As filed with the Securities and Exchange Commission
on December 23, 1998
Registration No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- ----------------------------------------------------------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. ___ |_|
Post-Effective Amendment No. ___ |_|
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1940 |_|
Amendment No. ___ |_|
(Check appropriate box or boxes)
------------------------
NATIONS FUND TRUST
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
--------------------------
Registrant's Telephone Number, including Area Code: (800) 626-2275
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With copies to:
Robert M. Kurucza, Esq. W. Bruce McConnel, III, Esq.
Marco E. Adelfio, Esq. Michael P. Malloy, Esq.
Morrison & Foerster LLP Drinker Biddle & Reath LLP
2000 Pennsylvania Ave., N.W. Philadelphia National Bank
Suite 5500 Building
Washington, D.C. 20006 1345 Chestnut Street
Philadelphia, PA 19107-2700
It is proposed that this filing will become effective on January 22, 1999
pursuant to Rule 488.
No filing fee is required under the Securities Act of 1933 because an indefinite
number of shares of beneficial interest in the Registrant, without par value,
has previously been registered pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended. The Registrant filed on June 25, 1998, the
notice required by Rule 24f-2 for its fiscal year ended March 31, 1998 (File No.
2-97817; 811-4305).
<PAGE>
NATIONS FUND TRUST
CROSS-REFERENCE SHEET
PART A
ITEM NO. ITEM CAPTION PROSPECTUS CAPTION
- -------- ------------ ------------------
1 Beginning of Registration COVER PAGE OF REGISTRATION
Statement and Outside STATEMENT; CROSS-REFERENCE SHEET; FRONT
Front Cover Page of COVER PAGE OF PROXY STATEMENT/PROSPECTUS
Prospectus
2 Beginning and Outside TABLE OF CONTENTS
Back Cover Page of
Prospectus
3 Fee Table, Synopsis APPENDIX II -- EXPENSE SUMMARIES OF
Information, and Risk PACIFIC HORIZON FUNDS AND THE
Factors CORRESPONDING NATIONS FUNDS;
SUMMARY -- PROPOSED REORGANIZATION;
SUMMARY-- OVERVIEW OF THE FUNDS;
SUMMARY--FEDERAL INCOME TAX CONSEQUENCES;
SUMMARY--NATIONS AND PACIFIC HORIZON BOARD
CONSIDERATION; SUMMARY--PRINCIPAL RISK
FACTORS; SUMMARY--VOTING INFORMATION;
SUMMARY--FEES AND EXPENSES.
4 Information About the THE REORGANIZATION - DESCRIPTION OF
Transaction THE AGREEMENT; THE REORGANIZATION -
PACIFIC HORIZON BOARD CONSIDERATION; THE
REORGANIZATION CAPITALIZATION; THE
REORGANIZATION - FEDERAL INCOME TAX
CONSIDERATIONS.
5 Information About the COMPARISON OF PACIFIC HORIZON AND
Registrant NATIONS; ADDITIONAL INFORMATION
ABOUT NATIONS
6 Information About the COMPARISON OF PACIFIC HORIZON AND
Company Being Acquired NATIONS; ADDITIONAL INFORMATION
ABOUT PACIFIC HORIZON
<PAGE>
7 Voting Information VOTING MATTERS
8 Interest of Certain NOT APPLICABLE
Persons and Experts
9 Additional Information NOT APPLICABLE
Required for Reoffering
by Persons Deemed to be
Underwriters
PART B
STATEMENT OF ADDITIONAL
ITEM NO. ITEM CAPTION INFORMATION CAPTION
10 Cover Page COVER PAGE
11 Table of Contents TABLE OF CONTENTS
12 Additional Information INCORPORATION OF DOCUMENTS BY
About the Registrant REFERENCE IN STATEMENT OF
ADDITIONAL INFORMATION
13 Additional Information NOT APPLICABLE
About the Company Being
Acquired
14 Financial Statements EXHIBITS TO STATEMENT OF ADDITIONAL
INFORMATION
PART C
ITEM NO.
15-17 Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this Registration
Statement.
<PAGE>
THE FOLLOWING ITEMS ARE HEREBY INCORPORATED BY REFERENCE INTO VARIOUS PARTS OF
THIS REGISTRATION STATEMENT:
NATIONS FUND TRUST ("NATIONS")
From Post-Effective Amendments Nos. 57 and 58 of Nations' Registration
Statement, filed November 5, 1998 and November 17, 1998, respectively (SEC File
Nos. 2-97817; 811-4305):
Prospectuses for the Investor A Shares of Nations Diversified Income Fund,
Nations Municipal Income Fund and Nations Short-Intermediate Government
Fund, dated August 1, 1998, as supplemented.
Prospectus for the Investor C Shares of Nations Diversified Income Fund,
dated August 1, 1998, as supplemented.
Statement of Additional Information for the Investor A Shares of the
Nations Diversified Income Fund, Nations Municipal Income Fund and Nations
Short-Intermediate Government and for the Investor C Shares of Nations
Diversified Income Fund, dated August 1, 1998.
The audited financial statements and related independent accountants' reports
for the Nations Diversified Income Fund, Nations Municipal Income Fund and
Nations Short-Intermediate Government Fund, contained in the Annual Report for
the fiscal year ended March 31, 1998.
The unaudited financial statements for the Nations Diversified Income Fund,
Nations Municipal Income Fund and Nations Short-Intermediate Government Fund,
contained in the Semi-Annual Report for the fiscal period ended September 30,
1998.
PACIFIC HORIZON FUNDS, INC. ("PACIFIC HORIZON")
From Post-Effective Amendment No. 60 of Pacific Horizon's Registration
Statement, filed July 1, 1998 (SEC File Nos. 2-81110; 811-4293):
Prospectus for the A and K shares of the Flexible Income Fund, the
National Municipal Bond Fund and the Short-Term Government Fund, dated
July 1, 1998, as supplemented.
Statement of Additional Information for the Flexible Income Fund, the
National Municipal Bond Fund and the Short-Term Government Fund, dated
July 1, 1998.
<PAGE>
The audited financial statements and related independent accountants' reports
for the Flexible Income Fund, the National Municipal Bond Fund and the
Short-Term Government Fund, contained in the Annual Report for the fiscal year
ended February 28, 1998.
The unaudited financial statements for the Flexible Income Fund, the National
Municipal Bond Fund and the Short-Term Government Fund, contained in the
Semi-Annual Report for the fiscal period ended August 31, 1998.
2
<PAGE>
PACIFIC HORIZON FUNDS, INC.
Flexible Income Fund
National Municipal Bond Fund
Short-Term Government Fund
400 Bellevue Parkway
Wilmington, Delaware 19809
February 1, 1999
Dear Shareholder:
On behalf of the Board of Directors of Pacific Horizon Funds, Inc.
("Pacific Horizon"), we are pleased to invite you to a special meeting of
shareholders of the Pacific Horizon Funds named above to be held at 10:00 a.m.
(Eastern time) on April 12, 1999, at 400 Bellevue Parkway, Wilmington, Delaware
(the "Meeting"). At the Meeting, you will be asked to approve a proposed
Agreement and Plan of Reorganization, dated as of January ___, 1999 (the
"Reorganization Agreement"), by and between Pacific Horizon and Nations Fund
Trust ("Nations"), which contemplates the reorganization of your Pacific Horizon
Fund into a corresponding fund of Nations, and the reorganization of Pacific
Horizon as a whole.
BACKGROUND. As you may recall, BankAmerica Corporation recently merged
with NationsBank Corporation to form the new BankAmerica Corporation
("BankAmerica"). As a result of the merger, both Bank of America National Trust
and Savings Association ("Bank of America"), the investment adviser to the
Pacific Horizon Funds, and NationsBanc Advisors, Inc. ("NBAI"), the investment
adviser to Nations, are indirect, wholly owned subsidiaries of BankAmerica. Bank
of America has decided to consolidate its mutual fund investment advisory
operations with those of NBAI.
At the upcoming Meeting, you will be asked to approve the reorganization
of your Pacific Horizon Fund into a corresponding Nations Fund (the
"Reorganization"). If all approvals are obtained, the Pacific Horizon Funds will
be reorganized into corresponding Nations Funds in May 1999, when your Pacific
Horizon Fund shares will be exchanged for shares of the corresponding Nations
Funds of equal value.
[PACIFIC HORIZON'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
TO APPROVE THE PROPOSED REORGANIZATION.]
In considering these matters, you should note:
o SIMILAR OBJECTIVES AND POLICIES
The Pacific Horizon Funds are proposed to be reorganized into Nations Funds
with investment policies and objectives that are, in general, substantially
similar to those of the corresponding Pacific Horizon Funds.
<PAGE>
o ENHANCED ACCESS AND SERVICE ARRANGEMENTS
Following the Reorganization, you will enjoy access to Nations Funds through
enhanced distribution, transaction and shareholder servicing arrangements.
Among other things, the new BankAmerica has the most comprehensive
distribution network of any banking organization in the country.
o SAME VALUE OF SHARES
The total dollar value of the Nations Fund shares you receive in the
Reorganization will be the same as the total dollar value of the Pacific
Horizon Fund shares that you held immediately before the Reorganization. THE
EXCHANGE OF PACIFIC HORIZON FUND SHARES FOR NATIONS FUND SHARES WILL BE
TAX-FREE UNDER FEDERAL LAW, AND NO FRONT-END OR CONTINGENT DEFERRED SALES
LOADS WILL BE CHARGED AS A RESULT OF THE EXCHANGE.
o THE PROPOSED REORGANIZATION IS EXPECTED TO BENEFIT PACIFIC HORIZON FUND
SHAREHOLDERS BY: Offering actual or potential reductions in total operating
expense ratios for certain funds;
Offering shareholders the opportunity to become part of a larger and more
diverse family of more than seventy mutual funds. Many of you will be able to
exchange your shares among most or all of those funds;
Offering access to a broader array of investment products, including a line
of fund-of-funds, and investment services including a mutual fund
marketplace; and
Providing opportunities for enhanced returns through combined investment
portfolios.
The formal Notice of Special Meeting, a Combined Proxy
Statement/Prospectus and a Proxy Ballot are enclosed. If you own shares in more
than one of the Pacific Horizon Funds named above, more than one Proxy Ballot
accompanies these materials. If you own shares in one or more of the Pacific
Horizon Funds not named above, you will be receiving separately a set of proxy
materials (including Proxy Ballot(s)) for the other funds(s).
Whether or not you plan to attend the Special Meeting, you may vote by
proxy in any of the following ways:
1. Mark, sign, date and return the enclosed Proxy Ballot(s) in the
enclosed postage-paid envelope;
2. Mark, sign, date and fax the enclosed Proxy Ballot(s) to ADP Proxy
Services at (704) 388-2641; or
3. Follow the instructions below to vote on-line or by telephone.
2
<PAGE>
Please return your Proxy Ballot(s), fax it to us or follow the
instructions below to vote on-line or by telephone, so that your vote will be
counted.
YOUR VOTE IS IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES THAT YOU
OWN. PLEASE VOTE BY RETURNING YOUR PROXY BALLOT(S) TODAY, EITHER IN THE ENCLOSED
POSTAGE-PAID ENVELOPE OR BY TELEFACSIMILE AT (704) 388-2641. YOU MAY ALSO VOTE
YOUR PROXY INSTANTLY BY A TOLL-FREE PHONE CALL OR BY VOTING ON-LINE.
PLEASE SEE BELOW.
The proposed Reorganization and the reasons for the Pacific Horizon
Board's unanimous recommendation are discussed in detail in the enclosed
materials, which you should read carefully. If you have any questions about the
Reorganization, please do not hesitate to contact Pacific Horizon toll free at
1-800-___-___.
We look forward to seeing you at the Meeting or receiving your Proxy
Ballot(s) or your on-line or telephone instructions so that your shares may be
voted at the Meeting.
Sincerely,
Dr. Cornelius J. Pings
President
3
<PAGE>
TWO QUICK AND EASY WAYS TO VOTE YOUR PROXY PACIFIC
INSTANTLY HORIZON
FUNDS
As a valued Pacific Horizon Funds shareholder, your proxy vote is important to
us. That's why we've made it faster and easier to vote your proxy at YOUR
convenience, 24 hours a day. After reviewing the enclosed PROXY STATEMENT, which
outlines important issues affecting your funds, select one of the following
quick and easy methods to register your vote - ACCURATELY and IMMEDIATELY.
VOTE ON-LINE VOTE BY TOLL-FREE PHONE CALL
1. Read the enclosed PROXY STATEMENT 1. Read the enclosed PROXY STATEMENT
and have your PROXY BALLOT(S)* at and have your PROXY BALLOT(S)* at
hand. hand.
2. Go to Web site WWW.PROXYVOTE.COM 2. Call toll-free 1-800-690-6903.
3. Enter the 12-digit Control Number 3. Enter the 12-digit Control Number
found on your PROXY BALLOT(S). found on your PROXY BALLOT(S).
4. Cast your vote using the 4. Cast your vote using the
easy-to-follow instructions. easy-to-follow instructions.
* DO NOT MAIL THE PROXY BALLOT(S) IF VOTING BY INTERNET OR TELEPHONE.
4
<PAGE>
PACIFIC HORIZON FUNDS, INC.
Flexible Income Fund
National Municipal Bond Fund
Short-Term Government Fund
400 Bellevue Parkway
Wilmington, Delaware 19809
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON APRIL 12, 1999
To Pacific Horizon Fund Shareholders:
NOTICE IS GIVEN THAT a special meeting of the shareholders (the "Meeting")
of the Pacific Horizon Funds named above (each a "Pacific Horizon Fund" and
together, the "Pacific Horizon Funds"), each of which is a series of Pacific
Horizon Funds, Inc. ("Pacific Horizon"), will be held at 10:00 a.m., Eastern
time, on April 12, 1999, at 400 Bellevue Parkway, Wilmington, Delaware, for
purpose of considering and voting upon:
ITEM 1. A proposal to approve an Agreement and Plan of Reorganization,
which provides for (a) the transfer of the assets and liabilities of each
Pacific Horizon Fund to a corresponding fund of Nations Fund Trust in
exchange for shares of designated classes of the corresponding Nations
fund of equal value, (b) the distribution of shares of designated classes
of the corresponding Nations fund to shareholders of each Pacific Horizon
Fund and (c) the dissolution under state law and the deregistration under
the Investment Company Act of 1940, as amended, of Pacific Horizon.
ITEM 2. Such other business as may properly come before the Meeting or any
adjournment(s).
Item 1 is described in the attached Combined Proxy Statement/Prospectus.
[YOUR DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSAL.]
Shareholders of record as of the close of business on January 14, 1999 are
entitled to notice of, and to vote at, the Meeting or any adjournment(s)
thereof.
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY CARD, WHICH IS BEING SOLICITED BY THE
PACIFIC HORIZON BOARD OF DIRECTORS. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
MEETING. SHAREHOLDERS ALSO MAY RETURN PROXIES BY: 1)FACSIMILE AT (704) 388-2641;
OR 2) TOUCHTONE VOTING BY DIALING (800) 690-6903; OR 3) VOTING ON-LINE AT WEB
SITE WWW.PROXYVOTE.COM. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE
EXERCISED BY SUBMITTING TO PACIFIC HORIZON A WRITTEN NOTICE OF REVOCATION OR A
SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
<PAGE>
By Order of the Board of Directors,
----------------------------
W. Bruce McConnel, III
Secretary
WE NEED YOUR PROXY VOTE IMMEDIATELY
A SHAREHOLDER MAY THINK HIS OR HER VOTE IS NOT IMPORTANT, BUT IT IS VITAL.
BY LAW, THE SPECIAL MEETING WILL HAVE TO BE ADJOURNED WITHOUT CONDUCTING ANY
BUSINESS IF LESS THAN A MAJORITY OF THE SHARES ELIGIBLE TO VOTE ARE REPRESENTED.
IN THAT EVENT, THE COMPANY WOULD CONTINUE TO SOLICIT VOTES IN AN ATTEMPT TO
ACHIEVE A QUORUM. YOUR VOTE COULD BE CRITICAL IN ALLOWING THE COMPANY TO HOLD
THE MEETING AS SCHEDULED, SO PLEASE RETURN YOUR PROXY BALLOT(S) IMMEDIATELY OR
VOTE ON-LINE OR BY TELEPHONE.
2
<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
FEBRUARY 1, 1999
PACIFIC HORIZON FUNDS, INC.
400 BELLEVUE PARKWAY
WILMINGTON, DELAWARE 19809
1-800-[ ]
NATIONS FUND TRUST
ONE NATIONSBANK PLAZA, 33RD FLOOR
CHARLOTTE, NORTH CAROLINA 28255
1-800-321-7854
This combined proxy statement/prospectus ("Proxy/Prospectus") is being
sent to shareholders of the Pacific Horizon Flexible Income Fund, Pacific
Horizon National Municipal Bond Fund and Pacific Horizon Short-Term Government
Fund (each a "Pacific Horizon Fund" and collectively the "Pacific Horizon
Funds"). The Board of Directors of Pacific Horizon Funds, Inc. ("Pacific
Horizon") has called a Special Meeting of Shareholders (the "Meeting") at 10:00
a.m. (Eastern time) on April 12, 1999 at 400 Bellevue Parkway, Wilmington,
Delaware. At the Meeting, shareholders will be asked:
o To approve a proposed Agreement and Plan of Reorganization dated as
of January ___, 1999 (the "Reorganization Agreement") by and between
Pacific Horizon and Nations Fund Trust ("Nations") which provides
for (a) the transfer of the assets and liabilities of each Pacific
Horizon Fund to a corresponding fund of Nations Fund Trust in
exchange for the shares of designated classes of the corresponding
Nations Fund of equal value; (b) the distribution of the shares of
designated classes of the corresponding Nations Fund to shareholders
of each Pacific Horizon Fun; and (c) the dissolution under state law
and the deregistration under the Investment Company Act of 1940, as
amended (the "1940 Act"), of Pacific Horizon.
The Reorganization Agreement, a copy of which is attached as Appendix I,
provides for the transfer of assets and liabilities of each Pacific Horizon Fund
to a corresponding fund of Nations (each a "Nations Fund" and collectively the
"Nations Funds") in exchange for shares ("Shares") of designated classes of the
corresponding Nations Fund of equal value (the "Reorganization"). Pacific
Horizon and Nations are both registered open-end management investment companies
(mutual funds).
As a result of the Reorganization, shareholders of the Pacific Horizon
Funds will become shareholders of the Nations Funds (the Pacific Horizon Funds
and Nations Funds are sometimes referred to as "Funds"). Table I below shows
each class of each Pacific Horizon Fund and the designated class of each
corresponding Nations Fund:
1
<PAGE>
TABLE I
- ------------------------------------- ------------------------------------
PACIFIC HORIZON FUND/SHARE CLASS CORRESPONDING NATIONS FUND/SHARE
CLASS
- ------------------------------------- ------------------------------------
FLEXIBLE INCOME FUND NATIONS DIVERSIFIED INCOME FUND
A Shares Investor A Shares
K Shares Investor C Shares
- ------------------------------------- ------------------------------------
NATIONAL MUNICIPAL BOND FUND NATIONS MUNICIPAL INCOME FUND
A Shares Investor A Shares
- ------------------------------------- ------------------------------------
SHORT-TERM GOVERNMENT FUND NATIONS SHORT-INTERMEDIATE
A Shares GOVERNMENT FUND
Investor A Shares
- ------------------------------------- ------------------------------------
Pacific Horizon also offers shares in other funds that are not part of
this Proxy/Prospectus. Pacific Horizon shareholders of those funds are voting on
similar agreements and plans of reorganization, that, in a like manner, would
provide for their reorganization into designated classes and corresponding
portfolios of two other registered investment companies - Nations Funds, Inc.
and Nations Institutional Reserves (together with Nations, the "Nations Funds
Family"). If the Reorganization Agreement and the Agreements and plans of
reorganization affecting the other funds of Pacific Horizon are approved and
consummated, Pacific Horizon will transfer all of its assets and liabilities and
deregister as a registered investment company and dissolved under Maryland law.
This Proxy/Prospectus sets forth concisely the information that a Pacific
Horizon Fund shareholder should know before voting, and should be retained for
future reference. It is both Pacific Horizon's proxy statement for the Meeting
and a prospectus for each Nations Fund.
Additional information is set forth in the statement of additional
information relating to this Proxy/Prospectus and in the prospectus dated July
1, 1998, as supplemented, for the Pacific Horizon Funds, both of which are
incorporated herein by reference. Each of these documents is on file with the
Securities and Exchange Commission (the "SEC"), and is available without charge
by calling or writing Pacific Horizon at the telephone number or address stated
above. The information contained in the Nations Funds prospectuses for the
designated share classes, dated August 1, 1998, as supplemented, also is
incorporated by reference into this Proxy/Prospectus. In addition, a prospectus
for the designated share classes of the Nations Funds accompanies this
Proxy/Prospectus. The Annual Report for the year ended March 31, 1998 and the
Semi-Annual Report for the period ended September 30, 1998 for the Nations Funds
are available without charge by calling or writing Nations at the telephone
number or address stated above. Each of these documents is also available on the
SEC's website at www.sec.gov.
2
<PAGE>
This Proxy/Prospectus is expected to be first sent to shareholders on or
about February 1, 1999.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE PACIFIC HORIZON FUNDS AND NATIONS FUNDS ARE NOT DEPOSITS OR
OBLIGATIONS OF OR GUARANTEED OR ENDORSED BY BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, NATIONSBANK, N.A. OR ANY OF THEIR AFFILIATES OR ANY OTHER
BANK. SUCH SHARES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THE DISTRIBUTOR OF THE PACIFIC HORIZON FUNDS IS
PROVIDENT DISTRIBUTORS, INC. THE DISTRIBUTOR OF THE NATIONS FUNDS IS STEPHENS
INC.
3
<PAGE>
TABLE OF CONTENTS
FEE TABLES............................................................x
Table II.....................................................x
SUMMARY...............................................................x
Proposed Reorganization.........................................x
Overview of the Funds...........................................x
Federal Income Tax Consequences.................................x
Nations and Pacific Horizon Board Consideration.................x
Principal Risk Factors..........................................x
Voting Information..............................................x
Management's Discussion of Nations Fund Performance.............x
Fees and Expenses...............................................x
THE REORGANIZATION....................................................x
Reasons for the Reorganization..................................x
Description of the Reorganization Agreement.....................x
Pacific Horizon Board Consideration.............................x
Capitalization..................................................x
Table III....................................................x
Federal Income Tax Considerations...............................x
Other Matters...................................................x
COMPARISON OF PACIFIC HORIZON AND NATIONS.............................x
Investment Objectives and Policies..............................x
Investment Advisory Services....................................x
Other Service Providers for the Pacific
Horizon and Nations..........................................x
Distribution and Shareholder Servicing Arrangements
for the Pacific Horizon Funds................................x
Distribution and Shareholder Servicing Arrangements
for the Nations Funds........................................x
Administration Agreements ......................................x
Shareholder Transactions and Services...........................x
Share Structure.................................................x
Comparison of Corporate/Trust Structure.........................x
VOTING MATTERS........................................................x
General Information.............................................x
Shareholder and Board Approvals.................................x
Table IV(A)..................................................x
Table IV(B)..................................................x
Quorum..........................................................x
Annual Meeting and Shareholder Meetings.........................x
ADDITIONAL INFORMATION ABOUT NATIONS..................................x
4
<PAGE>
ADDITIONAL INFORMATION ABOUT PACIFIC HORIZON..........................x
FINANCIAL STATEMENTS..................................................x
OTHER BUSINESS........................................................x
SHAREHOLDER INQUIRIES.................................................x
APPENDICES I AGREEMENT AND PLAN OF REORGANIZATION
II EXPENSE SUMMARIES OF PACIFIC HORIZON FUNDS AND THE
CORRESPONDING NATIONS FUNDS
III INVESTMENT OBJECTIVES, LIMITATIONS AND
CERTAIN SIGNIFICANT INVESTMENT POLICIES
OF THE NATIONS FUNDS AND THE
CORRESPONDING PACIFIC HORIZON FUNDS
IV SHAREHOLDER TRANSACTIONS AND SERVICES
OF THE NATIONS FUNDS AND THE CORRESPONDING PACIFIC
HORIZON FUNDS
V MANAGEMENT'S DISCUSSION OF NATIONS FUND PERFORMANCE
5
<PAGE>
FEE TABLES
The following table shows, as of September 30, 1998, (i) the current
annualized total expense ratio of the Pacific Horizon Funds before and after fee
waivers and/or expense reimbursements and (ii) the PRO FORMA annualized total
expense ratio of the corresponding Nations Funds, before and after fee waivers
and/or expense reimbursements, based upon the fee arrangements that will be in
place upon consummation of the Reorganization. This table shows that the Nations
Funds' PRO FORMA expense ratios, before waivers and reimbursements, are lower
than those of the corresponding Pacific Horizon Funds and that taking into
account voluntary waivers and reimbursements, they are higher than those of the
corresponding Pacific Horizon Funds. Detailed PRO FORMA expense information for
each proposed reorganization is included in Appendix II.
TABLE II
TOTAL EXPENSE INFORMATION
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
PACIFIC HORIZON TOTAL CORRESPONDING TOTAL COMBINED FUND/SHARE PRO FORMA
SHARE CLASS OPERATING NATIONS FUND/SHARE CLASS OPERATING CLASS POST-REORGANIZATION TOTAL
EXPENSES EXPENSES OPERATING
BEFORE/ BEFORE/ EXPENSES
AFTER AFTER BEFORE/AFTER
WAIVERS WAIVERS WAIVERS
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Pacific Horizon Flexible Income Fund Nations Diversified Income Fund Nations Diversified Income Fund
A Shares 1.38%/0.50% Investor A Shares 1.07%/0.97% Investor A Shares 1.07%/0.97%
K Shares 2.13%/1.00% Investor C Shares 1.82%/1.72% Investor C Shares 1.82%/1.72%
- ----------------------------------------------------------------------------------------------------------------------
Pacific Horizon National Muncipal Nations Municipal Income Fund Nations Municipal Income Fund
Bond Fund Investor A Shares 1.07%/0.80% Investor A Shares 1.07%/0.80%
A Shares 1.27%/0.50%
- ----------------------------------------------------------------------------------------------------------------------
Pacific Horizon Short-Term Nations Short-Intermediate Nations Short-Intermediate
Government Fund Government Fund Government Fund
A Shares 1.02%/0.25% Investor A Shares 0.85%/0.80% Investor A Shares 0.85%/0.80%
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
SUMMARY
The following is a summary of certain information relating to the proposed
Reorganization. More complete information is contained elsewhere in this
Proxy/Prospectus, the Prospectuses and Statements of Additional Information of
Pacific Horizon and Nations, and the Appendices attached hereto.
6
<PAGE>
PROPOSED REORGANIZATION. The Reorganization Agreement provides for: (1)
the transfer of all of the assets and liabilities of each Pacific Horizon Fund
to a corresponding Nations Fund in exchange for Shares of designated classes of
the corresponding Nations Fund of equal value; (2) the distribution of the
Nations Fund Shares to the shareholders of the Pacific Horizon Funds in
liquidation of the Pacific Horizon Funds; and (3) the dissolution under state
law and the deregistration under the 1940 Act, of Pacific Horizon. The
Reorganization is subject to a number of conditions, including Pacific Horizon
Fund shareholder approval.
The exchange of shares in the Reorganization will be tax-free under
federal law and shareholders will not pay any sales charge as a result of the
exchange of the shares in the Reorganization. As a result of the proposed
Reorganization, a Pacific Horizon Fund shareholder will become a shareholder of
the corresponding Nations Fund and will hold, immediately after the
Reorganization, Nations Fund Shares having a total dollar value equal to the
total dollar value of the shares of the Pacific Horizon Fund that the
shareholder held immediately before the Reorganization. The Reorganization is
expected to occur in May 1999 or such later date as may be determined pursuant
to the Reorganization Agreement. For more information about the Reorganization
and the Reorganization Agreement, see "The Reorganization--Description of the
Reorganization Agreement."
NBAI has advised Pacific Horizon and Nations Funds that NationsBank and
its affiliates intend, with respect to certain of their fiduciary accounts that
currently hold A Shares of a Pacific Horizon Fund, to exchange the Investor A
Shares that such accounts would be entitled to receive as a result of the
Reorganization for Primary A Shares of the same Fund of equal value at or
shortly after Closing.
OVERVIEW OF THE FUNDS. The investment objectives, policies and
restrictions of the Pacific Horizon Funds are, in general, substantially similar
to those of their corresponding Nations Fund. There are, however, differences.
For example, the weighted average maturity of the Pacific Horizon Short-Term
Government Fund's portfolio typically ranges from one to two years, while the
weighted average maturity of the Nations Short-Intermediate Government Fund's
portfolio is typically between three and five years. As a result the share value
of the Nations Short-Intermediate Government Fund may be more volatile. For
additional information, see "Comparison of Pacific Horizon and
Nations--Investment Objectives and Policies" and Appendix III.
NationsBanc Advisors, Inc. ("NBAI") currently serves as the investment
adviser to the Nations Funds. TradeStreet Investment Associates, Inc.
("TradeStreet") currently serves as investment sub-adviser to the Nations Funds.
Bank of America National Trust and Savings Association ("Bank of America")
currently serves as the investment adviser to the Pacific Horizon Funds. NBAI,
TradeStreet and Bank of America are wholly owned subsidiaries of BankAmerica
Corporation. Each Nations Fund's contractual advisory fee is higher than the
corresponding Pacific Horizon Fund's contractual advisory fee, though advisory
fees are only one type of fees and expenses paid by mutual funds. Total
operating expenses (before waivers and reimbursements) are lower for each
Nations Fund compared with its corresponding Pacific Horizon Fund; total
operating expenses (after waivers and reimbursements) are higher for each
Nations Fund. For a more detailed summary of fees and expenses, see Appendix II.
The Pacific Horizon Funds and Nations Funds have different administrators,
distributors, transfer agents and other service providers. For a detailed
description of the management of the Nations Funds, including NBAI, TradeStreet
and other service providers to the Nations Funds, see the Nations Fund
prospectus accompanying this Proxy/Prospectus.
7
<PAGE>
The purchase, redemption, dividend and other policies and procedures of
the Pacific Horizon Funds and the Nations Funds are generally similar. See
"Comparison of Pacific Horizon and Nations--Shareholder Transactions and
Services" and -- "Share Structure" and Appendix IV to this Proxy/Prospectus.
PLEASE NOTe THAT NO FRONT-END OR CONTINGENT DEFERRED SALES LOADS WILL BE IMPOSED
ON ANY OF THE SHAREHOLDERS OF THE PACIFIC HORIZON FUNDS AS A RESULT OF THE
ISSUANCE OF SHARES IN THE EXCHANGE OF SHARES IN THE REORGANIZATION.
FEDERAL INCOME TAX CONSEQUENCES. The exchange of shares in the
Reorganization is not expected to result in the recognition, for federal income
tax purposes, of gain or loss by the Pacific Horizon Funds, the Nations Funds or
their respective shareholders. The sale of securities by the Pacific Horizon
Funds prior to the Reorganization, whether in the ordinary course of business or
in anticipation of the Reorganization, could result in a taxable capital gains
distribution prior to the Reorganization. See "The Reorganization
Agreement--Federal Income Tax Considerations" for additional information.
PACIFIC HORIZON AND NATIONS BOARD CONSIDERATION. During its deliberations,
Pacific Horizon's Board of Directors (with the advice and assistance of its
counsel) reviewed, among other things: (1) the potential effect of the
Reorganization on the shareholders of the Pacific Horizon Funds; (2) the
capabilities, practices and resources of NBAI and the Nations Funds' other
service providers; (3) the investment advisory and other fees paid by the
Nations Funds, and the historical and projected expense ratios of the Nations
Funds as compared with those of the Pacific Horizon Funds and industry peer
groups; (4) the expected cost-savings for certain of the Pacific Horizon Funds,
including Pacific Horizon funds not part of this Proxy/Prospectus, as a result
of the reorganization of Pacific Horizon; (5) the investment objectives,
policies and limitations of the Nations Funds and their relative compatibility
with those of the Pacific Horizon Funds; (6) the historical investment
performance records of the Pacific Horizon Funds and the Nations Funds, relative
to each other and relative to peer groups; (7) the shareholder services offered
by Nations; (8) the terms and conditions of the Reorganization Agreement,
including those provisions that were intended to avoid dilution of the interests
of Pacific Horizon Fund shareholders; (9) the anticipated tax consequences of
the Reorganization for the respective Pacific Horizon Funds and their
shareholders; (10) the number of investment portfolio options that would be
available to shareholders after the Reorganization; (11) the viability of any
Pacific Horizon Fund on a stand-alone basis apart from the Nations Funds Family;
and (12) the potential benefits of the Reorganization to other persons,
especially NBAI and its affiliates. The Board also considered NBAI's belief that
the Reorganization would eliminate certain duplicative shareholder costs and
market overlap, facilitate consolidation of NBAI's managerial resources and
enhance generally operational efficiencies and focus with respect to the mutual
funds advised by NBAI. For additional information, see "The
Reorganization--Pacific Horizon Board Consideration."
8
<PAGE>
[Based upon their evaluation of the information presented to them, and in
light of their fiduciary duties under federal and state law, the Board of
Directors of Pacific Horizon, including all of the non-interested members of the
Board, determined that the proposed Reorganization is in the best interests of
the shareholders of each class of each Pacific Horizon Fund, and that the
interests of such shareholders will not be diluted as a result of the
Reorganization. PACIFIC HORIZON'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
PACIFIC HORIZON FUND SHAREHOLDERS APPROVE THE REORGANIZATION AGREEMENT.]
After considering the relevant factors, the Nations Board similarly found
that participation in the Reorganization is in the best interests of the Nations
Funds and that the interests of the shareholders of the Nations Funds will not
be diluted as a result of the Reorganization.
PRINCIPAL RISK FACTORS. Because of the general similarities of the
investment objectives, policies and restrictions of the Pacific Horizon Funds
and their corresponding Nations Funds, an investment in a Nations Fund involves
risks that are similar to those of the corresponding Pacific Horizon Fund.
An investment in each of the Pacific Horizon Funds and Nations Funds
involves risks typically associated with investing in a portfolio of
fixed-income securities, including both interest rate risk and credit risk.
Interest rate risk is the risk that the value of a security will tend to
decrease when market interest rates rise and increase when market interest rates
fall. In general, longer-term debt instruments tend to fluctuate in value more
than shorter-term debt instruments in response to market interest rate
movements. Therefore, because the weighted average maturity range of the Pacific
Horizon Short-Term Government Fund typically is less than that of Nations
Short-Intermediate Government Fund, the share price of the Nations Fund is
likely to fluctuate more in response to market interest rate changes than that
of the Pacific Horizon Fund.
Credit risk is the risk that the issuer of a fixed-income instrument will
be unable to pay principal or interest when due. Credit risk exposure is
substantially similar across Fund pairings, except that Nations
Short-Intermediate Government Fund is subject to less credit risk than the
Pacific Horizon Short-Term Government Fund because the Nations Fund typically
invests fully in U.S. Government obligations, whereas the Pacific Horizon Fund
may invest up to 35% of its assets in corporate bonds.
VOTING INFORMATION. This Proxy/Prospectus is being furnished in connection
with the solicitation of proxies by Pacific Horizon's Board of Directors. Only
shareholders of record at the close of business on January 14, 1999 will be
entitled to vote at the Meeting. Shares represented by a properly executed proxy
will be voted in accordance with the instructions thereon. If no instruction is
made, the named proxies will vote in favor of each proposal set forth in the
Notice of Meeting. Proxies may be revoked at any time before they are exercised
by submitting to Pacific Horizon a written notice of revocation or a
subsequently executed proxy or by attending the Meeting and voting in person.
For additional information, see "Information Relating to Voting Matters."
9
<PAGE>
THE REORGANIZATION
Significant features of the Reorganization are summarized below. This
summary is qualified in its entirety by reference to the Reorganization
Agreement, a copy of which is attached as Appendix I.
The proposed Reorganization is expected to benefit Pacific Horizon Fund
shareholders by, among other things:
(i) Offering shareholders the opportunity to become part of a larger and
more diverse family of more than seventy mutual funds. Many of you
will be able to exchange your shares among most or all of those
funds;
(ii) Offering access to a broader array of investment products, including
a line of fund-of-funds, and investment services including a mutual
fund marketplace;
(iii) Offering enhanced access and servicing arrangements; and
(iv) Providing opportunities for enhanced returns through combined
investment portfolios.
DESCRIPTION OF THE REORGANIZATION AGREEMENT. The Reorganization Agreement
provides that, at the Closing, the Fund Assets and Liabilities (as those terms
are defined in the Reorganization Agreement) of the Pacific Horizon Funds will
be transferred to Nations in exchange for full and fractional Shares of the
designated classes of the corresponding Nations Funds, as shown in Table I (see
page xx of this Proxy/Prospectus).
The Shares issued by each Nations Fund will have an aggregate dollar value
equal to the aggregate dollar value of the shares of the respective Pacific
Horizon Fund that are outstanding immediately before the Closing. Immediately
after the Closing, each Pacific Horizon Fund will distribute the Shares of the
Nations Fund received in the Reorganization to its shareholders in liquidation
of the Pacific Horizon Fund. Each shareholder owning shares of a particular
Pacific Horizon Fund at the Closing will receive Shares of the designated class
of the corresponding Nations Fund, and will receive any unpaid dividends or
distributions that were declared before the Closing on Pacific Horizon Fund
shares. Nations will establish an account for each former shareholder of the
Pacific Horizon Funds reflecting the number of Nations Fund Shares distributed
to that shareholder. The Shares issued in the Reorganization will be in
uncertificated form. NBAI has advised Pacific Horizon and Nations Funds that
NationsBank and its affiliates intend, with respect to certain of their
fiduciary accounts that currently hold A Shares of a Pacific Horizon Fund, to
exchange the Investor A Shares that such accounts would be entitled to receive
as a result of the Reorganization for Primary A Shares of the same Fund of equal
value at or shortly after Closing.
As indicated above, shareholders of other Pacific Horizon funds are voting
on similar agreements and plans of reorganization that, in a like manner, would
provide for the reorganization of those Pacific Horizon funds into designated
classes of corresponding portfolios of Nations Fund, Inc. and Nations
Institutional Reserves--other registered investment companies that, together
with Nations, comprise a significant part of the "Nations Funds Family." Please
note that a vote for or against the approval of the Reorganization Agreement
includes a vote for or against the reorganization of Pacific Horizon into the
Nations Funds Family. If the Reorganization Agreement and the agreements and
plans of reorganization affecting the other Pacific Horizon funds are approved
and consummated, Pacific Horizon will transfer all of its assets and
liabilities, as of the Closing, and all outstanding shares of the Pacific
Horizon Funds will be redeemed and canceled in exchange for shares of the
Nations Funds Family, and Pacific Horizon will wind up its affairs and apply to
be deregistered as an investment company under the 1940 Act and thereafter
dissolved under Maryland law.
10
<PAGE>
The Reorganization is subject to a number of conditions, including
approval of the Reorganization Agreement and the related matters described in
this Proxy/Prospectus by Pacific Horizon Fund shareholders; approval of the
Reorganization of Pacific Horizon by a majority of all the shares of the funds
of Pacific Horizon voting in the aggregate; the receipt of certain legal
opinions described in the Reorganization Agreement (which include an opinion of
Nations' counsel addressed to Pacific Horizon that the Nations Fund Shares
issued in the Reorganization will be validly issued, fully paid and
non-assessable); the receipt of certain certificates from the parties concerning
the continuing accuracy of the representations and warranties in the
Reorganization Agreement; the receipt of certain letters from independent
accountants regarding various financial matters; the receipt of any necessary
exemptive relief or no-action assurances requested from the SEC or its staff
with respect to Section 17(a) and 17(d) of the 1940 Act and Rule 17d-1
thereunder; and the parties' performance in all material respects of their
respective covenants and undertakings in the Reorganization Agreement. It is
possible that a majority of a Pacific Horizon Fund's shareholders may approve
the Reorganization Agreement while a sufficient majority of all shareholders of
all Pacific Horizon funds does not approve the reorganization of Pacific
Horizon. In such a case, the Board of Directors will contemplate what further
action is appropriate.
The Reorganization Agreement also provides that NBAI has agreed to assume
all customary expenses associated with the Reorganization. The Reorganization
Agreement also provides, among other things, that the Reorganization may be
abandoned at any time prior to the Closing upon the mutual consent of both
Pacific Horizon and Nations, or by either Nations or Pacific Horizon under
certain conditions; and that officers of Nations and of Pacific Horizon may
amend, modify or supplement the Reorganization Agreement, provided however, that
following the Meeting, no such amendment may have the effect of changing the
provisions for determining the number of Shares of the corresponding Nations
Fund to be issued to the shareholders of any Pacific Horizon Fund without
obtaining the Pacific Horizon Fund shareholders' further approval.
PACIFIC HORIZON BOARD CONSIDERATION. At meetings held on July 26 and 27,
1998, the Pacific Horizon Board of Directors was advised that Bank of America
and NBAI were considering recommending a consolidation of Pacific Horizon with
the Nations Fund Family following the September 30, 1998 merger of NationsBank
Corporation with BankAmerica Corporation. The Pacific Horizon Board then met
again on October 27th-28th, November 23rd, December 7th and December 14th and
January ___ to consider the Reorganization proposal offered by management of
Nations, NBAI and its affiliates. In preparation for each meeting, the Directors
were provided with detailed information about the Reorganization, the Nations
Funds and NBAI. These materials summarized the principal features of the
Reorganization, including the intention that the Reorganization be consummated
on a tax-free basis for each Fund and its shareholders. In addition, the Pacific
Horizon Directors received comparative information about the Pacific Horizon
Funds and the corresponding Nations Funds, including but not limited to the
following matters: (1) investment objectives and policies; (2) advisory
distribution and other servicing arrangements; (3) expenses (with and without
giving effect to current expense limitations), including pro forma expenses
relative to peer groups and (4) performance relative to peer groups. The Pacific
Horizon directors were also provided with information about NationsBank and its
investment advisory organizations, including information regarding those
individuals or teams of individuals with responsibility for managing each
Nations Fund.
11
<PAGE>
The Reorganization was unanimously approved by the Pacific Horizon Board
of Directors on January ___, 1999.
During its deliberations, Pacific Horizon's Board of Directors (with the
advice and assistance of its counsel) reviewed, among other things: (1) the
potential effect of the Reorganization on the shareholders of the Pacific
Horizon Funds; (2) the capabilities, practices and resources of NBAI and the
Nation Funds' other service providers; (3) the investment advisory and other
fees paid by the Nations Funds, and the historical and projected expense ratios
of the Nations Funds as compared with those of the Pacific Horizon Funds and
industry peer groups; (4) the expected cost-savings for certain of the Pacific
Horizon Funds, including Pacific Horizon funds not part of this
Proxy/Prospectus, as a result of the reorganization of Pacific Horizon; (5) the
investment objectives, policies and limitations of the Nations Funds and their
relative compatibility with those of the Pacific Horizon Funds; (6) the
historical investment performance records of the Pacific Horizon Funds and the
Nations Funds, relative to each other and relative to peer groups; (7) the
shareholder services offered by Nations; (8) the terms and conditions of the
Reorganization Agreement, including those provisions that were intended to avoid
dilution of the interests of Pacific Horizon Fund shareholders; (9) the
anticipated tax consequences of the Reorganization for the respective Pacific
Horizon Funds and their shareholders; (10) the number of investment portfolio
options that would be available to shareholders after the Reorganization; (11)
the viability of any Pacific Horizon Fund on a stand-alone basis apart from the
Nations Funds Family; and (12) the potential benefits of the Reorganization to
other persons, especially NBAI and its affiliates. The Board also considered
NBAI's belief that the Reorganization would eliminate certain duplicative
shareholder costs and market overlap, facilitate consolidation of NBAI's
managerial resources and enhance generally operational efficiencies and focus
with respect to the mutual funds advised by NBAI.
With respect to each Nations Fund, Pacific Horizon's Directors further
noted that the per share annualized total operating expense ratios after the
Reorganization, taking into account voluntary fee waivers, would be higher than
those of the corresponding Pacific Horizon Funds before the Reorganization. It
also noted that NBAI would assume all customary expenses associated with the
Reorganization and that it would commit to waive fees and/or reimburse expenses
as needed to ensure that, for one year from the Reorganization, the Nations
Funds total operating expense ratios will not exceed the PRO FORMA after waiver
expense ratios shown in Table II, absent extraordinary circumstances or a
reduction in Fund assets that impacts expense levels.
12
<PAGE>
After consideration of the foregoing and other factors, the Pacific
Horizon Directors unanimously determined that the Reorganization is in the best
interest of the shareholders of each Pacific Horizon Fund, and that the interest
of the shareholders of each Pacific Horizon Fund will not be diluted as a result
of such Reorganization.
CAPITALIZATION. The following table sets forth, as of September 30, 1998:
(1) the capitalization of each of the Pacific Horizon Funds; (2) the
capitalization of each of the corresponding Nations Funds; and (3) the PRO FORMA
capitalization of each of the Nations Funds as adjusted to give effect to the
Reorganization. The capitalization of each Pacific Horizon Fund and Nations Fund
is likely to be different at the Closing as a result of daily share purchase and
redemption activity in the Pacific Horizon Funds and Nations Funds as well as
the effects of the other ongoing operations of the respective Funds prior to
Closing.
TABLE III
CAPITALIZATION (AS OF SEPTEMBER 30, 1998)
1. The table below reflects current and PRO FORMA capitalization
information for the combination of the Pacific Horizon Flexible Income Fund with
Nations Diversified Income Fund.
- -----------------------------------------------------------------------------
NET ASSET
TOTAL NET SHARES VALUE
ASSETS OUTSTANDING PER SHARE
- -----------------------------------------------------------------------------
Pacific Horizon Flexible
Income Fund $38,320,503 2,276,077 $16.84
Class A $470,758 27,942 16.85
Class K
- -----------------------------------------------------------------------------
Nations Diversified Income
Fund $13,154,000 1,225,596 $10.73
Investor A $1,624,000 151,435 10.73
Investor C
- -----------------------------------------------------------------------------
PRO FORMA Combined Fund
Class A/Investor A $51,474,503 4796,938 $10.73
Class K/Investor C 2,094,758 195,308 10.73
- -----------------------------------------------------------------------------
2. The table below reflects current and PRO FORMA capitalization
information for the combination of the Pacific Horizon National Municipal Bond
Fund with Nations Municipal Income Fund.
13
<PAGE>
- -----------------------------------------------------------------------------
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
- -----------------------------------------------------------------------------
Pacific Horizon National
Municipal Bond Fund
Class A $21,503,672 2,009,639 $10.70
- -----------------------------------------------------------------------------
Nations Municipal Income
Fund
Investor A $24,183,000 2,071,605 $11.67
- -----------------------------------------------------------------------------
PRO FORMA Combined Fund
Class A/Investor A $45,686,672 3,914,250 $11.67
- -----------------------------------------------------------------------------
3. The table below reflects current and PRO FORMA capitalization
information for the combination of the Pacific Horizon Short-Term Government
Fund with Nations Short-Intermediate Government Fund.
- -----------------------------------------------------------------------------
TOTAL NET SHARES NET ASSET VALUE
ASSETS OUTSTANDING PER SHARE
- -----------------------------------------------------------------------------
Pacific Horizon Short-Term
Government Fund
Class A $21,732,313 2,152,873 $10.09
- -----------------------------------------------------------------------------
Nations Short-Intermediate
Government Fund
Investor A $49,653,000 11,807,460 $4.21
- -----------------------------------------------------------------------------
Pro Forma Combined Fund
Class A/Investor A $71,385,313 16,969,530 $4.21
- -----------------------------------------------------------------------------
FEDERAL INCOME TAX CONSIDERATIONS. Each Nations Fund and each Pacific
Horizon Fund intends to qualify as of the Closing, as a separate "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Accordingly, each Pacific Horizon Fund and each corresponding Nations
Fund has been, and expects to continue to be, relieved of federal income tax
liability.
Consummation of the Reorganization with respect to each Pacific Horizon
Fund and the corresponding Nations Fund is subject to the condition that Pacific
Horizon and Nations receive an opinion from Morrison & Foerster LLP
substantially to the effect that, for federal income tax purposes: (i) the
transfer of all of the Fund Assets and Liabilities of a Pacific Horizon Fund to
the corresponding Nations Fund in exchange for the Nations Fund Shares, and the
distribution of those Nations Fund Shares to shareholders of the Pacific Horizon
Fund, will constitute a "reorganization" within the meaning of Section 368(a) of
the Code, and the Pacific Horizon Fund and the Nations Fund will each be a
"party to a reorganization" within the meaning of Section 368(b) of the Code in
respect of the Reorganization; (ii) no gain or loss will be recognized by the
Pacific Horizon Fund upon the transfer of its Fund Assets and Liabilities to the
Nations Fund solely in exchange for the Nations Fund Shares; (iii) no gain or
loss will be recognized by the Nations Fund upon the receipt of the Fund Assets
and assumption of Liabilities of the Pacific Horizon Fund solely in exchange for
the Nations Fund Shares; (iv) the basis of the Fund Assets received by the
14
<PAGE>
Nations Fund pursuant to the Reorganization will be the same as the basis of
those assets in the hands of the Pacific Horizon Fund immediately prior to the
Reorganization; (v) the holding period of the Pacific Horizon Fund's assets in
the hands of the Nations Fund will include the period for which such assets have
been held by the Pacific Horizon Fund; (vi) no gain or loss will be recognized
by the Pacific Horizon Fund on the distribution to its shareholders of the
Nations Fund Shares; (vii) no gain or loss will be recognized by the
shareholders of the Pacific Horizon Fund upon their receipt of the Nations Fund
Shares in exchange for such shareholders' shares of the Pacific Horizon Fund;
(viii) the basis of the Nations Fund Shares received by the shareholders of the
Pacific Horizon Fund will be the same as the basis of the Pacific Horizon Fund
shares surrendered by such shareholders pursuant to the Reorganization; (ix) the
holding period for the Nations Fund Shares received by the Pacific Horizon Fund
shareholders will include the period during which such shareholders held the
Pacific Horizon Fund shares surrendered in exchange therefor, provided that such
Pacific Horizon Fund shares are held as a capital asset in the hands of the
Pacific Horizon Fund shareholders on the date of the exchange; and (x) each
Nations Fund will succeed to and take into account the tax attributes described
in Section 381(c) of the Code of the Pacific Horizon Fund as of the Closing
Date, subject to the conditions and limitations specified in the Code.
Shareholders of the Pacific Horizon Funds should note, however, that the sale of
securities by the Pacific Horizon Funds prior to the Closing whether in the
ordinary course of business or in anticipation of the Closing, could result in a
taxable capital gains distribution prior to the Closing.
Nations and Pacific Horizon have not sought, and will not seek, a private
ruling from the Internal Revenue Service ("IRS") with respect to the federal
income tax consequences of the Reorganization. The opinion of Morrison &
Foerster LLP with respect to the tax consequences of the Reorganization is not
binding on the IRS and does not preclude the IRS from adopting a contrary
position. Shareholders should consult their own advisers concerning the
potential tax consequences of the Reorganization to them, including any
applicable foreign, state or local income tax consequences.
OTHER MATTERS. Under a retirement plan approved by the Pacific Horizon
Board, each Pacific Horizon Director who has been in office for a specified
period of time is entitled to retirement benefits following death, resignation
or termination. The payment terms and the formula for calculating the amount of
the retirement benefits are set forth in Pacific Horizon's statement of
additional information. Because the Reorganization contemplates the dissolution
of Pacific Horizon, it is being considered a termination with respect to those
Directors who are not succeeding to the Nations Board. Such Directors will,
therefore, receive retirement benefits following the Reorganization.
COMPARISON OF PACIFIC HORIZON AND NATIONS
INVESTMENT OBJECTIVES AND POLICIES. The investment objectives, policies
and restrictions of the Pacific Horizon Funds are, in general, substantially
similar to those of their corresponding Nations Fund. They are summarized in
Appendix III. There are, however, certain differences. A brief summary of the
more significant differences follows.
PACIFIC HORIZON FLEXIBLE INCOME FUND/NATIONS DIVERSIFIED INCOME FUND.
While the Pacific Horizon Fund may invest up to 35% of its assets in
mortgage-backed securities, the corresponding Nations Fund may not invest more
than 25% of its assets in such securities. In addition, while the Pacific
Horizon Fund may invest up to 20% of its assets in foreign securities, the
corresponding Nations Fund may invest up to 25% of its assets in such
securities.
15
<PAGE>
PACIFIC HORIZON NATIONAL MUNICIPAL BOND FUND/NATIONS MUNICIPAL BOND FUND.
While under normal market conditions the Pacific Horizon Fund will invest at
least 65% of its assets in municipal obligations, the corresponding Nations Fund
invests at least 80% of its assets in such obligations. In addition, the Pacific
Horizon Fund may invest up to 35% of its assets in below-investment grade debt,
or "junk bonds," while the corresponding Nations Fund may not invest in such
securities.
PACIFIC HORIZON SHORT-TERM GOVERNMENT FUND/NATIONS SHORT-INTERMEDIATE
GOVERNMENT FUND. While the Pacific Horizon Fund may invest up to 35% of its
assets in mortgage-backed securities, the corresponding Nations Fund will not
invest more than 25% of its assets in such securities. In addition, while the
Pacific Horizon Fund invests up to 35% of its assets in corporate bonds, the
corresponding Nations Fund typically remains fully invested in U.S. Government
obligations. Under normal circumstances, it is expected that the average
weighted maturity of the Pacific Horizon Fund's investments will range from one
to two years, while it is expected that the Nations Fund portfolio's average
weighted maturity will be between three and five years and its duration will not
exceed five years.
The investment objectives, strategies and policies of the Pacific Horizon
Funds and Nations Funds are more fully discussed in Appendix III. Additional
information about the investment policies and restrictions of the Nations Funds
and the Pacific Horizon Funds is included in their respective prospectuses and
statements of additional information, which have been incorporated herein by
reference.
MANAGEMENT'S DISCUSSION OF NATIONS FUND PERFORMANCE. A discussion by Fund
management of the Nations Funds' recent performance can be found at Appendix V.
INVESTMENT ADVISORY SERVICES. Currently NBAI serves as investment adviser
to the Nations Funds and TradeStreet serves as investment sub-adviser to the
Nations Funds. Both NBAI and TradeStreet are wholly owned subsidiaries of
NationsBank, which in turn is an indirect wholly owned banking subsidiary of
BankAmerica Corporation. The Fixed Income Management Team of TradeStreet is
responsible for the day-to-day management of the Nations Diversified Income Fund
and Nations Short-Intermediate Government Fund. The Municipal Fixed Income
Management Team of TradeStreet is responsible for the day-to-day management of
Nations Municipal Income Fund.
NBAI is entitled to receive advisory fees, computed daily and paid
monthly, at the annual rate of 0.50% of the average daily net assets of the
Nations Diversified Income and Municipal Income Funds and at the annual rate of
0.30% of the average daily net assets of Nations Short-Intermediate Government
Fund. (Although contractual advisory fee rates for each Nations Fund are
currently 0.10% higher with respect to the Diversified Income Fund and Municipal
Income Fund and 0.30% higher with respect to the Short-Intermediate Government
Fund than those stated in this Appendix II, the contractual rates shown
throughout this Proxy/Prospectus will become effective at the time of the
Reorganization.) After waivers currently in effect, NBAI is receiving advisory
fees at the annual rates of 0.40%, 0.28% and 0.30%, of the average daily net
assets Nations Diversified Income Fund, Nations Intermediate Municipal Bond Fund
and Nations Short-Intermediate Government Bond Fund, respectively. For services
provided pursuant to an investment sub-advisory agreement, NBAI pays TradeStreet
sub-advisory fees, computed daily and paid monthly, at the annual rate of 0.15%
of the average daily net assets of Nations Diversified Income Fund and Nations
Short-Intermediate Government Fund, and 0.07% of the average daily net assets of
Nations Municipal Income Fund.
16
<PAGE>
Bank of America serves as investment adviser to the Pacific Horizon Funds.
Like NBAI and TradeStreet, Bank of America is also an indirect wholly owned
subsidiary of BankAmerica Corporation. With respect to the Pacific Horizon
Funds, Bank of America is currently entitled to receive a fee at the annual rate
of 0.45%, 0.35% and 0.25% of the average daily net assets of the Flexible Income
Fund, National Municipal Bond Fund and Short-Term Government Fund, respectively.
Other Service Providers for the
Pacific Horizon Funds and Nations Funds
Pacific Horizon Funds and Nations Funds have different services providers.
Upon completion of the Reorganization, Nations Funds will continue to engage its
existing service providers. In all cases, the types of services provided to the
Funds under these service arrangements are substantially similar.
<TABLE>
<CAPTION>
Pacific Horizon Funds Nations Funds
--------------------- -------------
<S> <C> <C>
Distributor Provident Distributors, Inc. Stephens Inc.
Administrator Bank of America Stephens Inc. and NationsBanc
Advisors, Inc.
Sub-Administrator PFPC, Inc. The Bank of New York
Transfer Agent PFPC, Inc. First Data Investor
Services Group, Inc.
Sub-Transfer Agent N/A The Bank of New York
Custodian The Bank of New York The Bank of New York
(National Municipal Bond
Fund Only)
PFPC Trust Company (All
Others)
Independent Accountants PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP
</TABLE>
17
<PAGE>
[Stephens currently serves as the Nations Funds' distributor. Pursuant to
Section 9(a) of the 1940 Act, Stephens could be disqualified from serving as
such. The SEC has granted a temporary exemption from the provisions of Section
9(a). Stephens has applied for a permanent exemption and anticipates receiving
such an exemption shortly.]
DISTRIBUTION AND SHAREHOLDER SERVICING ARRANGEMENTS FOR THE PACIFIC
HORIZON FUNDS
A SHARES. Pacific Horizon has adopted a Shareholder Services Plan for A
Shares, under which the A Shares of each Pacific Horizon Fund reimburse Pacific
Horizon's distributor--Provident Distributors, Inc. ("Provident") - for
shareholder servicing fees that Provident pays to various service organizations
whose customers own A Shares. Payments made under the Shareholder Services Plan
for A Shares, also cover shareholder services provided by Provident and for
support services provided to the beneficial owners of Pacific Horizon Fund
shares. Under the Plan, payments by a Pacific Horizon Fund may not exceed 0.25%
(annualized) of the average daily net assets of such Fund's A Shares. Excluded
from this calculation, however, are all shares acquired via a transfer of assets
from trust and agency accounts at Bank of America. Class A Shares charge a
front-end sales load. The maximum front-end sales load charged for each Pacific
Horizon Fund's A Shares is set forth in Appendix II. Sales load reduction and
waiver categories, which differ from those applicable to Investor A Shares of
the corresponding Nations Funds, are described in Appendix III. Certain
purchases of A Shares are subject to a contingent deferred sales charge ("CDSC")
if redeemed within a specific time period after purchase; Investor A shares of
the corresponding Nations Funds received in exchange for such shares will be
subject to the same CDSC if redeemed within the specified time period. All
former A Share shareholders will be credited for the period of time from the
original date of purchase of other shares for purposes of determining the amount
of their CDSC, if any.
K SHARES. Pacific Horizon also has adopted a Distribution Plan pursuant to
Rule 12b-1 under the 1940 Act, under which K Shares of a Pacific Horizon Fund
reimburse Provident for services rendered and costs incurred in connection with
distribution of K Shares. Distribution expenses include expenses incurred in
connection with advertising and marketing the Funds' K Shares; payments to
service organizations for assistance in connection with the distribution of K
Shares; and expenses incurred in connection with preparing, printing and
distributing prospectuses for the Funds (except those used for regulatory
purposes and distributed to existing shareholders). Under the Distribution Plan,
payments by a Pacific Horizon Fund for distribution expenses may not exceed
0.75% (annualized), of the average daily net assets of such Fund's K Shares.
Pacific Horizon also has adopted an Administrative and Shareholder
Services Plan for K Shares, under which K Shares of a Pacific Horizon Fund
reimburse Provident for administrative and shareholder servicing fees that
Provident pays to various services organizations whose customers own K Shares.
Administrative servicing expenses include expenses incurred in connection with
administrative services provided by Provident and payments to service
organizations for the provision of administrative services to beneficial owners
of K shares, such as establishing and maintaining accounts and records relating
to their clients who invest in K Shares, providing information to the Funds
necessary for accounting or sub-accounting and providing statements periodically
to clients showing their position in K Shares. Under the Administrative and
Shareholder Services Plan, payments for shareholder servicing expenses may not
exceed 0.25% (annualized) of the average daily net assets of a Fund's K Shares,
and payments for administrative servicing expenses may not exceed 0.75%
(annualized) of the average daily net assets of the Fund's K Shares.
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The total of all fees under the distribution plan and the administrative
and shareholder services plan may not exceed, in the aggregate, 1.00%
(annualized) of the average daily net assets of a Fund's K Shares.
DISTRIBUTION AND SHAREHOLDER SERVICING ARRANGEMENTS FOR THE NATIONS FUNDS.
INVESTOR A SHARES. Nations has adopted a Shareholder Servicing and
Distribution Plan (the "Investor A Plan") pursuant to Rule 12b-1 under the 1940
Act with respect to each Fund's Investor A Shares. The Investor A Plan provides
that each Fund may pay its distributor, Stephens Inc. ("Stephens"), banks,
broker/dealers or other financial institutions that offer Shares of the Fund and
that have entered into a Sales Support Agreement with Stephens ("Selling
Agents") or a Shareholder Servicing Agreement with Nations ("Servicing Agents"),
up to 0.25% (annualized) of the average daily net asset value of the Investor A
Shares. Investor A Shares charge a front-end sales load. The maximum front-end
sales load charged for each Nations Fund's Investor A Shares is set forth in
Appendix II. Sales load reduction and waiver categories, which differ from those
applicable to Class A Shares of the corresponding Pacific Horizon Funds, are
described in Appendix III and the accompanying Prospectus(es).
INVESTOR C SHARES. Nations has adopted a Distribution Plan with respect to
Investor C Shares of the Nations Funds. Pursuant to the Distribution Plan, the
Funds may compensate or reimburse Stephens for any activities or expenses
primarily intended to result in the sale of the Funds' Investor C Shares.
Payments under the Distribution Plan will be calculated daily and paid monthly
at a rate or rates set from time to time by the Trustees of Nations, provided
that the annual rate may not exceed 0.75% of the average daily net assets of the
Funds' Investor C Shares. The fees payable under the Distribution Plan are used
to, among other things, compensate Selling Agents for providing sales support
assistance relating to Investor C Shares. The Trustees of Nations also have
approved a shareholder servicing plan ("Servicing Plan") for the Funds which
permits the Fund to compensate Servicing Agents for services provided to their
customers that own Investor C Shares. Payments under the Servicing Plan are
calculated daily and paid monthly at a rate or rates set from time to time by
the Funds, provided that the annual rate may not exceed 0.25% of the average
daily net asset value of the Funds' Investor C Shares.
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Investor C Shares purchased after January ___, 1999 are subject to a CDSC
of 1% if redeemed within one year of purchase. However, no CDSC will apply to
Investor C Shares issued in the Reorganization.
[ADMINISTRATION AGREEMENTS. The Pacific Horizon Funds have entered into an
administration agreement with Bank of America. Stephens Inc. ("Stephens") serves
as administrator to Nations Funds pursuant to an administration agreement.
Effective December 1, 1998, NBAI began serving as co-administrator to Nations
Funds with Stephens, and The Bank of New York began serving as
sub-administrator. Under the new administration arrangements, which will become
effective for the Nations Funds on a Fund by Fund basis during the fourth
quarter of 1998 and first quarter of 1999, Stephens and NBAI provide various
administrative, accounting and corporate secretarial services and The Bank of
New York assists NBAI in performing certain administrative and accounting
services.]
SHAREHOLDER TRANSACTIONS AND SERVICES. The Pacific Horizon Funds and the
corresponding Nations Funds offer generally similar shareholder services and
transactions. There are however, some differences. For example, the minimum
initial investment for A and K Shares of the Pacific Horizon Funds is generally
$500 while the minimum initial investment for the corresponding Investor A
Shares and Investor C Shares of the Nations Funds, respectively, is generally
$1,000. Also, redemptions from a Pacific Horizon Fund Account generally requires
a $500 minimum balance, while Nations requires a $1,000 minimum balance. Another
difference is that Pacific Horizon provides check-writing privileges on all A
and K Shares, while Nations does not provide check-writing privileges on
Investor A and Investor C Shares of the Nations Funds (although Nations does
provide check-writing privileges on certain shares of its money market funds).
Additionally, Nations does not offer Teletrade--a service currently offered
Pacific Horizon Fund shareholders that allows shareholders to authorize
electronic transfers of money to purchase shares in or redeem shares from an
established Fund account. For a detailed comparison of shareholder transactions
and services see Appendix IV.
FEES AND EXPENSES. Certain Pacific Horizon Fund service providers
currently waive fees and/or reimburse expenses. For example, Bank of America
currently waives all of the fees that it is entitled to receive for providing
investment advisory services to the Pacific Horizon Funds. This subsidization
results in Bank of America and other service providers furnishing services to
the Funds at a loss.
The subsidization has benefited Pacific Horizon Fund shareholders in that
they have enjoyed total operating expenses below the median ratios of other
comparable mutual funds. Bank of America has informed Pacific Horizon that Bank
of America would have reduced this subsidization as the Funds reached larger
asset levels, such as the asset levels that will likely be attained by the
Nations Funds after the Reorganization. NBAI has informed Pacific Horizon that
for this reason, NBAI will not waive fees or reimburse expenses to the same
extent as Bank of America has for the Pacific Horizon Funds.
Due to reductions in waivers and/or reimbursements, Pacific Horizon Funds
shareholders are expected to experience higher total fund operating expenses
after the Reorganization. It is important, however, to consider that all total
operating expense ratios for the Nations Funds are within industry norms.
Moreover, NBAI has undertaken to waive fees and/or reimburse expenses as needed
to ensure that, for at least one year from the Reorganization, the Nations
Funds' total operating expense ratios will not exceed the PRO FORMA after waiver
ratios shown in Table II above, absent extraordinary circumstances or a
reduction in Fund assets that impacts expense levels. For detailed PRO FORMA
expense information, see Appendix II.
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SHARE STRUCTURE. Both Pacific Horizon and Nations are registered as
open-end management investment companies under the 1940 Act. Currently, Pacific
Horizon offers seventeen funds. The Nations Fund complex, which includes
numerous registered investment companies, will offer over seventy funds
immediately after the Reorganization.
Pacific Horizon was organized as a Maryland corporation on October 27,
1982. It is subject to the provisions of its Charter and By-Laws. Nations was
organized as a Massachusetts business trust on May 6, 1985 and is subject to the
provisions of its Declaration of Trust, as amended and supplemented, and
By-Laws. Pacific Horizon's charter documents authorizes the Board of Directors
to issue full and fractional shares of capital stock ($0.001 par value per
share) and to classify and reclassify any authorized and unissued shares into
one or more classes of shares. Shares of Nations Funds are sold without par
value, and each share represents an equal proportionate interest in a portfolio
of Nations with other shares of the same class. Nations Fund's Declaration of
Trust authorizes the Board of Trustees to classify shares into one or more
series of classes. Shares of both the Pacific Horizon Funds and Nations Funds
are entitled to one vote for each full share held and fractional votes for
fractional shares held.
Pacific Horizon Fund shareholders generally have cumulative voting rights
to the extent that may be required by applicable law. Additionally, shareholders
will vote in the aggregate and not by class or series, except as required by law
(or when permitted by the Board of Directors).
In accordance with Nations' Agreement and Declaration of Trust, all shares
of a series of Nations are entitled to vote by individual series, except (1)
when required by the 1940 Act, shares will be voted in the aggregate and not by
individual series, and (2) when the Trustees have determined that the matter
affects only the interests of one or more series, then only shareholders of such
series shall be entitled to vote thereon. There is no cumulative voting in the
election of Trustees for Nations.
Additional information concerning the attributes of the shares issued by
the Pacific Horizon Funds and Nations Funds is included in their respective
prospectuses, which are incorporated herein by reference. Information about the
dividend and distribution policies of both the Pacific Horizon Funds and Nations
Funds can be found in Appendix IV.
COMPARISON OF CORPORATE/TRUST STRUCTURE. As noted, Pacific Horizon is
organized as a Maryland corporation and Nations is organized as a Massachusetts
business trust. In general, the charter documents governing Pacific Horizon are
similar to those documents governing Nations. Although the rights of a
shareholder of a Maryland corporation vary in certain respects from the rights
of an interest holder of a Massachusetts business trust, the attributes of a
share of common stock are comparable to those of a share of beneficial interest,
I.E., shares of both are entitled to one vote per share held and fractional
votes for fractional shares held, and will vote in the aggregate and not by
portfolio or class except as otherwise required by law or when class voting is
permitted by its Board.
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It should be noted that under Maryland law, Pacific Horizon Fund
shareholders have no personal liability for Pacific Horizon's acts or
obligations. By contrast, under Massachusetts law, interest holders of a
Massachusetts business trust like Nations could, under certain circumstances, be
held personally liable for the obligations of the trust. However, Nations has
provisions in its Declarations of Trust that endeavor to protect shareholders
from such liability. Thus, the risk of an interest holder incurring a financial
loss on account of interest holder liability is limited to circumstances in
which the trust itself is unable to meet its obligations, a circumstance whose
likelihood is considered remote.
VOTING MATTERS
GENERAL INFORMATION. This Proxy/Prospectus is being furnished in
connection with the solicitation of proxies for the Meeting by the Board of
Directors of Pacific Horizon. It is expected that the solicitation of proxies
will be primarily by mail. [OFFICERS AND SERVICE CONTRACTORS OF PACIFIC HORIZON
AND NATIONS ALSO MAY SOLICIT PROXIES BY TELEFACSIMILE, TOUCHTONE VOTING AND
ON-LINE VOTING.] In this connection, Pacific Horizon has retained ADP Proxy
Services to assist in the solicitation of proxies for the Reorganization.
Shareholders may vote (1) by mail, by marking, signing, dating and returning the
enclosed Proxy Ballot in the enclosed postage-paid envelope; (2) by
telefacsimile, by marking, signing, dating and faxing the enclosed Proxy Ballot
to ADP Proxy Services at (704) 388-2641; or (3) by touchtone voting at (800)
690-6903; or 4) by on-line voting at www.proxyvote.com. Any shareholder giving a
proxy may revoke it at any time before it is exercised by submitting to Pacific
Horizon a written notice of revocation or a subsequently executed proxy or by
attending the Meeting and voting in person.
Any expenses incurred as a result of hiring ADP Proxy Services or any
other proxy solicitation agent will be borne by NBAI.
Only shareholders of record at the close of business on January 14, 1999
will be entitled to vote at the Meeting. On that date, the following Pacific
Horizon Shares were outstanding and entitled to be voted.
NAME OF PACIFIC HORIZON FUND AND CLASS SHARES ENTITLED TO VOTE
- -------------------------------------- -----------------------
FLEXIBLE INCOME FUND
A Shares
K Shares
NATIONAL MUNICIPAL BOND FUND
A Shares
SHORT-TERM GOVERNMENT FUND
A Shares
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Each whole and fractional share of a Pacific Horizon Fund is entitled to a
whole or fractional vote.
If the accompanying proxy is executed and returned in time for the
Meeting, the Shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Meeting.
SHAREHOLDER AND BOARD APPROVALS. The Reorganization Agreement is being
submitted for approval at the Meeting by Pacific Horizon's shareholders pursuant
to Pacific Horizon's Charter and By-Laws, and was approved by the Pacific
Horizon Board of Directors at a meeting held on January ___, 1999. The
Reorganization Agreement must be approved by a majority of the outstanding
shares of the Pacific Horizon Funds voting separately on a
portfolio-by-portfolio basis and the reorganization of Pacific Horizon
contemplated therein must be approved by a majority of the shares outstanding
and entitled to vote, voting in the aggregate, of all the series of Pacific
Horizon, including those funds that are not part of this Proxy/Prospectus. A
vote for the Reorganization Agreement includes a vote for the reorganization of
Pacific Horizon; correspondingly, a vote against the Reorganization Agreement is
a vote against the reorganization of Pacific Horizon. Separate proxy
solicitation materials are being mailed to the shareholders of all other series
of Pacific Horizon seeking the approval of similar agreements and plans of
reorganization and also Pacific Horizon's reorganization.
The Reorganization Agreement provides that in the event the Reorganization
Agreement is approved with respect to less than all of the Pacific Horizon
Funds, the failure of a Pacific Horizon Fund to consummate the transactions
contemplated by the Reorganization Agreement shall not affect the consummation
or validity of the Reorganization with respect to any other Pacific Horizon
Funds. It is possible that a majority of a Pacific Horizon Fund's shareholders
may approve the Reorganization Agreement while a sufficient majority of all
shareholders of all Pacific Horizon series voting in the aggregate does not vote
to approve the reorganization of Pacific Horizon. In such a case, the Board of
Directors will contemplate what further action is appropriate.
With respect to the approval of the Reorganization Agreement, the term
"majority of the outstanding shares" of Pacific Horizon or a Pacific Horizon
Fund means more than 50% of the outstanding shares of Pacific Horizon or the
particular Pacific Horizon Fund. The vote of the shareholders of the Nations
Funds is not being solicited, since their approval or consent is not necessary
for the Reorganization.
As of January 14, 1999, the officers and Directors of Pacific Horizon as a
group owned less than 1% of any Pacific Horizon Funds. As of January 14, 1999,
the officers and Trustees of Nations as a group owned less than 1% of any
Nations Fund. Table IV(A) shows the name, address and share ownership of each
person known to Pacific Horizon to have beneficial or record ownership with
respect to 5% or more of a class of a Pacific Horizon Fund as of January 14,
1999. Table IV(B) shows the name, address and share ownership of each person
known to Nations to have beneficial or record ownership with respect to 5% or
more of a class of a Nations Fund as of January 14, 1999.
23
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TABLE IV(A)
CLASS;
AMOUNT OF
PACIFIC SHARES PERCENTAGE
HORIZON NAME OWNED; TYPE PERCENTAGE PERCENTAGE OF FUND
FUND AND ADDRESS OF OWNERSHIP OF CLASS OF FUND POST-CLOSING
---- ----------- ------------ -------- ------- ------------
TABLE IV(B)
CLASS;
AMOUNT OF
SHARES PERCENTAGE
NATIONS NAME OWNED; TYPE PERCENTAGE PERCENTAGE OF FUND
FUND AND ADDRESS OF OWNERSHIP OF CLASS OF FUND POST-CLOSING
---- ----------- ------------ -------- ------- ------------
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class, or is identified as the holder of record of
more than 25% of a class and has voting and/or investment power, it may be
presumed to control such class.
Nations and Pacific Horizon have been advised by Bank of America that the
shares of each Pacific Horizon Fund over which Bank of America and its
affiliates have voting power may be voted: by Bank of America itself in its
capacity as fiduciary; by Bank of America pursuant to instruction from
underlying beneficial holders; or by one or more independent fiduciaries.
QUORUM. In the event that a quorum is not present at the Meeting, or in
the event that a quorum is present at the Meeting but sufficient votes to
approve the Reorganization Agreement are not received by one or more of the
Pacific Horizon Funds, one or more adjournment(s) may be proposed to permit
further solicitation of proxies. Any adjourned session or sessions may be held,
after the date set for the original Meeting without notice except announcement
at the Meeting, but, under Maryland law, no more than 120 days after the record
date. Any such adjournment(s) will require the affirmative vote of a majority of
those shares affected by the adjournment(s) that are represented at the 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 particular proposal
for which a quorum exists in favor of such adjournment(s), and will vote those
proxies required to be voted AGAINST such proposal against any adjournment(s). A
shareholder vote may be taken with respect to one or more Pacific Horizon Funds
(but not the other Pacific Horizon Funds) on some or all matters before any such
adjournment(s) if a quorum and sufficient votes have been received for approval.
24
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A quorum is constituted with respect to Pacific Horizon or a Pacific
Horizon Fund by the presence in person or by proxy of the holders of more than
50% of the outstanding shares of Pacific Horizon or the Pacific Horizon Fund
entitled to vote at the Meeting. For purposes of determining the presence of a
quorum for transacting business at the Meeting, abstentions will be treated as
shares that are present at the Meeting but which have not been voted.
Abstentions will have the effect of a "no" vote for purposes of obtaining the
requisite approvals of the Reorganization Agreement. Broker "non-votes" (that
is, proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owners or other persons entitled to
vote shares on a particular matter with respect to which the brokers or nominees
do not have discretionary power) will be treated the same as abstentions.
ANNUAL MEETINGS AND SHAREHOLDER MEETINGS. Neither Nations nor Pacific
Horizon presently intends to hold annual meetings of shareholders for the
election of directors/trustees and other business unless otherwise required by
the 1940 Act. Under certain circumstances, however, holders of at least 10% of
the outstanding shares of either Pacific Horizon or Nations have the right to
call a meeting of shareholders.
ADDITIONAL INFORMATION ABOUT NATIONS
Additional information about the Nations Funds is included in their
prospectuses and statements of additional information dated August 1, 1998, as
supplemented through the date hereof, copies of which, to the extent not
included herewith, may be obtained without charge by writing or calling Nations
at the address and telephone number set forth on the first page of this
Proxy/Prospectus. Nations is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and the 1940 Act, and in accordance
therewith it files reports, proxy materials and other information with the SEC.
Reports and other information filed by Nations can be inspected and copied at
the Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the offices of Nations listed above. In addition,
these materials can be inspected and copied at the SEC's Regional Offices at 7
World Trade Center, Suite 1300, New York, New York 10048, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials also can be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates.
Officers of Nations are elected by, and serve at the pleasure of, the
Board of Trustees. Officers of Nations receive no remuneration from Nations for
their services in such capacities.
Information included in this Proxy/Prospectus concerning Nations was
provided by Nations.
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ADDITIONAL INFORMATION ABOUT PACIFIC HORIZON
Additional information about the Pacific Horizon Funds is included in
their prospectuses and statements of additional information, dated July 1, 1998
as supplemented through the date hereof, which have been filed with the SEC.
Copies of these prospectuses and the related statements of additional
information may be obtained without charge by writing or calling Pacific Horizon
at the address and telephone number set forth on the first page of this
Proxy/Prospectus. Reports and other information filed by Pacific Horizon can be
inspected and copied at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the offices of Pacific
Horizon listed above. In addition, these materials can be inspected and copied
at the SEC's Regional Offices at 7 World Trade Center, Suite 1300, New York, New
York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials also can be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
Information included in this Proxy/Prospectus concerning Pacific Horizon
was provided by Pacific Horizon.
FINANCIAL STATEMENTS
The unaudited financial statements and financial highlights for shares of
the Nations Funds for the semi-annual period ended September 30, 1998 are
included or incorporated by reference in their prospectuses or statements of
additional information, or in the statement of additional information related to
this Proxy/Prospectus. The unaudited financial statements and financial
highlights for shares of the Pacific Horizon Fund for the semi-annual period
ended August 31, 1998 are included or incorporated by reference in their
prospectuses or statements of additional information or in the statement of
additional information related to this Proxy/Prospectus, or are included herein.
The annual financial statements and financial highlights of the Nations
Funds for the year ended March 31, 1998 have been audited by
PricewaterhouseCoopers LLP, independent accountants, to the extent indicated in
their reports thereon and have been incorporated by reference in the Statement
of Additional Information to this Proxy/Prospectus, in reliance upon such
reports given upon the authority of such firm as an expert in accounting and
auditing.
The annual financial statements and financial highlights of the Pacific
Horizon Funds for the year ended February 28, 1998 have been audited by
PricewaterhouseCoopers LLP, independent accountants, to the extent indicated in
their reports thereon and have been incorporated by reference in the Statement
of Additional Information to this Proxy/Prospectus, in reliance upon such
reports given upon the authority of such firm as an expert in accounting and
auditing.
26
<PAGE>
OTHER BUSINESS
Pacific Horizon's Board of Directors knows of no other business to be
brought before the Meeting. However, if any other matters properly come before
the Meeting, it is the intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to Pacific Horizon or to Nations in
writing at the address(es), or by phone at the phone number(s), on the cover
page of this Proxy/Prospectus.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED
TO MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. SHAREHOLDERS
ALSO MAY RETURN PROXIES BY TELEFACSIMILE OR VOTE ON-LINE OR BY TELEPHONE.
PACIFIC HORIZON WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS FEBRUARY 28,
1998 ANNUAL REPORTS, OR AUGUST 31, 1998 SEMI-ANNUAL REPORTS, TO ANY SHAREHOLDER
UPON REQUEST ADDRESSED TO: PACIFIC HORIZON FUNDS AT P.O. BOX 8968, WILMINGTON,
DE 19899 OR BY TELEPHONE AT 1-800-346-2087.
27
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APPENDIX I
FORM OF AGREEMENT
AND
PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of this _____ day of _______, 1999, by and between Nations Fund Trust
("Nations Funds"), a Massachusetts business trust, for itself and on behalf of
Nations Diversified Income Fund, Nations Municipal Income Fund and Nations
Short-Intermediate Government Fund (each an "Acquiring Fund" and collectively
the "Acquiring Funds"), each a portfolio of Nations Funds, and Pacific Horizon
Funds, Inc. ("Pacific Horizon Funds"), a Maryland corporation, for itself and on
behalf of the Pacific Horizon Flexible Income Fund, Pacific Horizon National
Municipal Bond Fund and Pacific Horizon Short-Term Government Fund (each an
"Acquired Fund" and collectively the "Acquired Funds"), each a portfolio of
Pacific Horizon Funds.
In accordance with the terms and conditions set forth in this
Agreement, the parties desire that all of the Fund Assets (as defined in
paragraph 1.2.a.) of each Acquired Fund be transferred to each Acquiring Fund
corresponding thereto, as set forth in the table attached hereto as Schedule A,
in exchange for shares of specified classes of the corresponding Acquiring Fund
("Acquiring Fund Shares") and the assumption by each Acquiring Fund of the
Liabilities (as defined in paragraph 1.3) of each corresponding Acquired Fund,
and that such Acquiring Fund Shares be distributed immediately after the
Closing(s), as defined in this Agreement, by each Acquired Fund to its
shareholders in liquidation of each Acquired Fund. The parties intend that each
Reorganization (as defined herein) qualify as a "reorganization," within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that each of the Acquiring Funds and the Acquired Funds qualify as
a "party to a reorganization," within the meaning of Section 368(b) of the Code,
with respect to such Reorganization.
In consideration of the promises and of the covenants and agreements
hereinafter set forth, the parties hereto, intending to be legally bound hereby,
covenant and agree as follows:
1. REORGANIZATION OF ACQUIRED FUNDS
1.1. Subject to the terms and conditions herein set forth, and on the
basis of the representations and warranties contained herein, each
Acquired Fund shall assign, deliver and otherwise transfer its
assets as set forth in paragraph 1.2.a (the "Fund Assets") to its
corresponding Acquiring Fund identified in Schedule A, and such
corresponding Acquiring Fund shall, as consideration therefor, on
the Closing Date (as defined in paragraph 3.1), (i) deliver to each
corresponding Acquired Fund the full and fractional number of shares
of each of its share classes calculated by dividing the value of the
Fund Assets less the Liabilities of the corresponding Acquired Fund
that are so conveyed and are attributable to each of the Acquiring
Fund's respective share classes set forth in Schedule A, computed in
the manner and as of the time and date set forth in this Agreement,
by the net asset value of one Acquiring Fund share of the particular
share class that is to be
I-1
<PAGE>
delivered with respect thereto, computed in the manner and as of the
time and date set forth in this Agreement; and (ii) assume all of
such Acquired Fund's Liabilities (as defined in paragraph 1.3). Such
transfer, delivery and assumption shall take place at the closing(s)
provided for in paragraph 3.1 (hereinafter sometimes referred to as
the "Closing(s)"). Promptly after the Closing(s), each Acquired Fund
shall distribute the Acquiring Fund Shares to the shareholders of
the respective share classes of the Acquired Fund in liquidation of
the Acquired Fund as provided in paragraph 1.4 hereof. Such
transaction(s) are hereinafter sometimes collectively referred to as
the "Reorganization(s)."
1.2.a. With respect to each Acquired Fund, the Fund Assets shall consist
of all property and assets of any nature whatsoever, including,
without limitation, all cash, cash equivalents, securities, claims
(whether absolute or contingent, known or unknown, accrued or
unaccrued) and receivables (including dividend and interest
receivables) owned by each Acquired Fund, and any prepaid expenses
shown as an asset on each Acquired Fund's books on the Closing
Date.
1.2.b. At least fifteen (15) business days prior to the Closing Date,
each Acquired Fund will provide the corresponding Acquiring Fund
with a schedule of its securities and other assets and Liabilities
of which it is aware, and such Acquiring Fund will provide the
Acquired Fund with a copy of the current investment objective and
policies applicable to each Acquiring Fund. Each Acquired Fund
reserves the right to sell any of the securities or other assets
shown on the list of the Fund's Assets prior to the Closing Date
but will not, without the prior approval of the corresponding
Acquiring Fund, acquire any additional securities other than
securities which the Acquiring Fund is permitted to purchase in
accordance with its stated investment objective and policies. At
least ten (10) business days prior to the Closing Date, the
Acquiring Fund will advise the corresponding Acquired Fund of any
investments of such Acquired Fund shown on such schedule which the
Acquiring Fund would not be permitted to hold, pursuant to its
stated investment objective and policies or otherwise. In the
event that the Acquired Fund holds any investments that its
corresponding Acquiring Fund would not be permitted to hold under
its stated investment objective or policies, the Acquired Fund, if
requested by the Acquiring Fund and, to the extent permissible and
consistent with the Acquired Fund's own investment objective and
policies, will dispose of such securities prior to the Closing
Date. In addition, if it is determined that the portfolios of the
Acquired Fund and the Acquiring Fund, when aggregated, would
contain investments exceeding certain percentage limitations to
which the Acquiring Fund is or will be subject with respect to
such investments, the Acquired Fund, if requested by the Acquiring
Fund and, to the extent permissible and consistent with the
Acquired Fund's own investment objective and policies, will
dispose of and/or reinvest a sufficient amount of such investments
as may be necessary to avoid violating such limitations as of the
Closing Date.
I-2
<PAGE>
1.3. Each Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. Each
Acquiring Fund will assume all liabilities and obligations of the
corresponding Acquired Fund, accrued, absolute, contingent or
otherwise existing, as of the Closing Date, which liabilities and
obligations shall include any obligation of the Pacific Horizon
Funds to indemnify Pacific Horizon Funds' current and former
Directors and officers, acting in their capacities as such, to the
fullest extent permitted by law and the Pacific Horizon Funds'
Charter, as in effect as of the date of this Agreement and any
obligations of the Pacific Horizon Funds to pay any retirement
benefits to current and former Directors pursuant to Pacific
Horizon Fund's retirement plan ("Liabilities"). Without limiting
the foregoing, each Acquired Fund agrees that all rights to
indemnification and retirement benefits and all limitations of
liability existing in favor of the Pacific Horizon Funds' current
and former Directors and officers, acting in their capacities as
such, under Pacific Horizon Funds' Charter as in effect as of the
date of this Agreement shall survive the Reorganization and shall
continue in full force and effect, without any amendment thereto,
and shall constitute rights which may be asserted against Nations
Funds, its successors or assigns. The Liabilities assumed by
Nations Funds, its successors or assigns, on behalf of an
Acquiring Fund shall be separate Liabilities of such Acquiring
Fund, and not joint or joint and several liabilities of any other
Acquiring Fund.
1.4. Prior to the Closing(s), Nations Funds and Pacific Horizon Funds
shall file appropriate Articles of Transfer pursuant to the laws
of the State of Maryland, effective as of the Closing(s).
1.5. Promptly after the Closing(s) with respect to each Acquired Fund,
the Acquired Fund will distribute the shares of the Acquiring Fund
class received by the Acquired Fund pursuant to paragraph 1.1 to
its shareholders of record determined as of the close of business
on the Closing Date ("Acquired Fund Investors") in complete
liquidation of the Acquired Fund. Acquired Fund Investors will be
credited with full and fractional shares of the class that is
issued by the corresponding Acquiring Fund under this Agreement
with respect to the shares of the Acquired Fund that are held by
the Acquired Fund Investors. Such distribution will be
accomplished by an instruction, signed by an appropriate officer
of Pacific Horizon Funds, to transfer the Acquiring Fund Shares
then credited to the Acquired Fund's account on the books of the
Acquiring Fund and to open accounts on the books of the Acquiring
Fund established and maintained by the Acquiring Fund's transfer
agent in the names of record of the Acquired Fund Investors and
representing the respective number of shares of the Acquiring Fund
due such Acquired Fund Investors. In exchange for Acquiring Fund
Shares distributed, all issued and outstanding shares of common
stock of the Acquired Fund will be redeemed and canceled
simultaneously therewith on the Acquired Fund's books; any
outstanding share certificates representing interests in the
Acquired Fund thereafter will represent the right to receive such
number of Acquiring Fund Shares after the Closing(s) as determined
in accordance with Section 1.1.
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1.6. If a request shall be made for a change of the registration of
shares of an Acquiring Fund to another person from the account of
the shareholder in which name the shares are registered in the
records of the corresponding Acquired Fund, it shall be a
condition of such registration of shares that there be furnished
to the Acquiring Fund an instrument of transfer properly endorsed,
accompanied by appropriate signature guarantees and otherwise in
proper form for transfer and, if any of such shares are
outstanding in certificated form, the certificates representing
such shares, and that the person requesting such registration
shall pay to such Acquiring Fund any transfer or other taxes
required by reason of such registration or establish to the
reasonable satisfaction of the Acquiring Fund that such tax has
been paid or is not applicable.
1.7. Following the transfer of assets by each Acquired Fund to the
corresponding Acquiring Fund, the assumption of the Acquired
Fund's Liabilities by the Acquiring Fund, and the distribution by
the Acquired Fund of the Acquiring Fund Shares received by it
pursuant to paragraph 1.4, Pacific Horizon Funds shall terminate
the qualification, classification and registration of such
Acquired Fund at all appropriate federal and state agencies. All
reporting and other obligations of Pacific Horizon Funds shall
remain the exclusive responsibility of Pacific Horizon Funds up to
and including the date on which the particular Acquired Fund is
terminated and deregistered, subject to any reporting or other
obligations described in paragraph 4.9. Subject to the provisions
of Section 1.8 and comparable provisions of similar Agreements and
Plans of Reorganizations being entered into between Pacific
Horizon Funds and Nations Institutional Reserves and Nations
Funds, Inc., at an appropriate time as determined by Pacific
Horizon Funds, upon the advice of counsel, Pacific Horizon Funds
will be dissolved under the laws of the State of Maryland.
1.8. Subject to the conditions set forth in this Agreement, the failure
of one Acquired Fund to consummate the transactions contemplated
hereby shall not affect the consummation or validity of a
Reorganization with respect to any other Acquired Fund, and the
provisions of this Agreement shall be construed to effect this
intent, including, without limitation, as the context requires,
construing the terms "Acquiring Fund" and "Acquired Fund" as
meaning only those series of Nations Funds and Pacific Horizon
Funds, respectively, which are involved in a Reorganization as of
a Closing Date.
2. VALUATION
2.1.a. With respect to each Acquired Fund, the value of the Fund Assets
shall be the value of such assets computed as of the time at which
its net asset value is calculated on the Closing Date (such time
and date being herein called the "Applicable Valuation Date"). The
net asset value of the Fund Assets to be transferred by the
Acquired Funds shall be computed by Pacific Horizon Funds and
shall be subject to adjustment by the amount, if any, agreed to by
Nations
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<PAGE>
Funds and the respective Acquired Funds. In determining the value
of the securities transferred by the Acquired Funds to the
Acquiring Funds, except as provided in sub-paragraph 2.1.b., each
security shall be priced in accordance with the pricing policies
and procedures of the Acquiring Funds as described in its then
current prospectuses and statements of additional information. For
such purposes, price quotations and the security characteristics
relating to establishing such quotations shall be determined by
Pacific Horizon Funds, provided that such determination shall be
subject to the approval of Nations Funds. Pacific Horizon Funds
and Nations Funds agree to use all commercially reasonable efforts
to resolve any material pricing differences between the prices of
portfolio securities determined in accordance with the pricing
policies and procedures of Pacific Horizon Funds and those
determined in accordance with the pricing policies and procedures
of the Acquiring Funds prior to the Applicable Valuation Date.
2.2. The net asset value of the share of a class of shares of an
Acquiring Fund shall be the net asset value per share of such
class computed on the Applicable Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then
current prospectus and statement of additional information.
3. CLOSING(S) AND CLOSING DATE
3.1. Prior to the Closing(s), Nations Funds and Pacific Horizon Funds
shall execute and file Articles of Transfer, effective as of the
Closing(s) with respect to the transactions contemplated hereby
with the Department of Assessments and Taxation of the State of
Maryland (the "Department of Assessments"). The Closing for the
Acquiring Funds and their corresponding Acquired Fund(s), shall
occur on May 14, 1999, and/or on such other date(s) as may be
mutually agreed upon in writing by the officers of the parties
hereto (a "Closing Date"). The Closing(s) shall be held at the
offices of Stephens Inc., 111 Center Street, Suite 300, Little
Rock, Arkansas 72201 or at such other location as is mutually
agreeable to the parties. All acts taking place at the Closing(s)
shall be deemed to take place simultaneously as of 4:00 p.m.
Eastern time on the Closing Date unless otherwise provided.
3.2. Each Acquiring Fund's custodian shall deliver at the Closing(s) a
certificate of an authorized officer stating that: (a) each
Acquired Fund's portfolio securities, cash and any other assets
have been delivered in proper form to the corresponding Acquiring
Fund on the Closing Date and (b) all necessary taxes including all
applicable federal and state stock transfer stamps, if any, have
been paid, or provision for payment shall have been made, by such
Acquired Fund in conjunction with the delivery of portfolio
securities. Proper delivery of cash shall be by wire to The Bank
of New York, the Acquiring Funds' Custodian, pursuant to
instruction to be delivered prior to the Closing(s).
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<PAGE>
3.3. Notwithstanding anything herein to the contrary, in the event that
on the Applicable Valuation Date (a) the New York Stock Exchange
shall be closed to trading or trading thereon shall be restricted
or (b) trading or the reporting of trading on such exchange or
elsewhere shall be disrupted so that, in the judgment of Nations
Funds and Pacific Horizon Funds, accurate appraisal of the value
of the net assets of an Acquiring Fund or an Acquired Fund is
impracticable, the Applicable Valuation Date and Closing Date
shall be postponed until the first business day after the day when
trading shall have been fully resumed without restriction or
disruption and reporting shall have been restored.
3.4. With respect to each Acquired Fund, Pacific Horizon Funds shall
provide Nations Funds and its transfer agents with immediate
access from and after the Closing Date to (a) the computer,
electronic or such other forms of records containing the names,
addresses and taxpayer identification numbers of all of the
Acquired Fund Investors and the number and percentage ownership of
outstanding Acquired Fund shares owned by such Acquired Fund
Investor, all as of the Applicable Valuation Date, and (b) all
original documentation (including all applicable Internal Revenue
Service forms, certificates, certifications and correspondence)
relating to the Acquired Fund Investors' taxpayer identification
numbers and their liability for or exemption from back-up
withholding. Each corresponding Acquiring Fund shall issue and
deliver to the Secretary or Assistant Secretary of Pacific Horizon
Funds, acting on behalf of the Acquired Fund, a confirmation
evidencing the Acquiring Fund Shares credited on the Closing Date
or shall provide evidence satisfactory to each Acquired Fund that
such Acquiring Fund Shares have been credited to each Acquired
Fund's account on the books of each Acquiring Fund. At the
Closing(s), each party shall deliver to the other such bills of
sale, checks, assignments, assumptions of liability share
certificates, if any, receipts or other documents of transfer,
assignment or conveyance as such other party or its counsel may
reasonably request.
3.5. Within twenty (20) days after the Closing Date, each Acquired Fund
shall deliver, in accordance with Article 1 hereof, to the
corresponding Acquiring Fund a statement of the Fund Assets and
Liabilities, together with a list of such Acquired Fund's
portfolio securities and other assets showing the respective
adjusted bases and holding periods thereof for income tax
purposes, as of the Closing Date, certified by an appropriate
officer of Pacific Horizon Funds.
4. COVENANTS WITH RESPECT TO THE ACQUIRING FUNDS AND THE ACQUIRED FUNDS
4.1. Pacific Horizon Funds has called or will call a meeting of the
Acquired Fund shareholders to consider and act upon this
Agreement, and to take such other actions reasonably necessary to
obtain the approval of the transactions contemplated herein,
including approval for each Acquired Fund's liquidating
distribution of the Acquiring Fund Shares contemplated hereby, and
for Pacific
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<PAGE>
Horizon Funds to terminate each Acquired Fund's qualification,
classification and registration if requisite approvals are
obtained with respect to each Acquired Fund. Nations Funds and
Pacific Horizon Funds will jointly prepare the notice of meeting,
form of proxy and proxy statement (collectively, "Proxy
Materials") to be used in connection with such meeting; provided
that Nations Funds has furnished or will furnish Pacific Horizon
Funds, with a current, effective prospectus, including any
supplements, relating to the class of shares of each Acquiring
Fund corresponding to the class of shares of each Acquired Fund
then outstanding for incorporation within and/or distribution with
the Proxy Materials, and with such other information relating to
the Acquiring Funds as is reasonably necessary for the preparation
of the Proxy Materials.
4.2. Pacific Horizon Funds, on behalf of each Acquired Fund, covenants
that each Acquired Fund shall not sell or otherwise dispose of any
Acquiring Fund Shares to be received in the transactions
contemplated herein, except in distribution to its shareholders in
accordance with the terms of this Agreement.
4.3. Pacific Horizon Funds, on behalf of each Acquired Fund, will
assist the corresponding Acquiring Fund in obtaining such
information as the Acquiring Fund reasonably requests concerning
the record and beneficial ownership of shares of each class of
each Acquired Fund.
4.4. Subject to the provisions hereof, Nations Funds, on its own behalf
and on behalf of each Acquiring Fund, and Pacific Horizon Funds,
on its own behalf and on behalf of each Acquired Fund, will take,
or cause to be taken, all actions, and do, or cause to be done,
all things reasonably necessary, proper or advisable to consummate
and make effective the transactions contemplated herein.
4.5. Pacific Horizon Funds, on behalf of each Acquired Fund, shall
furnish to its corresponding Acquiring Fund on the Closing Date, a
statement of the total amount of each Acquired Fund's assets and
Liabilities as of the Closing Date, which statement shall be
certified by an appropriate officer of Pacific Horizon Funds as
being determined in accordance with generally accepted accounting
principles consistently applied and as being valued in accordance
with paragraph 2.1 hereof. As promptly as practicable, but in any
case within sixty (60) days after the Closing Date, Pacific
Horizon Funds, on behalf of each Acquired Fund, shall furnish its
corresponding Acquiring Fund, in such form as is reasonably
satisfactory to Nations Funds, on behalf of each Acquiring Fund, a
statement certified by an officer of Pacific Horizon Funds of such
Acquired Fund's federal income tax attributes and the tax bases in
its assets that will be carried over to the corresponding
Acquiring Fund in the Reorganization pursuant to Section 381 of
the Code.
4.6. Nations Funds has prepared and filed, or will prepare and file,
with the Securities and Exchange Commission ("SEC") and the
appropriate state securities commissions a post-effective
amendment (the "N-1A Post-Effective
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<PAGE>
Amendment") to its registration statement on Form N-1A (File Nos.
33-33144; 811-6030), as promptly as practicable so that all
Acquiring Funds and their shares are registered under the
Securities Act of 1933, as amended (the "1933 Act"), the
Investment Company Act of 1940, as amended (the "1940 Act"), and
applicable state securities laws. In addition, Nations Funds, on
behalf of each Acquiring Fund, has prepared and filed, or will
prepare and file with the SEC a registration statement on Form
N-14 under the 1933 Act, relating to the Acquiring Fund Shares,
which, without limitation, shall include a proxy statement of
Pacific Horizon Funds and the prospectuses of the Acquiring Funds
of Nations Funds relating to the transactions contemplated by this
Agreement (the "Registration Statement"). Pacific Horizon Funds,
on behalf of each Acquired Fund, has provided or will provide each
corresponding Acquiring Fund with the materials and information
necessary to prepare the N-1A Post-Effective Amendment and the
Proxy Materials for inclusion in the Registration Statement,
prepared in accordance with paragraph 4.1, and with such other
information and documents relating to each Acquired Fund as are
requested by the corresponding Acquiring Fund and as are
reasonably necessary for the preparation of the N-1A
Post-Effective Amendment and the Registration Statement.
4.7. As soon after the Closing Date as is reasonably practicable,
Pacific Horizon Funds, on behalf of each Acquired Fund shall
prepare and file all federal and other tax returns and reports of
each Acquired Fund required by law to be filed with respect to all
periods ending on or before the Closing Date but not theretofore
filed.
4.8. With respect to each Acquiring Fund, Nations Funds agrees to use
all reasonable efforts to operate in accordance with its then
current prospectus and statement of additional information
prepared in accordance with Form N-1A, as may be modified from
time to time, including qualifying as a "regulated investment
company" under the Code, for at least one (1) year following the
Closing Date.
4.9. With respect to each Acquired Fund, Pacific Horizon Funds agrees
to use all reasonable efforts to operate in accordance with its
then current prospectus and statement of additional information
prepared in accordance with Form N-1A, as may be modified from
time to time, including qualifying as a "regulated investment
company" under the Code, up to the Closing Date.
4.10. Following the transfer of assets by each Acquired Fund to the
corresponding Acquiring Fund in exchange for Acquiring Fund Shares
and the assumption of all Liabilities of the Acquired Fund as
contemplated herein, Pacific Horizon Funds will file any final
regulatory reports, including but not limited to any Form N-SAR
and Rule 24f-2 filings with respect to such Acquired Fund(s),
promptly after the Closing Date. As soon as practicable after the
Closing Date and further subject to Section 1.8 hereof and
comparable provisions of similar Agreements and Plans of
Reorganization between Pacific Horizon Funds and Nations
Institutional Reserves and Nations Funds, Inc., Pacific Horizon
Funds shall file an application pursuant
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<PAGE>
to Section 8(f) of the 1940 Act for an order declaring that it has
ceased to be an investment company; shall file Articles of
Dissolution for recordation with the Department of Assessments,
and shall take, in accordance with Maryland General Corporation
Law, all other steps necessary and proper to effect its complete
dissolution.
4.11. Nations Fund, on behalf of each Acquiring Fund, shall use its best
efforts to satisfy the conditions of the statutory exemption set
forth in Section 15(f) of the 1940 Act, as an assumption of the
stated expectation of the Pacific Horizon Funds as set forth in
the proxy statement of Pacific Horizon Funds dated May 15, 1998.
5. REPRESENTATIONS AND WARRANTIES
5.1. Nations Funds, on behalf of itself and each Acquiring Fund,
represents and warrants to the Pacific Horizon Funds as follows:
5.1.a. Nations Funds was duly created pursuant to its Agreement
and Declaration of Trust by the Trustees for the purpose
of acting as a management investment company under the
1940 Act and is validly existing under the laws of the
Commonwealth of Massachusetts, and the Agreement and
Declaration of Trust directs the Trustees to manage the
affairs of Nations Funds and grants them all powers
necessary or desirable to carry out such responsibility,
including administering Nations Funds business as
currently conducted by Nations Funds and as described in
the current prospectuses of Nations Funds; Nations Funds
is registered as an investment company classified as an
open-end management company under the 1940 Act, and its
registration with the SEC as an investment company is in
full force and effect;
5.1.b. The Registration Statement, including the current
prospectuses and statement of additional information of
each Acquiring Fund, conform or will conform, at all times
up to and including the Closing Date, in all material
respects to the applicable requirements of the 1933 Act
and the 1940 Act and the regulations thereunder and do not
include or will not include any untrue statement of a
material fact or omit to state any material fact required
to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they
were made, not misleading;
5.1.c. Each Acquiring Fund is not in violation of, and the
execution, delivery and performance of this Agreement by
Nations Funds for itself and on behalf of each Acquiring
Fund does not and will not (i) violate Nations Funds'
Agreement and Declaration of Trust or By-Laws, or (ii)
result in a breach or violation of, or constitute a
default under any material agreement or
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<PAGE>
material instrument, to which Nations Funds is a party or
by which its properties or assets are bound;
5.1.d. Except as previously disclosed in writing to the Pacific
Horizon Funds, no litigation or administrative proceeding
or investigation of or before any court or governmental
body is presently pending or, to Nations Funds' knowledge,
threatened against Nations Funds or its business, the
Acquiring Funds or any of their properties or assets,
which, if adversely determined, would materially and
adversely affect Nations Funds or an Acquiring Fund's
financial condition or the conduct of their business, and
Nations Funds knows of no facts that might form the basis
for the institution of any such proceeding or
investigation, and no Acquiring Fund is a party to or
subject to the provisions of any order, decree or judgment
of any court or governmental body which materially and
adversely affects, or is reasonably likely to materially
and adversely affect, its business or its ability to
consummate the transactions contemplated herein;
5.1.e. All issued and outstanding shares, including shares to be
issued in connection with the Reorganization, of each
Acquiring Fund class will, as of the Closing Date, be duly
authorized and validly issued and outstanding, fully paid
and non-assessable by Nations Funds and the Acquiring Fund
does not have outstanding any option, warrants or other
rights to subscribe for or purchase any of its shares;
5.1.f. The execution, delivery and performance of this Agreement
on behalf of each Acquiring Fund will have been duly
authorized prior to the Closing Date by all necessary
action on the part of Nations Funds and the Trustees, and
this Agreement constitutes a valid and binding obligation
of Nations Funds and each Acquiring Fund enforceable in
accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, arrangement,
moratorium and other similar laws of general applicability
relating to or affecting creditors' rights and to general
equity principles;
5.1.g. The Acquiring Fund Shares to be issued and delivered to
the corresponding Acquired Fund for the account of the
Acquired Fund Investors, pursuant to the terms hereof,
will have been duly authorized as of the Closing Date and,
when so issued and delivered, will be duly and validly
issued, fully paid and non-assessable, and the shares of
the class of the Acquiring Fund issued and outstanding
prior to the Closing Date were offered and sold in
compliance with the applicable registration requirements,
or exemptions therefrom, of the 1933 Act, and all
applicable state securities laws, and the regulations
thereunder, and no shareholder of an Acquiring Fund shall
have any preemptive right of subscription or purchase in
respect thereto;
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<PAGE>
5.1.h. From the effective date of the Registration Statement,
through the time of the meeting of the Acquired Fund
shareholders and on the Closing Date, any written
information furnished by Nations Funds with respect to an
Acquiring Fund for use in the Proxy Materials, the
Registration Statement or any other materials provided in
connection with the Reorganization does not and will not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the information
provided not misleading;
5.1.i. No governmental consents, approvals, authorizations or
filings are required under the 1933 Act, the Securities
Exchange Act of 1934 (the "1934 Act"), the 1940 Act or
Massachusetts law for the execution of this Agreement by
Nations Funds, for itself and on behalf of each Acquiring
Fund, or the performance of the Agreement by Nations
Funds, for itself and on behalf of each Acquiring Fund,
except for the effectiveness of the Registration
Statement, any necessary exemptive relief or no-action
assurances requested from the SEC or its staff with
respect to Sections 17(a) and 17(d) of the 1940 Act and
Rule 17d-1 thereunder, and such other consents, approvals,
authorizations and filings as have been made or received,
and except for such consents, approvals, authorizations
and filings as may be required subsequent to the Closing
Date;
5.1.j. The Statement of Assets and Liabilities, Statement of
Operations and Statement of Changes in Net Assets of
Nations Diversified Income Fund, Nations Municipal Income
Fund and Nations Short-Intermediate Government Fund as of
and for the year ended March 31, 1998, audited by
PricewaterhouseCoopers LLP (copies of which have been or
will be furnished to the corresponding Acquired Fund), and
the unaudited Statement of Net Assets and Liabilities,
Statement of Operations and Statement of Changes in Net
Assets of Nations Diversified Income Fund, Nations
Municipal Income Fund and Nations Short-Intermediate
Government Fund as of and for the six-month period ended
September 30, 1998 (copies of which have been or will be
furnished to the corresponding Acquired Fund), present
fairly, in all material respects, the financial position
of Nations Diversified Income Fund, Nations Municipal
Income Fund and Nations Short-Intermediate Government Fund
as of such date and the results of its operations and the
changes in its Net Assets for the period then ended in
accordance with generally accepted accounting principles
consistently applied, and as of such date there were no
Liabilities of Nations Diversified Income Fund, Nations
Municipal Income Fund and Nations Short-Intermediate
Government Fund known to Nations Funds that were not
disclosed therein but that would be required to be
disclosed therein in accordance with generally accepted
accounting principles;
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<PAGE>
5.1.k. Since the date of the most recent audited financial
statements, there has not been any material adverse change
in any Acquiring Fund's financial position, assets,
liabilities or business, other than changes occurring in
the ordinary course of business, or any incurrence by an
Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as
otherwise disclosed in writing to and accepted by the
corresponding Acquired Fund, prior to the Closing Date
(for the purposes of this subparagraph (k), neither a
decline in an Acquiring Fund's net asset value per share
nor a decrease in an Acquiring Fund's size due to
redemptions shall be deemed to constitute a material
adverse change);
5.1.l. All federal and other tax returns and reports of Nations
Funds and each Acquiring Fund required by law to be filed
on or before the Closing Date have been or will be filed,
and all federal and other taxes owed by Nations Funds on
behalf of the Acquiring Funds have been or will be paid so
far as due, and to the best of Nations Funds' knowledge,
no such return is currently under audit and no assessment
has been asserted with respect to any such return;
5.1.m. At the Closing Date, the Acquiring Funds will have good
and marketable title to their assets and full right, power
and authority to assign, deliver and otherwise transfer
such assets; and
5.1.n. Each Acquiring Fund intends to qualify as a "regulated
investment company" under the Code, and each Acquiring
Fund that has conducted material investment operations
prior to the Closing Date has elected to qualify and has
qualified as a "regulated investment company" under the
Code, as of and since its first taxable year; has been a
"regulated investment company" under the Code at all times
since the end of its first taxable year when it so
qualified; and qualifies and shall continue to qualify as
a "regulated investment company" under the Code for its
current taxable year.
5.2. Pacific Horizon Funds, on behalf of itself and each Acquired Fund,
represents and warrants to Nations Funds as follows:
5.2.a. Pacific Horizon Funds was duly incorporated under the laws
of the State of Maryland for the purpose of acting as a
management investment company under the 1940 Act and is
validly existing under the laws of the State of Maryland,
and its Charter and the laws of the State of Maryland
provide that the affairs of Pacific Horizon Funds shall be
managed under the direction of the Directors and grants
them all powers necessary or desirable to carry out such
responsibility, including administering Pacific Horizon
Funds business as currently conducted by Pacific Horizon
Funds and as described in the current prospectuses of
Pacific Horizon Funds; Pacific Horizon Funds is registered
as an investment company classified as
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<PAGE>
an open-end management company under the 1940 Act, and its
registration with the SEC as an investment company is in
full force and effect;
5.2.b. All of the issued and outstanding shares of common stock
of each Acquired Fund have been offered and sold in
compliance in all material respects with applicable
registration requirements of the 1933 Act and state
securities laws;
5.2.c. The Acquired Funds are not in violation of, and the
execution, delivery and performance of this Agreement by
Pacific Horizon Funds for itself and on behalf of each
Acquired Fund does not and will not (i) violate Pacific
Horizon Funds' Charter or By-Laws, or (ii) result in a
breach or violation of, or constitute a default under any
material agreement or material instrument, to which
Pacific Horizon Funds is a party or by which its
properties or assets are bound, except as otherwise
previously disclosed in writing to the Acquiring Funds;
5.2.d. Except as previously disclosed in writing to Nations
Funds, no litigation or administrative proceeding or
investigation of or before any court or governmental body
is presently pending or, to Pacific Horizon Funds'
knowledge, threatened against any Acquired Fund or any of
its properties or assets which, if adversely determined,
would materially and adversely affect such Acquired Fund's
financial condition or the conduct of its business, and
Pacific Horizon Funds knows of no facts that might form
the basis for the institution of any such proceeding or
investigation, and no Acquired Fund is a party to or
subject to the provisions of any order, decree or judgment
of any court or governmental body that materially and
adversely affects, or is reasonably likely to materially
and adversely affect, its business or its ability to
consummate the transactions contemplated herein;
5.2.e. The Statement of Assets and Liabilities, Statement of
Operations and Statement of Changes in Net Assets of each
Acquired Fund as of and for the year ended February 28,
1998, audited by PricewaterhouseCoopers LLP (copies of
which have been or will be furnished to the corresponding
Acquiring Fund) and the unaudited Statement of Assets and
Liabilities, Statement of Operations and Statement of
Changes in Net Assets of each Acquired Funds as of and for
the six-month period ended August 31, 1998 (copies of
which have been or will be furnished to the corresponding
Acquiring Fund) present fairly, in all material respects,
the financial position of each Acquired Fund as of such
date and the results of its operations and the changes in
its Net Assets for such period in accordance with
generally accepted accounting principles consistently
applied, and as of such date there were no Liabilities of
any Acquired Fund known to Pacific Horizon Funds that were
not disclosed therein but that would be
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<PAGE>
required to be disclosed therein in accordance with
generally accepted accounting principles;
5.2.f. Since the date of the most recent audited financial
statements, there has not been any material adverse change
in any Acquired Fund's financial condition, assets,
Liabilities or business, other than changes occurring in
the ordinary course of business, or any incurrence by an
Acquired Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as
otherwise disclosed in writing to and accepted by the
corresponding Acquiring Fund, prior to the Closing Date
(for the purposes of this subparagraph (f), neither a
decline in an Acquired Fund's net asset value per share
nor a decrease in an Acquired Fund's size due to
redemptions shall be deemed to constitute a material
adverse change);
5.2.g. All federal and other tax returns and reports of Pacific
Horizon Funds and each Acquired Fund required by law to be
filed on or before the Closing Date, have been or will be
filed, and all federal and other taxes owed by Pacific
Horizon Funds on behalf of the Acquired Funds, have been
or will be paid so far as due, and to the best of Pacific
Horizon Funds' knowledge, no such return is currently
under audit and no assessment has been asserted with
respect to any such return;
5.2.h. Each Acquired Fund has elected to qualify and has
qualified as a "regulated investment company" under the
Code, as of and since its first taxable year; has been a
"regulated investment company" under the Code at all times
since the end of its first taxable year when it so
qualified; and qualifies and shall continue to qualify as
a "regulated investment company" under the Code for its
taxable year ending upon its liquidation;
5.2.i. All issued and outstanding shares of each Acquired Fund
are, and on the Closing Date will be, duly authorized and
validly issued and outstanding, and fully paid and
non-assessable by Pacific Horizon Funds, and all such
shares will, at the time of the Closing(s), be held by the
persons and in the amounts set forth in the list of
Acquired Fund Investors provided to each corresponding
Acquiring Fund, pursuant to paragraph 3.4, and no Acquired
Fund has outstanding any options, warrants or other rights
to subscribe for or purchase any of its shares, nor is
there outstanding any security convertible into any of its
shares;
5.2.j. At the Closing Date, each Acquired Fund will have good and
marketable title to its Fund Assets and full right, power
and authority to assign, deliver and otherwise transfer
such Fund Assets hereunder, and upon delivery and payment
for such Fund Assets as contemplated herein and the filing
of Articles of Transfer pursuant to the laws of the State
of Maryland, the corresponding Acquiring Fund will acquire
good and marketable title thereto, subject to no
restrictions on the ownership or transfer thereof other
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<PAGE>
than such restrictions as might arise under the 1933 Act
or state securities laws, and except for any liens or
transfer tax liens arising in connection with the transfer
of Fund Assets pursuant to this Agreement;
5.2.k. The execution, delivery and performance of this Agreement
on behalf of the Acquired Funds will have been duly
authorized prior to the Closing Date by all necessary
action on the part of Pacific Horizon Funds and the
Directors, and this Agreement constitutes a valid and
binding obligation of Pacific Horizon Funds and each
Acquired Fund enforceable in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar
laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
5.2.l. From the effective date of the Registration Statement,
through the time of the meeting of the Pacific Horizon
Funds shareholders, and on the Closing Date, the
Registration Statement insofar as it relates to materials
provided by Pacific Horizon Funds or the Acquired Funds,
used in connection with the preparation of the
Registration Statement: (i) will comply in all material
respects with the applicable provisions of the 1933 Act,
the 1934 Act and the 1940 Act and the regulations
thereunder and (ii) will not contain any untrue statement
of a material fact or omit to state a material fact
required to be stated therein or necessary to make the
statements therein not misleading, and as of such dates
and times, any written information furnished by Pacific
Horizon Funds, on behalf of the Acquired Funds, for use in
the Registration Statement or in any other manner that may
be necessary in connection with the transactions
contemplated hereby does not contain any untrue statement
of a material fact or omit to state a material fact
necessary to make the information provided not misleading;
and
5.2.m. No governmental consents, approvals, authorizations or
filings are required under the 1933 Act, the 1934 Act, the
1940 Act or Maryland law for the execution of this
Agreement by Pacific Horizon Funds, for itself and on
behalf of each Acquired Fund, or the performance of the
Agreement by Pacific Horizon Funds for itself and on
behalf of each Acquired Fund, except for the effectiveness
of the Registration Statement, any necessary exemptive
relief or no-action assurances requested from the SEC or
its staff with respect to Section 17(a) and 17(d) of the
1940 Act and Rule 17d-1 thereunder and the filing of
Articles of Transfer pursuant to Maryland law, and except
for such other consents, approvals, authorizations and
filings as have been made or received, and such consents,
approvals, authorizations and filings as may be required
subsequent to the Closing Date, it being understood,
however, that this Agreement and the transactions
contemplated herein must be approved by the shareholders
of the Acquired Funds as described in paragraph 8.1.
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<PAGE>
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED FUNDS
The obligations of Pacific Horizon Funds to consummate the
Reorganization with respect to each Acquired Fund shall be subject to the
performance by Nations Funds, for itself and on behalf of each Acquiring Fund,
of all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions with respect to each
corresponding Acquiring Fund:
6.1. All representations and warranties of Nations Funds with respect
to each Acquiring Fund contained herein shall be true and correct
in all material respects as of the date hereof and, except as they
may be affected by the transactions contemplated herein, as of the
Closing Date with the same force and effect as if made on and as
of the Closing Date.
6.2. Nations Funds, on behalf of each Acquiring Fund, shall have
delivered to Pacific Horizon Funds at the Closing(s) a certificate
executed on behalf of each corresponding Acquiring Fund by Nations
Funds' President, Secretary, Assistant Secretary, or other
authorized officer, in a form and substance reasonably
satisfactory to Pacific Horizon Funds and dated as of the Closing
Date, to the effect that the representations and warranties of
Nations Funds with respect to each Acquiring Fund made herein are
true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated herein, and as to
such other matters as such Acquired Fund shall reasonably request.
6.3. Each Acquired Fund shall have received at the Closing(s) a
favorable opinion of Morrison & Foerster LLP, counsel to Nations
Funds (based upon or subject to such representations, assumptions,
limitations or opinions of local counsel as such counsel may deem
appropriate or necessary), dated as of the Closing Date, in a form
(including the representations, assumptions, limitations or
opinions of local counsel upon which it is based or to which it is
subject) reasonably satisfactory to each Acquired Fund,
substantially to the effect that:
6.3.a. Nations Funds is a duly registered, open-end, management
investment company, and its registration with the SEC as
an investment company under the 1940 Act is in full force
and effect;
6.3.b. each Acquiring Fund is a portfolio of Nations Funds, which
is a company duly created pursuant to its Agreement and
Declaration of Trust, is validly existing and in good
standing under the laws of the Commonwealth of
Massachusetts and the Agreement and Declaration of Trust
directs the Trustees to manage the affairs of Nations
Funds and grants them all powers necessary or desirable to
carry out such responsibility, including administering
Nations Funds' business as described in the current
prospectuses of Nations Funds;
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<PAGE>
6.3.c. this Agreement has been duly authorized, executed and
delivered on behalf of Nations Funds and each Acquiring
Fund and, assuming due authorization, execution and
delivery of this Agreement on behalf of the Acquired
Funds, is a valid and binding obligation of Nations Funds
enforceable against Nations Funds in accordance with its
terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, arrangement, moratorium and
other similar laws of general applicability relating to or
affecting creditors' rights and to general equity
principles;
6.3.d. the Acquiring Fund Shares to be issued to the Acquired
Funds Investors pursuant to this Agreement are duly
registered under the 1933 Act on the appropriate form, and
are duly authorized and upon such issuance will be validly
issued and outstanding and fully paid and non-assessable,
and no shareholder of an Acquiring Fund has any preemptive
rights to subscription or purchase in respect thereof;
6.3.e. the N-1A Post-Effective Amendment and the Registration
Statement have become effective with the SEC and, to the
best of such counsel's knowledge, no stop order suspending
the effectiveness thereof has been issued and no
proceedings for that purpose have been instituted or are
pending or threatened;
6.3.f. except for the filing of Articles of Transfer pursuant to
Maryland law no consent, approval, authorization, filing
or order of any court or governmental authority of the
United States or any state is required for the
consummation by Nations Funds of the Reorganization with
respect to each Acquiring Fund;
6.3.g. to such counsel's knowledge, the execution and delivery of
the Agreement and the performance of its terms by Nations
Funds, and each Acquiring Fund, do not violate or result
in a violation of the Nations Funds Agreement and
Declaration of Trust or By-Laws, or any judgment, order or
decree known to such counsel, of any court or arbiter, to
which Nations Funds is a party, and, to such counsel's
knowledge, will not constitute a material breach of the
terms, conditions or provisions of, or constitute a
default under, any contract, undertaking, indenture or
other agreement by which Nations Funds is now bound or to
which it is now a party;
6.3.h. to such counsel's knowledge, (a) no legal or governmental
proceedings existing on or before the date of mailing the
combined proxy statement/prospectus ("Combined
Proxy/Prospectus"), involving Nations Funds or the
Acquiring Funds, are required to be described in the
Combined Proxy/Prospectus which are not described as
required and (b) there are no contracts or documents
relating to Nations Funds or the Acquiring Funds, known to
such counsel, of a character required to be
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<PAGE>
described in the Combined Proxy/Prospectus or to be filed
as an exhibit to the Registration Statement that are not
described or filed as required; and
6.3.i. to such counsel's knowledge, except as otherwise
disclosed in the Registration Statement, no litigation or
administrative proceeding or investigation of or before
any court or governmental body is presently pending or
threatened against Nations Funds or an Acquiring Fund or
any of their properties or assets and neither Nations
Funds nor any Acquiring Fund is a party to or subject to
the provisions of any order, decree or judgment of any
court or governmental body that materially and adversely
affects, or would materially and adversely affect, its
business.
6.4. As of the Closing Date with respect to the Reorganization of each
Acquired Fund, there shall have been no material change in the
investment objective, policies and restrictions nor any material
change in the investment management fees, fee levels payable
pursuant to the 12b-1 plan of distribution, other fees payable for
services provided to the Acquiring Funds, fee waiver or expense
reimbursement undertakings, or sales loads of the Acquiring Funds
from those fee amounts, undertakings and sales load amounts
described in the prospectus of each Acquiring Fund delivered to
the corresponding Acquired Fund pursuant to paragraph 4.1 and in
the notice of meeting, form of proxy and Combined Proxy/Prospectus
(collectively, "Proxy Materials").
6.5. With respect to each Acquiring Fund, the Board of Trustees of
Nations Funds, including a majority of the "non-interested"
Trustees, has determined that the Reorganization is in the best
interests of each Acquiring Fund and that the interests of the
existing shareholders of each Acquiring Fund would not be diluted
as a result of the Reorganization.
6.6. For the period beginning at the Closing Date of the last
Reorganization to occur and ending not less than six years
thereafter, Nations Funds, its successor or assigns shall provide,
or cause to be provided, liability coverage at least as comparable
to the liability coverage currently applicable to both former and
current Directors and officers of Pacific Horizon Funds, covering
the actions of such Directors and officers of Pacific Horizon
Funds for the period they served as such.
6.7. NBAI shall have delivered to Pacific Horizons Fund, no later than
April 15, 1999, a certificate, in form and substance reasonably
satisfactory to Pacific Horizon Funds, to the effect that NBAI
believes that, as of such date, The Bank of New York ("BONY") is
capable of satisfactorily providing accounting services for the
Acquired Funds and Acquiring Funds, on a combined basis, following
the Reorganization ("Accounting Services"). Such certificate shall
be based on a certificate from BONY to NBAI to the effect that
BONY is capable of satisfactorily providing the Accounting
Services.
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<PAGE>
6.8. Stephens Inc., the principal underwriter for the Nations Funds, no
later than the Closing Date, shall have received an exemptive
order under Section 9(c) of the 1940 Act, authorizing such company
to serve as the principal underwriter for the Nations Funds, or
otherwise shall be authorized to serve in such capacity.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING FUNDS
The obligations of Nations Funds to consummate the Reorganization
with respect to each Acquiring Fund shall be subject to the performance by
Pacific Horizon Funds of all the obligations to be performed by it hereunder,
with respect to each corresponding Acquired Fund, on or before the Closing Date
and, in addition thereto, the following conditions:
7.1. All representations and warranties of Pacific Horizon Funds with
respect to the Acquired Funds contained herein shall be true and
correct in all material respects as of the date hereof and, except
as they may be affected by the transactions contemplated by this
Agreement, as of the Closing Date, with the same force and effect
as if made on and as of the Closing Date.
7.2. Pacific Horizon Funds, on behalf of each Acquired Fund, shall have
delivered to each corresponding Acquiring Fund at the Closing(s) a
certificate executed on behalf of each Acquired Fund, by Pacific
Horizon Funds' President, Secretary or Assistant Secretary, or
other authorized officer, in form and substance reasonably
satisfactory to the Acquiring Funds and dated as of the Closing
Date, to the effect that the representations and warranties of
Pacific Horizon Funds with respect to each Acquired Fund made
herein are true and correct at and as of the Closing Date, except
as they may be affected by the transactions contemplated herein
and as to such other matters as each Acquiring Fund shall
reasonably request.
7.3. Each Acquiring Fund shall have received at the Closing(s) a
favorable opinion of Drinker Biddle & Reath LLP, counsel to
Pacific Horizon Funds (based upon or subject to such
representations, assumptions, limitations or opinions of local
counsel as such counsel may deem appropriate or necessary), dated
as of the Closing Date, in a form (including the representations,
assumptions, limitations or opinions of local counsel upon which
it is based or to which it is subject) reasonably satisfactory to
such Acquiring Fund, substantially to the effect that:
7.3.a. Pacific Horizon Funds is a duly registered, open-end
investment company, and its registration with the SEC as
an investment company under the 1940 Act is in full force
and effect;
7.3.b. each Acquired Fund is a portfolio of Pacific Horizon
Funds, Pacific Horizon Funds is a corporation duly
incorporated, validly existing and in good standing under
the laws of the State of Maryland, and the Charter and the
laws of the State of Maryland provide that the affairs of
Pacific Horizon Funds shall be managed under the direction
of the Directors and
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<PAGE>
grants them all powers necessary or desirable to carry out
such responsibility, including administering Pacific
Horizon Funds' business as described in the current
prospectuses of Pacific Horizon Funds;
7.3.c. this Agreement has been duly authorized, executed and
delivered by Pacific Horizon Funds, for itself and on
behalf of the Acquired Funds and, assuming due
authorization, execution and delivery of this Agreement on
behalf of each Acquiring Fund, is a valid and binding
obligation of Pacific Horizon Funds, enforceable against
Pacific Horizon Funds in accordance with its terms,
subject to the effect of bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar
laws of general applicability relating to or affecting
creditors' rights and court decisions with respect
thereto, and such counsel will express no opinion with
respect to the application of equitable principles in any
proceeding, whether at law or in equity;
7.3.d. no consent, approval, authorization, filing or order of
any governmental authority or to such counsel's knowledge,
order of any court of the United States or any state is
required for the consummation of the Reorganization by
Pacific Horizon Funds with respect to each Acquired Fund,
except for such consents, approvals, authorizations and
filings as have been made or received, and except for such
consents, approvals, authorizations and filings as may be
required subsequent to the Closing Date;
7.3.e. to such counsel's knowledge, the execution and delivery of
the Agreement and the performance of its terms by Pacific
Horizon Funds, and each Acquired Fund, do not violate or
result in a violation of the Pacific Horizon Funds'
Charter or By-Laws, or any judgment, order or decree known
to such counsel, of any court or arbiter, to which Pacific
Horizon Funds is a party, and, to such counsel's
knowledge, will not constitute a material breach of the
terms, conditions or provisions of, or constitute a
default under, any contract, undertaking, indenture or
other agreement by which Pacific Horizon Funds is now
bound or to which it is now a party;
7.3.f. to such counsel's knowledge, (a) no legal or governmental
proceedings existing on or before the date of mailing the
Combined Proxy/Prospectus involving Pacific Horizon Funds
or the Acquired Funds, are required to be described in the
Combined Proxy/Prospectus which are not described as
required and (b) there are no contracts or documents
relating to Pacific Horizon Funds or the Acquired Funds,
known to such counsel, of a character required to be
described in the Combined Proxy/Prospectus or to be filed
as an exhibit to the Registration Statement that are not
described or filed as required; and
7.3.g. to such counsel's knowledge, except as otherwise disclosed
in the Registration Statement, no litigation or
administrative proceeding or
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<PAGE>
investigation of or before any court or governmental body
is presently pending or threatened against Pacific Horizon
Funds or an Acquired Fund or any of their properties or
assets and neither Pacific Horizon Funds nor an Acquired
Fund is a party to or subject to the provisions of any
order, decree or judgment of any court or governmental
body that materially and adversely affects, or would
materially and adversely affect, its business.
7.4. Nations Funds, on behalf of each Acquiring Fund, shall have
received from PricewaterhouseCoopers LLP a letter addressed to
Nations Funds, on behalf of each Acquiring Fund, and dated as of
the Closing Date with respect to the Acquired Funds, in form and
substance satisfactory to Nations Funds, to the effect that:
7.4.a. they are independent accountants with respect to Pacific
Horizon Funds and each Acquired Fund within the meaning of
the 1933 Act and the applicable regulations thereunder;
7.4.b. in their opinion, the audited financial statements and the
per share data provided in accordance with Item 3 in Form
N-1A (the "Per Share Data") of the Acquired Fund included
or incorporated by reference in the Registration Statement
previously reported on by them comply as to form in all
material aspects with the applicable accounting
requirements of the 1933 Act and the published rules and
regulations thereunder;
7.4.c. on the basis of limited procedures agreed upon by Nations
Funds, on behalf of the Acquiring Funds and Pacific
Horizon Funds, on behalf of the Acquired Funds, and
described in such letter (but not an examination in
accordance with generally accepted auditing standards),
the data with respect to the acquiring funds used in the
calculation of any figure expressed numerically or in
dollars or percentages that appear in the Registration
Statement under: (a) "Table II -- Total Expense
Information" in the Combined Proxy Statement/Prospectus;
(b) "Table III -- Capitalization (as of September 30,
1998) in the Combined Proxy Statement/Prospectus; and (c)
"Appendix II -- Expense Summaries of Pacific Horizon Funds
and the Corresponding Nations Funds" in the Combined Proxy
Statement/Prospectus, agree with the underlying accounting
records of the Acquired Funds or with written estimates
provided by officers of Pacific Horizon Funds having
responsibility for financial and reporting matters, and
were found to be mathematically correct.
7.5. Pacific Horizon Funds shall have delivered to the Acquiring Funds,
pursuant to paragraph 5.2(e), copies of financial statements of
each Acquired Fund as of and for the year ended February 28, 1999,
audited by PricewaterhouseCoopers LLP.
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<PAGE>
7.6. With respect to each Acquired Fund, the Board of Directors of
Pacific Horizon Funds, including a majority of "non-interested"
Directors, has determined that the Reorganization is in the best
interests of each Acquired Fund and that the interests of the
existing investors in each Acquired Fund would not be diluted as a
result of the Reorganization.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUNDS AND THE
ACQUIRED FUNDS
The obligations of each Acquiring Fund and of each corresponding
Acquired Fund herein are subject to the further conditions that on or before the
Closing Date with respect to each Acquiring Fund and each corresponding Acquired
Fund:
8.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the
outstanding shares of common stock of Pacific Horizon Funds and of
each Acquired Fund, consistent with the provisions of the laws of
the State of Maryland, Pacific Horizon Funds' Charter and the 1940
Act, and certified copies of the resolutions evidencing such
approval shall have been delivered to each corresponding Acquiring
Fund. Approval of this Agreement by the requisite vote of the
holders of the outstanding shares of common stock in an Acquired
Fund shall constitute approval of all of the transactions
contemplated herein, including the reorganization of all
investment portfolios of Pacific Horizon Funds with the Nations
Family of Funds and the dissolution of Pacific Horizon Funds,
subject to the approval under Maryland law and the Charter of
Pacific Horizon Funds by the requisite vote of the holders of the
outstanding shares of common stock of Pacific Horizon Funds.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief
in connection with, this Agreement or any of the transactions
contemplated herein.
8.3. All consents of other parties and all other consents, orders,
approvals and permits of federal, state and local regulatory
authorities (including, without limitation, those of the SEC and
of state securities authorities) deemed necessary by Nations
Funds, on behalf of the Acquiring Funds or by Pacific Horizon
Funds, on behalf of the Acquired Funds, to permit consummation, in
all material respects, of the transactions contemplated herein
shall have been obtained, except where failure to obtain any such
consent, order or permit would not, in the opinion of the party
asserting that the condition to closing has not been satisfied,
involve a risk of a material adverse effect on the assets or
properties of any of an Acquiring Fund or its corresponding
Acquired Fund.
8.4. The N-1A Post-Effective Amendment and the Registration Statement
shall have become effective under the 1933 Act, no stop orders
suspending the effectiveness
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<PAGE>
thereof shall have been issued and, to the best knowledge of the
parties hereto, no investigation or proceeding for that purpose
shall have been instituted or be pending, threatened or
contemplated under the 1933 Act.
8.5. Except to the extent prohibited by Rule 19b-1 promulgated under
the 1940 Act, each Acquired Fund that has conducted material
investment operations prior to the Closing Date shall have
declared a dividend or dividends, with a record date and
ex-dividend date prior to the Applicable Valuation Date, which,
together with all previous dividends, shall have the effect of
distributing to each Acquired Fund's shareholders substantially
all of its net investment company taxable income, if any, for all
taxable periods or years ending on or prior to the Closing Date
(computed without regard to any deduction for dividends paid) and
substantially all of its net capital gain, if any, realized for
all taxable periods or years ending on or prior to the Closing
Date (after reduction for any capital loss carry forward.)
8.6. Nations Funds, on behalf of each Acquiring Fund, and Pacific
Horizon Funds, on behalf of each Acquired Fund, shall have
received from PricewaterhouseCoopers LLP a letter dated as of the
Closing Date, in form and substance satisfactory to Nations Funds
and to Pacific Horizon Funds, to the effect that on the basis of
limited procedures agreed upon by Nations Funds, on behalf of the
Acquiring Funds and Pacific Horizon Funds, on behalf of the
Acquired Funds (but not an examination in accordance with
generally accepted auditing standards), the data with respect to
the acquiring funds used in the calculation of any figure
expressed numerically or in dollars or percentages that appear in
the Registration Statement under: (a) "Table II -- Total Expense
Information" in the Combined Proxy Statement/Prospectus; (b)
"Table III -- Capitalization (as of September 30, 1998) in the
Combined Proxy Statement/Prospectus; and (c) "Appendix II --
Expense Summaries of Pacific Horizon Funds and the Corresponding
Nations Funds" in the Combined Proxy Statement/Prospectus, agree
with the underlying accounting records of the Acquiring Funds or
with written estimates provided by officers of Nations Funds
having responsibility for financial and reporting matters, and
were found to be mathematically correct.
8.7. Nations Funds and Pacific Horizon Funds shall have received an
opinion of Morrison & Foerster LLP addressed to both Nations Funds
and Pacific Horizon Funds in a form reasonably satisfactory to
them, and dated as of the Closing Date, substantially to the
effect that on the basis of facts, representations, and
assumptions set forth in such opinion:
8.7.a. each Reorganization will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and each
Acquiring Fund and the corresponding Acquired Fund will
each be a "party to a reorganization"
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<PAGE>
within the meaning of Section 368(b) of the Code with
respect to such Reorganization;
8.7.b. no gain or loss will be recognized by an Acquired Fund
upon the transfer of its assets and Liabilities to the
corresponding Acquiring Fund solely in exchange for the
Acquiring Fund Shares;
8.7.c. no gain or loss will be recognized by an Acquiring Fund
upon the receipt of the assets and assumption of
Liabilities of the corresponding Acquired Fund solely in
exchange for the Acquiring Fund Shares;
8.7.d. the basis of an Acquired Fund's assets received by the
corresponding Acquiring Fund pursuant to the
Reorganization will be the same as the basis of those
assets in the hands of the Acquired Fund immediately prior
to the Reorganization;
8.7.e. the holding period of an Acquired Fund's assets in the
hands of the corresponding Acquiring Fund will include the
period for which such assets have been held by the
Acquired Fund;
8.7.f. no gain or loss will be recognized by an Acquired Fund on
the distribution to its shareholders of the Acquiring Fund
Shares to be received by the Acquired Fund in the
Reorganization;
8.7.g. no gain or loss will be recognized by the shareholders of
an Acquired Fund upon their receipt of the corresponding
Acquiring Fund Shares in exchange for such shareholders'
shares of the Acquired Fund;
8.7.h. the basis of the Acquiring Fund Shares received by the
shareholders of the corresponding Acquired Fund will be
the same as the basis of the Acquired Fund shares
surrendered by such shareholders pursuant to the
Reorganization;
8.7.i. the holding period for the Acquiring Fund Shares received
by the Acquired Fund shareholders will include the period
during which such shareholders held the Acquired Fund
shares surrendered therefor, provided that such Acquired
Fund shares are held as a capital asset in the hands of
the Acquired Fund shareholders on the date of the
exchange; and
8.7.j. each Acquiring Fund will succeed to and take into account
the tax attributes described in Section 381(c) of the Code
of the corresponding Acquired Fund as of the Closing Date,
subject to the conditions and limitations specified in the
Code.
In rendering such opinion described in this paragraph 8.7, Morrison
& Foerster LLP may require and, to the extent they deem necessary and
appropriate, may rely upon representations made in certificates of Nations Funds
and Pacific Horizon Funds, their affiliates,
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<PAGE>
and principal shareholders. Notwithstanding anything herein to the contrary,
neither an Acquiring Fund nor its corresponding Acquired Fund may waive the
condition set forth in this paragraph 8.7.
8.8. Nations Funds and Pacific Horizon Funds shall have received (a) a
memorandum addressed to Nations Funds and the Pacific Horizon
Funds, in form reasonably satisfactory to them, prepared by
Morrison & Foerster LLP concerning the filing of notices and/or
other documents, and the payment of fees, in connection with the
shares to be issued by Nations Funds pursuant to this Agreement
under applicable state securities laws or the exemption from such
filing and payment requirements under such laws, and (b) assurance
reasonably satisfactory to each of them that all permits and other
authorizations necessary under state securities laws to consummate
the transactions contemplated by this Agreement have been
obtained.
8.9. The SEC shall not have issued any unfavorable advisory report
under Section 25(b) of the 1940 Act nor instituted any proceeding
seeking to enjoin consummation of the transactions contemplated by
this Agreement under Section 25(c) of the 1940 Act.
8.10. Pacific Horizon Funds' agreements with each of its service
contractors have terminated before or at the Closing, and each
party has received reasonable assurance that no claim for damages
(liquidated or otherwise) will arise as a result of such
termination.
9. FINDER'S FEES AND EXPENSES
9.1. Nations Funds, for itself and on behalf of the Acquiring Funds and
Pacific Horizon Funds, on behalf of itself and on behalf of the
Acquired Funds, represent and warrant that there are no brokers or
finders entitled to receive any payments in connection with the
transactions provided for herein.
9.2. NationsBanc Advisors, Inc. shall bear, or shall cause one of its
affiliates to bear, the customary expenses associated with the
transactions contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. This Agreement constitutes the entire agreement between the
parties and supersedes any prior or contemporaneous understanding
or arrangement with respect to the subject matter hereof.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in
connection herewith shall survive the consummation of the
transactions contemplated herein.
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<PAGE>
11. TERMINATION
11.1. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
11.1.a. by the mutual written consent of Nations Funds and Pacific
Horizon Funds;
11.1.b. by either Nations Funds or Pacific Horizon Funds by notice
to the other, without liability to the terminating party
on account of such termination (provided any such
termination shall not excuse the terminating party from
any liability arising out of a default or breach of this
Agreement by such terminating party) if such Closing(s)
shall not have occurred on or before December 31, 1999, or
such other date as may be agreed to by the parties; or
11.1.c. by either of Nations Funds or the Pacific Horizon Funds,
in writing without liability to the terminating party on
account of such termination (provided any such termination
shall not excuse the terminating party from any liability
arising out of a material default or breach of this
Agreement by such terminating party), if (i) the other
party shall fail to perform in any material respect its
agreements contained herein required to be performed prior
to the Closing Date, (ii) the other party materially
breaches or shall have materially breached any of its
representations, warranties or covenants contained herein,
or (iii) any other express condition precedent to the
obligations of the terminating party has not been met and
it reasonably appears that it will not or cannot be met.
11.2. Termination of this Agreement pursuant to paragraphs 11.1(a) or
(b) shall terminate all obligations of the parties hereunder with
respect to the Acquired Fund and Acquiring Fund affected by such
termination, or with respect to Nations Funds and Pacific Horizon
Funds, as the case may be, and there shall be no liability for
damages on the part of Nations Funds or Pacific Horizon Funds or
the Trustees or officers of Nations Funds or Directors or officers
of Pacific Horizon Funds, on account of termination pursuant to
paragraphs 11.1(a) or (b), except as provided in paragraphs
11.1(a) or (b); provided, however, that notwithstanding any
termination of this Agreement pursuant to paragraph 11.1, such
termination shall not relieve NationsBanc Advisors, Inc. of its
obligations pursuant to Section 9.2 hereof.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
Nations Funds, acting on behalf of each Acquiring Fund and the authorized
officers of Pacific Horizon Funds, acting on
I-26
<PAGE>
behalf of each Acquired Fund; provided, however, that following the meeting of
the shareholders of the Acquired Funds, no such amendment may have the effect of
changing the provisions for determining the number of shares of the
corresponding Acquiring Funds to be issued to the Acquired Fund Investors under
this Agreement to the detriment of such Acquired Fund Investors, or otherwise
materially and adversely affecting such Acquired Fund, without the Acquired Fund
obtaining the Pacific Horizon Fund(s)' shareholders further approval except that
nothing in this paragraph 12 shall be construed to prohibit any Acquiring Fund
and the corresponding Acquired Fund from amending this Agreement to change the
Closing Date or Applicable Valuation Date by mutual agreement.
At any time prior to or (to the fullest extent permitted by law)
after approval of this Agreement by the shareholders of Pacific Horizon Funds
either party may waive any breach by the other party or the failure to satisfy
any of the conditions to its obligations (such waiver to be in writing and
authorized by the Board of Trustees or Directors of the waiving party, or any
appropriate officer of either party, with or without the approval of such
party's shareholders).
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, certified mail or overnight express courier addressed to:
For Nations Funds, on behalf of itself and each Acquiring Fund:
Richard H. Blank, Jr.
Secretary
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
With copies to:
Robert M. Kurucza and
Marco E. Adelfio
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W., Suite 5500
Washington, D.C. 20006
For Pacific Horizon Funds, on behalf of itself and each Acquired
Fund:
c/o W. Bruce McConnel, III
Secretary
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107-3496
I-27
<PAGE>
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1. The article and paragraph headings contained herein are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All references herein
to articles, paragraphs, subparagraphs or Schedules shall be
construed as referring to articles, paragraphs or subparagraphs
hereof or Schedules hereto, respectively. Whenever the terms
hereto, hereunder, herein or hereof are used in this Agreement,
they shall be construed as referring to this entire Agreement,
rather than to any individual article, paragraph, subparagraph or
sentence.
14.2. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
14.3. This Agreement shall be governed by and construed in accordance
with the laws of the State of Maryland, without giving effect to
the conflicts of laws principles otherwise applicable therein.
14.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent
of the other parties. Nothing herein expressed or implied is
intended or shall be construed to confer upon or give any person,
firm or corporation, other than the parties hereto and their
respective successors and assigns, any rights or remedies under or
by reason of this Agreement.
14.5. It is expressly agreed that the obligations of Nations Funds
hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of Nations
Funds personally, but shall bind only the assets and the property
of the respective Acquiring Fund of Nations Funds, as provided in
its Agreement and Declaration of Trust. The execution and delivery
by such officers shall not be deemed to have been made by any of
them individually or to impose any liability on any of them
personally, but shall bind only the assets and the property of the
respective Acquiring Fund of Nations Funds as provided in its
Agreement and Declaration of Trust.
14.6. No Acquired Fund shall have any liability for the obligations of
any other Acquired Fund hereunder and no Acquiring Fund shall have
any liability for the obligation of any other Acquiring Fund
hereunder.
14.7. The names "Pacific Horizon Funds" and "Directors of Pacific
Horizon Funds" refer respectively to the corporation created and
the Directors, as directors but not individually or personally,
acting from time to time under Pacific Horizon Funds' Charter,
which is hereby referred to and a copy of which is on file at the
Department of Assessments and at the principal office of the
Corporation. The
I-28
<PAGE>
obligations of "Pacific Horizon Funds" entered into in the name or
on behalf thereof by any of the Directors, representatives or
agents are made not individually, but in such capacities, and are
not binding upon any of the Directors, shareholders, or
representatives of the Corporation personally, but bind only the
corporate property, and all persons dealing with any class of
shares of the Corporation must look solely to the corporate
property belonging to such class for the enforcement of any claims
against the Corporation.
14.8. Any announcement or similar publicity with respect to this
Agreement or the transactions contemplated herein shall be made
only at such time and in such manner as the parties shall agree;
provided that nothing herein shall prevent either party upon
notice to the other party from making such public announcements as
such party's counsel may consider advisable in order to satisfy
the party's legal and contractual obligations in such regard.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their authorized officers, and attested by their Secretaries
as of the day and year first written above.
NATIONS FUND TRUST, for itself and on
ATTEST: behalf of each Acquiring Fund
______________________________ By: _____________________________
Richard H. Blank, Jr. A. Max Walker
Secretary President and Chairman of the
Board of Trustees
PACIFIC HORIZON FUNDS, INC., for
ATTEST: itself and on behalf of each Acquired
Fund
_____________________________ By: _____________________________
W. Bruce McConnel, III Dr. Cornelius J. Pings
Secretary President and Chairman of the
Board of Directors
NATIONSBANC ADVISORS, INC., hereby
ATTEST: joins in this Agreement with respect
to, and agrees to be bound by Section
9.2 and 11.2 hereof
_____________________________ By: _____________________________
I-29
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
<S> <C>
Acquired Fund Acquiring Fund
- ------------------------------------------------- ------------------------------------------
Flexible Income Fund Nations Diversified Income Fund
A Shares (Class W Common Stock) Investor A Shares
K Shares (Class W-Special Series 5 Common Investor C Shares
Stock)
- ------------------------------------------------- ------------------------------------------
National Municipal Bond Fund Nations Municipal Income Fund
A Shares (Class Q Common Stock) Investor A Shares
- ------------------------------------------------- ------------------------------------------
Short-Term Government Fund Nations Short-Intermediate Government Fund
A Shares (Class U Common Stock) Investor A Shares
- ------------------------------------------------- ------------------------------------------
</TABLE>
A-1
<PAGE>
APPENDIX II
EXPENSE SUMMARIES OF THE PACIFIC HORIZON FUNDS
AND CORRESPONDING NATIONS FUNDS
-----------------------------------------------
The following tables (a) compare the fees and expenses as of September 30,
1998, for the respective Pacific Horizon Funds and their corresponding Nations
Funds and (b) show the estimated fees and expenses for the corresponding Nations
Funds on a PRO FORMA basis after giving effect to the reorganization. The
Nations Funds' management fees as of September 30, 1998, have been adjusted to
reflect a Board-approved reduction in the contractual fee rates under the
management contracts. The contractual management fees shown become effective
upon consummation of the Reorganization. The purpose of these tables is to
assist shareholders in understanding the various costs and expenses that
investors in these portfolios will bear as shareholders. The tables do not
reflect any charges that may be imposed by institutions directly on their
customer accounts in connection with investments in the portfolios. The fund
operating expense levels shown in this Proxy/Prospectus assume current net asset
levels; PRO FORMA expense levels shown should not be considered an actual
representation of future expenses or performance. Such PRO FORMA expense levels
project anticipated levels but may be greater or less than those shown.
II-1
<PAGE>
FLEXIBLE INCOME FUND-A SHARES
NATIONS DIVERSIFIED INCOME FUND-INVESTOR A SHARES
NATIONS
FLEXIBLE DIVERSIFIED COMBINED
INCOME INCOME FUND
FUND FUND PRO FORMA
---- ---- ---------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases
(as a percentage of offering
price) .......................... 4.75% 4.75% 4.75%
Maximum Sales Load Imposed on
Reinvested Dividends............. None None None
Maximum Deferred Sales Load(1)...... 1.00% 1.00% 1.00%
Redemption Fees .................... None None None
Exchange Fee ....................... None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees(2).................. 0.00% 0.40% 0.40%
12b-1/Shareholder Servicing Fees(3). 0.20% 0.25% 0.25%
Other Expenses(4)................... 0.30% 0.32% 0.32%
---- ---- ----
TOTAL FUND OPERATING EXPENSES:(5) 0.50% 0.97% 0.97%
==== ==== =====
- ----------------------------------------
(1) Certain A Shares and Investor A Shares that are purchased at net asset
value are subject to a Deferred Sales Load if redeemed within a
specified time after purchase.
(2) Management Fees (absent waivers) would be 0.45% for the Flexible Income
Fund and 0.50% for the Nations Diversified Income Fund and the Combined
Fund.
(3) 12b-1/Shareholder Servicing Fees (absent waivers) would be 0.25% for the
Flexible Income Fund.
(4) Other Expenses (absent waivers) would be 0.68% for the Flexible Income
Fund.
(5) Total Fund Operating Expenses (absent waivers) would be 1.38% for the
Flexible Income Fund and 1.07% for the Nations Diversified Income Fund
and the Combined Fund.
EXAMPLE:(6) You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at the end of each time
period:
NATIONS COMBINED
FLEXIBLE DIVERSIFIED FUND
INCOME FUND INCOME FUND PRO FORMA
----------- ----------- ---------
1 year ............................ $52 $57 $57
3 years ........................... 63 77 77
5 years ........................... 74 99 99
10 years .......................... 107 161 161
- --------------------
(6) THIS EXAMPLE SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL
DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE
AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME
IN THE YEARS SHOWN.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-2
<PAGE>
FLEXIBLE INCOME FUND-CLASS K SHARES*
NATIONS DIVERSIFIED INCOME FUND-INVESTOR C SHARES
NATIONS COMBINED
FLEXIBLE DIVERSIFIED FUND
INCOME FUND INCOME FUND PRO FORMA
----------------------- ---------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases None None None
(as a percentage of offering
price) ..........................
Maximum Sales Load Imposed on
Reinvested Dividends............. None None None
Maximum Deferred Sales Load ........ 1.00% 1.00% 1.00%
Redemption Fees .................... None None None
Exchange Fee ....................... None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees(1).................. 0.00% 0.40% 0.40%
12b-1/Shareholder Servicing Fees(2). 0.70% 1.00% 1.00%
Other Expenses(3)................... 0.30% 0.32% 0.32%
---- ---- ----
TOTAL FUND OPERATING EXPENSES:(4) 1.00% 1.72% 1.72%
==== ==== =====
- ----------------------------------------
(1) Management Fees (absent waivers) would be 0.45% for the Flexible Income
Fund and 0.50% for the Nations Diversified Income Fund and the Combined
Fund.
(2) 12b-1/Shareholder Servicing Fees (absent waivers) would be 1.00% for the
Flexible Income Fund.
(3) Other Expenses (absent waivers) would be 0.68% for the Flexible Income
Fund.
(4) Total Fund Operating Expenses (absent waivers) would be 2.13% for the
Flexible Income Fund and 1.82% for the Nations Diversified Income Fund
and the Combined Fund.
EXAMPLE:(5) You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at the end of each time
period:
NATIONS COMBINED
FLEXIBLE DIVERSIFIED FUND
INCOME FUND INCOME FUND PRO FORMA
----------- ----------- ---------
1 year ............................ $10 $27 $27
3 years ........................... 32 54 54
5 years ........................... 55 93 93
10 years .......................... 123 204 204
EXAMPLE:(5) You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) no redemption at the end of each
time period:
NATIONS COMBINED
FLEXIBLE DIVERSIFIED FUND
INCOME FUND INCOME FUND PRO FORMA
----------- ----------- ---------
1 year ............................ $10 $17 $17
3 years ........................... 32 54 54
5 years ........................... 55 93 93
10 years .......................... 123 204 204
- --------------------
(5) THESE EXAMPLES SHOULD NOT BE CONSIDERED A REPRESENTATION OF FUTURE
EXPENSES WHICH MAY BE MORE OR LESS THAN THOSE SHOWN. THE ASSUMED 5%
ANNUAL RETURN IS HYPOTHETICAL AND SHOULD NOT BE CONSIDERED A
REPRESENTATION OF PAST OR FUTURE ANNUAL RETURN; ACTUAL RETURN MAY BE
GREATER OR LESS THAN THE ASSUMED AMOUNT. THIS EXAMPLE ASSUMES THAT ALL
DIVIDENDS AND OTHER DISTRIBUTIONS ARE REINVESTED AND THAT THE PERCENTAGE
AMOUNTS LISTED UNDER TOTAL FUND OPERATING EXPENSES ABOVE REMAIN THE SAME
IN THE YEARS SHOWN.
II-3
<PAGE>
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
- ---------------------
* As of November 16, 1998 K Shares of Pacific Horizon's Flexible Income Fund
are no longer offered.
II-4
<PAGE>
NATIONAL MUNICIPAL BOND FUND-CLASS A SHARES
NATIONS MUNICIPAL INCOME FUND-INVESTOR A SHARES
NATIONAL NATIONS COMBINED
MUNICIPAL MUNICIPAL FUND
BOND FUND INCOME FUND PRO FORMA
--------- ----------- ---------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases 4.75% 4.75% 4.75%
(as a percentage of offering
price) ..........................
Maximum Sales Load Imposed on
Reinvested Dividends............. None None None
Maximum Deferred Sales Load(1)...... 1.00% 1.00% 1.00%
Redemption Fees .................... None None None
Exchange Fee ....................... None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees(2).................. 0.00% 0.28% 0.28%
12b-1 Fees/Shareholder Servicing(3). 0.00% 0.20% 0.20%
Other Expenses(4)................... 0.50% 0.32% 0.32%
---- ---- ----
TOTAL FUND OPERATING EXPENSES:(5) 0.50% 0.80% 0.80%
==== ==== ====
- ----------------------------------------
(1) Certain A Shares and Investor A Shares that are purchased at net asset
value are subject to a Deferred Sales Load if redeemed within a
specified time after purchase.
(2) Management Fees (absent waivers) would be 0.35% for the National
Municipal Bond Fund and 0.50% for Nations Municipal Income Fund and the
Combined Fund.
(3) 12b-1/Shareholder Servicing Fees (absent waivers) would be 0.25% for the
National Municipal Bond Fund, Nations Municipal Income Fund and the
Combined Fund.
(4) Other Expenses (absent waivers) would be 0.67% for the National
Municipal Bond Fund.
(5) Total Fund Operating Expenses (absent waivers) would be 1.27% for the
National Municipal Bond Fund and 1.07% for Nations Municipal Income Fund
and the Combined Fund.
EXAMPLE:(6) You would pay the following expenses on a $1,000 investment,
assuming (1) 5% gross annual return and (2) redemption at the end of each time
period:
NATIONAL NATIONS COMBINED
MUNICIPAL MUNICIPAL FUND
BOND FUND INCOME FUND PRO FORMA
--------- ----------- ---------
1 year ............................ $52 $55 $55
3 years ........................... 63 72 72
5 years ........................... 74 90 90
10 years .......................... 107 142 142
- --------------------
(6) This example should not be considered a representation of future
expenses which may be more or less than those shown. The assumed 5%
annual return is hypothetical and should not be considered a
representation of past or future annual return; actual return may be
greater or less than the assumed amount. This example assumes that all
dividends and other distributions are reinvested and that the percentage
amounts listed under total fund operating expenses above remain the same
in the years shown.
The purpose of the foregoing tables is to assist an investor in
understanding the various costs and expenses that an investor in the Funds will
bear directly or indirectly.
II-5
<PAGE>
SHORT-TERM GOVERNMENT FUND-CLASS A SHARES
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND-INVESTOR A SHARES
NATIONS
SHORT-
SHORT-TERM INTERMEDIATE COMBINED
GOVERNMENT GOVERNMENT FUND
FUND FUND PRO FORMA
---- ---- ---------
SHAREHOLDER TRANSACTION EXPENSES:
Maximum Sales Load Imposed on
Purchases 3.25% 3.25% 3.25%
(as a percentage of offering
price) ..........................
Maximum Sales Load Imposed on
Reinvested Dividends............. None None None
Maximum Deferred Sales Load1........ 1.00% 1.00% 1.00%
Redemption Fees .................... None None None
Exchange Fee ....................... None None None
ANNUAL FUND OPERATING EXPENSES:
(as a percentage of average net
assets)
Management Fees2.................... 0.00% 0.30% 0.30%
12b-1/Shareholder Servicing Fees3... 0.00% 0.20% 0.20%
Other Expenses4..................... 0.25% 0.30% 0.30%
---- ---- ----
TOTAL FUND OPERATING EXPENSES:5.. 0.25% 0.80% 0.80%
==== ==== =====
- ----------------------------------------
(1) Certain A Shares and Investor A Shares that are purchased at net asset
value are subject to a Deferred Sales Load if redeemed within a
specified time after purchase.
(2) Management Fees (absent waivers) would be 0.25% for the Short-Term
Government Fund.
(3) 12b-1/Shareholder Servicing Fees (absent waivers) would be 0.25% for the
Short-Term Government Fund and for Nations Short-Intermediate Government
Fund.
(4) Other Expenses (absent waivers) would be 0.52% for the Short-Term
Government Fund.
(5) Total Fund Operating Expenses (absent waivers) would be 1.02% for the
Short-Term Government Fund and 0.85% for Nations Short-Intermediate
Government Fund and the Combined Fund.
EXAMPLE:6 You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
NATIONS
SHORT-
SHORT-TERM INTERMEDIATE COMBINED
GOVERNMENT GOVERNMENT FUND
FUND FUND PRO FORMA
---- ---- ---------
1 year ............................ $35 $40 $40
3 years ........................... 40 57 57
5 years ........................... 46 76 76
10 years .......................... 63 128 128
- --------------------
(6) This example should not be considered a representation of future
expenses which may be more or less than those shown. The assumed 5%
annual return is hypothetical and should not be considered a
representation of past or future annual return; actual return may be
greater or less than the assumed amount. This example assumes that all
dividends and other distributions are reinvested and that the percentage
amounts listed under total fund operating expenses above remain the same
in the years shown.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly.
II-6
<PAGE>
APPENDIX III
Investment Objectives, Limitations and Certain Significant Investment
Policies of the Pacific Horizon Funds and Corresponding Nations Funds
This Appendix highlights the investment objectives and certain significant
similarities and differences among the investment limitations and investment
policies of the three Pacific Horizon Funds and the counterparts into which they
will be reorganized. The following is qualified in its entirety by the more
detailed information included in the prospectuses and statements of additional
information for the Pacific Horizon Funds and the corresponding Nations Funds
which are incorporated by reference in this Proxy/Prospectus.
I. PACIFIC HORIZON FLEXIBLE INCOME FUND/
NATIONS DIVERSIFIED INCOME FUND
A. Investment Objectives:
1. PACIFIC HORIZON FLEXIBLE INCOME FUND: to seek to provide investors
with a high current income consistent with reasonable investment risk.
2. NATIONS DIVERSIFIED INCOME FUND: to seek total return with an
emphasis on current income by investing in a diversified portfolio of fixed
income securities.
Comment: The Pacific Horizon Fund will pursue its objective by investing
primarily in a diversified portfolio of investment grade corporate debt
securities, although it may invest a portion of its assets in other types of
debt securities and money market instruments. Under normal circumstances the
Pacific Horizon Fund will invest at least 65% of total assets in investment
grade corporate debt obligations, such as bonds, debentures, notes and
convertible securities and U.S. Government Obligations, although it may also
invest up to 35% of total assets in lower quality, higher yielding securities,
and up to 35% of total assets in mortgage backed securities. The Fund also may
invest up to 20% of its assets in the debt obligations of foreign issuers,
including Yankee Bonds and Eurobonds.
Under normal market conditions, the Nations Fund will invest at least 65%
of its total assets in investment grade debt obligations. Unlike the Pacific
Horizon Fund, the Nations Fund has an expected average dollar-weighted maturity,
which is greater than five years. Similar to the Pacific Horizon Fund, the
Nations Fund also may invest up to 35% of the total value of its assets in lower
quality fixed income securities. The Nations Fund, however, intends to limit any
investment in mortgage-backed securities to 25%, as opposed to the 35% limit for
the Pacific Horizon Fund. The Nations Fund, like the Pacific Horizon Fund may
invest its assets in foreign securities, although the Nations Fund may invest up
to 25% of its assets in such securities while the Pacific Horizon Fund may
invest up to 20% of its net assets in such securities.
III-1
<PAGE>
II. PACIFIC HORIZON NATIONAL MUNICIPAL BOND FUND/
NATIONS MUNICIPAL INCOME FUND
A. Investment Objectives:
1. PACIFIC HORIZON NATIONAL MUNICIPAL BOND FUND: to seek to provide
investors with as high a level of current interest income free of regular
Federal income tax as is consistent with prudent investment management and
preservation of capital.
2. NATIONS MUNICIPAL INCOME FUND: to seek high current income exempt from
Federal income tax with the potential for principal fluctuation associated with
investments in long-term municipal securities. To the extent consistent with the
Fund's investment approach, the Fund is managed to seek capital appreciation and
minimize capital losses due to interest rate movements.
Comment: Under normal market conditions, the Pacific Horizon Fund will
invest at least 65% of its net assets in investment grade obligations issued by
or on behalf of states, territories, and possessions of the United States, the
District of Columbia, and their political subdivisions, the interest on which in
the opinion of bond counsel to the issuer is exempt from regular federal income
tax ("Municipal Obligations"). The Pacific Horizon Fund also may invest up to
35% of total assets in below investment grade debt, and may hold uninvested cash
reserves during temporary defensive periods or if suitable tax-exempt
obligations are unavailable. Investments may also be made in taxable obligations
if suitable tax-exempt obligations are unavailable or if acquisition of U.S.
Government or other taxable securities is deemed appropriate for temporary
defensive purposes.
The Nations Fund similarly invests in Municipal Obligations, although it
will invest at least 80% of its assets in investment grade Municipal
Obligations. Like the Pacific Horizon Fund, the Nations Fund also may invest in
short-term taxable (i.e. repurchase agreements and short-term debt securities)
and non-taxable obligations in such proportions as deemed appropriate during
temporary defensive periods. However, unlike the Pacific Horizon Fund, the
Nations Fund may not invest in below-investment grade securities. In addition,
while the Pacific Horizon Fund's average dollar weighted maturity will vary as
it is dependent upon the differing maturities of its investments, the Nations
Fund's average dollar weighted maturity is expected to be greater than seven
years and the Fund's duration is expected to be greater than six years.
III. PACIFIC HORIZON SHORT-TERM GOVERNMENT FUND/
NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND
A. Investment Objectives:
1. PACIFIC HORIZON SHORT-TERM GOVERNMENT FUND: to seek to provide
investors with a high level current income consistent with relative stability of
principal.
2. NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND: to seek high current income
consistent with modest fluctuation of principal.
III-2
<PAGE>
Comment: The Pacific Horizon Fund will pursue its investment objective by
investing at least 65% of total assets in U.S. Government Obligations. Under
normal circumstances it is expected that the average weighted maturity of the
Pacific Horizon Fund's investments will not exceed two years. Under normal
conditions the Pacific Horizon Fund's duration is expected to be in a range of
one to two years as reflected by a one-year U.S. treasury bill and a two-year
Treasury note respectively. However, there is no limit on the Fund's duration.
The Fund also may invest up to 35% of total asset in investment grade
non-government fixed income securities, mortgage backed securities, municipal
securities and cash equivalents, and up to 20% in foreign securities.
Like the Pacific Horizon Fund, the Nations Fund also typically invests in U.S.
Government Obligations, and also may invest in investment-grade non-government
fixed income securities, like corporate convertible and non-convertible debt
obligations, including bonds, notes, debentures, mortgage-backed securities,
real estate investment trusts and other asset-backed securities. However, unlike
the Pacific Horizon Fund, the corresponding Nations Fund typically will remain
fully invested in U.S. Government obligations and not be invested in corporate
bonds in any material percentage. Under normal weighted conditions it is
expected that the average dollar weighted maturity of the Nations Fund's
portfolio will be between three and five years and the duration will not exceed
five years; this is greater than the Pacific Horizon Fund's expected average
weighted maturity of two years and duration of between one and two years, and
may result in greater fluctuations of net asset value of the Nations Fund than
in the Pacific Horizon Fund.
III-3
<PAGE>
APPENDIX IV
SHAREHOLDER TRANSACTIONS AND SERVICES OF THE NATIONS FUNDS AND THE
CORRESPONDING PACIFIC HORIZON FUNDS
-----------------------------------------------
This Appendix compares the shareholder transactions and services of the
Pacific Horizon Funds and the corresponding Nations Funds. The following is
qualified in its entirety by the more detailed information included in the
prospectuses for the Pacific Horizon Funds and Nations Funds which are
incorporated by reference in this Proxy/Prospectus. Unless otherwise indicated,
terms used herein and not otherwise defined have the same meanings as are given
to them in such prospectuses. Please note that after the Reorganization, Nations
will continue to honor any standing instructions regarding the corresponding
Pacific Horizon Fund classes, under arrangements such as automatic withdrawal
plans, systematic investment plans or dividend reinvestment plans. In such
cases, standing instructions will be subject to the same or similar terms (e.g.,
minimum investments, account balances and minimum transaction amounts) currently
in effect, except that there may be exceptions with respect to the timing of
transactions which may need to be altered to comport with Nations procedures.
Shareholders will be notified of any such exceptions. After the Reorganization,
any instructions given with respect to any new account will be subject to the
terms of the applicable Nations Fund class.
I. PACIFIC HORIZON FUNDS - A SHARES
CORRESPONDING NATIONS FUNDS - INVESTOR A SHARES
A. Sales Charges and Exemptions
There is a maximum sales charge of 4.75%, 4.75% and 3.25% on A Shares of
the Pacific Horizon Flexible Income Fund, Pacific Horizon National Municipal
Bond Fund and Pacific Horizon Short-Term Government Fund, respectively. The
sales charge with respect to A Shares of the Pacific Horizon Funds may decrease
as the amount a shareholder invests increases. Also there is no sales charge on
purchases of A shares of $1 million or more. However, unless a Pacific Horizon
Fund shareholder participates in the Bank of America Daily Advantage(R) or
Advantage Plus(TM) programs, a contingent deferred sales charge will be imposed
as follows: 1% redemptions made within 1 year of purchases made on or after
November 16, 1998, declining to 0.50% in the second year, and eliminated
thereafter, or 1% on redemptions made within 18 months of purchases made before
November 16, 1998. An investor may be entitled to reduced sales charges on A
Shares through rights of accumulation, letters of intent, quantity discounts, or
through certain affiliations with BankAmerica Corporation.
IV-1
<PAGE>
There is a maximum sales charge of 4.75%, 4.75% and 3.25% on Investor A
Shares of Nations Diversified Income Fund, Nations Municipal Income Fund and
Nations Short-Intermediate Government Fund, respectively. Investor A Shares of
each of the Nations Funds that are purchased at net asset value have in addition
a 1.00% and 0.50% maximum deferred sales charge which is imposed only if shares
are redeemed within the first and second years of purchase, respectively. An
investor may be entitled to reduced sales charges on Investor A Shares through
rights of accumulation, letters of intent, quantity discounts, or through
certain affiliations with BankAmerica Corporation.
B. Purchase Policies
PACIFIC HORIZON FUNDS NATIONS FUNDS
--------------------- -------------
Minimum initial investment $500 for a regular $1,000 for a regular
account; $100 for account; $500 for IRA
investors purchasing investors; $250 for
through BofA or its non-working spousal
affiliates*; $500 for IRA IRAs; $250 for wrap fee
or SEP IRA investors; and other investment
$250 for non-working adviser accounts; $100
spousal IRAs; $2500 for for investors
SEP-IRAs with more than participating in the
one participant. Systematic Investment
Plan; no minimum
investment for 401(k)
plans, simplified
employee pension plans
("SEPs"), Savings
Incentives Method Plans
for Employees ("SIMPLE
IRAs") and salary
reduction-IRAs
("SAR-IRAs").**
Minimum subsequent $50 for regular accounts $100; $50 for subsequent
investments and $0 for investors investments made through
purchasing through BofA the Systematic
or its affiliates; for Investment Plan.
IRA or SEP IRA investors;
for non-working spousal
SEP-IRAs.
- ----------------------
* The minimum investment is $100 for purchases made through BofA or its
affiliates' trust and agency accounts or a Service Organization whose clients
have made aggregate minimum purchases of $1 million. The minimum investment is
$200 for BankAmerica cardholders with an appropriate award certificate.
**The assets of such plans must reach an asset value of $1,000 ($500 for SEPs,
SAR-SEPs Simple IRAs and SAR-IRAs) within one year of the account open date. If
the assets of such plans do not reach the minimum asset size within one year,
Nations reserves the right to redeem the Shares held by such plans on 60 days'
written notice.
IV-2
<PAGE>
Purchase methods Through Bank of America; Through Selling Agents,
Service Organizations; in Servicing Agents, a
person; by mail; by wire; Nations Fund Personal
by telephone; or Teletrade Investment Planner
Teletrade. account; by mail; by
wire; by telephone# and
a Systematic Investment
Plan.
C. Redemption Procedures
PACIFIC HORIZON FUNDS NATIONS FUNDS
--------------------- -------------
Through an authorized Yes Yes
selling or servicing agent
By mail Yes Yes
By telephone Yes Yes#
By wire Yes Yes
Check writing feature Yes+ No
By automatic withdrawal Yes (net asset value of Yes (net asset value of
plan account must be $5,000) account must be $10,000)@
Due to the high cost of maintaining fund accounts with small balances,
Nations Funds may redeem Investor A Shares and Pacific Horizon may redeem A
Shares, if the balance in a shareholder's account with the Fund drops below $500
as a result of redemptions, and the shareholder does not increase the balance to
at least $500 on 60 days' written notice. Share balances also may be redeemed at
the direction of an agent pursuant to arrangements between the agent and its
customer. Nations and Pacific Horizon also may redeem shares of the Nations
Funds and Pacific Horizon Funds involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.
- ---------------------
# Telephone transactions for the Nations Funds, consisting of purchases,
exchanges and redemptions, are limited to $50,000.
# Telephone transactions for the Nations Funds, consisting of purchases,
exchanges and redemptions, are limited to $50,000.
+ Transaction minimum: $500.
@ Shares of Nations Funds redeemed under the automatic withdrawal plan will
not be subject to a contingent deferred sales charge, provided that the
shares so redeemed do not exceed, on an annual basis, 12% of the net asset
value of the respective shares in the account.
IV-3
<PAGE>
D. Additional Shareholder Services
PACIFIC HORIZON FUNDS NATIONS FUNDS
Systematic/automatic Yes ($50 or more) Yes (in any amount from
investment plan $50 to $100,000).
E. Share Exchanges
PACIFIC HORIZON FUNDS NATIONS FUNDS
By mail Yes Yes
By telephone Yes Yes
Minimum The A Shares exchanged The Investor A Shares
must have a current value exchanged must have a
of at least $500. current value of at
least $1,000
Automatic exchange feature No Yes. A shareholder may
automatically exchange
at least $25 on a
monthly or quarterly
basis.
Investor A Shares of a Nations Fund may be exchanged for Investor A Shares
of any other Nations Fund (except Nations index funds). Exchanges are subject to
the minimum investment requirements imposed.
A Shares of a Pacific Horizon Fund may be exchanged for A Shares of any
other Pacific Horizon Fund or Time Horizon Fund. Exchanges are subject to the
minimum investment requirements imposed.
II. PACIFIC HORIZON FUND - K SHARES
CORRESPONDING NATIONS FUND - INVESTOR C SHARES
A. Sales Charges and Exemptions
Pacific Horizon's K Shares and Nations Funds' Investor C Shares are
offered at net asset value with no front-end sales charges, although a 1.00%
deferred sales charge will apply to all redemptions of Nations Funds' Investor C
Shares made within one year of purchase.
IV-4
<PAGE>
B. Purchase Policies
PACIFIC HORIZON FUNDS NATIONS FUNDS
Minimum initial investment $500 for a regular $1,000 for a regular
account; $100 for account; $500 for IRA
investors purchasing investors; $250 for
through BofA or its non-working spousal
affiliates*; $500 for IRA IRAs; $100 for investors
or SEP IRA investors; participating in the
$250 for non-working Systematic Investment
spousal IRAs; $2500 for Plan; no minimum
SEP-IRAs with more than investment for 401(k)
one participant. plans, simplified
employee pension plans
("SEPs"), Savings
Incentives Method Plans
for Employees ("SIMPLE
IRAs") and salary
reduction-IRAs
("SAR-IRAs").**
Minimum subsequent $50 for regular accounts $100; $50 for subsequent
investments and $0 for investors investments made through
purchasing through BofA the Systematic
or its affiliates; for Investment Plan.
IRA or SEP IRA investors;
for non-working spousal
IRAs; or for SEP-IRAs.
Purchase methods Through Bank of America; Through Selling Agents,
Service Organizations; in Servicing Agents, a
person; by mail; by wire; Nations Fund Personal
by telephone; or Investment Planner
Teletrade. account; by mail; by
wire; by telephone# and
a Systematic Investment
Plan.
- ----------
* The minimum investment is $100 for purchases made through BofA or its
affiliates' trust and agency accounts or a Service Organization whose clients
have made aggregate minimum purchases of $1 million. The minimum investment is
$200 for BankAmerica cardholders with an appropriate award certificate.
**The assets of such plans must reach an asset value of $1,000 ($500 for SEPs,
SAR-SEPs and SAR-IRAs) within one year of the account open date. If the assets
of such plans do not reach the minimum asset size within one year, Nations
reserves the right to redeem the Shares held by such plans on 60 days' written
notice.
# Telephone transactions for the Nations Funds, consisting of purchases,
exchanges and redemptions, are limited to $50,000.
IV-5
<PAGE>
[zz]
C. Redemption Procedures
PACIFIC HORIZON FUNDS NATIONS FUNDS
Through an authorized Yes Yes
selling or servicing agent
By mail Yes Yes
By telephone Yes Yes#
By wire Yes Yes
Check writing feature Yes+ No
By automatic withdrawal Yes (net asset value of Yes (net asset value of
plan account must be $5,000) account must be $10,000)@
Due to the high cost of maintaining fund accounts with small balances,
Nations Funds may redeem Investor C Shares and Pacific Horizon may redeem K
Shares, if the balance in a shareholder's account with the Fund drops below $500
as a result of redemptions, and the shareholder does not increase the balance to
at least $500 on 60 days' written notice. Share balances also may be redeemed at
the direction of an agent pursuant to arrangements between the agent and its
customer. Nations and Pacific Horizon also may redeem shares of the Nations
Funds and Pacific Horizon Funds involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.
D. Additional Shareholder Services
PACIFIC HORIZON FUNDS NATIONS FUNDS
Systematic/automatic Yes ($50 or more) Yes (in any amount from
investment plan $50 to $100,000).
- ----------
# Telephone transactions for the Nations Funds, consisting of purchases,
exchanges and redemptions, are limited to $50,000.
+ Transaction minimum: $500.
@ Shares of Nations Funds redeemed under the automatic withdrawal plan will
not be subject to a contingent deferred sales charge, provided that the
shares so redeemed do not exceed, on an annual basis, 12% of the net asset
value of the respective shares in the account.
IV-6
<PAGE>
E. Share Exchanges
PACIFIC HORIZON FUNDS NATIONS FUNDS
By mail Yes Yes
By telephone Yes Yes
Minimum The K Shares exchanged The Investor C Shares
must have a current value exchanged must have a
of at least $500. current value of at
least $1,000
Automatic exchange feature No Yes. A shareholder may
automatically exchange
at least $25 on a
monthly or quarterly
basis.
Investor C Shares of a Nations Fund may be exchanged for Investor C Shares
of any other Nations Fund non-money market fund or Daily Shares of a money
market fund. Exchanges are subject to the minimum investment requirements
imposed.
K Shares of a Pacific Horizon Fund may be exchanged for K Shares of any
other Pacific Horizon Fund or Time Horizon Fund. Exchanges are subject to the
minimum investment requirements imposed.
III. DIVIDENDS FOR EACH OF THE PACIFIC HORIZON FUNDS AND NATIONS FUNDS ARE
DECLARED DAILY AND PAID MONTHLY.
IV-7
<PAGE>
APPENDIX V
MANAGEMENT'S DISCUSSION OF NATIONS FUND PERFORMANCE
-----------------------------------------------
Nations
Diversified Income
Fund Portfolio Manager Commentary*
IN THE FOLLOWING INTERVIEW, MR. AHNRUD SHARES HIS VIEWS
ON NATIONS DIVERSIFIED INCOME FUND'S PERFORMANCE FOR THE
12-MONTH PERIOD ENDED MARCH 31, 1998 AND HIS CURRENT
OUTLOOK.
<TABLE>
<S> <C>
PORTFOLIO MANAGER PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
Mark S. Ahnrud, CFA, is Senior Our investment philosophy is biased toward total return,
Portfolio Manager of Nations recognizing that the combination of current income and price
Diversified Income Fund and a movement is ultimately more important than current income
Director of Fixed Income alone. We use a combination of investment
Management for TradeStreet strategies -- duration management (management of interest
Investment Associates, Inc., rate risk), sector rotation, security selection and yield
the investment sub-adviser to curve positioning -- to add value to the Fund over time. By
the Fund. using multiple strategies, we avoid making "big bets" and
INVESTMENT OBJECTIVE look for each strategy to add the potential for incremental
The Fund seeks total return income without any single strategy dominating returns. The
with an emphasis on current Fund invests in government securities and corporate bonds,
income by investing in a including high-yield corporate bonds. High-yield corporate
diversified portfolio of fixed bonds and government securities are not highly correlated to
income securities. one another; they react differently to changes in interest
PERFORMANCE REVIEW rates and the economy. This divergence in performance is the
For the 12-month period ended key to this part of the Fund's strategy, as the Fund
March 31, 1998, Nations balances credit risk and interest rate risk by allocating
Diversified Income Fund Primary assets to the different sectors as market conditions
A Shares provided a total warrant.
return of 11.07%.** WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
REPORTING PERIOD?
Early in the period, we were concerned about the strength of
the domestic economy and believed that the U.S. Federal
Reserve Board (the Fed) would be forced to raise interest
rates to slow growth. The 30-year U.S. Treasury bond began
the period yielding just over 7%, and the Fund was
positioned defensively (investing in bonds with relatively
short maturities in preparation for higher interest rates),
as we believed that yields would rise later in the year.
This economic strength was the result of a 30-year low in
unemployment rates, rising incomes, high levels of consumer
confidence and a rapidly rising equity market. But the
environment changed in the fiscal third quarter, as
continued low inflation and a rapidly diminishing federal
budget deficit combined with the anti-growth,
disinflationary shock waves emanating from Asia to push bond
yields down. As fear of the Fed raising interest rates
waned, the "flight to quality" trade drove prices higher.
The period ended with the 30-year U.S. Treasury yielding
just under 6%.
*The outlook of this Fund's portfolio manager may differ
from that presented for other Nations Funds mutual funds.
**The performance shown includes the effects of fee waivers
by the investment adviser, which has the effect of
increasing total return.
Source for all statistical data -- TradeStreet Investment
Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
V-1
<PAGE>
Nations
Diversified Income
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?
At the beginning of the period, we maintained a defensive
posture in the portfolio because we were concerned that
strong economic growth and the tight labor market would lead
the Fed to raise interest rates due to concerns about rising
inflation.
The Fund was underweighted in the corporate bond sector for
much of the period, as we believed that this sector was
overvalued relative to U.S. Treasury securities. We didn't
believe that the incremental yield advantage from owning
corporate bonds justified the credit risk assumed in owning
this sector. This environment of low incremental yield
pick-up for owning corporate bonds over U.S. Treasuries
caused the Fund to maintain a relatively low weighting in
the high-yield corporate sector as well.
The Fund's exposure to the mortgage-backed sector was high
during the early part of the period, but as interest rates
began to decline during the fiscal third quarter, we reduced
the Fund's exposure based on increasing prepayment fears and
our outlook that interest rates would continue to decline.
With rates back near their 1993 lows, we expected a
significant upturn in refinancing activity in early 1998. We
had been willing to take on prepayment risk in the
trading-range environment we saw early in the period, but we
believed that as the yield on the 10-year U.S. Treasury bond
declined below 6.1%, the risks of continuing to hold on to
this sector were too great.
OUR DECISION TO UNDERWEIGHT THE WHAT INVESTMENT DECISIONS CONTRIBUTED TO THE FUND'S STRONG
FUND'S CORPORATE BOND EXPOSURE PERFORMANCE?***
PROVED SUCCESSFUL. Our decision to underweight the Fund's corporate bond
exposure proved successful. As the Asian crisis played out
during the fiscal third quarter, the resultant "flight to
quality" caused corporate bonds to lag the performance of
U.S. Treasury bonds. This caused the worst period of
relative corporate bond performance in the last 10 years.
We were then able to use this as an opportunity to increase
the Fund's exposure to the corporate bond sector, as we
didn't believe that the end of the credit cycle was in
sight. We raised both the Fund's investment-grade and
high-yield bond holdings, increasing the portfolio's income.
We emphasized the health care, cable/media and financial
services sectors in the portfolio, which performed well
during the period. Specifically, companies like Viacom Inc.,
News Corp. Ltd., HEALTHSOUTH Corp. and Morgan Stanley Group
experienced solid performance.
***Portfolio holdings were current as of March 31, 1998, are
subject to change and may not be representative of current
holdings.
</TABLE>
V-2
<PAGE>
Nations
Diversif ied Income
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
WHAT INVESTMENT DECISIONS HINDERED OVERALL PORTFOLIO
PERFORMANCE DURING THE PERIOD?
Our defensive duration posture was the greatest hindrance to
performance during the period. While we extended duration
and had a much better second half of the year as interest
rates declined, it was not enough to recover the ground lost
during the fiscal second quarter.
WHAT ECONOMIC DEVELOPMENTS DO YOU ANTICIPATE DURING THE REST
OF 1998?
Later in 1998, either the fundamentally sound U.S. economy
will shrug off Asia's troubles, leading to a Fed tightening
of interest rates, or Asia will have a meaningful impact on
U.S. growth, further reducing inflation and raising the
probability that the Fed will ease interest rates. We are
positioned for the latter scenario, although our bullish
bias is tempered by the market's current overbought
condition, extreme bullish sentiment and the need for
further confirmation of a slowdown in the domestic economy.
HOW IS THE FUND POSITIONED TO TAKE ADVANTAGE OF THESE
ANTICIPATED DEVELOPMENTS?
We continue to favor the corporate bond sector over the
mortgage sector in this interest-rate environment. We are
more comfortable with the Fund owning corporate bonds, as we
are not forecasting a recession and believe that overall
corporate credit quality will continue to improve. We expect
to continue to increase the Fund's exposure to this sector
in the months ahead. The mortgage sector continues to look
unattractive to us, as the low interest-rate environment
will continue to result in significant prepayment activity.
</TABLE>
V-3
<PAGE>
Nations
Diversified Income
Fund
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/98)
[PIE CHART]
<TABLE>
<S> <C>
1.0% Foreign Bonds and Notes
2.3% Other Assets and Liabilities (Net)
2.7% Municipal Bonds
13.2% Mortgage-Backed Securities
35.1% U.S. Treasury Bonds
45.7% Corporate Bonds and Notes
</TABLE>
<TABLE>
<C> <S> <C>
TOP TEN HOLDINGS (AS A % OF NET ASSETS AS
OF 3/31/98)
-----------------------------------------
1 U.S. Treasury Bonds 35.1%
-----------------------------------------
2 Federal National Mortgage
Association (FNMA)
Certificates 8.6%
-----------------------------------------
3 Government National Mortgage
Association (GNMA)
Certificates 4.6%
-----------------------------------------
4 GTE Corporation 7.900%
02/01/27 1.8%
-----------------------------------------
5 Nebraska Investment Finance
Authority, Taxable-Series B,
6.550% 09/01/07 1.7%
-----------------------------------------
6 Westpoint Stevens Inc., Sr.
Notes, 8.750% 12/15/01 1.6%
-----------------------------------------
7 PDV America Inc., Gtd. Sr.
Notes, 7.875% 08/01/03 1.6%
-----------------------------------------
8 Morgan Stanley Finance PLC.
Gtd., Sub. Deb.,
8.030% 02/28/17 1.5%
-----------------------------------------
9 Time Warner Entertainment
8.375% 07/15/33 1.5%
-----------------------------------------
10 Rogers Cablesystems Limited,
Deb., 10.000% 12/01/07 1.5%
-----------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT AS OF
MARCH 31, 1998, ARE SUBJECT TO CHANGE
AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS.
V-4
<PAGE>
Nations
Diversif ied Income
Fund Performance
GROWTH OF $10,000 INVESTMENT
Primary A Shares (as of 3/31/98)
<TABLE>
<CAPTION>
Measurement Period Lehman Government Corporate Bond
(Fiscal Year Covered) Diversified Income $15,737 Index $14,886
Assumes the reinvestment of all distributions.
<S> <C> <C>
Oct. 30 1992 10000 10000
1992 10225 10163
10894 10636
11318 10955
11735 11317
1993 11828 11284
11512 10931
11344 10795
11442 10848
1994 11530 10888
12136 11431
13045 12172
13281 12405
1995 13940 12983
13497 12680
13543 12739
13812 12964
1996 14284 13360
14168 13245
14681 13727
15066 14208
1997 15511 14664
Mar. 31 1998 15737 14886
</TABLE>
Investor B Shares (as of 3/31/98)*
<TABLE>
<CAPTION>
Measurement Period Lehman Government Corporate Bond
(Fiscal Year Covered) Diversified Income $13,450 Index $13,897
Assumes the reinvestment of all distributions.
<S> <C> <C>
June 7 1993 10000 10000
10178 10227
10533 10565
1993 10597 10534
10295 10205
10125 10078
10194 10128
1994 10253 10165
10773 10671
11558 11364
11745 11581
1995 12305 12121
11891 11837
11910 11893
12123 12103
1996 12513 12473
12389 12365
12813 12815
13122 13264
1997 13481 13690
Mar. 31 1998 13450 13897
</TABLE>
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
Primary A Shares
Since Inception
(10/30/92 through 3/31/98) 8.73%
The charts to the left show the growth
in value of a hypothetical $10,000
investment in Primary A and Investor B
Shares of Nations Diversified Income
Fund from the date each class of shares
was first offered. Figures for the
Lehman Government Corporate Bond Index,
an unmanaged index comprised of U.S.
Government, U.S. Treasury and agency
securities, corporate and yankee bonds,
include reinvestment of dividends. It
is unavailable for investment. The
performance shown reflects the
performance of Primary A and Investor B
Shares. The performance of Primary B,
Investor A and Investor C Shares may
vary based on the differences in sales
loads and fees paid by the shareholders
investing in each class.
AVERAGE ANNUAL TOTAL RETURN
Investor B Shares
Since Inception NAV CDSC* (6/7/93
through
3/31/98) 6.68% 6.35%
</TABLE>
TOTAL RETURN (AS OF 3/31/98)
<TABLE>
<CAPTION>
Primary A Primary B Investor A Investor B Investor C
<S> <C> <C> <C> <C> <C>
Inception Date 10/30/92 6/28/96 11/25/92 6/7/93 11/9/92
NAV CDSC*
- --------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 11.07% 10.29% 10.80% 10.18% 5.18% 10.27%
- --------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
3 Years 9.05% NA 8.77% 8.21% 7.35% 8.35%
5 Years 7.63% NA 7.41% NA NA 6.92%
Since Inception 8.73% 8.26% 8.46% 6.68% 6.35% 8.10%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
The performance shown includes the effects of fee waivers by the investment
adviser, which has the effect of increasing total return.
*Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
Figures at net asset value (NAV) do not reflect any sales changes.
V-5
<PAGE>
Nations
Municipal Income
Fund Municipal Fixed Income
Management Team Commentary*
EFFECTIVE MARCH 1998, THE MUNICIPAL FIXED INCOME
MANAGEMENT TEAM OF TRADESTREET INVESTMENT ASSOCIATES,
INC. ASSUMED THE DAILY PORTFOLIO MANAGEMENT
RESPONSIBILITIES OF THE FUND. IN THE FOLLOWING
INTERVIEW, THE TEAM SHARES ITS VIEWS ON NATIONS
MUNICIPAL INCOME FUND'S PERFORMANCE FOR THE 12-MONTH
PERIOD ENDED MARCH 31, 1998 AND THEIR CURRENT OUTLOOK.
<TABLE>
<S> <C>
PORTFOLIO MANAGER BRIEFLY DESCRIBE YOUR OVERALL INVESTMENT PHILOSOPHY AND THE
The Fund is managed by the INVESTMENT APPROACH OF THE FUND.
Municipal Fixed Income The Fund balances its investments between high quality,
Management Team of TradeStreet investment-grade issues through which it seeks to reduce
Investment Associates, Inc., credit and liquidity risk, and lower quality,
investment sub-adviser to the investment-grade issues, for their additional yield
Fund. During the reporting potential. By maintaining a well-diversified portfolio, we
period, Michele M. Poirier was aim to limit the Fund's exposure to any single credit or
the Fund's portfolio manager. market sector. In addition, we use a combination of
INVESTMENT OBJECTIVE investment strategies, including duration management
The Fund seeks high current (managing the Fund's sensitivity to interest rates), market
income exempt from federal sector selection and individual credit reviews. We also seek
income tax consistent with the to limit the distribution of capital gains when appropriate.
potential for principal As a long-term portfolio, the Fund maintains an average
fluctuation associated with dollar-weighted maturity of greater than ten years and a
investments in long-term duration between seven and one-half and nine and one-half
municipal securities. The Fund years.
invests in investment-grade,
long-term municipal securities. HOW DID THE FUND PERFORM DURING THE PERIOD?
PERFORMANCE REVIEW With a total return of 11.12%, the Fund (Primary A Shares)
For the 12-month period ended outperformed its peer group, the Lipper General Municipal
March 31, 1998, Nations Debt Funds Universe,*** which returned 10.61% for the
Municipal Income Fund Primary A 12-month period ended March 31, 1998. The Fund benefited
Shares provided a total return from an overweighting in the lower end of the investment-
of 11.12%.** grade credit spectrum (bonds rated "A" and "Baa/BBB"), which
gave the Fund an income advantage. These positions also
enjoyed higher total returns as the gap between yields of
lower- and higher-rated credits narrowed during the period.
(Prices of lower-quality securities rise as their yields
fall to levels that are closer to those of higher-quality
securities.)
*The outlook for this Fund may differ from that presented
for other Nations Funds mutual funds.
**The performance shown includes the effect of fee waivers
by the investment adviser and the administrator, which have
the effect of increasing total return.
***Lipper Analytical Services, Inc., an independent mutual
fund performance monitor. Funds included in the Lipper
General Municipal Debt Funds Universe invest at least 65% of
their assets in municipal debt issues in the top four credit
ratings.
Source for all statistical data -- TradeStreet Investment
Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
V-6
<PAGE>
Nations
Municipal Income
Fund Municipal Fixed Income
Management Team Commentary continued...
<TABLE>
<S> <C>
THE FUND OUTPERFORMED ITS PEER WHAT IS YOUR OUTLOOK FOR THE MUNICIPAL BOND MARKET IN THE
GROUP FOR THE 12-MONTH PERIOD COMING YEAR?
ENDED MARCH 31, 1998. Looking ahead, municipal bond market participants will have
to keep one eye focused on Washington, D.C., where proposed
federal legislation addressing electric utility deregulation
and the reimbursement of not-for-profit health care
providers is being considered. We note that an uncertain
political climate for many municipal bond market sectors
such as these has become commonplace in recent
years -- presenting both a challenge and an opportunity for
astute investors seeking to capitalize on undervalued
securities.
</TABLE>
V-7
<PAGE>
Nations
Municipal Income
Fund
PORTFOLIO BREAKDOWN (AS A % OF TOTAL INVESTMENTS AS OF 3/31/98)
[PIE CHART]
<TABLE>
<S> <C> <C>
3.24% Water TOP TEN HOLDINGS
(AS A % OF NET ASSETS AS OF 3/31/98)
3.58% Education ----------------------------------------------
1 Polk County, Florida, Industrial 2.6%
3.66% Power/Utilities Revenue Development Authority, Solid Waste
Disposal Facilities Revenue, (Tampa
7.55% Hospital Electric Company Project), 5.850%
12/01/30
11.25% Other ----------------------------------------------
2 North Central Texas, Health 2.0%
35.22% Insured Facilities Development Corporation,
Hospital Revenue, (Presbyterian
15.45% General Obligation Healthcare), Series A, 5.000%
05/15/17
20.05% Pollution Control ----------------------------------------------
Revenue/Industrial 3 Murray City, Utah, Hospital Revenue 1.6%
Development Revenue Refunding, (IHC Health Services
Inc.), (MBIA Insured), 5.000%
PORTFOLIO HOLDINGS WERE CURRENT AS 05/15/22
OF MARCH 31, 1998, ARE SUBJECT TO ----------------------------------------------
CHANGE AND MAY NOT BE REPRESENTATIVE 4 Massachusetts State Port Authority, 1.6%
OF CURRENT HOLDINGS. Revenue Bonds, Special Facilities,
(Bosfuel Project), (MBIA Insured),
5.750% 07/01/39
----------------------------------------------
5 Courtland, Alabama, Industrial 1.5%
Development Board, Solid Waste
Disposal Revenue, 5.750% 11/01/27
----------------------------------------------
6 Pierce County, Washington, Economic 1.5%
Development Corporation, Solid
Waste Revenue, (Occidental
Petroleum), 5.800% 09/01/29
----------------------------------------------
7 Anchorage, Alaska, Electric 1.5%
Utilities Revenue Refunding, Senior
Lien, (MBIA Insured), Series B,
5.500% 02/01/26
----------------------------------------------
8 North Carolina State, Highway- 1.2%
Series A, 4.500% 05/01/07
----------------------------------------------
9 Washington State, GO, Refunding, 1.2%
Series A, 6.750% 02/01/15
----------------------------------------------
10 Adams County, Mississippi, 1.1%
Pollution Control, Revenue,
Refunded, (International Paper
Company), Series A, 5.500% 12/01/05
----------------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
V-8
<PAGE>
Nations
Municipal Income
Fund Performance
GROWTH OF $10,000 INVESTMENT
Primary A Shares (as of 3/31/98) [Line Graph]
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period Lehman Municipal Bond
(Fiscal Year Covered) Municipal Income $17,482 Index $17,369
<S> <C> <C>
Feb. 1 1991 10000 10000
10081 10090
10229 10306
10657 10707
1991 11084 11065
11050 11099
11500 11519
11766 11826
1992 12006 12041
12484 12488
12996 12897
13503 13333
1993 13629 13520
12729 12778
12841 12918
12855 13007
1994 12615 12821
13625 13727
13975 14058
14395 14462
1995 15075 15059
14839 14878
14986 14992
15391 15335
1996 15785 15726
15733 15688
16292 16229
16809 16718
1997 17292 17172
Mar. 31 1998 17482 17369
</TABLE>
Investor B Shares (as of 3/31/98)* [Line Graph]
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period Municipal Income Lehman Municipal Bond
(Fiscal Year Covered) $12,965 Index $13,693
<S> <C> <C>
June 7 1993 10000 10000
10146 10300
10522 10511
1993 10600 10658
9881 10073
9949 10184
9941 10254
1994 9737 10108
10498 10822
10747 11083
11050 11401
1995 11551 11872
11348 11729
11440 11819
11727 12090
1996 12005 12398
11943 12368
12344 12794
12712 13180
1997 13049 13537
Mar. 31 1998 12965 13693
</TABLE>
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
Primary A Shares
SINCE INCEPTION
(2/1/91 through 3/31/98) 8.11%
The charts to the left show the growth
in value of a hypothetical $10,000
investment in Primary A and Investor B
Shares of Nations Municipal Income Fund
from the date each class of shares was
first offered. The Lehman Municipal
Bond Index is a broad-based, unmanaged,
total return index composed of 8,000
investment-grade, long-term maturity
bonds. It is unavailable for
investment. The performance shown
reflects the performance of Primary A
and Investor B Shares. The performance
of Investor A and Investor C Shares may
vary based on the differences in sales
loads and fees paid by the shareholders
investing in each class.
AVERAGE ANNUAL TOTAL RETURN
Investor B Shares
SINCE
INCEPTION NAV CDSC*
(6/7/93 through
3/31/98) 5.88% 5.54%
[CHART LEGEND]
</TABLE>
TOTAL RETURN (AS OF 3/31/98)
<TABLE>
<CAPTION>
PRIMARY A INVESTOR A INVESTOR B INVESTOR C
<S> <C> <C> <C> <C> <C>
Inception Date 2/1/91 2/1/91 6/7/93 6/17/92
NAV CDSC*
- -------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 11.12% 10.89% 10.23% 5.23% 10.37%
- -------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
3 Years 8.66% 8.45% 7.84% 6.97% 7.99%
5 Years 6.97% 6.74% NA NA 6.23%
Since Inception 8.11% 7.95% 5.88% 5.54% 6.92%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
The performance shown includes the effect of fee waivers by the investment
adviser and the administrator, which have the effect of increasing total return.
*Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
Figures at net asset value (NAV) do not reflect any sales charges.
V-9
<PAGE>
Nations
Short-Intermediate Government
Fund Portfolio Manager Commentary*
IN THE FOLLOWING INTERVIEW, MR. SWAIM SHARES HIS VIEWS
ON NATIONS SHORT-INTERMEDIATE GOVERNMENT FUND'S
PERFORMANCE FOR THE 12-MONTH PERIOD ENDED MARCH 31, 1998
AND HIS CURRENT OUTLOOK.
<TABLE>
<S> <C>
PORTFOLIO MANAGER PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
John S. Swaim is The Fund offers shareholders a low-volatility,
Senior Portfolio Manager high-credit-quality approach to investing in the bond market
of Nations Short-Intermediate by focusing primarily on the relative attractiveness of U.S.
Government Fund and Senior Treasury securities and mortgage-backed securities.
Product Manager, Fixed Income
Management for TradeStreet WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
Investment Associates, Inc., REPORTING PERIOD?
the investment sub-adviser During the period, economic growth was well above the most
to the Fund. optimistic expectations of long-term sustainable levels,
INVESTMENT OBJECTIVE productivity rates were high and unemployment rates were at
The Fund seeks high current 30-year lows. In addition, inflation continued to fall and
income consistent with modest budget deficits declined, providing a favorable backdrop for
fluctuation financial assets.
of principal. It invests
primarily in securities issued In this economic environment, the U.S. Federal Reserve Board
or guaranteed (the Fed) opted to keep the Federal Funds rate steady at
by the U.S. Government, 5.5%. The benchmark 30-year U.S. Treasury bond started the
its agencies or period at just over 7%, traded in a fairly tight range until
instrumentalities. August 1997 and then declined in reaction to the Asian
PERFORMANCE REVIEW financial crisis, ending the period at just under 6%. (Bond
For the 12-month period ended yields typically move in the opposite direction of bond
March 31, 1998, Nations Short- prices, so that when yields go down, prices generally go
Intermediate Government Fund up.)
Primary A Shares provided a
total return of 9.11%.** Early in the reporting period, the economy experienced
impressive overall growth, a balanced budget and no
inflationary pressures. However, in August 1997, the market
retreated somewhat as the unemployment rate continued to
decline, consumer confidence remained high and the U.S.
dollar declined from its then year-to-date highs. But with
favorable inflation reports, the market accurately
anticipated that the Fed would not act to raise interest
rates. Accordingly, bond yields declined slightly in
September 1997.
*The outlook of this Fund's portfolio manager may differ
from that presented for other Nations Funds mutual funds.
**The performance shown includes the effects of fee waivers
by the investment adviser, which has the effect of
increasing total return.
Source for all statistical data -- TradeStreet Investment
Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
V-10
<PAGE>
Nations
Short-Intermediate Government
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
In the final quarter of 1997, Asian stock markets plunged to
levels not seen in several years, creating fears of a
financial crisis that affected the world's markets. As
investor confidence deteriorated, the U.S. bond market
benefited from a massive "flight to quality," with investors
selling off foreign securities and buying U.S. bonds. Within
the bond market, investors fled from corporate,
mortgage-backed and asset-backed securities into U.S.
Treasuries. As a result, any fund with primary holdings in
U.S. Treasuries was well positioned.
In early 1998, Fed Chairman Alan Greenspan discussed the
possibility of disinflationary shocks resulting from the
problems in Asia. This caused the bond market yield curve to
steepen dramatically, reducing short-term bond yields
relative to long-term bond yields, which also declined. In
February 1998, as the strength of the U.S. economy became a
concern, the market experienced a sell-off and investors
again entertained the possibility
that the Fed might raise interest rates to get ahead of
inflation and
influence growth.
IN JANUARY 1998, SHORT-TERM BOND PERFORMANCE FELL WHEN THE
YIELD CURVE STEEPENED. HOW WAS THE FUND AFFECTED BY THIS?
Prior to January 1998, the bond yield curve had been
flattening, indicating that investors who took on a
relatively low level of risk by investing in short-term
bonds earned income closer to that of more volatile 30-year
U.S. Treasury securities. The Fund benefited from this
flattening as it focused on very short-term and long-term
maturity securities. However, in January 1998, the yield
curve steepened sharply, negatively affecting the Fund's
performance as securities with intermediate maturities
outperformed.
WHAT INVESTMENT DECISIONS CONTRIBUTED TO THE FUND'S
PERFORMANCE?***
The Fund invested over half of its assets in U.S. Treasury
securities. While these are viewed by many as a handicap to
performance because of their relative lack of income, the
Fund takes advantage of the high liquidity they provide. The
U.S. Treasury market is the most liquid fixed income market
in the world, and the Fund used this part of its portfolio
for duration and yield-curve management, which contributed
to performance at the lowest possible transaction cost.
*** Portfolio characteristics were current as of March 31,
1998, are subject to change and may not be representative of
current characteristics.
</TABLE>
V-11
<PAGE>
Nations
Short-Intermediate Government
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
Because the Fund can conduct transactions for U.S. Treasury
securities at less cost than for any other, it can take
advantage of valuation opportunities that arise across the
yield curve. Positioning along the yield curve is a key for
value-added performance and enhances the stability provided
by the Fund to its investors. The liquidity of this market
also permits more frequent duration adjustments within a
narrow band. The Fund historically has added value with
these low-cost strategies.
WHAT INVESTMENT DECISIONS HINDERED OVERALL PORTFOLIO
PERFORMANCE DURING THE PERIOD?
As interest rates declined during the last six months due to
the Asian financial crisis, homeowners took advantage of
lower interest rates by prepaying or refinancing their
mortgages. As a result, mortgage-backed securities lost
value, causing a portion of the Fund to decline in value. In
reaction, we reduced the Fund's holdings in the mortgage
market. Because mortgage-backed securities had offered solid
income potential, it was important to invest in alternative
income-producing securities during this time. Accordingly,
we increased the Fund's weighting in callable securities,
which provided the Fund with an income component along with
liquidity.
WHAT ECONOMIC DEVELOPMENTS DO YOU ANTICIPATE DURING THE REST
OF 1998?
We anticipate the financial crisis in Asia to have an impact
on the U.S. economy, affecting our markets in the third or
fourth quarter of 1998. When this occurs, we expect the
economy to slow and disinflation to play a role. This could
ease pressure on the labor market and could prompt the Fed
to reduce interest rates. However, we do not expect the
impact to be so severe as to cause a recession.
We strive to provide investors If, however, the Asian situation does not have a significant
with a relatively stable net impact and economic growth remains strong, then the Fed will
asset value with attractive likely raise interest rates. We expect this to slow the
levels economy, eventually causing rates to decline.
of income.
HOW ARE YOU POSITIONING THE FUND TO TAKE ADVANTAGE OF THESE
ANTICIPATED DEVELOPMENTS?
The Fund will remain conservative and invest primarily in
U.S. Treasuries, maintaining a portfolio with a short
duration during the next few months. We strive to provide
investors with a relatively stable net asset value with
attractive levels of income.
</TABLE>
V-12
<PAGE>
Nations
Short-Intermediate Government
Fund
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/98)
[PIE CHART]
<TABLE>
<S> <C>
0.2% Government Guaranteed Bonds
4.3% Short-Term Investments
22.0% Mortgage-Backed
Securities
73.5% U.S. Government
and Agency
Obligations and
Other Assets
and Liabilities (Net)
</TABLE>
<TABLE>
<C> <S> <C>
TOP TEN HOLDINGS
(AS A % OF NET ASSETS AS OF 3/31/98)
-----------------------------------------
1 U.S. Treasury Notes 55.5%
-----------------------------------------
2 Federal National Mortgage
Association (FNMA)
Certificates 10.2%
-----------------------------------------
3 Federal National Mortgage
Association (FNMA) Notes 9.7%
-----------------------------------------
4 Federal Home Loan Mortgage
Corp. (FHLMC) Certificates 7.1%
-----------------------------------------
5 Government National Mortgage
Association (GNMA)
Certificates 4.6%
-----------------------------------------
6 U.S. Treasury Bond
6.125% 11/15/27 4.4%
-----------------------------------------
7 Federal Home Loan Mortgage
Corporation 6.625% 03/12/08 4.4%
-----------------------------------------
8 Federal Home Loan Bank
Discount Note
5.475% 04/24/98 4.1%
-----------------------------------------
9 Second Attransco Tanker
Corporation, Series A
8.500% 06/15/02 0.2%
-----------------------------------------
10 Federal Housing Authority
(FHA) Certificates and Notes
6.000% 07/15/04 0.2%
-----------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 1998, ARE SUBJECT
TO CHANGE AND MAY NOT BE REPRESENTATIVE
OF CURRENT HOLDINGS.
V-13
<PAGE>
Nations
Short-Intermediate Government
Fund Performance
GROWTH OF $10,000 INVESTMENT
Primary A Shares (as of 3/31/98)
<TABLE>
<CAPTION>
Measurement Period Short- Lehman Brothers Intermediate Government Bond
(Fiscal Year Covered) Intermediate Government $15,369 Index $16,072
Assumes the reinvestment of all distributions.
<S> <C> <C>
Aug. 1 1991 10000 10000
10427 10363
1991 10925 10862
10762 10748
11242 11164
11639 11653
1992 11556 11614
11997 12049
12185 12285
12461 12545
1993 12483 12564
12266 12332
12147 12263
12208 12356
1994 12183 12345
12648 12859
13124 13460
13314 13669
1995 13699 14126
13580 14029
13599 14124
13834 14366
1996 14135 14699
14086 14694
14498 15104
14841 15491
1997 15160 15834
Mar. 31 1998 15369 16072
</TABLE>
Investor B Shares (as of 3/31/98)
<TABLE>
<CAPTION>
Measurement Period Short- Lehman Brothers Intermediate Government Bond
(Fiscal Year Covered) Intermediate Government $12,162 Index $13,272
Assumes the reinvestment of all distributions.
<S> <C> <C>
June 7 1993 10000 10000
10092 10145
10304 10359
1993 10307 10375
10113 10184
9999 10127
10035 10204
1994 9999 10194
10366 10618
10740 11115
10878 11287
1995 11175 11665
11061 11585
11060 11663
11234 11863
1996 11461 12138
11404 12134
11720 12473
11979 12792
1997 12211 13075
Mar. 31 1998 12162 13272
</TABLE>
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
Primary A Shares
Since Inception
(8/1/91 through 3/31/98) 6.66%
The charts to the left show the growth
in value of a hypothetical $10,000
investment in Primary A and Investor B
Shares of Nations Short-Intermediate
Government Fund from the date each
class of shares was first offered.
Figures for the Lehman Brothers
Intermediate Government Bond Index, an
unmanaged index comprised of U.S.
government agency and U.S. Treasury
securities, include reinvestment of
dividends. It is unavailable for
investment. The performance shown
reflects the performance of Primary A
and Investor B Shares. The performance
of Primary B, Investor A and Investor C
Shares may vary based on the
differences in sales loads and fees
paid by the shareholders investing in
each class.
AVERAGE ANNUAL TOTAL RETURN
Investor B Shares
Since Inception NAV CDSC*
(6/7/93 through 3/31/98) 4.49% 4.15%
</TABLE>
TOTAL RETURN (AS OF 3/31/98)
<TABLE>
<CAPTION>
Primary A Primary B Investor A Investor B Investor C
<S> <C> <C> <C> <C> <C> <C>
Inception Date 8/1/91 6/28/96 8/5/91 6/7/93 6/17/92
NAV CDSC*
- ---------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 9.11% 8.74% 8.89% 8.35% 4.35% 8.45%
- ---------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
3 Years 6.71% NA 6.50% 6.03% 5.13% 6.14%
5 Years 5.08% NA 4.87% NA NA 4.48%
Since Inception 6.66% 6.85% 6.50% 4.49% 4.15% 5.03%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
The performance shown includes the effects of fee waivers by the investment
adviser, which has the effect of increasing total return.
*Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
Figures at net asset value (NAV) do not reflect any sales charges.
V-14
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DATED FEBRUARY 1, 1999
PACIFIC HORIZON FUNDS, INC.
P.O. Box 8968
Wilmington, Delaware 19899
1-800-[ ]
NATIONS FUND TRUST
One NationsBank Plaza, 33rd Floor
Charlotte, North Carolina 28255
1-800-321-7854
(APRIL 12, 1999 SPECIAL MEETING OF SHAREHOLDERS OF PACIFIC HORIZON FUNDS)
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Proxy/Prospectus dated the date hereof, for the
Special Meeting of Shareholders of Pacific Horizon to be held on April 12, 1999.
Copies of the Proxy/Prospectus may be obtained at no charge by writing or
calling Pacific Horizon or Nations at the addresses or telephone numbers set
forth above. Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the
Proxy/Prospectus.
INCORPORATION OF DOCUMENTS BY REFERENCE IN STATEMENT OF ADDITIONAL INFORMATION
Further information about the Investor A and Investor C Shares of Nations
Diversified Income Fund, and the Investor A Shares of Nations Municipal Income
Fund and Nations Short-Intermediate Government Fund, is contained in and
incorporated herein by reference to the statement of additional information for
Nations Diversified Income Fund, Nations Municipal Income Fund and Nations
Short-Intermediate Government Fund, dated August 1, 1998, as supplemented.
Further information about the A Shares and K Shares of the Pacific Horizon
Flexible Income Fund, and the A Shares of the Pacific Horizon National Municipal
Bond Fund and the Pacific Horizon Short-Term Government Fund, is contained in
and incorporated herein by reference to the statement of additional information
for Pacific Horizon Flexible Income Fund, Pacific Horizon National Municipal
Bond Fund and the Pacific Horizon Short-Term Government Fund, dated July 1,
1998.
The audited financial statements and related Report of Independent
Accountants for the year ended March 31, 1998 and the unaudited financial
statements for the semi-annual period ended September 30, 1998 for the Nations
Diversified Income Fund, Nations Municipal Income Fund
1
<PAGE>
and Nations Short-Intermediate Government Fund are incorporated herein by
reference. No other parts of the annual and semi-annual reports are incorporated
herein by reference.
The audited financial statements and related Report of Independent
Accountants for the year ended February 28, 1998, and the unaudited financial
statements for the semi-annual period ended August 31, 1998, for the Flexible
Income, National Municipal Bond and Short-Term Government Fund are incorporated
herein by reference. No other parts of the annual and semi-annual reports are
incorporated herein by reference.
2
<PAGE>
TABLE OF CONTENTS
General
Information....................................................4
Note Regarding PRO FORMA Financial
Information..............................................5
3
<PAGE>
GENERAL INFORMATION
The Reorganization contemplates the transfer of all of the assets and
liabilities of each Pacific Horizon Fund to a corresponding Nations Fund in
exchange for Shares of designated classes of the corresponding Nations Fund.
The Shares issued by Nations will have an aggregate value equal to the
aggregate value of the shares of the respective Pacific Horizon Funds that were
outstanding immediately before the Closing.
After the transfer of their assets and liabilities in exchange for Shares
of the Nations Funds, the Pacific Horizon Funds will distribute the Shares of
the Nations Funds to their shareholders in liquidation of the Pacific Horizon
Funds. Each shareholder owning shares of a particular Pacific Horizon Fund at
the Closing will receive Shares of the corresponding Nations Fund of equal
value, and will receive any unpaid dividends or distributions that were declared
before the Closing on shares of the Pacific Horizon Funds. Nations will
establish an account for each former shareholder of the Pacific Horizon Funds
reflecting the appropriate number of Nations Fund Shares distributed to the
shareholder. These accounts will be substantially identical to the accounts
maintained by Pacific Horizon for each shareholder. Upon completion of the
reorganization with respect to all Pacific Horizon funds, all outstanding shares
of the Pacific Horizon Funds will have been redeemed and cancelled in exchange
for Shares of the Nations Funds distributed, and Pacific Horizon will wind up
its affairs and be deregistered as an investment company under the 1940 Act and
dissolved under Maryland law.
For further information about the transaction, see the Proxy/Prospectus.
4
<PAGE>
NOTE REGARDING PRO FORMA FINANCIAL INFORMATION
Pro forma financial information giving effect to the proposed transfer of
assets and liabilities of the Pacific Horizon Funds to the Nations Funds is not
presented because in each case the aggregate net asset value of each Pacific
Horizon Fund was less than 10% of the aggregate net asset value of each
corresponding Nations Fund, as of December 23, 1998.
5
<PAGE>
NATIONS FUND TRUST
ONE NATIONSBANK PLAZA
33RD FLOOR
CHARLOTTE, NC 28255
1-800-626-2275
FORM N-14
PART C
OTHER INFORMATION
Item 15 Indemnification
Article IX, Section 9.3 of Registrant's Declaration of Trust,
incorporated by reference as Exhibit (1)(a) hereto, provides for the
indemnification of Registrant's trustees and employees. Indemnification of
Registrant's administrator, principal underwriter, custodian and transfer agent
is provided for, respectively, in:
1. Administration Agreement with Stephens Inc.;
2. Co-Administration Agreement with First Data Investors Services Group, Inc.;
3. Distribution Agreement with Stephens Inc.;
4. Custody Agreement with The Bank of New York;
5. Transfer Agency and Registrar Agreement with First Data Investors
Services Group, Inc.
The Registrant has entered into a Cross Indemnification Agreement with
Nations Fund, Inc. (the "Company") and Nations Fund Portfolios, Inc.
("Portfolios"), dated June 27, 1995. The Company and/or Portfolios will
indemnify and hold harmless the Trust against any losses, claims, damages or
liabilities, to which the Trust may become subject, under the Securities Act of
1933 (the "Act") and the Investment Company Act of 1940 (the "1940 Act") insofar
as such losses, claims, damages or liabilities (or actions in respect thereof)
arise out of or are based upon an untrue statement or alleged untrue statement
of a material fact contained in any Prospectuses, any Preliminary Prospectuses,
the Registration Statements, any other Prospectuses relating to the securities,
or any amendments or supplements to the foregoing (hereinafter referred to
collectively as the "Offering Documents"), or arise out of or are based upon the
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, in each case to the
extent, but only to the extent, that such untrue statement or alleged untrue
statement or omission or alleged omission was made in the Offering Documents in
reliance upon and in conformity with written information furnished to the
Company and/or Portfolios expressly for use therein; and
C-1
<PAGE>
will reimburse the Trust for any legal or other expenses reasonably incurred by
the Trust in connection with investigating or defending any such action or
claim; provided, however, that the Company and/or Portfolios shall not be liable
in any such case to the extent that any such loss, claim, damage, or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in the Offering Documents in reliance upon
and in conformity with written information furnished to the Company and/or
Portfolios by the Trust expressly for use in the Offering Documents.
Promptly after receipt by an indemnified party above of notice of the
commencement of any action, such indemnified party shall, if a claim in respect
thereof is to be made against the indemnifying party under such subsection,
notify the indemnifying party in writing of the commencement thereof; but the
omission to so notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise than under such
subsection. In case any such action shall be brought against any indemnified
party and it shall notify the indemnifying party of the commencement thereof,
the indemnifying party shall be entitled to notify the indemnifying party of the
commencement thereof, the indemnifying party shall be entitled to participate
therein and, to the extent that it shall wish, to assume the defense thereof,
with counsel satisfactory to such indemnified party, and, after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party under such subsection for any legal expenses of other counsel or any other
expenses, in such case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs of
investigation.
Registrant has obtained from a major insurance carrier a directors' and
officers' liability policy covering certain types of errors and omissions. In no
event will Registrant indemnify any of its trustees, officers, employees, or
agents against any liability to which such person would otherwise be subject by
reason of his/her willful misfeasance, bad faith, gross negligence in the
performance of his/her duties, or by reason of his reckless disregard of the
duties involved in the conduct of his/her office or arising under his/her
agreement with Registrant. Registrant will comply with Rule 484 under the
Securities Act of 1933 and Release No. 11330 under the 1940 Act, as amended, in
connection with any indemnification.
Insofar as indemnification for liability arising under the Securities
Act of 1933, as amended, may be permitted to trustees, officers, and controlling
persons of Registrant pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by Registrant of expenses
incurred or paid by a trustee, officer, or controlling person of Registrant in
the successful defense of any action, suit, or proceeding) is asserted by such
trustee, or controlling person in connection with the securities being
registered, Registrant will, unless in the opinion of its counsel the matter has
been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
C-2
<PAGE>
Item 16 Exhibits
All references to the "Registration Statement" in the following list of
Exhibits refer to the Registrant's Registration Statement on Form N-1A (File
Nos. 2-97817; 811-4305). All references to the "Pacific Horizon Registration
Statement" in the following list of Exhibits refer to the Pacific Horizon Funds,
Inc.'s Registration Statement on Form N-1A (File Nos. 2-81110; 811-4293).
EXHIBIT NUMBER DESCRIPTION
(1)(a) Declaration of Trust dated May 6, 1985, is incorporated
herein by reference to Post-Effective Amendment No. 57,
filed November 5, 1998.
(1)(b) Certificate pertaining to classification of shares dated
May 17, 1985, is incorporated herein by reference to
Post-Effective Amendment No. 57, filed November 5, 1998.
(1)(c) Amendment dated July 27, 1987, to Declaration of Trust is
incorporated by reference to Registrant's Post-Effective
Amendment No. 57, filed November 5, 1998.
(1)(d) Amendment dated September 13, 1989, to Declaration of Trust
is incorporated by reference to Registrant's Post-Effective
Amendment No. 57, filed November 5, 1998.
(1)(e) Certificate pertaining to classification of shares dated
August 24, 1990, is incorporated by reference to
Registrant's Post-Effective Amendment No. 57, filed
November 5, 1998.
(1)(f) Amendment dated November 26, 1990, to Declaration of Trust
is incorporated by reference to Registrant's Post-Effective
Amendment No. 57, filed November 5, 1998.
(1)(g) Certificate pertaining to classification of shares dated
July 18, 1991, is incorporated by reference to Registrant's
Post-Effective Amendment No. 57, filed November 5, 1998.
(1)(h) Amendment dated March 25, 1992, to Declaration of Trust is
incorporated by reference to Registrant's Post-Effective
Amendment No. 57, filed November 5, 1998.
(1)(i) Certificate relating to classification of shares is
incorporated by reference to Registrant's Post-Effective
Amendment No. 57, filed November 5, 1998.
C-3
<PAGE>
EXHIBIT NUMBER DESCRIPTION
(1)(j) Amendment dated September 21, 1992, to Declaration of
Trust, is incorporated by reference to Registrant's
Post-Effective Amendment No. 57, filed November 5, 1998.
(1)(k) Amendment dated March 26, 1993, to the Declaration of
Trust, is incorporated by reference to Registrant's
Post-Effective Amendment No. 57, filed November 5, 1998.
(1)(l) Certificate relating to the establishment of the Money
Market Funds' Investor C shares dated July 8, 1993, is
incorporated by reference to Registrant's Post-Effective
Amendment No. 57, filed November 5, 1998.
(1)(m) Certificate relating to the establishment of Equity Index
Fund, Short-Term Municipal Income Fund, Florida Municipal
Bond Fund, Georgia Municipal Bond Fund, Maryland Municipal
Bond Fund, North Carolina Municipal Bond Fund, South
Carolina Municipal Bond Fund, Tennessee Municipal Bond
Fund, Texas Municipal Bond Fund and Virginia Municipal Bond
Fund dated September 22, 1993, is incorporated by reference
to Registrant's Post-Effective Amendment No. 57, filed
November 5, 1998.
(1)(n) Certificate relating to the establishment of the Special
Equity Fund is incorporated by reference to Registrant's
Post-Effective Amendment No. 30 to the Registration
Statement, filed on December 1, 1993.
(1)(o) Certificate relating to the redesignation of Investor B
Shares and Investor C Shares of the Non-Money Market Funds
to "Investor C Shares" and "Investor N Shares,"
respectively, is incorporated by reference by
Post-Effective Amendment No. 57, filed November 5, 1998.
(1)(p) Certificate relating to the Classification of Shares of the
Money Market Fund and the Tax Exempt Fund creating
"Investor D Shares," is incorporated by reference to
Post-Effective Amendment No. 36, filed January 31, 1995.
(1)(q) Certification of Shares relating to the renaming of Nations
Special Equity Fund is incorporated by reference to
Post-Effective Amendment No. 57, filed November 5, 1998.
(1)(r) Certificate relating to the establishment of Nations
Tax-Managed Equity Fund's Series of Shares is incorporated
by reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(2)(a) Amendment and Restated Code of Regulations as approved and
adopted by Registrant's Board of Trustees is incorporated
by reference to Registrant's Post-Effective Amendment No.
57, filed November 5, 1998.
C-4
<PAGE>
EXHIBIT NUMBER DESCRIPTION
(3) Not Applicable.
(4) Form of Agreement and Plan of Reorganization, filed
herewith as Appendix I to the Combined Proxy
Statement/Prospectus.
(5) Not Applicable.
(6)(a) Investment Advisory Agreement between NationsBanc Advisors,
Inc., ("NBAI") and the Registrant is incorporated by
reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(6)(b) Sub-Advisory Agreement among NBAI, TradeStreet Investment
Associates, Inc. ("TradeStreet") and the Registrant is
incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
(6)(c) Sub-Advisory Agreement among NBAI, Marsico Capital
Management, LLC, and the Registrant, dated December 31,
1997, is incorporated by reference to Post-Effective
Amendment No. 57, filed November 5, 1998.
(7) Distribution Agreement between Stephens Inc. and Registrant
for all classes of shares of Nations Fund Trust is
incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
(8) Not Applicable.
(9)(a) Custody Agreement among Registrant and The Bank of New
York, dated October 19, 1998 is incorporated by reference
to Post-Effective Amendment No. 57, filed November 5,
1998.
(10)(a) Form of Shareholder Servicing Agreement relating to
Primary B Shares is incorporated by reference to
Post-Effective Amendment No. 57, filed November 5, 1998.
(10)(b) Shareholder Servicing Plan for Investor A Shares is
incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
(10)(c) Forms of Shareholder Servicing Agreement for Investor A
Shares are incorporated by reference to Post-Effective
Amendment No. 57, filed November 5, 1998.
(10)(d) Shareholder Servicing Plan for Investor B Shares of the
money market funds and Investor C Shares (formerly
Investor B Shares) of the Non-Money Market Funds, is
incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
C-5
<PAGE>
EXHIBIT NUMBER DESCRIPTION
(10)(e) Forms of Shareholder Servicing Agreement for Investor B
Shares of the Money Market Funds and Investor C Shares
(formerly Investor B Shares) of the Non-Money Market Funds,
are incorporated by reference to Post-Effective Amendment
No. 57, filed November 5, 1998.
(10)(f) Shareholder Servicing Plan for Investor C Shares of the
money market funds and Investor N Shares (formerly Investor
C Shares) of the Non-Money Market Funds, is incorporated by
reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(10)(g) Forms of Shareholder Servicing Agreement for Investor C
Shares of the Money Market Funds and Investor N Shares
(formerly Investor C Shares) of the Non-Money Market Funds
are incorporated by reference to Post-Effective Amendment
No. 57, filed November 5, 1998.
(10)(h) Amended and Restated Shareholder Servicing and Distribution
Plan Pursuant to Rule 12b-1 for Investor A Shares is
incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
(10)(i) Form of Sales Support Agreement for Investor A Shares is
incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
(10)(j) Amended and Restated Distribution Plan for Investor B
Shares of the Money Market Funds and Investor C Shares
(formerly Investor B Shares) of the Non-Money Market Funds,
is incorporated by reference to Post-Effective Amendment
No. 57, filed November 5, 1998.
(10)(k) Form of Sales Support Agreement for Investor B Shares of
the Money Market Funds and Investor C Shares (formerly
Investor B Shares) of the Non-Money Market Funds is
incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
(10)(l) Distribution Plan for Investor B (Investor N Shares) of the
Non-Money Market Funds is incorporated by reference to
Post-Effective Amendment No. 57, filed November 5, 1998.
(10)(m) Form of Sales Support Agreement for Investor B (Investor N
Shares) of the Non-Money Market Funds is incorporated by
reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(10)(n) Shareholder Administration Plan for Primary B Shares is
incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
C-6
<PAGE>
EXHIBIT NUMBER DESCRIPTION
(10)(o) Transfer Agency Agreement between Registrant and
NationsBank Texas, dated April 25, 1992, relating to the
Trust Shares (now known as Primary Shares) of the
Government, Tax Exempt, Money Market, Income, Equity,
Value, Managed Bond, Municipal Income, Georgia Municipal
Bond, Maryland Municipal Bond, South Carolina Municipal
Bond, Virginia Municipal Bond and Short-Intermediate
Government Funds, is incorporated by reference to
Post-Effective Amendment No. 57, filed November 5, 1998.
(10)(p) Amendment No. 1 dated September 28, 1992, to the Transfer
Agency Agreement between Registrant and NationsBank Texas,
dated April 25, 1992, relating to the Trust Shares (now
known as Primary Shares) of the Capital Growth Fund
Emerging Growth Fund, Balanced Assets Fund, Short-Term
Income Fund, Adjustable Rate Government Fund, Diversified
Income Fund, Strategic Fixed Income Fund, Mortgaged-Backed
Securities Fund, Florida Municipal Bond Fund, North
Carolina Municipal Bond Fund and Texas Municipal Bond Fund,
is incorporated by reference to Post-Effective Amendment
No. 57, filed November 5, 1998.
(10)(q) Amendment No. 2 dated February 3, 1993, to the Transfer
Agency Agreement between Registrant and NationsBank Texas,
dated April 25, 1992, relating to the Tennessee Municipal
Bond Fund and Municipal Income Fund, is incorporated by
reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(10)(r) Amendment No. 3 to the Transfer Agency Agreement relating
to the Equity Index Fund, Florida Municipal Bond Fund,
Georgia Municipal Bond Fund, Maryland Municipal Bond Fund,
North Carolina Municipal Bond Fund, South Carolina
Municipal Bond Fund, Tennessee Municipal Bond Fund, Texas
Municipal Bond Fund and Virginia Municipal Bond Fund, is
incorporated by reference to Post-Effective Amendment No.
57, filed November 5, 1998.
(10)(s) Amendment No. 4 to the Transfer Agency Agreement relating
to Nations Tax-Managed Equity Fund is incorporated by
reference to Post-Effective Amendment No. 57, filed
November 5, 1998.
(10)(t) Cross Indemnification Agreement dated June 27, 1995,
between the Trust, Nations Fund, Inc. and Nations Fund
Portfolios, Inc. incorporated by reference to
Post-Effective Amendment No. 57, filed November 5, 1998.
(11) Opinion and Consent of Morrison & Foerster LLP, filed
herewith.
C-7
<PAGE>
EXHIBIT NUMBER DESCRIPTION
(12) See Item 17(3) of this Part C.
(13)(a) Prototype Individual Retirement Account Plan, is
incorporated by reference to post-Effective Amendment No.
26, filed March 26, 1993.
(13)(b) Administration Agreement between Stephens Inc. and
Registrant is incorporated by reference to Post-Effective
Amendment No. 57, filed November 5, 1998.
(13)(c) Co-Administration Agreement between The Boston Company
Advisors, Inc. and Registrant is incorporated by reference
to Post-Effective Amendment No. 37, filed March 31, 1995.
(13)(d) Shareholder Administration Agreement for Trust B Shares
(now known as Primary B Shares) is incorporated by
reference to Post-Effective Amendment No. 41, filed January
29, 1996.
14(a) Consent of Independent Accountants--PricewaterhouseCoopers
LLP, filed herewith.
14(b) Consent of Independent Accountants--PricewaterhouseCoopers
LLP, filed herewith.
15 Not Applicable.
16 Powers of Attorney, filed herewith.
17(a) Form of Proxy Ballot, filed herewith.
17(c)(i) Prospectuses for the Investor A Shares of Nations
Diversified Income Fund, Nations Municipal Income Fund and
Nations Short-Intermediate Government Fund, dated August 1,
1998, as supplemented, filed as part of Post-Effective
Amendment No. __ to Nations' Registration Statement on Form
N-1A filed on ____.
17(c)(ii) Prospectus for the Investor C Shares of Nations Diversified
Income Fund, dated August 1, 1998, as supplemented, filed as
part of Post-Effective Amendment No. __ to Nations'
Registration Statement on Form N-1A filed on ____.
C-8
<PAGE>
EXHIBIT NUMBER DESCRIPTION
17(c)(iii) Statement of Additional Information for the Investor A
Shares of the Nations Diversified Income Fund, Nations
Municipal Income Fund and Nations Short-Intermediate
Government Fund and for the Investor C Shares of Nations
Diversified Income Fund, dated August 1, 1998, filed as
part of Post-Effective Amendment No. __ to Nations'
Registration Statement on Form N-1A filed on ____.
17(c)(iv) Prospectus for the A and K Shares of the Flexible Income Fund,
the National Municipal Bond Fund and the Short-Term Government
Fund, dated July 1, 1998, as supplemented, filed as part of
Post-Effective Amendment No. 60 to Pacific Horizons'
Registration Statement on Form N-1A filed on July
1, 1998.
17(c)(v) Statement of Additional Information for the A and K Shares
of the Flexible Income Fund, the National Municipal Bond
Fund and the Short-Term Government Fund and the K Shares of
the Flexible Income Fund dated July 1, 1998, filed as part
of Post-Effective Amendment No. 60 to Pacific Horizons'
Registration Statement on Form N-1A filed on July 1, 1998.
17(c)(vi) Annual Report for Nations Diversified Income Fund, Nations
Municipal Income Fund and Nations Short-Intermediate
Government Fund, dated March 31, 1998.
17(c)(vii) Annual Report for the Pacific Horizon Flexible Income Fund,
Pacific Horizon National Municipal Bond Fund and Pacific
Horizon Short-Term Government Fund, dated February 28, 1998.
Item 17 Undertakings.
(1) Registrant agrees that, prior to any public reoffering of
the securities registered through the use of a prospectus
which is a part of this registration statement by any
person or party who is deemed to be an underwriter within
the meaning of Rule 145(c) of the Securities Act of 1933,
the reoffering prospectus will contain the information
called for by the applicable registration form for the
reofferings by person who may be deemed underwriters, in
addition to the information called for by the other items
of the applicable form.
C-9
<PAGE>
EXHIBIT NUMBER DESCRIPTION
(2) The undersigned registrant agrees that every prospectus
that is filed under paragraph (1) above will be filed as
part of an amendment to the registration statement and will
not be used until the amendment is effective, and that, in
determining any liability under the Securities Act of 1933,
each post-effective amendment shall be deemed to be a new
registration statement for the securities offered therein,
and the offering of the securities at that time shall be
deemed to be the initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective
amendment, an opinion of counsel or a copy of an IRS ruling
supporting the tax consequences of the Reorganization within a
reasonable time after receipt of such opinion or ruling.
C-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form N-14 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Little
Rock, State of Arkansas on the 23rd day of December, 1998.
NATIONS FUND TRUST
By: *
-------------------------------------
A. Max Walker
President and Chairman
of the Board of Trustees
By: /s/ Richard H. Blank, Jr.
-------------------------------------
Richard H. Blank, Jr.
*Attorney-in-Fact
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement on Form N-14 has been signed below by the following
persons in the capacities and on the date indicated:
<TABLE>
<CAPTION>
SIGNATURES TITLE DATE
<S> <C> <C>
* President and Chairman December 23, 1998
- ------------------------- of the Board of Trustees
(A. Max Walker) (Principal Executive Officer)
/s/ Richard H. Blank, Jr. Treasurer December 23, 1998
- ------------------------- (Principal Financial and
(Richard H. Blank, Jr.) Accounting Officer)
* Trustee December 23, 1998
- -------------------------
(Edmund L. Benson, III)
* Trustee December 23, 1998
- -------------------------
(James Ermer)
* Trustee December 23, 1998
- -------------------------
(William H. Grigg)
* Trustee December 23, 1998
- -------------------------
(Thomas F. Keller)
* Trustee December 23, 1998
- -------------------------
(Carl E. Mundy, Jr.)
* Trustee December 23, 1998
- -------------------------
(Charles B. Walker)
* Trustee December 23, 1998
- -------------------------
(Thomas S. Word)
* Trustee December 23, 1998
- -------------------------
(James B. Sommers)
/s/ Richard H. Blank, Jr.
- -------------------------
Richard H. Blank, Jr.
*Attorney-in-Fact
</TABLE>
<PAGE>
NATIONS FUND TRUST
FILE NOS. 2-97817; 811-4305
Exhibit Number Description
- -------------- -----------
Ex-99.11 Opinion and Consent of Morrison &
Foerster LLP
Ex-99.14(a) Consent of Accountants -
PricewaterhouseCoopers LLP
Ex-99.14(b) Consent of Accountants -
PricewaterhouseCoopers LLP
Ex-99.16 Powers of Attorney
Ex-99.17 Form of Proxy Ballot
Ex-99.11
[MORRISON & FOERSTER LLP LETTERHEAD]
December 23, 1998
Nations Fund Trust
One NationsBank Plaza
Charlotte, NC 28255
Re: Units of Beneficial Interest of Nations Fund Trust
Ladies/Gentlemen:
We refer to the Registration Statement on Form N-14 (the "Registration
Statement") of Nations Fund Trust (the "Trust") relating to the registration of
an indefinite number of units of beneficial interest (the "Shares"), of certain
Funds of the Trust (the "Funds").
We have been requested by the Trust to furnish this opinion as Exhibit 11
to the Registration Statement.
We have examined documents relating to the organization of the Trust and
the authorization and issuance of the Shares. We have also made such inquiries
of the Trust and examined such questions of law as we have deemed necessary for
the purpose of rendering the opinion set forth herein. We have assumed the
genuineness of all signatures and the authenticity of all items submitted to us
as originals and the conformity with originals of all items submitted to us as
copies.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance of the Shares by the Trust has been duly and validly
authorized by all appropriate action and, assuming delivery in accordance with
the description set forth in the Combined Proxy Statement/Prospectus included in
the Registration Statement, the Shares will be legally issued, fully paid and
nonassessable by the Trust.
<PAGE>
Nations Fund Trust
December 23, 1998
Page Two
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we hereby consent to the use of our name and to the
description of advice rendered by our firm under the headings "The
Reorganization -- Federal Income Tax Considerations" in the Combined Proxy
Statement/Prospectus, under the heading "How The Funds Are Managed" in the
Prospectuses, and under the heading "Counsel" in the Statement of Additional
Information, which are incorporated by reference into the Registration
Statement.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
EXH.99.14(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Combined Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
N-14 (the "Registration Statement") of our report dated April 21, 1998, relating
to the financial statements and financial highlights appearing in the February
28, 1998 Annual Report of the Pacific Horizon Flexible Income Fund, Pacific
Horizon National Municipal Bond Fund and Pacific Horizon Short-Term Government
Fund (three of the seventeen portfolios constituting Pacific Horizon Funds,
Inc., hereafter referred to as the "Funds") which financial statements and
financial highlights are also incorporated by reference into the Combined Proxy
Statement/Prospectus and included in the Registration Statement. We also consent
to the incorporation by reference in the Prospectuses and Statement of
Additional Information of the Funds dated July 1, 1998, of our report dated
April 21, 1998, relating to the financial statements and financial highlights
appearing in the February 28, 1998 Annual Report of the Funds, which
Prospectuses and Statement of Information are also incorporated by reference in
the Registration Statement. We further consent to the references to us under the
headings "Financial Statements", "Other Service Providers for the Pacific
Horizon Funds and Nations Funds" and in paragraphs 5.2.e. and 7.4 of the
Agreement and Plan of Reorganization in such Combined Proxy Statement/Prospectus
and to the references to us under the headings "Financial Highlights" in the
Prospectuses dated July 1, 1998 for the Funds and under the headings
"Independent Accountants" and "Financial Statements" in the Statements of
Additional Information dated July 1, 1998 for the Funds.
PricewaterhouseCoopers LLP
New York, New York
December 23, 1998
Exhibit 99.14(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Combined Proxy
Statement/Prospectus and Statement of Additional Information constituting parts
of this Registration Statement on Form N-14 (the "Registration Statement") of
our reports dated May 28, 1998, relating to the financial statements and
financial highlights of Nations Diversified Income Fund, Nations Municipal
Income Fund and Nations Short-Intermediate Government Fund (the "Funds")
appearing in the March 31, 1998 Annual Reports to Shareholders, which financial
statements and financial highlights are also incorporated by reference into the
Registration Statement. We also consent to the references to us under the
headings "Financial Statements" and "Other Service Providers for the Pacific
Horizon Funds and Nations Funds" and in paragraphs 5.1.j. and 8.6 of the
Agreement and Plan of Reorganization in such Combined Proxy
Statement/Prospectus. We further consent to the references to us under the
headings "Financial Highlights" and "How The Funds Are Managed - Other Service
Providers" in the Prospectuses of the Funds dated August 1, 1998, as
supplemented, and under the heading "Independent Accountant and Reports" in the
Statement of Additional Information of the Funds dated August 1, 1998 which are
incorporated by reference into the Registration Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 23, 1998
Exhibit 99.16
POWER OF ATTORNEY
Edmund L. Benson, III, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund Trust (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as a trustee of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: December 23, 1998
/s/ Edmund L. Benson, III
------------------------------
Edmund L. Benson, III
<PAGE>
POWER OF ATTORNEY
James Ermer, whose signature appears below, does hereby constitute and
appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M. Kurucza, Marco E.
Adelfio and Steven G. Cravath, each individually, his true and lawful attorneys
and agents, with power of substitution or resubstitution, to do any and all acts
and things and to execute any and all instruments which said attorneys and
agents, each individually, may deem necessary or advisable or which may be
required to enable Nations Fund Trust (the "Trust") to comply with the
Investment Company Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as a trustee of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: December 23, 1998
/s/ James Ermer
------------------------------
James Ermer
<PAGE>
POWER OF ATTORNEY
William H. Grigg, whose signature appears below, does hereby constitute
and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M. Kurucza, Marco
E. Adelfio and Steven G. Cravath, each individually, his true and lawful
attorneys and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund Trust (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as a trustee of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: December 23, 1998
/s/ William H. Grigg
------------------------------
William H. Grigg
<PAGE>
POWER OF ATTORNEY
Thomas F. Keller, whose signature appears below, does hereby constitute
and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M. Kurucza, Marco
E. Adelfio and Steven G. Cravath, each individually, his true and lawful
attorneys and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund Trust (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as a trustee of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: December 23, 1998
/s/ Thomas F. Keller
------------------------------
Thomas F. Keller
<PAGE>
POWER OF ATTORNEY
A. Max Walker, whose signature appears below, does hereby constitute
and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M. Kurucza, Marco
E. Adelfio and Steven G. Cravath, each individually, his true and lawful
attorneys and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund Trust (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as an officer of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: December 23, 1998
/s/ A. Max Walker
------------------------------
A. Max Walker
<PAGE>
POWER OF ATTORNEY
Charles B. Walker, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund Trust (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as a trustee of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: December 23, 1998
/s/ Charles B. Walker
------------------------------
Charles B. Walker
<PAGE>
POWER OF ATTORNEY
Thomas S. Word, Jr., whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund Trust (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as a trustee of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: December 23, 1998
/s/ Thomas S. Word, Jr.
------------------------------
Thomas S. Word, Jr.
<PAGE>
POWER OF ATTORNEY
Richard H. Rose, whose signature appears below, does hereby constitute
and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M. Kurucza, Marco
E. Adelfio and Steven G. Cravath, each individually, his true and lawful
attorneys and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund Trust (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as an officer of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: December 23, 1998
/s/ Richard H. Rose
------------------------------
Richard H. Rose
<PAGE>
POWER OF ATTORNEY
Carl E. Mundy, Jr., whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund Trust (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as an officer of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: December 23, 1998
/s/ Carl E. Mundy, Jr.
------------------------------
Carl E. Mundy, Jr.
<PAGE>
POWER OF ATTORNEY
James B. Sommers, whose signature appears below, does hereby constitute
and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M. Kurucza, Marco
E. Adelfio and Steven G. Cravath, each individually, his true and lawful
attorneys and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund Trust (the "Trust") to comply with
the Investment Company Act of 1940, as amended, and the Securities Act of 1933,
as amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Trust's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as an officer of the Trust, such Registration Statement(s), and any
and all amendments thereto, filed with the Securities and Exchange Commission
under the 1933 Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said attorneys and
agents, individually or collectively, shall do or cause to be done by virtue
thereof.
Dated: December 23, 1998
/s/ James B. Sommers
------------------------------
James B. Sommers
EXH. 99.17
PROXY CARD
PACIFIC HORIZON FUNDS, INC.
FLEXIBLE INCOME FUND
SPECIAL MEETING OF SHAREHOLDERS-APRIL 12, 1999
The undersigned hereby appoints ________ and ________ (the "Proxies") and
each of them, attorneys and proxies of the undersigned, each with power of
substitution and resubstitution, to attend, vote and act for the undersigned at
the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific
Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00
A.M. (EASTERN TIME), on Monday, April 12, 1999, and at any adjournment or
adjournments thereof. The proxies will cast votes according to the number of
shares of the Pacific Horizon Flexible Income Fund (the "Fund") which the
undersigned may be entitled to vote with respect to the proposals set forth
below, in accordance with the specification indicated, if any, and with all the
powers which the undersigned would possess if personally present. The
undersigned hereby revokes any prior proxy to vote at such meeting, and hereby
ratifies and confirms all that said attorneys and Proxies, or either of them,
may lawfully do by virtue thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1,
1999.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH
UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY
(1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641 OR; (2)
TOUCH-TONE VOTING AT (800) 690-6903; OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM;
OR (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU
MARK, SIGN AND DATE YOUR PROXY CARD.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION
WILL BE VOTED IN FAVOR OF THE PROPOSAL.
To approve an Agreement and Plan of Reorganization, attached to the
Combined Proxy Statement/Prospectus for the Meeting, which provides for
(a) the transfer of all of the assets and liabilities of the Fund to a
corresponding fund of Nations Fund Trust in exchange for shares of a
designated class of such Nations fund of equal value; (b) the
distribution of the shares of designated classes of the corresponding
Nations fund to shareholders of each Pacific Horizon Fund; and (c) the
dissolution under state law and the deregistration under the Investment
Company Act of 1940, as amended, of Pacific Horizon.
|_|YES |_|NO |_|ABSTAIN
THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON.
<PAGE>
In their discretion, the Proxies, and either of them, are authorized to
vote upon any other business that may properly come before the meeting, or any
adjournment(s) thereof, including any adjournment(s) necessary to obtain
requisite quorums and/or approvals.
-----------------------------
-----------------------------, 1999
Please sign above exactly as your name(s) appear(s) hereon. Corporate proxies
should be signed in full corporate name by an authorized officer. Each joint
owner should sign personally. Fiduciaries should give full titles as such.
(Please Date)
<PAGE>
PROXY CARD
PACIFIC HORIZON FUNDS, INC.
NATIONAL MUNICIPAL BOND FUND
Special Meeting of Shareholders-April 12, 1999
The undersigned hereby appoints ________ and ________ (the "Proxies")
and each of them, attorneys and proxies of the undersigned, each with power of
substitution and resubstitution, to attend, vote and act for the undersigned at
the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific
Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00
a.m. (Eastern time), on Monday, April 12, 1999, and at any adjournment or
adjournments thereof. The proxies will cast votes according to the number of
shares of the Pacific Horizon National Municipal Bond Fund (the "Fund") which
the undersigned may be entitled to vote with respect to the proposals set forth
below, in accordance with the specification indicated, if any, and with all the
powers which the undersigned would possess if personally present. The
undersigned hereby revokes any prior proxy to vote at such meeting, and hereby
ratifies and confirms all that said attorneys and Proxies, or either of them,
may lawfully do by virtue thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1,
1999.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH
UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY
FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (____) __________ OR BY
MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK,
SIGN AND DATE YOUR PROXY CARD.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION WILL
BE VOTED IN FAVOR OF THE PROPOSAL.
To approve an Agreement and Plan of Reorganization, attached to
the Combined Proxy Statement/Prospectus for the Meeting, which
provides for (a) the transfer of all of the assets and liabilities
of the Fund to a corresponding fund of Nations Fund Trust in
exchange for shares of a designated class of such Nations fund of
equal value; (b) the distribution of the shares of designated
classes of the corresponding Nations fund to shareholders of each
Pacific Horizon Fund; and (c) the dissolution under state law and
the deregistration under the Investment Company Act of 1940, as
amended, of Pacific Horizon.
|_|YES |_|NO |_|ABSTAIN
THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON.
<PAGE>
In their discretion, the Proxies, and either of them, are authorized to
vote upon any other business that may properly come before the meeting, or any
adjournment(s) thereof, including any adjournment(s) necessary to obtain
requisite quorums and/or approvals.
-----------------------------
_____________________________, 1999
Please sign above exactly as your name(s) appear(s) hereon. Corporate proxies
should be signed in full corporate name by an authorized officer. Each joint
owner should sign personally. Fiduciaries should give full titles as such.
(Please Date)
<PAGE>
PROXY CARD
PACIFIC HORIZON FUNDS, INC.
SHORT-TERM GOVERNMENT FUND
Special Meeting of Shareholders-April 12, 1999
The undersigned hereby appoints ________ and ________ (the "Proxies")
and each of them, attorneys and proxies of the undersigned, each with power of
substitution and resubstitution, to attend, vote and act for the undersigned at
the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific
Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00
a.m. (Eastern time), on Monday, April 12, 1999, and at any adjournment or
adjournments thereof. The proxies will cast votes according to the number of
shares of the Pacific Horizon Short-Term Government Fund (the "Fund") which the
undersigned may be entitled to vote with respect to the proposals set forth
below, in accordance with the specification indicated, if any, and with all the
powers which the undersigned would possess if personally present. The
undersigned hereby revokes any prior proxy to vote at such meeting, and hereby
ratifies and confirms all that said attorneys and Proxies, or either of them,
may lawfully do by virtue thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1,
1999.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH
UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY
FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (____) __________ OR BY
MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK,
SIGN AND DATE YOUR PROXY CARD.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION WILL
BE VOTED IN FAVOR OF THE PROPOSAL.
To approve an Agreement and Plan of Reorganization, attached to
the Combined Proxy Statement/Prospectus for the Meeting, which
provides for (a) the transfer of all of the assets and liabilities
of the Fund to a corresponding fund of Nations Fund Trust in
exchange for shares of a designated class of such Nations fund;
(b) the distribution of the shares of designated classes of the
corresponding Nations fund to shareholders of each Pacific Horizon
Fund; and (c) the dissolution under state law and the
deregistration under the Investment Company Act of 1940, as
amended, of Pacific Horizon.
|_|YES |_|NO |_|ABSTAIN
THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON.
<PAGE>
In their discretion, the Proxies, and either of them, are authorized to
vote upon any other business that may properly come before the meeting, or any
adjournment(s) thereof, including any adjournment(s) necessary to obtain
requisite quorums and/or approvals.
-----------------------------
_____________________________, 1999
Please sign above exactly as your name(s) appear(s) hereon. Corporate proxies
should be signed in full corporate name by an authorized officer. Each joint
owner should sign personally. Fiduciaries should give full titles as such.
(Please Date)
