NATIONS FUND TRUST
One Bank of America Plaza
101 South Tryon Street
Charlotte, N.C. 28255
TELEPHONE: 800-653-9427
February 7, 2000
Dear Shareholder:
On behalf of the Board of Trustees of Nations Fund Trust (the "Trust"),
we are pleased to invite you to special meetings of shareholders of the Trust's
Nations Managed Value Index Fund and Nations Managed SmallCap Value Index Fund
(each a "Fund" and together the "Funds") to be held at 10:00 a.m. (Eastern time)
on April 21, 2000, at One Bank of America Plaza, 33rd Floor, Charlotte, North
Carolina (the "Meetings"). At the Meetings, you will be asked to approve the
proposed reorganization (the "Reorganization") of your Fund into a corresponding
mutual fund of the Trust. Specifically, Nations Managed Value Index Fund is
proposed to be reorganized into Nations Managed Index Fund, and Nations Managed
SmallCap Value Index Fund is proposed to be reorganized into Nations SmallCap
Index Fund.
YOUR NEW MUTUAL FUND (AN "ACQUIRING FUND") WILL HAVE A GENERALLY
SIMILAR INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND INVESTMENT
RISKS AS THOSE OF YOUR CURRENT FUND. There are, however, some differences
between your Fund and its Acquiring Fund that will be discussed in the
accompanying Combined Proxy Statement/Prospectus. The Reorganization will not
result in any change to the investment adviser or sub-adviser who currently
manage your Fund. In addition, the Reorganization will result in lower total
operating expense ratios for certain Fund share classes, and the same total
operating expense ratios for the other Fund share classes. The features and
services that are available to you today also will continue to be available to
you as an Acquiring Fund shareholder after the Reorganization.
Management proposed the Reorganization because the assets of each Fund
have declined to levels that make it inefficient for them to continue to operate
on a stand-alone basis. Because each Acquiring Fund is significantly larger than
its corresponding Fund, combining your Fund with its Acquiring Fund will result
in a mutual fund that will be able to spread its fixed costs over a much larger
asset base. This could allow each Acquiring Fund to achieve economies of scale
and other benefits that come from greater asset size.
Accordingly, management, including the Board of Trustees of the Trust,
believes that the proposed Reorganization should benefit Fund shareholders by,
among other things:
o Offering actual or potential reductions in total operating expense
ratios for Fund shareholders; and
o Offering shareholders the opportunity to remain invested in a
generally similar mutual fund in the Nations Funds family.
If shareholder approval is obtained and the other conditions to the
Reorganization are satisfied, it is anticipated that your Fund would be
reorganized into its corresponding Acquiring Fund on or about May 12, 2000, when
your Fund shares would be exchanged for shares of equal value of the same class
of shares of its Acquiring Fund. Lastly, the Reorganization is expected to be
tax-free under federal law.
THE TRUST'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO
APPROVE THE PROPOSED REORGANIZATION.
The formal Notice of Special Meeting, Combined Proxy
Statement/Prospectus and Proxy Ballot(s) are enclosed. The proposed
Reorganization and the reasons for the unanimous recommendation of the Trust's
Board are discussed in detail in the enclosed materials, which you should read
carefully. If you have any questions about the proposal, please do not hesitate
to contact the Trust at the toll-free number set forth above.
<PAGE>
We look forward to your attendance at the Meetings or receiving your
Proxy Ballot(s) so that your shares may be voted at the Meetings.
Sincerely,
A. Max Walker
President and Chairman of the Board of Trustees
YOUR VOTE IS IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES THAT
YOU OWN. PLEASE VOTE BY SUBMITTING YOUR PROXY BALLOT(S) TODAY, EITHER IN THE
ENCLOSED POSTAGE-PAID ENVELOPE OR BY TELEFACSIMILE AT (704) 388-2641. YOU MAY
ALSO SUBMIT YOUR PROXY BY A TOLL-FREE PHONE CALL OR BY VOTING ON-LINE, AS
INDICATED BELOW.
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TWO QUICK AND EASY WAYS TO SUBMIT YOUR PROXY
As a valued Fund shareholder, your proxy vote is important to us. That's why
we've made it faster and easier to submit your proxy at YOUR convenience, 24
hours a day. After reviewing the enclosed PROXY STATEMENT/PROSPECTUS ("PROXY
STATEMENT") select one of the following quick and easy methods to submit your
proxy - ACCURATELY and QUICKLY.
VOTE ON-LINE VOTE BY TOLL-FREE PHONE CALL
<S> <C> <C> <C>
1. Read the enclosed PROXY STATEMENT and have 1. Read the enclosed PROXY STATEMENT and have your
your PROXY BALLOT(S)* at hand. PROXY BALLOT(S)* at hand.
2. Go to Web site www.proxyvote.com 2. Call toll-free 1-800-690-6903.
3. Enter the 12-digit Control Number found on 3. Enter the 12-digit Control Number found on your
your PROXY BALLOT(S). PROXY BALLOT(S).
4. Submit your proxy using the easy-to-follow 4. Submit your proxy using the easy-to-follow
instructions. instructions.
* DO NOT MAIL THE PROXY BALLOT(S) IF SUBMITTING YOUR PROXY BY INTERNET OR TELEPHONE.
- ---------------------------------------------------------------------------------------------------------------------
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NATIONS FUND TRUST
One Bank of America Plaza
101 South Tryon Street
Charlotte, N.C. 28255
TELEPHONE: 800-653-9427
NOTICE OF SPECIAL MEETINGS OF SHAREHOLDERS
TO BE HELD ON APRIL 21, 2000
To Nations Managed Value Index Fund and Nations Managed SmallCap Value Index
Fund Shareholders:
PLEASE TAKE NOTE THAT special meetings of shareholders (the "Meetings")
of Nations Managed Value Index Fund and Nations Managed SmallCap Value Index
Fund of Nations Fund Trust (the "Trust"), will be held at 10:00 a.m., Eastern
time, on April 21, 2000, at One Bank of America Plaza, 33rd Floor, Charlotte,
North Carolina, for the purpose of considering and voting upon:
ITEM 1. An Agreement and Plan of Reorganization, dated as of February
1, 2000 (the "Reorganization Agreement"), by Nations Fund Trust, on
behalf of Nations Managed Value Index Fund, Nations Managed SmallCap
Value Index Fund, Nations Managed Index Fund and Nations Managed
SmallCap Index Fund (to be re-named Nations SmallCap Index Fund). The
Reorganization Agreement provides for the reorganization of: (i) FOR
SHAREHOLDERS OF NATIONS MANAGED VALUE INDEX FUND VOTING ONLY--Nations
Managed Value Index Fund into Nations Managed Index Fund; and (ii) FOR
SHAREHOLDERS OF NATIONS MANAGED SMALLCAP VALUE INDEX FUND VOTING
ONLY--Nations Managed SmallCap Value Index Fund into Nations SmallCap
Index Fund.
ITEM 2. Such other business as may properly come before the Meetings or
any adjournment(s).
Item 1 is described in the attached Combined Proxy
Statement/Prospectus.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE
PROPOSAL.
Shareholders of record as of the close of business on January 10, 2000
are entitled to notice of, and to vote at, the Meetings or any adjournment(s)
thereof.
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN
THE ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY BALLOT, WHICH IS BEING SOLICITED
BY THE TRUST'S BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
MEETINGS. SHAREHOLDERS ALSO MAY SUBMIT THEIR PROXIES BY: 1) FACSIMILE AT (704)
388-2641; 2) BY DIALING (800) 690-6903; OR 3) ON-LINE AT WEBSITE
WWW.PROXYVOTE.COM. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED
BY SUBMITTING TO THE TRUST A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY
DATED PROXY OR BY ATTENDING THE MEETINGS AND VOTING IN PERSON.
By Order of the Board of Trustees,
Richard H. Blank, Jr.
Secretary
February 7, 2000
<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
Dated February 7, 2000
NATIONS FUND TRUST
One Bank of America Plaza
101 South Tryon Street
Charlotte, North Carolina 28255
1-800-653-9427
This Combined Proxy Statement/Prospectus ("Proxy/Prospectus") is
furnished in connection with the solicitation of proxies by the Board of
Trustees of Nations Fund Trust (the "Trust") at Special Meetings of Shareholders
of the Trust's Nations Managed Value Index Fund and Nations Managed SmallCap
Value Index Fund to be held April 21, 2000 at 10:00 a.m. (Eastern time) at One
Bank of America Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North
Carolina. These Special Meetings and any adjournment(s) are referred to as the
"Meetings." The Meetings have been called to consider the following proposal:
o To approve an Agreement and Plan of Reorganization, dated as of
Febraury 1, 2000 (the "Reorganization Agreement"), by Nations Fund
Trust, on behalf of Nations Managed Value Index Fund, Nations
Managed SmallCap Value Index Fund, Nations Managed Index Fund and
Nations Managed SmallCap Index Fund (to be re-named Nations SmallCap
Index Fund). The Reorganization Agreement provides for the
reorganization of (i) Nations Managed Value Index Fund into Nations
Managed Index Fund; and (ii) Nations Managed SmallCap Value Index
Fund into Nations SmallCap Index Fund.
If the Reorganization Agreement is approved, (i) a shareholder of a
class of shares of Nations Managed Value Index Fund ("Managed Value Index Fund")
will become a shareholder of the same class of shares of Nations Managed Index
Fund ("Managed Index Fund"); and (ii) a shareholder of a class of shares of
Nations Managed SmallCap Value Index Fund ("Managed SmallCap Value Index Fund")
will become a shareholder of the same class of shares of Nations SmallCap Index
Fund ("SmallCap Index Fund"). Throughout this Proxy/Prospectus, the Managed
Value Index Fund and Managed SmallCap Value Index Fund are each referred to as a
"Fund," and together as the "Funds." Similarly, the Managed Index Fund and
SmallCap Index Fund are each referred to as an "Acquiring Fund," and together as
the "Acquiring Funds."
Specifically, the Reorganization Agreement provides for the transfer of
the assets and liabilities of each Fund to each corresponding Acquiring Fund in
exchange for shares of equal value of the same classes of such Acquiring Fund
(the "Reorganization"). This means that after the closing of the Reorganization
(which is currently expected to be on or about May 12, 2000), each Fund
shareholder will be an Acquiring Fund shareholder.
While each Acquiring Fund will have a generally similar investment
objective, principal investment strategies and investment risks as its
corresponding Fund, there are some differences that are discussed in this
Proxy/Prospectus.
This Proxy/Prospectus sets forth concisely the information about the
Acquiring Funds that a prospective investor ought to know before investing. This
Proxy/Prospectus should be retained for future reference.
Additional information about the Funds is available in their:
o Prospectuses;
o Statement of Additional Information, or SAI; and
o annual and semi-annual reports to shareholders.
All of this information is in documents filed with the United States
Securities and Exchange Commission (the "SEC") and is available upon oral or
written request and without charge. The information contained in the
prospectuses of the Funds and Acquiring Funds is legally deemed to be part of
this Proxy/Prospectus and is incorporated by reference. Copies of the relevant
Acquiring Fund prospectus(es) accompany this Proxy/Prospectus. The annual and
semi-annual reports to shareholders for the fiscal year ended March 31, 1999 and
fiscal period ended September 30, 1999, respectively, and the prospectus(es) for
the Funds have previously been mailed to Fund
1
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shareholders. Additional copies of any of these documents are available without
charge by writing the address given above or by calling 1-800-765-2668.
Documents also are available on the website of the SEC at www.sec.gov.
It is expected that this Proxy will be mailed to shareholders on or
about February 7, 2000.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED
THESE SECURITIES OR DETERMINED IF THIS PROXY/PROSPECTUS IS TRUTHFUL OR COMPLETE.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
2
<PAGE>
TABLE OF CONTENTS
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SUMMARY................................................................................................4
Fee Tables....................................................................................4
Overview of the Reorganization................................................................4
Overview of the Funds and Acquiring Funds.....................................................5
Principal Risk Factors........................................................................5
THE REORGANIZATION.....................................................................................7
Description of the Reorganization Agreement...................................................7
Reasons for the Reorganization Agreement......................................................7
Board Consideration...........................................................................8
Federal Income Tax Considerations.............................................................8
Capitalization................................................................................9
COMPARISON OF THE FUNDS AND THE ACQUIRING FUNDS.......................................................10
Comparison of Investment Objective and Principal Investment Strategies.......................10
Comparison of Fund and Acquiring Fund Performance............................................12
Comparison of Advisory and Other Service Arrangements and Fees...............................13
Comparison of Purchase, Redemption and Exchange Policies and Other Shareholder
Transactions and Services....................................................................14
VOTING MATTERS........................................................................................14
General Information..........................................................................14
Shareholder and Board Approvals..............................................................15
Principal Shareholders.......................................................................15
Quorum.......................................................................................17
Annual Meetings and Shareholder Meetings.....................................................17
ADDITIONAL INFORMATION ABOUT THE TRUST................................................................17
FINANCIAL STATEMENTS..................................................................................18
OTHER BUSINESS........................................................................................18
SHAREHOLDER INQUIRIES.................................................................................18
APPENDICES
I. EXPENSE SUMMARIES OF THE FUNDS
II. COMPARISON OF PERFORMANCE OF THE FUNDS
III. MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE
</TABLE>
3
<PAGE>
SUMMARY
The following is an overview of the proposed Reorganization. More
complete information about the Reorganization is contained throughout the
Proxy/Prospectus.
FEE TABLES
The following table shows, as of October 31, 1999: (i) the current
annualized total operating expense ratios of the Funds (before and after fee
waivers and/or expense reimbursements); (ii) the current annualized total
operating expense ratios of the Acquiring Funds (before and after fee waivers
and/or expense reimbursements); and (iii) the PRO FORMA annualized total
operating expense ratios of the corresponding Acquiring 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.
The table shows that the total operating expense ratios of the Funds
(before fee waivers and/or expense reimbursements) are significantly higher than
those of the Acquiring Funds.
The table also shows that, on a PRO FORMA basis, the SmallCap Index
Fund's total operating expense ratios (after fee waivers and/or expense
reimbursements) are lower than those of the corresponding Managed SmallCap Value
Index Fund, and that the Managed Index Fund's total operating expense ratios
(after waivers and/or expense reimbursements) are equal to those of the Managed
Value Index Fund. Detailed PRO FORMA expense information for each proposed
reorganization is included in Appendix I.
TOTAL EXPENSE INFORMATION
-------------------------
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PRO FORMA
TOTAL TOTAL TOTAL
OPERATING OPERATING OPERATING
EXPENSES CORRESPONDING EXPENSES COMBINED FUND/ EXPENSES
BEFORE/AFTER ACQUIRING BEFORE/AFTER SHARE CLASS POST- BEFORE/AFTER
FUND/SHARE CLASS WAIVERS FUND/SHARE CLASS WAIVERS REORGANIZATION WAIVERS
- ---------------- ------- ---------------- ------- -------------- -------
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Managed Value Index Fund Managed Index Fund Managed Index Fund
Primary A shares 3.86%/0.50% Primary A shares Primary A shares
Investor A shares 0.73%/0.50% 0.73%/0.50%
4.11%/0.75% Investor A shares 0%
0.98%/0.75% Investor A shares
0.98%/0.75%
5%
Managed SmallCap Value Index Fund SmallCap Index Fund* SmallCap Index Fund*
Primary A shares 4.83%/0.50% Primary A shares Primary A shares
Investor A shares 0.82%/0.50%
5.08%/0.75% Investor A shares 0% 0.81%/0.40%
1.07%/0.75% Investor A shares
1.06%/0.65%
5%
---------------------------------
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*SPECIAL NOTE FOR SHAREHOLDERS OF THE MANAGED SMALLCAP VALUE INDEX FUND
- - The Reorganization contemplates the reorganization of the Managed SmallCap
Value Index Fund into the SmallCap Index Fund. As of the date of this
Proxy/Prospectus, the SmallCap Index Fund is operating under the name,
investment objective, principal investment strategies and risks of Nations
Managed SmallCap Index
4
<PAGE>
Fund. However, on or before the closing of the Reorganization (which is expected
to be on May 12, 2000), the Nations Managed SmallCap Index Fund will be re-named
the SmallCap Index Fund, and will have the investment objective, principal
investment strategies and investment risks described in this Proxy/Prospectus.
OVERVIEW OF THE REORGANIZATION
The Reorganization Agreement provides for: (1) the transfer of all of
the assets and liabilities of each Fund to its corresponding Acquiring Fund in
exchange for shares of equal value of the same classes of the Acquiring Fund, as
shown below; and (2) the distribution of the Acquiring Fund shares to the
shareholders of the Fund in liquidation of that Fund. The Reorganization is
subject to a number of conditions, including approval by Fund shareholders. The
Reorganization generally refers to the proposed reorganization of both Funds.
However, the reorganization of each Fund is exclusive of the other-that is, only
the Fund(s) whose shareholders approve the Reorganization will be reorganized.
SHAREHOLDERS OWNING SHARES OF THE WOULD RECEIVE SHARES OF THE FOLLOWING
FOLLOWING ACQUIRED FUNDS AND CLASSES: ACQUIRING FUNDS AND CLASSES:
Managed Value Index Fund Managed Index Fund
Primary A shares Primary A shares
Investor A shares Investor A shares
Managed SmallCap Value Index Fund SmallCap Index Fund
Primary A shares Primary A shares
Investor A shares Investor A shares
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 shares in the Reorganization. As a result of the proposed
Reorganization, a Fund shareholder will become a shareholder of a corresponding
Acquiring Fund and will hold, immediately after the Reorganization, Acquiring
Fund shares having a total dollar value equal to the total dollar value of the
shares of the Fund that the shareholder held immediately before the
Reorganization. The Reorganization is expected to occur on May 12, 2000, 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."
OVERVIEW OF THE FUNDS AND ACQUIRING FUNDS
Investment Objective and Principal Investment Strategies. The
investment objective and principal investment strategies of the Funds are
generally similar to those of the Acquiring Funds. Each Fund and Acquiring Fund
seeks, over the long term, to provide a total return to investors that (before
fees and expenses) EXCEEDS the total return of a certain index by investing
primarily in the common stocks that are included in the respective index (except
with respect to the SmallCap Index Fund, which seeks to provide a total return
to investors that (before fees and expenses) CORRESPONDS to the total return of
an index).
However, there are some important differences. For example, (i) the
Funds are managed utilizing a "value" investment strategy whereas the Acquiring
Funds' strategies do not focus on "value" stocks; (ii) the Funds invest in a
smaller universe of stocks than do the corresponding Acquiring Funds; and (iii)
the Managed SmallCap Value Index Fund is proposed to be reorganized into the
SmallCap Index Fund, which unlike the Managed SmallCap Value Index Fund, is not
an actively managed mutual fund. For additional information about the
similarities and differences between the investment objective and strategies of
the Funds and Acquiring Funds, see "Comparison of the Funds and the Acquiring
Funds-Comparison of Investment Objective and Principal Investment Strategies."
Service Providers. The Funds and the Acquiring Funds have the same
investment adviser, investment sub-adviser and other service providers, as
discussed under "Comparison of the Funds and the Acquiring Funds-Comparison of
Advisory and Other Service Arrangements and Fees." The contractual fees rates
charged to the Funds and the Acquiring Funds are the same.
Purchase, Redemption, Distribution and Other Procedures. The purchase,
redemption, distribution, dividend, exchange and other policies and procedures
of the share classes of the Funds are identical to those of the corresponding
share classes of the Acquiring Funds. For more information concerning these
policies and procedures, see "Comparison of the Funds and the Acquiring
Funds-Comparison of Purchase, Redemption, Distribution and Exchange Policies and
other Shareholder Transactions and Services."
Federal Income Tax Consequences. The exchange of shares in the
Reorganization is not expected to result
5
<PAGE>
in the recognition, for federal income tax purposes, of gain or loss by the
Funds, the Acquiring Funds or their respective shareholders. The sale of
securities by a Fund prior to the Reorganization, whether in the ordinary course
of business or in anticipation of the Reorganization, could result in a taxable
distribution to the Fund's shareholders. See "The Reorganization
Agreement--Federal Income Tax Considerations" for additional information. Each
Fund and Acquiring 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, the Funds and the Acquiring Funds have been,
and expect to continue to be, relieved of federal income tax liability.
PRINCIPAL RISK FACTORS
Because of the general similarities in investment objective and
principal investment strategies of the Funds and their corresponding Acquiring
Funds, investments in the Acquiring Funds will generally involve risks that are
similar to those of the Funds, although there are some important differences
that a shareholder should consider. Both common and not common risks of the
Funds and the Acquiring Funds are discussed below.
Managed Value Index Fund and Managed Index Fund
- -----------------------------------------------
o RISKS COMMON TO BOTH THE FUND AND ITS ACQUIRING FUND
INVESTMENT STRATEGY RISK. Both the Managed Value Index Fund and the
Managed Index Fund are actively managed. Accordingly, the management team for
each of the Managed Value Index Fund and the Managed Index Fund chooses stocks,
pursuant to the funds' investment objective, that it believes have the potential
for higher growth than their benchmark index. There is a risk that the value of
these investments will not rise as high as the management team expects, or will
fall.
STOCK MARKET RISK. Both the Managed Value Index Fund and the Managed
Index Fund invest in common stocks. The value of the stocks that the Managed
Value Index Fund and the Managed Index Fund hold can be affected by exchanges in
U.S. or foreign economies and financial markets, and the companies that issue
the stocks, among other things. Stock prices can rise or fall over short as well
as long periods. In general, stock markets tend to move in cycles, with periods
of rising prices and periods of falling prices. As of the date of this
Proxy/Prospectus, the stock markets as measured by the S&P 500 and other
commonly used indices, were trading at or close to record levels. There can be
no guarantee that these levels will continue.
FUTURES RISK. Both the Managed Value Index Fund and the Managed Index
Fund may use futures contracts to manage liquidity. There is a risk that this
could result in losses, reduce returns, increase transaction costs or increase
volatility.
o RISKS NOT COMMON TO BOTH THE FUND AND ITS ACQUIRING FUND
DIVERSIFICATION RISK. The Managed Index Fund holds roughly twice as
many stocks as the Managed Value Index Fund. The broader holdings of the
Acquiring Fund translates to greater diversification and, therefore, potentially
less risk.
Managed SmallCap Value Index Fund and SmallCap Index Fund
- ---------------------------------------------------------
o RISKS COMMON TO BOTH THE FUND AND ITS ACQUIRING FUND
STOCK MARKET RISK. Both the Managed SmallCap Value Index Fund and the
SmallCap Index Fund invest in common stocks. The value of the stocks that the
Managed SmallCap Value Index Fund and the SmallCap Index Fund hold can be
affected by exchanges in U.S. or foreign economies and financial markets, and
the companies that issue the stocks, among other things. Stock prices can rise
or fall over short as well as long periods. In general, stock markets tend to
move in cycles, with periods of rising prices and periods of falling prices. As
of the date of this Proxy/Prospectus, the stock markets as measured by the S&P
500 and other commonly used indices, were trading at or close to record levels.
There can be no guarantee that these levels will continue.
SMALL COMPANY RISK. Both the Managed SmallCap Value Index Fund and the
SmallCap Index Fund invest in stocks of smaller companies, which for many
reasons tend to have greater price swings than stocks of larger companies,
including that they trade less frequently and in lower volumes. These securities
may have a potential for gains but also carry more risk.
FUTURES RISK. Both the Managed SmallCap Value Index Fund and the
SmallCap Index Fund may use futures contracts to manage liquidity. There is a
risk that this could result in losses, reduce returns, increase transaction
costs or increase volatility.
6
<PAGE>
o RISKS NOT COMMON TO BOTH THE FUND AND ITS ACQUIRING FUND
INVESTMENT STRATEGY RISK. The Managed SmallCap Value Index Fund is
actively managed. Accordingly, its management team chooses stocks, pursuant to
its investment objective, that it believes have the potential for higher growth
than its benchmark index. There is a risk that the value of these investments
will not rise as high as the management team expects, or will fall. The SmallCap
Index Fund uses a "passive" or "indexing" investment approach which attempts to
duplicate the performance of its benchmark index. There is no assurance that the
returns of the SmallCap Index Fund will match the returns of its benchmark
index. In addition, the value of the SmallCap Index Fund will rise and fall with
the performance of such index.
DIVERSIFICATION RISK. The SmallCap Index Fund holds roughly twice as
many stocks as the Fund. The broader holdings of the SmallCap Index Fund
translates to greater diversification and, therefore, potentially less risk.
For a more complete description of the Funds' and the Acquiring Funds'
investment strategies and restrictions, see the Funds' and the Acquiring Funds'
Prospectuses and Statements of Additional Information.
THE REORGANIZATION
DESCRIPTION OF THE REORGANIZATION AGREEMENT
The Reorganization Agreement is the governing document of the
Reorganization. Among other things, it provides for (i) the transfer of all of
the assets and liabilities of the Funds to the Acquiring Funds in exchange for
shares of equal value of the same classes of the Acquiring Funds; and (ii) the
distribution of such Acquiring Funds' shares to shareholders of the Funds in
liquidation of the Funds. The completion of the Reorganization is conditioned
upon the Trust receiving an opinion from counsel that the exchange contemplated
under the Reorganization will be tax-free under federal law. The Reorganization
Agreement includes a number of other conditions for completion of the
Reorganization, sets forth representations and warranties of the parties and
describes the mechanics of the transaction.
The Reorganization Agreement also provides that the Reorganization may
be abandoned at any time before the Closing upon the mutual consent of a Fund
and its Acquiring Fund. At any time before or (to the extent permitted by law)
after approval of the agreement by the shareholders of the Fund: (i) the parties
may, by written agreement authorized by the Trust's Board of Trustees and with
or without the approval of their shareholders, amend any of the provisions of
the Reorganization Agreement; and (ii) either party may waive any default by the
other party or the failure to satisfy any of the conditions to its obligations
(the waiver is to be in writing and authorized by the Trust's Board of Trustees
with or without the approval of such party's shareholders).
Upon completion of the Reorganization, all outstanding shares of the
Funds will be canceled. Exchange or redemption requests received thereafter will
be deemed to be exchange or redemption requests for shares of the Acquiring
Funds.
Finally, the Reorganization provides that Banc of America Advisors,
Inc. ("BAAI") or its affiliates will bear all customary expenses associated with
the Reorganization.
A copy of the Reorganization Agreement is available at no charge by
calling or writing the Trust at the toll-free telephone number or address listed
on the first page of the Proxy/Prospectus. Copies of the Reorganization
Agreement also are available at the SEC's website (www.sec.gov).
REASONS FOR THE REORGANIZATION
The primary reason for the Reorganization relates to the long-term
viability of the Funds. The prospects for each Fund's long-term viability,
including the maintenance of stable and competitive expense ratios, are low
because of its small asset size and the belief that Fund assets are unlikely to
increase given current negative investor perceptions with respect to "value"
style investing as applied to enhanced-index mutual funds. Management believes
that the interests of the shareholders of the Funds would likely be better
served if the Funds participated in the Reorganization, thereby enabling
shareholders to own shares of an Acquiring Fund with significantly higher assets
(and correspondingly, potentially longer viability) than each Fund, while
allowing Fund shareholders to remain invested in a similar mutual fund in the
Nations Funds family. If the Funds were to continue to operate at their current
low asset levels, it is likely that the increased expense involved in operating
the Funds would eventually be passed on to Fund shareholders, thereby making an
investment in the Funds more expensive and potentially reducing shareholder
returns.
7
<PAGE>
Accordingly, management, including the Board of Trustees of the Trust,
believes that the proposed Reorganization should benefit Fund shareholders by,
among other things:
o Offering actual or potential reductions in total operating expense
ratios for Fund shareholders; and
o Offering shareholders the opportunity to remain invested in a
generally similar mutual fund in the Nations Funds family.
8
<PAGE>
BOARD CONSIDERATION
The Trust's Board of Trustees unanimously voted to approve the
Reorganization Agreement at a meeting held on December 9, 1999. During its
deliberations, the Board of Trustees (with the advice and assistance of its
counsel) reviewed and considered, among other things: (1) the various aspects of
the Reorganization and the terms of the Reorganization Agreement; (2) the
long-term viability of the Funds given their current asset levels and their
ability to attract additional assets given current negative investor perceptions
with respect to "value" style investing and industry trends with respect to
managed or enhanced index investment products; (3) the option of liquidating the
Funds; (4) the investment advisory and other fees paid by the Funds, and the
historical and projected expense ratios for the Funds, as compared with those of
the Acquiring Funds and industry peer groups; (5) the expected cost-savings (on
a pre-waiver and/or reimbursement basis) for all of the Funds' shareholders,
along with the expected cost-savings (on an after-waiver and/or reimbursement
basis) for all shareholders of the Managed SmallCap Value Index Fund; (6) the
investment objective, principal investment strategies and limitations of the
Funds and their relative compatibility with those of the Acquiring Funds, (7)
the historical investment performance records of the Funds and the Acquiring
Funds; (8) the fact that Fund shareholders would experience no change in
shareholder services with respect to their class of shares; (9) the terms and
conditions of the Reorganization Agreement; (10) the anticipated tax-free nature
of the exchange of shares in the Reorganization; (11) potential benefits of the
Reorganization, if any, to other persons, including BAAI and its affiliates
(e.g., the benefit of consolidating resources within BAAI and its affiliates).
The Board also considered BAAI's belief that the Reorganization would eliminate
certain duplicative shareholder costs (e.g., legal and accounting costs) and
reduce market overlap-that is, BAAI's belief that investors had not perceived a
significant enough difference between the Funds and their corresponding
Acquiring Funds to warrant offering both investment options. It also was noted
that BAAI or an affiliate would assume all customary expenses associated with
the Reorganization.
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
Trustees of the Trust, including all of the non-interested trustees, determined
that participation in the Reorganization, as contemplated by the Reorganization
Agreement, was in the best interests of the Funds and the Acquiring Funds, and
that neither the shares of the Funds nor the Acquiring Funds would be diluted as
a result of the Reorganization.
THE TRUST'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT FUND
SHAREHOLDERS APPROVE THE REORGANIZATION AGREEMENT.
FEDERAL INCOME TAX CONSIDERATIONS
The exchange of shares in connection with the Reorganization is
expected to be tax-free under federal law, as described below. The obligation of
the Funds and the Acquiring Funds to consummate the merger is conditioned upon
the receipt by the Trust of an opinion of Morrison & Foerster LLP reasonably
acceptable to the Trust substantially to the effect that, on the basis of the
representations set forth or referred to in the opinion, the acquisition of the
assets and liabilities of each Fund by the corresponding Acquiring Fund will be
treated for federal income tax purposes as a tax-free reorganization under
Section 368(a) of the Code and that each of the Fund and the corresponding
Acquiring Fund will be a party to the reorganization within the meaning of
Section 368(b) of the Code. It is expected that:
o Neither the Funds nor the Acquiring Funds will recognize any gain
or loss as a result of the Reorganization.
o A Fund shareholder will not recognize any gain or loss as a
result of the receipt of Acquiring Fund shares in exchange for
its Fund shares pursuant to the Reorganization.
o A Fund shareholder's aggregate tax basis for the Acquiring Fund
shares received pursuant to the Reorganization will equal its
aggregate tax basis in Fund shares held immediately before the
Reorganization.
o A Fund shareholder's holding period for the Acquiring Fund shares
received pursuant to the Reorganization will include the period
during which the Fund shares are held.
Regardless of whether the acquisition of the assets and liabilities of
each Fund by the Acquiring Fund qualifies as a tax-free reorganization as
described above, the sale of securities by the Funds prior to the
Reorganization, whether in the ordinary course of business or in anticipation of
the Reorganization, could result in a taxable distribution to the Funds'
shareholders.
9
<PAGE>
The above discussion summarizes the material federal income tax
consequences of the Reorganization that are applicable to Fund shareholders. It
is based on the Code, applicable Treasury Regulations, judicial authority, and
administrative rulings and practice, all as of the date of this Proxy/Prospectus
and all of which are subject to change, including changes with retroactive
effect. The discussion does not address any state, local or foreign tax
consequences of the Reorganization. A Fund shareholder's tax treatment may vary
depending upon its particular situation. A Fund shareholder may also be subject
to special rules not discussed below if such shareholder is a certain kind of
shareholder, including: an insurance company; a tax-exempt organization; a
financial institution or broker-dealer; a person who is neither a citizen nor
resident of the United States; a holder of Fund shares as part of a hedge,
straddle or conversion transaction; or a person that does not hold Fund shares
as a capital asset at the time of the Reorganization.
The Trust has not requested and will not request an advance ruling from
the Internal Revenue Service as to the tax consequences of the Reorganization or
any related transaction. The Internal Revenue Service may adopt positions
contrary to that discussed below and such positions could be sustained. A Fund
shareholder is urged to consult with its own tax advisors as to the particular
tax consequences of the merger to the Fund shareholder, including the
applicability and effect of any state, local or foreign laws, and the effect of
possible changes in applicable tax laws.
Each Fund and Acquiring Fund has qualified and intends to continue to
qualify, as a separate "regulated investment company" under the Code.
Accordingly, each Fund and Acquiring Fund has been, and expects to continue to
be, relieved of federal income tax liability.
CAPITALIZATION
The following tables show the total net assets, number of shares
outstanding and net asset value per share of each Fund and its acquiring Fund.
This information is generally referred to as the "capitalization" of each Fund
and Acquiring Fund. The term "PRO FORMA capitalization" means the expected
capitalization of the Acquiring Funds after they have combined with the Funds,
i.e., as if the Reorganization had already occurred.
These capitalization tables are based on figures as of October 31,
1999. The ongoing investment performance and daily share purchase and redemption
activity of each Fund affects capitalization. Therefore, the capitalization of
each Fund and Acquiring Fund on the Closing Date may vary from the
capitalization shown in the following table.
Current and PRO FORMA Capitalization Table For the Managed Value Index
Fund and the Managed Index Fund as of October 31, 1999
------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL NET ASSETS SHARES OUTSTANDING NET ASSET VALUE
---------------- ------------------ ---------------
PER SHARE
---------
<S> <C> <C> <C>
Managed Value Index Fund $4,211,413 367,746 $11.45
(Primary A shares) (Primary A shares) (Primary A shares)
$2,605,031 227,240 $11.46
(Investor A shares) (Investor A shares) (Investor A shares)
Managed Index Fund $645,454,029 31,637,445 $20.40
(Primary A shares) ( Primary A shares) (Primary A shares)
$54,268,028 2,659,920 $20.40
(Investor A shares) (Investor A shares) (Investor A shares)
PRO FORMA Managed Index Fund $649,665,442 31,843,887 $20.40
(Primary A shares) (Primary A shares) (Primary A shares)
$56,873,059 2,787,618 $20.40
(Investor A shares) (Investor A shares) (Investor A shares)
</TABLE>
10
<PAGE>
Current and PRO FORMA Capitalization Table For the Managed SmallCap Value Index
Fund and the SmallCap Index Fund as of October 31, 1999
-------------------------------------------------------
<TABLE>
<CAPTION>
TOTAL NET ASSETS SHARES OUTSTANDING NET ASSET VALUE
---------------- ------------------ ---------------
PER SHARE
---------
<S> <C> <C> <C>
Managed SmallCap Value Index Fund $3,281,135 341,207 $9.62
(Primary A shares) (Primary A shares) (Primary A shares)
$1,771,080 184,093 $9.62
(Investor A shares) (Investor A shares) (Investor A shares)
SmallCap Index Fund $189,698,315 16,115,599 $11.77
(Primary A shares) ( Primary A shares) (Primary A shares)
$8,687,827 738,798 $11.76
(Investor A shares) (Investor A shares) (Investor A shares)
PRO FORMA SmallCap Index Fund $192,979,450 16,394,370 $11.77
(Primary A shares) (Primary A shares) (Primary A shares)
$10,458,907 889,400 $11.76
(Investor A shares) (Investor A shares) (Investor A shares)
</TABLE>
The Acquiring Funds' financial highlights can be found in their
Prospectuses, which are incorporated by reference in this Proxy/Prospectus.
COMPARISON OF THE FUNDS AND THE ACQUIRING FUNDS
COMPARISON OF INVESTMENT OBJECTIVE AND PRINCIPAL INVESTMENT STRATEGIES
The investment objective and principal investment strategies of the
Funds and the Acquiring Funds are generally similar. The chart below compares
these aspects of each Fund and its corresponding Acquiring Fund. Additional
information about each Fund's and Acquiring Fund's investment objective and
principal investment strategies is contained in its Prospectus and Statement of
Additional Information.
Managed Value Index Fund and Managed Index Fund
-----------------------------------------------
The Managed Value Index Fund normally invests at least 80% of its
assets in common stocks that are included in the Standard & Poor's/BARRA Value
Index ("S&P/BARRA Value Index"). The Managed Index Fund normally invests at
least 80% of its assets in common stocks that are included in the Standard &
Poor's 500 Composite Stock Price Index ("S&P 500").
The primary difference between the Managed Value Index Fund and the
Managed Index Fund is that the Managed Value Index Fund pursues its objective by
investing in stocks in the S&P/BARRA Value Index. The S&P/BARRA Value Index is
designed to be a benchmark of the performance of value stocks, which are stocks
that have low price-to-book ratios relative to the S&P 500 as a whole.
Both mutual funds are actively managed, which means that an investment
team manages the funds' investment portfolio by actively selecting stocks. When
selecting investments for these funds, the team starts with the stocks included
on the S&P/BARRA Value Index (in the case of the Managed Value Index Fund), or
the S&P 500 (in the case of the Managed Index Fund). The team then ranks the
attractiveness of each stock on the relevant index using a quantitative
analysis, which takes into account value measures like book value, earnings
yield and cash flow to measure a stock's intrinsic worth versus its market
price. Each stock is assigned a ranking from 1 to 10 (best to worst). The Funds
will hold a slightly higher percentage of attractively ranked stocks than the
relevant index and hold a lower percentage--or none--of a less attractively
ranked stock.
Because the Managed Index Fund tries to maintain a portfolio of stocks
from the S&P 500, it has a broader and more diverse portfolio than the Managed
Value Index Fund, which tries to maintain a portfolio of stocks from the smaller
universe of stocks on the S&P/BARRA Value Index.
11
<PAGE>
<TABLE>
<CAPTION>
- --------------------- -------------------------------------------------- ------------------------------------------------
MANAGED VALUE INDEX FUND MANAGED INDEX FUND (ACQUIRING FUND)
- --------------------- -------------------------------------------------- ------------------------------------------------
<S> <C> <C>
Investment The Managed Value Index Fund seeks, over The Managed Index Fund seeks, over the
Objective: the long term, to provide a total return long term, to provide a total return that
that (before fees and expenses) exceeds the (before fees and expenses) exceeds the
total return of the S&P/BARRA Value Index. total return of the S&P 500.
- --------------------- --------------------------------------------------------- ------------------------------------------------
Investment The Managed Value Index Fund normally The Managed Index Fund normally invests
Policies: invests at least 80% of its assets in at least 80% of its assets in common
common stocks that are included in the stocks that are included in the S&P 500.
S&P/BARRA Value Index.
The management team tries to maintain a The management team tries to maintain a
portfolio that matches the industry and portfolio that matches the industry and
risk characteristics of the S&P/BARRA Value risk characteristics of the S&P 500. The
Index. The team will, from time to time, team will, from time to time, vary the
vary the number and percentages of the number and percentages of the Fund's
Fund's holdings to try to provide higher holdings to try to provide higher returns
returns than the S&P/BARRA Value Index than the S&P 500 and to reduce the risk
while reducing the risk of underperforming of underperforming the index over time.
the index over time.
The Fund usually holds 100 to 200 of the The Fund usually holds 300 to 400 of the
stocks included in the S&P/BARRA Value stocks included in the S&P 500.
Index.
The Fund may invest in securities that are The Fund may invest in securities that
not part of its principal investment are not part of its principal investment
strategies, but it will not hold more than strategies, but it will not hold more
10% of its assets in any one type of these than 10% of its assets in any one type of
securities. These securities are described these securities. These securities are in
its SAI. described in its SAI.
The Fund may also invest in financial The Fund may also invest in financial
futures traded on U.S. exchanges. futures traded on U.S. exchanges.
- --------------------- --------------------------------------------------------- ------------------------------------------------
</TABLE>
Managed SmallCap Value Index Fund and SmallCap Index Fund
---------------------------------------------------------
The Managed SmallCap Value Index Fund normally invests at least 80% of
its assets in common stocks that are included in the Standard & Poor's/BARRA
SmallCap Value Index ("S&P/BARRA SmallCap Value Index"). The Managed SmallCap
Index Fund normally invests at least 80% of its assets in common stocks that are
included in the Standard & Poor's SmallCap 600 Index ("S&P SmallCap 600").
One primary difference between the Managed SmallCap Value Index Fund
and the SmallCap Index Fund is that the Managed SmallCap Value Index Fund
pursues its objective by investing in stocks in the S&P/BARRA SmallCap Value
Index. The S&P/BARRA SmallCap Value Index is designed to be a benchmark of the
performance of value stocks, which are stocks that have low price-to-book ratios
relative to the S&P 600 as a whole.
A second primary difference is that the Managed SmallCap Value Index
Fund is actively managed whereas the SmallCap Index Fund is not. This difference
relates to whether the team actively picks stocks for a fund versus passively
buying stocks seeking to replicate the composition of an index. In the case of
the Managed SmallCap Value Index Fund, the team actively selects stocks for the
Fund. When selecting investments for the Fund, the team starts with the stocks
included on the S&P/BARRA SmallCap Value Index. The team then ranks the
attractiveness of each stock on the S&P/BARRA SmallCap Value Index using a
quantitative analysis, which takes into account
12
<PAGE>
value measures like book value, earnings yield and cash flow to measure a
stock's intrinsic worth versus its market price. Each stock is assigned a
ranking from 1 to 10 (best to worst). The Fund will hold a slightly higher
percentage of attractively ranked stocks than the relevant index and hold a
lower percentage--or none--of a less attractively ranked stock.
For the SmallCap Index Fund, on the other hand, the team tries to
maintain a portfolio that matches the S&P SmallCap 600. Accordingly, it has a
broader and more diverse portfolio than the Managed SmallCap Value Index Fund
because it invests in a larger number of stocks.
<TABLE>
<CAPTION>
- --------------------- ----------------------------------------------- -------------------------------------------------
MANAGED SMALLCAP VALUE INDEX FUND SMALLCAP INDEX FUND (ACQUIRING FUND)
--------------------------------- -------------------
- --------------------- ----------------------------------------------- -------------------------------------------------
<S> <C> <C>
Investment The Managed SmallCap Value Index Fund The SmallCap Index Fund seeks, over the
Objective: seeks, over the long term, to provide a long term, to provide a total return that
total return that (before fees and (before fees and expenses) corresponds to
expenses) exceeds the total return of the total return of the S&P SmallCap 600.
the S&P/BARRA SmallCap Value Index.
- --------------------- ----------------------------------------------- -------------------------------------------------
Investment The Managed SmallCap Value Index Fund The SmallCap Index Fund normally invests
Policies: normally invests at least 80% of its at least 80% of its assets in common
assets in common stocks that are stocks that are included in the S&P
included in the S&P/BARRA SmallCap Value SmallCap 600.
Index.
The management team tries to maintain a The management team tries to maintain a
portfolio that matches the industry and portfolio that matches the industry and
risk characteristics of the S&P/BARRA risk characteristics of the S&P SmallCap
SmallCap Value Index. The team will, 600. The team will, from time to time,
from time to time, vary the number and vary the number and percentages of the
percentages of the Fund's holdings to Fund's holdings to try to provide higher
try to provide higher returns than the returns than the S&P SmallCap 600 while
S&P/BARRA SmallCap Value Index while reducing the risk of underperforming the
reducing the risk of underperforming the index over time.
index over time.
The Fund usually holds 200 to 300 of the The Fund usually holds 400 to 500 of the
stocks. stocks included in the S&P SmallCap 600.
The Fund may invest in securities that The Fund may invest in securities that are
are not part of its principal investment not part of its principal investment
strategies, but it will not hold more strategies, but it will not hold more than
than 10% of its assets in any one type 10% of its assets in any one type of these
of these securities. These securities securities. These securities are
are described in its SAI. described in its SAI.
The Fund may also invest in financial The Fund may also invest in financial
futures traded on U.S. exchanges. futures traded on U.S. exchanges.
- --------------------- ----------------------------------------------- -------------------------------------------------
</TABLE>
COMPARISON OF FUND AND ACQUIRING FUND PERFORMANCE
For a comparison of the performance of the Funds and their
corresponding Acquiring Funds, by class, see Appendix II. Of course, a Fund's or
Acquiring Fund's past performance is no guarantee of how it will perform in the
future.
13
<PAGE>
COMPARISON OF ADVISORY AND OTHER SERVICE ARRANGEMENTS AND FEES
The Funds and the Acquiring Funds have the same service providers. Upon
completion of the Reorganization, these service providers will continue to serve
the Acquiring Funds in the capacities indicated below.
SERVICE PROVIDERS FOR THE FUNDS AND THE ACQUIRING FUNDS
-------------------------------------------------------
Investment Adviser BAAI
Investment Sub-Adviser Banc of America Capital
Management, Inc. ("BACAP")
Distributor Stephens Inc. ("Stephens")
Co-Administrator BAAI
Co-Administrator Stephens
Sub-Administrator The Bank of New York
Custodian The Bank of New York
Transfer Agent PFPC Inc.
Sub-Transfer Agent Bank of America, N.A. ("Bank of
America") (for Primary A shares
only)
Independent Accountants PricewaterhouseCoopers LLP
Investment Advisory Services. BAAI serves as the investment adviser for
each Fund. Each Fund pays an advisory fee, computed daily and paid monthly, to
BAAI based on each Fund's average daily net assets. Currently, the maximum
advisory fee rate for each of the Funds is 0.40%. The maximum advisory fee rate
for each of the Acquiring Funds also is 0.40%. BACAP is the investment
sub-adviser for each Fund. BAAI pays BACAP sub-advisory fees, computed daily and
paid monthly, at the maximum annual rate of 0.10% of the Funds' and Acquiring
Funds' average daily net assets. BAAI and BACAP are registered investment
advisers and wholly-owned subsidiaries of Bank of America. Currently, BAAI
advises over 70 mutual funds in the Nations Funds family and BACAP has over 200
institutional clients and sub-advises more than 50 mutual funds in the Nations
Funds family.
The following table shows the investment advisory fees, both before and
after waivers, for the Funds and their Acquiring Funds (as of October 31, 1999).
INVESTMENT ADVISORY FEE INFORMATION
-----------------------------------
<TABLE>
<CAPTION>
<S> <C> <C> <C>
FUND ADVISORY FEES ACQUIRING FUND PRO FORMA ADVISORY FEES
- ---- BEFORE/AFTER WAIVERS -------------- BEFORE/ AFTER WAIVERS
- ---- -------------------- ---------------------
Managed Value Index Fund Managed Index Fund
Advisory Fee 0.40%/0.00% Advisory Fee 0.40%/0.17%
Managed SmallCap Value Index Fund SmallCap Index Fund
Advisory Fee 0.40%/0.00% Advisory Fee 0.40%/0.05%
</TABLE>
Administration Services. Stephens and BAAI are the co-administrators
for the Funds and Acquiring Funds. Stephens and BAAI provide the Funds and
Acquiring Funds with administrative services, including, among other things,
general supervision of their non-investment operations, preparation of proxy
statements and shareholder reports and general supervision of data completion in
connection with preparing periodic reports to the Board of
14
<PAGE>
Trustees and officers of the Trust. For these services and the assumption of
expenses, Stephens and BAAI are entitled to a monthly fee, in the aggregate, at
the annual rate of 0.23% of the Funds' and Acquiring Funds' average daily net
assets.
Distribution and Shareholder Servicing Arrangements. Shares of the
Funds and Acquiring Funds are distributed by Stephens, a broker-dealer
registered under the Securities Exchange Act of 1934 (the "1934 Act").
INVESTOR A SHARES. Pursuant to combined distribution and shareholder
servicing plans adopted pursuant to Rule 12b-1 under the Act by the Funds and
Acquiring Funds for their Investor A shares, each Fund and Acquiring Fund may
compensate Stephens for any activities or expenses primarily intended to result
in the sale of Investor A shares, including sales related services provided by
banks, broker/dealers or other financial institutions ("Selling Agents") that
have entered into a sales support agreement with Stephens. In addition, each
Fund and Acquiring Fund may compensate or reimburse broker/dealers, banks and
other financial institutions ("Servicing Agents") which provide shareholder
support services to their customers who own Investor A shares. This shareholder
servicing and distribution plan provides that each Fund may pay Stephens,
Selling Agents that have entered into a sales support agreement with Stephens,
or Servicing Agents that have entered into a Shareholder Servicing Agreement
with the Funds up to 0.25% (on an annualized basis) of the average daily net
asset value of the Investor A shares of the Funds.
PRIMARY A SHARES. Primary A shares of the Funds are not subject to any
distribution or shareholder servicing fees and, accordingly, the Funds have not
adopted any related plans.
COMPARISON OF PURCHASE, REDEMPTION, DISTRIBUTION AND EXCHANGE POLICIES
AND OTHER SHAREHOLDER TRANSACTIONS AND SERVICES
The Reorganization will not result in any change to a Fund
shareholder's class of shares. A Fund shareholder of Investor A shares will,
immediately after the Reorganization, hold Investor A shares in the Acquiring
Fund and a Primary A Fund shareholder will hold Primary A shares in the
Acquiring Fund. Accordingly, all of the purchase, redemption, distribution,
exchange policies and other shareholder transactions and services applicable to
a shareholder's share class will remain unaffected and unchanged by the
Reorganization. As noted, no sales charge or sales load will be imposed in
connection with the exchange of shares in the Reorganization.
VOTING MATTERS
GENERAL INFORMATION
This Proxy/Prospectus is being furnished in connection with the
solicitation of proxies for the Meetings by the Board of Trustees of the Trust.
It is expected that the solicitation of proxies will be primarily by mail.
Officers and service contractors of the Trust also may solicit proxies by
telephone or otherwise. In this connection, the Trust has retained ADP Proxy
Services to assist in the solicitation of proxies for the Reorganization.
Shareholders may submit their proxy: (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; (3) by touch-tone 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
the Trust a written notice of revocation to the Trust at the address shown on
the cover page of this Proxy/Prospectus, or a subsequently executed proxy or by
attending the Meetings 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 BAAI or its affiliates.
Only shareholders of record at the close of business on January 10,
2000 will be entitled to vote at the Meetings. On that date, the following
shares were outstanding and entitled to be voted.
FUND SHARES ENTITLED TO VOTE
- ---- -----------------------
MANAGED VALUE INDEX FUND .........................439,142
MANAGED SMALLCAP VALUE INDEX FUND ................331,909
Each whole and fractional share of a Fund is entitled to a whole or
fractional vote.
15
<PAGE>
If the accompanying proxy is executed and returned in time for the
Meetings, the shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Meetings.
SHAREHOLDER AND BOARD APPROVALS. The Reorganization Agreement is being
submitted for approval at the Meetings by the Funds' shareholders pursuant to
the Trust's Declaration of Trust and Code of Regulations, and was unanimously
approved by the Trust's Board of Trustees at a meeting held on December 9, 1999.
The Reorganization Agreement must be approved by a majority of the shares of
each Fund present and voting at the Meetings.
The Reorganization Agreement provides that in the event the
Reorganization Agreement is approved with respect to less than both of the
Funds, the failure of one Fund to consummate the transactions contemplated by
the Reorganization Agreement shall not affect the consummation or validity of
the Reorganization with respect to the other Fund. It is possible that a
majority of one Fund's shareholders may approve the Reorganization Agreement
while a sufficient majority of the shareholders of the other Fund do not approve
the Reorganization. In such a case, the Fund whose shareholders approved the
Reorganization Agreement will be reorganized pursuant to the terms of the
Reorganization Agreement. The Board of Trustees will contemplate what further
action is appropriate should one or both of the Funds not approve the
Reorganization Agreement.
The vote of the shareholders of the Acquiring Funds is not being
solicited, since their approval or consent is not necessary for the
Reorganization.
PRINCIPAL SHAREHOLDERS. The table below shows the name, address and
share ownership of each person known to the Trust to have ownership with respect
to 5% or more of a class of a Fund and/or Acquiring Fund as of January 10, 2000.
Each shareholder is known to own as of record the shares indicated below. Any
shareholder known to the Trust to own such shares beneficially is designated by
an asterisk.
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PERCENTAGE OF
CLASS AMOUNT OF PERCENTAGE OF PERCENTAGE FUND POST
FUND NAME AND ADDRESS SHARES OWNED CLASS OF FUND CLOSING
- ---------------------------- ------------------------------ -------------------- --------------- ---------------- ---------------
MANAGED VALUE INDEX Charles Schwab & Co., Inc. Investor A 40.37% 19.51% 0.25%
FBO Customers 85,692.960
101 Montgomery Street
San Francisco, CA 94104
Donaldson Lufkin Jenrette Investor A 6.56% 3.17% 0.04%
PO Box 2052 13,918.240
Jersey City, NJ 07303-9998
NFSC FEBO #W55-629405 Investor A 5.16% 2.49% 0.03%
4242 N Capistrano #217 10,954.440
Dallas, TX 75287
Bank of America, N.A. Primary A 57.65% 29.79% 0.38%
Attn: Tony Farrer 130,813.650
1401 Elm Street, 11th Floor
Dallas, TX 75202-2911
Charles Schwab & Co., Inc. Primary A 30.77% 15.90% 0.21%
FBO Customers 69,819.960
101 Montgomery Street
San Francisco, CA 94104
MANAGED SMALLCAP VALUE Charles Schwab & Co., Inc. Investor A 58.18% 29.73% 0.68%
INDEX FBO Customers 98,667.170
101 Montgomery Street
San Francisco, CA 94104
Charles Schwab & Co., Inc. Primary A 35.51% 17.37% 0.39%
FBO Customers 57,643.840
101 Montgomery Street
San Francisco, CA 94104
</TABLE>
16
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
PERCENTAGE OF
CLASS AMOUNT OF PERCENTAGE OF PERCENTAGE FUND POST
FUND NAME AND ADDRESS SHARES OWNED CLASS OF FUND CLOSING
- ---------------------------- ------------------------------ -------------------- --------------- ---------------- ---------------
Bank of America, N.A. Primary A 28.25% 13.81% 0.31%
Attn: Tony Farrer 45,852.840
1401 Elm Street, 11th Floor
Dallas, TX 75202-2911
Michael Larkin TTEE Primary A 12.24% 5.99% 0.14%
Larkin IRREV Family Trust 19,875.490
8665 Bay Colony Dr., Apt. 702
Naples, FL 34108
Donaldson Lufkin Jenrette Primary A 6.48% 3.17% 0.07%
PO Box 2052 10,524.700
Jersey City, NJ 07303-9998
National Investor Services Primary A 5.52% 2.70% 0.06%
FBO 512-50919-17 8,957.470
55 Walter Street, 32nd Floor
New York, NY 10041
MANAGED INDEX Muir & Co. Investor A 6.19% 0.46% 0.46%
C/O Frost National Bank 155,166.700
PO Box 2479
San Antonio, TX 78298-2479
Charles Schwab & Co., Inc. Investor A 6.16% 0.46% 0.45%
FBO Customers 154,516.590
101 Montgomery Street
San Francisco, CA 94104
Bank of America, N.A. Primary A 93.64% 86.64% 85.53%
Attn: Tony Farrer 29,086,908.550
1401 Elm Street, 11th Floor
Dallas, TX 75202-2911
Pamela & William Keene JTWR Primary B 99.77% 0.00% 0.00%
2016 Englewood Dr. 246,440
Apex, NC 27502
MANAGED SMALLCAP INDEX Charles Schwab & Co., Inc. Investor A 37.41% 1.56% 1.53%
FBO Customers 223,240.440
101 Montgomery Street
San Francisco, CA 94104
Dade Community Foundation, Investor A 7.19% 0.30% 0.29%
Inc. 42,906.400
200 South Biscayne Blvd., S
Miami, FL 33131-2343
Balsa & Co. Investor A 5.88% 0.25% 0.24%
C/O Chase Manhattan Bank 35,088.330
PO Box 1768 Grand Central
Station
New York, NY 10163-1768
Bank of America, N.A. Primary A 88.85% 85.14% 83.20%
Attn: Tony Farrer 12,144,915.240
1401 Elm Street, 11th Floor
Dallas, TX 75202-2911
Bank of America, N.A. Primary A 8.76% 8.39% 8.20%
Attn: Tony Farrer 1,196,770.960
1401 Elm Street, 11th Floor
Dallas, TX 75202-2911
</TABLE>
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
17
<PAGE>
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. As of January 10, 2000, Bank of America
had voting control of 29.79% of the Managed Value Index Fund's outstanding
shares. Accordingly, the Bank of America may be considered to "control" the
Fund. The address of Bank of America is: 1401 Elm Street, 11th Floor, Dallas, TX
75202-2911. It is possible that the effect of the bank's control would be the
increased likelihood that the Fund's shareholders will approve the
Reorganization.
As of January 10, 2000, the officers and trustees of the Trust, as a
group, owned less than 1% of any class of any Fund or Acquiring Fund.
QUORUM. In the event that a quorum is not present at the Meetings, or
in the event that a quorum is present at the Meetings but sufficient votes to
approve the Reorganization Agreement are not received by one or more of the
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 Meetings without notice except announcement at the Meetings. 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 Meetings 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 Fund (but not the other Fund)
on some or all matters before any such adjournment(s) if a quorum is present and
sufficient votes have been received for approval with respect to such Fund.
A quorum is constituted with respect to a Fund by the presence in
person or by proxy of the holders of more than one-half of the outstanding
shares of a Fund entitled to vote at the Meetings. For purposes of determining
the presence of a quorum for transacting business at the Meetings, abstentions
will be treated as shares that are present at the Meetings 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. The Trust presently does not
hold annual meetings of shareholders for the election of Trustees and other
business unless otherwise required by the 1940 Act.
ADDITIONAL INFORMATION ABOUT THE TRUST
Additional information about the Funds is included in their
Prospectuses and Statements of Additional Information dated August 1, 1999, as
supplemented, copies of which, to the extent not included herewith, may be
obtained without charge by writing or calling the Trust at the address and
telephone number set forth on the first page of this Proxy/Prospectus. The Trust
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 the Trust 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 the Trust 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.
In addition, the SEC maintains a web site (www.sec.gov) that contains reports,
other information and proxy statements filed by the Trust.
Officers of the Trust are elected by, and serve at the pleasure of, the
Board of Trustees. Officers of the Trust receive no remuneration from the Trust
for their services in such capacities.
Information included in this Proxy/Prospectus concerning the Trust was
provided by the Trust.
18
<PAGE>
FINANCIAL STATEMENTS
The audited financial statements and financial highlights for shares of
the Funds for the annual period ended March 31, 1999 are 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 Funds
for the semi-annual period ended September 30, 1999 are incorporated by
reference in their prospectuses or statements of additional information or in
the statement of additional information related to this Proxy/Prospectus.
The annual financial statements and financial highlights of the Funds
for the year ended March 31, 1999 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.
OTHER BUSINESS
The Trust's Board of Trustees knows of no other business to be brought
before the Meetings. However, if any other matters properly come before the
Meetings, 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 the Trust 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 BALLOT(S) AND RETURN IT IN
THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES.
SHAREHOLDERS ALSO MAY SUBMIT PROXIES BY TELEFACSIMILE, TELEPHONE OR ON-LINE.
THE TRUST WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS MARCH 31, 1999
ANNUAL REPORT, OR SEPTEMBER 30, 1999 SEMI-ANNUAL REPORT, TO ANY SHAREHOLDER UPON
REQUEST ADDRESSED TO: NATIONS FUND TRUST, ONE BANK OF AMERICA PLAZA, 101 SOUTH
TRYON STREET, CHARLOTTE, N.C. 28255 OR BY TELEPHONE AT 1-800-321-7854.
19
<PAGE>
APPENDIX I
EXPENSE SUMMARIES OF THE MANAGED VALUE INDEX FUND, MANAGED INDEX
FUND, MANAGED SMALLCAP VALUE INDEX FUND AND SMALLCAP INDEX FUND
-----------------------------------------------
The following tables (a) compare the fees and expenses as of October
31, 1999, for each class of the Funds and the corresponding class of the
Acquiring Funds, and (b) show the estimated fees and expenses for the combined
Fund on a PRO FORMA basis after giving effect to the Reorganization. The Funds'
total expense ratios reflect limitations that management has put in place as of
October 31, 1999. 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.
The Reorganization contemplates the reorganization of the Managed
SmallCap Value Index Fund into the SmallCap Index Fund. As of the date of this
Proxy/Prospectus, the SmallCap Index Fund is operating under a different name,
investment objective and principal investment strategies. Accordingly, the
current fees and expenses and related examples shown in this Appendix are for
the Nations Managed SmallCap Index Fund. On or before the closing of the
Reorganization (which is expected to be on May 12, 2000), the Nations Managed
SmallCap Index Fund will be re-named the SmallCap Index Fund, and will have the
investment objective, principal investment strategies and investment risks
described in this Proxy/Prospectus.
I-1
<PAGE>
MANAGED VALUE INDEX FUND-PRIMARY A SHARES
AND
MANAGED INDEX FUND-PRIMARY A SHARES
<TABLE>
<CAPTION>
- ---------------------------------------------------------- ----------------- ------------------ -------------------
PRIMARY A SHARES MANAGED INDEX
FUND
MANAGED VALUE PRO FORMA
INDEX FUND MANAGED INDEX (AFTER
FUND REORGANIZATION)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
<S> <C> <C> <C>
SHAREHOLDER FEES
- ---------------------------------------------------------- ----------------- ------------------ -------------------
(Fees paid directly from your investment)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Maximum sales charge (load) imposed on purchases none none none
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Maximum deferred sales charge (load) none none none
- ---------------------------------------------------------- ----------------- ------------------ -------------------
ANNUAL FUND OPERATING EXPENSES(1)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
(Expenses that are deducted from the Fund's assets)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Management fees 0.40% 0.40% 0.40%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Other expenses 3.46% 0.33% 0.33%
----- ----- -----
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Total annual Fund operating expenses 3.86% 0.73% 0.73%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Fee waivers and/or reimbursements (3.36)% (0.23)% (0.23)%
------- -------- -------
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Total net expenses(2) 0.50% 0.50% 0.50%
======= ======= =======
- ---------------------------------------------------------- ----------------- ------------------ -------------------
----------------------------------
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until July 31,
2000. The figures shown here are after waivers and/or reimbursements. There is
no guarantee that these waivers and/or reimbursements will continue after this
date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you invest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
o the waivers and/or reimbursements shown above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<CAPTION>
-------------------------------- ------------- ------------- -------------- -----------------
<S> <C> <C> <C> <C>
PRIMARY A SHARES 1 year 3 years 5 years 10 years
-------------------------------- ------------- ------------- -------------- -----------------
Managed Value Index Fund $51 $867 $1,702 $3,873
-------------------------------- ------------- ------------- -------------- -----------------
Managed Index Fund $51 $210 $383 $885
-------------------------------- ------------- ------------- -------------- -----------------
Managed Index Fund PRO FORMA $51 $210 $383 $885
(after reorganization)
-------------------------------- ------------- ------------- -------------- -----------------
</TABLE>
I-2
<PAGE>
MANAGED SMALLCAP VALUE INDEX FUND-PRIMARY A SHARES
AND
SMALLCAP INDEX FUND-PRIMARY A SHARES
<TABLE>
<CAPTION>
- ---------------------------------------------------------- ----------------- ------------------ ----------------------
<S> <C> <C> <C>
PRIMARY A SHARES SMALLCAP INDEX FUND
MANAGED PRO FORMA
SMALLCAP VALUE (AFTER
INDEX FUND SMALLCAP INDEX REORGANIZATION)
FUND(1)
- ---------------------------------------------------------- ----------------- ------------------ ----------------------
SHAREHOLDER FEES
- ---------------------------------------------------------- ----------------- ------------------ ----------------------
(Fees paid directly from your investment)
- ---------------------------------------------------------- ----------------- ------------------ ----------------------
Maximum sales charge (load) imposed on purchases none none none
- ---------------------------------------------------------- ----------------- ------------------ ----------------------
Maximum deferred sales charge (load) none none none
- ---------------------------------------------------------- ----------------- ------------------ ----------------------
ANNUAL FUND OPERATING EXPENSES(2)
- ---------------------------------------------------------- ----------------- ------------------ ----------------------
(Expenses that are deducted from the Fund's assets)
- ---------------------------------------------------------- ----------------- ------------------ ----------------------
Management fees 0.40% 0.40% 0.40%
- ---------------------------------------------------------- ----------------- ------------------ ----------------------
Other expenses 4.43% 0.42% 0.41%
----- ----- -----
- ---------------------------------------------------------- ----------------- ------------------ ----------------------
Total annual Fund operating expenses 4.83% 0.82% 0.81%
- ---------------------------------------------------------- ----------------- ------------------ ----------------------
Fee waivers and/or reimbursements (4.33)% (0.32)% (0.41)%
------- ------- -------
- ---------------------------------------------------------- ----------------- ------------------ ----------------------
Total net expenses(3) 0.50% 0.50% 0.40%
======= ======= =====
- ---------------------------------------------------------- ----------------- ------------------ ----------------------
----------------------------------------
(1) The SmallCap Index Fund was, as of October 31, 1999, conducting
business as Nations Managed SmallCap Index Fund.
(2) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(3) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until July 31,
2000. The figures shown here are after waivers and/or reimbursements. There is
no guarantee that these waivers and/or reimbursements will continue after this
date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Primary A Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you invest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
o the waivers and/or reimbursements shown above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<CAPTION>
-------------------------------- ------------- -------------- ------------- --------------------
<S> <C> <C> <C> <C>
Primary A Shares 1 year 3 years 5 years 10 years
-------------------------------- ------------- -------------- ------------- --------------------
Managed SmallCap Value Index
Fund $51 $1,062 $2,077 $4,629
-------------------------------- ------------- -------------- ------------- --------------------
SmallCap Index Fund $51 $230 $424 $984
-------------------------------- ------------- -------------- ------------- --------------------
SmallCap Index Fund PRO FORMA $41 $218 $409 $963
(after reorganization)
-------------------------------- ------------- -------------- ------------- --------------------
</TABLE>
I-3
<PAGE>
MANAGED VALUE INDEX FUND-INVESTOR A SHARES
AND
MANAGED INDEX FUND-INVESTOR A SHARES
<TABLE>
<CAPTION>
- ---------------------------------------------------------- ----------------- ------------------ -------------------
<S> <C> <C> <C>
INVESTOR A SHARES MANAGED INDEX
FUND
MANAGED VALUE PRO FORMA
INDEX FUND MANAGED INDEX (AFTER
FUND REORGANIZATION)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
SHAREHOLDER FEES
- ---------------------------------------------------------- ----------------- ------------------ -------------------
(Fees paid directly from your investment)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Maximum sales charge (load) imposed on purchases none none none
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Maximum deferred sales charge (load) none none none
- ---------------------------------------------------------- ----------------- ------------------ -------------------
ANNUAL FUND OPERATING EXPENSES(1)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
(Expenses that are deducted from the Fund's assets)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Management fees 0.40% 0.40% 0.40%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Distribution (12b-1) and shareholders servicing fees 0.25% 0.25% 0.25%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Other expenses 3.46% 0.33% 0.33%
----- ----- ------
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Total annual Fund operating expenses 4.11% 0.98% 0.98%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Fee waivers and/or reimbursements (3.36)% (0.23)% (0.23%)
------- ------- -------
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Total net expenses(2) 0.75% 0.75% 0.75%
======= ======= =====
- ---------------------------------------------------------- ----------------- ------------------ -------------------
----------------------------------------
(1) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(2) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until July 31,
2000. The figures shown here are after waivers and/or reimbursements. There is
no guarantee that these waivers and/or reimbursements will continue after this
date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you invest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
o the waivers and/or reimbursements shown above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<CAPTION>
--------------------------------- ------------- -------------- ------------- ---------------------
<S> <C> <C> <C> <C>
Investor A Shares 1 year 3 years 5 years 10 years
--------------------------------- ------------- -------------- ------------- ---------------------
Managed Value Index Fund $77 $941 $1,821 $4,091
--------------------------------- ------------- -------------- ------------- ---------------------
Managed Index Fund $77 $289 $519 $1,180
--------------------------------- ------------- -------------- ------------- ---------------------
Managed Index Fund PRO FORMA $77 $289 $519 $1,180
(after reorganization)
--------------------------------- ------------- -------------- ------------- ---------------------
</TABLE>
I-4
<PAGE>
MANAGED SMALLCAP VALUE INDEX FUND-INVESTOR A SHARES
AND
SMALLCAP INDEX FUND-INVESTOR A SHARES
<TABLE>
<CAPTION>
- ---------------------------------------------------------- ----------------- ------------------ -------------------
<S> <C> <C> <C>
INVESTOR A SHARES SMALLCAP INDEX
MANAGED FUND
SMALLCAP VALUE PRO FORMA
INDEX FUND SMALLCAP INDEX (AFTER
FUND(1) REORGANIZATION)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
SHAREHOLDER FEES
- ---------------------------------------------------------- ----------------- ------------------ -------------------
(Fees paid directly from your investment)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Maximum sales charge (load) imposed on purchases none none none
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Maximum deferred sales charge (load) none none none
- ---------------------------------------------------------- ----------------- ------------------ -------------------
ANNUAL FUND OPERATING EXPENSES(2)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
(Expenses that are deducted from the Fund's assets)
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Management fees 0.40% 0.40% 0.40%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Distribution (12b-1) and shareholders servicing fees 0.25% 0.25% 0.25%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Other expenses 4.43% 0.42% 0.41%
----- ----- -----
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Total annual Fund operating expenses 5.08% 1.07% 1.06%
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Fee waivers and/or reimbursements (4.33)% (0.32)% (0.41%)
------- ------- -------
- ---------------------------------------------------------- ----------------- ------------------ -------------------
Total net expenses(3) 0.75% 0.75% 0.65%
======= ======= =======
- ---------------------------------------------------------- ----------------- ------------------ -------------------
------------------------------------------
(1) The SmallCap Index Fund was, as of October 31, 1999, conducting
business as Nations Managed SmallCap Index Fund.
(2) The figures contained in the above table are based on amounts
incurred during the Fund's most recent fiscal year and have been adjusted, as
necessary, to reflect current service provider fees.
(3) The Fund's investment adviser and/or some of its other service
providers have agreed to waive fees and/or reimburse expenses until July 31,
2000. The figures shown here are after waivers and/or reimbursements. There is
no guarantee that these waivers and/or reimbursements will continue after this
date.
EXAMPLE
This example is intended to help you compare the cost of investing in
this Fund with the cost of investing in other mutual funds.
This example assumes:
o you invest $10,000 in Investor A Shares of the Fund for the time
periods indicated and then sell all of your shares at the end of
those periods
o you invest all dividends and distributions in the Fund
o your investment has a 5% return each year
o the Fund's operating expenses remain the same as shown in the
table above
o the waivers and/or reimbursements shown above expire July 31,
2000 and are not reflected in the 3, 5 and 10 year examples
Although your actual costs may be higher or lower, based on these
assumptions your costs would be:
<CAPTION>
---------------------------- ------------- ------------- ------------- --------------
<S> <C> <C> <C> <C>
Investor A Shares 1 year 3 years 5 years 10 years
---------------------------- ------------- ------------- ------------- --------------
Managed SmallCap Value
Index Fund $77 $1,135 $2,192 $4,826
---------------------------- ------------- ------------- ------------- --------------
SmallCap Index Fund $77 $309 $559 $1,277
---------------------------- ------------- ------------- ------------- --------------
SmallCap Index Fund PRO $66 $296 $545 $1,257
FORMA
(after reorganization)
---------------------------- ------------- ------------- ------------- --------------
</TABLE>
I-5
<PAGE>
APPENDIX II--COMPARISON OF PERFORMANCE
NATIONS MANAGED VALUE INDEX FUND - PRIMARY A SHARES
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect deductions of
sales charges or account fees, if any, and would be lower if they did.
[BAR CHART APPEARS HERE]
1997 1998 1999
2.71%* 13.71% 9.58%
*Return is from inception (11-24-97) to 12-31-97.
YEAR-TO-DATE RETURN AS OF DECEMBER 31, 1999: 9.58%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
BEST: 4th quarter 1998: 17.06%
WORST: 3rd quarter 1998: -12.56%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
The table shows the Fund's average annual total return for each period,
compared with the S&P/BARRA Value Index, an unmanaged index of a group of stocks
included in the S&P 500 that have low price-to-book ratios relative to the S&P
500 as a whole. The index is weighted by market capitalization, and is not
available for investment.
Since
1 year inception
Primary A Shares 9.58% 12.46%
S&P/BARRA Value Index 12.72% 14.31%
II-1
<PAGE>
NATIONS MANAGED VALUE INDEX FUND - INVESTOR A SHARES
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect deductions of
sales charges or account fees, if any, and would be lower if they did.
[BAR CHART APPEARS HERE]
1997 1998 1999
2.67%* 13.56% 9.27%
*Return is from inception (11-24-97) to 12-31-97
YEAR-TO-DATE RETURN AS OF DECEMBER 31, 1999: 9.27%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
BEST: 4th quarter 1998: 17.01%
WORST: 3rd quarter 1998: -12.56%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
The table shows the Fund's average annual total return for each period
compared with the S&P/BARRA Value Index, an unmanaged index of a group of stocks
included in the S&P 500 that have low price-to-book ratios relative to the S&P
500 as a whole. The index is weighted by market capitalization, and is not
available for investment.
Since
1 year inception
Investor A Shares 9.27% 12.22%
S&P/BARRA Value Index 12.72% 14.31%
II-2
<PAGE>
NATIONS MANAGED INDEX FUND - PRIMARY A SHARES
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect deductions of
sales charges or account fees, if any, and would be lower if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998 1999
17.00%* 33.46% 26.64% 17.70%
*Return is from inception (7-31-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF DECEMBER 31, 1999: 17.70%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
BEST: 4th quarter 1998: 20.98%
WORST: 3rd quarter 1998: -10.62%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common stocks,
weighted by market capitalization. The index is not available for investment.
Since
1 year inception
Primary A Shares 17.70% 28.02%
S&P 500 21.04% 29.60%
II-3
<PAGE>
NATIONS MANAGED INDEX FUND - INVESTOR A SHARES
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect deductions of
sales charges or account fees, if any, and would be lower if they did.
[BAR CHART APPEARS HERE]
1996 1997 1998 1999
16.95%* 33.19% 26.33% 17.41%
*Return is from inception (7-31-96) to 12-31-96
YEAR-TO-DATE RETURN AS OF DECEMBER 31, 1999: 17.41%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
BEST: 4th quarter 1998: 20.91%
WORST: 3rd quarter 1998: -10.67%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
The table shows the Fund's average annual total return for each period,
compared with the S&P 500, an unmanaged index of 500 widely held common stocks,
weighted by market capitalization. The S&P 500 is not available for investment.
Since
1 year inception
Investor A Shares 17.41% 27.75%
S&P 500 21.04% 29.60%
II-4
<PAGE>
NATIONS MANAGED SMALLCAP VALUE INDEX FUND - PRIMARY A SHARES
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from year to year. These returns do not reflect deductions of
sales charges or account fees, if any, and would be lower if they did.
[BAR CHART APPEARS HERE]
1997 1998 1999
4.13%* -2.90% 1.73%
*Return is from inception (11-24-97) to 12-31-97.
YEAR-TO-DATE RETURN AS OF DECEMBER 31, 1999: 1.73%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
BEST: 4th quarter 1998: 12.36%
WORST: 3rd quarter 1998: -20.07%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
The table shows the Fund's average annual total return for each period,
compared with the S&P/BARRA SmallCap Value Index, an unmanaged index of a group
of stocks included in the S&P SmallCap 600 that have low price-to-book ratios
relative to the S&P SmallCap 600 as a whole. The index is weighted by market
capitalization and is not available for investment.
Since
1 year inception
Primary A Shares 1.73% 1.35%
S&P/BARRA SmallCap Value Index 3.03% 0.31%
II-5
<PAGE>
NATIONS MANAGED SMALLCAP VALUE INDEX FUND - INVESTOR A SHARES
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect deductions of
sales charges or account fees, if any, and would be lower if they did.
[BAR CHART APPEARS HERE]
1997 1998 1999
4.10%* -3.12% 1.47%
*Return is from inception (11-24-97) to 12-31-97.
YEAR-TO-DATE RETURN AS OF DECEMBER 31, 1999: 1.47%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
BEST: 4th quarter 1998: 12.27%
WORST: 3rd quarter 1998: -20.07%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
The table shows the Fund's average annual total return for each period,
compared with the S&P/BARRA SmallCap Value Index, an unmanaged index of a group
of stocks included in the S&P SmallCap 600 that have low price-to-book ratios
relative to the S&P SmallCap 600 as a whole. The index is weighted by market
capitalization, and is not available for investment.
Since
1 year inception
Investor A Shares 1.47% 1.10%
S&P/BARRA SmallCap Value Index 3.03% 0.31%
II-6
<PAGE>
NATIONS SMALLCAP INDEX FUND - INVESTOR A SHARES(1)
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
[BAR CHART APPEARS HERE]
1996 1997 1998 1999
3.15%* 27.55% -1.89% 5.27%
The bar chart shows you how the performance of the Fund's Investor A
Shares has varied from year to year. These returns do not reflect deductions of
sales charges or account fees, if any, and would be lower if they did.
*Return is from inception (10-15-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF DECEMBER 31, 1999: 5.27%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
BEST: 4th quarter 1998: 17.52%
WORST: 3rd quarter 1998: -20.89%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
The table shows the Fund's average annual total return for each period,
compared with the S&P SmallCap 600, an unmanaged index of 600 common stocks,
weighted by market capitalization. The S&P SmallCap 600 is not available for
investment.
Since
1 year inception
Investor A Shares 5.27% 10.02%
S&P SmallCap 600 12.42% 13.26%
-----------------------------------
(1) The SmallCap Index Fund was, as of October 31, 1999, conducting
business as Nations Managed SmallCap Index Fund.
II-7
<PAGE>
NATIONS SMALLCAP INDEX FUND - PRIMARY A SHARES(1)
YEAR BY YEAR TOTAL RETURN (%) AS OF DECEMBER 31 EACH YEAR
The bar chart shows you how the performance of the Fund's Primary A
Shares has varied from
[BAR CHART APPEARS HERE]
1996 1997 1998 1999
3.17%* 27.97% -1.65% 5.47%
year to year. These returns do not reflect deductions of sales charges or
account fees, if any, and would be lower if they did.
*Return is from inception (10-15-96) to 12-31-96.
YEAR-TO-DATE RETURN AS OF DECEMBER 31, 1999: 5.47%
BEST AND WORST QUARTERLY RETURNS DURING THIS PERIOD
BEST: 4th quarter 1998: 17.64%
WORST: 3rd quarter 1998: -20.83%
AVERAGE ANNUAL TOTAL RETURN AS OF DECEMBER 31, 1999
The table shows the Fund's average annual total return for each period,
compared with the S&P SmallCap 600, an unmanaged index of 600 common stocks,
weighted by market capitalization. The index is not available for investment.
Since
1 year inception
Primary A Shares 5.47% 10.29%
S&P SmallCap 600 12.42% 13.26%
---------------------------------
(1) The SmallCap Index Fund was, as of October 31, 1999, conducting
business as Nations Managed SmallCap Index Fund.
II-8
<PAGE>
APPENDIX III
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed Value Index
Fund
Structured Products Management
Team Commentary*
In the following interview, the team shares its views on
Nations Managed Value Index Fund's performance for the
12-month period ended March 31, 1999, and its outlook for
the future.
PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
The Fund is managed by the Traditional index funds try to emulate the performance of a
Structured Products Management benchmark index without taking into account the wide
Team of TradeStreet Investment differences among the stocks that make it up. Nations
Associates, Inc., investment Managed Value Index Fund differs from these "passive" funds
sub-adviser to the Fund. by adding an overlay of active professional management. This
INVESTMENT OBJECTIVE added dimension is designed to reduce exposure to the least
The Fund seeks, over the long- attractive securities in the Fund's benchmark, the S&P/BARRA
term, to provide a total return Value Index (the Index). In this way, the Fund seeks
that (gross of fees and expenses) increased performance potential relative to the Index, while
exceeds the total return of the retaining its core characteristics. In addition, we manage
Standard & Poor's 500/BARRA Value the Fund with shareholders' taxes in mind, keeping turnover
Index (S&P/BARRA Value Index).** low in an effort to limit capital gains distributions.
PERFORMANCE REVIEW HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT
For the 12-month period ended PREVAILED OVER THE PAST 12 MONTHS?+
March 31, 1999, Nations Managed The Fund (Investor A Shares) provided shareholders with a
Value Index Fund Investor A Shares return of 2.97%, trailing the 5.73% return of the S&P/BARRA
provided shareholders with a total Value Index. We employ a combination of measures in
return of 2.97%.*** selecting the securities held in the Fund. Unfortunately,
some of these measures were inverted in their stock
selection ability for the reporting period. That is, the
stocks that were ranked most favorably by some of our
measures had worse performance than the stocks ranked
unfavorably by the same measures. In large part, this was
due to a market that, in our view, paid insufficient
attention to valuation. Other aspects of our process worked
well, but were more than offset by the unusual degree of
inversion in a few measures.
*The outlook for this Fund may differ from that
presented for other Nations Funds mutual funds.
**The S&P/BARRA Value Index is an unmanaged,
market-capitalization-weighted index
comprised of a subset of stocks of the S&P 500 Index
with low price-to-book ratios relative to
the S&P 500 Index as a whole. It is unavailable for
investment.
***The performance shown includes the effect of fee
waivers and expense reimbursements by
the investment adviser, which have the effect of
increasing total return.
+Portfolio characteristics are subject to change and
may not be representative of current
characteristics.
Source for all statistical data -- TradeStreet
Investment Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
III-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed Value Index
Fund
Structured Products Management
Team Commentary continued...
Performance was also hampered by the Fund's underweight
position in technology. Conversely, the Fund benefited from
an overweighting and good stock selection in the finance
sector.
THE INVESTMENT OBJECTIVE STATES THAT THE FUND SEEKS, OVER
THE LONG-TERM, TO PROVIDE A TOTAL RETURN THAT (GROSS OF FEES
AND EXPENSES) EXCEEDS THE TOTAL RETURN OF THE S&P/BARRA
VALUE INDEX. PLEASE ELABORATE.
The stocks that comprise the S&P/BARRA Value Index are a
subset of the widely-followed Standard & Poor's 500
Composite Stock Price Index (S&P 500 Index).(++) These
stocks have lower price-to-book ratios -- calculated by
dividing each company's current stock price by the book
value per share of the company's equity -- than the S&P 500
Index as a whole; they are generally considered "value"
stocks. The Fund does not attempt to outperform the whole
S&P 500 Index. Instead, its objective is to pursue better
performance than the value-oriented portion of it, known as
the S&P/BARRA Value Index.
WHAT INVESTMENT OPPORTUNITIES DO YOU ANTICIPATE FOR THE
COMING YEAR?
For the last few years, the market has been heavily biased
in favor of growth stocks, giving them a performance edge.
But the longer-term historic pattern has been for growth and
value stocks to cycle in and out of favor. After years of
narrow focus by investors on growth stocks, we believe that
the arguments for value investing have become more
compelling. For example, when we compare such fundamental
valuation measures as price-to-earnings(+++) and price-to-
book ratios for the S&P/BARRA Value Index to the same
measures for the S&P/BARRA Growth Index(#) we find a
significant disparity in favor of value-oriented stocks.
If history is any guide, investors will eventually return to
value investing; value stocks such as those that the Fund
holds would then be well-positioned for potential gains. In
our view, this performance potential favors investing in the
more reasonably valued issues that the S&P/BARRA Value Index
represents.
++The Standard & Poor's 500 Composite Stock Price Index is
an unmanaged index of 500 widely held common stocks. It is
unavailable for investment.
+++The price/earnings ratio gives investors an idea of how
much they are paying for a company's earnings power.
#The S&P/BARRA Growth Index is an unmanaged,
market-capitalization-weighted index comprised of a subset
of stocks of the S&P 500 Index with high price-to-book
ratios relative to the S&P 500 Index as a whole. It is
unavailable for investment.
</TABLE>
III-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed Value Index
Fund
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/99)
[PIE CHART]
2.8% Recreation
3.0% Automobiles and Trucks
3.1% Computer Related
3.2% Media
5.1% Insurance
6.2% Electric Power
6.9% Financial Services
9.2% Oil - International
9.7% Utilities - Telephone
12.9% Banking
37.9% Other
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 1999, ARE
SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS.
TOP TEN HOLDINGS
- --------------------------------------------
1 Exxon Corporation 3.7%
- --------------------------------------------
2 AT&T Corporation 3.1%
- --------------------------------------------
3 Citigroup Inc. 3.0%
- --------------------------------------------
4 Royal Dutch Petroleum Company 2.3%
- --------------------------------------------
5 Time Warner Inc. 1.8%
- --------------------------------------------
6 Chase Manhattan Corporation 1.8%
- --------------------------------------------
7 Bell Atlantic Corporation 1.7%
- --------------------------------------------
8 BellSouth Corporation 1.6%
- --------------------------------------------
9 Fannie Mae 1.5%
- --------------------------------------------
10 Hewlett-Packard Company 1.4%
- --------------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
III-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed Value Index
Fund Performance
GROWTH OF $10,000 INVESTMENT
[INVESTOR A RETURN CHART]
MANAGED|
S&P/BARRA|VALUE VALUE INDEX|
INDEX|$12,056 $11,704
------------------- ---------------
Nov. 24|1997 10000.00 10000.00
'1997' 10222.00 10267.00
11403.00 11368.00
11462.00 11395.00
9982.00 9964.00
'1998' 11722.00 11659.00
Mar. 31|1999 12056.00 11704.00
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
Since Inception
(11/24/97 through
3/31/99) 12.39%
The chart to the left shows
the growth in value of a
hypothetical $10,000
investment in Investor A
Shares of Nations Managed
Value Index Fund from the
inception of the shareclass.
Figures for the S&P/BARRA
Value Index, an unmanaged,
market-
capitalization-weighted
index comprised of a subset
of the S&P 500 Index,
include reinvestment of
dividends. It is unavailable
for investment. The
performance of Primary A
Shares may vary based on the
differences in fees paid by
the shareholders investing
in each class.
[CHART LEGEND]
TOTAL RETURN(AS OF 3/31/99)
Primary A Investor A
Inception Date 11/24/97 11/24/97
- -------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 3.06% 2.97%
- -------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
SINCE INCEPTION 12.54% 12.39%
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 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 and expense
reimbursements by the investment adviser, which have the effect of increasing
total return.
</TABLE>
III-4
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed Index
Fund
Structured Products Management
Team Commentary*
In the following interview, the team shares its views on
Nations Managed Index Fund's performance for the 12-month
period ended March 31, 1999, and its outlook for the future.
PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
The Fund is managed by the Traditional index funds try to emulate the performance of a
Structured Products Management benchmark index without taking into account the wide
Team of TradeStreet Investment differences among the stocks that make it up. Nations
Associates, Inc., investment Managed Index Fund differs from these "passive" funds by
sub-adviser to the Fund. adding an overlay of active professional management. This
INVESTMENT OBJECTIVE added dimension is designed to reduce exposure to the least
The Fund seeks, over the long- attractive securities in the S&P 500 Index (the Index) and
term, to provide a total return to carefully seek lower levels of portfolio risk. In this
that (gross of fees and expenses) way, the Fund seeks increased performance potential relative
exceeds the total return of the to the its benchmark, the S&P 500 Index, while retaining its
Standard & Poor's 500 Composite core characteristics. Our carefully structured management
Stock Price Index (S&P 500 process has the further goal of reducing the risk of
Index).** underperforming the benchmark. In addition, we manage the
PERFORMANCE REVIEW Fund with shareholders' taxes in mind, keeping turnover low
For the 12-month period ended in an effort to limit capital gains distributions.
March 31, 1999, Nations Managed HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT
Index Fund Investor A Shares PREVAILED OVER THE PAST 12 MONTHS?
provided shareholders with a total Nations Managed Index Fund (Investor A Shares) returned 15%,
return of 14.97%.*** but lagged the S&P 500 Index which returned 18.46%. One
aspect of the Fund's investment process is that we avoid
having excessive exposure to securities we believe are
expensive, or overvalued. Unfortunately, during the last
year the market focused on those companies within the Index
that were larger and had strong price momentum. Little
emphasis was placed on the relative value of the stocks
being bought. That factor more than any other led to the
underperformance the Fund experienced compared to the Index.
Having said that, the Fund outperformed its peer group, the
Lipper Growth & Income Funds Universe(+), which returned
5.47% for the period.
*The outlook for this Fund may differ from that
presented for other Nations Funds mutual
funds.
**The Standard & Poor's 500 Composite Stock Price
Index is an unmanaged index of 500
widely held common stocks. It is unavailable for
investment.
***The performance shown includes the effect of fee
waivers by the investment adviser, which
have the effect of increasing total return.
+Lipper Inc., is an independent mutual fund
performance monitor. Funds in the Lipper
Growth & Income Funds Average combine a
growth-of-earnings orientation and an income
requirement for level and/or rising dividends.
Source for all statistical data -- TradeStreet
Investment Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
III-5
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed Index
Fund
Structured Products Management
Team Commentary continued...
THE INVESTMENT OBJECTIVE STATES THAT THE FUND SEEKS, OVER
THE LONG-TERM, TO PROVIDE A TOTAL RETURN THAT (GROSS OF FEES
AND EXPENSES) EXCEEDS THE TOTAL RETURN OF THE S&P 500 INDEX.
PLEASE ELABORATE.
Our stock selection process is based on a straightforward
approach that evaluates every stock in the S&P 500 Index.
The purpose of this analysis is to identify and eliminate
the least attractive securities and modestly emphasize the
most attractive while keeping portfolio characteristics in
line with the Index. While we seek to avoid the least
promising securities, we do not eliminate a stock if it
represents a major portion of the Index.
For example, we would not eliminate stocks like Microsoft
Corporation or General Electric Company because these stocks
are such large components of the S&P 500 Index; in an effort
to reduce benchmark risk, we would maintain some exposure in
these stocks regardless of their performance. Conversely, we
will not overweight a stock in the portfolio by more than 30
basis points of the benchmark index, with 100 basis points
equaling 1.0%. Thus, if a stock represents .50% of the
Index, the Fund's maximum position would be .80%.
We also seek to minimize taxable capital gains distributions
to shareholders, first by limiting portfolio turnover to no
more than 25% per year. To further manage realized capital
gains, the Fund employs the identified cost accounting
method. Through this strategy, when we decide to cut back
holdings of a particular stock, we first sell the shares
with the highest tax cost basis, thus reducing the amount of
capital gains that the Fund must recognize and distribute.
Another technique that helps us manage capital gains
distributions is called "tax-loss harvesting".(++) When we
review the gains the Fund has realized by selling stocks
profitably, the Fund may then choose to take losses in other
portfolio securities. By offsetting gains against losses in
this way, the amount of gain that must be paid out as a
capital gains distribution is reduced, helping to reduce
shareholders' potential tax liability.
++Tax-loss harvesting is a method whereby a mutual fund may,
at times, sell portfolio securities in order to realize
capital losses.
</TABLE>
III-6
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed Index
Fund
Structured Products Management
Team Commentary continued...
WHICH SECTORS PROVED FAVORABLE FOR THE FUND AND WHICH PROVED UNFAVORABLE?(+++)
The Fund's overweighted position in communication services, a strong sector last year,
helped performance. The year's strongest performing sector was technology; while the
Fund held a number of technology companies that performed well, it was underweighted in
the sector due to the excessively high valuations we saw in many technology stocks. The
Fund was also hurt by a slightly overweighted position in capital goods stocks.
WHAT DO YOU ANTICIPATE FOR THE COMING YEAR?
We continue to be in a favorable market environment, benefiting from a near-ideal
combination of low inflation, high company productivity and an efficient economy.
Although we do not foresee a repetition of the exceptional results of the last few
years, we still anticipate positive returns for equities of the kind the Fund holds,
relative to other types of investments.
+++Portfolio characteristics are subject to change and may not be representative of
current characteristics.
</TABLE>
III-7
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed Index
Fund
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/99)
[PIE CHART]
3.3% Oil - International
3.4% Retail - General
3.5% Electrical Equipment
3.8% Insurance
5.4% Financial Services
6.0% Computer Software
6.3% Computer Related
8.2% Banking
8.6% Drugs
8.6% Utilities - Telephone
42.9% Other
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 1999, ARE
SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS.
TOP TEN HOLDINGS
- --------------------------------------------
1 Microsoft Corporation 4.3%
- --------------------------------------------
2 General Electric Company 3.5%
- --------------------------------------------
3 Wal-Mart Stores, Inc. 2.0%
- --------------------------------------------
4 Intel Corporation 1.9%
- --------------------------------------------
5 Merck & Company, Inc. 1.8%
- --------------------------------------------
6 AT&T Corporation 1.8%
- --------------------------------------------
7 International Business Machines
Corporation 1.7%
- --------------------------------------------
8 Pfizer Inc. 1.7%
- --------------------------------------------
9 Cisco Systems, Inc. 1.7%
- --------------------------------------------
10 MCI Worldcom, Inc. 1.6%
- --------------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
III-8
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed Index
Fund Performance
GROWTH OF $10,000 INVESTMENT
[INVESTOR A RETURN CHART]
S&P
500|COMPOSITE|STOCK
PRICE|INDEX|$21,035 MANAGED|INDEX|$20,334
--------------------- -----------------------
July 31|1996 10000 10000
10786 10744
'1996' 11684 11695
11998 12013
14094 14049
15148 15231
'1997' 15583 15578
17756 17686
18342 18221
16517 16277
'1998' 20035 19681
Mar. 31|1999 21035 20334
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
Since Inception
(7/31/96 through
3/31/99) 30.50%
The chart to the left shows
the growth in value of a
hypothetical $10,000
investment in Investor A
Shares of Nations Managed
Index Fund from the
inception of the shareclass.
Figures for the Standard &
Poor's 500 Composite Stock
Price Index, an unmanaged
index of 500 widely held
common stocks, include
reinvestment of dividends.
It is unavailable for
investment. The performance
of Primary A and Primary B
Shares may vary based on the
differences in fees paid by
the shareholders investing
in each class.
[CHART LEGEND]
TOTAL RETURN (AS OF 3/31/99)
Primary A Primary B Investor A
Inception Date 7/31/96 10/15/96 7/31/96
- --------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 15.25% 14.78% 14.97%
- --------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
SINCE INCEPTION 30.76% 30.34% 30.50%
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 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, which have the effect of increasing total return.
</TABLE>
III-9
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed SmallCap Value Index
Fund
Structured Products Management
Team Commentary*
In the following interview, the team shares its views on
Nations Managed SmallCap Value Index Fund's performance for
the 12-month period ended March 31, 1999, and its outlook
for the future.
PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
The Fund is managed by the Traditional index funds try to emulate the performance of a
Structured Products Management benchmark index without taking into account the wide
Team of TradeStreet Investment differences among the stocks that make it up. Nations
Associates, Inc., investment Managed SmallCap Value Index Fund differs from these
sub-adviser to the Fund. "passive" funds by adding an overlay of active professional
INVESTMENT OBJECTIVE management. This added dimension is designed to reduce
The Fund seeks, over the long- exposure to the least attractive securities in the S&P/BARRA
term, to provide a total return SmallCap Value Index (the Index). In this way, the Fund
that (gross of fees and expenses) seeks increased performance potential relative to its
exceeds the total return of the benchmark, the S&P/BARRA SmallCap Value Index, while
Standard & Poor's SmallCap retaining the Index's core characteristics. In addition, we
600/BARRA Value Index (S&P/BARRA manage the Fund with shareholders' taxes in mind, keeping
SmallCap Value Index)** turnover low in an effort to limit capital gains
PERFORMANCE REVIEW distributions.
For the 12-month period ended HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT
March 31, 1999, Nations Managed PREVAILED OVER THE PAST 12 MONTHS?(+)
SmallCap Value Index Fund Investor For the reporting period, the Fund (Investor A Shares)
A Shares provided a total return returned -20.23%, outperforming the S&P/BARRA SmallCap Value
of -20.23%.*** Index which returned -22.91%. The best performing sectors in
the Fund were finance and transportation. Additionally,
stock selection was very strong in the consumer cyclical and
capital goods sectors. Areas that detracted from performance
were technology and health-care.
*The outlook for this Fund may differ from that
presented for other Nations Funds mutual
funds.
**The S&P/BARRA SmallCap Value Index is an unmanaged,
market-capitalization-weighted
index comprised of a subset of stocks of the S&P
SmallCap 600 Index with low price-to-book
ratios relative to the S&P SmallCap 600 Index as a
whole. It is unavailable for investment.
***The performance shown includes the effect of fee
waivers and expense reimbursements by
the investment adviser, which have the effect of
increasing total return.
+Portfolio characteristics are subject to change and
may not be representative of current
characteristics.
Source for all statistical data -- TradeStreet
Investment Associates, Inc.
BECAUSE SMALL COMPANIES HAVE NARROWER MARKETS AND
LIMITED FINANCIAL RESOURCES AND THEIR STOCKS ARE NOT AS
WIDELY TRADED AS LARGE COMPANY STOCKS, THEIR SHARE PRICES WILL BE
MORE VOLATILE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
III-10
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed SmallCap Value Index
Fund
Structured Products Management
Team Commentary continued...
THE INVESTMENT OBJECTIVE STATES THAT THE FUND SEEKS, OVER
THE LONG-TERM, TO PROVIDE A TOTAL RETURN THAT (BEFORE FEES
AND EXPENSES) EXCEEDS THE TOTAL RETURN OF THE S&P/BARRA
SMALLCAP VALUE INDEX. PLEASE ELABORATE.
The stocks that comprise the S&P/BARRA SmallCap Value Index
are part of the broader Standard & Poor's SmallCap 600 Index
(S&P SmallCap 600)(++). This subset of stocks has lower
price-to-book ratios -- calculated by dividing each
company's current stock price by the book value of the
company's equity -- than the S&P SmallCap 600 as a whole;
they are generally considered "value" stocks. The Fund does
not attempt to outperform the whole S&P SmallCap 600.
Instead, its aim is to outperform only a portion of
it -- the value-oriented stocks of this small-capitalization
index.
WHAT INVESTMENT OPPORTUNITIES DO YOU ANTICIPATE FOR THE
COMING YEAR?
The market has favored growth stocks almost exclusively
during the last few years, giving them a decided performance
edge over value stocks. But at some point such disparities
typically reverse; over longer periods, investor interest
has cycled between small-capitalization and
large-capitalization stocks as well as between companies
with growth and value characteristics.
After years of narrow focus on large-capitalization growth
stocks, we believe that the arguments for value investing in
the small-capitalization sector have become more compelling
than in the recent past. Small-capitalization value stocks
should eventually produce the potential for above-average
returns. Should that happen, the Fund is designed to seek
performance superior to the returns of the S&P/BARRA
SmallCap Value Index.
++The Standard & Poor's SmallCap 600 Index is an unmanaged,
market-capitalization-weighted index consisting of 600
common stocks. It is unavailable for investment.
</TABLE>
III-11
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed SmallCap Value Index
Fund
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/99)
[PIE CHART]
3.2% Building Materials
3.4% Apparel and Textiles
3.5% Oil and Gas
3.8% Restaurants and Lodging
4.0% Financial Services
4.1% Construction
4.7% Consumer Goods and Services
4.9% Electronics
5.7% Insurance
5.7% Retail - Specialty
57.0% Other
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 1999, ARE
SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS.
TOP TEN HOLDINGS
- --------------------------------------------
1 Commercial Federal Corporation 1.1%
- --------------------------------------------
2 Fremont General Corporation 1.1%
- --------------------------------------------
3 Zale Corporation 1.0%
- --------------------------------------------
4 AnnTaylor Stores Corporation 1.0%
- --------------------------------------------
5 NAC Re Corporation 0.9%
- --------------------------------------------
6 La-Z-Boy Inc. 0.9%
- --------------------------------------------
7 AptarGroup Inc. 0.9%
- --------------------------------------------
8 Sierra Pacific Resources 0.9%
- --------------------------------------------
9 D.R. Horton Inc. 0.8%
- --------------------------------------------
10 Southwest Gas Corporation 0.8%
- --------------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
III-12
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed SmallCap Value Index
Fund Performance
GROWTH OF $10,000 INVESTMENT
[INVESTOR A RETURN CHART]
S&P/BARRA|SMALLCAP|VALUE MANAGED|SMALLCAP|VALUE
INDEX|$8,820 INDEX|$9,158
---------------------- -----------------------
Nov. 24|1997 10000 10000
'1997' 10291 10410
11460 11479
11021 11239
8630 8983
'1998' 9755 10086
Mar. 31|1999 8820 9158
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
Since Inception
(11/24/97 through
3/31/99) -6.32%
The chart to the left shows
the growth in value of a
hypothetical $10,000
investment in Investor A
Shares of Nations Managed
SmallCap Value Index Fund
from the inception of the
shareclass. Figures for the
S&P/BARRA SmallCap Value
Index, an unmanaged,
market-capitalization-weighted
index comprised of a subset
of the S&P SmallCap 600
Index, include reinvestment
of dividends. It is
unavailable for investment.
The performance of Primary A
Shares may vary based on the
differences in fees paid by
the shareholders investing
in each class.
[CHART LEGEND]
TOTAL RETURN (AS OF 3/31/99)
Primary A Investor A
Inception Date 11/24/97 11/24/97
- -----------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE -20.11% -20.23%
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
SINCE INCEPTION -6.17% -6.32%
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 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 and expense
reimbursements by the investment adviser, which have the effect of increasing
total return.
</TABLE>
III-13
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed SmallCap Index
Fund
Structured Products Management
Team Commentary*
In the following interview, the team shares its views on
Nations Managed SmallCap Index Fund's performance for the
12-month period ended March 31, 1999, and its outlook for
the future.
PORTFOLIO MANAGEMENT PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
The Fund is managed by the Traditional index funds try to emulate the performance of a
Structured Products Management benchmark index without taking into account the wide
Team of TradeStreet Investment differences among the stocks that make it up. Nations
Associates, Inc., investment Managed SmallCap Index Fund differs from these "passive"
sub-adviser to the Fund. funds by adding an overlay of active professional
INVESTMENT OBJECTIVE management. This added dimension is designed to reduce
The Fund seeks, over the long- exposure to the least attractive securities in the S&P
term, to provide a total return SmallCap 600 Index (the Index) and to carefully seek lower
that (gross of fees and expenses) levels of portfolio risk. In this way, the Fund seeks
exceeds the total return of the increased performance potential relative to its benchmark,
Standard & Poor's SmallCap 600 the S&P SmallCap 600 Index, while maintaining its core
Index (S&P SmallCap 600 Index)** characteristics. In addition, we manage the Fund with
PERFORMANCE REVIEW shareholders' taxes in mind, employing various techniques
For the 12-month period ended such as limiting portfolio turnover in an effort to limit
March 31, 1999, Nations Managed capital gains distributions.
SmallCap Index Fund Investor A HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT
Shares provided a total return of PREVAILED OVER THE PAST 12 MONTHS?
- -20.67%.*** For the reporting period, the Fund (Investor A Shares)
returned -20.67, slightly trailing the benchmark, the S&P
SmallCap 600 Index, which returned -19.13%. One aspect of
the Fund's investment process is that it avoids excessive
exposure to stocks we believe are expensive, or overvalued.
Unfortunately, during the last year, the market focused on
the largest companies within the small-company universe.
Little emphasis was placed on the relative value of the
stocks being bought. That factor, more than any other, led
to the performance the Fund experienced relative to the
benchmark.
*The outlook for this Fund may differ from that
presented for other Nations Funds mutual
funds.
**The Standard & Poor's SmallCap 600 Index is an
unmanaged, market-capitalization-
weighted index consisting of 600 common stocks. It is
unavailable for investment.
***The performance shown includes the effect of fee
waivers and expense reimbursements by
the investment adviser, which have the effect of
increasing total return.
Source for all statistical data -- TradeStreet
Investment Associates, Inc.
BECAUSE SMALL COMPANIES HAVE NARROWER MARKETS AND
LIMITED FINANCIAL RESOURCES AND THEIR STOCKS ARE NOT AS
WIDELY TRADED AS LARGE COMPANY STOCKS, THEIR SHARE PRICES WILL BE
MORE VOLATILE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
III-14
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed SmallCap Index
Fund
Structured Products Management
Team Commentary continued...
THE INVESTMENT OBJECTIVE STATES THAT THE FUND SEEKS, OVER
THE LONG-TERM, TO PROVIDE A TOTAL RETURN THAT (GROSS OF FEES
AND EXPENSES) EXCEEDS THE TOTAL RETURN OF THE S&P SMALLCAP
600 INDEX. PLEASE ELABORATE.
Our stock selection process is based on a straightforward
approach that evaluates every stock in the S&P SmallCap 600
Index. The purpose of this analysis is to identify and
eliminate the least attractive securities and modestly
emphasize the most attractive while keeping portfolio
characteristics in line with the Index. While the Fund seeks
to avoid the least promising securities, we do not eliminate
a stock if it represents a major portion of the S&P SmallCap
600 Index.
We also seek to reduce taxable capital gains distributions
to shareholders by limiting portfolio turnover to no more
than 25% per year. To further manage capital gains, the Fund
employs the identified cost accounting method. Through this
strategy, when we decide to cut back holdings of a
particular stock, we first sell the shares with the highest
tax cost basis, thus reducing the amount of capital gains
that the Fund must recognize and distribute.
Another technique that helps manage capital gains
distributions is called "tax-loss harvesting".(+) When we
review the gains the Fund has realized by selling stocks at
a profit, the Fund may then choose to take losses in other
portfolio securities. By offsetting gains against losses in
this way, we reduce the amount of gain that must be paid out
as a capital gains distribution, helping to reduce
shareholders' potential tax liability.
WHICH SECTORS PROVED FAVORABLE FOR THE FUND AND WHICH PROVED
UNFAVORABLE?(++)
Energy stocks were the poorest performing sector in the S&P
SmallCap 600 Index during the twelve months ending March 31,
1999. The Fund benefited from being underweighted in the
sector, and the stocks it held performed somewhat better
overall than those in the Index. The Fund's holdings in the
transportation sector performed well but the Fund had
difficulty in technology; although many technology stocks
delivered strong returns, the Fund's underweighted position
in the sector hurt performance. In the financial sector, the
characteristics that the Fund focuses on were not rewarded.
+Tax-loss harvesting is a method whereby a mutual fund may,
at times, sell portfolio securities in order to realize
capital losses.
++Portfolio characteristics are subject to change and may
not be representative of current characteristics.
</TABLE>
III-15
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed SmallCap Index
Fund
Structured Products Management
Team Commentary continued...
WHAT DO YOU ANTICIPATE FOR THE COMING YEAR?
We are bullish on the small-capitalization market because
current valuations do not seem to reflect the potential
growth that we anticipate for many smaller companies. We are
optimistic that the next twelve months could see renewed
strength in small-capitalization stocks.
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/99)
[PIE CHART]
3.2% Machinery and Equipment
3.2% Computer Related
3.3% Medical Services
4.0% Insurance
4.3% Retail - Specialty
4.4% Drugs
4.5% Electronics
4.7% Apparel and Textiles
5.0% Banking
5.7% Financial Services
57.7% Other
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 1999, ARE
SUBJECT TO CHANGE AND MAY NOT BE
REPRESENTATIVE OF CURRENT HOLDINGS.
TOP TEN HOLDINGS
- --------------------------------------------
1 VISX Inc. 1.3%
- --------------------------------------------
2 Medimmune Inc. 1.1%
- --------------------------------------------
3 Sanmina Corporation 1.0%
- --------------------------------------------
4 Xylan Corporation 0.9%
- --------------------------------------------
5 Express Scripts Inc., Class A 0.8%
- --------------------------------------------
6 Velassis Communications Inc. 0.7%
- --------------------------------------------
7 Zale Corporation 0.7%
- --------------------------------------------
8 Acxiom Corporation 0.7%
- --------------------------------------------
9 American Management Systems 0.7%
- --------------------------------------------
10 Mohawk Industries Inc. 0.7%
- --------------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
III-16
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Nations
Managed SmallCap Index
Fund Performance
GROWTH OF $10,000 INVESTMENT
[INVESTOR A RETURN CHART]
S&P|SMALLCAP|600 MANAGED|SMALLCAP|
INDEX|$11,770 INDEX|$11,511
------------------------------ ----------------
Oct. 15|1996 10000.00 10000.00
'1996' 10433.00 10315.00
9854.00 9848.00
11640.00 11573.00
13522.00 13373.00
'1997' 13104.00 13155.00
14554.00 14510.00
13904.00 14018.00
10998.00 11089.00
'1998' 12932.00 12906.00
Mar. 31|1999 11770.00 11511.00
AVERAGE ANNUAL TOTAL RETURN
Investor A Shares
Since Inception
(10/15/96 through
3/31/99) 5.90%
The chart to the left shows
the growth in value of a
hypothetical $10,000
investment in Investor A
Shares of Nations Managed
SmallCap Index Fund from the
inception of the shareclass.
Figures for the S&P SmallCap
600 Index, an unmanaged
index of 600 common stocks
that capture the economic
and industry characteristics
of small company stock
performance, include
reinvestment of dividends.
It is unavailable for
investment. The performance
of Primary A Shares may vary
based on the differences in
fees paid by the
shareholders investing in
each class.
[CHART LEGEND]
TOTAL RETURN (AS OF 3/31/99)
Primary A Investor A
Inception Date 10/15/96 10/15/96
- -----------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE -20.50% -20.67%
- -----------------------------------------------------------------------------------------------
AVERAGE ANNUAL RETURNS
SINCE INCEPTION 6.16% 5.90%
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 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, which have the effect of increasing total return.
</TABLE>
III-17
<PAGE>
NATIONS FUND TRUST
EXHIBIT INDEX
Exhibit No. Description
- ----------- -----------
EX-99.4 Agreement and Plan of Reorganization
EX-99.17(a) Proxy Ballots
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as
of this 1st day of February, 2000 by Nations Fund Trust (the "Trust"), a
Massachusetts business trust, for itself and on behalf of Nations Managed Value
Index Fund, Nations Managed SmallCap Value Index Fund, Nations Managed Index
Fund and Nations Managed SmallCap Index Fund (to be re-named Nations SmallCap
Index Fund).
WHEREAS, the Trust is an open-end management investment company
registered with the Securities and Exchange Commission (the "SEC") under the
Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the parties desire that the Fund Assets and Liabilities (as
defined below) of the Trust's Nations Managed Value Index Fund and Nations
Managed SmallCap Value Index Fund (each, an "Acquired Fund," and, collectively,
the "Acquired Funds") be conveyed to and be acquired and assumed, respectively,
by the Trust's Nations Managed Index Fund and Nations Managed SmallCap Index
Fund (to be re-named Nations SmallCap Index Fund (each, an "Acquiring Fund," and
collectively, the "Acquiring Funds") in exchange for shares of equal U.S. dollar
value of the Acquiring Funds as set forth on the attached Schedule A, which
shall thereafter promptly be distributed to the shareholders of the Acquired
Funds in connection with their liquidation as described in this Agreement (each
such acquisition and assumption of an Acquired Fund's Fund Assets and
Liabilities by the corresponding Acquired Fund a "Reorganization," and,
together, the "Reorganizations"); and
WHEREAS, the parties intend that each Reorganization qualify as a
"reorganization," within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that the Acquired Fund and the
corresponding Acquiring Fund will each be a "party to a reorganization," within
the meaning of Section 368(b) of the Code, with respect to the Reorganization.
NOW, THEREFORE, in accordance with the terms and conditions described
herein, the Acquired Funds and Acquiring Funds shall be consolidated as follows:
1. Conveyance of Fund Assets and Liabilities of the Acquired Funds.
---------------------------------------------------------------
(a) Except as provided below, at the Effective Time of the
Reorganization (as defined in Section 8) all assets of every kind, and all
interests, rights, privileges and powers of the Acquired Funds (the "Fund
Assets"), subject to all liabilities of the Acquired Funds existing as of the
Effective Time of the Reorganization (the "Liabilities"), shall be transferred
by each Acquired Fund to each corresponding Acquiring Fund and shall be accepted
and assumed by such Acquiring Fund, as more particularly set forth in this
Agreement, such that at and after the Effective Time of the Reorganization: (i)
all Fund Assets of the Acquired Funds shall become the assets of the Acquiring
Funds, and (ii) all Liabilities of the Acquired Funds shall attach to the
Acquiring Funds, enforceable against the Acquiring Funds to the same extent as
if originally incurred by them.
(b) It is understood and agreed that the Fund Assets shall
include 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 or exercisable by the Acquired Funds,
and any deferred or prepaid expenses shown as an asset on the Acquired Funds'
books, that the Liabilities of the Acquired Funds shall include all liabilities,
whether known or unknown, accrued or unaccrued, absolute or contingent, in all
cases, existing at the Effective Time of the Reorganization.
(c) At least fifteen (15) business days prior to the Closing
Date (as defined in Section 8), the Acquired Funds will provide to, or cause to
be provided to, the Acquiring Funds, a schedule of its securities, other assets
and its known liabilities. It is understood and agreed that the Acquired Funds
may sell any of the securities or other assets shown on such schedule prior to
the Effective Time of the Reorganization but will not, without the prior
approval of the Acquiring Funds, acquire any additional securities other than
securities that the Acquiring Funds are permitted to purchase in accordance with
their stated investment objectives and policies. At least ten (10) business days
prior to the Closing Date, the
1
<PAGE>
Acquiring Funds will advise the corresponding Acquired Funds of any investments
of the Acquired Funds shown on such schedule that the Acquiring Funds would not
be permitted to hold, pursuant to its stated investment objective and policies
or otherwise. An Acquired Fund, if requested by the corresponding Acquiring
Fund, will dispose of any such securities prior to the Closing Date to the
extent practicable and consistent with applicable legal requirements. In
addition, if it is determined that the investment portfolios of an Acquired Fund
and its corresponding Acquiring Fund, when aggregated, would contain investments
exceeding certain percentage limitations applicable to such Acquiring Fund, the
Acquired Fund, if requested by the corresponding Acquiring Fund, will dispose of
a sufficient amount of such investments as may be necessary to avoid violating
such limitations as of the Effective Time of the Reorganization.
(d) The Fund Assets shall be transferred and conveyed to the
Acquiring Funds on the following basis:
(1) In exchange for the transfer of the Fund Assets, the
Acquiring Funds shall simultaneously issue to the corresponding
Acquired Funds at the Effective Time of the Reorganization full and
fractional Primary A Shares and Investor A Shares of the Acquiring
Funds having an aggregate net asset value equal to the net value of the
Fund Assets minus Liabilities so conveyed and assumed, all determined
in accordance with this Agreement. In this regard, the number of full
and fractional shares of the Acquiring Funds delivered to the Acquired
Funds shall be determined by dividing the value of the Fund Assets
minus Liabilities, computed in the manner and as of the time and date
set forth in this Agreement, by the net asset value of one Acquiring
Funds' Primary A Share and Investor A Share, computed in the manner and
as of the time and date set forth in this Agreement.
(2) The net asset value of shares to be delivered by the
Acquiring Funds, and the net value of the Fund Assets minus Liabilities
to be conveyed by the Acquired Funds and assumed by the Acquiring
Funds, shall, in each case, be determined as of the Valuation Time as
defined in Section 3. The net asset value of Primary A Shares and
Investor A Shares of the Acquiring Funds shall be computed in
accordance with its then current valuation procedures. In determining
the value of the Fund Assets, each security to be included in the Fund
Assets shall be priced in accordance with the Acquiring Funds' then
current valuation procedures.
2. Liquidation of the Acquired Funds. At the Effective Time of the
Reorganization, the Acquired Funds shall make a liquidating distribution to its
shareholders as follows: Shareholders of record of the Acquired Funds shall be
credited with full and fractional shares of the respective Primary A Shares and
Investor A Shares that are issued by the Acquiring Funds in connection with the
Reorganization corresponding to the Acquiring Funds' shares that are held of
record by the shareholder at the Effective Time of the Reorganization. Each such
shareholder also shall have the right to receive any unpaid dividends or other
distributions which were declared before the Effective Time of the
Reorganization with respect to the Acquired Funds' shares that are held of
record by the shareholder at the Effective Time of the Reorganization, and the
Trust shall record on its books the ownership of the respective Acquiring Funds'
shares by such shareholders (the "Transferor Record Holders"). All of the issued
and outstanding shares of the Acquiring Funds at the Effective Time of the
Reorganization shall be redeemed and canceled on the books of the Trust at such
time. As soon as reasonably possible after the Effective Time of the
Reorganization, the Trust shall wind up the affairs of the Acquired Funds and
shall file any final regulatory reports, including but not limited to any Form
N-SAR and Rule 24f-2 filings, with respect to the Acquired Funds, and also shall
take all other steps as are necessary and proper to effect the termination or
declassification of the Acquired Funds in accordance with all applicable laws.
3. Valuation Time. The "Valuation Time" shall be the time as of which
the net asset value of each class of shares of each of the Acquired Funds and
the Acquiring Funds is determined pursuant to their respective valuation
procedures on the Closing Date or such earlier or later time as may be mutually
agreed to in writing by the parties hereto.
2
<PAGE>
4. Certain Representations, Warranties and Agreements of the Trust on
behalf of the Acquired Funds. The Trust, on behalf of itself and, where
appropriate, the Acquired Funds, represents and warrants to, and agrees with,
the Trust on behalf of the Acquiring Funds as follows, with such
representations, warranties and agreements made on behalf of the Acquiring Funds
on a several (and not joint, or joint and several) basis:
(a) The Trust is a corporation, duly created, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts. The
Trust is registered with the SEC as an open-end management investment company
under the 1940 Act, and such registration is in full force and effect.
(b) The Trust has the power to own all of its properties and
assets and to consummate the transactions contemplated herein, and has all
necessary federal, state and local authorizations to carry on its business as
now being conducted and to consummate the transactions contemplated by this
Agreement.
(c) This Agreement has been duly authorized by the Board of
Trustees of the Trust on behalf of the Acquired Funds, and executed and
delivered by duly authorized officers of the Trust, and represents a valid and
binding contract, 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. The execution and delivery
of this Agreement does not, and, subject to the approval of shareholders
referred to in Section 6, the consummation of the transactions contemplated by
this Agreement will not, violate the Declaration of Trust of the Trust or any
material agreement or arrangement to which it is a party or by which it is
bound.
(d) The Trust's Acquired Funds have elected to qualify and have
qualified as "regulated investment companies" under Part I of Subchapter M of
Subtitle A, Chapter 1, of the Code, as of and since their first taxable year;
have been regulated investment companies under such Part of the Code at all
times since the end of their first taxable year when they so qualified; and
qualify and shall continue to qualify as regulated investment companies for
their taxable years ending upon their liquidations.
(e) The Trust has valued, and will continue to value, the
portfolio securities and other assets of the Acquired Funds in accordance with
applicable legal requirements.
(f) The proxy materials included within the Registration
Statement on Form N-14 (the "N-14 Registration Statement") from its effective
date with the SEC, through the time of the shareholders meeting referred to in
Section 6 and the Effective Time of the Reorganization, insofar as they relate
to the Trust, (i) shall comply in all material respects with the provisions of
the Securities Exchange Act of 1934 as amended (the "1934 Act") and the 1940
Act, the rules and regulations thereunder, and state securities laws, and (ii)
shall 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
made therein not misleading.
(g) All of the issued and outstanding shares of the Acquired
Funds have been validly issued and are fully paid and non-assessable, and were
offered for sale and sold in conformity with the registration requirements of
all applicable federal and state securities laws.
(h) The Trust shall operate the business of the Acquired Funds
in the ordinary course between the date hereof and the Effective Time of the
Reorganization, except that the Trust shall complete all measures in respect of
the Acquired Funds prior to the Effective Time of the Reorganization to ensure
that each Reorganization qualifies as a "reorganization" within the meaning of
Section 368(a) of the Code, regardless of whether such measures are in the
ordinary course. It is understood that such ordinary course of business will
include the declaration and payment of customary dividends and distributions and
any other dividends and distributions deemed advisable in anticipation of the
Reorganizations. Notwithstanding anything herein to the contrary, the Trust may
take all appropriate action necessary in order for the Trust to receive the
opinion provided for in Sections 9(e) and 10(g).
3
<PAGE>
(i) At the Effective Time of the Reorganization, the Acquired
Funds will have good and marketable title to the Fund Assets and full right,
power and authority to assign, deliver and otherwise transfer such assets.
(j) At the Effective Time of the Reorganization, all federal and
other tax returns and reports of the Acquired Funds required by law to have been
filed by such time shall have been filed, and all federal and other taxes shall
have been paid so far as due, or provision shall have been made for the payment
thereof and, to the best knowledge of management of the Trust, no such return or
report shall be currently under audit and no assessment shall have been asserted
with respect to such returns or reports.
5. Certain Representations, Warranties and Agreements of the Trust on
behalf of the Acquiring Funds. The Trust, on behalf of itself and where
appropriate, the Acquiring Funds, represents and warrants to, and agrees with
the Trust on behalf of the Acquired Funds as follows, with such representations,
warranties and agreements made on behalf of the Acquiring Funds on a several
(and not joint, or joint and several) basis:
(a) The Trust is a corporation duly created, validly existing
and in good standing under the laws of the Commonwealth of Massachusetts. The
Trust is registered with the SEC as an open-end management investment company
under the 1940 Act and such registration is in full force and effect.
(b) The Trust has the power to own all of its properties and
assets and to consummate the transactions contemplated herein, and has all
necessary federal, state and local authorizations to carry on its business as
now being conducted and to consummate the transactions contemplated by this
Agreement.
(c) This Agreement has been duly authorized by the Board of
Trustees of the Trust on behalf of the Acquiring Funds, and executed and
delivered by duly authorized officers of the Trust, and represents a valid and
binding contract, 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. The execution and delivery
of this Agreement does not, and the consummation of the transactions
contemplated by this Agreement will not, violate the Declaration of Trust of the
Trust or any material agreement or arrangement to which it is a party or by
which it is bound.
(d) The Acquiring Funds have elected to qualify and have
qualified as "regulated investment companies" under Part I of Subchapter M of
Subtitle A, Chapter 1, of the Code, as of and since their first taxable year;
have been regulated investment companies under such Part of the Code at all
times since the end of their first taxable year when they so qualified; and
qualify and shall continue to qualify as regulated investment companies for
their current taxable years.
(e) The Trust has valued, and will continue to value, the
portfolio securities and other assets of the Acquiring Funds in accordance with
applicable legal requirements.
(f) The N-14 Registration Statement, including the proxy
materials contained therein, from its effective date with the SEC through the
time of the shareholders meeting referred to in Section 6 and at the Effective
Time of the Reorganization, insofar as it relates to the Trust, or the Acquiring
Funds, or the Primary A Shares and Investor A Shares of the Acquiring Funds to
be issued pursuant thereto (i) shall comply in all material respects with the
provisions of the Securities Act of 1933, as amended, (the "1933 Act"), the 1934
Act and the 1940 Act, the rules and regulations thereunder, and state securities
laws, and (ii) shall 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 made therein not misleading.
(g) The shares of the Acquiring Funds to be issued and delivered
to the corresponding Acquired Funds for the account of the shareholders of the
Acquired Funds, pursuant to the terms hereof, shall have been duly authorized as
of the Effective Time of the Reorganization and, when so issued and
4
<PAGE>
delivered, shall be duly and validly issued, fully paid and non-assessable, and
no shareholder of the Acquiring Funds shall have any preemptive right of
subscription or purchase in respect thereto.
(h) All of the issued and outstanding shares of the Acquiring
Funds have been validly issued and are fully paid and non-assessable, and were
offered for sale and sold in conformity with the registration requirements of
all applicable federal and state securities laws.
(i) The Trust shall operate the business of the Acquiring Funds
in the ordinary course between the date hereof and the Effective Time of the
Reorganization, except that the Trust shall complete all measures in respect of
the Acquiring Funds prior to the Effective Time of the Reorganization to ensure
that each Reorganization qualifies as a "reorganization" within the meaning of
Section 368(a) of the Code, regardless of whether such measures are in the
ordinary course. It is understood that such ordinary course of business will
include the declaration and payment of customary dividends and distributions and
any other dividends and distributions deemed advisable in anticipation of the
Reorganizations.
(j) At the Effective Time of the Reorganization, all federal and
other tax returns and reports of the Acquiring Funds required by law to have
been filed by such time shall have been filed, and all federal and other taxes
shall have been paid so far as due, or provision shall have been made for the
payment thereof and, to the best knowledge of management of the Trust, no such
return or report shall be currently under audit and no assessment shall have
been asserted with respect to such returns or reports.
6. Shareholder Action. As soon as practicable after the effective
date of the N-14 Registration Statement the Trust shall hold a meeting(s) of the
shareholders of the Acquired Funds for the purpose of considering and voting
upon:
(a) approval of this Agreement and the Reorganization
contemplated hereby; and
(b) such other matters as may be determined by the Board of
Trustees of the Trust.
7. Regulatory Filings. As soon as practicable, the Trust shall file an
N-14 Registration Statement with the SEC, which shall include all proxy
materials required in connection with the Acquired Funds' shareholder approval
referenced in Section 6, and, where required, with appropriate state securities
regulatory authorities.
8. Closing Date, Effective Time of the Reorganization. The "Closing
Date" shall be May 12, 2000, or such earlier or later date as may be mutually
agreed in writing by the parties hereto. Delivery of the Fund Assets and the
shares of the Acquiring Funds to be issued pursuant to Section 1 and the
liquidation of the Acquired Funds pursuant to Section 2 shall occur on the day
following the Closing Date, whether or not such day is a business day, or on
such other date, and at such place and time, as may be mutually agreed in
writing, by the parties hereto. The date and time at which such actions are
taken are referred to herein as the "Effective Time of the Reorganization." To
the extent any Fund Assets are, for any reason, not transferred at the Effective
Time of the Reorganization, the Trust shall cause such Fund Assets to be
transferred in accordance with this Agreement at the earliest practicable date
thereafter.
9. Conditions to the Trust's Obligations on Behalf of the Acquired
Funds. The obligations of the Trust hereunder shall be subject to the following
conditions precedent:
(a) This Agreement and the Reorganization shall have been
approved by the Board of Trustees of the Trust and by a majority of the
shareholders of the Acquired Funds in the manner required by applicable law and
this Agreement.
(b) All representations and warranties of the Trust made in this
Agreement shall be true and correct in all material respects as if made at and
as of the Valuation Time and the Effective Time of the Reorganization.
5
<PAGE>
(c) The Trust shall have delivered a certificate executed in its
name by its President or Vice President and its Treasurer or Assistant
Treasurer, in a form reasonably satisfactory and dated as of the Closing Date,
to the effect that the representations and warranties of the Acquiring Funds
made in this Agreement are true and correct at and as of the Valuation Time and
that, to the best of its knowledge, the Fund Assets include only assets which
the Acquiring Funds may properly acquire under their investment objectives,
policies and limitations and may otherwise be lawfully acquired by the Acquiring
Funds.
(d) The Trust shall have received an opinion of Morrison &
Foerster LLP, as counsel to the Trust in form reasonably satisfactory to the
Trust and dated the Closing Date, substantially to the effect that (i) the Trust
is a corporation duly established and validly existing under the laws of the
Commonwealth of Massachusetts; (ii) the shares of the Acquiring Funds to be
delivered to the Acquired Funds as provided for by this Agreement are duly
authorized and upon delivery will be validly issued, fully paid and
non-assessable by the Trust; (iii) this Agreement has been duly authorized,
executed and delivered by the Trust, and represents a legal, valid and binding
contract, enforceable in accordance with its terms, subject to the effect of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and such counsel shall express no opinion with respect to the
application of equitable principles in any proceeding whether at law or in
equity; (iv) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated by this Agreement will not,
violate the Declaration of Trust of the Trust or any material contract known to
such counsel to which the Trust is a party or by which it is bound; and (v) no
consent, approval, authorization or order of any court or governmental authority
is required for the consummation by the Trust of the transactions contemplated
by this Agreement, except such as have been obtained under the 1933 Act, the
1934 Act, the 1940 Act, the rules and regulations under those Acts and such as
may be required by state securities laws or such as may be required subsequent
to the Effective Time of the Reorganization. Such opinion may rely on the
opinion of other counsel to the extent set forth in such opinion, provided such
other counsel is reasonably acceptable to the Trust.
(e) The Trust shall have received an opinion of Morrison &
Foerster LLP, based upon representations made in certificates provided by the
Trust and/or its affiliates and/or principal shareholders of the Acquired Funds
to Morrison & Foerster LLP, addressed to the Trust in a form reasonably
satisfactory to the Trust, and dated as of the Closing Date, with respect to the
matters specified in Subsection 10(g).
(f) The Trust shall have received (i) a memorandum addressed to
the Trust, in a form reasonably satisfactory to them, prepared by Morrison &
Foerster LLP, or another person approved by the parties, concerning the
registration of shares to be issued by the Trust pursuant to this Agreement
under applicable state securities laws or the exemption from registration under
such laws, and (ii) assurance reasonably satisfactory to it that all permits and
other authorizations necessary under state securities laws to consummate the
transactions contemplated by this Agreement have been obtained.
(g) The N-14 Registration Statement shall have become effective
under the 1933 Act and no stop order suspending the effectiveness shall have
been instituted, or to the knowledge of the Trust, contemplated by the SEC.
(h) No action, suit or other proceeding shall be threatened or
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 the transactions contemplated herein.
(i) 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.
(j) The Trust on behalf of the Acquired Funds shall have
performed and complied in all material respects with each of its agreements and
covenants required by this Agreement to be performed or complied with by it
prior to or at the Valuation Time and the Effective Time of the Reorganization.
6
<PAGE>
(k) The Trust shall have received a duly executed instrument
whereby the Acquiring Funds assume all of the liabilities of the Acquired Funds.
10. Conditions to the Trust's Obligations on behalf of the Acquiring
Funds. The obligations of the Trust hereunder shall be subject to the following
conditions precedent:
(a) This Agreement and the Reorganization shall have been
approved by the Board of Trustees of the Trust on behalf of the Acquiring Funds
and by a majority of the shareholders of the Acquired Funds in the manner
required by applicable law and this Agreement.
(b) The Trust shall have delivered to the Trust a statement of
assets and liabilities of the Acquired Funds, showing the tax costs of such
securities by lot and the holding periods of such securities, as of the
Valuation Time, certified by the Treasurer or Assistant Treasurer of the Trust
as having been prepared in accordance with generally accepted accounting
principles consistently applied.
(c) The Trust shall have duly executed and delivered to the
Trust such bills of sale, assignments, certificates and other instruments of
transfer ("Transfer Documents") as the Trust may deem necessary or desirable to
transfer all of the Acquired Funds' rights, titles and interests in and to the
Fund Assets.
(d) All representations and warranties of the Trust made in this
Agreement shall be true and correct in all material respects as if made at and
as of the Valuation Time and the Effective Time of the Reorganization.
(e) The Trust shall have delivered a certificate executed in its
name by its President or Vice President and its Treasurer or Assistant
Treasurer, in a form reasonably satisfactory and dated as of the Closing Date,
to the effect that the representations and warranties of the Acquired Funds made
in this Agreement are true and correct at and as of the Valuation Time.
(f) The Trust shall have received an opinion of Morrison &
Foerster LLP, as counsel to the Trust, in a form reasonably satisfactory to the
Trust and dated the Closing Date, substantially to the effect that (i) the Trust
is a business trust duly established and validly existing under the laws of the
Commonwealth of Massachusetts; (ii) this Agreement has been duly authorized,
executed and delivered by the Trust and represents a legal, valid and binding
contract, enforceable in accordance with its terms, subject to the effect of
bankruptcy, insolvency, moratorium, fraudulent conveyance and similar laws
relating to or affecting creditors' rights generally and court decisions with
respect thereto, and such counsel shall express no opinion with respect to the
application of equitable principles in any proceeding, whether at law or in
equity; (iii) the execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated by this Agreement will not,
violate the Declaration of Trust of the Trust or any material contract known to
such counsel to which the Trust is a party or by which it is bound; and (iv) no
consent, approval, authorization or order of any court or governmental authority
is required for the consummation by the Trust of the transactions contemplated
by this Agreement, except such as have been obtained under the 1933 Act, the
1934 Act, the 1940 Act, the rules and regulations under those Acts and such as
may be required under the state securities laws or such as may be required
subsequent to the Effective Time of the Reorganization. Such opinion may rely on
the opinion of other counsel to the extent set forth in such opinion, provided
such other counsel is reasonably acceptable to the Trust.
(g) The Trust shall have received an opinion of Morrison &
Foerster LLP, based upon representations made in certificates provided by the
Trust and/or its affiliates and/or principal shareholders of the Acquiring Funds
to Morrison & Foerster LLP, addressed to the Trust in a form reasonably
satisfactory to the Trust, and dated as of the Closing Date, substantially to
the effect that, for federal income tax purposes, each Reorganization will
qualify as a "reorganization," within the meaning of Section 368(a) of the Code,
and the Acquiring Fund and the corresponding Acquired Fund will each be a "party
to a reorganization," within the meaning of Section 368(b) of the Code, with
respect to the Reorganization.
7
<PAGE>
(h) The Fund Assets to be transferred to the Acquiring Funds
under this Agreement shall include no assets which the Acquiring Funds may not
properly acquire pursuant to its investment objectives, policies or restrictions
or may not otherwise lawfully acquire.
(i) The N-14 Registration Statement shall have become effective
under the 1933 Act and no stop order suspending such effectiveness shall have
been instituted or, to the knowledge of the Trust, contemplated by the SEC.
(j) No action, suit or other proceeding shall be threatened or
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 the transactions contemplated herein.
(k) 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.
(l) The Trust on behalf of the Acquiring Funds shall have
performed and complied in all material respects with each of its agreements and
covenants required by this Agreement to be performed or complied with by it
prior to or at the Valuation Time and the Effective Time of the Reorganization.
(m) Prior to the Valuation Time, each Acquired Fund shall have
declared a dividend or dividends, with a record date and ex-dividend date prior
to the Valuation Time, which, together with all previous dividends, shall have
the effect of distributing to its shareholders all of its "net investment
company taxable income" (as defined in the Code and computed without regard to
any deduction for dividends paid), if any, for all taxable periods or years
ending on or before the Effective Time of the Reorganization, and all of its net
capital gain, if any, realized in taxable periods of years ending on or before
Effective Time of the Reorganization.
11. Survival of Representations and Warranties. The representations and
warranties of the Trust on behalf of the Acquiring Funds set forth in this
Agreement shall survive the delivery of the Fund Assets to the Acquiring Funds
and the issuance of the shares of the Acquiring Funds at the Effective Time of
the Reorganization.
12. Tax Matters.
(a) The Trust hereby represents, warrants and covenants that it shall
use its best efforts to cause each Reorganization to qualify, and will not
(whether before or after consummation of the Reorganizations) take any actions
that could prevent each Reorganization from qualifying, as a "reorganization"
under the provisions of Section 368 of the Code.
(b) Except where otherwise required by law, the parties shall not take
a position on any tax returns inconsistent with the treatment of each
Reorganization for tax purposes as a "reorganization," within the meaning of
Section 368(a) of the Code and each Acquiring Fund and each Acquired Fund will
comply with the record keeping and information filing requirements of Section
1.368-3 of the Treasury Regulation in accordance therewith.
13. Termination of Agreement. This Agreement may be terminated by a
party at or, in the case of Subsection 13(c), below, at any time prior to, the
Effective Time of the Reorganization by a vote of a majority of its Board of
Trustees as provided below:
(a) By the Trust on behalf of the Acquiring Funds if the
conditions set forth in Section 10 are not satisfied as specified in said
Section;
(b) By the Trust on behalf of the Acquired Funds if the
conditions set forth in Section 9 are not satisfied as specified in said
Section; and
8
<PAGE>
(c) By mutual written consent of both parties.
14. Governing Law. This Agreement and the transactions contemplated
hereby shall be governed, construed and enforced in accordance with the laws of
the State of New York, except to the extent preempted by federal law.
15. Brokerage Fees and Expenses.
(a) The Trust represents and warrants that there are no brokers
or finders entitled to receive any payments in connection with the transactions
provided for herein.
(b) Banc of America Advisors, Inc. or its affiliates will be
responsible for the customary expenses related to entering into and carrying out
the provisions of this Agreement, whether or not the transactions contemplated
hereby are consummated.
16. Amendments.
This Agreement may be amended, modified or supplemented in such
manner as may be agreed upon in writing by the authorized officers of the Trust,
acting on behalf of the Acquiring Funds and the Acquired Funds; 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 Acquiring Funds to be issued to the Transferor
Record Holders under this Agreement to the detriment of such Transferor Record
Holders, or otherwise materially and adversely affecting the Acquired Funds,
without the Acquiring Funds obtaining their shareholders' further approval.
At any time prior to or (to the fullest extent permitted by law)
after approval of this Agreement by the shareholders of the Acquired Funds, the
Trust, on behalf of either the Acquired Funds, or the Trust, on behalf of the
Acquiring Funds, may waive any breach or failure to satisfy any of the
conditions to the obligations set forth herein (such waiver to be in writing and
authorized by the Board of Trustees).
17. Counterparts.
This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be executed by their duly authorized officers designated below as
of the date first written above.
NATIONS FUND TRUST
On behalf of the Acquired Funds
By: /s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
Secretary
NATIONS FUND TRUST
On behalf of the Acquiring Funds
By: /s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
Secretary
10
<PAGE>
SCHEDULE A
----------
SHAREHOLDERS OWNING SHARES OF THE WOULD RECEIVE SHARES OF THE
FOLLOWING TRUST'S ACQUIRED FUNDS AND FOLLOWING TRUST'S ACQUIRING FUNDS
CLASSES: AND CLASSES:
Nations Managed Value Index Fund Nations Managed Index Fund
Primary A Shares Primary A Shares
Investor A Shares Investor A Shares
Nations Managed SmallCap Value Index Fund Nations SmallCap Index Fund
Primary A Shares Primary A Shares
Investor A Shares Investor A Shares
NATIONS MANAGED VALUE INDEX FUND
NATIONS FUND TRUST
PROXY CARD
SPECIAL MEETING OF SHAREHOLDERS-APRIL 21, 2000
The undersigned hereby appoints Robert B. Carroll, Richard H. Blank,
Jr. and James E. Banks, Jr. (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 Nations Managed Value Index Fund (the "Fund") of Nations Fund
Trust (the "Trust") to be held at One Bank of America Plaza, 33rd Floor,
Charlotte, North Carolina at 10:00 a.m. (Eastern time), on Friday, April 21,
2000, and at any adjournment or adjournments thereof. The proxies will cast
votes according to the number of shares of the Fund which the undersigned may be
entitled to vote with respect to the proposals set forth 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 PROXY STATEMENT, DATED FEBRUARY 1, 2000.
YOU ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE EACH ACCOMPANYING PROXY BALLOT, WHICH IS BEING SOLICITED BY THE TRUST'S
BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. YOU ALSO
MAY SUBMIT PROXIES: 1) BY FACSIMILE AT (704) 388-2641; 2) BY DIALING (800)
690-6903; OR 3) ON-LINE AT WEBSITE WWW.PROXYVOTE.COM. PROXIES MAY BE REVOKED AT
ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO THE COMPANY A WRITTEN NOTICE
OF REVOCATION OR A SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE MEETING AND
VOTING IN PERSON.
Please sign below 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.
<PAGE>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
NATIONS MANAGED VALUE INDEX FUND
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.
Vote On Proposal
To approve an Agreement and Plan of Reorganization, dated as of
February 1, 2000 (the "Reorganization Agreement"), by Nations Fund
Trust, on behalf of Nations Managed Value Index Fund, Nations Managed
SmallCap Value Index Fund, Nations Managed Index Fund and Nations
Managed SmallCap Index Fund (to be re-named Nations SmallCap Index
Fund). The Reorganization Agreement provides for the reorganization of
(i) Nations Managed Value Index Fund into Nations Managed Index Fund;
and (ii) Nations Managed SmallCap Value Index Fund into Nations
SmallCap Index Fund.
|_|FOR |_|AGAINST |_|ABSTAIN
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.
------------------------ -----------
Signature Date
------------------------ -----------
Signature (Joint Owners) Date
<PAGE>
NATIONS MANAGED SMALLCAP VALUE INDEX FUND
NATIONS FUND TRUST
PROXY CARD
SPECIAL MEETING OF SHAREHOLDERS-APRIL 21, 2000
The undersigned hereby appoints Robert B. Carroll, Richard H. Blank,
Jr. and James E. Banks, Jr. (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 Nations Managed SmallCap Value Index Fund (the "Fund") of
Nations Fund Trust (the "Trust") to be held at One Bank of America Plaza, 33rd
Floor, Charlotte, North Carolina at 10:00 a.m. (Eastern time), on Friday, April
21, 2000, and at any adjournment or adjournments thereof. The proxies will cast
votes according to the number of shares of the Fund which the undersigned may be
entitled to vote with respect to the proposals set forth 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 PROXY STATEMENT, DATED FEBRUARY 1, 2000.
YOU ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE ENCLOSED
ENVELOPE EACH ACCOMPANYING PROXY BALLOT, WHICH IS BEING SOLICITED BY THE TRUST'S
BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING. YOU ALSO
MAY SUBMIT PROXIES: 1) BY FACSIMILE AT (704) 388-2641; 2) BY DIALING (800)
690-6903; OR 3) ON-LINE AT WEBSITE WWW.PROXYVOTE.COM. PROXIES MAY BE REVOKED AT
ANY TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO THE COMPANY A WRITTEN NOTICE
OF REVOCATION OR A SUBSEQUENTLY DATED PROXY OR BY ATTENDING THE MEETING AND
VOTING IN PERSON.
Please sign below 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.
<PAGE>
_ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _ _
THIS PROXY CARD IS VALID ONLY WHEN SIGNED AND DATED.
NATIONS MANAGED SMALLCAP VALUE INDEX FUND
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.
Vote On Proposal
To approve an Agreement and Plan of Reorganization, dated as of
February 1, 2000 (the "Reorganization Agreement"), by Nations Fund
Trust, on behalf of Nations Managed Value Index Fund, Nations Managed
SmallCap Value Index Fund, Nations Managed Index Fund and Nations
Managed SmallCap Index Fund (to be re-named Nations SmallCap Index
Fund). The Reorganization Agreement provides for the reorganization of
(i) Nations Managed Value Index Fund into Nations Managed Index Fund;
and (ii) Nations Managed SmallCap Value Index Fund into Nations
SmallCap Index Fund.
|_|FOR |_|AGAINST |_|ABSTAIN
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.
------------------------ -----------
Signature Date
------------------------ -----------
Signature (Joint Owners) Date
