SCHEDULE 14a
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant _ x_
Filed by a Party other than the Registrant
Check the appropriate box: ____
___ Preliminary Proxy Statement ___ Confidential, for Use of the
Commission Only (as
permitted by Rule
14a-6(e)(2)
_x_ Definitive Proxy Statement
___ Definitive Additional Materials
___ Soliciting Material Pursuant to
Rule 14a-11(c) or Rule 14a-12
MarketWatch Funds
- -----------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -----------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
_ x_ No fee required.
____ Fee computed on table below per Exchange Act
Rules 14a-6(i)(1) and 0-11.
(1) Title of each class of securities to which transaction applies:
- -----------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -----------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing
fee is calculated and state how it was determined):
- -----------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- -----------------------------------------------------------------------------
(5) Total fee paid:
- -----------------------------------------------------------------------------
___ Fee paid previously with preliminary materials.
- -----------------------------------------------------------------------------
___ Check box if any part of the fee is offset as provided by
Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting
fee was paid previously. Identify the previous filing by registration
statement number, or the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
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<PAGE>
Dear MarketWatch Funds Shareholder:
I am writing you to inform you of a special meeting of the MarketWatch Funds
shareholders, which will be held on December 5, 1997 to vote on an important
proposal that affects the MarketWatch Funds. As a shareholder, you have the
opportunity to voice your opinion on this matter. This package contains
information about the proposal and the materials to use to vote by mail.
Please take a few minutes to read the enclosed materials and cast your vote
on the proxy ballot(s) enclosed. It is extremely important to vote promptly.
YOUR VOTE IS IMPORTANT NO MATTER HOW MANY SHARES YOU OWN. IF WE DO NOT
RECEIVE ENOUGH VOTES, WE MUST RESOLICIT SHAREHOLDERS AT AN ADDITIONAL COST.
WE ENCOURAGE YOU TO SUPPORT THE TRUSTEES' RECOMMENDATION.
Pending shareholder approval, it is anticipated that Central Fidelity Banks,
Inc. will merge into Wachovia Corporation before December 31, 1997. In
connection with this transaction, it is proposed that the MarketWatch Funds
enter into a new investment advisory agreement with Wachovia Bank, N.A.
("Wachovia").
Wachovia serves as investment adviser to a number of other registered
investment companies that are series of The Wachovia Funds and The Wachovia
Municipal Funds (collectively, "Wachovia Fund Group"). Following the Bank
Holding Company Merger, Wachovia expects to recommend that the MarketWatch
Funds should be integrated with the Wachovia Fund Group. Any such combination
will be subject to separate consideration and approval by the MarketWatch
Board of Trustees and by the shareholders of each MarketWatch Fund.
This special meeting of shareholders is being called to obtain your approval
of the new investment advisory agreement.
o There will be no change in the MarketWatch Funds' investment objectives
or investment policies or in the responsibilities of the investment adviser
as a result of the new investment advisory agreement;
o There will be no increase in the contractual fees payable to the adviser
as a result of the approval of the new investment advisory agreement;
PLEASE REVIEW THE FOLLOWING NOTICE TO SHAREHOLDERS CAREFULLY. IN IT,
YOU WILL FIND A BRIEF SUMMARY OF THE PROPOSAL THAT IS INCLUDED IN THIS
PROXY.
YOUR VOTE IS IMPORTANT TO US. PLEASE MARK, SIGN AND DATE THE ENCLOSED PROXY
CARD(S) AND RETURN THEM AS SOON AS POSSIBLE. For your convenience, we have
enclosed a self-addressed stamped envelope. Please call 1-800-752-1823 if
you have any questions. Thank you for taking the time to complete the proxy
card(s) and for your investment in the MarketWatch Funds.
Sincerely,
/s/ Walter B. Grimm
- -------------------
Walter B. Grimm
Chairman
MarketWatch Funds
<PAGE>
DEFINITIVE COPY
MARKETWATCH FUNDS
3435 Stelzer Road
Columbus, Ohio 43219
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held on December 5, 1997
To the Shareholders of MarketWatch Funds:
NOTICE IS HEREBY GIVEN that a Special Meeting of Shareholders (the
"Special Meeting") of each portfolio of MarketWatch Funds (the "Trust") will
be held on December 5, 1997, at 10:00 a.m. (Eastern Time), at the offices of
BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43219, for the
following purposes:
(1) To approve a new investment advisory agreement with Wachovia
Bank, N.A. with respect to each portfolio of the Trust (voted on by
shareholders of each portfolio);
(2) To transact such other business as may properly come before the
Special Meeting or any adjournment or postponement thereof.
The proposals referred to above are discussed in the Proxy Statement
attached to this Notice. Each shareholder is invited to attend the Special
Meeting in person. Shareholders of record at the close of business on
November 10, 1997 have the right to vote at the Special Meeting. IF YOU
CANNOT BE PRESENT AT THE SPECIAL MEETING, WE URGE YOU TO FILL IN, SIGN, DATE
AND PROMPTLY RETURN THE ENCLOSED PROXY CARD OR CARDS IN THE ENVELOPE
PROVIDED, WHICH IS ADDRESSED FOR YOUR CONVENIENCE AND NEEDS NO POSTAGE IF
MAILED IN THE UNITED STATES. IF YOU SIGN, DATE AND RETURN YOUR PROXY CARD OR
CARDS BUT GIVE NO VOTING INSTRUCTIONS, YOUR SHARES WILL BE VOTED "FOR" THE
PROPOSALS NOTICED ABOVE. IN ORDER TO AVOID THE ADDITIONAL EXPENSE OF FURTHER
SOLICITATION, WE ASK YOUR COOPERATION IN COMPLETING AND RETURNING YOUR PROXY
CARD OR CARDS PROMPTLY.
By Order of the Board of Trustees
/s/ Christina T. Simmons
------------------------
Christina T. Simmons
Assistant Secretary
November 20, 1997
<PAGE>
MARKETWATCH FUNDS
3435 Stelzer Road
Columbus, Ohio 43219
PROXY STATEMENT
This Proxy Statement is furnished in connection with the
solicitation of proxies by the Board of Trustees of MarketWatch Funds (the
"Trust") for use at a Special Meeting and any adjournment(s) thereof (the
"Special Meeting") of shareholders of the Trust's Money Market Fund, Equity
Fund, Intermediate Fixed Income Fund and Virginia Municipal Bond Fund (the
"Funds") to be held at 3435 Stelzer Road, Columbus, Ohio 43219 on December 5,
1997 at 10:00 a.m. (Eastern Time).
It is expected that the solicitation of proxies will be
primarily by mail. The Trust's officers and service contractors may also
solicit proxies by telephone, telegraph, or personal interview, and will
tabulate proxies. Proxy solicitation costs will be borne by Wachovia Bank,
N.A. ("Wachovia") or other service providers of the Trust and will not be
charged to the Trust. It is anticipated that banks, brokerage houses, and
other custodians will be requested on behalf of the Funds to forward
solicitation material to their principals to obtain authorizations for the
execution of proxies. Any shareholder giving a proxy may revoke it at any
time before it is exercised by submitting to the Trust a written notice of
revocation, a subsequently executed proxy or by attending the Special Meeting
and electing to vote in person. This Proxy Statement and the enclosed proxy
are expected to be distributed to shareholders on or about November 20, 1997.
The following table identifies the proposals to be voted on at
the Special Meeting and the shareholders who are being solicited with respect
to each proposal:
Proposal Shareholders Solicited
-------- ----------------------
Approval of a new Each Fund, voting
investment advisory agreement separately on a Fund-by-
with Wachovia. Fund basis.
To transact Each Fund, voting
such other business as may separately on a Fund-by-
properly come before the Fund basis.
Special Meeting or any
adjournment thereof.
Only shareholders of record at the close of business on
November 10, 1997 will be entitled to vote at the Special Meeting. On that
date, there were 17,367,585.250 shares of the Money Market Fund,
16,238,653.017 shares of the Equity Fund, 9,611,631.016 shares of the
Intermediate Fixed Income Fund and
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<PAGE>
10,855,114.284 shares of the Virginia Municipal Bond Fund outstanding and
entitled to be voted at the Special Meeting. Each share or fraction thereof
is entitled to one vote or a fraction thereof. Shareholders of each Fund will
vote separately as a Fund with respect to the proposals described herein.
IF YOU DO NOT EXPECT TO BE PRESENT AT THE SPECIAL MEETING,
PLEASE DATE AND SIGN THE ENCLOSED PROXY CARD OR CARDS AND MAIL THE SAME
IN THE ENCLOSED REPLY ENVELOPE. PLEASE ALLOW SUFFICIENT TIME FOR THE PROXY
CARD OR CARDS TO BE RECEIVED ON OR BEFORE 11:00 A.M., EASTERN TIME, ON
DECEMBER 3, 1997.
THE TRUST WILL FURNISH TO SHAREHOLDERS UPON REQUEST, WITHOUT
CHARGE, COPIES OF ITS MOST RECENT ANNUAL REPORT TO SHAREHOLDERS AND ITS MOST
RECENT SEMI-ANNUAL REPORT. REQUESTS FOR SUCH REPORTS SHOULD BE DIRECTED TO
MARKETWATCH FUNDS, C/O BISYS FUND SERVICES, INC., 3435 STELZER ROAD,
COLUMBUS, OHIO 43219, OR BY CALLING 1-800-752-1823. SUCH REPORTS ARE NOT
TO BE REGARDED AS PROXY SOLICITING MATERIAL.
-2-
<PAGE>
PROPOSAL 1: APPROVAL OR DISAPPROVAL OF NEW INVESTMENT
ADVISORY AGREEMENT
Introduction
Central Fidelity National Bank ("Central Fidelity") currently
provides investment advisory services to each Fund of the Trust pursuant to
an advisory agreement between the Trust and Central Fidelity dated January
27, 1993 (the "Current Advisory Agreement").
Central Fidelity Banks, Inc. ("CFB"), the parent of the
Trust's investment adviser, has agreed to merge with Wachovia Corporation,
the parent of Wachovia. In anticipation of the completion of this merger (the
"Bank Holding Company Merger") and to provide continuity in investment
advisory services to the Funds, shareholders of the Funds will be asked to
approve a new investment advisory agreement between the Trust and Wachovia
(the "New Advisory Agreement"). The Trust's entry into the New Advisory
Agreement would terminate the Current Advisory Agreement. In addition,
consummation of the Bank Holding Company Merger may be deemed to result in
the automatic termination of the Current Advisory Agreement.
Under the New Advisory Agreement, Wachovia, rather than
Central Fidelity, would be responsible for providing advisory services to the
Funds. A copy of the New Advisory Agreement is attached as Exhibit A.
Wachovia also serves as investment adviser to a number of
other registered investment companies that are series of the Wachovia Funds
and the Wachovia Municipal Funds (collectively, "Wachovia Fund Group").
Following the Bank Holding Company Merger, Wachovia expects to recommend that
the Funds should be integrated with the Wachovia Fund Group. Any such
combination will be subject to separate consideration and approval by the
Trust's Board of Trustees and by the shareholders of each Fund.
Background
Wachovia Corporation and CFB, both bank holding companies,
entered into an Agreement and Plan of Merger dated as of June 23, 1997,
providing for the merger of CFB with and into Wachovia Corporation. Wachovia
Corporation will be the surviving corporation and will continue under the
name "Wachovia Corporation." The board of directors of each bank holding
company has approved the Bank Holding Company Merger, which is expected to
become effective by December 31, 1997, subject to prior approval by the
shareholders of CFB. Wachovia Corporation is a publicly owned bank holding
company registered under the Bank Holding Company Act of 1956, as amended,
and a savings and
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<PAGE>
loan holding company registered under the Home Owners' Loan Act of 1933, as
amended. Through its one principal banking subsidiary, Wachovia, Wachovia
Corporation managed more than $29 billion in assets, including approximately
$4.5 billion in mutual fund assets, as of September 30, 1997. Wachovia
Corporation is the owner of all outstanding shares of Wachovia except for
directors' qualifying shares.
The Investment Company Act of 1940, as amended (the "1940
Act") requires that shareholders vote on all investment advisory agreements.
In addition, the Current Advisory Agreement for the Funds provides for its
automatic termination upon its assignment. The Bank Holding Company Merger
may result in a change in control of Central Fidelity and an assignment. In
such event, the Current Advisory Agreement would automatically terminate upon
the consummation of the Bank Holding Company Merger.
As described below, the terms and conditions of the New
Advisory Agreement, including advisory fees charged thereunder, are
substantially the same as those under the Current Advisory Agreement. Should
the Bank Holding Company Merger not be consummated, Central Fidelity will
continue to serve as the investment adviser pursuant to the terms of the
Current Advisory Agreement.
On October 15, 1997, the Board of Trustees of the Trust,
including a majority of those trustees who were not "interested persons" (as
defined in the 1940 Act) of any party to the agreement, unanimously approved
and recommended that the shareholders of each of the Funds approve the New
Advisory Agreement. If approved by shareholders at the Special Meeting, the
New Advisory Agreement will take effect on the consummation of the Bank
Holding Company Merger which is expected to become effective by December 31,
1997.
The Current Advisory Agreement was most recently approved by
the Board of Trustees of the Trust with respect to each Fund on January 13,
1997. Prior to the public offering of the shares of each Fund, the Trust's
sponsor and distributor, as each Fund's initial shareholder, approved the
Current Advisory Agreement on January 26, 1993.
The Current Advisory Agreement provides that Central Fidelity
shall render investment management services to the Funds, subject to the
supervision of the Board of Trustees of the Trust. Under the Current Advisory
Agreement, Central Fidelity is entitled to receive advisory fees from the
Funds, computed daily and paid monthly, at the annual rates of .50% of the
average daily net assets of the Money Market Fund, 1.00% of the average daily
net assets of the Equity Fund, and .74% of the average
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<PAGE>
daily net assets of each of the Intermediate Fixed Income Fund and Virginia
Municipal Bond Fund.
The table below sets forth (i) net assets for each Fund as of
the six month period ended May 31, 1997; (ii) the rates of advisory fees,
computed daily and payable monthly, to which Central Fidelity is entitled for
the services provided and expenses assumed pursuant to the Current Advisory
Agreement; (iii) advisory fees (net of waivers) paid by each Fund for the
fiscal year ended November 30, 1996; and (iv) the effective rates of each of
the advisory fees (net of waivers) expressed as a percentage of average net
assets for the fiscal year ended November 30, 1996:
Advisory Fees
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------------
Effective
Rate of
Advisory
Advisory Fees (Net of
Fees (Net Waivers) as
of a Percentage
Annual Waivers) of Average
Advisory Paid for Net Assets
Fee (Based Fiscal for Fiscal
Net Assets on Average Year Ended Year Ended
MarketWatch Funds as of 5/31/97 Net Assets) 11/30/96 11/30/96
- -------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Money Market Fund(1)
$ 15,535,063 .50% $ 0 .0%
- -------------------------------------------------------------------------------------------------------
Equity Fund(1)
$279,567,856 1.00% $1,070,702 .74%
- ------------------------------------------------------------------------------------------------------
Intermediate Fixed
Income Fund(1) $ 95,602,602 .74% $ 188,872 .48%
- -------------------------------------------------------------------------------------------------------
Virginia Municipal Bond
Fund(1) $115,230,950 .74% $ 250,321 .39%
=======================================================================================================
<FN>
1 The Trust has been informed that Central Fidelity and/or BISYS Fund
Services, Inc. ("BISYS") currently intend to continue to waive fees
and reimburse expenses during the current fiscal year ending November
30, 1997 so that total operating expenses for the Money Market Fund,
Equity Fund, Intermediate Fixed Income Fund and Virginia Municipal
Bond Fund will not exceed .32%, 1.35%, 1.09% and 1.04% of their
respective average net assets. These fee waivers and expense
reimbursements are voluntary, and Central Fidelity and/or BISYS may
modify or terminate them at any time after November 30, 1997 without
a Fund's consent.
</TABLE>
In addition, for the fiscal year ended November 30, 1996, the Trust paid
advisory fees of $55,243 with respect to the Flexible Income Fund, a
portfolio of the Trust that was terminated as of February 9, 1997.
For the fiscal year ended November 30, 1996, the Equity Fund
paid $89,768 in total dollar amount of brokerage commissions. In addition,
Central Fidelity, on behalf of the Equity Fund, directed brokerage
transactions to Interstate Securities and Autranet in return for the
provision of investment information. For the fiscal year ended November 30,
1996, the
-5-
<PAGE>
amounts of such transactions and related commissions on behalf of the Equity
Fund were $16,950 and $24,432, respectively. None of the other Funds paid any
brokerage commissions or entered into any brokerage transactions during the
fiscal year ended November 30, 1996. The Funds, however, engage in
transactions with dealers acting as principal and the costs of such
transactions involve dealer spreads rather than brokerage commissions.
Description of the New Advisory Agreement
In the New Advisory Agreement Wachovia would agree, subject to
the supervision of the Trust's Board of Trustees, to provide a continuous
investment program for the Funds in accordance with their respective
investment objectives and policies and restrictions as stated in their then
current Prospectuses and resolutions of the Board. Wachovia would determine
from time to time what securities and other investments will be purchased,
retained or sold by the Trust with respect to each Fund. Wachovia would agree
not to make loans to any person to purchase or carry shares of the Trust.
The terms and conditions of the New Advisory Agreement are
substantially the same as those of the Current Advisory Agreement. The
advisory fees charged under the two agreements are identical.
The New Advisory Agreement provides that it will continue in
effect as to each Fund from the date of execution until November 30, 1999,
unless sooner terminated, and thereafter for successive one-year terms,
provided that such continuance is specifically approved at least annually (i)
by the vote of a majority of those members of the Trust's Board of Trustees
who are not parties to the agreement or "interested persons" (as defined in
the 1940 Act) of any such party, cast in person at a meeting called for the
purpose of voting on such approval, and (ii) by the vote of a majority of the
Trust's Board of Trustees or by a vote of a majority of the outstanding
voting securities of such Fund. The New Advisory Agreement may be terminated
with respect to a Fund at any time, without the payment of any penalty, by
any party thereto on 60 days' written notice, and automatically terminates
upon its "assignment" (as defined in the 1940 Act).
Under the New Advisory Agreement and the Current Advisory
Agreement, the investment adviser pays all expenses incurred by it in
connection with its activities under the agreements, other than the cost of
securities (including brokerage commissions, if any) purchased for the Funds.
Both the Current Advisory Agreement and New Advisory Agreement
require that the investment adviser will maintain its
-6-
<PAGE>
policy and practice of conducting its fiduciary functions independently. In
making investment recommendations for the Funds, the investment adviser's
personnel will not inquire or take into consideration whether the issuers of
securities proposed for purchase or sale for the Trust's account are
customers of the investment adviser or of its parent or its subsidiaries or
affiliates. Furthermore, in dealing with such customers, the investment
adviser and its parent, subsidiaries and affiliates will not inquire or take
into consideration whether securities of those customers are held by the
Trust.
Like the Current Advisory Agreement, the New Advisory
Agreement provides that in executing portfolio transactions and selecting
brokers or dealers, the investment adviser will attempt to obtain prompt
execution of orders in an effective manner at the most favorable price. Both
agreements provide that, consistent with this obligation and to the extent
permitted by the 1940 Act, when the execution and price offered by two or
more brokers or dealers are comparable, the investment adviser may, in its
discretion, purchase and sell portfolio securities to and from brokers and
dealers who provide the investment adviser with research advice and other
services.
Under both the Current Advisory Agreement and New Advisory
Agreement, portfolio securities will not be purchased from or sold in
principal transactions to the investment adviser or any affiliated person of
the Trust or of the investment adviser, except to the extent permitted by
law.
Both the New Advisory Agreement and the Current Advisory
Agreement provide that the investment adviser shall not be liable for any
error of judgment or mistake of law or for any loss suffered by the Funds,
except a loss resulting from a breach of fiduciary duty with respect to the
receipt of compensation for services or a loss resulting from willful
misfeasance, bad faith or gross negligence by the investment adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under the agreements.
Information About Central Fidelity National Bank ("Central
Fidelity")
Central Fidelity, the current investment adviser of the Funds,
is a wholly-owned subsidiary of CFB. Both entities have their principal place
of business at 1021 East Cary Street, Richmond, Virginia 23219. As of
November 10, 1997, no person to the Trust's knowledge owned beneficially or
of record 10% or more of any class of issued and outstanding voting
securities of CFB except that Central Fidelity held in fiduciary capacities
approximately 12.56% or 7,185,335 of the outstanding voting securities of CFB
for the benefit of various employee benefit and trust accounts.
-7-
<PAGE>
The name and principal occupation of the principal executive
officer and each director of Central Fidelity as of November 10, 1997 were as
follows:
<TABLE>
<CAPTION>
Position
with Central Other Type
Fidelity Business of
Name National Bank Connections Business
- ---- ------------- ----------- --------
<S> <C> <C> <C>
Bernard C. Baldwin, III Director Attorney, Edmunds & Law
Williams, P.C.
Billy H. Branch Director President, Branch Investments
Management Corp.
Richard A. Director President, Shoe
Carrington, III Consolidated Shoe Co. Manufacturing
Edward T. Caton, III Director Attorney, Law
Edward T. Caton, P.C.
Ashton W. Clarke Director Retired; former Chairman Banking
of The First National
Bank of Yorktown
Manuel Deese Director Retired; former Executive Insurance
Vice President,
Trigon, Blue Cross &
Blue Shield of Virginia
Donald F. DeLaney Director Retired; former Chief Consulting
Financial Officer; Central
Fidelity National Bank
Ronald V. Dolan Director President and Chief Executive Insurance
Officer, First Colony Life
Insurance Co.
George H. Gilliam Director Of Counsel, Law
Gilliam, Scott and Kroner,
P.C.
C. Linwood Holt Director President, Norcarva Construction
Constructors, Inc.
Fred H. Lawson Director Former President and Manufacturing
Chief Executive Officer,
Courtland Manufacturing Co.
William R. Lewis, Jr. Director President, Farming
Associated Farms
-8-
<PAGE>
<CAPTION>
Position
with Central Other Type
Fidelity Business of
Name Bank Connections Business
- ---- ------------- ----------- --------
<S> <C> <C> <C>
Lewis N. Miller, Jr. Director Chairman of the Board Banking
and Chief Executive
Officer, Central Fidelity
Banks, Inc. and Central
Fidelity National Bank
Hubel Robins, Jr. Director Chairman of the Board, Insurance
Robins Insurance Agency, Inc.
Gustav H. Stalling, III Director President, Manufacturing
Stalling, Inc.
</TABLE>
All of the above persons may be reached c/o Central
Fidelity National Bank, 1021 East Cary Street, Richmond, Virginia
23219.
Information About Wachovia Bank, N.A. ("Wachovia")
Wachovia, a wholly-owned subsidiary of Wachovia Corporation,
is the proposed investment adviser for the Trust pursuant to the New Advisory
Agreement. Both companies have their principal place of business at 100 North
Main Street, Winston-Salem, North Carolina 27101. As of September 30, 1997,
no person owned beneficially or of record 10% or more of any class of issued
and outstanding voting securities of Wachovia Corporation.
The name and principal occupation of the principal executive
officer and each director of Wachovia as of November 1, 1997 were as
follows:
<TABLE>
<CAPTION>
Position Other Type
with Business of
Name Wachovia Connections Business
- ---- -------- ----------- --------
<S> <C> <C> <C>
L.M. Director President and Banking
Baker, Jr. Chief Officer,
Wachovia
Corporation
James S. Balloun Director Chairman and Chief Diversified
Executive Officer, Manufacturing
National Service and Services
Industries, Inc.
Peter C. Director President and Packaging
Browning Chief Operating
Officer, Sonoco
Products Company
-9-
<PAGE>
John T. Casteen III Director President, Education
The University of
Virginia
John L. Clendenin Director Chairman of the Communications
Board,
BellSouth Corporation
Lawrence M. Director Chairman of the Utilities
Gressette, Jr. Executive Committee,
SCANA Corporation
Dr. Thomas K. Director President, Education
Hearn, Jr. Wake Forest University
George W. Director President and Textile
Henderson, III Chief Executive Manufacturing
Officer, Burlington
Industries, Inc.
W. Hayne Hipp Director President and Chief Insurance
Executive Officer, The and Broadcasting
Liberty Corporation
Robert M. Director Chairman, RMH Construction and
Holder, Jr. Group, LLC Development
Robert A. Ingram Director President and Chief Pharmaceuticals
Executive Officer,
Glaxo Wellcome, Inc.
James W. Director President and Consulting and
Johnston Chief Executive Investments
Officer, Stonemaker
Enterprises, Inc.
John G. Medlin, Jr. Director Chairman of the Board, Banking
Wachovia Corporation
Wyndham Robertson Director Writer; Former Vice Writing
President for
Communications,
University of
North Carolina
Herman J. Russell Director Chairman, H.J. Russel Management
& Company Services
Sherwood H. Director Chairman of the Board, Utilities
Smith, Jr. Carolina Power & Light
Company
John C. Director Chairman and Chief Information
Whitaker, Jr. Executive Officer, Services and
Inmar Enterprises, Inc. Transaction
Processing
</TABLE>
All of the above persons may be reached c/o Wachovia Bank,
N.A., 100 North Main Street, Winston-Salem, North Carolina 27101.
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<PAGE>
Wachovia serves as an investment adviser to the following
series of the Wachovia Fund Group with investment objectives similar to those
of certain of the Funds:
<TABLE>
<CAPTION>
Maximum
Annual
Fund Net Assets Advisory Fee
---- ---------- ------------
(As of (Based on Average
September 30, 1997) Net Assets)
<S> <C> <C>
Wachovia $465.2 million .50%
Money Market
Fund*
Wachovia $560.7 million .50%
U.S. Treasury
Money Market
Fund*
Wachovia $198.9 million .70%
Equity Fund*
Wachovia $223.1 million .70%
Quantitative Equity
Fund*
Wachovia Fixed $189.8 million .60%
Income Fund*
Wachovia Georgia $16.0 million .75%
Municipal Bond Fund*
Wachovia North $ 54.1 million .75%
Carolina Municipal
Bond Fund*
Wachovia South $107.6 million .75%
Carolina Municipal
Bond Fund*
<FN>
* Wachovia may from time to time waive its advisory fees and change any
waivers at any time.
</TABLE>
Authority to Act as Investment Adviser
Banking laws and regulations currently prohibit a bank holding
company registered under the Bank Holding Company Act of 1956 or any
affiliate thereof from sponsoring, organizing or controlling a registered
open-end investment company continuously engaged in the issuance of its
shares, and prohibit banks generally from underwriting, selling or
distributing securities, but in general do not prohibit such a holding
company or affiliate banks generally from acting as investment adviser,
transfer agent or custodian to such an investment company or from purchasing
shares of such a company as agent for and upon the
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<PAGE>
order of customers. Wachovia is subject to such laws and regulations, but
believes that it may perform the services contemplated by the New Advisory
Agreement discussed above without violating the Glass-Steagall Act or other
applicable banking laws or regulations. Future changes in legal requirements
relating to the permissible activities of banks and their affiliates, as well
as future interpretations of current requirements, could prevent Wachovia
from continuing to perform such services for the Trust. If Wachovia were
prohibited from acting as investment adviser to the Trust, it is expected
that the Board of Trustees of the Trust would recommend that shareholders
approve new investment advisory arrangements.
Board of Trustees' Considerations and Recommendations
At the Trust's Board of Trustees meeting held on October 15,
1997, Central Fidelity and Wachovia recommended that each of the Funds be
provided investment advisory services by Wachovia, as described in this Proxy
Statement, following the Bank Holding Company Merger. The Trust's entry into
the New Advisory Agreement with Wachovia would terminate the Current Advisory
Agreement with Central Fidelity. Moreover, the consummation of the Bank
Holding Company Merger may be deemed to result in a change in control of
Central Fidelity, which would automatically terminate the Current Advisory
Agreement in accordance with the terms of such agreement and the 1940 Act.
At its meeting on October 15, 1997, the Board of Trustees,
including those trustees who were not interested persons of the Trust or of
Wachovia, approved the New Advisory Agreement with respect to each Fund after
considering the services to be provided (and assumption of related expenses)
and such other matters as the Board considered relevant in the exercise of
its reasonable business judgment. In approving the New Advisory Agreement,
the Board took into consideration the effect of the Bank Holding Company
Merger on the Trust and the recommendations of Central Fidelity and Wachovia.
The Board considered the structure and organization of Wachovia, the nature,
quality and extent of the investment advisory services to be provided to the
Funds by Wachovia and the qualifications and experience of the Wachovia
personnel intended to provide such services. The Board also noted that
Wachovia expressed its intention to seek to retain, at least through the
first quarter of 1998, the services of the individuals who presently provide
portfolio management services to the Trust under the Current Advisory
Agreement. However, Wachovia informed the Board that at the present time
there can be no assurance that these individuals will agree to join Wachovia
or that they will continue to provide services to the Trust under the New
Advisory Agreement. Additionally, the Board reviewed the investment
performance of those portfolios of the Wachovia Fund Group that are similar
to
-12-
<PAGE>
the Funds, as well as other comparative industry data relating to investment
performance, advisory fees and expense ratios of the Funds. The Board of
Trustees further noted that the terms and conditions of the New Advisory
Agreement are substantially the same as those in the Current Advisory
Agreement, including the advisory fees payable by each Fund, which are
identical. The Board of Trustees reaffirmed its previous determination that
such terms and fees were fair and reasonable with respect to each Fund.
After consideration of the foregoing factors, together with
certain other information considered to be relevant, the Board of Trustees of
the Trust unanimously approved the New Advisory Agreement and directed that
it be submitted to shareholders for approval. THE BOARD OF TRUSTEES OF THE
TRUST UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS OF EACH FUND VOTE "FOR"
APPROVAL OF THE NEW ADVISORY AGREEMENT.
Votes Required for Approval of Matters at the Special Meeting
Under the 1940 Act, the New Advisory Agreement must be
approved by the holders of a majority of the outstanding shares of each Fund,
with each Fund's shareholders voting separately. As used in this Proxy
Statement, a majority of the outstanding shares of a Fund means the lesser of
(i) 67% of the shares of the Fund present at the Special Meeting if the
holders of more than 50% of the outstanding shares of the Fund are present in
person or by proxy, or (ii) more than 50% of the outstanding shares of the
Fund.
A quorum is constituted with respect to a Fund by the presence
in person or by proxy of the holders of more than 50% of the outstanding
shares of the Fund entitled to vote at the Special Meeting. In tallying
shareholder votes, abstentions and broker non-votes (i.e., proxies sent in by
brokers and other nominees that cannot be voted on a proposal because
instructions have not been received from the beneficial owners) will be
counted for purposes of determining whether a quorum is present for purposes
of convening the Special Meeting. However, abstentions and broker non-votes
will have the same effect as a vote against the proposal.
If approved by the holders of a majority of the outstanding
shares of each Fund, it is anticipated that the New Advisory Agreement will
become effective upon the date of the Bank Holding Company Merger. If the
holders of a majority of the outstanding shares of a Fund do not approve the
New Advisory Agreement, the Board of Trustees will consider what action to
take in the best interests of the shareholders of that Fund.
In the event that a quorum is not present at the Special
Meeting, or in the event that a quorum is present at the
-13-
<PAGE>
Special Meeting but sufficient votes to approve the New Advisory Agreement
are not received, the persons named as proxies may propose one or more
adjournments of the Special Meeting to permit further solicitation of
proxies. Any such adjournment will require the affirmative vote of a majority
of those shares affected by the adjournment that are represented at the
Special Meeting in person or by proxy. If a quorum is present, the persons
named as proxies will vote those proxies which they are entitled to vote for
the New Advisory Agreement in favor of such adjournments, and will vote those
proxies required to be voted against such proposals against any adjournment.
A shareholder vote may be taken with respect to one or more Funds prior to
any such adjournment if sufficient votes have been received for approval with
respect to any such Fund.
The Trust has been advised by Central Fidelity that shares of
each Fund over which Central Fidelity has voting power will be voted in
accordance with its fiduciary and other legal obligations with respect to the
particular accounts involved. In the exercise of its discretion, Central
Fidelity may consult with or seek recommendations from the beneficial owners
or other independent fiduciaries of such accounts.
If the accompanying proxy card or cards are executed and
returned in time for the Special Meeting, the shares covered thereby will be
voted in accordance with the proxy or proxies on all matters that may
properly come before the Special Meeting or any adjournment thereof.
THE BOARD OF TRUSTEES OF THE TRUST UNANIMOUSLY RECOMMENDS THAT
THE SHAREHOLDERS OF EACH FUND VOTE "FOR" APPROVAL OF THE NEW ADVISORY
AGREEMENT.
ADDITIONAL INFORMATION
Beneficial Owners
As of October 15, 1997, the Trust's trustees and officers,
as a group, beneficially owned less than 1% of the shares of the Trust.
As of October 15, 1997, Central Fidelity held of record, but
not beneficially, approximately 76.41%, 78.21%, 90.26% and 90.69% of the
respective outstanding shares of the Money Market Fund, Equity Fund,
Intermediate Fixed Income Fund and the Virginia Municipal Bond Fund. As of
the same date, the following persons beneficially owned 5% or more of the
shares of the Funds:
-14-
<PAGE>
<TABLE>
<CAPTION>
Percentage of
Number of Outstanding
Shares Shares
--------- -------------
<S> <C> <C>
Money Market Fund
CORELINK FINANCIAL, INC. 2,727,333.710 15.8400%
PO BOX 4054
CONCORD, CA 94524
CENTRAL FIDELITY NATIONAL BANK 13,153,598.460 76.4100
CASH
LARCO ATTN MUTUAL FUND DESK
PO BOX 27602 5TH FL JAMES CENTER
RICHMOND, VA 23261
Equity Fund
CORELINK FINANCIAL, INC. 1,103,904.245 6.8100
PO BOX 4054
CONCORD, CA 94524
CENTRAL FIDELITY NATIONAL BANK 4,965,021.426 30.6600
REINVEST
LARCO ATTN MUTUAL FUND DESK
PO BOX 27602 5TH FL JAMES CENTER
RICHMOND, VA 23261
CENTRAL FIDELITY NATIONAL BANK 7,698,563.552 47.5500
CASH
LARCO ATTN MUTUAL FUND DESK
PO BOX 27602 5TH FL JAMES CENTER
RICHMOND, VA 23261
Intermediate Fixed Income
Fund
CENTRAL FIDELITY NATIONAL BANK 8,841,047.636 90.2600
CASH
LARCO ATTN MUTUAL FUND DESK
PO BOX 27602 5TH FL JAMES CENTER
RICHMOND, VA 23261
Virginia Municipal Bond Fund
CENTRAL FIDELITY NATIONAL BANK 9,868,795.933 90.6900
CASH
LARCO ATTN MUTUAL FUND DESK
PO BOX 27602 5TH FL JAMES CENTER
RICHMOND, VA 23261
</TABLE>
For purposes of the 1940 Act, any person who owns directly or
through one or more controlled companies more than 25 percent of the voting
securities of a company is presumed to "control" such company. Under this
definition, Central Fidelity and its affiliates may be deemed to be
controlling persons of the Trust.
Shareholder Meetings
The Trust is organized as a Massachusetts business trust. The
Trust's Declaration of Trust does not require that an annual meeting of
shareholders be held each year. The Trust does not intend to hold annual
meetings of shareholders except as required by the 1940 Act or other
applicable law. The Trust's Code of Regulations provides that special
meetings of shareholders, including meetings to consider the removal of
trustees, shall be called at the written request of the shareholders entitled
to vote at least 10% of the outstanding shares of the Trust entitled to be
voted at such meetings. To
-15-
<PAGE>
the extent required by law, the Trust will assist in shareholder
communications on such matters.
Distributor, Administrator and Transfer Agent
Shares are distributed on a continuous basis by the
Trust's sponsor and distributor, BISYS Fund Services, Inc.
("BISYS"). BISYS also serves as the administrator to the Trust.
BISYS Fund Services, Ohio, Inc. ("BISYS"), an affiliate of BISYS,
serves as the Trust's transfer agent and also provides certain
accounting services for each Fund. Both companies are located
at 3435 Stelzer Road, Columbus, Ohio 43219.
Other Services Provided by Central Fidelity
Pursuant to its Custodian Agreement with the Trust, Central
Fidelity serves as custodian for the Funds and receives compensation from
each Fund for its services and out-of-pocket expenses. For the fiscal year
ended November 30, 1996, Central Fidelity received custody fees of $0,
$28,806, $2,557, $7,799 and $12,844 with respect to the Money Market, Equity,
Flexible Income, Intermediate Fixed Income and Virginia Municipal Bond Funds,
respectively.
Pursuant to the Trust's Distribution and Services Plan
(the "Plan"), Central Fidelity is entitled to a monthly fee computed at the
annual rate of up to .25% of the average aggregate net assets of Fund shares
for which Central Fidelity provides certain administrative support services.
For the fiscal year ended November 30, 1996, Central Fidelity received
servicing fees under the Plan of $0, $360,076, $31,968, $97,485 and
$160,544 with respect to the Money Market, Equity, Flexible Income,
Intermediate Fixed Income and Virginia Municipal Bond Funds, respectively.
Following approval of the New Advisory Agreement, Central
Fidelity will continue to provide custodial services, as well as
administrative support services under the Plan.
Independent Auditors
KPMG Peat Marwick LLP, located at Two Nationwide Plaza, Suite
1600, Columbus, Ohio 43215, serves as the Trust's independent auditors and
audited the Trust's operations for the fiscal year ended November 30, 1996.
At its meeting on January 13, 1997, the Trust's Board of Trustees selected
KPMG Peat Marwick LLP to serve in such capacity for the fiscal year ending
November 30, 1997.
Officers
Officers of the Trust are elected by, and serve at the
pleasure of, the Board of Trustees. Officers receive no
remuneration from the Trust for their services in such
capacities. The following persons are officers: Walter B.
Grimm, President; William J. Tomko, Vice President; Bruce Treff,
Secretary; Alaina V. Metz, Assistant Secretary; Thresa Dewar,
Treasurer; Christina T. Simmons, Assistant Secretary. Messrs.
Grimm, Tomko, and Treff and Mmes. Metz and Dewar are employees of BISYS.
Ms. Simmons is a counsel of the law firm of Drinker Biddle & Reath
LLP, Philadelphia, Pennsylvania, which serves as counsel to the
Trust. Drinker Biddle & Reath LLP receives fees for its
services.
-16-
<PAGE>
Other Business
No business other than the matters described above is expected
to come before the Special Meeting, but should any other matter requiring a
vote of shareholders arise, the persons named in the enclosed proxy card or
cards will vote thereon according to their best judgment in the interests of
the Trust.
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE SPECIAL
MEETING AND WHO WISH TO HAVE THEIR SHARES VOTED ARE REQUESTED TO DATE AND
SIGN THE ENCLOSED PROXY CARD OR CARDS AND RETURN THE SAME IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
17
<PAGE>
EXHIBIT A
PROPOSED
MARKETWATCH FUNDS
INVESTMENT ADVISORY AGREEMENT
THIS AGREEMENT, made as of December ___, 1997 between MarketWatch
Funds, a Massachusetts business trust (herein called the "Trust"), and
Wachovia Bank, N.A., a national banking association having its principal
place of business in Winston- Salem, North Carolina (herein called the
"Investment Adviser").
WHEREAS, the Trust is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended (the
"1940 Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to
furnish investment advisory and administrative services to newly created
investment portfolios of the Trust and may retain the Investment Adviser to
serve in such capacity to certain additional investment portfolios of the
Trust, all as now or hereafter may be identified in Schedule A hereto, as
such Schedule may be amended from time to time (individually referred to
herein as a "Fund" and collectively as the "Funds") and the Investment
Adviser represents that it is willing and possesses legal authority to so
furnish such services without violation of applicable laws (including the
Glass-Steagall Act) and regulations;
NOW, THEREFORE, in consideration of the premises and mutual covenants
herein contained, it is agreed between the parties hereto as follows:
1. Appointment. The Trust hereby appoints the Investment Adviser to
act as investment adviser to the Funds for the period and on the terms set
forth in this Agreement. The Investment Adviser accepts such appointment and
agrees to furnish the services herein set forth for the compensation herein
provided. Additional investment portfolios may from time to time be added to
those covered by this Agreement by the parties executing a new Schedule A
which shall become effective upon its execution and shall supersede any
Schedule A having an earlier date.
2. Delivery of Documents. The Trust has furnished the Investment
Adviser with copies properly certified or authenticated of each of the
following.
(a) the Trust's Agreement and Declaration of Trust, dated June 4,
1992, and filed with the Secretary of State of Massachusetts
on June 4, 1992, and any and all amendments thereto or
restatements thereof (such
A-1
<PAGE>
Declaration, as presently in effect and as it shall from time
to time be amended or restated, is herein called the
"Declaration of Trust");
(b) the Trust's Code of Regulations and any amendments
thereto;
(c) resolutions of the Trust's Board of Trustees authorizing the
appointment of the Investment Adviser and approving this
Agreement;
(d) the Trust's Notification of Registration on Form N-8A under
the 1940 Act as filed with the Securities and Exchange
Commission on June 5, 1992, and all amendments thereto;
(e) the Trust's Registration Statement on Form N-1A under the
Securities Act of 1933, as amended (the "1933 Act"), and under
the 1940 Act as filed with the Securities and Exchange
Commission and all amendments thereto; and
(f) the most recent Prospectus and Statement of Additional
Information of each of the Funds (such Prospectus and
Statement of Additional Information, as presently in effect,
and all amendments and supplements thereto, are herein
collectively called the "Prospectus").
The Trust will furnish the Investment Adviser from time to time with copies
of all amendments of or supplements to the foregoing.
3. Management. Subject to the supervision of the Trust's Board of
Trustees, the Investment Adviser will provide a continuous investment program
for the Funds, including investment research and management with respect to
all securities and investment and cash equivalents in the Funds. The
Investment Adviser will determine from time to time what securities and other
investments will be purchased, retained or sold by the Trust with respect to
the Funds. The Investment Adviser will provide the services under this
Agreement in accordance with each of the Fund's investment objectives,
policies, and restrictions as stated in the Prospectus and resolutions of the
Trust's Board of Trustees. The Investment Adviser further agrees that it:
(a) will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which
it has investment responsibilities;
(b) will conform with all applicable Rules and Regulations of the
Securities and Exchange Commission under the 1940 Act and in
addition will conduct its activities under this Agreement in
accordance with any applicable
A-2
<PAGE>
regulations of any governmental authority pertaining to
the investment advisory activities of the Investment
Adviser;
(c) will not make loans to any person either to purchase or to
carry units of beneficial interest ("shares") in the Trust;
(d) will place or cause to be placed orders for the Funds
either directly with the issuer or with any broker or
dealer. In placing orders with brokers and dealers,
the Investment Adviser will attempt to obtain prompt
execution of orders in an effective manner at the most
favorable price. Consistent with this obligation and
to the extent permitted by the 1940 Act, when the
execution and price offered by two or more brokers or
dealers are comparable, the Investment Adviser may, in
its discretion, purchase and sell portfolio securities
to and from brokers and dealers who provide the
Investment Adviser with research advice and other
services. In no instance will portfolio securities be
purchased from or sold to the Trust's distributor, the
Investment Adviser, or any affiliated person of the
Trust, the Trust's distributor or the Investment
Adviser, except to the extent permitted by the 1940 Act
and the Commission;
(e) will maintain all books and records with respect to the
securities transactions of the Funds and will furnish the
Trust's Board of Trustees with such periodic and special
reports as the Board may reasonably request;
(f) will treat confidentially and as proprietary
information of the Trust all records and other
information relative to the Trust and the Funds and
prior, present, or potential shareholders, and will not
use such records and information for any purpose other
than performance of its responsibilities and duties
hereunder, except after prior notification to and
approval in writing by the Trust, which approval shall
not be unreasonably withheld and may not be withheld
where the Investment Adviser may be exposed to civil or
criminal contempt proceedings for failure to comply,
when requested to divulge such information by duly
constituted authorities, or when so requested by the
Trust;
(g) will maintain its policy and practice of conducting its
fiduciary functions independently. In making investment
recommendations for the Funds, the Investment Adviser's
personnel will not inquire or take into consideration whether
the issuers of securities
A-3
<PAGE>
proposed for purchase or sale for the Trust's account are
customers of the Investment Adviser or of its parent or its
subsidiaries or affiliates. In dealing with such customers,
the Investment Adviser and its parent, subsidiaries, and
affiliates will not inquire or take into consideration whether
securities of those customers are held by the Trust;
(h) will comply with the self-custody requirements of the 1940 Act
and rule 17f-2 thereunder; and
(i) will promptly review all (1) current security reports,
(2) summary reports of transactions and pending
maturities (including the principal, cost and accrued
interest on each portfolio security in maturity date
order) and (3) current cash position reports (including
cash available from portfolio sales and maturities and
sales of a Fund's shares less cash needed for
redemptions and settlement of portfolio purchases) upon
receipt thereof from the Trust and will report any
errors or discrepancies in such reports to the Trust or
its designee within three (3) business days.
4. Services Not Exclusive. The investment management services
furnished by the Investment Adviser hereunder are not to be deemed exclusive,
and the Investment Adviser shall be free to furnish similar services to
others so long as its services under this Agreement are not impaired thereby.
5. Books and Records. In compliance with the requirements of Rule
31a-3 under the 1940 Act, the Investment Adviser hereby agrees that all
records which it maintains for the Funds are the property of the Trust and
further agrees to surrender promptly to the Trust any of such records upon
the Trust's request. The Investment Adviser further agrees to preserve for
the periods prescribed by Rule 31a-2 under the 1940 Act the records required
to be maintained by Rule 31a-1 under the 1940 Act.
6. Expenses. During the term of this Agreement, the Investment
Adviser will pay all expenses incurred by it in connection with its
activities under this Agreement other than the cost of securities (including
brokerage commissions, if any) purchased for the Funds.
7. Compensation. For the services provided and the expenses assumed
pursuant to this Agreement, each Fund will pay the Investment Adviser and the
Investment Adviser will accept as full compensation therefor a fee as set
forth on Schedule A hereto. The obligations of each Fund to pay the
above-described fee to the Investment Adviser will begin as of the date of
the initial public sale of shares in such Fund. The fee attributable
A-4
<PAGE>
to each Fund shall be the obligation of that Fund and not of any
other Fund.
If in any fiscal year the aggregate expenses of any of the Funds (as
defined under the securities regulations of any state having jurisdiction
over the Trust) exceed the expense limitations of any such state, the
Investment Adviser will reimburse the Fund for a portion of such excess
expenses equal to such excess times the ratio of the fees otherwise payable
by the Fund to the Investment Adviser hereunder to the aggregate fees
otherwise payable by the Fund to the Investment Adviser hereunder and to
BISYS Fund Services, Inc. under the Management and Administration Agreement
between BISYS Fund Services, Inc. and the Trust. The obligation of the
Investment Adviser to reimburse the Funds hereunder is limited in any fiscal
year to the amount of its fee hereunder for such fiscal year, provided,
however, that notwithstanding the foregoing, the Investment Adviser shall
reimburse the Funds for such proportion of such excess expenses regardless of
the amount of fees paid to it during such fiscal year to the extent that the
securities regulations of any state having jurisdiction over the Trust so
require. Such expense reimbursement, if any, will be estimated daily and
reconciled and paid on a monthly basis.
8. Limitation of Liability of Investment Adviser. The Investment
Adviser shall not be liable for any error of judgment or mistake of law or
for any loss suffered by the Funds in connection with the performance of this
Agreement, except a loss resulting from a breach of fiduciary duty with
respect to the receipt of compensation for services or a loss resulting from
willful misfeasance, bad faith or gross negligence on the part of the
Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
9. Term, Duration and Termination. This Agreement shall become
effective with respect to each Fund listed on Schedule A hereof as of the
date first written above (or, if a particular Fund is not in existence on
that date, on the date a registration statement relating to that Fund becomes
effective with the Securities and Exchange Commission), provided that it
shall have been approved by vote of a majority of the outstanding voting
securities of each such Fund, in accordance with the requirements under the
1940 Act, and unless sooner terminated as provided herein, shall continue
until November 30, 1999. Thereafter, if not terminated, this Agreement shall
continue with respect to a particular Fund for successive one-year terms,
provided that such continuance is specifically approved at least annually (a)
by the vote of a majority of those members of the Trust's Board of Trustees
who are not parties to this Agreement or interested persons of any such
party, cast in person at a meeting called for the purpose of voting on such
approval, and (b) by the vote of a
A-5
<PAGE>
majority of the Trust's Board of Trustees or by the vote of a majority of the
outstanding voting securities of such Fund. Notwithstanding the foregoing,
this Agreement may be terminated as to a particular Fund at any time on sixty
days' written notice, without the payment of any penalty, by the Trust (by
vote of the Trust's Board of Trustees or by vote of a majority of the
outstanding voting securities of such Fund) or by the Investment Adviser.
This Agreement will immediately terminate in the event of its assignment. (As
used in this Agreement, the terms "majority of the outstanding voting
securities," "interested persons" and "assignment" shall have the same
meanings as ascribed to such terms in the 1940 Act.
10. Investment Adviser's Representations. The Investment Adviser
hereby represents and warrants that it is willing and possesses all requisite
legal authority to provide the services contemplated by this Agreement
without violation of applicable law and regulations, including but not
limited to the Glass- Steagall Act and the regulations promulgated
thereunder.
11. Amendment of this Agreement. No provision of this Agreement may
be changed, waived, discharged or terminated orally, but only by an
instrument in writing signed by the party against which enforcement of the
change, waiver, discharge or termination is sought.
12. Governing Law. This Agreement shall be governed by and
provisions shall be construed in accordance with the laws of the
Commonwealth of Massachusetts.
13. Limitation of Liability of Trustees and Shareholders. The names
"MarketWatch Funds" and "Trustees of MarketWatch Funds" refer respectively to
the Trust created and the Trustees, as trustees but not individually or
personally, acting from time to time under an Agreement and Declaration of
Trust dated as of June 4, 1992 to which reference is hereby made and a copy
of which is on file at the office of the Secretary of State of The
Commonwealth of Massachusetts and elsewhere as required by law, and to any
and all amendments thereto so filed or hereafter filed. The obligations of
"MarketWatch Funds" entered into in the name or on behalf thereof by any of
the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, shareholders
or representatives of the Trust personally, but bind only the assets of the
Trust and all persons dealing with any series or shares of the Trust must
took solely to the assets of the Trust belonging to such series for the
enforcement of any claims against the Trust.
A-6
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument to
be executed by their officers designated below as of the day and year first
above written.
MARKETWATCH FUNDS
By:__________________________
Title:_______________________
WACHOVIA BANK, N.A.
By:__________________________
Title:_______________________
A-7
<PAGE>
Dated: December __, 1997
Schedule A
to the
Investment Advisory Agreement
between MarketWatch Funds and Wachovia Bank, N.A.
NAME OF FUND COMPENSATION
MarketWatch Annual rate of fifty one-hundredths of one
Money Market Fund percent (.50%) of the average daily net
assets of the MarketWatch Money Market Fund.
MarketWatch Annual rate of one percent (1.00%) of the
Equity Fund average daily net assets of the MarketWatch
Equity Fund.
MarketWatch Annual rate of seventy four one-hundredths
Intermediate Fixed Income Fund of one percent (.74%) of the average daily
net assets of the MarketWatch Intermediate
Fixed Income Fund.
MarketWatch Annual rate of seventy four one-hundredths
Virginia Municipal Bond Fund of one percent (.74%) of the average daily
net assets of the MarketWatch Virginia
Municipal Bond Fund.
MARKETWATCH FUNDS
By:_________________________________
Title:______________________________
WACHOVIA BANK, N.A.
By:_________________________________
Title:______________________________
All fees are computed daily and paid monthly.
<PAGE>
--- DEFINITIVE PROXY CARD ---
MONEY MARKET FUND
OF
MARKETWATCH FUNDS
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE MARKETWATCH
FUNDS (THE "TRUST") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS OF THE MONEY
MARKET FUND TO BE HELD AT THE OFFICES OF BISYS FUND SERVICES, INC., 3435
STELZER ROAD, COLUMBUS, OHIO 43219 AT 10 A.M. (EASTERN TIME) ON DECEMBER 5,
1997. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE
ACTION TO BE TAKEN ON THE FOLLOWING PROPOSALS. IN THE ABSENCE OF ANY
SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS 1 AND 2.
(1) Proposal to approve a New Investment Advisory Agreement between the Trust
and Wachovia Bank, N.A. ("Wachovia"):
/ / For / / Against / / Abstain
(2) In his discretion, the proxy is authorized to vote upon such other
business as may properly come before the meeting, or any
adjournment(s) thereof.
________________________________________________________
The undersigned hereby appoints Walter B. Grimm as attorney and proxy
of the undersigned with the power of substitution and resubstitution, to
attend, vote and act for the undersigned at the Special Meeting of
Shareholders of the Money Market Fund of the Trust to be held at the offices
of BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43219 at
10:00 a.m. (Eastern time) on December 5, 1997 and at any adjournment or
adjournments thereof, casting votes according to the number of shares of the
Fund which the undersigned may be entitled to vote with respect to the
proposals set forth above, in accordance with the specification indicated, if
any, and with all the powers which the undersigned would possess if
personally present, hereby revoking any prior proxy to vote at such meeting,
and hereby ratifying and confirming all that said attorney and proxy may
lawfully do by virtue hereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL
MEETING OF SHAREHOLDERS OF THE TRUST AND THE PROXY STATEMENT DATED NOVEMBER
20, 1997.
THIS PROXY IS SOLICITED BY THE
BOARD OF TRUSTEES ON BEHALF OF THE
MONEY MARKET FUND OF THE TRUST.
PLEASE MARK, SIGN, DATE AND RETURN
THIS PROXY CARD PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
___________________________________
___________________________________
<PAGE>
Signature(s) (Title(s), if
applicable)
Please sign above exactly as your
name(s) appear(s) hereon. Corporate
or partnership proxies should be
signed in full corporate or
partnership name by an authorized
officer. Each joint owner should
sign personally. When signing as a
fiduciary, please give full title
as such.
_______________________, 1997
<PAGE>
--- DEFINITIVE PROXY CARD ---
EQUITY FUND
OF
MARKETWATCH FUNDS
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE MARKETWATCH
FUNDS (THE "TRUST") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS OF THE
EQUITY FUND TO BE HELD AT THE OFFICES OF BISYS FUND SERVICES, INC., 3435
STELZER ROAD, COLUMBUS, OHIO 43219 AT 10 A.M. (EASTERN TIME) ON DECEMBER 5,
1997. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY IN THE
ENCLOSED POSTAGE-PAID ENVELOPE.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE
ACTION TO BE TAKEN ON THE FOLLOWING PROPOSALS. IN THE ABSENCE OF ANY
SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS 1 AND 2.
(1) Proposal to approve a New Investment Advisory Agreement between the Trust
and Wachovia Bank, N.A. ("Wachovia"):
/ / For / / Against / / Abstain
(2) In his discretion, the proxy is authorized to vote upon such other
business as may properly come before the meeting, or any
adjournment(s) thereof.
________________________________________________________
The undersigned hereby appoints Walter B. Grimm as attorney and proxy
of the undersigned with the power of substitution and resubstitution, to
attend, vote and act for the undersigned at the Special Meeting of
Shareholders of the Equity Fund of the Trust to be held at the offices of
BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio 43219 at 10:00
a.m. (Eastern time) on December 5, 1997 and at any adjournment or
adjournments thereof, casting votes according to the number of shares of the
Fund which the undersigned may be entitled to vote with respect to the
proposals set forth above, in accordance with the specification indicated, if
any, and with all the powers which the undersigned would possess if
personally present, hereby revoking any prior proxy to vote at such meeting,
and hereby ratifying and confirming all that said attorney and proxy may
lawfully do by virtue hereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL
MEETING OF SHAREHOLDERS OF THE TRUST AND THE PROXY STATEMENT DATED NOVEMBER
20, 1997.
THIS PROXY IS SOLICITED BY THE
BOARD OF TRUSTEES ON BEHALF OF THE
EQUITY FUND OF THE TRUST. PLEASE
MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY IN THE ENCLOSED
POSTAGE-PAID ENVELOPE.
___________________________________
___________________________________
<PAGE>
Signature(s) (Title(s), if
applicable)
Please sign above exactly as your
name(s) appear(s) hereon. Corporate
or partnership proxies should be
signed in full corporate or
partnership name by an authorized
officer. Each joint owner should
sign personally. When signing as a
fiduciary, please give full title
as such.
___________________________, 1997
<PAGE>
--- DEFINITIVE PROXY CARD ---
INTERMEDIATE FIXED INCOME FUND
OF
MARKETWATCH FUNDS
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE MARKETWATCH
FUNDS (THE "TRUST") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS OF THE
INTERMEDIATE FIXED INCOME FUND TO BE HELD AT THE OFFICES OF BISYS FUND
SERVICES, INC., 3435 STELZER ROAD, COLUMBUS, OHIO 43219 AT 10 A.M. (EASTERN
TIME) ON DECEMBER 5, 1997. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE
ACTION TO BE TAKEN ON THE FOLLOWING PROPOSALS. IN THE ABSENCE OF ANY
SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS 1 AND 2.
(1) Proposal to approve a New Investment Advisory Agreement between the Trust
and Wachovia Bank, N.A. ("Wachovia"):
/ / For / / Against / / Abstain
(2) In his discretion, the proxy is authorized to vote upon such other
business as may properly come before the meeting, or any
adjournment(s) thereof.
________________________________________________________
The undersigned hereby appoints Walter B. Grimm as attorney and proxy
of the undersigned with the power of substitution and resubstitution, to
attend, vote and act for the undersigned at the Special Meeting of
Shareholders of the Intermediate Fixed Income Fund of the Trust to be held at
the offices of BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio
43219 at 10:00 a.m. (Eastern time) on December 5, 1997 and at any adjournment
or adjournments thereof, casting votes according to the number of shares of
the Fund which the undersigned may be entitled to vote with respect to the
proposals set forth above, in accordance with the specification indicated, if
any, and with all the powers which the undersigned would possess if
personally present, hereby revoking any prior proxy to vote at such meeting,
and hereby ratifying and confirming all that said attorney and proxy may
lawfully do by virtue hereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL
MEETING OF SHAREHOLDERS OF THE TRUST AND THE PROXY STATEMENT DATED NOVEMBER
20, 1997.
THIS PROXY IS SOLICITED BY THE
BOARD OF TRUSTEES ON BEHALF OF THE
INTERMEDIATE FIXED INCOME FUND OF
THE TRUST. PLEASE MARK, SIGN, DATE
AND RETURN THIS PROXY CARD PROMPTLY
IN THE ENCLOSED POSTAGE-PAID
ENVELOPE.
___________________________________
<PAGE>
___________________________________
Signature(s) (Title(s), if
applicable)
Please sign above exactly as your
name(s) appear(s) hereon. Corporate
or partnership proxies should be
signed in full corporate or
partnership name by an authorized
officer. Each joint owner should
sign personally. When signing as a
fiduciary, please give full title
as such.
____________________________, 1997
<PAGE>
--- DEFINITIVE PROXY CARD ---
VIRGINIA MUNICIPAL BOND FUND
OF
MARKETWATCH FUNDS
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF THE MARKETWATCH
FUNDS (THE "TRUST") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS OF THE
VIRGINIA MUNICIPAL BOND FUND TO BE HELD AT THE OFFICES OF BISYS FUND
SERVICES, INC., 3435 STELZER ROAD, COLUMBUS, OHIO 43219 AT 10 A.M. (EASTERN
TIME) ON DECEMBER 5, 1997. PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD
PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE
ACTION TO BE TAKEN ON THE FOLLOWING PROPOSALS. IN THE ABSENCE OF ANY
SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF PROPOSALS 1 AND 2.
(1) Proposal to approve a New Investment Advisory Agreement between the Trust
and Wachovia Bank, N.A. ("Wachovia"):
/ / For / / Against / / Abstain
(2) In his discretion, the proxy is authorized to vote upon such other
business as may properly come before the meeting, or any
adjournment(s) thereof.
________________________________________________________
The undersigned hereby appoints Walter B. Grimm as attorney and proxy
of the undersigned with the power of substitution and resubstitution, to
attend, vote and act for the undersigned at the Special Meeting of
Shareholders of the Virginia Municipal Bond Fund of the Trust to be held at
the offices of BISYS Fund Services, Inc., 3435 Stelzer Road, Columbus, Ohio
43219 at 10:00 a.m. (Eastern time) on December 5, 1997 and at any adjournment
or adjournments thereof, casting votes according to the number of shares of
the Fund which the undersigned may be entitled to vote with respect to the
proposals set forth above, in accordance with the specification indicated, if
any, and with all the powers which the undersigned would possess if
personally present, hereby revoking any prior proxy to vote at such meeting,
and hereby ratifying and confirming all that said attorney and proxy may
lawfully do by virtue hereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL
MEETING OF SHAREHOLDERS OF THE TRUST AND THE PROXY STATEMENT DATED NOVEMBER
20, 1997.
THIS PROXY IS SOLICITED BY THE
BOARD OF TRUSTEES ON BEHALF OF THE
VIRGINIA MUNICIPAL BOND FUND OF THE
TRUST. PLEASE MARK, SIGN, DATE AND
RETURN THIS PROXY CARD PROMPTLY IN
THE ENCLOSED POSTAGE-PAID ENVELOPE.
___________________________________
___________________________________
<PAGE>
Signature(s) (Title(s), if
applicable)
Please sign above exactly as your
name(s) appear(s) hereon. Corporate
or partnership proxies should be
signed in full corporate or
partnership name by an authorized
officer. Each joint owner should
sign personally. When signing as a
fiduciary, please give full title
as such.
____________________________, 1997
