates. An issuer of pass-through certificates gathers
monthly payments from an underlying pool of mortgages. Then, the issuer
deducts its fees and expenses and passes the balance of the payments onto
the certificate holders once a month. Holders of pass-through certificates
receive a pro rata share of all payments and pre-payments from the
underlying mortgages. As a result, the holders assume all the prepayment
risks of the underlying mortgages. Collateralized Mortgage Obligations
(CMOs) CMOs, including interests in real estate mortgage investment
conduits (REMICs), allocate payments and prepayments from an underlying
pass-through certificate among holders of different classes of mortgage
backed securities. This creates different prepayment and market risks for
each CMO class. For example, in a sequential pay CMO, one class of CMOs
receives all principal payments and prepayments. The next class of CMOs
receives all principal payments after the first class is paid off. This
process repeats for each sequential class of CMO. As a result, each class
of sequential pay CMOs reduces the prepayment risks of subsequent classes.
More sophisticated CMOs include planned amortization classes (PACs) and
targeted amortization classes (TACs). PACs and TACs are issued with
companion classes. PACs and TACs receive principal payments and prepayments
at a specified rate. The companion classes receive principal payments and
prepayments in excess of the specified rate. In addition, PACs will receive
the companion classes' share of principal payments, if necessary, to cover
a shortfall in the prepayment rate. This helps PACs and TACs to control
prepayment risks by increasing the risks to their companion classes. CMOs
may allocate interest payments to one class (Interest Only or IOs) and
principal payments to another class (Principal Only or POs). POs increase
in value when prepayment rates increase. In contrast, IOs decrease in value
when prepayments increase, because the underlying mortgages generate less
interest payments. However, IOs tend to increase in value when interest
rates rise (and prepayments decrease), making IOs a useful hedge against
market risks. Another variant allocates interest payments between two
classes of CMOs. One class (Floaters) receives a share of interest payments
based upon a market index such as LIBOR. The other class (Inverse Floaters)
receives any remaining interest payments from the underlying mortgages.
Floater classes receive more interest (and Inverse Floater classes receive
correspondingly less interest) as interest rates rise. This shifts
prepayment and market risks from the Floater to the Inverse Floater class,
reducing the price volatility of the Floater class and increasing the price
volatility of the Inverse Floater class. CMOs must allocate all payments
received from the underlying mortgages to some class. To capture any
unallocated payments, CMOs generally have an accrual (Z) class. Z classes
do not receive any payments from the underlying mortgages until all other
CMO classes have been paid off. Once this happens, holders of Z class CMOs
receive all payments and prepayments. Similarly, REMICs have residual
interests that receive any mortgage payments not allocated to another REMIC
class.

<PAGE>

The degree of increased or decreased prepayment risks depends upon the
structure of the CMOs. IOs, POs, and Inverse Floaters are among the most
volatile investment grade fixed income securities currently traded in the
United States. However, the actual returns on any type of mortgage backed
security depend upon the performance of the underlying pool of mortgages,
which no one can predict and will vary among pools. Asset Backed Securities
Asset backed securities are payable from pools of obligations other than
mortgages. Most asset backed securities involve consumer or commercial
debts with maturities of less than ten years. However, almost any type of
fixed income assets (including other fixed income securities) may be used
to create an asset backed security. Asset backed securities may take the
form of commercial paper, notes, or pass through certificates. Asset backed
securities may also resemble some types of CMOs, such as Floaters, Inverse
Floaters, IOs and POs. Historically, borrowers are more likely to refinance
their mortgage than any other type of consumer or commercial debt. In
addition, some asset backed securities use prepayment to buy additional
assets, rather than paying off the securities. Therefore, while asset
backed securities may have some prepayment risks, they generally do not
present the same degree of risk as mortgage backed securities. Zero Coupon
Securities Zero coupon securities do not pay interest or principal until
final maturity unlike debt securities that provide periodic payments of
interest (referred to as a coupon payment). Investors buy zero coupon
securities at a price below the amount payable at maturity. The difference
between the purchase price and the amount paid at maturity represents
interest on the zero coupon security. An investor must wait until maturity
to receive interest and principal, which increases the market and credit
risks of a zero coupon security. There are many forms of zero coupon
securities. Some are issued at a discount and are referred to as zero
coupon or capital appreciation bonds. Others are created from interest
bearing bonds by separating the right to receive the bond's coupon payments
from the right to receive the bond's principal due at maturity, a process
known as coupon stripping. Treasury STRIPs, IOs and POs are the most common
forms of stripped zero coupon securities. In addition, some securities give
the issuer the option to deliver additional securities in place of cash
interest payments, thereby increasing the amount payable at maturity. These
are referred to as pay-in-kind or PIK securities. Bank Instruments Bank
instruments are unsecured interest bearing deposits with banks. Bank
instruments include bank accounts, time deposits, certificates of deposit
and banker's acceptances. Yankee instruments are denominated in U.S.
dollars and issued by U.S. branches of foreign banks. Eurodollar
instruments are denominated in U.S. dollars and issued by non-U.S. branches
of U.S. or foreign banks. Insurance Contracts Insurance contracts include
guaranteed investment contracts, funding agreements and annuities. A Fund
may treat these contracts as fixed income securities. Credit Enhancement
Credit enhancement consists of an arrangement in which a company agrees to
pay amounts due on a fixed income security after the issuer defaults. In
some cases the company providing credit enhancement makes all payments
directly to the security holders and receives reimbursement from the
issuer. Normally, the credit enhancer has greater financial resources and
liquidity than the issuer. For this reason, the investment adviser may
evaluate the credit risk of a fixed income security based solely upon its
credit enhancement. Common types of credit enhancement include guarantees,
letters of credit, bond insurance and surety bonds. Credit enhancement also
includes arrangements where securities or other liquid assets secure
payment of a fixed income security. Following a default, these assets may
be sold and the proceeds paid to security's holders. Either form of credit
enhancement reduces credit risks by providing another source of payment for
a fixed income security.
Convertible Securities
Convertible securities are fixed income securities that the Fund has the option
to exchange for equity securities at a specified conversion price. The option
allows the Fund to realize additional returns if the market price of the equity
securities exceeds the conversion price. For example, the Fund may hold fixed
income securities that are convertible into shares of common stock at a
conversion price of $10 per share. If the market value of the shares of common
stock reached $12, the Fund could realize an additional $2 per share by
converting its fixed income securities.

<PAGE>

Convertible securities have lower yields than comparable fixed income
securities. In addition, at the time a convertible security is issued the
conversion price exceeds the market value of the underlying equity securities.
Thus, convertible securities may provide lower returns than non-convertible
fixed income securities or equity securities depending upon changes in the price
of the underlying equity securities. However, convertible securities permit the
Fund to realize some of the potential appreciation of the underlying equity
securities with less risk of losing its initial investment. A Fund may treat
convertible securities as both fixed income and equity securities for purposes
of its investment policies and limitations, because of their unique
characteristics. Tax Exempt Securities Tax exempt securities are fixed income
securities that pay interest that is not subject to regular federal income
taxes. Typically, states, counties, cities and other political subdivisions and
authorities issue tax exempt securities. The market categorizes tax exempt
securities by their source of repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its charter
or state law. Special Revenue Bonds Special revenue bonds are payable
solely from specific revenues received by the issuer such as specific
taxes, assessments, tolls, or fees. Bondholders may not collect from the
municipality's general taxes or revenues. For example, a municipality may
issue bonds to build a toll road, and pledge the tolls to repay the bonds.
Therefore, any shortfall in the tolls normally would result in a default on
the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance private
entities. For example, a municipality may issue bonds to finance a new
factory to improve its local economy. The municipality would lend the
proceeds from its bonds to the company using the factory, and the company
would agree to make loan payments sufficient to repay the bonds. The
bonds would be payable solely from the company's loan payments, not from
any other revenues of the municipality. Therefore, any default on the
loan normally would result in a default on the bonds. The interest on
many types of private activity bonds is subject to the federal
alternative minimum tax (AMT).
Tax Increment Financing Bonds
Tax increment financing (TIF) bonds are payable from increases in taxes or
other revenues attributable to projects financed by the bonds. For example,
a municipality may issue TIF bonds to redevelop a commercial area. The TIF
bonds would be payable solely from any increase in sales taxes collected
from merchants in the area. The bonds could default if merchants' sales,
and related tax collections, failed to increase as anticipated. Municipal
Notes Municipal notes are short-term tax exempt securities. Many
municipalities issue such notes to fund their current operations before
collecting taxes or other municipal revenues. Municipalities may also issue
notes to fund capital projects prior to issuing long-term bonds. The
issuers typically repay the notes at the end of their fiscal year, either
with taxes, other revenues or proceeds from newly issued notes or bonds.
Variable Rate Demand Instruments Variable rate demand instruments are tax
exempt securities that require the issuer or a third party, such as a
dealer or bank, to repurchase the security for its face value upon demand.
The securities also pay interest at a variable rate intended to cause the
securities to trade at their face value. The Fund treats demand instruments
as short-term securities, because their variable interest rate adjusts in
response to changes in market rates, even though their stated maturity may
extend beyond thirteen months. Municipal Leases Municipalities frequently
enter into leases for equipment or facilities. In order to comply with
state public financing laws, these leases are typically subject to annual
appropriation. In other words, a municipality may end a lease, without
penalty, by failing to include the lease payments in its annual budget.
However, upon such an event, the lessor may repossess and resell the
equipment or facility. The Fund typically invests in securities supported
by pools of municipal leases. The most common type of lease backed
securities are certificates of participation (COPs). However, the Fund may
also invest directly in individual leases.
Foreign Securities
Foreign securities are securities of issuers based outside the United States. A
Fund considers an issuer to be based outside the United States if: o it is
organized under the laws of, or has a principal office located in, another
country; o the principal trading market for its securities is in another
country; or o it (or its subsidiaries) derived in its most current fiscal year
at least 50% of its total assets, capitalization, gross
revenue or profit from goods produced, services performed, or sales made in
another country.
Foreign securities are primarily denominated in foreign currencies. Along with
the risks normally associated with domestic securities of the same type, foreign
securities are subject to currency risks and risks of foreign investing. Trading
in certain foreign markets is also subject to liquidity risks.
Depositary Receipts
Depositary receipts represent interests in underlying securities issued by
a foreign company. Depositary receipts are not traded in the same market as
the underlying security. The foreign securities underlying American
Depositary Receipts (ADRs) are traded in the United States. ADRs provide a
way to buy shares of foreign-based companies in the United States rather
than in overseas markets. ADRs are also traded in U.S. dollars, eliminating
the need for foreign exchange transactions. The foreign securities
underlying European Depositary Receipts (EDRs), Global Depositary Receipts
(GDRs), and International Depositary Receipts (IDRs), are traded globally
or outside the United States. Depositary Receipts involve many of the same
risks of investing directly in foreign securities, including currency risks
and risks of foreign investing. Foreign Exchange Contracts In order to
convert U.S. dollars into the currency needed to buy a foreign security, or
to convert foreign currency received from the sale of a foreign security
into U.S. dollars, the Fund may enter into spot currency trades. In a spot
trade, the Fund agrees to exchange one currency for another at the current
exchange rate. The Fund may also enter into derivative contracts in which a
foreign currency is an underlying asset. The exchange rate for currency
derivative contracts may be higher or lower than the spot exchange rate.
Use of these derivative contracts may increase or decrease the Fund's
exposure to currency risks. Foreign Government Securities Foreign
government securities generally consist of fixed income securities
supported by national, state or provincial governments or similar political
subdivisions. Foreign government securities also include debt obligations
of supranational entities, such as international organizations designed or
supported by governmental entities to promote economic reconstruction or
development, international banking institutions and related government
agencies. Examples of these include, but are not limited to, the
International Bank for Reconstruction and Development (the World Bank), the
Asian Development Bank, the European investment Bank and the Inter-American
Development Bank. Foreign government securities also include fixed income
securities of quasi-governmental agencies that are either issued by
entities owned by a national, state or equivalent government or are
obligations of a political unit that are not backed by the national
government's full faith and credit. Further, foreign government securities
include mortgage-related securities issued or guaranteed by national, state
or provincial governmental instrumentalities, including quasi-governmental
agencies.
Derivative Contracts
Derivative contracts are financial instruments that require payments based upon
changes in the values of designated (or underlying) securities, currencies,
commodities, financial indices or other assets. Some derivative contracts (such
as futures, forwards and options) require payments relating to a future trade
involving the underlying asset. Other derivative contracts (such as swaps)
require payments relating to the income or returns from the underlying asset.
The other party to a derivative contract is referred to as a counterparty. Many
derivative contracts are traded on securities or commodities exchanges. In this
case, the exchange sets all the terms of the contract except for the price.
Investors make payments due under their contracts through the exchange. Most
exchanges require investors to maintain margin accounts through their brokers to
cover their potential obligations to the exchange. Parties to the contract make
(or collect) daily payments to the margin accounts to reflect losses (or gains)
in the value of their contracts. This protects investors against potential
defaults by the counterparty. Trading contracts on an exchange also allows
investors to close out their contracts by entering into offsetting contracts.
For example, the Fund could close out an open contract to buy an asset at a
future date by entering into an offsetting contract to sell the same asset on
the same date. If the offsetting sale price is more than the original purchase
price, the Fund realizes a gain; if it is less, the Fund realizes a loss.
Exchanges may limit the amount of open contracts permitted at any one time. Such
limits may prevent the Fund from closing out a position. If this happens, the
Fund will be required to keep the contract open (even if it is losing money on
the contract), and to make any payments required under the contract (even if it
has to sell portfolio securities at unfavorable prices to do so). Inability to
close out a contract could also harm the Fund by preventing it from disposing of
or trading any assets it has been using to secure its obligations under the
contract. The Fund may also trade derivative contracts over-the-counter (OTC) in
transactions negotiated directly between the Fund and the counterparty. OTC
contracts do not necessarily have standard terms, so they cannot be directly
offset with other OTC contracts. In addition, OTC contracts with more
specialized terms may be more difficult to price than exchange traded contracts.
Depending upon how the Fund uses derivative contracts and the relationships
between the market value of a derivative contract and the underlying asset,
derivative contracts may increase or decrease the Fund's exposure to market and
currency risks, and may also expose the Fund to liquidity and leverage risks.
OTC contracts also expose the Fund to credit risks in the event that a
counterparty defaults on the contract. A Fund may trade in the following types
of derivative contracts.
Futures Contracts
Futures contracts provide for the future sale by one party and purchase by
another party of a specified amount of an underlying asset at a specified
price, date, and time. Entering into a contract to buy an underlying asset
is commonly referred to as buying a contract or holding a long position in
the asset. Entering into a contract to sell an underlying asset is commonly
referred to as selling a contract or holding a short position in the asset.
Futures contracts are considered to be commodity contracts. Futures
contracts traded OTC are frequently referred to as forward contracts.
Options Options are rights to buy or sell an underlying asset for a
specified price (the exercise price) during, or at the end of, a specified
period. A call option gives the holder (buyer) the right to buy the
underlying asset from the seller (writer) of the option. A put option gives
the holder the right to sell the underlying asset to the writer of the
option. The writer of the option receives a payment, or premium, from the
buyer, which the writer keeps regardless of whether the buyer uses (or
exercises) the option. A Fund, except the Wachovia Municipal Funds may
engage in one or more of the following: Buy 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.

<PAGE>

Hybrid Instruments
Hybrid instruments combine elements of derivative contracts with those of
another security (typically a fixed income security). All or a portion of
the interest or principal payable on a hybrid security is determined by
reference to changes in the price of an underlying asset or by reference to
another benchmark (such as interest rates, currency exchange rates or
indices). Hybrid instruments also include convertible securities with
conversion terms related to an underlying asset or benchmark. The risks of
investing in hybrid instruments reflect a combination of the risks of
investing in securities, options, futures and currencies, and depend upon
the terms of the instrument. Thus, an investment in a hybrid instrument may
entail significant risks in addition to those associated with traditional
fixed income or convertible securities. Hybrid instruments are also
potentially more volatile and carry greater market risks than traditional
instruments. Moreover, depending on the structure of the particular hybrid,
it may expose the Fund to leverage risks or carry liquidity risks.
Special Transactions
Repurchase Agreements
Repurchase agreements are transactions in which a Fund buys a security from
a dealer or bank and agrees to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
investment adviser. The Funds' custodian or subcustodian will take
possession of the securities subject to repurchase agreements. The
investment adviser or subcustodian will monitor the value of the underlying
security each day to ensure that the value of the security always equals or
exceeds the repurchase price. Repurchase agreements are subject to credit
risks. Reverse Repurchase Agreements Reverse repurchase agreements are
repurchase agreements in which the Fund is the seller (rather than the
buyer) of the securities, and agrees to repurchase them at an agreed upon
time and price. A reverse repurchase agreement may be viewed as a type of
borrowing by the Fund. Reverse repurchase agreements are subject to credit
risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
When Issued Transactions When issued transactions are arrangements in which
the Fund buys securities for a set price, with payment and delivery of the
securities scheduled for a future time. During the period between purchase
and settlement, no payment is made by the Fund to the issuer and no
interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the
price of its shares. Settlement dates may be a month or more after entering
into these transactions so that the market values of the securities bought
may vary from the purchase prices. Therefore, when issued transactions
create market risks for the Fund. When issued transactions also involve
credit risks in the event of a counterparty default.
To Be Announced Securities (TBAs)
As with other when issued transactions, a seller agrees to issue a TBA
security at a future date. However, the seller does not specify the
particular securities to be delivered. Instead, the Fund agrees to
accept any security that meets specified terms. For example, in a TBA
mortgage backed transaction, the Fund and the seller would agree upon
the issuer, interest rate and terms of the underlying mortgages.
However, the seller would not identify the specific underlying
mortgages until it issues the security. TBA mortgage backed securities
increase market risks because the underlying mortgages may be less
favorable than anticipated by the Fund.
Dollar Rolls
Dollar rolls are transactions where a Fund sells mortgage-backed securities
with a commitment to buy similar, but not identical, mortgage-backed
securities on a future date at a lower price. Normally, one or both
securities involved are TBA mortgage backed securities. Dollar rolls are
subject to market risks and credit risks.

<PAGE>

Securities Lending
A Fund may lend portfolio securities to borrowers that the investment
adviser deems creditworthy. In return, the Fund receives cash or liquid
securities from the borrower as collateral. The borrower must furnish
additional collateral if the market value of the loaned securities
increases. Also, the borrower must pay the Fund the equivalent of any
dividends or interest received on the loaned securities. The Fund will
reinvest cash collateral in securities that qualify as an acceptable
investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral. Loans are subject to termination
at the option of the Fund or the borrower. The Fund will not have the right
to vote on securities while they are on loan, but it will terminate a loan
in anticipation of any important vote. The Fund may pay administrative and
custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash collateral to a securities lending agent
or broker. Securities lending activities are subject to market risks and
credit risks.
Asset Coverage
In order to secure its obligations in connection with derivatives contracts or
special transactions, a Fund will either own the underlying assets, enter into
an offsetting transaction or set aside readily marketable securities with a
value that equals or exceeds the Fund's obligations. Unless the Fund has other
readily marketable assets to set aside, it cannot trade assets used to secure
such obligations entering into an offsetting derivative contract or terminating
a special transaction. This may cause the Fund to miss favorable trading
opportunities or to realize losses on derivative contracts or special
transactions. Investment Risks Stock Market Risks o The value of equity
securities in a Fund's portfolio will rise and fall. These fluctuations could be
a sustained trend or a
drastic movement. A Fund's portfolio will reflect changes in prices of
individual portfolio stocks or general changes in stock valuations.
Consequently, the Fund's share price may decline and you could lose money.
o The investment adviser attempts to manage market risk by limiting the
amount a Fund invests in each company's equity securities. However,
diversification will not protect the Fund against widespread or prolonged
declines in the stock market.
Sector Risks
o Companies with similar characteristics may be grouped together in broad
categories called sectors. Sector risk is the possibility that a certain
sector may underperform other sectors or the market as a whole. As the
investment adviser allocates more of the Fund's portfolio holdings to a
particular sector, the Fund's performance will be more susceptible to any
economic, business or other developments which generally affect that
sector.
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.

<PAGE>

Risks Related to Company Size
o Generally, the smaller the market capitalization of a company, the fewer
the number of shares traded daily, the less liquid its stock and the more
volatile its price. Market capitalization is determined by multiplying the
number of its outstanding shares by the current market price per share.
o Companies with smaller market capitalizations also tend to have unproven
track records, a limited product or service base and limited access to
capital. These factors also increase risks and make these companies more
likely to fail than larger, well capitalized companies.
Currency Risks
o Exchange rates for currencies fluctuate daily. The combination of currency
risk and market risk tends to make securities traded in foreign markets
more volatile than securities traded exclusively in the U.S.
o The investment adviser attempts to manage currency risk by limiting the
amount the Fund invests in securities denominated in a particular currency.
However, diversification will not protect the Fund against a general
increase in the value of the U.S.
dollar relative to other currencies.
Risks of Foreign Investing
o Foreign securities pose additional risks because foreign economic or
political conditions may be less favorable that those of the United States.
Foreign financial markets may also have fewer investor protections.
Securities in foreign markets may also be subject to taxation policies that
reduce returns for U.S. investors.
o Due to these risk factors, foreign securities may be more volatile and less
liquid than similar securities traded in the U.S. Leverage Risks o Leverage risk
is created when an investment exposes the Fund to a level of risk that exceeds
the amount invested. Changes in
the value of such an investment magnify the Fund's risk of loss and
potential for gain.
o Investments can have these same results if their returns are based on a
multiple of a specified index, security, or other benchmark.
Bond Market Risks
o Prices of fixed income securities rise and fall in response to interest
rate changes for similar securities. Generally, when interest rates rise,
prices of fixed income securities fall.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity
of a fixed income security to changes in interest rates.
Credit Risks
o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, a
Fund will lose money.
o Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investors Service. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not
received a rating, the Fund must rely entirely upon the investment
adviser's credit assessment.
o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security's rating
is lowered, or the security is perceived to have an increased credit risk.
An increase in the spread will cause the price of the security to decline.
o Credit risk includes the possibility that a party to a transaction
involving the Fund will fail to meet its obligations. This could cause the
Fund to lose the benefit of the transaction or prevent the Fund from
selling or buying other securities to implement its investment strategy.
Call Risks
o Call risk is the possibility that an issuer may redeem a fixed income
security before maturity (a call) at a price below its current market
price. An increase in the likelihood of a call may reduce the security's
price.
o If a fixed income security is called, the Fund may have to reinvest the
proceeds in other fixed income securities with lower interest rates, higher
credit risks, or other less favorable characteristics.
Prepayment Risks
o Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate
mortgages when mortgage rates fall. This results in the prepayment of
mortgage backed securities with higher interest rates. Conversely,
prepayments due to refinancings decrease when mortgage rates increase. This
extends the life of mortgage backed securities with lower interest rates.
As a result, increases in prepayments of high interest rate mortgage backed
securities, or decreases in prepayments of lower interest rate mortgage
backed securities, may reduce their yield and price. This relationship
between interest rates and mortgage prepayments makes the price of mortgage
backed securities more volatile than most other types of fixed income
securities with comparable credit risks.
Risks Associated with Noninvestment Grade Securities
o Securities rated below investment grade, also known as junk bonds,
generally entail greater market, credit and liquidity risks than investment
grade securities. For example, their prices are more volatile, economic
downturns and financial setbacks may affect their prices more negatively,
and their trading market may be more limited.
Tax Risks
o In order to be tax-exempt, municipal securities must meet certain legal
requirements. Failure to meet such requirements may cause the interest
received and distributed by the Fund to shareholders to be taxable.
o Changes or proposed changes in federal tax laws may cause the prices of
municipal securities to fall. Investing in the S&P 500 Index-Equity Index Fund
The Equity Index Fund is managed passively, in the sense that the traditional
management functions of economic, financial and market analysis are limited to
the extend that the Fund seeks to duplicate the composition of the S&P 500
Index. Furthermore, a company's adverse financial circumstance will not require
its elimination from the Fund's portfolio, unless the company's stock is removed
from the Index by S&P. The Fund is managed by utilizing a computer program that
identifies which stocks should be purchased or sold in order to approximate, as
much as possible, the investment return of the securities that comprise the
index. The Fund will select a stock for purchase into its investment portfolio
based on the stock's inclusion and weighting in the Index, starting with the
heaviest-weighted stock. Thus, the proportion of Fund assets invested in any one
stock comprising the Index may not be identical to the percentage the particular
stock represents in the Index. On occasion, so as to respond to changes in the
Index's composition, as well as corporate mergers, tender offers, and other
circumstances, additional adjustments will be made in the Fund's portfolio.
However, it is anticipated that these adjustments will occur infrequently, and
the costs will be minimized. As a result, portfolio turnover is expected to be
below that encountered in other investment company portfolios. Therefore, the
accompanying costs, including accounting costs, brokerage fees, custodial
expenses, and transfer taxes, are expected to be relatively low. While the cash
flows into and out of the Fund will impact the Fund's portfolio turnover rate
and the Fund's ability to duplicate the composition of the Index and approximate
its performance, investment adjustments will be made, as practicably as
possible, to account for these circumstances. Since the Fund will seek to
duplicate the Index's stock composition precisely, it is anticipated that the
Fund's performance will approximate the performance of the Index. Factors such
as the size of the Fund's portfolio, the size and timing of cash flows into and
out of the Fund, changes in the securities markets and the Index itself, and the
normal costs of a mutual fund will account for the difference between the
performances of the Fund and the Index. Investment Limitations
Selling Short and Buying On Margin
The Equity Fund, Quantitative Equity Fund, Growth & Income Fund, Equity
Index Fund, Special Values Fund, Emerging Markets Fund, and Balanced
Fund will not sell any securities short or purchase any securities on
margin, other than in connection with buying stock index futures
contracts, put options on stock index futures, put options on financial
futures and portfolio securities, and writing covered call options, but
may obtain such short-term credits as are necessary for the clearance
of purchases and sales of portfolio securities. The Short-Term Fixed
Income Fund will not sell any securities short or purchase any
securities on margin, other than in connection with put options on
financial futures, put options on portfolio securities, and writing
covered call options, but may obtain such short-term credits as may be
necessary for clearance of purchases and sales of securities. The Fixed
Income Fund, Intermediate Fixed Income Fund, Georgia Municipal Bond
Fund, North Carolina Municipal Bond Fund, South Carolina Municipal Bond
Fund, and Virginia Municipal Bond Fund will not sell any securities
short or purchase any securities on margin but may obtain such
short-term credits as may be necessary for clearance of purchases and
sales of securities. The deposit or payment by a Fund of initial or
variation margin in connection with financial futures contracts or
related options transactions is not considered the purchase of a
security on margin. Issuing Senior Securities and Borrowing Money The
Funds will not issue senior securities, except that a Fund may borrow
money directly or through reverse repurchase agreements in amounts up
to one-third of the value of its net assets, including the amounts
borrowed and except, with respect to the Equity Index Fund, Balanced
Fund, Fixed Income Fund, Intermediate Fixed Income Fund and Short-Term
Fixed Income Fund, as permitted by its investment objective and
policies.. The Funds (except for the Growth & Income Fund, the
Intermediate Fixed Income Fund and the Virginia Municipal Bond Fund)
will not borrow money or engage in reverse repurchase agreements for
investment leverage, but rather as a temporary, extraordinary, or
emergency measure to facilitate management of the portfolio by enabling
a Fund to meet redemption requests when the liquidation of portfolio
securities is deemed to be inconvenient or disadvantageous. A Fund will
not purchase any securities while borrowings in excess of 5% of the
value of its total assets are outstanding. Pledging Assets The Equity
Fund, Growth & Income Fund, Quantitative Equity Fund, and Special
Values Fund, Equity Index Fund, Balanced Fund, Fixed Income Fund,
Intermediate Fixed Income Fund and Short-term Fixed Income Fund will
not mortgage, pledge, or hypothecate any assets except to secure
permitted borrowings. In those cases, the Fund may mortgage, pledge, or
hypothecate assets to secure such borrowings having a market value not
exceeding the lesser of the dollar amounts borrowed or 15% of the value
of total assets at the time of the borrowing. For purposes of this
limitation, the following are not deemed to be pledges: margin deposits
for the purchase and sale of futures contracts and related options, and
segregation or collateral arrangements made in connection with options
activities or the purchase of securities on a when-issued basis. The
Emerging Markets Fund will not mortgage, pledge, or hypothecate any
assets except to secure permitted borrowings. For purposes of this
limitation, the following will not be deemed to be pledges of the
Fund's assets: (a) the deposit of assets in escrow in connection with
the writing of covered put or call options and the purchase of
securities on a when-issued basis; and (b) collateral arrangements with
respect to (i) the purchase and sale of stock options (and options on
stock indices) and (ii) initial or variation margin for futures
contracts. The Georgia Municipal Bond Fund, North Carolina Municipal
Bond Fund, South Carolina Municipal Bond Fund, and Virginia Municipal
Bond Fund will not mortgage, pledge, or hypothecate any assets except
to secure permitted borrowings. In those cases, South Carolina
Municipal Bond Fund may mortgage, pledge, or hypothecate assets having
a market value not exceeding 10% of the value of its total assets at
the time of the pledge. Investing in Real Estate The Funds (except the
Georgia Municipal Bond Fund, North Carolina Municipal Bond Fund, South
Carolina Municipal Bond Fund, and Virginia Municipal Bond Fund) will
not buy or sell real estate, including limited partnership interests,
although a Fund may invest in the securities of companies whose
business involves the purchase or sale of real estate or in securities
which are secured by real estate or interests in real estate. The
Georgia Municipal Bond Fund, North Carolina Municipal Bond Fund, South
Carolina Municipal Bond Fund, and Virginia Municipal Bond Fund will not
buy or sell real estate, although a Fund may invest in municipal bonds
secured by real estate or interests in real estate. Investing in
Commodities The Funds will not buy or sell commodities, commodity
contracts, or commodities futures contracts, except however, to the
extent that the Wachovia Funds may engage in transactions involving
futures contracts and related options. Underwriting The Funds will not
underwrite any issue of securities, except as each Fund may be deemed
to be an underwriter under the Securities Act of 1933 in connection
with the sale of securities which the Fund may purchase pursuant to its
investment objective, policies, and limitations. Diversification of
Investments With respect to securities comprising 75% of the value of
its total assets, the Funds (except Georgia Municipal Bond Fund, North
Carolina Municipal Bond Fund, South Carolina Municipal Bond Fund, and
Virginia Municipal Bond Fund) will not purchase securities issued by
any one issuer (other than cash, cash items or securities issued or
guaranteed by the government of the United States or its agencies or
instrumentalities and repurchase agreements collateralized by such
securities) if, as a result, more than 5% of the value of each Fund's
total assets would be invested in the securities of that issuer. Also,
a Fund will not acquire more than 10% of the outstanding voting
securities of any one issuer. Concentration of Investments The Wachovia
Funds will not invest 25% or more of the value of their total assets in
any one industry, except that a Fund may invest 25% or more of the
value of its total assets in cash, cash items, or securities issued or
guaranteed by the U.S. government, its agencies or instrumentalities,
and repurchase agreements collateralized by such securities. The
Wachovia Municipal Funds will not purchase securities if, as a result
of such purchase, 25% or more of the value of its total assets would be
invested in industrial development bonds or other securities, the
interest upon which is paid from revenues of similar type projects. A
Fund may invest 25% or more of the value of its total assets in cash,
cash items, or securities issued or guaranteed by the government of the
United States or its agencies, or instrumentalities and repurchase
agreements collateralized by such U.S. government securities. Lending
Cash or Securities The Equity Fund, Growth & Income Fund and Special
Values Fund, Balanced Fund, Fixed Income Fund, Intermediate Fixed
Income Fund and Short-Term Fixed Income Fund will not lend any of their
assets except portfolio securities, the market value of which do not
exceed one-third of the value of a Fund's total assets. The
Quantitative Equity Fund and Emerging Markets Fund will not lend any of
their assets except portfolio securities. This shall not prevent the
above Funds from purchasing or holding U.S. government obligations,
money market instruments, demand master notes, bonds, debentures,
notes, certificates of indebtedness, or other debt securities, entering
into repurchase agreements, or engaging in other transactions where
permitted by each Fund's investment objective, policies, and
limitations. The Equity Index Fund will not lend any of its assets
except portfolio securities, the market value of which does not exceed
one-third of the value of the Fund's total assets. This shall not
prevent the purchase or holding of corporate or government bonds,
debentures, notes, certificates of indebtedness or other debt
securities of an issuer, repurchase agreements, or engaging in other
transactions where permitted by the Fund's investment objective,
policies and limitations. The Georgia Municipal Bond Fund, North
Carolina Municipal Bond Fund, and Virginia Municipal Bond Fund will not
lend any assets except portfolio securities The South Carolina
Municipal Bond Fund may not lend any assets except portfolio securities
up to one-third of the value of its total assets. The Funds may,
however, acquire publicly or non-publicly issued municipal bonds or
temporary investments or enter into repurchase agreements in accordance
with each Fund's investment objective, policies, limitations and the
Trust's Declaration of Trust. Investing in Restricted Securities The
South Carolina Municipal Bond Fund will not invest more than 10% of the
value of its net assets in securities subject to restrictions on resale
under the Securities Act of 1933. Dealing in Puts and Calls The South
Carolina Municipal Bond Fund will not buy or sell puts, calls,
straddles, spreads, or any combination of these.
The above investment limitations cannot be changed without shareholder approval.
The following limitations, however, may be changed by the Trustees without
shareholder approval. Shareholders will be notified before any material change
in these limitations becomes effective.
Investing in Securities of Other Investment Companies
The Funds will limit their investment in other investment companies to
not more than 3% of the total outstanding voting stock of any
investment company, will invest no more than 5% of their total assets
in any one investment company, and will invest no more than 10% of
their total assets in investment companies in general, unless, they are
permitted to exceed these limitations by action of the SEC. The Funds
will purchase securities of closed-end investment companies only in
open market transactions involving only customary brokers' commissions.
However, these limitations are not applicable if the securities are
acquired in a merger, consolidation, reorganization, or acquisition of
assets. It should be noted that investment companies incur certain
expenses such as custodian and transfer agency fees, and therefore, any
investment by a Fund in shares of another investment company would be
subject to such duplicate expenses. The Funds will invest in other
investment companies primarily for the purpose of investing their
short-term cash on a temporary basis. However, the Equity Index Fund
may invest in Standard & Poor's Depository Receipts (SPDRs), which
represent interests in the portfolio of securities held by a unit
investment trust, a type of investment company. SPDRs trade like shares
of common stock on the American Stock Exchange and are intended to
provide investment results that generally correspond to the price and
yield performance of the S&P 500 Index. The Fund's purchase of SPDRs
are subject to the 3%, 5% and 10% limitations described above and
secondary market purchases and sales are subject to ordinary brokerage
commissions. Investing in Restricted Securities The Funds will not
invest more than 10% of their total assets in securities subject to
restrictions on resale under the Securities Act of 1933, except for
certain restricted securities which meet the criteria for liquidity as
established by the Trustees. Investing in Illiquid Securities The Funds
will not invest more than 15% of their net assets in securities which
are illiquid, including repurchase agreements providing for settlement
in more than seven days after notice, over-the-counter options,
non-negotiable time deposits with maturities over seven days, and
certain securities not determined under guidelines established by the
Trustees to be liquid. Investing in Put Options The Funds (except
Georgia Municipal Bond Fund, North Carolina Municipal Bond Fund, South
Carolina Municipal Bond Fund, and Virginia Municipal Bond Fund) will
not purchase put options on securities, other than put options on stock
indices, unless the securities are held in a Fund's portfolio and not
more than 5% of the value of the Fund's total assets would be invested
in premiums on open put option positions. The Georgia Municipal Bond
Fund, North Carolina Municipal Bond Fund, South Carolina Municipal Bond
Fund, and Virginia Municipal Bond Fund will not buy or sell puts,
calls, straddles, spreads, or any combination of these. Writing Covered
Call Options The Funds will not write call options on securities unless
the securities are held in a Fund's portfolio or unless a Fund is
entitled to them in deliverable form without further payment or after
segregating cash in the amount of any further payment. Investing in
Warrants The Funds will not invest more than 5% of their net assets in
warrants. No more than 2% of a Fund's net assets, to be included within
the overall 5% limit on investments in warrants, may be warrants which
are not listed on the New York Stock Exchange or the American Stock
Exchange. Purchasing Securities to Exercise Control The Funds will not
purchase securities of a company for purposes of exercising control or
management.
Except with respect to borrowing money, if a percentage limitation is adhered to
at the time of investment, a later increase or decrease in percentage resulting
from any change in value or net assets will not result in a violation of such
restriction. For purposes of its policies and limitations, the Funds consider
certificates of deposit and demand and time deposits issued by a U.S. branch of
a domestic bank or savings association, having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of deposit, to be "cash items."
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;

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.

<PAGE>

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

<PAGE>

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.

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

Rule 12b-1 Plan
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professional such as banks,
broker/dealers, trust departments of bank, and registered investment advisers)
for marketing activities (such as advertising, printing and distributing
prospectuses, and providing incentives to investment professional) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Fund achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. Also, the
Fund's service providers that receive asset-based fees also benefit from stable
or increasing Fund assets.

The Funds may compensate the Distributor more or less than its actual marketing
expenses. In no event will a Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

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

HOW TO BUY SHARES

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

Through A Retirement Program
Class A Shares may be purchased at NAV by participants in qualified retirement
plans for which Wachovia Bank, or an affiliate, had previously, but no longer,
serves in an administrative or fiduciary capacity. Purchases made by or through
a Qualified Retirement Plan (Retirement Plan) that has in excess of an aggregate
investment of $500,000 in certain Delaware Group Funds and any portfolios of The
Wachovia Funds and purchases made by companies participating in a Retirement
Plan that has at least 100 employees will be made at NAV, without the imposition
of the sales charge. Purchases made by any Retirement Plan that has an aggregate
investment of over $500,000 in the Wachovia Funds may also purchase at NAV.
Class Y Shares are also offered to participants in qualified retirement plans
that offer a Wachovia Fund as an investment option through a program known as
"Institutional Solutions" marketed by Delaware Investment and Retirement
Services, Inc. Exchanging Securities For Shares You may contact the Distributor
to request a purchase of Shares in an exchange for securities you own. The Funds
reserve the right to determine whether to accept your securities and the minimum
market value to accept. Each Fund will value your securities in the same manner
as it values its assets. This exchange is treated as a sale of your securities
for federal tax purposes.

Subaccounting Services
Investment professionals are encouraged to open single master accounts. However,
certain investment professionals may wish to use the transfer agent's
subaccounting system to minimize their internal recordkeeping requirements. The
transfer agent may charge a fee based on the level of subaccounting services
rendered. Investment professionals holding Shares in a fiduciary, agency,
custodial, or similar capacity may charge or pass through subaccounting fees as
part of or in addition to normal trust or agency account fees. They may also
charge fees for other services they provide that may be related to the ownership
of Shares. This information should, therefore, be read together with any
agreement between the customer and the financial intermediary with regard to the
services provided, the fees charged for those services, and any restrictions and
limitations imposed.

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

HOW TO EXCHANGE SHARES

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

<PAGE>

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

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

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

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

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

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

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

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

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

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

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

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

Federal Income Tax
Each Fund intends to meet requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies. If these requirements are not
met, the Funds will not receive special tax treatment and will pay federal
income tax.

Each Fund will be treated as a single, separate entity for federal income tax
purposes so that income earned and capital gains and losses realized by the
Trusts' other portfolios will be separate from those realized by the Fund.

Foreign Investments
If the Fund purchases foreign securities, their investment income may be subject
to foreign withholding or other taxes that could reduce the return on these
securities. Tax treaties between the United States and foreign countries,
however, may reduce or eliminate the amount of foreign taxes to which the Fund
would be subject. The effective rate of foreign tax cannot be predicted since
the amount of Fund assets to be invested within various countries is uncertain.
However, the Fund intends to operate so as to qualify for treaty-reduced tax
rates when applicable.

Distributions from a Fund may be based on estimates of book income for the year.
Book income generally consists solely of the coupon income generated by the
portfolio, whereas tax basis income includes gains or losses attributable to
currency fluctuation. Due to differences in the book and tax treatment of fixed
income securities denominated in foreign currencies, it is difficult to project
currency effects on an interim basis. Therefore, to the extent that currency
fluctuations cannot be anticipated, a portion of distributions to shareholders
could later be designated as a return of capital, rather than income, for income
tax purposes, which may be of particular concern to simple trusts.

If the Fund invests in the stock of certain foreign corporations, they may
constitute Passive Foreign Investment Companies (PFIC), and the Fund may be
subject to Federal income taxes upon disposition of PFIC investments.

If more than 50% of the value of the Fund's assets at the end of the tax year is
represented by stock or securities of foreign corporations, the Fund intends to
qualify for certain Code stipulations that would allow shareholders to claim a
foreign tax credit or deduction on their U.S. income tax returns. The Code may
limit a shareholder's ability to claim a foreign tax credit. Shareholders who
elect to deduct their portion of the Fund's foreign taxes rather than take the
foreign tax credit must itemize deductions on their income tax returns.

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

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

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

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

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

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

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

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

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

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

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

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

WHO MANAGES AND PROVIDES SERVICES TO THE FUNDS?

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

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

<PAGE>

- ---------------------------------- ---------------------------------------------------------------------- -------------------
Name Occupations for past 5 Years Aggregate
Birthdate Compensation from
Address Fund Complex
Position with Trusts
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
James A. Hanley Retired; Vice President and Treasurer, Abbott Laboratories (health $26,400
August 13, 1931 care products) (until 1992).
4272 Sanctuary Way
Bonita Springs, FL
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Samuel E. Hudgins Hudgins Consulting, LLC (independent consultant); President, $26,400
March 4, 1929 Percival Hudgins & Company, LLC (investment bankers/financial
715 Whitemere Court, N.W. consultants) (until September 1997); Director, Atlantic American
Atlanta, GA Corporation (insurance holding company).
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
J. Berkely Ingram, Jr. Real estate investor and partner; formerly, Vice Chairman, $24,000
April 17, 1924 Massachusetts Mutual Life Insurance Company.
114-L Reynolda Village
Winston-Salem, NC
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
D. Dean Kaylor Retired; Executive Vice President and Chief Financial Officer, NBD $24,000
June 29, 1930 Bank, N.A. and NBD Bancorp, Inc. (bank and bank holding company)
2835 Greenbriar (until 1990).
Harbor Springs, MI
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Alvin J. Schexnider, Ph.D. Chancellor, Winston-Salem State University $12,000
May 26, 1945
5005 Marble Arch Road
Winston-Salem, NC 27104
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Charles S. Way, Jr.* PresidentChairman and CEO, The Beach Company and its various $24,000
December 18, 1937 affiliated companies and partnerships.
211 King Street
Suite 300
Charleston, SC
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
John W. McGonigle President and Chief Executive Officer, Federated Investors $0
October 26, 1938 Management Company; Executive Vice President, Secretary, General
Federated Investors Tower Counsel, and Trustee, Federated Investors; Trustee, Federated
Pittsburgh, PA Advisers, Federated Management, Federated Research, and Federated
President and Treasurer Services Company; and Director, Federated Securities Corp.
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Charles L. Davis, Jr. Vice President, Federated Services Company. $0
March 23, 1960
Federated Investors Tower
Pittsburgh, PA
Vice President and Assistant
Treasurer
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Peter J. Germain Senior Vice President and Director of Proprietary Funds Services, $0
September 3, 1959 Federated Services Company; formerly, Senior Corporate Counsel,
Federated Investors Tower Federated Services Company.
Pittsburgh, PA
Secretary
- ---------------------------------- ---------------------------------------------------------------------- -------------------
</TABLE>

<PAGE>

Investment Adviser
The investment adviser conducts investment research and makes investment
decisions for the Funds. The investment adviser is a business unit of Wachovia
Bank, N.A.

The investment adviser shall not be liable to the Trusts, the Funds, or any Fund
shareholder for any losses that may be sustained in the purchase, holding, or
sale of any security or for anything done or omitted by it, except acts or
omissions involving willful misfeasance, bad faith, gross negligence, or
reckless disregard of the duties imposed upon it by its contract with the
Trusts.

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

Brokerage Transactions
When selecting brokers and dealers to handle the purchase and sale of portfolio
instruments, the investment adviser looks for prompt execution of the order at a
favorable price. The investment adviser will generally use those who are
recognized dealers in specific portfolio instruments, except when a better price
and execution of the order can be obtained elsewhere. The investment adviser may
select brokers and dealers based on whether they also offer research services
(as described below). In selecting among firms believed to meet these criteria,
the investment adviser may give consideration to those firms which have sold or
are selling Shares of the Fund and other funds distributed by the Distributor
and its affiliates. The investment adviser makes decisions on portfolio
transactions and selects brokers and dealers subject to review by the Fund's
Board.

Research Services. Research services may include advice as to the advisability
of investing in securities; security analysis and reports; economic studies;
industry studies; receipt of quotations for portfolio evaluations; and similar
services. Research services may be used by the investment adviser or by
affiliates of Federated Investors in advising other accounts. To the extent that
receipt of these services may replace services for which the investment adviser
or its affiliates might otherwise have paid, it would tend to reduce their
expenses. The investment adviser and its affiliates exercise reasonable business
judgment in selecting those brokers who offer brokerage and research services to
execute securities transactions. They determine in good faith that commissions
charged by such persons are reasonable in relationship to the value of the
brokerage and research services provided.

Investment decisions for the Fund are made independently from those of other
accounts managed by the investment adviser. When the Fund and one or more of
those accounts invests in, or disposes of, the same security, available
investments or opportunities for sales will be allocated among the Fund and the
account(s) in a manner believed by the investment adviser to be equitable. While
the coordination and ability to participate in volume transactions may benefit
the Fund, it is possible that this procedure could adversely impact the price
paid or received and/or the position obtained or disposed of by the Fund.

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

Administrator
Federated Services Company, a subsidiary of Federated Investors, provides
administrative personnel and services (including certain legal and financial
reporting services) necessary to operate the Fund. Federated Services Company
provides these at the following annual rate of the average aggregate daily net
assets of the Funds in the Trusts (excluding Wachovia Prime Cash Management
Fund) as specified below:
Maximum Average Aggregate Daily Net
Administrative Fee Assets of the Funds
.10 of 1% on the first $3.5 billion
.06 of 1% on assets in excess of $3.5 billion

<PAGE>

Custodian
Wachovia Bank, N.A., is custodian (the Custodian) for the securities and cash of
the Funds. Under the Custodian Agreement, the Custodian holds the Funds'
portfolio securities in safekeeping and keeps all necessary records and
documents relating to its duties. For the services to be provided to the Trusts
pursuant to the Custodian Agreement, the Trusts pay the Custodian an annual fee
based upon the average daily net assets of the Funds and which is payable
monthly. The Custodian will also charge transaction fees and out-of-pocket
expenses.

Transfer Agent And Dividend Disbursing Agent
Federated Services Company, through its registered transfer agent subsidiary,
Federated Shareholder Services Company, also provides certain accounting and
recordkeeping services with respect to the Funds' portfolio investments.

Independent Public Accountants
Ernst & Young LLP is the independent auditors for the Funds.

Shareholder Services
The Fund may pay Federated Administrative Services, a subsidiary of Federated,
for providing shareholder services and maintaining shareholder accounts.
Federated Administrative Services may select others to perform these services
for their customers and may pay them fees.

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

<PAGE>

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

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

Fees are allocated among Classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees and shareholder services fees, which are
borne only by the applicable Class of Shares. Class Y Shares do not incur 12b-1
fees or shareholder services fees. HOW DO THE FUNDS MEASURE PERFORMANCE?

The Funds may advertise Share performance by using the Securities and Exchange
Commission's (SEC) standard method for calculating performance applicable to all
mutual funds. The SEC also permits this standard performance information to be
accompanied by non-standard performance information.

Unless otherwise stated, any quoted Share performance reflects the effect of
non-recurring charges, such as maximum sales charges, which, if excluded, would
increase the total return and yield. The performance of Shares depends upon such
variables as: portfolio quality; average portfolio maturity; type and value of
portfolio securities; changes in interest rates; changes or differences in the
Fund's or any class of Shares' expenses; and various other factors.

Share performance fluctuates on a daily basis largely because net earnings and
offering price per Share fluctuate daily. Both net earnings and offering price
per Share are factors in the computation of yield and total return.

Total Return
Total return represents the change (expressed as a percentage) in the value of
Shares over a specific period of time, and includes the investment of income and
capital gains distributions.

The average annual total return for Shares is the average compounded rate of
return for a given period that would equate a $1,000 initial investment to the
ending redeemable value of that investment. The ending redeemable value is
computed by multiplying the number of Shares owned at the end of the period by
the NAV per Share at the end of the period. The number of Shares owned at the
end of the period is based on the number of Shares purchased at the beginning of
the period with $1,000, less any applicable sales charge, adjusted over the
period by any additional Shares, assuming the annual reinvestment of all
dividends and distributions.

When Shares of a Fund are in existence for less than a year, the Fund may
advertise cumulative total return for that specific period of time, rather than
annualizing the total return.

Yield
The yield of Shares is calculated by dividing: (i) the net investment income per
Share earned by the Shares over a thirty-day period; by (ii) the maximum
offering price per Share on the last day of the period. This number is then
annualized using semi-annual compounding. This means that the amount of income
generated during the thirty-day period is assumed to be generated each month
over a 12-month period and is reinvested every six months. The tax- equivalent
yield of Shares is calculated similarly to the yield, but is adjusted to reflect
the taxable yield that Shares would have had to earn to equal the actual yield,
assuming a specific tax rate. The yield and tax-equivalent yield do not
necessarily reflect income actually earned by Shares because of certain
adjustments required by the SEC and, therefore, may not correlate to the
dividends or other distributions paid to shareholders.

To the extent investment professional and broker/dealers charge fees in
connection with services provided in conjunction with an investment in Shares,
the Share performance is lower for shareholders paying those fees.

<PAGE>

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

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

<PAGE>

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

Taxable Yield Equivalent for 1999 - STATE OF GEORGIA
Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%

Combined Federal and State: 21.000% 34.000% 37.000% 42.000% 45.600%
- ----------------------------------------------------------------------------------------------------------------------
Joint Return $1-43,050 $43,051-104,050 $104,051-158,550 $158,551-283,150 Over 283,150
Single Return $1-25,750 $25,751-62,450 $62,451-130,250 $130,251-283,150 Over 283,150
Tax Exempt Yield: Taxable Yield Equivalent:
1.50% 1.90% 2.27% 2.38% 2.59% 2.76%
2.00% 2.53% 3.03% 3.17% 3.45% 3.68%
2.50% 3.16% 3.79% 3.97% 4.31% 4.60%
3.00% 3.80% 4.55% 4.76% 5.17% 5.51%
3.50% 4.43% 5.30% 5.56% 6.03% 6.43%
4.00% 5.06% 6.06% 6.35% 6.90% 7.35%
4.50% 5.70% 6.82% 7.14% 7.76% 8.27%
5.00% 6.33% 7.58% 7.94% 8.62% 9.19%
5.50% 6.96% 8.33% 8.73% 9.48% 10.11%
6.00% 7.59% 9.09% 9.52% 10.34% 11.03%
6.50% 8.23% 9.85% 10.32% 11.21% 11.95%
7.00% 8.86% 10.61% 11.11% 12.07% 12.87%
Note: The maximum marginal tax rate for each bracket was used in calculating the taxable yield equivalent.
Furthermore, additional state and local taxes paid on comparable taxable investments
were not used to increase federal deductions.

Taxable Yield Equivalent for 1999 - STATE OF NORTH CAROLINA
Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%

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

<PAGE>

Taxable Yield Equivalent for 1999 - STATE OF SOUTH CAROLINA
Tax Bracket:
Federal 15.00% 28.00% 31.00% 36.00% 39.60%

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

Taxable Yield Equivalent for 1999 - STATE OF VIRGINIA

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

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

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

Performance 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 Five-Year State General Obligations Bonds is an index comprised of all
state general obligation debt issues with maturities between four and six years.
These bonds are rated A or better and represent a variety of coupon ranges.
Index figures are total returns calculated for one, three, and twelve month
periods as well as year-to-date. Total returns are also calculated as of the
inception of the index, December 31, 1979. Lehman Brothers Three-Year State
General Obligations Bonds is an index comprised of the same issues noted above
except that the maturities range between two and four years. Index figures are
total returns calculated for the same periods as listed above. Morningstar,
Inc., an independent rating service, is the publisher of the bi-weekly Mutual
Fund Values. Mutual Fund Values rates more than 1,000 NASDAQ-listed mutual funds
of all types, according to their risk-adjusted returns. The maximum rating is
five stars, and ratings are effective for two weeks. FINANCIAL INFORMATION

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

<PAGE>

INVESTMENT RATINGS

<PAGE>

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.

<PAGE>

ADDRESSES

<S> <C>

The Wachovia Funds
The Wachovia Municipal Funds
Class A Shares, Class B Shares, Class Y Shares 101 Greystone Boulevard
SC-9215
Columbia, SC 29226

Distributor
Federated Securities Corp. Federated Investors Tower
1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779

Investment Adviser
Wachovia Asset Management 100 North Main Street
Winston-Salem, NC 27101

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

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Independent Auditors
Ernst & Young LLP 200 Clarendon Street
Boston, MA 02116
</TABLE>

WACHOVIA PRIME CASH
MANAGEMENT FUND
WACHOVIA TAX-FREE
MONEY MARKET FUND
WACHOVIA U.S. TREASURY
MONEY MARKET FUND
INSTITUTIONAL SHARES

Prospectus
February 28, 1999

Wachovia Prime Cash Management Fund

Wachovia Tax-Free Money Market Fund

Wachovia U.S. Treasury Money Market Fund

Portfolios of The Wachovia Funds

INSTITUTIONAL SHARES

CONTENTS

Fund Goals, Strategies, Performance and Risk 1
What are the Funds' Fees and Expenses? 5
What are the Funds' Main Investments and
Investment Techniques? 6
What are the Risks of Investing in the Funds? 6
What do Shares Cost? 7
How are the Funds Sold? 7
How to Purchase Shares 8
How to Exchange Shares 8
How to Redeem Shares 8
Account and Share Information 9
Who Manages the Funds? 10
Financial Information 10

FEBRUARY 28, 1999

Fund Goals, Strategies, Performance and Risk

WACHOVIA PRIME CASH MANAGEMENT FUND

Goal
To provide current income consistent with stability of principal and liquidity.

Strategy

The Fund pursues its objective by investing exclusively in a portfolio of money
market instruments (high-quality, short-term debt securities) maturing in 397
days or less. The investment adviser uses macroeconomic, credit and market
analysis to select portfolio securities. In doing so, it assesses the trend in
investment rates, the shape of various yield curves and relative duration.

Total Return Bar Chart and Table
[Graph appears here-see appendix]

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's Institutional Shares
total returns on a yearly basis.

The Fund's Institutional 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 Institutional Shares highest
quarterly return was 1. 50% (quarter ended June 30, 1995). Its lowest quarterly
return was 0.78% (quarter ended March 31, 1994).

Average Annual Total Returns and Yield

The following table represents the Fund's Institutional Shares Average Annual
Total Return through December 31, 1998.
<TABLE>
<CAPTION>
Calendar Period Return
<S> <C>
1 Year 5.49%
5 Years 5.33%
Start of Performance1 5.30%
</TABLE>

1 The Fund's Institutional Shares start of performance date was December 2,
1993.

The Fund's 7-Day Net Yield as of December 31, 1998 was 4.98%. Investors may
call the Fund at 1-800-994-4414 to acquire the current 7-Day Net Yield.

WACHOVIA TAX-FREE MONEY MARKET FUND

Goal
To provide current income exempt from federal regular income tax consistent with
stability of principal and liquidity.

Strategy

The Fund pursues its objective by investing primarily in a portfolio of
short-term municipal securities maturing in 397 days or less. The investment
adviser selects investments after assessing factors such as the trend in
interest rates, the shape of the municipal yield curve, tax rates and supply.

Total Return Bar Chart and Table
[Graph appears here-see appendix]

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's Institutional Shares
total returns on a yearly basis.

The Fund's Institutional 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 Institutional Shares highest
quarterly return was 0.96% (quarter ended June 30, 1995). Its lowest quarterly
return was 0.52% (quarter ended March 31, 1994).

Average Annual Total Returns and Yield
The following table represents the Fund's Institutional Shares Average Annual
Total Return through December 31, 1998.
<TABLE>
<CAPTION>
Calendar Period Return
<S> <C>
1 Year 3.24%
5 Years 3.20%
Start of Performance1 3.01%
</TABLE>

1 The Fund's Institutional Shares start of performance date was May 14, 1992.
The Fund's 7-Day Net Yield as of December 31, 1998 was 3.04%. Investors may
call the Fund at 1-800-994-4414 to acquire the current 7-Day Net Yield.

WACHOVIA U.S. TREASURY MONEY MARKET FUND

Goal
To provide current income consistent with stability of principal and liquidity.

Strategy

The Fund pursues its objective by investing in a portfolio of short-term U.S.
Treasury obligations which are issued by the U.S. government, and are fully
guaranteed as to payment of principal and interest by the United States. The
investment adviser selects investments after assessing factors such as the trend
in interest rates, the shape of the treasury yield curve, tax rates and supply.

Total Return Bar Chart and Table
[Graph appears here-see appendix]

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's Institutional Shares
total returns on a yearly basis.

The Fund's Institutional 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 Institutional Shares highest
quarterly return was 1.43% (quarter ended June 30, 1995). Its lowest quarterly
return was 0.70% (quarter ended December 31, 1993).

Average Annual Total Returns and Yield
The following table represents the Fund's Institutional Shares Average Annual
Total Return through December 31, 1998.
<TABLE>
<CAPTION>
Calendar Period Return
<S> <C>
1 Year 5.18%
5 Years 5.05%
Start of Performance1 4.55%
</TABLE>

1 The Fund's Institutional Shares start of performance date was May 7, 1992.

The Fund's 7-Day Net Yield as of December 31, 1998 was 4.53%. Investors may
call the Fund at 1-800-994-4414 to acquire the current 7-Day Net Yield.

PRINCIPAL INVESTMENT RISKS

An investment in a Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Funds seek to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Funds.

Money Market Risks

. Prices of fixed income securities rise and fall in response to interest rate
changes for similar securities. Generally, when interest rates rise, prices of
fixed income securities fall.
. Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this
risk by purchasing short-term securities.
. A Fund can also be affected by the credit quality of the securities in its
portfolio. The credit quality of a security is based upon the ability of the
issuer to repay the security. Money market funds attempt to minimize this risk
by investing in securities with high credit quality.

Any of these risks may have an adverse affect on a Fund's total return or yield.

What are the Funds' Fees and Expenses?

This table describes the fees and expenses that you may pay when you buy, hold
and redeem each Fund's Institutional Shares.

<TABLE>
<CAPTION>
Shareholder Fees Fees Paid Directly From Your Investment Prime Cash Tax-Free Money U.S. Treasury
Management Fund Market Fund Money Market Fund
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of
offering price) None None None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase
price or redemption proceeds, as applicable) None None None
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other
Distributions) (as a percentage of offering price) None None None
Redemption Fee (as a percentage of amount redeemed, if applicable) None None None
Exchange Fee None None None

Annual Fund Operating Expenses1
Expenses That are Deducted From Fund Assets
(as a percentage of average net assets)
Management Fee 0.30% 0.50% 0.50%
Distribution (12b-1) Fee None None None
Shareholder Services Fee None None None
Other Expenses 0.07% 0.16% 0.14%
Total Annual Fund Operating Expenses (Before Waivers)1 0.37% 0.66% 0.64%
Waiver of Fund Expenses 0.19% 0.42% 0.40%
Total Actual Annual Fund Operating Expenses (After Waivers) 0.18% 0.24% 0.24%

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

EXAMPLE

The following Example is intended to help you compare the cost of investing in
each Fund's Institutional Shares with the cost of investing in other mutual
funds. The Example assumes that you invest $10,000 in each Fund's Institutional
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 Institutional Shares 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>
Prime Cash Management $18 $58 $101 $230
Fund
Tax-Free Money Market $25 $77 $135 $306
Fund
U.S. Treasury Money $25 $77 $135 $306
Market Fund
</TABLE>

What are the Funds' Main Investments and Investment Techniques?

Money market funds are subject to federal regulations designed to help maintain
liquidity and a stable share price. The regulations set high standards for
credit quality, and require investments in individual securities to mature in
397 days or less.

MUNICIPAL SECURITIES

Municipal Securities are fixed income securities issued by states, counties,
cities and other political subdivisions and authorities. Although most municipal
securities are exempt from federal income tax, municipalities may also issue
taxable securities. The Tax-Free Fund may invest in such taxable municipal
securities. Interest from the Fund's investments may be subject to the federal
alternative minimum tax for individuals and corporations.

U.S. TREASURY OBLIGATIONS
U.S. Treasury Obligations are direct obligations of the federal government of
the United States. Investors regard treasury securities as having the lowest
credit risk.

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. foreign banks.

TEMPORARY DEFENSIVE INVESTMENTS

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

What are the Risks of Investing in the Funds?

BANK INSTRUMENTS RISKS

Bank insurance instruments may include Eurodollar Certificates of Deposit
(ECDs), Yankee Certificates of Deposit (Yankee CDs) and Eurodollar Time Deposits
(ETDs). ECDs, ETDs, Yankee CDs, and Europaper are subject to somewhat different
risks than domestic obligations of domestic issuers. Examples of these risks
include international economic and political developments, foreign governmental
restrictions that may adversely affect the payment of principal or interest,
foreign withholding or other taxes on interest income, difficulties in obtaining
or enforcing a judgment against the issuing bank, and the possible impact of
interruptions in the flow of international currency transactions. Different
risks may also exist for ECDs, ETDs, and Yankee CDs because the banks issuing
these instruments, or their domestic or foreign branches, are not necessarily
subject to the same regulatory requirements that apply to domestic banks, such
as reserve requirements, loan limitations, examinations, accounting, auditing,
and recordkeeping and the public availability of information.

MUNICIPAL SECURITIES RISKS

Local political and economic factors may adversely affect the value and
liquidity of municipal securities held by a Fund. The value of municipal
securities may 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.

TAX EXEMPTION RISK
Interest on a municipal security may be subject to regular federal income tax.

YEAR 2000 READINESS

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

The Adviser believes that its process for selecting securities generally reduces
the Funds' exposure to Year 2000 related problems. In addition, to assess the
potential effect of the Year 2000 problem, the

Adviser is reviewing available information regarding the Year 2000 readiness
of issuers of securities the Funds may purchase.

What do Shares Cost?

You can purchase, redeem, or exchange shares any day on which Wachovia Bank,
N.A. the New York Stock Exchange (NYSE) and the Federal Reserve Wire System are
open for business. When the Fund receives your transaction request in proper
form, it is processed at the next determined net asset value (NAV).

NAV is determined at 12:00 noon and as of the close of trading (normally, 4:00
p.m. Eastern time) on days when the NYSE is open.

Fund Minimum Investment Required

Prime Cash
Management Fund $5 million

Tax-Free Fund Consult your account agreement with
U.S. Treasury Fund Wachovia Bank for any applicable
minimum investments

Minimums may be waived from time to time.

The required minimum investment may be modified for investments made via the
sweep account program under the applicable account agreement.

How are the Funds Sold?

The Funds (except Prime Cash Management Fund) offer two share classes:
Investment Shares and Institutional Shares, each representing interests in a
single portfolio of securities.

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

Shares are offered only for purchase through Wachovia Bank and its affiliates.
Shares are offered only to accounts held by Wachovia Bank in a fiduciary,
advisory, agency, custodial or similar capacity.

How to Purchase Shares

The Funds and the Distributor reserve the right to reject any purchase request.

THROUGH WACHOVIA BANK

If you are a customer of Wachovia Bank you may purchase Shares by telephone, by
mail or in person in accordance with the procedures established by Wachovia Bank
set forth in your account agreement.

Payment may be made to Wachovia Bank by check, federal funds, or by debiting
your account with Wachovia Bank.
In order for your purchase to receive that day's dividends:

. Purchase orders for the Funds must be received by Wachovia Bank by 11:00 a.m.
(Eastern time); and
. Payment by federal funds must by received by Wachovia Bank. before 4:00 p.m.
(Eastern time) on the same day as the purchase order.

Orders are considered received after payment by check is converted into federal
funds and received by Wachovia Bank, normally the next business day.

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.

THROUGH A SWEEP ACCOUNT

If you are investing in a Fund as part of a Wachovia Bank sweep account program,
automatic purchases and redemptions will be made by Wachovia Bank on your behalf
pursuant to the sweep agreement you signed as part of your trust account with
Wachovia Bank.

How to Exchange Shares

EXCHANGE PRIVILEGE
You may exchange Shares of a Fund for Shares of the same class of another 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 subsequent purchase, and is a taxable
transaction. Signatures must be guaranteed if you request an exchange into
another Fund with a different shareholder registration.

An excessive number of exchanges may be disadvantageous to the Funds.
Therefore, the Funds, in addition to the right to reject any exchange, reserve
the right to modify or terminate the exchange privilege of any shareholder,
provided the shareholder is given 60 days' written notice.

Exchange orders must be received by the Funds between 12:00 noon (Eastern
time) and 4:00 p.m. (Eastern time) to receive that day's share price. Orders
received after 4:00 p.m. (Eastern time) will receive the price determined at
12:00 noon (Eastern time) the next business day.

Call you account officer at Wachovia Bank for complete instructions on how to
exchange Shares.

How to Redeem Shares

Each Fund redeems Shares at their NAV next determined after the Fund receives
the redemption request in proper form.

If your redemption request is received by Wachovia Bank by 11:00 a.m. (Eastern
time) redemption proceeds will normally be wired that same day but will not be
entitled to that day's dividend. Proceeds for redemption requests received after
11:00 a.m. (Eastern time) will normally be wired or a check mailed the following
business day and those Shares will be entitled to that day's dividend.

Contact your account officer at Wachovia Bank for complete instructions on how
to redeem Shares.

ADDITIONAL CONDITIONS

Telephone Transactions

The Funds will record your telephone instructions. If the Funds do not follow
reasonable procedures, it may be liable for losses due to unauthorized or
fraudulent telephone instructions. The Funds will notify you if it changes
telephone transaction privileges.

Share Certificates

The Funds no longer issue Share certificates. If you are redeeming or exchanging
Shares represented by certificates previously issued by a Fund, you must return
the certificates with your written redemption or exchange 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 periodic confirmation of all activity in your account including
purchases, redemptions, exchanges and dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

Each Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase shares by check, you begin earning dividends on the business day
after the Fund receives your check. You earn dividends through the day your
redemption request is received.

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

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

Fund distributions (except Tax-Free Fund) are expected to be primarily
dividends. Redemptions and exchanges are taxable sales.

Please consult your tax adviser regarding your federal, state, and local tax
liability.

Tax-Free Fund

It is anticipated that the Tax-Free Fund's distributions will be primarily
dividends that are exempt from federal income tax, although a portion of the
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. You may have
to include certain dividends as taxable income if the federal alternative
minimum tax applies to you. Capital gains and non-exempt dividends are taxable
whether paid in cash or reinvested in the 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, Wachovia Asset Management. The investment adviser manages
the Funds' assets, including buying and selling portfolio securities. The
investment adviser's address is 100 North Main Street, Winston-Salem, NC 27101.

Wachovia Bank has been managing trust assets for over 100 years, with over $42
billion in managed assets as of December 31, 1998. Wachovia Bank. also serves as
investment adviser to The Wachovia Municipal Funds, another investment company.
<TABLE>
<CAPTION>
Fund Annual Investment
AdvisoryFee paid
toInvestment Adviser as a
percentage of averagedaily
net assets
<S> <C>
Prime Cash Management Fund 0.30%
Tax-Free Money Market Fund 0.50%
U.S. Treasury Money Market Fund 0.50%
</TABLE>

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

Financial Information

FINANCIAL HIGHLIGHTS

INSTITUTIONAL SHARES

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report dated January 20, 199 9 is included in the
Annual Report for the Fund, which is incorporated by reference. This table
should be read in conjunction with the Fund's Financial Statements and notes
thereto, which may be obtained free of charge from the Fund.

Futher information about the performance of the Fund is contained in the Fund's
Annual Report dated November 30, 1998 which may be obtained free of charge.

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended November 30,
1998 1997 1996 1995 1994(a)
<S> <C> <C> <C> <C> <C>
Net asset value, beginning ofperiod $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.05 0.05 0.05 0.06 0.04
Less distributions
Distributions from net (0.05) (0.05) (0.05) (0.06) (0.04)
investmentincome
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return (b) 5.54% 5.55% 5.44% 5.95% 4.02%

Ratios to average net assets
Expenses 0.18% 0.18% 0.18% 0.18% 0.18%*
Net investment income 5.40% 5.43% 5.34% 5.80% 4.31%*
Expense waiver/ reimbursement(c) 0.19% 0.25% 0.27% 0.27% 0.28%*
Supplemental data
Net assets, end of period $1,829,211 $1,450,195 $1,176,855 $879,603 $816,008
(000omitted)
</TABLE>

* Computed on an annualized basis.
(a) Reflects operations for the period from December 2, 1993 (date of initial
public investment) to November 30, 1994.

(b) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

Financial Highlights-Wachovia Tax-Free Money Market Fund

INSTITUTIONAL SHARES

Futher information about the performance of the Fund is contained in the Fund's
Annual Report dated November 30, 1998 which may be obtained free of charge.

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended November 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning ofperiod $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.03 0.03 0.03 0.04 0.02
Less distributions
Distributions from net investmentincome (0.03) (0.03) (0.03) (0.04) (0.02)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return (a) 3.29% 3.41% 3.24% 3.59% 2.42%

Ratios to average net assets
Expenses 0.24% 0.24% 0.29% 0.32% 0.38%
Net investment income 3.24% 3.34% 3.22% 3.55% 2.41%
Expense waiver/reimbursement (b) 0.42% 0.45% 0.43% 0.46% 0.45%
Supplemental data
Net assets, end of period (000omitted) $275,323 $182,473 $118,877 $80,274 $93,867
</TABLE>

(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

Financial Highlights-Wachovia U.S. Treasury Money Market Fund

INSTITUTIONAL SHARES

Futher information about the performance of the Fund is contained in the Fund's
Annual Report dated November 30, 1998 which may be obtained free of charge.

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended November 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning ofperiod $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.05 0.05 0.05 0.06 0.04
Less distributions
Distributions from net investmentincome (0.05) (0.05) (0.05) (0.06) (0.04)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return (a) 5.25% 5.31% 5.18% 5.66% 3.70%

Ratios to average net assets
Expenses 0.24% 0.24% 0.30% 0.32% 0.36%
Net investment income 5.15% 5.20% 5.07% 5.54% 3.72%
Expense waiver/reimbursement (b) 0.40% 0.41% 0.39% 0.40% 0.51%
Supplemental data
Net assets, end of period (000omitted) $466,538 $510,323 $302,306 $214,356 $87,531
</TABLE>

(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

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

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

Shareholder Reports--The Fund publishes annual and semi-annual reports to
shareholders which include information about the Fund's investments. The annual
report discusses market conditions and investment strategies that significantly
affected the Fund's performance during its last fiscal year.

To obtain the SAI, the annual and semi-annual reports and other information call
your investment professional or the Fund at 1-800-994-4414.

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

WACHOVIA PRIME CASH
MANAGEMENT FUND
WACHOVIA TAX-FREE
MONEY MARKET FUND
WACHOVIA U.S. TREASURY
MONEY MARKET FUND
INSTITUTIONAL SHARES
Addresses

WACHOVIA MONEY MARKET FUND
INSTITUTIONAL SHARES

101 Greystone Boulevard
SC-9215
Columbia, SC 29226

DISTRIBUTOR

Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779

INVESTMENT ADVISER

Wachovia Asset Management
100 North Main Street
Winston-Salem, NC 27101

CUSTODIAN

Wachovia Bank, N.A.
301 North Church Street
Winston-Salem, NC 27150

TRANSFER AGENT, Federated
DIVIDEND DISBURSING AGENT,
AND PORTFOLIO RECORDKEEPER

Shareholder
Services Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779

COUNSEL TO
THE WACHOVIA FUNDS

Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, DC 20036-1800

COUNSEL TO
THE INDEPENDENT TRUSTEES

Piper & Marbury L.L.P.
1200 Nineteenth Street, NW
Washington, DC 20036-2430

INDEPENDENT AUDITORS

Ernst & Young LLP
One Oxford Centre
Pittsburgh, Pennsylvania 15219

February 28, 1999
822-21 (2/99)
Cusip 929901205
Cusip 929901403
Cusip 929901825
3042106A (2/99)

WACHOVIA MONEY MARKET FUND
WACHOVIA TAX-FREE
MONEY MARKET FUND
WACHOVIA U.S. TREASURY
MONEY MARKET FUND
INVESTMENT SHARES

PROSPECTUS
FEBRUARY 28, 1999

Wachovia Money Market Fund

Wachovia Tax-Free Money Market Fund

Wachovia U.S. Treasury Money Market Fund

Portfolios of The Wachovia Funds

INVESTMENT SHARES

CONTENTS

Fund Goals, Strategies, Performance and Risk 1
What are the Funds' Fees and Expenses? 4
What are the Funds' Main Investments and Investment Techniques? 5
What are the Risks of Investing in the Funds? 5
What do Shares Cost? 6
How are the Funds Sold? 6
How to Purchase Shares 7
How to Exchange Shares 8
How to Redeem Shares 8
Account and Share Information 10
Who Manages the Funds? 11
Financial Information 11

FEBRUARY 28, 1999

Fund Goals, Strategies, Performance and Risk

WACHOVIA MONEY MARKET FUND

Goal
To provide current income consistent with stability of principal and liquidity.

Strategy

The Fund pursues its objective by investing exclusively in a portfolio of money
market instruments (high-quality, short-term debt securities) maturing in 397
days or less. The investment adviser uses macroeconomic credit and market
analysis to select portfolio securities. In doing so, it assesses the trend in
interest rates, the shape of various yield curves and relative duration.

Total Return Bar Chart and Table
[GRAPH APPEARS HERE-see appendix]

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's Investment Shares total
returns on a yearly basis.

The Fund's Investment 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 Investment Shares highest
quarterly return was 1.37% (quarter ended June 30, 1995). Its lowest quarterly
return was 0.68% (quarter ended March 31, 1994).

Average Annual Total Returns and Yield

The following table represents the Fund's Investment Shares Average Annual Total
Return through December 31, 1998.

Calendar Period Return

1 Year 4.86%
5 Years 4.74%
Start of Performance1 4.27%

1 The Fund's Investment Shares start of performance date was June 2, 1992. The
Fund's 7-Day Net Yield as of December 31, 1998 was 4.33%. Investors may call
the Fund at 1-800-994-4414 to acquire the current 7-Day Net Yield.

WACHOVIA TAX-FREE MONEY MARKET FUND

Goal
To provide current income exempt from federal regular income tax consistent with
stability of principal and liquidity.

Strategy

Total Return Bar Chart and Table
[GRAPH APPEARS HERE-see appendix]

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's Investment Shares total
returns on a yearly basis.

The Fund's Investment 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 Investment Shares highest
quarterly return was 0.88% (quarter ended June 30, 1995). Its lowest quarterly
return was 0.45% (quarter ended March 31, 1994).

Average Annual Total Returns and Yield

The following table represents the Fund's Investment Shares Average Annual Total
Return through December 31, 1998.

Calendar Period Return

1 Year 2.83%
5 Years 2.82%
Start of Performance1 2.65%

1 The Fund's Investment Shares start of performance date was May 20, 1992. The
Fund's 7-Day Net Yield as of December 31, 1998 was 2.64%. Investors may call
the Fund at 1-800-994-4414 to acquire the current 7-Day Net Yield.

WACHOVIA U.S. TREASURY MONEY MARKET FUND

Goal
To provide current income consistent with stability of principal and liquidity.

Strategy

Total Return Bar Chart and Table
[GRAPH APPEARS HERE-see appendix]

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's Investment Shares total
returns on a yearly basis.

The Fund's Investment 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 Investment Shares highest
quarterly return was 1.36% (quarter ended June 30, 1995). Its lowest quarterly
return was 0.64% (quarter ended March 31, 1994).

Average Annual Total Returns and Yield

The following table represents the Fund's Investment Shares Average Annual Total
Return through December 31, 1998.

Calendar Period Return

1 Year 4.76%
5 Years 4.66%
Start of Performance1 4.42%

1 The Fund's Investment Shares start of performance date was May 11, 1993.

The Fund's 7-Day Net Yield as of December 31, 1998 was 4.13%. Investors may
call the Fund at 1-800-994-4414 to acquire the current 7-Day Net Yield.

PRINCIPAL INVESTMENT RISKS

Money Market Risks

Any of these risks may have an adverse affect on a Fund's total return or yield.

What are the Funds' Fees and Expenses?

This table describes the fees and expenses that you may pay when you buy, hold
and redeem each Fund's Investment Shares.

<TABLE>
<CAPTION>
Shareholder Fees Money Tax-Free U.S. Treasury
Fees Paid Directly From Your Investment Market Money Money Market
Fund Market Fund Fun
<S> <C> <C> <C>
Maximum Sales Charge (Load) Imposed on Purchases
(as a percentage of offering price) None None None
Maximum Deferred Sales Charge (Load)
(as a percentage of original purchase price or
redemption proceeds, as applicable) None None None
Maximum Sales Charge (Load) Imposed on
Reinvested Dividends (and other Distributions)
(as a percentage of offering price) None None None
Redemption Fee (as a percentage of amount
redeemed, if applicable) None None None
Exchange Fee None None None

Annual Fund Operating Expenses1
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 0.50% 0.50% 0.50%
Distribution (12b-1) Fee 0.40% 0.40% 0.40%
Shareholder Services Fee None None None
Other Expenses 0.14% 0.15% 0.14%
Total Annual Fund Operating Expenses
(Before Waiver)1 1.04% 1.05% 1.04%
Waiver of Fund Expenses 0.26% 0.41% 0.40%
Total Actual Annual Fund Operating Expenses
(After Waiver) 0.78% 0.64% 0.64%

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

EXAMPLE

The following Example is intended to help you compare the cost of investing in
each Fund's Investment Shares with the cost of investing in other mutual funds.
The Example assumes that you invest $10,000 in each Fund's Investment 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 Investment Shares operating expenses are based
upon the current expense limitation shown above in the table. Although your
actual costs may be higher or lower, based on these assumptions your costs would
be:
<TABLE>
<CAPTION>
Share Class 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
Money Market Fund $80 $249 $433 $966
Tax-Free Money Market Fund $65 $205 $357 $798
U.S. Treasury Money Market Fund $65 $205 $357 $798
</TABLE>

What are the Funds' Main Investments and Investment Techniques?

MUNICIPAL SECURITIES

U.S. TREASURY OBLIGATIONS

U.S. Treasury Obligations are direct obligations of the federal government of
the United States. Investors regard treasury securities as having the lowest
credit risk.

BANK INSTRUMENTS

TEMPORARY DEFENSIVE INVESTMENTS

What are the Risks of Investing in the Funds?

BANK INSTRUMENTS RISKS

MUNICIPAL SECURITIES RISKS

TAX EXEMPTION RISK

Interest on a municipal security may be subject to regular federal income tax.

YEAR 2000 READINESS

The Adviser believes that its standard process for selecting shares generally
reduces the Funds' exposure to year 2000 problems. In addition, to assess the
potential effect of the Year 2000 problem, the Adviser is reviewing available
information regarding the Year 2000 readiness of issuers of securities the Funds
may purchase.

What do Shares Cost?

NAV is determined at 12:00 noon and as of the close of regular trading
(normally 4:00 p.m. Eastern time) each day the NYSE is open.

The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value.

Your first investment in a Fund must be at least $1,000.

The required minimum investment may be modified for investments made via the
sweep account program under the applicable account agreement.

How are the Funds Sold?

The Funds offer two share classes: Investment Shares and Institutional Shares,
each representing interests in a single portfolio of securities.

This prospectus relates only to Investment Shares. Each share class has
different expenses, which affects its performance. Call 1-800-994-4414 or
contact your investment professional for more information concerning the other
classes.

The Funds' Distributor, Federated Securities Corp., markets the Shares
described in this prospectus to institutions or individuals, directly or through
investment professionals. When the Distributor receives marketing fees, it may
pay some or all of them to investment professionals. The Distributor and its
affiliates may pay out of their assets other amounts (including items of
material value) to investment professionals for marketing and servicing Shares.
The Distributor is a subsidiary of Federated Investors, Inc. (Federated).

RULE 12B-1 PLAN

Each Fund has adopted a Rule 12b-1 Plan, which allows it to pay marketing fees
to the Distributor and investment professionals for the sale, distribution and
customer servicing of the Fund's Investment Shares. Because you pay marketing
fees on an ongoing basis, your investment cost for Investment 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 Wachovia Investments, Inc., Wachovia Bank or
other Service Organizations.
The Funds and the Distributor reserve the right to reject any purchase request.

THROUGH WACHOVIA INVESTMENTS, INC.

If you are a customer of Wachovia Investment, Inc. or Wachovia Brokerage Service
you may purchase Shares by telephone, by mail or in person.

In order for your purchase to receive that day's dividends:

. Purchase orders for the Funds must be received by Wachovia Investments, Inc.
by:

Money Market Fund 11:00 a.m. (Eastern time)
Tax-Free Fund 10:00 a.m. (Eastern time)
U.S. Treasury Fund 11:00 a.m. (Eastern time)

. Payment by federal funds must by received by Wachovia Investments Inc. before
4:00 p.m. (Eastern time) on the same day as the purchase order.

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.

By Mail

To purchase Shares of a Fund by mail, send a check made payable to (Name of
Fund) to:

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

Orders by mail are considered received after payment by check is converted by
Wachovia Investments, Inc. into federal funds.

THROUGH WACHOVIA BANK OR OTHER SERVICE ORGANIZATIONS

Customers of Wachovia Bank may purchase Shares of the Funds by telephone, by
mail, or in person with their account officer in accordance with procedures in
your account agreement.

In order for your purchase to receive that day's dividends:

. Purchase orders for the Funds must be received by Wachovia Bank by:

Money Market Fund 10:00 a.m. (Eastern time)
Tax-Free Fund 9:00 a.m. (Eastern time)
U.S. Treasury Fund 10:00 a.m. (Eastern time)

. Payment by federal funds must by received by Wachovia Bank before 4:00 p.m.
(Eastern time) on the same day as the purchase order.

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.

THROUGH A SWEEP ACCOUNT

How to Exchange Shares

EXCHANGE PRIVILEGE

You may exchange Shares of a Fund for Shares of the same class of another 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.

Each shareholder is limited to five exchanges per year or three per calendar
quarter. The Funds reserve the right to modify or terminate a shareholder's
exchange privilege if exchanges exceed these limitations. The Funds reserve the
right to reject any exchange.

By Telephone

To exchange Shares by telephone call 1-800-994-4414.

By Mail

To exchange Shares by mail, write the Fund at:

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

You may exchange Class B Shares of another Wachovia Fund for Investment Shares
of the U.S. Treasury Fund.

<TABLE>
<CAPTION>
Year of Redemption After Purchase of Class B Shares CDSC
<S> <C>
First 5.00%
Third 4.00%
Fourth 3.00%
Fifth 3.00%
2.00%
Sixth 1.00%
Seventh and beyond 0.00%
</TABLE>

Class B Shares will be exchanged without a contingent deferred sales charge
(CDSC) unless you redeem the exchanged-for shares within seven years of the
original purchase of Class B Shares. The CDSC will be determined as follows:

You will not be charged a CDSC when redeeming shares:

. representing the portion of redemption proceeds attributable to increases in
the value of your account due to increases in the NAV;
. purchased with reinvested dividends or capital gains;
. that you hold for seven years or more;
following the death or disability of any shareholder in the account; or
. as a required retirement plan distribution.

If your redemption qualifies, you or your account representative must notify the
Distributor at the time of redemption to eliminate the CDSC.

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 Wachovia Investments, Inc., Wachovia Bank or through a Service
Organization.

THROUGH WACHOVIA INVESTMENTS, INC.

By Telephone
To redeem Shares by telephone you must:

. Complete a telephone redemption authorization form available from Wachovia
Investments, Inc. then
. Call the Funds at 1-800-994-4414 for further instructions.

. Redemption requests must be received by the Funds by: Money Market Fund 11:00
a.m. (Eastern time) Tax-Free Fund 10:00 a.m. (Eastern time) U.S. Treasury
Fund 11:00 a.m. (Eastern time)

Proceeds will normally be credited the same day to your brokerage account. For
orders received after these times, proceeds will normally be credited to your
account the following business day.

By Mail
To redeem shares by mail send your written request to the Funds at:

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

Include your name, the Fund's name and share class, the brokerage account number
and the Share or dollar amount requested.

Call 1-800-994-4414 for assistance in redeeming shares by mail.

THROUGH WACHOVIA BANK OR OTHER SERVICE ORGANIZATIONS

By Telephone
Call your account officer/representative for instructions on redeeming by
telephone. Your Service Organization may charge you fees for its services.

Redemption requests must be received by the Funds by:

Money Market Fund 11:00 a.m. (Eastern time)
Tax-Free Fund 10:00 a.m. (Eastern time)
U.S. Treasury Fund 11:00 a.m. (Eastern time)

Proceeds will normally be wired that same day to your account at Wachovia Bank
or a check sent to your address of record. For orders received after these
times, proceeds will normally be wired or a check mailed the following business
day.

By Mail
Contact Wachovia Bank or your Service Organization for instructions on how to
redeem Shares by mail.

SWEEP ACCOUNTS

If you are redeeming Shares held through a Wachovia Bank sweep account program,
redemptions will be made by Wachovia Bank on your behalf pursuant to the sweep
agreement you signed as part of your trust account with Wachovia Bank.

WRAP FEE PROGRAM

If you are redeeming Shares of the Money Market Fund held through a wrap fee
program, they will be made by Wachovia Bank on your behalf pursuant to the
related account agreement you have with Wachovia Bank.

LIMITATIONS ON REDEMPTION PROCEEDS
Redemption proceeds are normally paid 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.

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.

ADDITIONAL CONDITIONS

Telephone Transactions

Share Certificates

The Funds no longer issues Share certificates. If you are redeeming or
exchanging Shares represented by certificates previously issued by a Fund, you
must return the certificates with your written redemption or exchange 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
Each month you will receive confirmation of all activity in your account
including purchases, redemptions, exchanges and dividends and capital gains
paid.

DIVIDENDS AND CAPITAL GAINS

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

If you purchase Shares just before a Fund declares a dividend or capital gain
distribution, you will pay the full price for the Shares and then receive a
portion of the price back in the form of a distribution, whether or not you
reinvest the distribution in Shares. Therefore, you should consider the tax
implications of purchasing Shares shortly before a Fund declares a dividend or
capital gain. Investors who purchase Shares through Wachovia Bank or another
Service Organization should consult their account agreement for any special
provisions with respect to dividends, capital gains and available reinvestment
options.

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

Fund distributions (except Tax-Free Fund) are expected to be primarily
dividends. Redemptions and exchanges are taxable sales.

Please consult your tax adviser regarding your federal, state, and local tax
liability.

Tax-Free Fund

Capital gains and non-exempt dividends are taxable whether paid in cash or
reinvested in the 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 investment adviser receives an annual investment advisory fee equal to
0.50% of each Fund's average daily net assets.

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

Financial Information

FINANCIAL HIGHLIGHTS

Financial Highlights-Money Market Fund

INVESTMENT SHARES

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report dated January 20, 1999 is included in the
Annual Report for the Fund, which is incorporated by reference. This table
should be read in conjunction with the Fund's Financial Statements and notes
thereto, which may be obtained free of charge from the Fund.

Further information about the performance of the Fund is contained in the Fund's
Annual Report dated November 30, 1998 which may be obtained free of charge.

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended November 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.05 0.05 0.05 0.05 0.03
Less distributions
Distributions from net investmentincome (0.05) (0.05) (0.05) (0.05) (0.03)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return (a) 4.92% 4.95% 4.83% 5.40% 3.46%

Ratios to average net assets
Expenses 0.78% 0.78% 0.77% 0.72% 0.68%
Net investment income 4.80% 4.85% 4.74% 5.27% 3.44%
Expense waiver/reimbursement (b) 0.26% 0.28% 0.32% 0.40% 0.50%
Supplemental data
Net assets, end of period (000 omitted) $482,128 $320,480 $230,263 $165,636 $56,105
</TABLE>

(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

Financial HighlightsTax-Free Money Market Fund

INVESTMENT SHARES

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report dated January 20, 1999 is included in the
Annual Report for the Fund, which is incorporated by reference. This table
should be read in conjunction with the Fund's Financial Statements and notes
thereto, which may be obtained free of charge from the Fund.

Further information about the performance of the Fund is contained in the Fund's
Annual Report dated November 30, 1998 which may be obtained free of charge.

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended November 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.03 0.03 0.03 0.03 0.02
Less distributions
Distributions from net investment income (0.03) (0.03) (0.03) (0.03) (0.02)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return (a) 2.88% 2.99% 2.83% 3.25% 2.11%

Ratios to average net assets
Expenses 0.64% 0.64% 0.69% 0.66% 0.68%
Net investment income 2.83% 2.93% 2.84% 3.19% 2.11%
Expense waiver/reimbursement (b) 0.41% 0.45% 0.43% 0.52% 0.55%
Supplemental data
Net assets, end of period (000 omitted) $133,211 $85,852 $74,922 $55,733 $42,820
</TABLE>

(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

Financial Highlights-U.S. Treasury Money Market Fund

INVESTMENT SHARES

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report dated January 20, 1999 is included in the
Annual Report for the Fund, which is incorporated by reference. This table
should be read in conjunction with the Fund's Financial Statements and notes
thereto, which may be obtained free of charge from the Fund.

Further information about the performance of the Fund is contained in the Fund's
Annual Report dated November 30, 1998 which may be obtained free of charge.

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)
<TABLE>
<CAPTION>
Year Ended November 30,
1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from investment operations
Net investment income 0.05 0.05 0.04 0.05 0.03
Less distributions
Distributions from net investment income (0.05) (0.05) (0.04) (0.05) (0.03)
Net asset value, end of period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total return (a) 4.83% 4.89% 4.77% 5.30% 3.39%

Ratios to average net assets
Expenses 0.63% 0.64% 0.70% 0.66% 0.66%
Net investment income 4.74% 4.80% 4.68% 5.21% 3.42%
Expense waiver/reimbursement (b) 0.40% 0.41% 0.39% 0.46% 0.61%
Supplemental data
Net assets, end of period (000 omitted) $198,771 $117,495 $104,336 $81,739 $46,396
</TABLE>

(a) Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

(b) This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

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

To obtain the SAI, the annual and semi-annual reports and other information call
your investment professional or the Fund at 1-800-994-4414.

WACHOVIA MONEY MARKET FUND
WACHOVIA TAX-FREE
MONEY MARKET FUND
WACHOVIA U.S. TREASURY
MONEY MARKET FUND
INVESTMENT SHARES

Addresses

WACHOVIA MONEY MARKET FUND
INVESTMENT SHARES

101 Greystone Boulevard
SC-9215
Columbia, SC 29226

DISTRIBUTOR

Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779

INVESTMENT ADVISER

Wachovia Asset Management
100 North Main Street
Winston-Salem, NC 27101

CUSTODIAN

Wachovia Bank, N.A.
301 North Church Street
Winston-Salem, NC 27150

TRANSFER AGENT,
DIVIDEND DISBURSING AGENT,
AND PORTFOLIO RECORDKEEPER

Federated Shareholder
Services Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779

COUNSEL TO
THE WACHOVIA FUNDS

Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, DC 20036-1800

COUNSEL TO
THE INDEPENDENT TRUSTEES

Piper & Marbury L.L.P.
1200 Nineteenth Street, NW
Washington, DC 20036-2430

INDEPENDENT AUDITORS

Ernst & Young LLP
One Oxford Centre
Pittsburgh, Pennsylvania 15219
February 28, 1999
822-21 (2/99)
Cusip 929901205
Cusip 929901403
Cusip 929901825
3042106A (2/99)

Wachovia Money Market Fund
Institutional Shares
(A Portfolio of The Wachovia Funds)

Prospectus
February 28, 1999

PROSPECTUS

Wachovia Money Market Fund

A Portfolio of The Wachovia Funds

INSTITUTIONAL SHARES

Fund Goals, Strategies, Performance and Risk 1
What are the Fund's Fees and Expenses? 3
What are the Fund's Main Investments and
Investment Techniques? 4
What are the Risks of Investing in the Fund? 4
What do Shares Cost? 5
How is the Fund Sold? 5
How to Purchase Shares 5
How to Exchange Shares 6
How to Redeem Shares 6
Account and Share Information 6
Who Manages the Fund? 7
Financial Information 7

FEBRUARY 28, 1999

Fund Goals, Strategies, Performance and Risk

WHAT IS THE FUND'S INVESTMENT GOAL?

The Fund's goal is to provide current income consistent with stability of
principal and liquidity.

WHAT IS THE MAIN INVESTMENT STRATEGY OF THE FUND?

The Fund pursues its objective by investing exclusively in a portfolio of money
market instruments (high-quality, short-term debt securities) maturing in 397
days or less. The investment adviser uses macroeconomic, credit and market
analysis to select portfolio securities. In doing so, it assesses the trend in
interest rates, the shape of various yield curves and relative duration.

Total Return Bar Chart and Table

[GRAPH APPEARS HERE-see appendix]

Historically, the Fund has maintained a constant $1.00 net asset value per
share. The bar chart shows the variability of the Fund's Institutional Shares
total returns on a yearly basis.

The Fund's Institutional 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 Institutional Shares highest
quarterly return was 1.45% (quarter ended June 30, 1995). Its lowest quarterly
return was 0.74% (quarter ended June 30, 1993).

Average Annual Total Returns and Yield
The following table represents the Fund's Institutional Shares Average Annual
Total Return through December 31, 1998.
<TABLE>
<CAPTION>
Calendar Period Return
<S> <C>
1 Year 5.28%
5 Years 5.12%
Start of Performance1 4.65%
</TABLE>

1 The Fund's Institutional Shares start of performance date was June 2, 1992.

The Fund's 7-Day Net Yield as of December 31, 1998 was 4.73%. Investors may
call the Fund at 1-800-994-4414 to acquire the current 7-Day Net Yield.

WHAT ARE THE PRINCIPAL RISKS OF INVESTING IN THE FUND?

An investment in the Fund is not insured or guaranteed by the Federal Deposit
Insurance Corporation or any other government agency. Although the Fund seeks to
preserve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Fund.

Money Market Risks

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

. Interest rate changes have a greater effect on the price of fixed income
securities with longer maturities. Money market funds try to minimize this
risk by purchasing short-term securities.

. The Fund can also be affected by the credit quality of the securities in its
portfolio. The credit quality of a security is based upon the ability of the
issuer to repay the security. Money market funds attempt to minimize this
risk by investing in securities with high credit quality.

Any of these risks may have an adverse affect on the Fund's total return or
yield.

What are the Fund's Fees and Expenses?

This table describes the fees and expenses that you may pay when you buy, hold
and redeem the Fund's Institutional Shares.

<TABLE>
<CAPTION>
Shareholder Fees Institutional
Fees Paid Directly From Your Investment Shares
<S> <C>
Maximum Sales Charge (Load) Imposed on Purchases (as a percentage of offering price) None
Maximum Deferred Sales Charge (Load) (as a percentage of original purchase price or redemption proceeds, as None
applicable)
Maximum Sales Charge (Load) Imposed on Reinvested Dividends (and other Distributions) (as a percentage of None
offering price)
Redemption Fee (as a percentage of amount redeemed, if applicable) None
Exchange Fee None

Annual Fund Operating Expenses
Expenses That are Deducted From Fund Assets (as a percentage of average net assets)
Management Fee 0.50% Distribution (12b-1) Fee None Shareholder Services Fee None
Other Expenses 0.14% Total Annual Fund Operating Expenses (Before Waiver)1 0.64%
Waiver of Fund Expenses 0.26% Total Actual Annual Fund Operating Expenses (After
Waiver) 0.38% 1 Pursuant to an agreement between the Adviser and the Trust, the
Adviser agrees during the period from December 15, 1998 through
January31, 2000 to waive its fees, and/or make reimbursements to the Funds, so
that each Fund's net operating expenses do not exceed, in the aggregate, the
Fund's Total Actual Annual Operating Expenses listed above. The Adviser agrees
that this obligation shall constitute a contractual commitment enforceable by
the Trust and that the Adviser shall not assert any right to reimbursement of
amounts so waived or reimbursed.
</TABLE>

EXAMPLE

The following Example is intended to help you compare the cost of investing in
the Fund's Institutional Shares with the cost of investing in other mutual
funds. The Example assumes that you invest $10,000 in each Fund's Institutional
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 the Fund's Institutional Shares 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>
Institutional Shares 1 Year 3 Years 5 Years 10 Years
<S> <C> <C> <C> <C>
$39 $122 $213 $480
</TABLE>

What are the Fund's Main Investments and Investment Techniques?

U.S. TREASURY OBLIGATIONS

U.S. Treasury Obligations are direct obligations of the federal government of
the United States. Investors regard treasury securities as having the lowest
credit risk.

BANK INSTRUMENTS

What are The

Risks of Investing in The Fund?

BANK INSTRUMENTS RISKS

YEAR 2000 READINESS

While it is impossible to determine in advance all of the risks to the Fund,
the Fund could experience interruptions in basic financial and operational
functions. Fund shareholders could experience errors or disruptions in Fund
share transactions or Fund communications.

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

The Adviser believes that its standard process for selecting securities
generally reduces the Fund's exposure to Year 2000 related problems. In
addition, to assess the potential effect of the Year 2000 problem, the Adviser
is reviewing available information regarding the Year 2000 readiness of issuers
of securities the Fund may purchase.

Year 2000 problems would also increase the risks of the Fund's investments.
The financial impact of these issues for the Fund is still being determined.
There can be no assurance that potential Year 2000 problems would not have a
material adverse effect on the Fund.

What do Shares Cost?

You can purchase, redeem, or exchange shares any day on which Wachovia Bank,
N.A., the New York Stock Exchange (NYSE) and the Federal Reserve Wire System are
open for business. When the Fund receives your transaction request in proper
form, it is processed at the next determined net asset value (NAV).

NAV is determined at 12:00 noon and as of the close of trading (normally, 4:00
p.m. Eastern time) on day's when the NYSE is open.

Consult your account agreement with Wachovia Bank in order to determine any
applicable minimum investment.
The required minimum investment may be modified for investments made via the
sweep account program under the applicable account agreement.

How is the Fund Sold?

The Fund offers two share classes: Investment Shares and Institutional Shares,
each representing interests in a single portfolio of securities.

How to Purchase Shares

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

THROUGH WACHOVIA BANK

If you are a customer of Wachovia Bank you may purchase Shares by telephone, by
mail or in person in accordance with the procedures established by Wachovia Bank
set forth in your account agreement.

Payment may be made to Wachovia Bank by check, federal funds, or by debiting
your account with Wachovia Bank.

In order for your purchase to receive that day's dividends:

. Purchase orders for the Funds must be received by Wachovia Bank by 11:00 a.m.
(Eastern time); and
. Payment by federal funds must by received by Wachovia Bank before 4:00 p.m.
(Eastern time) on the same day as the purchase order.

Orders are considered received after payment by check is converted into federal
funds and received by Wachovia Bank, normally the next business day.

THROUGH AN EXCHANGE

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

THROUGH A SWEEP ACCOUNT

How to Exchange Shares

EXCHANGE PRIVILEGE

You may exchange Shares of a Fund for Shares of the same class of another 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 excessive number of exchanges may be disadvantageous to the Fund.
Therefore, the Fund, in addition to its right to reject any exchange, reserve
the right to modify or terminate the exchange privilege of any shareholder,
provided the shareholder is given 60 days' written notice.

Exchange orders must be received by the Fund between 12:00 noon (Eastern time)
and 4:00 p.m. (Eastern time) to receive that day's share price. Orders received
after 4:00 p.m. (Eastern time) will receive the price determined at 12:00 noon
(Eastern time) the next business day.

Call you account officer at Wachovia Bank for complete instructions on how to
exchange Shares.

How to Redeem Shares

The Fund redeems Shares at its NAV next determined after the Fund receives the
redemption request in proper form.

Contact your account officer at Wachovia Bank for complete instructions on how
to redeem Shares.

ADDITIONAL CONDITIONS

Telephone Transactions

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

Share Certificates

The Fund no longer issues 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 or exchange 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 periodic confirmation of all activity in your account including
purchases, redemptions, exchanges and dividends and capital gains paid.

DIVIDENDS AND CAPITAL GAINS

The Fund declares any dividends daily and pays them monthly to shareholders. If
you purchase shares by check, you begin earning dividends on the business day
after the Fund receives your check. You earn dividends through the day your
redemption request is received.

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

If you purchase Shares just before the 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.

ACCOUNTS WITH LOW BALANCES

TAX INFORMATION

The Fund sends 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 the Fund holds its assets.

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

Who Manages the Fund?

The Board of Trustees governs the Fund. The Board selects and oversees the
investment adviser, Wachovia Asset Management. The investment adviser manages
the Fund's assets, including buying and selling portfolio securities. The
investment adviser's address is 100 North Main Street, Winston-Salem, NC 27101.

Wachovia Bank has been managing trust assets for over 100 years, with over $42
billion in managed assets as of December 31, 1998. Wachovia Bank also serves as
investment adviser to The Wachovia Municipal Funds, another investment company.
The investment adviser receives an annual investment advisory fee equal to 0.50%
of the Fund's average aggregate daily net assets.

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

Financial Information

FINANCIAL HIGHLIGHTS

The following financial highlights are intended to help you understand the
Fund's financial performance for its past five fiscal years. 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 the Fund, assuming
reinvestment of all dividends and distributions.

FINANCIAL HIGHLIGHTS

INSTITUTIONAL SHARES

The following table has been audited by Ernst & Young LLP, the Fund's
independent auditors. Their report dated January 20, 1999 is included in the
Annual Report for the Fund, which is incorporated by reference. This table
should be read in conjunction with the Fund's Financial Statements and notes
thereto, which may be obtained free of charge from the Fund.

Further information about the performance of the Fund is contained in the Fund's
Annual Report dated November 30, 1998 which may be obtained free of charge.

(FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD)

<TABLE>
<CAPTION>
Year Ended November 30 1998 1997 1996 1995 1994
<S> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Income from Investment Operations:
Net investment income 0.05 0.05 0.05 0.06 0.04
Less Distributions:
Distributions from net investment income (0.05) (0.05) (0.05) (0.06) (0.04)
Net Asset Value, End of Period $ 1.00 $ 1.00 $ 1.00 $ 1.00 $ 1.00
Total Returna 5.33% 5.37% 5.25% 5.75% 3.77%

Ratios to Average Net Assets:
Expenses 0.38% 0.38% 0.37% 0.38% 0.38%
Net investment income 5.20% 5.24% 5.14% 5.61% 3.74%
Expense waiver/reimbursementb 0.26% 0.28% 0.32% 0.34% 0.40%
Supplemental Data:
Net assets, end of period (000 omitted) $181,282 $157,438 $135,748 $126,042 $129,233
</TABLE>

a Based on net asset value, which does not reflect the sales charge or
contingent deferred sales charge, if applicable.

b This voluntary expense decrease is reflected in both the expense and net
investment income ratios shown above.

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

To obtain the SAI, the annual and semi-annual reports and other information call
your investment professional or the Fund at 1-800-994-4414.

Wachovia Money Market Fund
Institutional Shares
(A Portfolio of The Wachovia Funds)

Addresses

Wachovia Money Market Fund
Institutional Shares

101 Greystone Boulevard
SC-9215
Columbia, SC 29226

Distributor

Federated Securities Corp.
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779

Investment Adviser

Wachovia Asset Management
100 North Main Street
Winston-Salem, NC 27101

Custodian

Wachovia Bank, N.A.
301 North Church Street
Winston-Salem, NC 27150

Transfer Agent,
Dividend Disbursing Agent,
and Portfolio Recordkeeper

Federated Shareholder
Services Company
Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, Pennsylvania 15222-3779

Counsel to the Wachovia Funds

Kirkpatrick & Lockhart LLP
1800 Massachusetts Avenue, NW
Washington, DC 20036-1800

Counsel to the Independent Trustees

Piper & Marbury L.L.P.
1200 Nineteenth Street, NW
Washington, DC 20036-2430

Independent Auditors

Ernst & Young LLP
One Oxford Centre
Pittsburgh, Pennsylvania 15219

February 28, 1999
822-16 (2/99)

[RECYCLED PAPER LOGO]
Cusip 929901106
2020203A-IS (2/99)

THE WACHOVIA FUNDS
Wachovia Money Market Fund
Wachovia Prime Cash Management Fund
Wachovia U.S. Treasury Money Market Fund
Wachovia Tax-Free Money Market Fund
Institutional Shares
Investment Shares
Statement of Additional Information
February 28, 1999

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

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

Contents

How Are the Funds Organized?..........................1
Securities in Which the Funds Invest..................1
What do Shares Cost?..................................8
How Are the Funds Sold?...............................9
How to Buy Shares.....................................9
How to Redeem Shares..................................9
Account and Share Information.........................10
Tax Information.......................................10
Who Manages and Provides Services to the Funds........10
How do the Funds Measure Performance?.................13
Financial Information.................................15
Investment Ratings....................................15
Addresses.............................................19
Federated Securities Corp., Distributor,
subsidiary of Federated Investors, Inc.
2020203B (2/99)

<PAGE>

HOW ARE THE FUNDS ORGANIZED?

The Wachovia Funds (the Trust) is an open-end, management investment company
that established under the laws of the Commonwealth of Massachusetts on November
19, 1991. The Trust may offer separate series of shares representing interests
in separate portfolios of securities. The Funds are diversified portfolios of
the Trust. The Trust changed its name from The Biltmore Funds on July 31, 1997.
The Board of Trustees (the Board) has established two classes of shares of the
Funds, known as Institutional Shares and Investment Shares (Shares). This SAI
relates to both classes of Shares. Each Fund offers both classes except for the
Prime Cash Management Fund which offers only Investment Shares.

SECURITIES IN WHICH THE FUNDS INVEST

Following is a table that indicates 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>

- -----------------------------------------------------------------------------------------------------------------------
Securities Money Market Fund Prime Cash U.S Treasury Fund Tax-Free Fund
Management Fund
- ---------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Bank Instruments A A N A
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Commercial Paper2 A A N A
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Corporate Debt Obligations A A N N
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Credit Enhancement7 A A N A
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Foreign Bank Instruments A A N N
- --------------------------------------------- -------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Lending of Portfolio Securities5 A A A N
- --------------------------------------------- -------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Money Market Instruments1 P P A A
- ----------------------------------------------------------------------------------
- --------------------------------------------- -------------------------------------
Municipal Securities3 N N N P
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Repurchase Agreements4 A A A A
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Restricted and Illiquid Securities4 A A N A
- -----------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Reverse Repurchase Agreements A A A A
--------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Securities of Other Investment Companies A A A A
--------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Temporary Investments N N N A
------------------------------------- ------------------
- -----------------------------------------------------------------------------------------------------------------------
U.S. Government Obligations A A P A
--------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------
Variable Rate Demand Notes A A N A
- ---------------------------------------------
--------------------------------------------------------------------------
When-Issued and Delayed Delivery A A A A
Transactions6
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>

1. Rated in the highest short-term rating categories by one or more nationally
recognized statistical rating organizations (NRSROs). 2. Rated A-1 by Standard &
Poor's or Prime-1 by Moody's Investors Service. 3. The Tax-Free Fund may
purchase up to 20% of its total net assets in municipal securities, the interest
of which is subject to federal alternative minimum tax. 4. As a matter of
practice, repurchase agreements providing for settlement in more than seven days
after notice and other illiquid obligations will be limited to not more than 10%
of each Fund's net assets. 5. The amount of portfolio securities each Fund will
lend will be limited to not more than one-third of each Fund's total assets. 6.
Each Fund does not intend to engage in such transactions to an extent that would
cause the segregation of more than 20% of the total value of its assets. 7. A
Fund may have more than 25% of its total assets invested in securities credit
enhanced by banks.

<PAGE>

Securities Descriptions and Techniques
Fixed Income Securities
Fixed income securities pay interest, dividends or distributions at a specified
rate. The rate may be a fixed percentage of the principal or adjusted
periodically. In addition, the issuer of a fixed income security must repay the
principal amount of the security, normally within a specified time. Fixed income
securities provide more regular income than equity securities. However, the
returns on fixed income securities are limited and normally do not increase with
the issuer's earnings. This limits the potential appreciation of fixed income
securities as compared to equity securities. A security's yield measures the
annual income earned on a security as a percentage of its price. A security's
yield will increase or decrease depending upon whether it costs less (a
discount) or more (a premium) than the principal amount. If the issuer may
redeem the security before its scheduled maturity, the price and yield on a
discount or premium security may change based upon the probability of an early
redemption. Securities with higher risks generally have higher yields. The
following describes the types of fixed income securities in which a Fund may
invest.
Treasury Securities
Treasury securities are direct obligations of the federal government of the
United States. Investors regard treasury securities as having the lowest
credit risks. Agency Securities Agency securities are issued or guaranteed
by a federal agency or other government sponsored entity acting under
federal authority (a GSE). The United States supports some GSEs with its
full, faith and credit. Other GSEs receive support through federal
subsidies, loans or other benefits. A few GSEs have no explicit financial
support, but are regarded as having implied support because the federal
government sponsors their activities. Investors regard agency securities as
having low credit risks, but not as low as treasury securities. The Fund
treats mortgage backed securities guaranteed by GSEs as agency securities.
Although a GSE guarantee protects against credit risks, it does not reduce
the market and prepayment risks of these mortgage backed securities.
Corporate Debt Securities Corporate debt securities are fixed income
securities issued by businesses. Notes, bonds, debentures and commercial
paper are the most prevalent types of corporate debt securities. A Fund may
also purchase interests in bank loans to companies. The credit risks of
corporate debt securities vary widely amount issuers. The credit risk of an
issuer's debt security may also vary based on its priority for repayment.
For example, higher ranking (senior) debt securities have a higher priority
than lower ranking (subordinated) securities. This means that the issuer
might not make payments on subordinated securities while continuing to make
payments on senior securities. In addition, in the event of bankruptcy,
holders of senior securities may receive amounts otherwise payable to the
holders of subordinated securities. Some subordinated securities, such as
trust preferred and capital securities notes, also permit the issuer to
defer payments under certain circumstances. For example, insurance
companies issue securities known as surplus notes that permit the insurance
company to defer any payment that would reduce its capital below regulatory
requirements.
Commercial Paper
Commercial paper is an issuer's obligation with a maturity of less than
nine months. Companies typically issue commercial paper to pay for
current expenditures. Most issuers constantly reissue their commercial
paper and use the proceeds (or borrowings from bank loans) to repay
maturing paper. If the issuer cannot continue to obtain liquidity in
this fashion, its commercial paper may default. The short maturity of
commercial paper reduces both the market and credit risks as compared
to other debt securities of the same issuer. Demand Instruments Demand
instruments are corporate debt securities that the issuer must repay
upon demand. Other demand instruments require a third party, such as a
dealer or bank, to repurchase the security for its face value upon
demand. The Fund treats demand instruments as short-term securities,
even though their stated maturity may extend beyond one year.
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. 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.
Tax Exempt Securities
Tax exempt securities are fixed income securities that pay interest that is not
subject to regular federal income taxes. Typically, states, counties, cities and
other political subdivisions and authorities issue tax exempt securities. The
market categorizes tax exempt securities by their source of repayment.
General Obligation Bonds
General obligation bonds are supported by the issuer's power to exact
property or other taxes. The issuer must impose and collect taxes
sufficient to pay principal and interest on the bonds. However, the
issuer's authority to impose additional taxes may be limited by its charter
or state law. Special Revenue Bonds Special revenue bonds are payable
solely from specific revenues received by the issuer such as specific
taxes, assessments, tolls, or fees. Bondholders may not collect from the
municipality's general taxes or revenues. For example, a municipality may
issue bonds to build a toll road, and pledge the tolls to repay the bonds.
Therefore, any shortfall in the tolls normally would result in a default on
the bonds.
Private Activity Bonds
Private activity bonds are special revenue bonds used to finance
private entities. For example, a municipality may issue bonds to
finance a new factory to improve its local economy. The municipality
would lend the proceeds from its bonds to the company using the
factory, and the company would agree to make loan payments sufficient
to repay the bonds. The bonds would be payable solely from the
company's loan payments, not from any other revenues of the
municipality. Therefore, any default on the loan normally would result
in a default on the bonds. The interest on many types of private
activity bonds is subject to the federal alternative minimum tax (AMT).
Tax Increment Financing Bonds
Tax increment financing (TIF) bonds are payable from increases in taxes or
other revenues attributable to projects financed by the bonds. For example,
a municipality may issue TIF bonds to redevelop a commercial area. The TIF
bonds would be payable solely from any increase in sales taxes collected
from merchants in the area. The bonds could default if merchants' sales,
and related tax collections, failed to increase as anticipated. Municipal
Notes Municipal notes are short-term tax exempt securities. Many
municipalities issue such notes to fund their current operations before
collecting taxes or other municipal revenues. Municipalities may also issue
notes to fund capital projects prior to issuing long-term bonds. The
issuers typically repay the notes at the end of their fiscal year, either
with taxes, other revenues or proceeds from newly issued notes or bonds.

Variable Rate Demand Instruments
Variable rate demand instruments are tax exempt securities that require the
issuer or a third party, such as a dealer or bank, to repurchase the
security for its face value upon demand. The securities also pay interest
at a variable rate intended to cause the securities to trade at their face
value. The Fund treats demand instruments as short-term securities, because
their variable interest rate adjusts in response to changes in market
rates, even though their stated maturity may extend beyond thirteen months.
Municipal Leases Municipalities frequently enter into leases for equipment
or facilities. In order to comply with state public financing laws, these
leases are typically subject to annual appropriation. In other words, a
municipality may end a lease, without penalty, by failing to include the
lease payments in its annual budget. However, upon such an event, the
lessor may repossess and resell the equipment or facility. The Fund
typically invests in securities supported by pools of municipal leases. The
most common type of lease backed securities are certificates of
participation (COPs). However, the Fund may also invest directly in
individual leases.
Special Transactions
Repurchase Agreements
Repurchase agreements are transactions in which a Fund buys a security from
a dealer or bank and agrees to sell the security back at a mutually agreed
upon time and price. The repurchase price exceeds the sale price,
reflecting the Fund's return on the transaction. This return is unrelated
to the interest rate on the underlying security. The Fund will enter into
repurchase agreements only with banks and other recognized financial
institutions, such as securities dealers, deemed creditworthy by the
investment adviser. The Funds' custodian or subcustodian will take
possession of the securities subject to repurchase agreements. The
investment adviser or subcustodian will monitor the value of the underlying
security each day to ensure that the value of the security always equals or
exceeds the repurchase price. Repurchase agreements are subject to credit
risks. Reverse Repurchase Agreements Reverse repurchase agreements are
repurchase agreements in which the Fund is the seller (rather than the
buyer) of the securities, and agrees to repurchase them at an agreed upon
time and price. A reverse repurchase agreement may be viewed as a type of
borrowing by the Fund. Reverse repurchase agreements are subject to credit
risks. In addition, reverse repurchase agreements create leverage risks
because the Fund must repurchase the underlying security at a higher price,
regardless of the market value of the security at the time of repurchase.
When Issued Transactions When issued transactions are arrangements in which
the Fund buys securities for a set price, with payment and delivery of the
securities scheduled for a future time. During the period between purchase
and settlement, no payment is made by the Fund to the issuer and no
interest accrues to the Fund. The Fund records the transaction when it
agrees to buy the securities and reflects their value in determining the
price of its shares. Settlement dates may be a month or more after entering
into these transactions so that the market values of the securities bought
may vary from the purchase prices. Therefore, when issued transactions
create market risks for the Fund. When issued transactions also involve
credit risks in the event of a counterparty default.
To Be Announced Securities (TBAs)
As with other when issued transactions, a seller agrees to issue a TBA
security at a future date. However, the seller does not specify the
particular securities to be delivered. Instead, the Fund agrees to
accept any security that meets specified terms. For example, in a TBA
mortgage backed transaction, the Fund and the seller would agree upon
the issuer, interest rate and terms of the underlying mortgages.
However, the seller would not identify the specific underlying
mortgages until it issues the security. TBA mortgage backed securities
increase market risks because the underlying mortgages may be less
favorable than anticipated by the Fund.

Securities Lending
A Fund may lend portfolio securities to borrowers that the investment
adviser deems creditworthy. In return, the Fund receives cash or liquid
securities from the borrower as collateral. The borrower must furnish
additional collateral if the market value of the loaned securities
increases. Also, the borrower must pay the Fund the equivalent of any
dividends or interest received on the loaned securities. The Fund will
reinvest cash collateral in securities that qualify as an acceptable
investment for the Fund. However, the Fund must pay interest to the
borrower for the use of cash collateral. Loans are subject to termination
at the option of the Fund or the borrower. The Fund will not have the right
to vote on securities while they are on loan, but it will terminate a loan
in anticipation of any important vote. The Fund may pay administrative and
custodial fees in connection with a loan and may pay a negotiated portion
of the interest earned on the cash collateral to a securities lending agent
or broker. Securities lending activities are subject to market risks and
credit risks.
Investment Risks
Leverage Risks
o Leverage risk is created when an investment exposes the Fund to a level of
risk that exceeds the amount invested. Changes in the value of such an
investment magnify the Fund's risk of loss and potential for gain.
o Investments can have these same results if their returns are based on a
multiple of a specified index, security, or other benchmark.
Bond Market Risks
o Prices of fixed income securities rise and fall in response to interest
rate changes for similar securities. Generally, when interest rates rise,
prices of fixed income securities fall.
o Interest rate changes have a greater effect on the price of fixed income
securities with longer durations. Duration measures the price sensitivity
of a fixed income security to changes in interest rates.
Credit Risks
o Credit risk is the possibility that an issuer will default on a security by
failing to pay interest or principal when due. If an issuer defaults, a
Fund will lose money.
o Many fixed income securities receive credit ratings from services such as
Standard & Poor's and Moody's Investors Service. These services assign
ratings to securities by assessing the likelihood of issuer default. Lower
credit ratings correspond to higher credit risk. If a security has not
received a rating, the Fund must rely entirely upon the investment
adviser's credit assessment.
o Fixed income securities generally compensate for greater credit risk by
paying interest at a higher rate. The difference between the yield of a
security and the yield of a U.S. Treasury security with a comparable
maturity (the spread) measures the additional interest paid for risk.
Spreads may increase generally in response to adverse economic or market
conditions. A security's spread may also increase if the security's rating
is lowered, or the security is perceived to have an increased credit risk.
An increase in the spread will cause the price of the security to decline.
o Credit risk includes the possibility that a party to a transaction
involving the Fund will fail to meet its obligations. This could cause the
Fund to lose the benefit of the transaction or prevent the Fund from
selling or buying other securities to implement its investment strategy.
Prepayment Risks
o Generally, homeowners have the option to prepay their mortgages at any time
without penalty. Homeowners frequently refinance high interest rate
mortgages when mortgage rates fall. This results in the prepayment of
mortgage backed securities with higher interest rates. Conversely,
prepayments due to refinancings decrease when mortgage rates increase. This
extends the life of mortgage backed securities with lower interest rates.
As a result, increases in prepayments of high interest rate mortgage backed
securities, or decreases in prepayments of lower interest rate mortgage
backed securities, may reduce their yield and price. This relationship
between interest rates and mortgage prepayments makes the price of mortgage
backed securities more volatile than most other types of fixed income
securities with comparable credit risks.
Investment Limitations
Issuing Senior Securities and Borrowing Money
The Funds will not issue senior securities, except that each Fund may
borrow money directly or through reverse repurchase agreements in
amounts up to one-third of the value of its total assets, including the
amount borrowed. The Funds will not borrow money or engage in reverse
repurchase agreements for investment leverage, but rather as a
temporary, extraordinary, or emergency measure or to facilitate
management of the portfolio by enabling the Fund to meet redemption
requests when the liquidation of portfolio securities is deemed to be
inconvenient or disadvantageous.

Lending Cash or Securities
The Funds will not lend any of its assets, except portfolio securities
up to one-third of the value of its total assets. This shall not
prevent the Money Market Fund or the Prime Cash Management Fund from
purchasing or holding money market instruments, including repurchase
agreements and variable amount demand master notes, permitted by its
investment objective, policies, and limitations or Declaration of Trust
or prevent the Treasury Money Market Fund from purchasing or holding
U.S. government securities, including repurchase agreements, permitted
by its investment objective and policies.

The Tax-Free Fund will not lend any of its assets, except that it may
acquire publicly or non-publicly issued Municipal Securities or
temporary investments or enter into repurchase agreements, in
accordance with its investment objective, policies and limitations.
Investing in Real Estate
The Money Market Fund and the Prime Cash Management Fund will not
purchase or sell real estate, including limited partnership interests,
although they may invest in securities of issuers 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 Treasury Money Market Fund and the Tax-Free Money Market Fund may
not purchase or sell real estate, including limited partnership
interests, although the Tax-Free Money Market Fund may invest in
securities secured by real estate or interests in real estate.

Investing in Commodities
The Funds will not purchase or sell commodities, commodity contracts,
or commodity futures contracts.

Diversification of Investments
With respect to securities comprising 75% of the value of its total
assets, the Money Market Fund, Prime Cash Management Fund and Tax-Free
Money Market Fund each will not purchase securities of any one issuer
(other than cash, cash items or securities issued or guaranteed by the
government of the United States or its agencies or instrumentalities
and repurchase agreements collateralized by U.S. government securities,
or, with respect to the Treasury Money Market Fund, collateralized by
U.S. Treasury Securities) if as a result more than 5% of the value of
its total assets would be invested in the securities of that issuer.

Concentration of Investments
The Money Market Fund and the Prime Cash Management Fund each will not
invest 25% or more of the value of its total assets in any one
industry. Each Fund may invest 25% or more of the value of its total
assets in cash or certain money market instruments, (including, with
respect to the Prime Cash Management Fund, instruments issued by a U.S.
branch of a domestic bank having capital, surplus, and undivided
profits in excess of $100,000,000 at the time of investment),
securities issued or guaranteed by the U.S. government, its agencies,
or instrumentalities, or instruments secured by these money market
instruments, such as repurchase agreements.

The Tax-Free Money Market Fund will not purchase securities, if, as a
result of such purchase 25% or more of the value of its assets would be
invested in any one industry or in industrial development bonds or
other securities, the interest upon which is paid from revenues of
similar type projects. However, the Fund may invest, as a temporary
investments, more than 25% of the value of its assets in cash or
certain money market instruments, including securities issued or
guaranteed by the U.S. government, its agencies, or instrumentalities
or instruments secured by these money market instruments, such as
repurchase agreements.

Underwriting
Each Fund will not underwrite any issue of securities, except as it may
be deemed to be an underwriter under the Securities Act of 1933 in
connection with the sale of securities in accordance with its
investment objective, policies, and limitations.

Except as noted, the above limitations cannot be changed without shareholder
approval. The Funds do not consider the issuance of separate classes of shares
to involve the issuance of "senior securities" within the meaning of the
investment limitation set forth above. The following investment limitations,
however, may be changed by the Board of Trustees (the "Trustees") without
shareholder approval. Shareholders will be notified before any material change
in these policies becomes effective.

Selling Short and Buying on Margin
The Funds will not sell any securities short or purchase any securities
on margin but may obtain such short-term credits as are necessary for
clearance of transactions.

Investing in Restricted Securities
The Money Market Fund and the Prime Cash Management Fund each will not
invest more than 10% of its net assets in securities subject to
restrictions in resale under federal securities law, except for Section
4(2) commercial paper and other restricted securities determined to be
liquid under criteria established by the Trustees.

The Tax-Free Money Market Fund will not invest more than 10% of its net
assets in securities subject to restrictions on resale under federal
securities law, except for restricted securities determined to be
liquid under criteria established by the Trustees.

Investing in Illiquid Securities
The Money Market Fund and the Prime Cash Management Fund each will not
invest more than 10% of the value of its net assets in illiquid
securities, including repurchase agreements providing for settlement in
more than seven days after notice, non-negotiable fixed income time
deposits with maturities over seven days, and restricted securities
which have not been determined to be liquid under criteria established
by the Trustees.

The Tax-Free Money Market Fund and the Treasury Money Market Fund each
will not invest more than 10% of its net assets in illiquid securities,
including repurchase agreements providing for settlement in more than
seven days after notice, and, with respect to Tax-Free Money Market
Fund, in restricted securities which have not been determined to be
liquid under criteria established by the Trustees.

Investing in New Issuers
The Money Market Fund and the Prime Cash Management Fund each will not
invest in more than 5% of the value of its total assets in securities
of issuers which have records of less than three years of continuous
operations, including the operation of any predecessor.

Investing in Securities of Other Investment Companies
The Fund will limit its investment in other investment companies to no
more than 3% of the total outstanding voting stock of any investment
company, invest no more than 5% of its total assets in any one
investment company, or invest more than 10% of its total assets in
investment companies in general, unless it is permitted to exceed these
limitations by action of the SEC. The Fund will limit its investments
in the securities of other investment companies to those of money
market funds having investment objectives and policies similar to its
own. The Fund will purchase securities of closed-end investment
companies only in open market transactions involving only customary
broker's 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 agent fees, and
therefore any investment by the Fund in shares of another investment
company would be subject to such duplicate expenses.

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.

Each Fund will not purchase any securities while borrowings in excess of 5% of
the value of its total assets are outstanding.

Each Fund does not expect to borrow money in excess of 5% of the value of its
net assets or invest in securities of closed-end investment companies during the
coming fiscal year.

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 and loan, having capital, surplus, and undivided profits in excess of
$100,000,000 at the time of investment , to be "cash items."

Regulatory Compliance
Each Fund may follow non-fundamental operational policies that are more
restrictive than its fundamental investment limitations, as set forth in the
prospectus and this Statement of Additional Information, in order to comply with
applicable laws and regulations, including the provisions of and regulations
under the Investment Company Act of 1940. In particular, the Funds will comply
with the various requirements of Rule 2a-7, which regulates money market mutual
funds. Each Fund will determine the effective maturity of its investments, as
well as its ability to consider a security as having received the requisite
short-term ratings by NRSROs, according to Rule 2a-7. Each Fund may change these
operational policies to reflect changes in the laws and regulations without the
approval of its shareholders.

WHAT DO SHARES COST?

Each Fund attempts to stabilize the value of a Share at $1.00.

Use of the Amortized Cost Method
The Trustees have decided that the best method for determining the value of
portfolio instruments is amortized cost. Under this method, portfolio
instruments are valued at the acquisition cost as adjusted for amortization of
premium or accumulation of discount rather than at current market value. The
Funds' use of the amortized cost method of valuing portfolio instruments depends
on its compliance with certain conditions in Rule 2a-7 (the "Rule") promulgated
by the SEC under the 1940 Act. Under the Rule, the Trustees must establish
procedures reasonably designed to stabilize the net asset value per Share, as
computed for purposes of distribution and redemption, at $1.00 per Share, taking
into account current market conditions and the Fund's investment objective.

Under the Rule, the Funds are permitted to purchase instruments which are
subject to demand features or standby commitments. As defined by the Rule, a
demand feature entitles the Fund to receive the principal amount of the
instrument from the issuer or a third party on (1) no more than 30 days' notice
or (2) at specified intervals not exceeding 397 days on no more than 30 days'
notice. A standby commitment entitles the Fund to achieve same day settlement
and to receive an exercise price equal to the amortized cost of the underlying
instrument plus accrued interest at the time of exercise.

The Funds acquire instruments subject to demand features and standby commitments
to enhance the instrument's liquidity. The Funds treat demand features and
standby commitments as a part of the underlying instruments, because a Fund does
not acquire them for speculative purposes and cannot transfer them separately
from the underlying instruments. Therefore, although the Rule defines demand
features and standby commitments as "puts," the Funds do not consider them to be
separate investments for the purposes of its investment policies.

Monitoring Procedures
The Trustees' procedures include monitoring the relationship between
the amortized cost value per Share and the net asset value per Share
based upon available indications of market value. The Trustees will
decide what, if any, steps should be taken if there is a difference of
more than 0.5 of 1% between the two values. The Trustees will take any
steps they consider appropriate (such as redemption in kind or
shortening the average portfolio maturity) to minimize any material
dilution or other unfair results arising from differences between the
two methods of determining net asset value.

Investment Restrictions
The Rule requires that a Fund limit its investments to instruments
that, in the opinion of the Trustees, present minimal credit risks and
have received the requisite rating from one or more NRSROs. If the
instruments are not rated, the Trustees must determine that they are of
comparable quality.

The Rule also requires a Fund to maintain a dollar-weighted average
portfolio maturity (not more than 90 days) appropriate to the objective
of maintaining a stable net asset value of $1.00 per Share. In
addition, no instrument with a remaining maturity of more than 397 days
can be purchased by a Fund. Should the disposition of a portfolio
security result in a dollar-weighted average portfolio maturity of more
than 90 days, a Fund will invest its available cash to reduce the
average maturity to 90 days or less as soon as possible. Shares of
investment companies purchased by the Fund will meet these same
criteria and will have investment policies consistent with the Rule.

<PAGE>

The Funds may attempt to increase yield by trading portfolio securities
to take advantage of short-term market variations. This policy may,
from time to time, result in high portfolio turnover. Under the
amortized cost method of valuation, neither the amount of daily income
nor the net asset value is affected by any unrealized appreciation or
depreciation of the portfolio. In periods of declining interest rates,
the indicated daily yield on Shares of the Fund, computed by dividing
the annualized daily income on a Fund's portfolio by the net asset
value computed as above, may tend to be higher than a similar
computation made by using a method of valuation based upon market
prices and estimates. In periods of rising interest rates, the
indicated daily yield on Shares of a Fund computed the same way may
tend to be lower than a similar computation made by using a method of
calculation based upon market prices and estimates.

HOW ARE THE FUNDS SOLD?

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

Rule 12b-1 Plan
As a compensation-type plan, the Rule 12b-1 Plan is designed to pay the
Distributor (who may then pay investment professionals 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 professionals) to promote
sales of Shares so that overall Fund assets are maintained or increased. This
helps the Funds achieve economies of scale, reduce per share expenses, and
provide cash for orderly portfolio management and Share redemptions. Also, the
Funds' service providers that receive asset-based fees also benefit from stable
or increasing Fund assets.

The Funds may compensate the Distributor more or less than its actual marketing
expenses. In no event will a Fund pay for any expenses of the Distributor that
exceed the maximum Rule 12b-1 Plan fee.

HOW TO BUY SHARES

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.

HOW TO REDEEM SHARES

Redemption In Kind
Although each Fund intends 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 the Funds' portfolio securities.

Because the Funds have elected to be governed by Rule 18f-1 under the Investment
Company Act of 1940, the Fund is 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 Funds' Board deems fair and
equitable and, to the extent available, such securities will be readily
marketable.

<PAGE>

ACCOUNT AND SHARE INFORMATION

Voting Rights
Each share of a Fund gives the shareholder one vote in Trustee elections and
other matters submitted to shareholders for vote. All classes of each Fund in
the Trust have equal voting rights, except that in matters affecting only a
particular Fund or class, only Shares of that Fund or class are entitled to
vote.

Trustees may be removed by the Trustees or by shareholders at a special meeting.
A special meeting of shareholders will be called by the Trustees upon the
written request of shareholders who own at least 10% of the Trust's outstanding
shares of all series entitled to vote.

- ---------------------------------------- -------------------------------------- ---------------------- ------------------------
Shareholder Name Fund Share Class Percentage Owned
- ---------------------------------------- -------------------------------------- ---------------------- ------------------------
- ---------------------------------------- -------------------------------------- ---------------------- ------------------------
Wachovia Brokerage Services Money Market Fund Investment 43.24%
Tax Free Money Market Fund Investment 28.75%
U.S. Treasury Money Market Fund Investment 33.76%
- ---------------------------------------- -------------------------------------- ---------------------- ------------------------
- ---------------------------------------- -------------------------------------- ---------------------- ------------------------
Wachovia Bank of North Carolina Money Market Fund Investment 24.79%
Wachovia Investors Account Money Market Fund Institutional 100.00%
Tax Free Money Market Fund Investment 19.09%
U.S. Treasury Money Market Fund Investment 28.77%
U.S. Treasury Money Market Fund Institutional 100.00%
Prime Cash Management Fund Institutional 100.00%
- ---------------------------------------- -------------------------------------- ---------------------- ------------------------
- ---------------------------------------- -------------------------------------- ---------------------- ------------------------
Wachovia Bank of Georgia Money Market Fund Investment 18.07%
Wachovia Investors Account Tax Free Money Market Fund Investment 29.91%
U.S. Treasury Money Market Fund Investment 29.26%
- ---------------------------------------- -------------------------------------- ---------------------- ------------------------
- ---------------------------------------- -------------------------------------- ---------------------- ------------------------
Wachovia Bank of South Carolina Money Market Fund Investment 5.76%
Wachovia Investors Account Tax Free Money Market Fund Investment 19.48%
- ---------------------------------------- -------------------------------------- ---------------------- ------------------------
</TABLE>

Shareholders owning 25% or more of outstanding Shares may be in control and be
able to affect the outcome of certain matters presented for a vote of
shareholders.

TAX INFORMATION

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
Trust's other portfolios will be separate from those realized by the Fund.

WHO MANAGES AND PROVIDES SERVICES TO THE FUNDS?

Board Of Trustees
The Board is responsible for managing the Trust's business affairs and for
exercising all the Trust's 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 Trust,
principal occupations for the past five years, total compensation received as a
Trustee from the Trust as part of the Fund Complex for the most recent fiscal
year. Each of the Trustees and officers listed below holds an identical position
with The Wachovia Municipal Funds, another investment company. The Wachovia
Funds are comprised of fourteen Funds and The Wachovia Municipal Funds are
comprised of four funds, together they form the Fund Complex.

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

<PAGE>

- ---------------------------------- ---------------------------------------------------------------------- -------------------
Name Occupations for past 5 Years Aggregate
Birthdate Compensation from
Address Fund Complex
Position with Trusts
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
James A. Hanley Retired; Vice President and Treasurer, Abbott Laboratories (health $26,400
August 13, 1931 care products) (until 1992).
4272 Sanctuary Way
Bonita Springs, FL
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Samuel E. Hudgins Hudgins Consulting, LLC (independent consultant); President, $26,400
March 4, 1929 Percival Hudgins & Company, LLC (investment bankers/financial
715 Whitemere Court, N.W. consultants) (until September 1997); Director, Atlantic American
Atlanta, GA Corporation (insurance holding company).
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
J. Berkely Ingram, Jr. Real estate investor and partner; formerly, Vice Chairman, $24,000
April 17, 1924 Massachusetts Mutual Life Insurance Company.
114-L Reynolda Village
Winston-Salem, NC
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
D. Dean Kaylor Retired; Executive Vice President and Chief Financial Officer, NBD $24,000
June 29, 1930 Bank, N.A. and NBD Bancorp, Inc. (bank and bank holding company)
2835 Greenbriar (until 1990).
Harbor Springs, MI
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Alvin J. Schexnider, Ph.D. Chancellor, Winston-Salem State University. $12,000
May 26, 1945
5005 Marble Arch Road
Winston-Salem, NC 27104
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Charles S. Way, Jr.* Chairman and CEO, The Beach Company and its various affiliated $24,000
December 18, 1937 companies and partnerships.
211 King Street
Suite 300
Charleston, SC
Trustee
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
John W. McGonigle President and Chief Executive Officer, Federated Investors $0
October 26, 1938 Management Company; Executive Vice President, Secretary, General
Federated Investors Tower Counsel, and Trustee, Federated Investors; Trustee, Federated
Pittsburgh, PA Advisers, Federated Management, Federated Research, and Federated
President and Treasurer Services Company; and Director, Federated Securities Corp.
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Charles L. Davis, Jr. Vice President, Federated Services Company. $0
March 23, 1960
Federated Investors Tower
Pittsburgh, PA
Vice President and Assistant
Treasurer
- ---------------------------------- ---------------------------------------------------------------------- -------------------
- ---------------------------------- ---------------------------------------------------------------------- -------------------
Peter J. Germain Senior Vice President and Director of Proprietary Funds Services, $0
September 3, 1959 Federated Services Company; formerly, Senior Corporate Counsel,
Federated Investors Tower Federated Services Company.
Pittsburgh, PA
Secretary
- ---------------------------------- ---------------------------------------------------------------------- -------------------
</TABLE>

<PAGE>

Investment Adviser
The Adviser, Wachovia Asset Management, conducts investment research and makes
investment decisions for the Funds. The Adviser is a business unit of Wachovia
Bank, N.A.

The Adviser shall not be liable to the Trust, the Funds, or any Fund shareholder
for any losses that may be sustained in the purchase, holding, or sale of any
security or for anything done or omitted by it, except acts or omissions
involving willful misfeasance, bad faith, gross negligence, or reckless
disregard of the duties imposed upon it by its contract with the Trust.

Investment decisions for the Funds are made independently from those of other
accounts managed by the Adviser. When the Funds 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 Adviser to be equitable. While the coordination and
ability to participate in volume transactions may benefit the Funds, it is
possible that this procedure could adversely impact the price paid or received
and/or the position obtained or disposed of by the Funds.

Administrator
Federated Administrative Services, a subsidiary of Federated Investors, Inc.,
provides administrative personnel and services (including certain legal and
financial reporting services) necessary to operate the Funds. Federated
Administrative Services provides these at the following annual rate of the
average aggregate daily net assets of The Wachovia Funds and The Wachovia
Municipal Funds (excluding Wachovia Prime Cash Management Fund) as specified
below:
Maximum Average Aggregate Daily Net
Administrative Fee Assets of the Funds
.10 of 1% on the first $3.5 billion
.06 of 1% on assets in excess of $3.5 billion

Custodian
Wachovia Bank, N.A., is custodian (the Custodian) for the securities and cash of
the Funds. Under the Custodian Agreement, the Custodian holds the Funds'
portfolio securities in safekeeping and keeps all necessary records and
documents relating to its duties. For the services to be provided to the Trust
pursuant to the Custodian Agreement, the Trust pays the Custodian an annual fee
based upon the average daily net assets of each Fund and which is payable
monthly. The Custodian will also charge transaction fees and out-of-pocket
expenses.

Independent Auditor
Ernst & Young LLP is the independent auditor for the Funds.
<TABLE>
<CAPTION>

Fees Paid By The Funds For Services
- ------------------------ ---------------------------------------- ------------------------------------ --------------
Fund Advisory Fee Paid/ Administrative Fee Paid 12b-1 Fee
Advisory Fee Waived Advisory Fee Waived Paid
------------------------------------ --------------
---------------------------------------- ------------------------------------ --------------
For the fiscal year ended For the fiscal year ended For the
November 30, November 30, fiscal year
ended
---------------------------------------- ------------------------------------
-----------------------------------------------------------------------------
1998 1997 1996 1998 1997 1996 November 30,
1998
- ---------------------------------------------------------------------------------------------------------------------
Money Market Fund $2,852,311 $2,133,189 $1,682,976 $853,922 $357,303 $291,826 $467,324
$1,483,247 $1,207,652 $1,066,801 $0 $0 $0
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
Prime Cash Management $5,235,535 $4,057,063 $3,161,728 $853,922 $1,132,184 $913,490 N/A
Fund $3,308,314 $2,841,827 $2,374,109 $0 $383,724 $310,436
- ---------------------------------------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------------------------------------
U.S. Treasury Fund $3,390,866 $3,023,600 $1,754,090 $641,336 $507,009 $303,954 $601,466
$2,669,811 $2,489,781 $1,350,937 $0 $0 $0
---------------
- ---------------------------------------------------------------------------------------------------------------------
Tax-Free Fund $1,878,120 $1,318,455 $891,888 $353,629 $220,229 $154,633 $467,324
$1,562,980 $1,185,295 $757,528 $0 $0 $0
- ---------------------------------------------------------------------------------------------------------------------
</TABLE>

Fees are allocated among Classes based on their pro rata share of Fund assets,
except for marketing (Rule 12b-1) fees which are borne only by the applicable
Class of Shares.
HOW DO THE FUNDS MEASURE PERFORMANCE?

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 Funds' or any class of Shares'
expenses; and various other factors.

To the extent investment professionals 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.

Yield
Each Fund calculates its yield for both classes of Shares daily, based upon the
seven days ending on the day of the calculation, called the "base period." This
yield is computed by:

determining the net change in the value of a hypothetical account with
a balance of one Share at the beginning of the base period, with the net
change excluding capital changes but including the value of any additional
Shares purchased with dividends earned from the original one Share and all
dividends declared on the original and any purchased Shares;
dividing the net change in the account's value by the value of the
account at the beginning of the base period to determine
the base period return; and
multiplying the base period return by (365/7).

Effective Yield
The Funds' effective yield for both classes of Shares is computed by
compounding the unannualized base period return by: adding 1 to the
base period return; raising the sum to the 365/7th power; and
subtracting 1 from the result.

<PAGE>

- -------------------------------------- ---------------------------------- -----------------------------------
Fund Yield Effective Yield
for the 7-day period ended for the 7-day period ended
November 30, 1998 November 30, 1998
---------------------------------- -----------------------------------
---------------- ----------------- ----------------- -----------------
Institutional Investment Institutional Investment
Shares Shares Shares Shares
- -------------------------------------- ---------------- ----------------- ----------------- -----------------
- -------------------------------------- ---------------- ----------------- ----------------- -----------------
Money Market Fund 4.78% 4.38% 4.90% 4.48%
- -------------------------------------- ---------------- ----------------- ----------------- -----------------
- -------------------------------------- ---------------- ----------------- ----------------- -----------------
Prime Cash Management Fund 5.08% N/A 5.21% N/A
- -------------------------------------- ---------------- ----------------- ----------------- -----------------
- -------------------------------------- ---------------- ----------------- ----------------- -----------------
U.S. Treasury Fund 4.38% 3.98% 4.48% 4.06%
- -------------------------------------- ---------------- ----------------- ----------------- -----------------
Tax-Free Fund 3.09% 2.69% 3.14% 2.72%
- -------------------------------------- ---------------- ----------------- ----------------- -----------------
</TABLE>

Tax-Equivalent Yield-Tax-Free Fund
The tax- equivalent yield of Shares is calculated similarly to the yield, but is
adjusted to reflect the taxable yield that Shares would have had to earn to
equal the actual yield, assuming a specific tax rate. The yield and
tax-equivalent yield do not necessarily reflect income actually earned by Shares
because of certain adjustments required by the SEC and, therefore, may not
correlate to the dividends or other distributions paid to shareholders.

The tax-equivalent yields for the Tax-Free Money Market Fund's Institutional
Shares and Investment Shares for the seven-day period ended November 30, 1998
were 4.29% and 3.74%, respectively.

Tax Equivalency Table-Tax-Free Fund
Set forth below is the sample tax-equivalency table that may be used in
advertising and sales literature. The table is for illustrative purposes only
and is not representative of past or future performance of the Fund. The
interest earned by the municipal securities owned by the 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.

<PAGE>

Taxable Yield Equivalent for 1999 MultiState Municipal Fund

Federal Income Tax Bracket: 15.00% 28.00% 31.00% 36.00% 39.60%
Joint Return $1-43,050 $43,051-104,050 $104,051-158,550 $158,551-283,150 Over 283,150
Single Return $1-25,750 $25,751-62,450 $62,451-130,250 $130,251-283,150 Over 283,150
Tax Exempt Yield: Taxable Yield Equivalent:
1.00% 1.18% 1.39% 1.45% 1.56% 1.66%
1.50% 1.76% 2.08% 2.17% 2.34% 2.48%
2.00% 2.35% 2.78% 2.90% 3.13% 3.31%
2.50% 2.94% 3.47% 3.62% 3.91% 4.14%
3.00% 3.53% 4.17% 4.35% 4.69% 4.97%
3.50% 4.12% 4.86% 5.07% 5.47% 5.79%
4.00% 4.71% 5.56% 5.80% 6.25% 6.62%
4.50% 5.29% 6.25% 6.52% 7.03% 7.45%
5.00% 5.88% 6.94% 7.25% 7.81% 8.28%
5.50% 6.47% 7.64% 7.97% 8.59% 9.11%
6.00% 7.06% 8.33% 8.70% 9.38% 9.93%
6.50% 7.65% 9.03% 9.42% 10.16% 10.76%
7.00% 8.24% 9.72% 10.14% 10.94% 11.59%
7.50% 8.82% 10.42% 10.87% 11.72% 12.42%
8.00% 9.41% 11.11% 11.59% 12.50% 13.25%
</TABLE>

Note: The maximum marginal tax rate for each bracket was used in
calculating the taxable yield equivalent. 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 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.

Lipper Analytical Services, Inc. ranks funds in various fund categories
by making comparative calculations using total return. Total return assumes
the reinvestment of all income dividends and capital gains distributions,
if any. From time to time, the Fund will quote its Lipper ranking in the
"institutional tax exempt money market funds" and "tax exempt money market
funds" categories in advertising and sales literature.

Salomon Brothers Six-Month Prime Muni Notes is an index of selected
municipal notes, maturing in six months, whose yields are chosen as
representative of this market. Calculations are made weekly and monthly.

Salomon Brothers One-Month Tax-Exempt Commercial Paper is an index of
selected tax-exempt commercial paper issues, maturing in one month, whose
yields are chosen as representative of this particular market. Calculations
are made weekly and monthly.
Ehrlich-Bober & Co., Inc. also tracks this Salomon Brothers index.

Money, a monthly magazine, regularly ranks money market funds in
various categories based on the latest available seven-day compound
(effective) yield. From time to time, the Funds will quote its Money
ranking in advertising and sales literature.

IBC/Donoghue's Money Fund Report publishes annualized yields of
hundreds of money market funds on a weekly basis and, through its Money
Market Insight publication, reports monthly and 12-month-to-date investment
results for the same money funds.

Bank Rate Monitor National Index, Miami Beach, Florida, is a financial
reporting service which publishes weekly average rates of 50 leading bank
and thrift institution money market deposit accounts. The rates published
in the index are averages of the personal account rates offered on the
Wednesday prior to the date of publication by ten of the largest banks and
thrifts in each of the five largest Standard Metropolitan Statistical
Areas. Account minimums range upward from $2,500 in each institution and
compounding methods vary. If more than one rate is offered, the lowest rate
is used. Rates are subject to change at any time specified by the
institution.

FINANCIAL INFORMATION

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

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.

<PAGE>

ADDRESSES
<TABLE>
<CAPTION>

<S> <C>

The Wachovia Funds
Institutional Shares and Investment Shares 101 Greystone Boulevard
SC-9215
Columbia, SC 29226

Distributor
Federated Securities Corp. Federated Investors Tower
1001 Liberty Avenue,
Pittsburgh, Pennsylvania 15222-3779

Investment Adviser
Wachovia Asset Management 100 North Main Street
Winston-Salem, NC 27101

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

Transfer Agent and Dividend Disbursing Agent
Federated Shareholder Services Company Federated Investors Tower
1001 Liberty Avenue
Pittsburgh, PA 15222-3779

Independent Auditors
Ernst & Young LLP 200 Clarendon Street
Boston, MA 02116
</TABLE>

A. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Equity Fund Class A
Shares as of the calendar year-end for each of five years. The `y' axis
reflects the "% TotaL Return" beginning with "0" and increasing in
increments of 5% up to 35%. The `x-axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features five distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1994 through 1998, The
percentages noted are: 2.03%, 31.50%, 18.80%, 25.08% and 22.85% The total
returns displayed for the Fund do not reflect the payment of any sales
charges or recurring shareholder account fees. If these charges or fees had
been included, the returns shown would have been lower. Within the period
shown in the Chart, the Fund's highest quarterly return was 21.97%. Its
lowest quarterly return was- -11.37%.

B. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Quantitative Equity Fund
Class A Shares as of the calendar year-end for each of five years. The `y'
axis reflects the "% Total Return" beginning with "0" and increasing in
increments of10% up to 40%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features four distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1995through 1998, The
percentages noted are: 38.56%, 21.48%, 34.24% and 24.24%. The total returns
displayed for the Fund do not reflect the payment of any sales charges or
recurring shareholder account fees. If these charges or fees had been
included, the returns shown would have been lower. Within the period shown
in the Chart, the Fund's highest quarterly return was 23.16%. Its lowest
quarterly return was -10.56%.

C. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Growth & Income Fund
Class A Shares as of the calendar year-end for each of five years. The `y'
axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 5% up to 35%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features five distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1994through 1998, The
percentages noted are: -1.09%, 34.61%, 23.78%, 32.63% and24.32%. The total
returns displayed for the Fund do not reflect the payment of any sales
charges or recurring shareholder account fees. If these charges or fees had
been included, the returns shown would have been lower. Within the period
shown in the Chart, the Fund's highest quarterly return was 21.16%. Its
lowest quarterly return was -9.79%.

D. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Equity Index Fund Class A
Shares as of the calendar year-end for each of five years. The `y' axis
reflects the "% Total Return" beginning with "0" and increasing in
increments of 10% up to 40%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features five distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for 0.85%, 36.76%,22.41%, 32.32%, 27.82%. The
total returns displayed for the Fund do not reflect the payment of any
sales charges or recurring shareholder account fees. If these charges or
fees had been included, the returns shown would have been lower. Within the
period shown in the Chart, the Fund's highest quarterly return was21.17%.
Its lowest quarterly return was -10.05%.

E. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Special Values Fund Class
A Shares as of the calendar year-end for each of five years. The `y' axis
reflects the "% Total Return" beginning with "-5" and increasing in
increments of 5% up to 40%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998.The light gray shaded
chart features five distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the -3.32%, 30.26%, 36.98%, 29.08%, -1.51%.
The total returns displayed for the Fund do not reflect the payment of any
sales charges or recurring shareholder account fees. If these charges or
fees had been included, the returns shown would have been lower. Within the
period shown in the Chart, the Fund's highest quarterly return was 14.08%.
Its lowest quarterly return was -18.00%.

F. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Emerging Markets Fund
Class A Shares as of the calendar year-end for each of four years. The `y'
axis reflects the "% Total Return" beginning with "-25" and increasing in
increments of 5% up to 15%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year end December 31, 1998. The light gray shaded
chart features four distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1995 through 1998, The
percentages noted are: 7.93%, 10.32%, -4.01%, -24.79%. The total returns
displayed for the Fund do not reflect the payment of any sales charges or
recurring shareholder account fees. If these charges or fees had been
included, the returns shown would have been lower. Within the period shown
in the Chart, the Fund's highest quarterly return was 18.76%. Its lowest
quarterly return was -26.63%.

G. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Balanced Fund Class A
Shares as of the calendar year-end for each of five years. The `y' axis
reflects the "% Total Return" beginning with "-5" and increasing in
increments of 5% up to 30%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features five distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1994 through 1998, The
percentages noted are: -0.51%, 27.72,%, 13.64%, 19.13%,17.35%. The total
returns displayed for the Fund do not reflect the payment of any sales
charges or recurring shareholder account fees. If these charges or fees had
been included, the returns shown would have been lower. Within the period
shown in the Chart, the Fund's highest quarterly return was 12.86%. Its
lowest quarterly return was -5.22%.

H. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Fixed Income Fund Class A
Shares as of the calendar year-end for each of five Years. The `y' axis
reflects the "% Total Return" beginning with "-5" and increasing in
increments of 5% up to 20%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features five distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1994 through 1998, The
percentages noted are: -3.84%, 17.94%, 2.85%,8.17%, 8.34%. The total
returns displayed for the Fund do not reflect the payment of any sales
charges or recurring shareholder account fees. If these charges or fees had
been included, the returns shown would have been lower. Within the period
shown in the Chart, the Fund's highest quarterly return was5.97%. Its
lowest quarterly return was -3.12%.

I. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Intermediate Fixed Income
Fund Class A Shares as of the calendar year-end for each of five years. The
`y' axis reflects the "% Total Return" beginning with "-4" and increasing
in increments of 4% up to 16%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features five distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1994 through 1998, The
percentages noted are: -3.36, 15.15%, 2.01%, 8.66%, 8.76%. The total
returns displayed for the Fund do not reflect the payment of any sales
charges or recurring shareholder account fees. If these charges or fees had
been included, the returns shown would have been lower. Within the period
shown in the Chart, the Fund's highest quarterly return was 5.25%. Its
lowest quarterly return was -3.26%.

J. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Short-Term Fixed Income
Fund Class A Shares as of the calendar year-end for each of five years. The
`y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 2% up to 10%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features five distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1994 through 1998, The
percentages noted are: 1,17%, 9.34%, 4.58%, 5.59%,6.76%. The total returns
displayed for the Fund do not reflect the payment of any sales charges or
recurring shareholder account fees. If these charges or fees had been
included, the returns shown would have been lower. Within the period shown
in the Chart, the Fund's highest quarterly return was 3.23%. Its lowest
quarterly return was -0.27%.

K. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Georgia Municipal Bond
Fund Class A Shares as of the calendar year-end for each of four years. The
`y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 4% up to 16%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features four distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1995 through 1998, The
percentages noted are: 14.66%, 3.46%, 7.36%, 5.09%. Within the period shown
in the Chart, the Fund's highest quarterly return was 5.69%. Its lowest
quarterly return was -1.29%.

L. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia North Carolina Municipal
Bond Fund Class A Shares as of the calendar year-end for each of four
years. The `y' axis reflects the "%Total Return" beginning with "0" and
increasing in increments of 4% up to 16%.The `x' axis represents
calculation periods (from the earliest calendar year end of the Fund's
start of business through the calendar year ended December 31,1998. The
light gray shaded chart features four distinct vertical bars, each shaded
in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Class for each calendar year is
stated directly at the top of each respective bar, for the calendar years
1995 through 1998, The percentages noted are: 15.22%, 3.37%, 7.73%, 5.41%
Within the period shown in the Chart, the Fund's highest quarterly return
was 5.48%. Its lowest quarterly return was -1.72%.

M. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia South Carolina Municipal
Bond Fund Class A Shares as of the calendar year-end for each of seven
Years. The `y' axis reflects the "% Total Return" beginning with "-4" and
increasing in increments of 4% up to 16%. The `x' axis represents
calculation periods (from the earliest calendar year end of the Fund's
start of business through the calendar year ended December 31, 1998. The
light gray shaded chart features seven distinct vertical bars, each shaded
in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Class for each calendar year is
stated directly at the top of each respective bar, for the calendar years
1992through 1998, The percentages noted are: 8.73%, 12.01%,- -3.72%,
15.33%, 3.94%, 8.14%, 5.14% Within the period shown in the Chart, the
Fund's highest quarterly return was 5.96%. Its lowest quarterly return was-
-4.32%.

N. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Virginia Municipal Bond
Fund Class A Shares as of the calendar year-end for each of five years. The
`y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of5% up to 25%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year end December 31, 1998. The light gray shaded
chart features five distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1995through 1998, The
percentages noted are: -5.95%, 13.80%, 1.67%, 7.97%, 5.57%.Within the
period shown in the Chart, the Fund's highest quarterly return was5.23%.
Its lowest quarterly return was -5.59%.

CLASS Y SHARES

A. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Equity Fund Class Y
Shares as of the calendar year-end for each of two years. The `y' axis
reflects the "% Total Return" beginning with "0" and increasing in
increments of 5% up to 30%. The `x-axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features two distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1997 through 1998, The
percentages noted are: 25.37% and 23.15%. The total returns displayed for
the Fund do not reflect the payment of any sales charges or recurring
shareholder account fees. If these charges or fees had been included, the
returns shown would have been lower. Within the period shown in the Chart,
the Fund's highest quarterly return was 22.04%. Its lowest quarterly return
was -11.31%.

B. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Quantitative Equity Fund
Class Y Shares as of the calendar year-end for each of two years. The `y'
axis reflects the "% Total Return" beginning with "0"and increasing in
increments of 5% up to 30%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features two distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1997 through 1998, The
percentages noted are:25.37% and 23.15%. The total returns displayed for
the Fund do not reflect the payment of any sales charges or recurring
shareholder account fees. If these charges or fees had been included, the
returns shown would have been lower. Within the period shown in the Chart,
the Fund's highest quarterly return was 23.29%. Its lowest quarterly return
was -10.55%.

C. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Equity Index Fund Class Y
Shares as of the calendar year-end for each of two years. The `y' axis
reflects the "% Total Return" beginning with "0" and increasing in
increments of 5% up to 35%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features two distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1997 through 1998, the
percentages noted are: 32.70% and 28.15%.The total returns displayed for
the Fund do not reflect the payment of any sales charges or recurring
shareholder account fees. If these charges or fees had been included, the
returns shown would have been lower. Within the period shown in the Chart,
the Fund's highest quarterly return was 21.28%. Its lowest quarterly return
was -10.03%.

D. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Special Values Fund Class
Y Shares as of the calendar year-end for each of two years. The `y' axis
reflects the "% Total Return" beginning with "-5" and increasing in
increments of 5% up to 30%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year end December 31, 1998. The light gray shaded
chart features two distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1997through 1998, the
percentages noted are: 29.25% and -1.26%. The total returns displayed for
the Fund do not reflect the payment of any sales charges or recurring
shareholder account fees. If these charges or fees had been included, the
returns shown would have been lower. Within the period shown in the Chart,
the Fund's highest quarterly return was 14.13%. Its lowest quarterly return
was- -17.97%.

E. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Emerging Markets Fund
Class Y Shares as of the calendar year-end for each of two years. The `y'
axis reflects the "% Total Return" beginning with "-25" and increasing in
increments of 5% up to 0%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features two distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1997through 1998, The
percentages noted are: -3.89% and -24.62%. The total returns displayed for
the Fund do not reflect the payment of any sales charges or recurring
shareholder account fees. If these charges or fees had been included, the
returns shown would have been lower. Within the period shown in the Chart,
the Fund's highest quarterly return was 18.76%. Its lowest quarterly return
was- -26.53%.

F. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Balanced Fund Class Y
Shares as of the calendar year-end for each of two years. The `y' axis
reflects the "%Total Return" beginning with "0" and increasing in
increments of 5% up to 20%.The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31,1998. The light gray shaded
chart features two distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1997 through 1998, The
percentages noted are: 19.49 and 17.60%. The total returns displayed for
the Fund do not reflect the payment of any sales charges or recurring
shareholder account fees. If these charges or fees had been included, the
returns shown would have been lower. Within the period shown in the Chart,
the Fund's highest quarterly return was 12.91%. Its lowest quarterly return
was -5.17%.

G. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Fixed Income Fund Class Y
Shares as of the calendar year-end for each of two years. The `y' axis
reflects the "% Total Return" beginning with "-5" and increasing in
increments of 5% up to 20%. The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features two distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1997 through 1998, The
percentages noted are: 8.43% and 8.61%. The total returns displayed for the
Fund do not reflect the payment of any sales charges or recurring
shareholder account fees. If these charges or fees had been included, the
returns shown would have been lower. Within the period shown in the Chart,
the Fund's highest quarterly return was 3.92%. Its lowest quarterly return
was 1.01%.

H. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Short-Term Fixed Income
Fund Class Y Shares as of the calendar year-end for each of two years. The
`y' axis reflects the "%Total Return" beginning with "0" and increasing in
increments of 2% up to 10%.The `x' axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31,1998. The light gray shaded
chart features two distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1997 through 1998, The
percentages noted are: 5.85% and 7.12%. The total returns displayed for the
Fund do not reflect the payment of any sales charges or recurring
shareholder account fees. If these charges or fees had been included, the
returns shown would have been lower. Within the period shown in the Chart,
the Fund's highest quarterly return was 3.29%. Its lowest quarterly return
was 0.57%.

I. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Georgia Municipal Bond
Fund Class A Shares as of the calendar year-end for each of two years. The
`y' axis reflects the "% Total Return" beginning with "0" and increasing in
increments of 2% up to 10%. The `x-axis represents calculation periods
(from the earliest calendar year end of the Fund's start of business
through the calendar year ended December 31, 1998. The light gray shaded
chart features two distinct vertical bars, each shaded in charcoal, and
each visually representing by height the total return percentages for the
calendar year stated directly at its base. The calculated total return
percentage for the Class for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1997 through 1998, The
percentages noted are: 7.61% and 5.35%. The total returns displayed for the
Fund do not reflect the payment of any sales charges or recurring
shareholder account fees. If these charges or fees had been included, the
returns shown would have been lower. Within the period shown in the Chart,
the Fund's highest quarterly return was 3.17%. Its lowest quarterly return
was -0.66%.

J. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia North Carolina Municipal
Bond Fund Class Y Shares as of the calendar year-end for each of two years.
The `y' axis reflects the "% Total Return" beginning with "0" and
increasing in increments of 2% up to 10%. The `x' axis represents
calculation periods (from the earliest calendar year end of the Fund's
start of business through the calendar year ended December 31, 1998. The
light gray shaded chart features two distinct vertical bars, each shaded in
charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Class for each calendar year is
stated directly at the top of each respective bar, for the calendar years
1997 through 1998, The percentages noted are: 7.97% and 5.67%. The total
returns displayed for the Fund do not reflect the payment of any sales
charges or recurring shareholder account fees. If these charges or fees had
been included, the returns shown would have been lower. Within the period
shown in the Chart, the Fund's highest quarterly return was 3.39%. Its
lowest quarterly return was -0.51%.

K. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia South Carolina Municipal
Bond Fund Class Y Shares as of the calendar year-end for each of two years.
The `y' axis reflects the "% Total Return" beginning with "0" and
increasing in increments of 2% up to 10%. The `x' axis represents
calculation periods (from the earliest calendar year end of the Fund's
start of business through the calendar year ended December 31, 1998. The
light gray shaded chart features two distinct vertical bars, each shaded in
charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Class for each calendar year is
stated directly at the top of each respective bar, for the calendar years
1997 through 1998, The percentages noted are: 8.39% and 5.70%. The total
returns displayed for the Fund do not reflect the payment of any sales
charges or recurring shareholder account fees. If these charges or fees had
been included, the returns shown would have been lower. Within the period
shown in the Chart, the Fund's highest quarterly return was 3.34%. Its
lowest quarterly return was -0.31%.

INSTITUTIONAL SHARES

A. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Money Market Fund
Institutional Class Shares as of the calendar year-end for each of six
years. The `y' axis reflects the "%Total Return" beginning with "0" and
increasing in increments of 2% up to 6%.The `x' axis represents calculation
periods (from the earliest calendar year end of the Fund's start of
business through the calendar year ended December 31,1998. The light gray
shaded chart features 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 for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1993 through 1998, The
percentages noted are: 3.02%, 3.98%, 5.75%, 5.23%, 5.39%, 5.28%. Within the
period shown in the Chart, the Fund's highest quarterly return was 1.45%.
Its lowest quarterly return was 0.74%.

B. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Prime Cash Management
Fund Institutional Class Shares as of the calendar year-end for each of
five years. The `y' axis reflects the "% Total Return" beginning with"0"
and increasing in increments of 2% up to 6%. The `x' axis represents
calculation periods (from the earliest calendar year end of the Fund's
start of business through the calendar year ended December 31, 1998. The
light gray shaded chart features five distinct vertical bars, each shaded
in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Class for each calendar year is
stated directly at the top of each respective bar, for the calendar years
1994 through 1998, The percentages noted are: 4.24%, 5.96%, 5.42%, 5.57%,
5.49%. Within the period shown in the Chart, the Fund's highest quarterly
return was 1,50%. Its lowest quarterly return was 0.78%.

C. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Tax-Free Money Market
Fund Institutional Class Shares as of the calendar year-end for each of six
years. The `y' axis reflects the "% Total Return" beginning with "0" and
increasing in increments of 1% up to 4%. The `x' axis represents
calculation periods (from the earliest calendar year end of the Fund's
start of business through the calendar year ended December 31, 1998. The
light gray shaded chart features 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 for each calendar year is
stated directly at the top of each respective bar, for the calendar years
1993 through 1998, The percentages noted are: 2.25%, 2.54%,3.60%, 3.23%,
3.40% and 3.24%. Within the period shown in the Chart, The Fund's highest
quarterly return was 0.96%. Its lowest quarterly return was 0.52%.

D. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia U.S. Treasury Money
Market Fund Institutional Class Shares as of the calendar year-end for each
of six years. The `y' axis reflects the "% Total Return" beginning with "0"
and increasing in increments of2% up to 6%. The `x' axis represents
calculation periods (from the earliest calendar year end of the Fund's
start of business through the calendar year end December 31, 1998. 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 for each calendar year is
stated directly at the top of each respective bar, for the calendar years
1993through 1998, The percentages noted are: 2.89%, 3.90%, 5.68%, 5.17%,
5.32% and5.18%. Within the period shown in the Chart, the Fund's highest
quarterly return was 1.43%. Its lowest quarterly return was 0.70%.

INVESTMENT SHARES

A. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Money Market Fund
Investment Class Shares as of the calendar year-end for each of six years.
The `y' axis reflects the "% Total Return" beginning with "0" and
increasing in increments of 1% up to 6%. The `x-axis represents calculation
periods (from the earliest calendar year end of the Fund's start of
business through the calendar year ended December 31, 1998. The light gray
shaded chart features 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 for each calendar year is stated directly at the
top of each respective bar, for the calendar years 1993 through 1998, The
percentages noted are: 2.72%, 3.67%, 5.39%, 4.18%, 4.97% and 4.86%. Within
the period shown in the Chart, the Fund's highest quarterly return was
1.37%. Its lowest quarterly return was 0.68%.

B. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia Tax-Free Money Market
Fund Investment Class Shares as of the calendar year-end for each of six
years. The `y' axis reflects the "% Total Return" beginning with "0" and
increasing in increments of 1% up to 4%. The `x' axis represents
calculation periods (from the earliest calendar year end of the Fund's
start of business through the calendar year ended December 31, 1998. The
light gray shaded chart features 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 for each calendar year is
stated directly at the top of each respective bar, for the calendar years
1993 through 1998, The percentages noted are: 1.94%, 2.24%,3.25%, 2.82%,
2.99% and 2.83%. Within the period shown in the Chart, the Fund's highest
quarterly return was 0.88%. Its lowest quarterly return was 0.45%.

C. The graphic presentation displayed here consists of a bar chart
representing the annual total returns of Wachovia U.S. Treasury Money
Market Fund Investment Class Shares as of the calendar year-end for each of
five years. The `y' axis reflects the "% Total Return" beginning with "0"
and increasing in increments of2% up to 6%. The `x' axis represents
calculation periods (from the earliest calendar year end of the Fund's
start of business through the calendar year end December 31, 1998. The
light gray shaded chart features five distinct vertical bars, each shaded
in charcoal, and each visually representing by height the total return
percentages for the calendar year stated directly at its base. The
calculated total return percentage for the Class for each calendar year is
stated directly at the top of each respective bar, for the calendar years
1994through 1998, The percentages noted are: 3.59%, 5.32%, 4.75%, 4.90% and
4.76%.Within the period shown in the Chart, the Fund's highest quarterly
return was1.36%. Its lowest quarterly return was 0.64