As filed with the Securities and Exchange Commission
on February 20, 1997
Registration No. 33-________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 (X)
Pre-Effective Amendment No. ___ ( )
Post-Effective Amendment No. ___ ( )
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1940 ( )
Amendment No. ___ ( )
(Check appropriate box or boxes)
________________________
NATIONS FUND, INC.
(Exact Name of Registrant as specified in Charter)
111 Center Street
Little Rock, Arkansas 72201
(Address of Principal Executive Offices, including Zip Code)
__________________________
Registrant's Telephone Number, including Area Code: (800)
626-2275
Richard H. Blank, Jr.
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
(Name and Address of Agent for Service)
With copies to:
Robert M. Kurucza, Esq. Philip H. Newman, Esq.
Marco E. Adelfio, Esq. Goodwin, Proctor &
Morrison & Foerster LLP Hoar LLP
2000 Pennsylvania Ave., 53 State Street
N.W. Exchange Place
Suite 5500 Boston, MA 02109
Washington, D.C. 20006
It is proposed that this filing will become effective on
March 22, 1997 pursuant to Rule 488.
No filing fee is required under the Securities Act of 1933
because an indefinite number of shares of beneficial
interest in the Registrant, without par value, has
previously been registered pursuant to Rule 24f-2 under the
Investment Company Act of 1940, as amended. The Registrant
filed on May 24, 1996, the notice required by Rule 24f-2 for
its fiscal year ended March 31, 1996 (File No. 33-4038; 811-
4614).
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Nations Fund, Inc.
Cross-Reference Sheet
PART A
Item No. Item Caption Prospectus Caption
1 Beginning of COVER PAGE OF REGISTRATION
Registration STATEMENT; CROSS-REFERENCE
Statement and SHEET; FRONT COVER PAGE OF
Outside Front Cover PROSPECTUS/PROXY STATEMENT
Page of Prospectus
2 Beginning and TABLE OF CONTENTS
Outside Back Cover
Page of Prospectus
3 Fee Table, Synopsis APPENDIX II -- EXPENSE
Information, and SUMMARIES SUMMARY -- PROPOSED
Risk Factors REORGANIZATION; -- PRINCIPAL
RISK FACTORS;
4 Information About INFORMATION RELATING TO THE
the Transaction PROPOSED REORGANIZATION
5 Information About COMPARISON OF PILOT AND
the Registrant NATIONS; ADDITIONAL
INFORMATION ABOUT NATIONS
6 Information About COMPARISON OF PILOT AND
the Company Being NATIONS; ADDITIONAL
Acquired INFORMATION ABOUT PILOT
7 Voting Information INFORMATION RELATING TO
VOTING MATTERS
8 Interest of Certain NOT APPLICABLE
Persons and Experts
9 Additional NOT APPLICABLE
Information Required
for Reoffering by
Persons Deemed to be
Underwriters
<PAGE>
PART B
Statement of Additional
Item No. Item Caption Information Caption
10 Cover Page COVER PAGE
11 Table of Contents TABLE OF CONTENTS
12 Additional INCORPORATION OF DOCUMENTS BY
Information About REFERENCE IN STATEMENT OF
the Registrant ADDITIONAL INFORMATION
13 Additional NOT APPLICABLE
Information About
the Company Being
Acquired
14 Financial Statements EXHIBITS TO STATEMENT OF
ADDITIONAL INFORMATION
PART C
Item No.
15-17 Information required to be included in Part C is
set forth under the appropriate Item, so numbered,
in Part C of this Registration Statement.
<PAGE>
THE FOLLOWING ITEMS ARE HEREBY INCORPORATED BY REFERENCE:
NATIONS FUND, INC. ("NATIONS")
From Post-Effective Amendment No. 31 of the Nations Registration Statement,
filed July 25, 1996 (SEC File Nos. 33-4038; 811;4614):
Prospectuses for the Investor A, Investor N and Primary A Shares of the
Nations Equity Income Fund, dated July 31, 1996.
Prospectuses for the Daily, Investor B and Primary A Shares of the
Nations Prime Fund and Nations Treasury Fund.
The audited financial statements and related independent auditors' reports for
the Nations Equity Income Fund, Nations Prime Fund and Nations Treasury Fund,
contained in the Annual Report for the fiscal year ended March 31, 1996.
The unaudited financial statements and related independent auditors' reports for
the Nations Equity Income Fund, Nations Prime Fund and Nations Treasury Fund,
contained in the Semi-Annual Report for the six-month period ended September 30,
1996.
THE PILOT FUNDS ("PILOT")
From Post-Effective Amendment No. 33 of the Pilot Registration Statement, filed
November 12, 1996 (SEC File Nos. 2-78440; 811-3517):
Prospectuses for the Class A, Class B and Pilot Shares of the Pilot
Equity Income Fund, Pilot International Equity Fund, Pilot Small
Capitalization Equity Fund and Pilot U.S. Government Securities Fund,
dated January 2, 1997.
Prospectuses for the Administration, Investor and Pilot Shares of the
Pilot Short-Term U.S. Treasury Fund and Short-Term Diversified Assets
Fund, dated January 2, 1997.
The audited financial statements and related independent auditors' reports for
the Pilot Equity Income Fund, Pilot International Equity Fund, Pilot Small
Capitalization Equity Fund, Pilot U.S. Government Securities Fund, Pilot
Short-Term U.S. Treasury Fund and Short-Term Diversified Assets Fund, contained
in the Annual Report for the fiscal year ended August 31, 1996.
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THE PILOT FUNDS
Pilot Equity Income Fund
Pilot International Equity Fund
Pilot Short-Term Diversified Assets Fund
Pilot Short-Term U.S. Treasury Fund
Pilot Small Capitalization Equity Fund
Pilot U.S. Government Securities Fund
3435 Stelzer Road
Columbus, Ohio 43219
March 20, 1997
Dear Shareholder:
On behalf of the Board of Trustees of The Pilot Funds ("Pilot"), we are
pleased to invite you to a special meeting of the shareholders of the Pilot
funds named above (each a "Pilot Fund" and together, the "Pilot Funds") to be
held on April 21, 1997 at 10:00 a.m., Eastern time, at the offices of BISYS Fund
Services, Inc., 3435 Stelzer Road, Columbus, Ohio (the "Meeting"). At the
Meeting, shareholders of each Pilot Fund will be asked to consider a proposed
reorganization of their Pilot Fund into a corresponding portfolio of Nations
Fund, Inc. (each a "Nations Fund" and together the "Nations Funds").
Background. As you may recall, Boatmen's Bancshares, Inc. ("Bancshares")
recently merged into NationsBank Corporation. Prior to the merger, Bancshares
was the parent of Boatmen's Trust Company ("Boatmen's"), investment adviser to
the Pilot Funds. At Special Meetings of Pilot Fund shareholders on December 18
and 20, 1996, you approved new investment advisory arrangements with Boatmen's
in anticipation of the Bancshares- NationsBank Corporation merger.
At the upcoming Meeting, management is asking you to approve a
reorganization of your Pilot Fund into a corresponding Nations Fund. The Nations
Funds are an open- end investment company advised by NationsBanc Advisors, Inc.,
a subsidiary of NationsBank, N.A. If all approvals are obtained, the Pilot Funds
would be reorganized into the corresponding Nations Funds on or about May 2,
1997, when your Pilot Fund shares would be exchanged for shares of the
corresponding Nations Fund of equal value.
PILOT'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT
YOU VOTE TO APPROVE THE PROPOSED REORGANIZATION.
Please note that Pilot Shareholders who hold shares of Pilot funds other
than those listed above will receive proxy materials under separate cover with
respect to proposals affecting those funds. Shareholders should fill out the
proxy card(s) for each of those Pilot funds in which they hold shares in order
to vote those shares.
<PAGE>
In considering these matters, you should note:
(Bullet) Similar Objectives and Policies
Three of the six Pilot Funds are proposed to be reorganized into
new Nations Funds that have been created (specifically for purposes
of the reorganization) as vehicles for the continuation of these
Pilot Funds. The remaining three Pilot Funds are proposed to be
reorganized into operating Nations Funds with investment policies
and objectives that are substantially similar, and in some cases
identical, to those of the corresponding Pilot Funds.
(Bullet) Similar Access Arrangements
Following the reorganization, you will enjoy access to the Nations
Funds through distribution, transaction and shareholder servicing
arrangements that are substantially similar to the Pilot Funds'
current arrangements.
(Bullet) Same Value of Shares
The total dollar value of the Nations Fund shares you receive in
the reorganization will be the same as the total dollar value of
the Pilot Fund shares that you held immediately before the
Reorganization. The reorganization will be tax free, and no front-
end or contingent deferred sales loads will be charged in
connection with the exchange of Pilot Fund shares for Nations Fund
shares.
(Bullet) Operating Expense Ratios
The annual fund operating expense ratio (after waivers) for the
corresponding Nations Fund classes after the reorganization is
expected to be no higher than the annual fund operating expense
ratio of your Pilot Fund class, except for Class A shares and Pilot
shares of the Pilot Equity Income Fund.
The proposed reorganization is expected to benefit Pilot Fund shareholders
by:
(Bullet) offering actual or potential reductions in total
operating expense ratios;
(Bullet) offering shareholders the opportunity to join, and
exchange their shares within, a larger and more diverse
family of more than 50 funds;
(Bullet) offering access to a broader array of investment
products, such as a new line of funds-of-funds, and
investment services, such as a mutual fund asset allocation
program, a mutual fund marketplace and cash sweep programs;
and
(Bullet) providing opportunities for enhanced returns through
combined investment portfolios.
The formal Notice of Special Meeting, a Combined Proxy
Statement/Prospectus and a Proxy Ballot are enclosed. If you own shares in more
than one of the Pilot Funds that is named above, more than one Proxy Ballot
accompanies these materials. If you own
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<PAGE>
shares in one or more of the Pilot funds that is not named above, you will be
receiving separately a set of proxy materials (including Proxy Ballot(s)) for
the other fund(s).
Whether or not you plan to attend the Meeting, you may vote by proxy in
any of the following ways:
[ballot/proxy solicitation information to be inserted]
Please return your Proxy Ballot or call [or fax us] so that your vote will
be counted.
YOUR VOTE IS VERY IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES THAT
YOU OWN. PLEASE VOTE BY RETURNING YOUR PROXY BALLOT TODAY, [ballot/proxy
solicitation information to be inserted]
The proposed reorganization and the reasons for the Pilot Board's
unanimous recommendation are discussed in detail in the enclosed materials,
which you should read carefully. If you have any questions about the
reorganization, please do not hesitate to call Pilot Funds toll free at
1-800-71-PILOT.
We look forward to seeing you at the Meeting or receiving your proxy so
that your shares may be voted at the Meeting.
Sincerely,
William J. Tomko
President
The Pilot Funds
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<PAGE>
THE PILOT FUNDS
Pilot Equity Income Fund
Pilot International Equity Fund
Pilot Short-Term Diversified Assets Fund
Pilot Short-Term U.S. Treasury Fund
Pilot Small Capitalization Equity Fund
Pilot U.S. Government Securities Fund
3435 Stelzer Road
Columbus, Ohio 43219
NOTICE OF SPECIAL SHAREHOLDERS MEETING
To Be Held On April 21, 1997
To Pilot Fund Shareholders:
NOTICE IS GIVEN THAT a special meeting of the shareholders (the "Meeting")
of the Pilot Equity Income Fund, Pilot International Equity Fund, Pilot
Short-Term Diversified Assets Fund, Pilot Small Capitalization Equity Fund,
Pilot Short-Term U.S. Treasury Fund and Pilot U.S. Government Securities Fund
(each a "Pilot Fund" and together, the "Pilot Funds"), each of which is a series
of The Pilot Funds ("Pilot"), will be held at the offices of BISYS Fund
Services, Inc., 3435 Stelzer Road, Columbus, Ohio, on April 21, 1997 at 10:00
a.m., Eastern time, for purpose of considering and voting upon:
ITEM 1. A proposal to approve an Agreement and
Plan of Reorganization providing for the
transfer of the assets and stated liabilities
of each Pilot Fund to a corresponding fund of
Nations Fund, Inc. in exchange for shares of
designated classes of the corresponding Nations
Fund.
ITEM 2. Such other business as may properly
come before the Meeting or any adjournment(s).
Item 1 is described in the attached Combined Proxy Statement/Prospectus.
YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSAL.
Shareholders of record as of the close of business on March [ ], 1997 are
entitled to notice of, and to vote at, the Meeting or any adjournment(s)
thereof.
<PAGE>
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY CARD, WHICH IS BEING SOLICITED BY THE
PILOT BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING.
SHAREHOLDERS ALSO MAY RETURN PROXIES BY TELEFAX. PROXIES MAY BE REVOKED AT ANY
TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO PILOT A WRITTEN NOTICE OF
REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE MEETING AND
VOTING IN PERSON.
By Order of the Trustees,
George O. Martinez,
Secretary
<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
Dated March 22, 1997
THE PILOT FUNDS
3435 Stelzer Road
Columbus, Ohio 43219-3035
1-800-717-4568
NATIONS FUND, INC.
One NationsBank Plaza, 33rd Floor
Charlotte, North Carolina 28255
1-800-321-7854
This Combined Proxy Statement/Prospectus is furnished to shareholders of
the Pilot Equity Income Fund, Pilot International Equity Fund, Pilot Short-Term
Diversified Assets Fund, Pilot Short-Term U.S. Treasury Fund, Pilot Small
Capitalization Equity Fund and Pilot U.S. Government Securities Fund (each a
"Pilot Fund" and collectively the "Pilot Funds") in connection with the
solicitation of proxies by the management of The Pilot Funds ("Pilot"). The
Board of Trustees has called a Special Meeting of Shareholders (the "Meeting")
at 10:00 a.m. (Eastern time) on April 21, 1997 at the offices of BISYS Fund
Services, Inc., 3435 Stelzer Road, Columbus, Ohio. At the Meeting, shareholders
will be asked to approve a proposed Agreement and Plan of Reorganization dated
as of February [ ], 1997 (the "Agreement") by and between Pilot and Nations
Fund, Inc. ("Nations"). A copy of a form of the Agreement is attached as
Appendix I.
Pilot and Nations are both registered open-end management investment
companies (mutual funds) that offer money market, tax-exempt, bond and equity
investment portfolios. The Agreement provides for the transfer of assets and
stated liabilities of each Pilot Fund to a corresponding investment portfolio of
Nations (each a "Nations Fund" and collectively the "Nations Funds") in exchange
for shares ("Shares") of comparable classes of the Nations Fund having equal
value (the "Reorganization"). As a result of the Reorganization, shareholders of
the Pilot Funds will become shareholders of the Nations Funds. Table I, under
"Information Relating to the Proposed Reorganization--Description of the
Agreement," shows each class of each Pilot Fund and the corresponding class of
each corresponding Nations Fund.
This Combined Proxy Statement/Prospectus sets forth concisely the
information that a Pilot shareholder should know before voting, and should be
retained for future reference. For shareholders of the Pilot Funds that will be
reorganized into the Nations Equity Income Fund, Nations Prime Fund and Nations
Treasury Fund (the "Operating Nations Funds") this Combined Proxy
Statement/Prospectus is accompanied by the following documents: (i) the Annual
Report(s) for the Operating Nations Funds dated March 31, 1996 and (ii) the
current prospectus(es) for the Operating Nations Funds, dated July 31, 1996.
Annual Reports and prospectuses for the Nations International Growth Fund,
Nations Small Company Growth Fund and Nations U.S. Government Bond Fund (the
1
<PAGE>
"New Nations Funds") are not enclosed because the New Nations Funds are being
created to continue the current operations of their corresponding Pilot Funds.
Additional information is set forth in the statement of additional information
relating to this Combined Proxy Statement/Prospectus, dated the date hereof,
which is incorporated herein by reference, and in the prospectuses dated January
2, 1997 for the Pilot Funds. Each of these documents is on file with the
Securities and Exchange Commission (the "SEC"), and is available without charge
by calling or writing Pilot or Nations at the respective telephone numbers or
addresses stated on the cover sheet of this Combined Proxy Statement/Prospectus.
The information contained in the Operating Nations Fund prospectuses and the
prospectuses for the Pilot Funds is incorporated by reference into this Combined
Proxy Statement/Prospectus.
The following summarizes the proposal to be voted on by shareholders of
each Pilot Fund at the Meeting:
Proposal Shareholders Solicited
1. To approve an Agreement and Plan of Each Pilot Fund voting separately
Reorganization providing for the transfer on a portfolio-by-portfolio basis.
of the assets and liabilities of the
Pilot Funds to corresponding Nations
Funds in exchange for Shares of
comparable classes of the corresponding
Nations Funds.
This Combined Proxy Statement/Prospectus is Pilot's proxy statement for the
Meeting, and Nations' prospectus for the Shares of the Operating Nations Funds
that have been registered with the SEC and are to be issued in connection with
the Reorganization. This Combined Proxy Statement/Prospectus is not a prospectus
for Shares of the New Nations Funds that will be issued in connection with the
Reorganization because the New Nations Funds are being created to continue the
current operations of their corresponding Pilot Funds. Because this is a
"Combined" Proxy Statement/Prospectus, reference to certain Pilot Funds, and the
New Nations Funds into which they will be reorganized, appears in various places
throughout this document. However, these references relate only to the Proxy
Statement portion of this document and not the Prospectus portion. This Combined
Proxy Statement/Prospectus is not offering for sale shares in any of the New
Nations Funds.
This Combined Proxy Statement/Prospectus is expected to be first sent to
shareholders on or about March 22, 1997.
THE SECURITIES OF THE NATIONS FUNDS OFFERED HEREBY HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES
2
<PAGE>
COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS COMBINED PROXY
STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS COMBINED PROXY
STATEMENT/PROSPECTUS AND IN THE MATERIALS EXPRESSLY INCORPORATED HEREIN BY
REFERENCE AND, IF GIVEN OR MADE, SUCH OTHER INFORMATION OR REPRESENTATIONS MUST
NOT BE RELIED UPON AS HAVING BEEN AUTHORIZED BY PILOT, NATIONS OR THEIR
RESPECTIVE SPONSORS AND DISTRIBUTORS.
EACH MONEY MARKET FUND SEEKS TO MAINTAIN A NET ASSET VALUE OF $1.00 PER
SHARE. AN INVESTMENT IN A NATIONS MONEY MARKET FUND IS NEITHER INSURED NOR
GUARANTEED BY THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A NATIONS
MONEY MARKET FUND WILL BE ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER
SHARE.
SHARES OF PILOT AND NATIONS ARE NOT DEPOSITS OR OBLIGATIONS OF OR
GUARANTEED OR ENDORSED BY, NATIONSBANK, N.A. OR ANY OF ITS AFFILIATES OR ANY
OTHER BANK. SUCH SHARES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THE DISTRIBUTOR OF THE PILOT FUNDS IS PILOT FUNDS
DISTRIBUTORS, INC. AND THE SPONSOR IS BISYS FUND SERVICES LIMITED PARTNERSHIP.
THE DISTRIBUTOR AND SPONSOR OF THE NATIONS FUNDS IS STEPHENS INC.
3
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TABLE OF CONTENTS
FEE TABLES................................................................6
SUMMARY...................................................................6
Proposed Reorganization..............................................6
Principal Risk Factors...............................................8
Voting Information...................................................9
INFORMATION RELATING TO THE PROPOSED REORGANIZATION.......................9
Description of the Agreement.........................................9
Table I..........................................................9
Pilot Board Consideration...........................................12
Capitalization......................................................14
Table II -- Pro Forma Capitalization (as of December 31, 1996)..14
Federal Income Tax Consequences.....................................18
Other Provisions Applicable to the New Nations Funds................18
COMPARISON OF PILOT AND NATIONS..........................................19
Investment Objectives and Policies..................................19
Investment Adviser and Other Service Providers......................20
Table III -- Total Expense Information..........................21
Other Service Providers for the Pilot Funds and Nations Funds...25
Share Structure.....................................................26
Distribution Plans, Administration Plans and Shareholder Servicing
Arrangements....................................................27
Shareholder Transactions and Services...............................29
INFORMATION RELATING TO VOTING MATTERS...................................29
General Information.................................................29
Shareholder and Board Approvals.....................................30
Table IV(A).....................................................31
Table IV(B).....................................................31
Quorum..............................................................32
Annual Meetings and Shareholder Meetings............................32
ADDITIONAL INFORMATION ABOUT NATIONS.....................................32
ADDITIONAL INFORMATION ABOUT PILOT.......................................33
FINANCIAL STATEMENTS.....................................................33
OTHER BUSINESS...........................................................34
SHAREHOLDER INQUIRIES....................................................34
4
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APPENDICES I Agreement And Plan Of Reorganization
II Expense Summaries Of Pilot Funds And The Corresponding
Nations Funds
III Investment Objectives, Limitations And Certain Significant
Investment Policies Of The
Operating Nations Funds And The Corresponding Pilot Funds
IV Shareholder Transactions And Services Of The Nations Funds
And The Corresponding Pilot Funds
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FEE TABLES
Pro Forma Expense Information for each proposed reorganization is included
in Appendix II to this Combined Proxy Statement/Prospectus.
SUMMARY
Proposed Reorganization. The Agreement provides for: (i) the transfer
of all of the assets and stated liabilities of each Pilot Fund to a
corresponding Nations Fund in exchange for Shares of comparable classes of
the corresponding Nations Fund; and (ii) the distribution of Nations Fund Shares
to the shareholders of the Pilot Funds in liquidation of the Pilot Funds. The
Reorganization is subject to a number of conditions with respect to each Pilot
Fund, including shareholder approval. Following the Reorganization, Pilot will
wind up its affairs and deregister as an investment company under the Investment
Company Act of 1940 (the "1940 Act").
As a result of the proposed Reorganization, a Pilot Fund shareholder will
become a shareholder of its corresponding Nations Fund and will hold,
immediately after the closing(s) of the Reorganization (the "Closing(s)"),
Shares of the comparable class of the corresponding Nations Fund having a total
dollar value equal to the total dollar value of the Shares of the Pilot Fund
that the shareholder held immediately before the Closing(s).
Overview of Pilot and Nations. The investment objectives, policies and
restrictions of the Operating Nations Funds are, in general, substantially
similar to those of the corresponding Pilot Funds. See "Comparison of Pilot and
Nations--Investment Objectives and Policies" and Appendix III to this Combined
Proxy Statement/Prospectus. The investment objectives, policies and restrictions
of the New Nations Funds are identical in all material respects to the
corresponding Pilot Funds.
Boatmen's Trust Company ("Boatmen's") currently serves as investment
adviser to the Pilot Funds. Kleinwort Benson Investment Management Americas Inc.
("Kleinwort") currently serves as the investment manager to the Pilot
International Equity Fund. NationsBanc Advisors, Inc. ("NBAI") currently serves
as the investment adviser to each Operating Nations Fund, and will serve as the
investment adviser to each of the New Nations Funds. TradeStreet Investment
Associates, Inc. ("TradeStreet") currently serves as investment sub-adviser to
the Operating Nations Funds. With respect to the New Nations Funds, Boatmen's
will serve as investment sub-adviser to both the Nations Small Company Growth
Fund and the Nations U.S. Government Bond Fund; and Kleinwort will serve as
investment sub-adviser to the Nations International Growth Fund. As used herein,
the "Adviser" means NBAI, TradeStreet, Boatmen's and/or Kleinwort, as the
context may require. See "Comparison of Pilot and Nations--Investment Adviser
and Other Service Providers."
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Table III, under "Comparison of Pilot and Nations--Investment Adviser and
Other Service Providers," shows the current (after waivers or reimbursements)
total operating expenses for each class of Pilot Fund along with the total
operating expenses (after waivers or reimbursements) that could be expected for
each class of Pilot Fund after the Reorganization. NBAI has committed to
maintain current (after waiver) expense ratios for all Nations Fund classes for
a period of at least two years after the Closing, absent extraordinary
circumstances or a reduction in fund assets that impacts fee levels (the
"Expense Commitment"). NBAI believes that the achievement of the pro forma
expense levels is likely and that shareholders may, therefore, enjoy even lower
expense ratios than the levels to which the Adviser has committed.
Appendix II to this Combined Proxy Statement/Prospectus provides additional
information about the fees and expenses for each of the Nations Funds and
corresponding Pilot Funds. The Pilot Funds have a different administrator,
distributor, transfer agent, independent auditor and different
trustees/directors. See "Comparison of Pilot and Nations--Investment Adviser and
Other Service Providers."
The Nations Equity Income Fund, Nations International Growth Fund, Nations
Small Company Growth Fund and Nations U.S. Government Bond Fund will each issue
three classes of Shares in the Reorganization: Investor A Shares, Investor N
Shares and Primary A Shares. The Nations Treasury Fund and Nations Prime Fund
will each issue three classes of Shares in the Reorganization: Daily Shares,
Investor B Shares and Primary A Shares. See "Comparison of Pilot and
Nations--Share Structure."
With certain exceptions, the purchase, redemption, dividend and other
policies and procedures of the Pilot Funds and the Nations Funds are generally
similar. Among the exceptions is that only the Pilot Shares issued by the Pilot
money market funds and the Investor B Shares of the Nations money market funds
offer checkwriting redemption privileges. See "Comparison of Pilot and
Nations--Shareholder Transactions and Services" and Appendix IV to this Combined
Proxy Statement/Prospectus.
The Nations Funds are sold at net asset value, with no front-end or
contingent deferred sales load, whereas the Pilot Funds charge a front-end sales
charge on their Class A Shares and a contingent deferred sales charge on their
Class B Shares. Although, no front-end or contingent deferred sales charge will
be imposed on any of the shareholders in connection with the Reorganization,
former Class B shareholders will remain subject to the contingent deferred sales
charge structure in place for Pilot Class B shares.
Federal Income Tax Consequences. Morrison & Foerster LLP, legal counsel to
Nations, will issue an opinion as of the Closing to the effect that, based on
certain assumptions, the Reorganization will not give rise to the recognition of
gain or loss for federal income tax purposes to the Pilot Funds, the Nations
Funds or their respective shareholders.
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The Agreement contemplates that, upon notice from Nations, ten days prior
to the Closing Date, a Pilot Fund must immediately sell prior to the Closing
Date, to the extent permissible and consistent with that Pilot Fund's own
investment objective and policies, any portfolio security identified by Nations
as impermissible under the investment objectives and limitations of the Nations
Fund into which the Pilot Fund is to be reorganized. Such a sale could result in
taxable capital gains for a Pilot Fund and its shareholders.
See Appendix I to this Combined Proxy Statement/Prospectus.
Pilot and Nations Board Consideration. In considering the Agreement, the
Boards of Pilot and Nations, including the disinterested Directors and Trustees
thereof, were advised by their respective legal counsel, as well as by separate
legal counsel to the disinterested Directors and Trustees, as to their fiduciary
duties under the 1940 Act and the required determinations that each Board should
make under the 1940 Act in connection with the Reorganization. After considering
the relevant factors, as discussed in greater detail below under "Information
Relating to the Proposed Reorganization--Pilot Board Consideration," the Pilot
Board found, on behalf of the Pilot Funds, that participation in the
Reorganization, as contemplated by the Agreement, is in the best interests of
the Pilot Funds and that the interests of the shareholders of the Pilot Funds
would not be diluted as a result of the Reorganization. Pilot's Board of
Trustees unanimously recommends that Pilot shareholders approve the Agreement.
Similarly, after considering the relevant factors, the Nations Board, on
behalf of the Nations Funds, found that participation in the Reorganizations, as
contemplated by the Plans of Reorganization, is in the best interests of the
Nations Funds and that the interests of the shareholders of the Nations Funds
will not be diluted as a result of the Reorganization.
Principal Risk Factors. Because of the similarities of the investment
objectives, policies and restrictions of the Pilot Funds and their
corresponding Nations Funds, an investment in a Nations Fund involves
risks that are similar to those of the corresponding Pilot Fund. These
investment risks, in general, are those typically associated with investing in a
portfolio of common stocks in the case of the Pilot and Nations equity funds,
and a portfolio of high quality, short-term money market instruments in the case
of the Pilot and Nations money market funds.
The risks associated with the Nations Equity Income Fund (and its
corresponding Pilot Equity Income Fund) are those associated with investments in
common stocks and other equity securities, which are generally stock market
risks. Stock values fluctuate in response to the activities of individual
companies and in response to general market and economic conditions and,
accordingly, the value of the stocks that a fund holds may decline over short or
extended periods.
An investment in the Nations Prime Fund (and its corresponding Pilot
Short-Term Diversified Assets Fund) or the Nations Treasury Fund (and its
corresponding Pilot Short-Term U.S. Treasury Fund), involves risks typically
associated with investing in a portfolio
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of high quality, short-term money market instruments. In addition, these money
market funds attempt to maintain a stable net asset value of $1.00, although
there is no assurance that they will be able to do so.
Voting Information. This Combined Proxy is being furnished in
connection with the solicitation of proxies by Pilot's Board of Trustees
at the Meeting. Only shareholders of record at the close of business on
March [ ], 1997 will be entitled to vote at the Meeting. Each whole or
fractional share is entitled to a whole or fractional vote. Shares represented
by a properly executed proxy will be voted in accordance with the instructions
thereon or, if no specification is made, the persons named as proxies will vote
in favor of each proposal set forth in the Notice of Meeting. Proxies may be
revoked at any time before they are exercised by submitting to Pilot a written
notice of revocation or a subsequently executed proxy or by attending the
Meeting and voting in person. For additional information, see "Information
Relating to Voting Matters."
INFORMATION RELATING TO THE PROPOSED REORGANIZATION
The terms and conditions of the Reorganization are set forth in the
Agreement. Significant provisions of the Agreement are summarized below;
however, this summary is qualified in its entirety by reference to the
Agreement, a copy of which is attached as Appendix I to this Combined Proxy
Statement/Prospectus.
Description of the Agreement. The Agreement provides that at the
Closing the assets and stated liabilities of the Pilot Funds will be
transferred to Nations in exchange for full and fractional Shares of the
corresponding Nations Funds as shown in the following table.
<TABLE>
<CAPTION>
Table I
Pilot Fund/Share Class Corresponding Nations Fund/Share Class
<S> <C>
Pilot Equity Income Fund Nations Equity Income Fund (Operating)
Class A Shares Investor A Shares
Class B Shares Investor N Shares
Pilot Shares Primary A Shares
Pilot International Equity Fund Nations International Growth Fund (New)
Class A Shares Investor A Shares
Class B Shares Investor N Shares
Pilot Shares Primary A Shares
Pilot Short-Term U.S. Treasury Fund Nations Treasury Fund (Operating)
Investor Shares Daily Shares
Administration Shares Investor B Shares
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
<S> <C>
Pilot Shares Primary A Shares
Pilot Short-Term Diversified Assets Fund Nations Prime Fund (Operating)
Investor Shares Daily Shares
Administration Shares Investor B Shares
Pilot Shares Primary A Shares
Pilot Small Capitalization Equity Fund Nations Small Company Growth Fund (New)
Class A Shares Investor A Shares
Class B Shares Investor N Shares
Pilot Shares Primary A Shares
Pilot U.S. Government Securities Fund Nations U.S. Government Bond Fund (New)
Class A Shares Investor A Shares
Class B Shares Investor N Shares
Pilot Shares Primary A Shares
</TABLE>
The Shares issued by each Nations Fund in the Reorganization will have an
aggregate dollar value equal to the aggregate dollar value of the Shares of the
respective Pilot Fund that are outstanding immediately before the Closing.
Immediately after the Closing, each Pilot Fund will distribute the Shares of the
Nations Fund received in the Reorganization to its shareholders in liquidation
of the Pilot Fund. Each shareholder owning Shares of a particular Pilot Fund at
the Closing will receive Shares of the comparable class of the corresponding
Nations Fund, and will receive any unpaid dividends or distributions that were
declared before the Closing on Pilot Fund Shares. Nations will establish an
account for each former shareholder of the Pilot Funds reflecting the
appropriate number of Nations Fund Shares distributed to that shareholder. These
accounts will be substantially identical to the accounts currently maintained by
Pilot for each shareholder. Shares of the Nations Funds are in uncertificated
form.
Although no formal action has been taken, upon completion of the
Reorganization, it is contemplated that if Pilot Shareholders approve the
Agreement, and shareholders of all other series of Pilot approve a similar
Agreement, all outstanding Shares of the Pilot Funds will be redeemed and
canceled in exchange for Shares of the Nations Funds distributed, and Pilot will
wind up its affairs and apply to be deregistered as an investment company under
the 1940 Act. Pilot would permanently close its stock transfer books as of the
close of business on the business day immediately preceding the Closing.
Exchange or redemption requests required after that time will be deemed to be
exchange or redemption requests for Shares of the Nations Funds.
The Reorganization is subject to a number of conditions, including approval
of the Agreement and the related matters described in this Combined Proxy
Statement/ Prospectus by Pilot shareholders at the Meeting; the receipt of
certain legal opinions
10
<PAGE>
described in the Agreement (which include an opinion of counsel to Nations that
the Nations Fund Shares issued in the Reorganization will be validly issued,
fully paid and non-assessable); the receipt of certain certificates from the
parties concerning the continuing accuracy of the representations and warranties
in the Agreement; the receipt of "comfort letters" from the independent public
accountants of Pilot and Nations regarding various financial matters; any
necessary exemptive relief or no-action assurances requested from the SEC or its
Staff with respect to Section 17(a) and 17(d) of the 1940 Act and Rule 17d-1
thereunder; and the parties' performance in all material respects of their
respective covenants and undertakings in the Agreement. The Agreement
contemplates that, upon notice from Nations, ten days prior to the Closing Date,
a Pilot Fund must immediately sell prior to the Closing Date, to the extent
permissible and consistent with that Pilot Fund's own investment objective and
policies, any portfolio security identified by Nations as impermissible under
the investment objectives and limitations of the Nations Fund into which the
Pilot Fund is to be reorganized. Such a sale could result in taxable capital
gains for a Pilot Fund and its shareholders.
Assuming satisfaction of the conditions in the Agreement, the Closing will
be effective at the close of business on May 2, 1997 or, in accordance with the
Agreement, such other date as agreed to in writing by the officers of the
parties to the Agreement.
The Agreement provides that NBAI has committed to absorb substantially all
of the expenses associated with the Reorganization. See Appendix I to this
Combined Proxy Statement/Prospectus. A portion of the expenses to be incurred in
connection with the Reorganization, approximately $450,000, will be allocated to
the Nations Funds following the consummation of the Reorganization (the
"Allocated Amount"). NBAI will absorb all expenses of the Reorganization other
than the Allocated Amount. The Expense Commitment, as discussed above, will
cause NBAI, in effect, to absorb a substantial portion of the Allocated Amount
(approximately $320,000) through additional fee waivers. NBAI also will absorb
the portion of the remaining Allocated Amount that otherwise would be borne by
current Pilot Fund shareholders (approximately $31,000), by making a capital
contribution in this amount to the Pilot Funds prior to the Closing. The portion
of the Allocated Amount that remains after NBAI absorbs this $351,000
(approximately $99,000) will, in effect, be borne by current Nations Fund
shareholders. The Nations Funds Board approved this arrangement as being in the
best interest of shareholders in light of, among other things, the benefits to
such shareholders from the Expense Commitment, and the anticipated benefits
expected to accrue to these shareholders over time from the addition of
approximately $6 billion in assets (as of December 31, 1996) into the Nations
Funds through the Reorganization.
The Agreement also provides that the Reorganization may be abandoned at any
time prior to the Closing upon the mutual consent of both Pilot and Nations, or
by either Nations or Pilot under certain conditions. The Agreement further
provides that officers of Nations and of Pilot may amend, modify or supplement
the Agreement; provided, however, that following the Meeting, no such amendment
may have the effect of changing the provisions for determining the number of
Shares of the corresponding Nations Fund to
11
<PAGE>
be issued to the Pilot Fund shareholders of any Pilot Fund without obtaining the
Pilot Fund shareholders' further approval.
Pilot Board Consideration. On August 29, 1996, Boatmen's Bancshares, Inc.
("Bancshares"), the parent of Boatmen's, the Pilot Funds' investment adviser,
entered into an Agreement and Plan of Merger with NationsBank Corporation, which
provided that Bancshares would merge with and into a wholly-owned subsidiary of
NationsBank Corporation (the "Holding Company Merger"). The Holding Company
Merger was consummated on January 7, 1997. In connection therewith, and
consistent with the requirements of the 1940 Act and the terms of the respective
investment advisory and management agreements, the change in control of the
Boatmen's resulted in the automatic and immediate termination of each investment
advisory agreement between Pilot, on behalf of the respective Pilot Fund, and
Boatmen's, and the investment management agreement among Pilot, on behalf of the
Pilot International Equity Fund, Boatmen's and Kleinwort. To ensure that this
automatic termination would not disrupt the investment advisory services
provided to the Pilot Funds, Pilot shareholders approved at a December 18, 1996
meeting, new investment advisory agreements between Pilot, on behalf of the
Pilot Funds (except the Pilot Missouri Short-Term Tax Exempt Fund, Pilot
Short-Term U.S. Treasury Fund, Pilot Growth Fund and Pilot Diversified Bond
Fund), and Boatmen's; and a new investment management agreement between Pilot,
on behalf of Pilot International Equity Fund, Boatmen's and Kleinwort. At a
December 20, 1996 meeting, Pilot shareholders approved new investment advisory
agreements between Pilot, on behalf of the Pilot Missouri Short-Term Tax Exempt
Fund, Pilot Short-Term U.S. Treasury Fund, Pilot Growth Fund and Pilot
Diversified Bond Fund, and Boatmen's.
At its December 4, 1996 meeting, the Pilot Board of Trustees was first
advised that Boatmen's and NationsBank, N.A. ("NationsBank") were considering
the possibility of recommending a consolidation of the Pilot Funds with the
Nations Funds following the Holding Company Merger. Thereafter, on January 31,
1997 and February 5, 1997, the Pilot Trustees met to consider formal proposals
by Boatmen's and NationsBank regarding the Reorganization.
In preparation for the meetings, the Trustees were provided with a variety
of information about the Reorganization, the Pilot Funds, the Nations Funds and
NationsBank. These materials summarized the principal features of the
Reorganization including the intention that each transaction be consummated on a
tax-free basis for the participating Funds and their shareholders. In addition,
the Pilot Trustees received comparative information for the Pilot Funds and
their corresponding Nations Funds with respect to the following matters: (a)
investment objectives and policies; (b) advisory, distribution and other
servicing arrangements; (c) expenses (with and without giving effect to current
expense limitations), including pro forma expenses assuming consummation of the
Reorganization and expenses relative to peer groups, and (d) performance
relative to peer groups. The Pilot Trustees were also provided with information
about NationsBank and its investment advisory organization, including
information regarding those individuals
12
<PAGE>
with responsibility for each Nations Fund, and the anticipated impact of the
proposed Reorganization on Boatmen's, NBAI and TradeStreet.
The Trustees were also advised that the parties to the Holding Company
Merger had stated their intention to meet the conditions of Section 15(f) of the
1940 Act with respect to the Pilot Funds and their successors. Section 15(f) of
the 1940 Act provides that when a change in control of an investment adviser
occurs, the investment adviser or any of its affiliated persons may receive any
amount or benefit in connection therewith as long as, among other things, no
"unfair burden" is imposed on the investment company as a result of the
transaction relating to the change of control, or any expenses or implied terms,
conditions or understandings applicable thereto. The term "unfair burden" as
defined by the 1940 Act includes any arrangement during the two-year period
after the transaction whereby the investment adviser (or predecessor or
successor adviser), or any "interested person" of any such adviser, receives or
is entitled to receive any compensation, directly or indirectly, from the
investment company or its security holders (other than fees for bona fide
investment advisory or other services) or from any person in connection with the
purchase or sale of securities or other property to, from or on behalf of the
investment company (other than fees for bona fide principal underwriting
services). Section 15(f) also requires that through January 7, 2000 (the
three-year period immediately following the Holding Company Merger), at least
75% of the Board of Trustees of the Pilot Funds or its successor will not be
"interested persons" of NBAI or Boatmen's within the meaning of the 1940 Act.
The Pilot Trustees were informed that the Board of Trustees of the Nations Funds
currently satisfy this requirement.
At the Trustees' meeting on February 5, 1997, NBAI and TradeStreet
represented to the Pilot Trustees that they would commit to the Expense
Commitment described above. Based upon this commitment and the current expense
ratio and expense limitation information provided for both the Pilot Funds and
the Nations Funds, the Pilot Trustees concluded that, for the foreseeable
future, the Reorganization would likely result in a substantial savings in
expenses to Pilot Fund shareholders.
During the course of their deliberations at the January 31 and February 5
meetings, the Trustees considered other potential benefits of the Reorganization
to Pilot shareholders, including convenient access via the exchange privilege to
a larger universe of funds within the Nations Fund Family and the availability
of other investment products offered by NationsBank. The Pilot Trustees further
noted that, in general, the performance of the Operating Nations Funds was
comparable to or better than that of their corresponding Pilot Funds.
After consideration of the foregoing and other factors, and with the advice
and assistance of independent counsel, the Pilot Trustees unanimously determined
that the Reorganization is in the best interest of the shareholders of each
Pilot Fund, and that the shareholders of each Pilot Fund will not be diluted as
a result of such Reorganization.
13
<PAGE>
Capitalization. Three of the Pilot Funds would be reorganized into
three Operating Nations Funds, and three of the Pilot Funds would be
reorganized into three New Nations Funds that are being created by Nations and
will have nominal assets and liabilities at the Closing. The following table
sets forth, as of December 31, 1996, (i) the capitalization of each of the three
Pilot Funds that would be reorganized into Operating Nations Funds; (ii) the
capitalization of each of the corresponding Operating Nations Funds involved;
and (iii) the pro forma capitalization of each of the Operating Nations Funds as
adjusted to give effect to the Reorganization of the foregoing Pilot Funds. The
capitalization of each Pilot Fund and Operating Nations Fund is likely to be
different at the Closing as a result of daily share purchase and redemption
activity in the Pilot Funds as well as the effects of the Pilot Funds' other
ongoing operations. Because the other three Pilot Funds are to be reorganized
into the New Nations Funds, which will have nominal assets and liabilities
before the Reorganization, information on the capitalization of these other
Pilot Funds and Nations Funds is not presented.
Table II -- Pro Forma Capitalization (as of December 31, 1996)
1. The table below reflects current and pro forma capitalization
information for the combination of the Pilot Short-Term U.S. Treasury Fund with
the Nations Treasury Fund.
<TABLE>
<CAPTION>
Net Asset Value
Total Net Assets Shares Outstanding Per Share
<S> <C> <C> <C>
Pilot Short-Term U.S. Treasury Fund $244,383,339 244,409,830 $1.00
(Administration) (Administration) (Administration)
$199,585,840 199,608,935 $1.00
(Investor) (Investor) (Investor)
$1,339,481,347 1,339,664,550 $1.00
(Pilot) (Pilot) (Pilot)
Nations Treasury Fund $1,430,200,657 1,430,195,664 $1.00
(Investor B) (Investor B) (Investor B)
$3,312 3,312 $1.00
(Daily) (Daily) (Daily)
$802,215,342 802,212,354 $1.00
(Primary A) (Primary A) (Primary A)
Pro Forma Pilot Short-Term U.S. $1,674,583,996 1,674,579,003 $1.00
Treasury Fund/Nations Treasury Fund (Administration/ (Administration/ (Administration/
</TABLE>
14
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Investor B) Investor B) Investor B)
$199,589,152 199,589,152 $1.00
(Investor/Daily) (Investor/Daily) (Investor/Daily)
$2,141,696,689 2,141,693,701 $1.00
(Pilot/Primary A) (Pilot/Primary A) (Pilot/Primary A)
</TABLE>
15
<PAGE>
2. The table below reflects current and pro forma capitalization
information for the combination of the Pilot Short-Term Diversified Assets Fund
with the Nations Prime Fund.
<TABLE>
<CAPTION>
Net Asset Value
Total Net Assets Shares Outstanding Per Share
<S> <C> <C> <C>
Pilot Short-Term Diversified Assets $263,818,929 263,865,378 $1.00
Fund (Administration) (Administration) (Administration)
$90,901,799 90,914,227 $1.00
(Investor) (Investor) (Investor)
$1,516,294,946 1,516,562,244 $1.00
(Pilot) (Pilot) (Pilot)
Nations Prime Fund $334,645,247 334,683,374 $1.00
(Investor B) (Investor B) (Investor B)
$1,286,091 1,286,231 $1.00
(Daily) (Daily) (Daily)
$2,450,204,444 2,450,477,109 $1.00
(Primary A) (Primary A) (Primary A)
Pro Forma Pilot Short-Term Diversified $598,464,176 598,502,303 $1.00
Assets Fund/Nations Prime Fund (Administration/ (Administration/ (Administration/
Investor B) Investor B) Investor B)
$92,187,890 92,188,030 $1.00
(Investor/Daily) (Investor/Daily) (Investor/Daily)
$3,966,499,390 3,966,772,055 $1.00
(Pilot/Primary A) (Pilot/Primary A) (Pilot/Primary A)
</TABLE>
16
<PAGE>
3. The table below reflects current and pro forma capitalization information for
the combination of the Pilot Equity Income Fund with the Nations Equity Income
Fund.
<TABLE>
<CAPTION>
Net Asset Value
Total Net Assets Shares Outstanding Per Share
<S> <C> <C> <C>
Pilot Equity Income Fund $2,659,191 200,014 $13.30
(Class A) (Class A) (Class A)
$4,506,718 339,410 $13.28
(Class B) (Class B) (Class B)
$140,296,962 10,625,660 $13.20
(Pilot) (Pilot) (Pilot)
Nations Equity Income Fund $45,645,666 3,770,008 $12.11
(Investor A) (Investor A) (Investor A)
$109,027,552 9,013,385 $12.10
(Investor N) (Investor N) (Investor N)
$212,944,324 17,534,902 $12.14
(Primary A) (Primary A) (Primary A)
Pro Forma Pilot Equity Income $48,304,857 3,989,594 $12.11
Fund/Nations Equity Income Fund (Class A/ (Class A/ (Class A/
Investor A) Investor A) Investor A)
$113,534,270 9,385,841 $12.10
(Class B/ (Class B/ (Class B/
Investor N) Investor N) Investor N)
$353,241,286 29,091,489 $12.14
(Pilot/Primary A) (Pilot/Primary A) (Pilot/Primary A)
</TABLE>
17
<PAGE>
Federal Income Tax Consequences. Consummation of the Reorganization with
respect to each Pilot Fund is subject to the condition that Pilot and Nations
receive an opinion from Morrison & Foerster LLP to the effect that, for federal
income tax purposes, (i) the transfer of all or substantially all of a Pilot
Fund's assets in exchange for the corresponding Nations Fund Shares and the
assumption by each Nation Fund of the stated liabilities of the
corresponding Pilot Fund will constitute a "reorganization" within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended
(the "Code") and each Nations Fund and Pilot Fund will be a "party to a
reorganization" within the meaning of Section 368(b) of the Code; (ii) no gain
or loss will be recognized by a Pilot Fund upon the transfer of its assets to
the corresponding Nations Fund solely in exchange for the Nations Fund Shares or
the assumption of the stated liabilities of the Pilot Fund by the Nations Fund;
(iii) no gain or loss will be recognized by a Nations Fund upon (a) its receipt
of assets from the corresponding Pilot Fund solely in exchange for the Nations
Fund Shares, (b) the Nations Fund's assumption of the Pilot Fund's stated
liabilities, and (c) the constructive or actual distribution by the Pilot Fund
of the Nations Fund Shares to the Pilot Fund shareholders in exchange for their
Shares of the Pilot Fund; (iv) the aggregate federal income tax basis of a Pilot
Fund's assets received by the corresponding Nations Fund pursuant to the
Reorganization will be the same as the aggregate federal income tax basis of
those assets in the hands of the Pilot Fund immediately prior to the
Reorganization; (v) the holding period of a Pilot Fund's assets received by the
corresponding Nations Fund pursuant to the Reorganization will include the
period for which such assets have been held by the Pilot Fund; (vi) no gain or
loss will be recognized by a Pilot Fund on the distribution to its shareholders
of the Nations Fund Shares to be received by the Pilot Fund in the
Reorganization; (vii) no gain or loss will be recognized by the shareholders of
a Pilot Fund upon their receipt of the Nations Fund Shares in exchange for such
shareholders' Shares of the Pilot Fund; (viii) the federal income tax basis of
the Nations Fund Shares received by the shareholders of the corresponding Pilot
Fund will be the same as the federal income tax basis of the Pilot Fund Shares
exchanged by such shareholders pursuant to the Reorganization; (ix) the holding
period for the Nations Fund Shares for which Shares of the corresponding Pilot
Fund are exchanged pursuant to the Reorganization will include the period that
the Pilot Fund Shares have been held by the holder, provided that the Pilot Fund
Shares have been held as a capital asset by the holder; and (x) a Nations Fund
will succeed to and take into account the tax attributes described in Section
381(c) of the Code of the corresponding Pilot Fund as of the Closing Date,
subject to the conditions and limitations specified in the Code.
In the event that Pilot and Nations do not receive the foregoing opinion of
Morrison & Foerster LLP, the Reorganization will not take place and Pilot's
Board of Trustees will consider other alternatives.
Other Provisions Applicable to the New Nations Funds. The New Nations
Funds corresponding to Pilot's International Equity Fund, Small Capitalization
Equity Fund and U.S. Government Securities Fund are being created for the
purpose of effecting the
18
<PAGE>
Reorganization of these three funds to and continue their current operations as
series of Nations. Although the current total operating expense ratio for the
Pilot International Equity Fund will be the same as the corresponding Nations
International Growth Fund after the Reorganization, the current contractual
investment advisory fee (a component of the total operating expense ratio) for
the Pilot International Growth Fund is lower than that of its corresponding
Nations International Growth Fund will be after the Reorganization. The three
classes of the New Nations Funds that are being issued in connection with the
Reorganization will have purchase, exchange and redemption procedures that are
generally similar to the purchase, exchange and redemption procedures of that
share class of the Operating Nations Funds. Policies regarding when dividends
are declared and paid differs among some of the New Nations Funds and some of
their corresponding Pilot Funds. See Appendix IV Dividends and Distributions.
The Financial Highlights, classification and subclassification, investment
objectives and policies, responsibilities of the board of directors, fund
performance, shareholder inquiry policy, dividend and distribution policies, tax
consequences, pricing of fund Shares, distribution of fund Shares, method
followed in determining total offering price, tax status, calculation of
performance data, and financial statements are the same in all material respects
between each New Nations Fund and its corresponding Pilot Funds to which they
correspond.
Information about the similarities and differences between the New Nations
Funds and the Pilot Funds to which they correspond regarding: the identity and
compensation of the investment adviser; the voting rights of shareholders, any
restrictions or material obligations associated with ownership of Shares; the
share structure; the identity of the principal underwriter, sales charges; any
minimum initial or subsequent investment; Rule 12b-1 plans, including associated
fees and expenses; and shareholder redemption, repurchase and exchange rights,
is included in other appropriately titled sections within this Combined Proxy
Statement/Prospectus and the Appendices hereto.
COMPARISON OF PILOT AND NATIONS
Investment Objectives and Policies. The investment objectives, policies
and restrictions of the Operating Nations Funds are, in general, similar to
those of the corresponding Pilot Funds.
Any differences are discussed in Appendix III to this Combined Proxy
Statement/Prospectus with respect to the three Pilot Funds that will be
reorganized into the three Operating Nations Funds. The investment objectives,
policies and restrictions of the New Nations Funds are identical in all material
respects to the corresponding Pilot Funds.
19
<PAGE>
Additional information with respect to the investment policies and
restrictions of the three Operating Nations Funds and the Pilot Funds is
included in their respective prospectuses, which have been incorporated herein
by reference.
Investment Adviser and Other Service Providers. Currently, NBAI serves as
the investment adviser for each of the Operating Nations Funds, and Boatmen's
serves as investment adviser to the Pilot Funds. After the Reorganization,
NBAI will serve as the investment adviser to the Nations Funds.
The following table shows, as of November 30, 1996, (i) the current total
expense ratio of the Pilot Funds after waivers and (ii) the pro forma total
expense ratio of the corresponding Nations Funds, based upon the fee
arrangements, including waivers and reimbursements, that will be in place upon
consummation of the Reorganization. Table III shows that for all classes of
Pilot Funds, except Class A Shares and Pilot Shares of the Pilot Equity Income
Fund, total operating expenses (after waivers) will be equal to or less than
current total operating expenses for the corresponding Nations Fund. Detailed
pro forma expense information for each proposed reorganization is included in
Appendix II to this Combined Proxy Statement/ Prospectus.
20
<PAGE>
Table III -- Total Expense Information
<TABLE>
<CAPTION>
Total Fund Operating Expenses for Pro Forma Combined
Name of the Period Ended 11/30/96 Total Fund Operating Expenses
Pilot Fund (After Waivers) (After Waivers)
<S> <C> <C>
Pilot Equity Income Fund 0.98% 1.12%
(Class A) (Class A/Investor A)
1.73% 1.62%
(Class B) (Class B/Investor N)
0.73% 0.87%
(Pilot) (Pilot/Primary A)
Pilot International Equity Fund 1.37% 1.37%
(Class A) (Class A/Investor A)
2.12% 2.12%
(Class B) (Class B/Investor N)
1.12% 1.12%
(Pilot) (Pilot/Primary A)
Pilot Short-Term Diversified 0.56% 0.55%
Assets Fund (Administration) (Admin./Investor B)
0.81% 0.80%
(Investor) (Investor/Daily)
0.31% 0.30%
(Pilot) (Pilot/Primary A)
Pilot Short-Term U.S. Treasury 0.58% 0.55%
Fund (Administration) (Admin./Investor B)
0.83% 0.80%
(Investor) (Investor/Daily)
0.33% 0.30%
(Pilot) (Pilot/Primary A)
Pilot Small Capitalization 1.20% 1.20%
Equity Fund (Class A) (Class A/Investor A)
1.95% 1.70%
(Class B) (Class B/Investor N)
0.95% 0.95%
(Pilot) (Pilot/Primary A)
Pilot U.S. Government Securities 0.86% 0.85%
Fund (Class A) (Class A/Investor A)
1.61% 1.25%
(Class B) (Class B/Investor N)
0.61% 0.60%
(Pilot) (Pilot/Primary A)
</TABLE>
21
<PAGE>
Pilot Funds' Advisory Contracts. In connection with the Holding Company
Merger, which was consummated on January 7, 1997, and consistent with the
requirements of the 1940 Act, the change in control of Boatmen's resulted in the
automatic and immediate termination of the investment advisory agreements
between Pilot, on behalf of the Pilot Funds, and Boatmen's. To ensure that this
automatic termination would not disrupt the investment advisory services
provided to the Pilot Funds, Pilot shareholders approved at a December 18, 1996
meeting, new investment advisory agreements between Pilot, on behalf of the
Pilot Funds (except the Pilot Missouri Short-Term Tax Exempt Fund, Pilot
Short-Term U.S. Treasury Fund, Pilot Growth Fund and Pilot Diversified Bond
Fund), and Boatmen's; and a new investment management agreement between Pilot,
on behalf of Pilot International Equity Fund, Boatmen's and Kleinwort. At a
December 20, 1996 meeting, Pilot shareholders approved new investment advisory
agreements between Pilot, on behalf of the Pilot Missouri Short-Term Tax Exempt
Fund, Pilot Short-Term U.S. Treasury Fund, Pilot Growth Fund and Pilot
Diversified Bond Fund, and Boatmen's. Accordingly, Boatmen's continues to act as
investment adviser to the Pilot Funds and Kleinwort continues to act as
investment manager of the Pilot International Equity Fund.
Nations Funds' Advisory Contracts. NBAI serves as investment adviser to the
Operating Nations Funds and will serve as investment adviser to the New Nations
Funds after the Reorganization. Subject to the general supervision of Nations'
Board of Directors, and in accordance with the investment policies of each
Operating Nations Fund, NBAI formulates guidelines and lists of approved
investments and makes decisions with respect to and places orders for the Fund's
purchases and sales of portfolio securities and maintains records relating to
such purchases and sales. With respect to the non-money market funds, NBAI is
authorized to allocate purchase and sale orders for portfolio securities to
certain financial institutions, including, in the case of agency transactions,
financial institutions which are affiliated with NBAI or which have sold Shares
in such funds, if NBAI believes that the quality of the transaction and the
commission are comparable to what they would be with other qualified brokerage
firms. From time to time, to the extent consistent with their investment
objectives, policies and restrictions, the Funds may invest in securities of
companies with which NationsBank has a lending relationship. NBAI may delegate
certain responsibilities to investment sub-advisers listed below.
TradeStreet currently serves as investment sub-adviser for the Operating
Nations Funds, and Kleinwort serves as investment manager for the Pilot
International Equity Fund. After the Reorganization, TradeStreet will serve as
the investment sub-adviser to the Operating Nations Funds. For the New Nations
Funds, pursuant to investment sub-advisory agreements, Boatmen's will serve as
investment sub-adviser for Nations Small Company Growth Fund and Nations U.S.
Government Bond Fund; Kleinwort will serve as investment sub-adviser for Nations
International Growth Fund.
For the services provided and expenses assumed by these investment
sub-advisers, NBAI will pay, subject to any waivers and/or reimbursements then
in effect, (i) TradeStreet at the annual rate of 0.055% of the average daily net
assets of Nations
22
<PAGE>
Treasury Fund and Nations Prime Fund and 0.20% of the average daily net assets
of Nations Equity Income Fund; (ii) Boatmen's will be paid by NBAI at the annual
rate of 0.25% of the average daily net assets of Nations Small Company Growth
Fund and 0.15% of the average daily net assets of Nations U.S. Government Bond
Fund; (iii) Kleinwort will be paid by NBAI at the annual rate of 0.40% of the
average daily net assets between $0 and $325 million of Nations International
Growth Fund, and at the annual rate of 0.25% of the average daily net assets
above $325 million of Nations International Growth Fund.
From time to time, NBAI, Kleinwort, Boatmen's and TradeStreet may waive or
reimburse (either voluntarily or pursuant to applicable state limitations)
advisory fees or expenses payable by a Nations Fund.
The principal portfolio managers of the Operating Nations Funds, and the
New Nations Funds upon commencement of their operations, along with their
positions with the Adviser and a brief summary of the business experience and
education are set forth below.
Nations Equity Income Fund - Eric S. Williams, a Chartered Financial
Analyst, is a Senior Product Manager, Equity Management for TradeStreet and
Senior Portfolio Manager for Nations Equity Income Fund. Mr. Williams has been
the Portfolio Manager for Nations Equity Income Fund since 1991. Prior to
assuming his position with TradeStreet, he was Senior Vice President and Senior
Portfolio Manager for the Investment Management Group at NationsBank. He has
worked in the investment community since 1980. His past experience includes fund
analysis and portfolio management for National Bank of Detroit. Mr. Williams
received a B.S. in Accounting from East Carolina University, Summa Cum Laude and
an M.B.A. from Indiana University. He is on the Advisory Board of Indiana
University's Investment Management Academy, and is a member of the Association
for Investment Management and Research as well as the North Carolina Society of
Financial Analysts, Inc.
Nations International Growth Fund - Michael E. Kenneally, a Chartered
Financial Analyst, is a Senior Vice President and Director of Research for
Boatmen's and is part of the team that will be responsible for the day to day
management of Nations International Growth Fund upon its commencement. He
currently oversees Boatmen's fundamental and quantitative research efforts as
well as passive and quantitative investment management. His additional
responsibilities include investment product development, international equity
investment and equity derivative strategies. He holds both a bachelor's degree
in economics and an M.B.A. in finance from the University of Missouri. He joined
Boatmen's in 1983 as an equity analyst, later became a quantitative analyst, and
subsequently worked as both a fixed-income portfolio manager and an equity
portfolio manager. Mr. Kenneally is also a member of the Association for
Investment Management and Research, the St. Louis Society of Financial Analysts,
the Chicago Quantitative Alliance, and the Society of Quantitative Analysts.
23
<PAGE>
Nations Prime Fund - Martha L. Sherman is a Senior Product Manager, Money
Market Management for TradeStreet and is Senior Portfolio Manager for Nations
Prime Fund. She has been Portfolio Manager of the Nations Prime Fund since 1988.
Prior to assuming her position with TradeStreet, she was Vice President and
Senior Portfolio Manager for the Investment Management Group at NationsBank. Ms.
Sherman has worked in the investment community since 1981. Her past experience
includes investment research for William Lowry & Associates. Ms. Sherman
received a B.S. in Business Administration from the University of Texas at
Dallas.
Nations Small Company Growth Fund - Mr. Daniel N. Ginsparg, Senior
Portfolio Manager and Manager of Quantitative Research is part of the team that
will be responsible for the day to day management of Nations Small Company
Growth Fund upon its commencement. Mr. Ginsparg is responsible for quantitative
research applications and is involved in the management of the Pilot Small
Capitalization Equity Fund. Mr. Ginsparg received both his bachelor's degree and
M.B.A. from the University of Missouri. He joined Boatmen's in 1989 and is a
member of the Chicago Quantitative Alliance, the Society of Quantitative
Analysts, and the St. Louis Society of Financial Analysts.
Nations Treasury Fund - Sandra L. Duck is a Product Manager, Money Market
Management for TradeStreet and is Portfolio Manager for Nations Treasury Fund.
She has been Portfolio Manager for the Fund since 1993. Prior to assuming her
position with TradeStreet, she was Vice-President and Portfolio Manager for the
Investment Management Group at NationsBank. Ms. Duck has worked in the
investment community since 1980. Her past experience includes product management
and trading for Interstate/Johnson Lane and First Charlotte Corporation. Ms.
Duck graduated from King's College.
Nations U.S. Government Bond Fund - The Fixed Income Committee of Boatmen's
will be primarily responsible for the day-to-day management of Nations U.S.
Government Bond Fund upon its commencement.
Both NBAI and TradeStreet are wholly owned subsidiaries of NationsBank,
which in turn is a wholly owned banking subsidiary of NationsBank Corporation, a
bank holding company organized as a North Carolina Corporation. Both NBAI and
TradeStreet have their principal offices at One NationsBank Plaza, Charlotte,
North Carolina 28225.
Boatmen's is an indirect subsidiary of NationsBank Corporation. Boatmen's
has its principal offices at 100 N. Broadway, St. Louis, Missouri 63178.
Kleinwort is an investment management subsidiary of the London-based
Kleinwort Benson Group plc, a wholly owned subsidiary of Dresdner Bank AG.
Kleinwort is located at 200 Park Avenue, New York, New York 10166.
Morrison & Foerster LLP, counsel to Nations and special counsel to
NationsBank, has advised Nations and NationsBank that NationsBank and its
affiliates may perform the
24
<PAGE>
services contemplated by the advisory contracts described above and the
prospectuses for the Operating Nations Funds without violation of the
Glass-Steagall Act or other applicable laws or regulations. Such counsel has
pointed out, however, that there are no controlling judicial or administrative
interpretations or decisions and the future judicial or administrative
interpretations of, or decisions relating to, present federal or state statutes,
including the Glass-Steagall Act, and regulations relating to the permissible
activities of banks and their subsidiaries or affiliates, as well as future
changes in such statutes, regulations and judicial or administrative decisions
or interpretations, could prevent such entities from continuing to perform, in
whole or in part, such services. If any such entity were prohibited from
performing any of such services, it is expected that new agreements would be
proposed or entered into with another entity or entities qualified to perform
such services.
Other Service Providers. The other service providers for the Pilot Funds
and the Nations Funds are different, as forth in the table below.
Other Service Providers for the Pilot Funds and Nations Funds
<TABLE>
<CAPTION>
Pilot Funds Nations Funds
<S> <C> <C>
Distributor Pilot Funds Distributors, Inc. ("PFD") Stephens Inc. ("Stephens")
Administrator BISYS Fund Services, Limited Partnership Stephens
Co-Administrator None First Data Investor
Services Group, Inc.
("First Data")
Sub-Administrator None NationsBank
Transfer Agent BISYS Fund Services, Inc. First Data
Sub-Transfer Agent Banker's Trust Company NationsBank of Texas, N.A.
("NationsBank of Texas")
Custodian Boatmen's NationsBank of Texas
Sub-Custodian Banker's Trust Company The Bank of New York
Independent Accountants Arthur Andersen LLP Price Waterhouse LLP
</TABLE>
Share Structure. Both Pilot and Nations are registered as open-end
management investment companies under the 1940 Act. Currently, Pilot offers
fourteen funds.
25
<PAGE>
Immediately after the Reorganization, the Nations Fund Family, which includes
Nations, Nations Fund Trust, Nations Fund Portfolios, Inc., Nations
Institutional Reserves and Nations LifeGoal Funds, Inc., will offer over fifty
funds.
Pilot is organized as a Massachusetts business trust and is subject to the
provisions of its Agreement and Declaration of Trust and By-Laws. Nations is
organized as a Maryland corporation and is subject to the provisions of its
Articles of Incorporation, as amended and supplemented, and By-Laws. Shares of
the Nations Funds and Pilot Funds have a par value of $.001. Shares of both the
Pilot Funds and Nations Funds are entitled to one vote for each full share held
and fractional votes for fractional Shares held, and will vote in the aggregate
and not by portfolio or class subject to certain notable exceptions for Pilot.
In particular, when a proposal affects less than all Pilot portfolios or
classes, only the affected portfolios or classes may vote on that proposal. Each
portfolio votes separately with respect to any proposal to approve its
investment advisory agreement, to change its fundamental investment objectives
or policies, or to adopt a plan of reorganization. Similarly, a class of a
portfolio votes separately with respect to any proposal to approve a plan of
distribution for that class.
Shares of the Pilot Funds and Nations Funds have no pre-emptive rights and
have only such conversion and exchange rights as the Board of Trustees of Pilot
or the Board of Directors of Nations, respectively, may grant in their
discretion. The Investor N Shares of the Operating Nations Funds currently do
not have a conversion feature comparable to that of the Class B Shares of the
Pilot Funds. However, management of Nations will undertake to either implement
such a feature or present a shareholder proposal to Investor N Shareholders to
add a comparable conversion feature. When issued for payment as described in
their respective prospectuses, Nations Fund Shares and Pilot Fund Shares are
fully paid and non-assessable by either Nations or Pilot.
Nations' Board of Directors has authorized the issuance of five classes of
Shares in each of the New Nations Funds: Primary A, Primary B, Investor A,
Investor C and Investor N (although Primary B and Investor C Shares will not be
offered in connection with the Reorganization). Each share of a class of a
Nations Fund represents an equal proportionate interest in a particular
portfolio with other Shares of the same class and is entitled to cash dividends
and distributions earned on such Shares as are declared in the discretion of the
Nations Board of Directors.
The accrued expenses of the Nations Funds, as well as certain expenses
attributable to each class of Shares, are deducted from accrued income before
dividends are declared. The Nations Funds' expenses included, but are not
limited to: fees paid to the Adviser, NationsBank, Stephens and First Data;
interest; trustees' fees; federal and state securities registration and
qualification fees; brokerage fees and commissions; costs of preparing and
printing prospectuses for regulatory purposes and for distribution to existing
shareholders; charges of the Custodian and Transfer Agent; certain insurance
premiums; outside auditing and legal expenses; costs of shareholder reports and
shareholder meetings; other expenses which are not expressly assumed by the
Adviser, NationsBank, Stephens or First
26
<PAGE>
Data under their respective agreements with Nations Fund; and any extraordinary
expenses. Each class of Shares may bear certain class specific costs associated
with retail transfer agency, shareholder servicing, sales support and
distribution. Any general expenses of Nations Fund that are not readily
identifiable as belonging to a particular investment portfolio are allocated
among all portfolios in the proportion that the assets of a portfolio bears to
the assets of Nations Fund or in such other manner as the Board of Directors
deems appropriate.
Additional information concerning the attributes of the Shares issued by
Pilot and the Operating Nations Funds is included in their respective
prospectuses, which are incorporated herein by reference.
Distribution Plans, Administration Plans and Shareholder Servicing
ArrangementsDistribution Plans, Administration Plans and Shareholder Servicing
Arrangements. Shares of the Pilot Funds are distributed by PFD, a broker-dealer
registered with the Commission under the Securities Exchange Act of 1934, as
amended (the "1934 Act"). The Pilot Funds adopted Distribution Plans pursuant to
Rule 12b-l under the 1940 Act for its Class A and Class B Shares. Under these
Plans, PFD receives payments for distribution and support services. The
Distribution Plan for Class A Shares authorizes payments to PFD and service
organizations for personal services provided to Class A shareholders and/or the
maintenance of shareholder accounts. Payments under the Distribution Plan for
Class A Shares may not exceed 0.25% (on an annual basis) of the average daily
net assets of the outstanding Shares to which such Distribution Plan relates.
Distribution payments under the Distribution Plan for Class B Shares
may not exceed 1.00% (on an annual basis ) of the average daily net assets of
the Class B Shares. Not more than 0.25% of such value will be used to compensate
service organizations for personal services provided to Class B shareholders
and/or the maintenance of shareholder accounts. Not more than 0.75% of such
value will be paid to PFD as reimbursement for commissions and transaction fees
as well as expenses related to other promotional and distribution activities.
Actual distribution expenses paid by PFD with respect to Class B Shares for
any given year may exceed the distribution fees and contingent deferred sales
charges received with respect to those Shares. These excess expenses may be
reimbursed by a Pilot Fund or its Class B Shareholders out of contingent
deferred sales charges and distribution payments in future years as long as the
Distribution Plan for Class B Shares is in effect.
The Distributor has voluntarily agreed to limit the fees it receives on
Class A Shares from certain Pilot Funds. Pilot Shares pay no account
administration or Rule 12b-1 fees. Pilot Administration Shares pay an account
administration fee of 0.25%, and Pilot Investor Shares pay a Rule 12b-1 fee of
0.50%.
Shares of the Nations Funds are distributed by Stephens, a broker-dealer
registered with the Commission under the 1934 Act, pursuant to a Distribution
Agreement.
27
<PAGE>
Stephens receives no compensation in connection with the distribution of Primary
A Shares of the Nations Funds.
Investor A Shares. The Nations Funds have adopted an Amended and Restated
Shareholder Servicing and Distribution Plan (the "Investor A Plan") pursuant to
Rule 12b-1 under the 1940 Act with respect to each Fund's Investor A Shares. The
Investor A Plan provides that each Fund may pay Stephens or banks,
broker/dealers or other financial institutions that offer Shares of the Fund and
that have entered into a Sales Support Agreement with Stephens ("Selling
Agents") or a Shareholder Servicing Agreement with Nations Fund ("Servicing
Agents"), up to 0.10% (on an annualized basis) of the average daily net asset
value of Investor A Shares of the Money Market Funds and up to 0.25% (on an
annualized basis) of the average daily net asset value of the Non-Money Market
Funds.
Investor B Shares, Investor N Shares and Daily Shares: In addition, the
Nations Funds have approved Amended and Restated Shareholder Servicing Plans
("Servicing Plans") with respect to the Investor B and Daily Shares of the Money
Market Funds and Investor N Shares of the Non-Money Market Funds. Pursuant to
the respective Servicing Plans, each Fund may pay Servicing Agents for certain
expenses that are incurred by the Servicing Agents in connection with
shareholder support services that are provided by the Servicing Agents. Payments
under the Servicing Plans will be calculated daily and paid monthly at a rate
set from time to time by the Board, provided that the annual rate may not exceed
0.25% of the average daily net asset value of the Money Market Funds' Investor B
Shares or the Daily Shares or Investor N Shares of the Non-Money Market Funds.
The Nations Funds also have approved Distribution Plans with respect to
Investor N Shares of the Non-Money Market Funds and Investor B and Daily Shares
of the Money Market Funds. Pursuant to the Distribution Plans, a Fund may
compensate or reimburse Stephens for any activities or expenses primarily
intended to result in the sale of such Fund's Shares, including for sales
related services provided by Selling Agents. Payments under a Fund's
Distribution Plan will be calculated daily and paid monthly at a rate or rates
set from time to time by the Board provided that the annual rate may not exceed
0.75% of the average daily net asset value of each Non-Money Market Fund's
Investor N Shares or 0.10% of the Investor B Shares of the Money Market Funds
and 0.45% Daily Shares of the Money Market Funds.
The Pilot Funds have entered into an Administration Agreement with BISYS
Fund Services Limited Partnership. Administrative services are provided to the
Nations Funds by Stephens and First Data as co-administrator and NationsBank as
sub-administrator to Stephens. The types of administrative services provided to
the Pilot Funds and Nations Funds are substantially similar. BISYS has agreed to
voluntarily waive its fees from, and reimburse certain expenses to, the Pilot
Funds under certain circumstances.
BISYS Fund Services, Inc., a wholly-owned subsidiary of The BISYS Group,
Inc. is the transfer agent for all classes of the Pilot Funds. Prior to April
26, 1996, Primary Fund
28
<PAGE>
Services Corporation was the transfer agent for Class A Shares and Class B
Shares of the Pilot Funds. First Data provides substantially similar transfer
agency services with respect to the Shares of the Nations Funds.
Boatmen's is custodian for each of the Pilot Funds and Banker's Trust
Company is sub custodian for any foreign or certificated securities held by the
Pilot Funds. NationsBank of Texas is custodian for all classes of the Nations
Funds and The Bank of New York is sub-custodian for all classes of the Nations
Funds.
Shareholder Transactions and Services. The Pilot Funds and the
corresponding Nations Funds offer generally similar shareholder services
and transactions. There are however, some differences. For example, while
the Pilot Funds charge a front-end sales charge on their Class A Shares and a
contingent deferred sales charge on their Class B Shares, the corresponding
classes of the Nations Funds charge neither a front-end nor contingent
deferred sales charge on any of the Shares they offer. However, after the
Reorganization, former Class B Shares will remain subject to the contingent
deferred sales charge applicable to their Class B Shares. In addition, except
for Pilot Administration Shares and Nations Investor B Shares, Nations and Pilot
share classes have substantially similar minimum investment requirements. For a
detailed comparison of these shareholders transactions and services, see
Appendix IV to this Combined Proxy Statement/Prospectus.
INFORMATION RELATING TO VOTING MATTERS
General Information. This Combined Proxy Statement/Prospectus is being
furnished in connection with the solicitation of proxies for the Meeting by
the Board of Trustees of Pilot. It is expected that the solicitation of
proxies will be primarily by mail. Officers and service contractors of
Pilot and Nations also may solicit proxies by telephone, telegraph
or personal interview. In this connection, Pilot has retained [ ] to assist
in the solicitation of proxies for the Reorganization. Shareholders may
vote by (1) mail, by marking, signing, dating and returning the enclosed Proxy
Ballot in the enclosed postage-paid envelope; or (2) telefacsimile, by marking,
signing, dating and faxing the enclosed Proxy Ballot to [ ] at [ ] (a
confirmation of your telefacsimile vote will be mailed to you). Any shareholder
giving a proxy may revoke it at any time before it is exercised by submitting to
Pilot a written notice or revocation or a subsequently executed proxy or by
attending the Meeting and voting in person.
If a proxy solicitation agent is hired to conduct the proxy vote, the
expenses incurred as a result will not be borne by Pilot shareholders.
Only shareholders of record at the close of business on March [ ],
1997 will be entitled to vote at the Meeting. On that date, the following Pilot
Shares were outstanding and entitled to be voted.
29
<PAGE>
Name of Pilot Fund
and Class Shares Entitled to Vote
------------------- -----------------------
Pilot Equity Income Fund --
Class A Shares
Class B Shares
Pilot Shares
Pilot International Equity Fund --
Class A Shares
Class B Shares
Pilot Shares
Pilot Short-Term Diversified Assets Fund --
Investor Shares
Administration Shares
Pilot Shares
Pilot Short-Term U.S. Treasury Fund --
Investor Shares
Administration Shares
Pilot Shares
Pilot Small Capitalization Equity Fund --
Class A Shares
Class B Shares
Pilot Shares
Pilot U.S. Government Securities Fund --
Class A Shares
Class B Shares
Pilot Shares
Each whole and fractional share is entitled to a whole or fractional vote.
If the accompanying proxy is executed and returned in time for the Meeting,
the Shares covered thereby will be voted in accordance with the proxy on all
matters that may properly come before the Meeting.
Shareholder and Board Approvals. The Agreement and related matters are
being submitted for approval at the Meeting by Pilot's shareholders pursuant
to the provisions of Pilot's Agreement and Declaration of Trust. With
respect to each Pilot Fund, approval of the Agreement requires the approval of
a majority of the outstanding Shares of that Pilot Fund voting separately on a
portfolio-by-portfolio basis. The Agreement provides that in the event the
Agreement is approved with respect to less than all of the Pilot Funds,
the failure of a Pilot Fund to consummate the transactions
contemplated by the Agreement shall not affect the consummation or validity
of any other transaction or reorganization contemplated by the Agreement.
30
<PAGE>
The approval of the Agreement by the Board of Trustees of Pilot is
discussed above under "Information Relating to the Proposed
Reorganization--Board Consideration." The Agreement was approved by the Board of
Directors of Nations at a meeting held on February 5-6, 1997.
As of March [ ], 1997, the Officers and Trustees of Pilot as a group owned
less than 1% of any of the Pilot Funds. As of March [ ], 1997, the Officers and
Directors of Nations as a group owned less than 1% of any of the Nations
Funds. Table IV(A) shows the name, address and share ownership of each
person known to Pilot to have beneficial or record ownership with respect to
5% or more of a class of a Pilot Fund as of March [ ], 1997. Table IV(B) shows
the name, address and share ownership of each person known to Nations to have
beneficial or record ownership with respect to 5% or more of a class of a
Nations Fund as of March [ ], 1997.
Table IV(A)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Class; Amount of Percentage Percentage Percentage
Name and Shares Owned; of of of Fund
Pilot Fund Address Type of Ownership Class Fund Post-Closing
</TABLE>
Table IV(B)
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
Class; Amount of Percentage Percentage Percentage
Name and Shares Owned; of of of Fund
Nations Fund Address Type of Ownership Class Fund Post-Closing
</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 extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder or 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.
Quorum. In the event that a quorum is not present at the Meeting, or
in the event that a quorum is present at the Meeting but sufficient votes to
approve the Agreement are not received by one or more of the Pilot Funds, one or
more adjournment(s) may be proposed to permit further solicitation of proxies.
Any adjourned session or sessions may be held, within a reasonable time after
the date set for the original meeting, without the necessity of
31
<PAGE>
further notice. A majority of the Shares voted, at a shareholder meeting of
which a quorum is present, shall decide any questions, except when a different
vote is required or permitted by any provision of the 1940 Act or other
applicable law or by the Pilot Agreement and Declaration of Trust or By-Laws.
For purposes of determining the presence of a quorum for transacting business at
the Meeting, abstentions will be treated as shares that are present at the
Meeting but which have not been voted. Abstentions will have the effect of a
"no" vote for purposes of obtaining the requisite approvals. 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 as abstentions, the effect of
which is described above.
Annual Meetings and Shareholder Meetings. Neither Nations or Pilot
presently intends to hold annual meetings of shareholders for the election of
directors/trustees and other business unless otherwise required by the 1940
Act. Under certain circumstances, however, shareholders of the Pilot Funds
have the right to call a meeting of shareholders if for a period of 75 days
after written request by shareholders holding at least a majority of
the Shares then outstanding of any Pilot Fund or class entitled to vote
upon any matter requiring action by the shareholders pursuant to the Pilot
Agreement and Declaration of Trust that a meeting be called to consider
action on such matters, then that majority may call and give notice of such
meeting. Similarly, under certain circumstances, shareholders may request
that the Directors of Nations call a shareholder meeting; the Secretary of
Nations shall call a meeting upon the written request of shareholders owning at
least 10% of the outstanding Shares entitled to vote and upon payment by such
shareholders of the estimated cost of preparing and mailing a notice of the
meeting.
ADDITIONAL INFORMATION ABOUT NATIONS
Additional information about the Operating Nations Funds is included in
their prospectuses and statements of additional information dated July 31, 1996,
as supplemented through the date hereof, copies of which, to the extent not
included herewith, may be obtained without charge by writing or calling Nations
at the address and telephone number set forth on the first page of this Combined
Proxy Statement/Prospectus. Nations is subject to the informational requirements
of the Securities Exchange Act of 1934, as amended, and the 1940 Act, and in
accordance therewith it files reports, proxy materials and other information
with the SEC. Reports and other information filed by Nations can be inspected
and copied at the Public Reference Facilities maintained by the SEC at 450 Fifth
Street, N.W., Washington, D.C. 20549 and at the offices of Nations listed above.
In addition, these materials can be inspected and copied at the SEC's Regional
Offices at 7 World Trade Center, Suite 1300, New York, New York 10048, and
Northwestern Atrium Center, 500 West Madison Street, Suite 1400, Chicago,
Illinois 60661. Copies of such materials also can be obtained from the Public
Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
32
<PAGE>
Officers of Nations are elected by, and serve at the pleasure of, the Board
of Directors. Officers of Nations receive no remuneration from Nations for their
services in such capacities.
ADDITIONAL INFORMATION ABOUT PILOT
Additional information about the Pilot Funds is included in their
prospectuses and statements of additional information, dated January 2, 1997 as
supplemented through the date hereof, which have been filed with the SEC. Copies
of these prospectuses and the related statements of additional information may
be obtained without charge by or calling Pilot at the address and telephone
number set forth on the first page of this Combined Proxy Statement/Prospectus.
Reports and other information filed by Pilot 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 Pilot 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.
FINANCIAL STATEMENTS
The unaudited financial statements and condensed financial information for
Shares of the Operating Nations Funds for the semi-annual period ended September
30, 1996 are included or incorporated by reference in their prospectuses or
statements of additional information, or in the statement of additional
information related to this Combined Proxy Statement/Prospectus. The audited
financial statements and condensed financial information for Shares of the Pilot
Fund for the annual period ended August 31, 1996 are included or incorporated by
reference in their prospectuses or statements of additional information or in
the statement of additional information related to this Combined Proxy
Statement/Prospectus, or are included herein.
The annual financial statements and financial highlights have been audited
by independent auditors to the extent indicated in their reports thereon, also
incorporated by reference or included in such prospectuses and statements of
additional information, and have been incorporated herein by reference in
reliance upon such reports given upon the authority of such firms as experts in
accounting and auditing.
The audited financial statements and financial highlights of the Operating
Nations Funds as of and for the year ended March 31, 1996, have been
incorporated by reference herein and in the statement of additional information
in reliance upon the report of Price
33
<PAGE>
Waterhouse LLP, independent certified public accountants, incorporated by
reference herein, and upon the authority of said firm as experts in accounting
and auditing.
The financial statements and financial highlights of the Pilot Funds as of
and for the year ended August 31, 1996, have been incorporated by reference
herein and in the registration statement. These financial statements have been
audited by Arthur Andersen LLP, independent auditors, as stated in their
reports, which have also been incorporated by reference herein, and have been so
included upon the report of such firm given upon their authority as experts in
accounting and auditing.
OTHER BUSINESS
Pilot's Board of Trustees knows of no other business to be brought before
the Meeting. However, if any other matters come before the Meeting, it is the
intention that proxies which do not contain specific restrictions to the
contrary will be voted on such matters in accordance with the judgment of the
persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to The Pilot Funds or to Nations
Fund, Inc. in writing at the address(es), or by phone at the phone number(s), on
the cover page of this Combined Proxy Statement/Prospectus.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED
TO MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. SHAREHOLDERS
ALSO MAY RETURN PROXIES BY TELEFACSIMILE OR VOTE BY TELEPHONE.
THE PILOT FUNDS WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS AUGUST 31, 1996
ANNUAL SHAREHOLDERS REPORT TO ANY SHAREHOLDER UPON REQUEST ADDRESSED TO: THE
PILOT FUNDS 3435 STELZER ROAD, COLUMBUS, OHIO 43219-3035 OR BY TELEPHONE AT
1-800-717-4568.
34
<PAGE>
APPENDIX I
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement")
is made as of this ___ day of _________, 1997, by and between Nations Fund, Inc.
("Nations Fund"), a Maryland corporation, for itself and on behalf of Nations
Treasury Fund, Nations Prime Fund, Nations Equity Income Fund, Nations
International Growth Fund, Nations Small Company Growth Fund and Nations U.S.
Government Bond Fund (each an "Acquiring Fund" and collectively the "Acquiring
Funds"), all portfolios of Nations Fund, and The Pilot Funds ("Pilot Funds"), a
Massachusetts business trust, for itself and on behalf of the Pilot Short-Term
U.S. Treasury Fund, Pilot Short-Term Diversified Assets Fund, Pilot Equity
Income Fund, Pilot International Equity Fund, Pilot Small Capitalization Equity
Fund and Pilot U.S. Government Securities Fund (each an "Acquired Fund" and
collectively the "Acquired Funds"), all portfolios of Pilot Funds.
In accordance with the terms and conditions set forth in this
Agreement, the parties desire that all of the assets of each Acquired Fund be
transferred to each Acquiring Fund corresponding thereto, as set forth in the
table attached hereto as Schedule A, in exchange for shares of specified classes
of the corresponding Acquiring Fund ("Acquiring Fund Shares") and the assumption
by each Acquiring Fund of the Stated Liabilities (as defined in paragraph 1.3)
of each corresponding Acquired Fund, and that such Acquiring Fund Shares be
distributed immediately after the Closing(s), as defined in this Agreement, by
each Acquired Fund to its shareholders in liquidation of each Acquired Fund.
This Agreement is intended to be and is adopted as a reorganization for each
Acquired Fund within the meaning of Section 368(a) of the Internal Revenue Code
of 1986, as amended (the "Code").
In consideration of the promises and of the covenants and
agreements hereinafter set forth, the parties hereto, intending to be legally
bound hereby, covenant and agree as follows:
1. REORGANIZATION OF ACQUIRED FUNDS
1.1 Subject to the terms and conditions herein set forth, and on
the basis of the representations and warranties contained
herein, each Acquired Fund shall assign, deliver and otherwise
transfer its assets as set forth in paragraph 1.2 (the "Fund
Assets") to its corresponding Acquiring Fund identified in
Schedule A, and such corresponding Acquiring Fund shall, as
consideration therefor, on the Closing Date (as defined in
paragraph 3.1), (i) deliver to such Acquired Fund full and
fractional Acquiring Fund Shares, the number of which shall be
determined by dividing (a) that portion of the value of the
Fund Assets, net of an
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Acquired Fund's Stated Liabilities, computed in the manner and
as of the time and date set forth in paragraph 2.1,
representative of the shares of beneficial interest of each
Acquired Fund, by (b) the net asset value of one share of each
Acquiring Fund's class of shares identified in Schedule A,
computed in the manner and as of the time and date set forth
in paragraph 2.2, and (ii) assume the Acquired Fund's Stated
Liabilities. Such transfer, delivery and assumption shall take
place at the closing(s) provided for in paragraph 3.1
(hereinafter sometimes referred to as the "Closing(s)").
Promptly after the Closing(s), each Acquired Fund shall
distribute the Acquiring Fund Shares to the shareholders of
the Acquired Fund in liquidation of the Acquired Fund as
provided in paragraph 1.4 hereof. Such transaction(s) are
hereinafter sometimes collectively referred to as the
"Reorganization(s)."
1.2.a. With respect to each Acquired Fund, the Fund Assets shall
consist of all property and assets of any nature whatsoever,
including, without limitation, all cash, cash equivalents,
securities, claims and receivables (including dividend and
interest receivables) owned by each Acquired Fund, and any
prepaid expenses shown as an asset on each Acquired Fund's
books on the Closing Date.
1.2.b. At least fifteen (15) business days prior to the Closing Date,
each Acquired Fund will provide the corresponding Acquiring
Fund with a schedule of its securities and other assets and
its known liabilities, and such Acquiring Fund will provide
the Acquired Fund with a copy of the current investment
objective and policies applicable to each Acquiring Fund. Each
Acquired Fund reserves the right to sell any of the securities
or other assets shown on the list of the Fund's Assets prior
to the Closing Date but will not, without the prior approval
of the corresponding Acquiring Fund, acquire any additional
securities other than securities which the Acquiring Fund is
permitted to purchase in accordance with its stated investment
objective and policies. At least ten (10) business days prior
to the Closing Date, the Acquiring Fund will advise the
corresponding Acquired Fund of any investments of such
Acquired Fund shown on such schedule which the Acquiring Fund
would not be permitted to hold, pursuant to its stated
investment objective and policies or otherwise. In the event
that the Acquired Fund holds any investments that its
corresponding Acquiring Fund would not be permitted to hold
under its stated investment objective or policies, the
Acquired Fund, if requested by the Acquiring Fund and, to the
extent permissible and consistent with the Acquired Fund's own
investment objective and policies, will dispose of such
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securities prior to the Closing Date. In addition, if it is
determined that the portfolios of the Acquired Fund and the
Acquiring Fund, when aggregated, would contain investments
exceeding certain percentage limitations to which the
Acquiring Fund is or will be subject with respect to such
investments, the Acquired Fund, if requested by the Acquiring
Fund and, to the extent permissible and consistent with the
Acquired Fund's own investment objective and policies, will
dispose of and/or reinvest a sufficient amount of such
investments as may be necessary to avoid violating such
limitations as of the Closing Date.
1.3. Each Acquired Fund will endeavor to discharge all of its
known liabilities and obligations prior to the Closing Date.
Each Acquiring Fund will assume all liabilities and
obligations disclosed on an unaudited statement of assets and
liabilities of the corresponding Acquired Fund prepared by or
on behalf of Pilot Funds as of the Applicable Valuation Date
(as defined in paragraph 2.1), in accordance with generally
accepted accounting principles consistently applied from the
prior audited period ("Stated Liabilities"). The Acquiring
Fund shall assume only the Stated Liabilities of its
corresponding Acquired Fund, and no other liabilities or
obligations, whether absolute or contingent, known or unknown,
accrued or unaccrued.
1.4. Promptly after the Closing(s) with respect to each Acquired
Fund, the Acquired Fund will distribute the Acquiring Fund
Shares received by the Acquired Fund pursuant to paragraph 1.1
PRO RATA to its shareholders of record determined as of the
close of business on the Closing Date ("Acquired Fund
Investors") in complete liquidation of the Acquired Fund. Such
distribution will be accomplished by an instruction, signed by
an appropriate officer of Pilot Funds, to transfer the
Acquiring Fund Shares then credited to the Acquired Fund's
account on the books of the Acquiring Fund to open accounts on
the books of the Acquiring Fund established and maintained by
the Acquiring Fund's transfer agent in the names of record of
the Acquired Fund Investors and representing the respective
PRO RATA number of shares of the Acquiring Fund due such
Acquired Fund Investor. In exchange for Acquiring Fund Shares
distributed, all issued and outstanding shares of beneficial
interest of the Acquired Fund will be redeemed and canceled
simultaneously therewith on the Acquired Fund's books; any
outstanding share certificates representing interests in the
Acquired Fund thereafter will represent the right to receive
such number of Acquiring Fund Shares after the Closing(s) as
determined in accordance with Section 1.1.
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1.5. If a request shall be made for a change of the registration
of shares of each Acquiring Fund to another person from the
account of the shareholder in which name the shares are
registered in the records of the Acquired Fund it shall be a
condition of such registration of shares that there be
furnished the Acquiring Fund an instrument of transfer
properly endorsed, accompanied by appropriate signature
guarantees and otherwise in proper form for transfer and, if
any of such shares are outstanding in certificated form, the
certificates representing such shares, and that the person
requesting such registration shall pay to such Acquiring Fund
any transfer or other taxes required by reason of such
registration or establish to the reasonable satisfaction of
the Acquiring Fund that such tax has been paid or is not
applicable.
1.6. Following the transfer of assets by each Acquired Fund to the
corresponding Acquiring Fund, the assumption of the Acquired
Fund's Stated Liabilities by the Acquiring Fund, and the
distribution by the Acquired Fund of the Acquiring Fund Shares
received by it pursuant to paragraph 1.4, Pilot Funds shall
terminate the qualification, classification and registration
of such Acquired Fund at all appropriate federal and state
agencies. All reporting and other obligations of Pilot Funds
shall remain the exclusive responsibility of Pilot Funds up to
and including the date on which the particular Acquired Fund
is terminated and deregistered, subject to any reporting or
other obligations described in paragraph 4.10.
1.7. The failure of one Acquired Fund to consummate the
transactions contemplated hereby shall not affect the
consummation or validity of a Reorganization with respect to
any other Acquired Fund, and the provisions of this Agreement
shall be construed to effect this intent, including, without
limitation, as the context requires, construing the terms
"Acquiring Fund" and "Acquired Fund" as meaning only those
series of Nations Fund and Pilot Funds, respectively, which
are involved in a Reorganization as of a Closing Date.
2. VALUATION
2.1 With respect to each Acquired Fund, the value of the Fund
Assets shall be the value of such assets computed as of the
time at which its net asset value is calculated pursuant to
the valuation procedures set forth in each Acquiring Fund's
then current prospectus and statement of additional
information on the Closing Date (such time and date being
herein called the "Applicable Valuation Date").
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2.2. The net asset value of the share of a class of shares of an
Acquiring Fund shall be the net asset value per share of such
class computed on the Applicable Valuation Date, using the
valuation procedures set forth in the Acquiring Fund's then
current prospectus and statement of additional information.
2.3. All computations of value contemplated by this Article 2
shall be made by the respective Acquiring Fund's
co-administrator, First Data Investor Services Group, Inc.
("First Data") in accordance with its regular practice as
pricing agent and reviewed by its independent accountants.
Each Acquiring Fund shall cause its Co-Administrator to
deliver a copy of its valuation report, reviewed by its
independent accountants to Pilot Funds and each Acquired Fund
at the Closing(s).
3. CLOSING(S) AND CLOSING DATE
3.1. The Closing(s) for the Reorganization(s) shall occur on May
2, 1997, and/or on such other date(s) as may be mutually
agreed upon in writing by the officers of the parties hereto
(the "Closing Date"). The Closing(s) shall be held at the
offices of Stephens Inc., 111 Center Street, Suite 300, Little
Rock, Arkansas 72201 or at such other location as is mutually
agreeable to the parties. All acts taking place at the
Closing(s) shall be deemed to take place simultaneously as of
4:00 p.m. Eastern time on the Closing Date unless otherwise
provided.
3.2. Each Acquiring Fund's custodian shall deliver at the
Closing(s) a certificate of an authorized officer stating
that: (a) each Acquired Fund's portfolio securities, cash and
any other assets have been delivered in proper form to the
corresponding Acquiring Fund on the Closing Date and (b) all
necessary taxes including all applicable federal and state
stock transfer stamps, if any, have been paid, or provision
for payment shall have been made, by such Acquired Fund in
conjunction with the delivery of portfolio securities. Proper
delivery of cash shall be by wire to The Bank of New York, the
Acquiring Funds' Sub-Custodian, pursuant to instruction to be
delivered prior to the Closing(s).
3.3. Notwithstanding anything herein to the contrary, in the event
that on the Applicable Valuation Date (a) the New York Stock
Exchange shall be closed to trading or trading thereon shall
be restricted or (b) trading or the reporting of trading on
such exchange or elsewhere shall be disrupted so that, in the
judgment of Nations Fund and Pilot Funds, accurate appraisal
of the value of the net assets of an Acquiring Fund
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<PAGE>
or an Acquired Fund is impracticable, the Applicable Valuation
Date and Closing Date shall be postponed until the first
business day after the day when trading shall have been fully
resumed without restriction or disruption and reporting shall
have been restored.
3.4. With respect to each Acquired Fund, Pilot Funds shall provide
Nations Fund and its transfer agents with immediate access
from and after the Closing Date to (a) the computer,
electronic or such other forms of records containing the
names, addresses and taxpayer identification numbers of all of
the Acquired Fund investors ("Acquired Fund Investor") and the
number and percentage ownership of outstanding Acquired Fund
shares owned by such Acquired Fund Investor, all as of the
Applicable Valuation Date, and (b) all original documentation
(including all applicable Internal Revenue Service forms,
certificates, certifications and correspondence) relating to
the Acquired Fund Investors' taxpayer identification numbers
and their liability for or exemption from back-up withholding.
Each corresponding Acquiring Fund shall issue and deliver to
the Secretary or Assistant Secretary of Pilot Funds, acting on
behalf of the Acquired Fund, a confirmation evidencing the
Acquiring Fund Shares credited on the Closing Date or shall
provide evidence satisfactory to each Acquired Fund that such
Acquiring Fund Shares have been credited to each Acquired
Fund's account on the books of each Acquiring Fund. At the
Closing(s), each party shall deliver to the other such bills
of sale, checks, assignments, share certificates, if any,
receipts or other documents of transfer, assignment or
conveyance as such other party or its counsel may reasonably
request.
3.5. Within thirty (30) days after the Closing Date, each Acquired
Fund shall deliver, in accordance with Article 1 hereof, to
the corresponding Acquiring Fund a statement of the Fund
Assets and Stated Liabilities, together with a list of such
Acquired Fund's portfolio securities and other assets showing
the respective adjusted bases and holding periods thereof for
income tax purposes, as of the Closing Date, certified by an
appropriate officer of Pilot Funds.
3.6 Each Acquiring Fund will cause a confirmation statement to be
mailed or delivered to each corresponding Acquired Fund
Investor setting forth the number of Acquiring Fund Shares
registered in such Acquired Fund Investor's name.
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4. COVENANTS WITH RESPECT TO THE ACQUIRING FUNDS AND THE ACQUIRED FUNDS
4.1. Pilot Funds, with respect to the Acquired Funds, has called
or will call a meeting of Pilot Fund shareholders to consider
and act upon this Agreement, and to take all other actions
reasonably necessary to obtain the approval of the
transactions contemplated herein, including approval for each
Acquired Fund's liquidating distribution of the Acquiring Fund
Shares contemplated hereby, and for Pilot Funds to terminate
each Acquired Fund's qualification, classification and
registration if requisite approvals are obtained with respect
to each Acquired Fund. Nations Fund and Pilot Funds will
jointly prepare the notice of meeting, form of proxy and proxy
statement (collectively, "Proxy Materials") to be used in
connection with such meeting; provided that Nations Fund has
furnished or will furnish Pilot Funds with a current,
effective prospectus, including any supplements, relating to
the class of shares of each Acquiring Fund corresponding to
the class of shares of each Acquired Fund then outstanding for
incorporation within and/or distribution with the Proxy
Materials, and with such other information relating to the
Acquiring Funds as is reasonably necessary for the preparation
of the Proxy Materials.
4.2. Nations Fund, on behalf of each Acquiring Fund, will use its
best efforts to meet the requirements for the statutory
exemption provided by Section 15(f) of the Investment Company
Act of 1940 (the "1940 Act").
4.3. Pilot Funds, on behalf of each Acquired Fund, covenants that
the corresponding Acquiring Fund Shares to be issued hereunder
are not being acquired for the purpose of making any
distribution thereof, other than in accordance with the terms
of this Agreement.
4.4. Pilot Funds, on behalf of each Acquired Fund, will assist the
corresponding Acquiring Fund in obtaining such information as
the Acquiring Fund reasonably requests concerning the record
and beneficial ownership of shares of each class of each
Acquired Fund.
4.5. Subject to the provisions hereof, Nations Fund, on its own
behalf and on behalf of each Acquiring Fund; and Pilot Funds,
on its own behalf and on behalf of each Acquired Fund, will
take, or cause to be taken, all actions, and do, or cause to
be done, all things reasonably
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necessary, proper or advisable to consummate and make
effective the transactions contemplated herein.
4.6. Pilot Funds, on behalf of each Acquired Fund, shall furnish
to its corresponding Acquiring Fund on the Closing Date, a
final statement of the total amount of each Acquired Fund's
assets and liabilities as of the Closing Date, which statement
shall be certified by an appropriate officer of Pilot Funds as
being determined in accordance with generally accepted
accounting principles consistently applied and as being valued
in accordance with paragraph 2.1 hereof. As promptly as
practicable, but in any case within sixty (60) days after the
Closing Date, Pilot Funds, on behalf of each Acquired Fund,
shall furnish its corresponding Acquiring Fund, in such form
as is reasonably satisfactory to Nations Fund, on behalf of
each Acquiring Fund, a statement certified by an officer of
Pilot Funds of such Acquired Fund's federal income tax
attributes that will be carried over to the corresponding
Acquiring Fund in the reorganization pursuant to Section 381
of the Code.
4.7. Nations Fund, on behalf of each Acquiring Fund, has prepared
and filed, or will prepare and file with the SEC a
registration statement on Form N-14 under the Securities Act
of 1933, as amended (the "1933 Act"), relating to the
Acquiring Fund Shares, which, without limitation, shall
include a proxy statement of Pilot Funds and the prospectuses
of the Acquiring Funds of Nations Fund relating to the
transactions contemplated by this Agreement (the "Registration
Statement"). Pilot Funds, on behalf of each Acquired Fund, has
provided or will provide each corresponding Acquiring Fund
with the materials and information necessary to prepare the
Proxy Materials for inclusion in the Registration Statement,
prepared in accordance with paragraph 4.1, and with such other
information and documents relating to each Acquired Fund as
are requested by the corresponding Acquiring Fund and as are
reasonably necessary for the preparation of the Registration
Statement.
4.8. As soon after the Closing Date as is reasonably practicable,
Pilot Funds, on behalf of each Acquired Fund: (a) shall
prepare and file all federal and other tax returns and reports
of each Acquired Fund required by law to be filed with respect
to all periods ending on or before the Closing Date but not
theretofore filed and (b) shall pay all federal and other
taxes shown as due thereon and/or all federal and other taxes
that were unpaid as of the Closing Date.
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4.9. With respect to each Acquiring Fund, Nations Fund agrees to
use all reasonable efforts to operate in accordance with its
then current prospectus and statement of additional
information prepared in accordance with Form N-1A, including
qualifying as a regulated investment company under Subchapter
M of the Code, for at least one (1) year following the Closing
Date.
4.10. Following the transfer of assets by each Acquired Fund to the
corresponding Acquiring Fund in exchange for Acquiring Fund
Shares and the assumption of the Stated Liabilities of the
Acquired Fund as contemplated herein, Pilot Funds will file
any final regulatory reports, including but not limited to any
Form N-SAR and Rule 24f-2 filings with respect to such
Acquired Fund(s), promptly after the Closing Date and also
will take all other steps as are necessary and proper to
effect the termination or declassification of such Acquired
Funds of Pilot Funds in accordance with the laws of the
Commonwealth of Massachusetts and other applicable
requirements.
5. REPRESENTATIONS AND WARRANTIES
5.1. Nations Fund, on behalf of itself and each Acquiring Fund,
represents and warrants to the Pilot Funds as follows:
5.1.a. Nations Fund was duly created pursuant to its
Articles of Incorporation by the Directors for the
purpose of acting as a management investment company
under the 1940 Act and is validly existing under the
laws of the state of Maryland, and the Articles of
Incorporation directs the Directors to manage the
affairs of Nations Fund and grants them all powers
necessary or desirable to carry out such
responsibility, including administering Nations Fund
business as currently conducted by Nations Fund and
as described in the current prospectuses of Nations
Fund; Nations Fund is registered as an investment
company classified as an open-end management company,
under the 1940 Act and its registration with the SEC
as an investment company is in full force and effect;
5.1.b. The Registration Statement, including the current
prospectuses and statement of additional information
of each Acquiring Fund, conform or will conform, at
all times up to and including the Closing Date, in
all material respects to the applicable requirements
of the 1933 Act and the 1940 Act and the regulations
thereunder and do not include or will not include
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any untrue statement of a material fact or omit to
state any material fact required to be stated therein
or necessary to make the statements therein, in light
of the circumstances under which they were made, not
misleading;
5.1.c. Each Acquiring Fund is not in violation of, and the
execution, delivery and performance of this Agreement
by Nations Fund for itself and on behalf of each
Acquiring Fund will not (i) violate Nations Fund's
Articles of Incorporation or By-Laws, or (ii) result
in a breach or violation of, or constitute a default
under any material agreement or material instrument,
to which Nations Fund is a party or by which its
properties or assets are bound;
5.1.d. Except as previously disclosed in writing to the
Pilot Funds, no litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or, to Nations
Fund's knowledge, threatened against Nations Fund or
its business, the Acquiring Funds or any of their
properties or assets, which, if adversely determined,
would materially and adversely affect Nations Fund or
an Acquiring Fund's financial condition or the
conduct of their business, and Nations Fund knows of
no facts that might form the basis for the
institution of any such proceeding or investigation,
and no Acquiring Fund is a party to or subject to the
provisions of any order, decree or judgment of any
court or governmental body which materially and
adversely affects, or is reasonably likely to
materially and adversely affect, its business or its
ability to consummate the transactions contemplated
herein;
5.1.e. All issued and outstanding shares, including shares
to be issued in connection with the Reorganization,
of the class of the Acquiring Fund will, as of the
Closing Date, be duly authorized and validly issued
and outstanding, fully paid and non-assessable by
Nations Fund and the Acquiring Fund does not have
outstanding any option, warrants or other rights to
subscribe for or purchase any of its shares;
5.1.f. The execution, delivery and performance of this
Agreement on behalf of each Acquiring Fund will have
been duly authorized prior to the Closing Date by all
necessary action on the part of Nations Fund and the
Directors, and this Agreement constitutes a valid and
binding obligation of Nations Fund and
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each Acquiring Fund enforceable in accordance with
its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, arrangement, moratorium
and other similar laws of general applicability
relating to or affecting creditors' rights and to
general equity principles;
5.1.g. The Acquiring Fund Shares to be issued and delivered
to the corresponding Acquired Fund for the account of
the Acquired Fund Investors, pursuant to the terms
hereof, will have been duly authorized as of the
Closing Date and, when so issued and delivered, will
be duly and validly issued, fully paid and
non-assessable, and the shares of the class of the
Acquiring Fund issued and outstanding prior to the
Closing Date were offered and sold in compliance with
the applicable registration requirements, or
exemptions therefrom, of the 1933 Act, and all
applicable state securities laws, and the regulations
thereunder;
5.1.h. On the effective date of the Registration Statement,
at the time of the meeting of the Acquired Fund
shareholders and on the Closing Date, any written
information furnished by Nations Fund with respect to
an Acquiring Fund for use in the Proxy Materials, the
Registration Statement or any other materials
provided in connection with the Reorganization does
not and will not contain any untrue statement of a
material fact or omit to state a material fact
necessary to make the information provided not
misleading;
5.1.i. No governmental consents, approvals, authorizations
or filings are required under the 1933 Act, , the
Securities Exchange Act of 1934 (the "1934 Act"), the
1940 Act or Maryland law for the execution of this
Agreement by Nations Fund, for itself and on behalf
of each Acquiring Fund, or the performance of the
Agreement by Nations Fund, for itself and on behalf
of each Acquiring Fund, except for the effectiveness
of the Registration Statement, any necessary
exemptive relief or no-action assurances requested
from the SEC or its Staff with respect to Sections
17(a) and 17(d) of the 1940 Act and Rule 17d-1
thereunder, and such other consents, approvals,
authorizations and filings as have been made or
received, and except for such consents, approvals,
authorizations and filings as may be required
subsequent to the Closing Date;
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5.1.j. The Statement of Assets and Liabilities, Statement
of Operations and Statement of Changes in Net Assets
of each Acquiring Fund as of and for the year ended
March 31, 1996, audited by Price Waterhouse LLP
(copies of which have been or will be furnished to
the corresponding Acquired Fund) fairly present, in
all material respects, the financial condition of
each Acquiring Fund as of such date and its results
of operations for such period in accordance with
generally accepted accounting principles consistently
applied and as of such date there were no liabilities
of any Acquiring Fund (contingent or otherwise) known
to Nations Fund that were not disclosed therein but
that would be required to be disclosed therein in
accordance with generally accepted accounting
principles;
5.1.k. Since the date of the most recent audited financial
statements, there has not been any material adverse
change in any Acquiring Fund's financial condition,
assets, liabilities or business, other than changes
occurring in the ordinary course of business. For the
full and partial taxable year from its inception
through the Closing Date, each Acquiring Fund of
Nations Fund has qualified, or will qualify, as a
separate regulated investment company under
Subchapter M of the Code and has taken all necessary
and required actions to maintain such status;
5.1.l. All federal and other tax returns and reports of
Nations Fund and each Acquiring Fund required by law
to be filed on or before the Closing Date have been
or will be filed, and all federal and other taxes
owed by Nations Fund on behalf of the Acquiring Funds
have been or will be paid so far as due, and to the
best of Nations Fund's knowledge, no such return is
currently under audit and no assessment has been
asserted with respect to any such return; and
5.1.m. At the Closing Date, the Acquiring Funds will have
good and marketable title to their assets and full
right, power and authority to assign, deliver and
otherwise transfer such assets.
5.2. Pilot Funds, on behalf of itself and each Acquired Fund,
represents and warrants to Nations Fund as follows:
5.2.a. Pilot Funds was duly created pursuant to its
Agreement and Declaration of Trust by the Trustees
for the purpose of acting
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as a management investment company under the 1940 Act
and is validly existing under the laws of the
Commonwealth of Massachusetts, and the Agreement and
Declaration of Trust directs the Trustees to manage
the affairs of Pilot Funds and grants them all powers
necessary or desirable to carry out such
responsibility, including administering Pilot Funds
business as currently conducted by Pilot Funds and as
described in the current prospectuses of Pilot Funds;
Pilot Funds is registered as an investment company
classified as an open-end management company, under
the 1940 Act and its registration with the SEC as an
investment company is in full force and effect;
5.2.b. All of the issued and outstanding shares
representing units of beneficial interest of each
Acquired Fund have been offered and sold in
compliance in all material respects with applicable
registration requirements of the 1933 Act and state
securities laws;
5.2.c. The Acquired Funds are not in material violation of,
and the execution and the performance of the
Agreement by Pilot Funds for itself and on behalf of
each Acquired Fund does not and will not (i) violate
Pilot Funds' Agreement and Declaration of Trust or
By-Laws, or (ii) result in a breach or violation of,
or constitute a default under, any term of any
material agreement or material instrument to which
Pilot Funds is a party or by which its properties or
assets are bound, except as otherwise disclosed in
writing to the Acquiring Funds;
5.2.d. Except as previously disclosed in writing to Nations
Fund, no litigation or administrative proceeding or
investigation of or before any court or governmental
body is presently pending or, to Pilot Funds'
knowledge, threatened against any Acquired Fund or
any of its properties or assets which, if adversely
determined, would materially and adversely affect
such Acquired Fund's financial condition or the
conduct of its business, and Pilot Funds knows of no
facts that might form the basis for the institution
of any such proceeding or investigation, and no
Acquired Fund is a party to or subject to the
provisions of any order, decree or judgment of any
court or governmental body that materially and
adversely affects, or is reasonably likely to
materially and adversely affect, its business
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or its ability to consummate the transactions
contemplated herein;
5.2.e. The Statement of Assets and Liabilities, Statement
of Operations and Statement of Changes in Net Assets
of each Acquired Fund as of and for the year ended
August 31, 1996, audited by Arthur Andersen LLP
(copies of which have been or will be furnished to
the Acquiring Fund) fairly present, in all material
respects, the financial condition of each Acquired
Fund as of such date and its results of operations
for such period in accordance with generally accepted
accounting principles consistently applied, and as of
such date there were no liabilities of any Acquired
Fund (contingent or otherwise) known to Pilot Funds
that were not disclosed therein but that would be
required to be disclosed therein in accordance with
generally accepted accounting principles;
5.2.f. Since the date of the most recent audited financial
statements, there has not been any material adverse
change in any Acquired Fund's financial condition,
assets, liabilities or business, other than changes
occurring in the ordinary course of business, or any
incurrence by an Acquired Fund of indebtedness
maturing more than one year from the date such
indebtedness was incurred, except as otherwise
disclosed in writing to and accepted by the
corresponding Acquiring Fund, prior to the Closing
Date (for the purposes of this subparagraph (f),
neither a decline in an Acquired Fund's net asset
value per share nor a decrease in an Acquired Fund's
size due to redemptions shall be deemed to constitute
a material adverse change);
5.2.g. All federal and other tax returns and reports of
Pilot Funds and each Acquired Fund required by law
have been or will be filed, and all federal and other
taxes owed by Pilot Funds and each Acquired Fund
shall, with respect to all period ending on or before
the Closing Date, have been or will be paid so far as
due, and to the best of Pilot Funds' knowledge, no
such return is currently under audit and no
assessment has been asserted with respect to any such
return;
5.2.h. For the full and partial taxable year from its
inception through the Closing Date, each Acquired
Fund has qualified, or will qualify, as a separate
regulated investment company under
I-14
<PAGE>
Subchapter M of the Code and has taken or will take
all necessary and required actions to maintain such
status;
5.2.i. All issued and outstanding shares of each Acquired
Fund are, and on the Closing Date will be, duly
authorized and validly issued and outstanding, and
fully paid and non-assessable by Pilot Funds, and all
such shares will, at the time of the Closing(s), be
held by the persons and in the amounts set forth in
the list of Acquired Fund Investors provided to each
corresponding Acquiring Fund, pursuant to paragraph
3.4, and no Acquired Fund has outstanding any
options, warrants or other rights to subscribe for or
purchase any of its shares, nor is there outstanding
any security convertible into any of its shares;
5.2.j. At the Closing Date, each Acquired Fund will have
good and marketable title to its Fund Assets and full
right, power and authority to assign, deliver and
otherwise transfer such Fund Assets hereunder, and
upon delivery and payment for such Fund Assets as
contemplated herein, the corresponding Acquiring Fund
will acquire good and marketable title thereto,
subject to no restrictions on the ownership or
transfer thereof other than such restrictions as
might arise under the 1933 Act;
5.2.k. The execution, delivery and performance of this
Agreement on behalf of the Acquired Funds will have
been duly authorized prior to the Closing Date by all
necessary action on the part of Pilot Funds and the
Trustees, and this Agreement constitutes a valid and
binding obligation of Pilot Funds and each Acquired
Fund enforceable in accordance with its terms,
subject as to enforcement, to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other
similar laws of general applicability relating to or
affecting creditors' rights and to general equity
principles;
5.2.l. From the effective date of the Registration
Statement, through the time of the meeting of the
Acquired Fund Investors, and on the Closing Date, the
Registration Statement, insofar as it relates to
materials provided by Pilot Funds or the Acquired
Funds, used in connection with the preparation of the
Registration Statement: (i) will comply in all
material respects with the applicable provisions of
the 1933 Act, the 1934 Act and the 1940 Act and the
regulations thereunder and (ii) will
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<PAGE>
not contain any untrue statement of a material fact
or omit to state a material fact required to be
stated therein or necessary to make the statements
therein not misleading, and as of such dates and
times, any written information furnished by Pilot
Funds, on behalf of the Acquired Funds, for use in
the Registration Statement or in any other manner
that may be necessary in connection with the
transactions contemplated hereby does not contain any
untrue statement of a material fact or omit to state
a material fact necessary to make the information
provided not misleading; and
5.2.m. No governmental consents, approvals, authorizations
or filings are required under the 1933 Act, the 1934
Act, the 1940 Act or Massachusetts law for the
execution of this Agreement by Pilot Funds, for
itself and on behalf of each Acquired Fund, or the
performance of the Agreement by Pilot Funds for
itself and on behalf of each Acquired Fund, except
for the effectiveness of the Registration Statement,
except for any necessary exemptive relief or
no-action assurances requested from the SEC or its
Staff with respect to Section 17(a) and 17(d) of the
1940 Act and Rule 17d-1 thereunder, and except for
such other consents, approvals, authorizations and
filings as have been made or received, and except for
such consents, approvals, authorizations and filings
as may be required subsequent to the Closing Date.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED FUNDS
The obligations of Pilot Funds to consummate the
Reorganization with respect to each Acquired Fund shall be subject to the
performance by Nations Fund, for itself and on behalf of each Acquiring Fund, of
all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions with respect to each
corresponding Acquiring Fund:
6.1. All representations and warranties of Nations Fund with
respect to each Acquiring Fund contained herein shall be true
and correct in all material respects as of the date hereof
and, except as they may be affected by the transactions
contemplated herein, as of the Closing Date with the same
force and effect as if made on and as of the Closing Date.
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<PAGE>
6.2. Nations Fund, on behalf of each Acquiring Fund, shall have
delivered to Pilot Funds at the Closing(s) a certificate
executed on behalf of each corresponding Acquiring Fund by
Nations Fund's President, Secretary, Assistant Secretary, or
other authorized officer, in a form reasonably satisfactory to
the Pilot Funds and dated as of the Closing Date, to the
effect that the representations and warranties of Nations Fund
with respect to each Acquiring Fund made herein are true and
correct at and as of the Closing Date, except as they may be
affected by the transactions contemplated herein, and as to
such other matters as such Acquired Fund shall reasonably
request.
6.3. Each Acquired Fund shall have received at the Closing(s) a
favorable opinion of Morrison & Foerster LLP, counsel to
Nations Fund (based upon or subject to such representations,
assumptions, limitations or opinions of local counsel as such
counsel may deem appropriate or necessary), dated as of the
Closing Date, in a form (including the representations,
assumptions, limitations or opinions of local counsel upon
which it is based or to which it is subject) reasonably
satisfactory to each Acquired Fund, substantially to the
effect that:
6.3.a. Nations Fund is a duly registered, open-end,
management investment company, and its registration
with the SEC as an investment company under the 1940
Act is in full force and effect;
6.3.b. each Acquiring Fund is a portfolio of Nations Fund,
which is a company duly created pursuant to its
Articles of Incorporation, is validly existing and in
good standing under the laws of the state of
Maryland, and the Articles of Incorporation directs
the Directors to manage the affairs of Nations Fund
and grants them all powers necessary or desirable to
carry out such responsibility, including
administering Nations Fund's business as described in
the current prospectuses of Nations Fund;
6.3.c. this Agreement has been duly authorized, executed
and delivered on behalf of Nations Fund and each
Acquiring Fund and, assuming due authorization,
execution and delivery of this Agreement on behalf of
the Acquiring Funds, is a valid and binding
obligation of Nations Fund enforceable against
Nations Fund in accordance with its terms, subject as
to enforcement, to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other
similar laws of general applicability
I-17
<PAGE>
relating to or affecting creditors' rights and to
general equity principles;
6.3.d. the Acquiring Fund Shares to be issued to the
Acquired Funds Investors pursuant to this Agreement
are duly registered under the 1933 Act on the
appropriate form, and are duly authorized and upon
such issuance will be validly issued and outstanding
and fully paid and non-assessable, and no shareholder
of an Acquiring Fund has any preemptive rights to
subscription or purchase in respect thereof;
6.3.e. the Registration Statement has become effective with
the SEC and, to the best of such counsel's knowledge,
no stop order suspending the effectiveness thereof
has been issued and no proceedings for that purpose
have been instituted or are pending or threatened;
6.3.f. no consent, approval, authorization, filing or order
of any court or governmental authority of the United
States or any state is required for the consummation
by Nations Fund of the Reorganization with respect to
each Acquiring Fund;
6.3.g. to such counsel's knowledge, the execution and
delivery of the Agreement and the performance of its
terms by Nations Fund, and each Acquiring Fund, do
not violate or result in a violation of the Nations
Fund Agreement and Declaration of Trust or Code of
Regulations, or any judgment, order or decree known
to such counsel, of any court or arbiter, to which
Nations Fund is a party, and, to such counsel's
knowledge, will not constitute a material breach of
the terms, conditions or provisions of, or constitute
a default under, any contract, undertaking, indenture
or other agreement by which Nations Fund is now bound
or to which it is now a party;
6.3.h. to such counsel's knowledge, (a) no legal or
governmental proceedings existing on or before the
date of mailing the Combined Proxy
Statement/Prospectus, involving Nations Fund or the
Acquiring Funds, are required to be described in the
Combined Proxy Statement/Prospectus which are not
described as required and (b) there are no contracts
or documents relating to Nations Fund or the
Acquiring Funds, known to such counsel, of a
character required to be described in the Combined
Proxy Statement/Prospectus or to be filed as
I-18
<PAGE>
an exhibit to the Registration Statement that are not
described or filed as required; and
6.3.i. to such counsel's knowledge, except as otherwise
disclosed in the Registration Statement, no
litigation or administrative proceeding or
investigation of or before any court or governmental
body is presently pending or threatened against
Nations Fund or an Acquiring Fund or any of their
properties or assets and neither Nations Fund nor any
Acquiring Fund is a party to or subject to the
provisions of any order, decree or judgment of any
court or governmental body that materially and
adversely affects, or would materially and adversely
affect, its business.
6.4. Each Acquired Fund also shall receive at the Closing(s) a
letter from Morrison & Foerster LLP, dated as of the Closing
Date, in a form reasonably satisfactory to each Acquired Fund,
substantially to the effect that: such counsel has
participated in conferences with representatives of Nations
Fund and its accountants concerning the Registration Statement
and has considered the matters required to be stated therein
and the statements contained therein, although such counsel
has not independently verified the accuracy, completeness or
fairness of such statements. Based upon and subject to the
foregoing, nothing has come to such counsel's attention that
leads such counsel to believe that the Registration Statement,
at the time it became effective with the SEC pursuant to Rule
488 under the 1933 Act or as of the Closing Date, contained an
untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to
make the statements therein, in light of the circumstances
under which they were made, not misleading (it being
understood that such counsel has not been requested to and
does not make any comment in this paragraph with respect to
the financial statements, supporting schedules, footnotes, and
other financial and statistical information contained in the
Registration Statement.
6.5. As of the Closing Date with respect to the Reorganization of
each Acquired Fund, there shall have been no material change
in the investment objective, policies and restrictions nor any
material change in the investment management fees, fee levels
payable pursuant to the 12b-1 plan of distribution, other fees
payable for services provided to the Acquiring Funds, fee
waiver or expense reimbursement undertakings, or sales loads
of the Acquiring Funds from those fee amounts, undertakings
and sales load amounts described in the
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<PAGE>
prospectus of each Acquiring Fund delivered to the
corresponding Acquired Fund pursuant to paragraph 4.1 and in
the Proxy Materials.
6.6. With respect to each Acquiring Fund, the Board of Directors
of Nations Fund, including a majority of the "non-interested"
Directors, has determined that the Reorganization is in the
best interests of each Acquiring Fund and that the interests
of the existing shareholders of each Acquiring Fund would not
be diluted as a result of the Reorganization.
6.7. Nations Fund shall have procured Directors'/Trustees'
liability insurance reasonably satisfactory to Pilot Funds.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING FUNDS
The obligations of Nations Fund to consummate the
Reorganization with respect to each Acquiring Fund shall be subject to the
performance by Pilot Funds of all the obligations to be performed by it
hereunder, with respect to each corresponding Acquired Fund, on or before the
Closing Date and, in addition thereto, the following conditions:
7.1. All representations and warranties of Pilot Funds with
respect to the Acquired Funds contained herein shall be true
and correct in all material respects as of the date hereof
and, except as they may be affected by the transactions
contemplated by this Agreement, as of the Closing Date, with
the same force and effect as if made on and as of the Closing
Date.
7.2. Pilot Funds, on behalf of each Acquired Fund, shall have
delivered to each corresponding Acquiring Fund at the
Closing(s) a certificate executed on behalf of each Acquired
Fund, by Pilot Funds' President, Secretary or Assistant
Secretary, or other authorized officer, in form and substance
satisfactory to the Acquiring Funds and dated as of the
Closing Date, to the effect that the representations and
warranties of Pilot Funds with respect to each Acquired Fund
made herein is true and correct at and as of the Closing Date,
except as they may be affected by the transactions
contemplated herein and as to such other matters as each
Acquiring Fund shall reasonably request.
7.3. Each Acquiring Fund shall have received at the Closing(s) a
favorable opinion from Goodwin, Proctor & Hoar LLP, counsel to
Pilot Funds (based upon or subject to such representations,
assumptions,
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<PAGE>
limitations or opinions of local counsel as such counsel may
deem appropriate or necessary), dated as of the Closing Date,
in a form (including the representations, assumptions,
limitations or opinions of local counsel upon which it is
based or to which it is subject) reasonably satisfactory to
such Acquiring Fund, substantially to the effect that:
7.3.a. Pilot Funds is a duly registered, open-end
investment company, and its registration with the SEC
as an investment company under the 1940 Act is in
full force and effect;
7.3.b. each Acquired Fund is a portfolio of Pilot Funds,
Pilot Funds is a business trust duly created pursuant
to its Agreement and Declaration of Trust, is validly
existing and in good standing under the laws of the
Commonwealth of Massachusetts, and the Agreement and
Declaration of Trust directs the Trustees to manage
the affairs of Pilot Funds and grants them all powers
necessary or desirable to carry out such
responsibility, including administering Pilot Funds'
business as described in the current prospectuses of
Pilot Funds;
7.3.c. this Agreement has been duly authorized, executed
and delivered by Pilot Funds on behalf of Pilot Funds
and each Acquired Fund and, assuming due
authorization, execution and delivery of this
Agreement on behalf of each Acquiring Fund, is a
valid and binding obligation of Pilot Funds,
enforceable against Pilot Funds in accordance with
its terms, subject as to enforcement, to bankruptcy,
insolvency, reorganization, arrangement, moratorium
and other similar laws of general applicability
relating to or affecting creditors' rights and to
general equity principles;
7.3.d. no consent, approval, authorization, filing or order
of any court or governmental authority of the United
States or any state is required for the consummation
of the Reorganization with respect to each Acquired
Fund, except for such consents, approvals,
authorizations and filings as have been made or
received, and except for such consents, approvals,
authorizations and filings as may be required
subsequent to the Closing Date;
7.3.e. to such counsel's knowledge, the execution and
delivery of the Agreement and the performance of its
terms by Pilot Funds,
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<PAGE>
and each Acquired Fund, do not violate or result in a
violation of the Pilot Funds' Agreement and
Declaration of Trust or By-Laws, or any judgment,
order or decree known to such counsel, of any court
or arbiter, to which Pilot Funds is a party, and, to
such counsel's knowledge, will not constitute a
material breach of the terms, conditions or
provisions of, or constitute a default under, any
contract, undertaking, indenture or other agreement
by which Pilot Funds is now bound or to which it is
now a party;
7.3.f. to such counsel's knowledge, (a) no legal or
governmental proceedings existing on or before the
date of mailing the Combined Proxy
Statement/Prospectus involving Pilot Funds or the
Acquired Funds, are required to be described in the
Combined Proxy Statement/Prospectus which are not
described as required and (b) there are no contracts
or documents relating to Pilot Funds or the Acquired
Funds, known to such counsel, of a character required
to be described in the Combined Proxy
Statement/Prospectus or to be filed as an exhibit to
the Registration Statement that are not described or
filed as required; and
7.3.g. to such counsel's knowledge, except as otherwise
disclosed in the Registration Statement, no
litigation or administrative proceeding or
investigation of or before any court or governmental
body is presently pending or threatened against Pilot
Funds or an Acquired Fund or any of their properties
or assets and neither Pilot Funds nor an Acquired
Fund is a party to or subject to the provisions of
any order, decree or judgment of any court or
governmental body that materially and adversely
affects, or would materially and adversely affect,
its business.
7.4. Each Acquired Fund also shall receive at the Closing(s) a
letter from Goodwin, Proctor & Hoar LLP, dated as of the
Closing Date, in a form reasonably satisfactory to each
Acquiring Fund, substantially to the effect that: such counsel
has participated in conferences with representatives of Pilot
Funds and its accountants concerning the Registration
Statement and has considered the matters required to be stated
therein and the statements contained therein, although such
counsel has not independently verified the accuracy,
completeness or fairness of such statements. Based upon and
subject to the foregoing, nothing has come to such counsel's
attention that leads such counsel
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<PAGE>
to believe that the Registration Statement, at the time it
became effective with the SEC pursuant to Rule 488 under the
1933 Act or as of the Closing Date, contained an untrue
statement of a material fact or omitted to state a material
fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which
they were made, not misleading (it being understood that such
counsel has not been requested to and does not make any
comment in this paragraph with respect to the financial
statements, supporting schedules, footnotes, and other
financial and statistical information contained in the
Registration Statement.
7.5. Nations Fund, on behalf of each Acquiring Fund, shall have
received from Arthur Andersen LLP a letter addressed to
Nations Fund, on behalf of each Acquiring Fund, and dated as
of the Closing Date with respect to the Acquired Funds, in
form and substance satisfactory to Nations Fund, to the effect
that:
7.5.a. they are independent accountants with respect to
Pilot Funds and each Acquired Fund within the meaning
of the 1933 Act and the applicable regulations
thereunder;
7.5.b. in their opinion, the audited financial statements
and the Per Share Data provided in accordance with
Item 3 in Form N-1A (the "Per Share Data") of the
Acquired Fund included or incorporated by reference
in the Registration Statement previously reported on
by them comply as to form in all material aspects
with the applicable accounting requirements of the
1933 Act and the published rules and regulations
thereunder;
7.5.c. on the basis of limited procedures agreed upon by
Nations Fund, on behalf of the Acquiring Funds and
Pilot Funds, on behalf of the Acquired Funds, and
described in such letter (but not an examination in
accordance with generally accepted auditing
standards), the information relating to the Acquired
Funds appearing in the Registration Statement that is
expressed in dollars or percentages of dollars (with
the exception of performance comparisons) has been
obtained from the accounting records of the Acquired
Funds or from schedules prepared by officers of Pilot
Funds having responsibility for financial and
reporting matters and such information is in
agreement with such records, schedules or
computations made therefrom.
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<PAGE>
7.6. Pilot Funds shall have delivered to the Acquiring Funds,
pursuant to paragraph 5.2(e), copies of financial statements
of each Acquired Fund as of and for the period ended August
31, 1996, audited by Arthur Andersen LLP.
7.7. With respect to each Acquired Fund, the Board of Trustees of
Pilot Funds, including a majority of "non-interested"
Trustees, has determined that the Reorganization is in the
best interests of each Acquired Fund and that the interests of
the existing investors in each Acquired Fund would not be
diluted as a result of the Reorganization.
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUNDS AND
THE ACQUIRED FUNDS
The obligations of each Acquiring Fund and of each
corresponding Acquired Fund herein are the subject to the further conditions
that on or before the Closing Date with respect to each Acquiring Fund and each
corresponding Acquired Fund:
8.1. This Agreement and the transactions contemplated herein shall
have been approved by the requisite vote of the holders of the
outstanding shares of beneficial interest in each Acquired
Fund in accordance with the provisions of Pilot Funds'
Agreement and Declaration of Trust and the requirements of the
1940 Act, and certified copies of the resolutions evidencing
such approval shall have been delivered to each corresponding
Acquiring Fund.
8.2. On the Closing Date, no action, suit or other proceeding
shall be pending before any court or governmental agency in
which it is sought to restrain or prohibit, or obtain damages
or other relief in connection with, this Agreement or any of
the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders,
approvals and permits of federal, state and local regulatory
authorities (including, without limitation, those of the SEC
and of state securities authorities) deemed necessary by
Nations Fund, on behalf of the Acquiring Funds or by Pilot
Funds, on behalf of the Acquired Funds, to permit
consummation, in all material respects, of the transactions
contemplated herein shall have been obtained, except where
failure to obtain any such consent, order or permit would not,
in the opinion of the party asserting that the condition to
closing has not been satisfied, involve a risk of a material
adverse effect on the assets or properties of any of an
Acquiring Fund or its corresponding Acquired Fund.
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<PAGE>
8.4. The Registration Statement shall have become effective under
the 1933 Act, no stop orders suspending the effectiveness
thereof shall have been issued and, to the best knowledge of
the parties hereto, no investigation or proceeding for that
purpose shall have been instituted or be pending, threatened
or contemplated under the 1933 Act.
8.5. Except to the extent prohibited by Rule 19b-1 promulgated
under the 1940 Act, each Acquired Fund shall have declared a
dividend or dividends which, together with all previous such
dividends, shall have the effect of distributing to each
Acquired Fund's shareholders substantially all of its
investment company taxable income for all taxable years ending
on or prior to the Closing Date (computed without regard to
any deduction for dividends paid) and substantially all of its
net capital gain for all taxable years ending on or prior to
the Closing Date (after reduction for any capital loss carry
forward.)
8.6. The Acquiring Funds and the Acquired Funds shall have
received from Price Waterhouse LLP a letter dated as of the
Closing Date, in form and substance satisfactory to Nations
Fund and to Pilot Funds, to the effect that on the basis of
limited procedures agreed upon by Nations Fund, on behalf of
the Acquiring Funds and Pilot Funds, on behalf of the Acquired
Funds (but not an examination in accordance with generally
accepted auditing standards): (i) the data utilized in the
calculations of the projected expense ratio appearing in the
Registration Statement and Proxy Materials agree with
underlying accounting records of the Acquiring Funds and the
Acquired Funds or to written estimates by First Data and were
found to be mathematically correct; and (ii) certain other
procedures as considered necessary by Nations Funds.
8.7. Nations Fund and the Pilot Funds shall have received an
opinion of Morrison & Foerster LLP addressed to both the
Acquiring Funds and the Acquired Funds substantially to the
effect that, for federal income tax purposes:
8.7.a. the transfer of all or substantially all of an
Acquired Fund's assets in exchange for the
corresponding Acquiring Fund Shares and the
assumption by each Acquiring Fund of the Stated
Liabilities of the corresponding Acquired Fund will
constitute a "reorganization" within the meaning of
Section 368(a) of the Code and each Acquiring Fund
and Acquired Fund will be a "party to a
reorganization" within the meaning of Section 368(b)
of the Code;
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<PAGE>
8.7.b. no gain or loss will be recognized by an Acquired
Fund upon the transfer of its assets to the
corresponding Acquiring Fund solely in exchange for
the Acquiring Fund Shares or the assumption of the
Stated Liabilities of the Acquired Fund by the
Acquiring Fund;
8.7.c. no gain or loss will be recognized by an Acquiring
Fund upon (i) its receipt of assets from the
corresponding Acquired Fund solely in exchange for
the Acquiring Fund Shares, (ii) the Acquiring Fund's
assumption of the Acquired Fund's Stated Liabilities,
and (iii) the constructive or actual distribution by
the Acquired Fund of the Acquiring Fund Shares to the
Acquired Fund shareholders in exchange for their
shares of the Acquired Fund;
8.7.d. the aggregate federal income tax basis of an
Acquired Fund's assets received by the corresponding
Acquiring Fund pursuant to the Reorganization will be
the same as the aggregate federal income tax basis of
those assets in the hands of the Acquired Fund
immediately prior to the Reorganization;
8.7.e. the holding period of an Acquired Fund's assets
received by the corresponding Acquiring Fund pursuant
to the Reorganization will include the period for
which such assets have been held by the Acquired
Fund;
8.7.f. no gain or loss will be recognized by an Acquired
Fund on the distribution to its shareholders of the
Acquiring Fund Shares to be received by the Acquired
Fund in the Reorganization;
8.7.g. no gain or loss will be recognized by the
shareholders of an Acquired Fund upon their receipt
of the Acquiring Fund Shares in exchange for such
shareholders' shares of the Acquired Fund;
8.7.h. the federal income tax basis of the Acquiring Fund
Shares received by the shareholders of the
corresponding Acquired Fund will be the same as the
federal income tax basis of the Acquired Fund shares
exchanged by such shareholders pursuant to the
Reorganization;
8.7.i the holding period for the Acquiring Fund Shares for
which shares of the corresponding Acquired Fund are
exchanged pursuant to the Reorganization will include
the period that the
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<PAGE>
Acquired Fund shares have been held by the holder,
provided that the Acquired Fund shares have been held
as a capital asset by the holder; and
8.7.j an Acquiring Fund will succeed to and take into
account the tax attributes described in Section
381(c) of the Code of the corresponding Acquired Fund
as of the Closing Date, subject to the conditions and
limitations specified in the Code.
Notwithstanding anything herein to the contrary, neither an Acquiring Fund
nor its corresponding Acquired Fund may waive the condition set forth in this
paragraph 8.7.
9. BROKERAGE FEES AND EXPENSES
9.1. Nations Fund, for itself and on behalf of the Acquiring Funds
and Pilot Funds, on behalf of itself and on behalf of the
Acquired Funds, represent and warrant that there are no
brokers or finders entitled to receive any payments in
connection with the transactions provided for herein.
9.2. Except as may be otherwise provided herein, NationsBanc
Advisors, Inc. ("NBAI") will bear the expenses incurred in
connection with entering into and carrying out the provisions
of this Agreement. Certain expenses to be incurred in
connection with the Reorganization, approximately $450,000,
will be allocated to the Acquiring Funds following the
consummation of the Reorganization (the "Allocated Amount").
In addition, NBAI has committed to maintain current (after
waiver) expense ratios for all Acquiring Funds for a period of
at least two years after the Closing, absent extraordinary
circumstances or a reduction in fund assets that impacts fee
levels (the "Expense Commitment"). Because of this Expense
Commitment, NBAI will in effect absorb a substantial portion
of the Allocated Amount (approximately $320,000) through such
Expense Commitment, NBAI also will absorb the portion of the
Allocated Amount that otherwise would be borne by current
Acquired Fund shareholders, approximately $31,000, by making a
capital contribution in this amount to the Pilot Funds prior
to the Closing.
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<PAGE>
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. This Agreement constitutes the entire agreement between the
parties and supersedes any prior or contemporaneous
understanding or arrangement with respect to the subject
matter hereof.
10.2. The representations, warranties and covenants contained in
this Agreement or in any document delivered pursuant hereto or
in connection herewith shall survive the consummation of the
transactions contemplated herein.
11. TERMINATION
11.1. This Agreement may be terminated and the transactions
contemplated hereby may be abandoned at any time prior to the
Closing:
11.1.a. by the mutual written consent of Nations Fund and
Pilot Funds;
11.1.b. by either Nations Fund or Pilot Funds by notice to
the other, without liability to the terminating party
on account of such termination (provided any such
termination shall not excuse the terminating party
from any liability arising out of a default or breach
of this Agreement by such terminating party) if such
Closing(s) shall not have occurred on or before
December 31, 1997; or
11.1.c. by either of Nations Fund or the Pilot Funds, in
writing without liability to the terminating party on
account of such termination (provided any such
termination shall not excuse the terminating party
from any liability arising out of a material default
or breach of this Agreement by such terminating
party), if (i) the other party shall fail to perform
in any material respect its agreements contained
herein required to be performed prior to the Closing
Date, (ii) the other party materially breaches or
shall have breached any of its representations,
warranties or covenants contained herein, or (iii)
any other express condition precedent to the
obligations of the terminating party has not been met
and it reasonably appears that it will not or cannot
be met.
11.2. Termination of this Agreement pursuant to paragraphs 11.1(a)
or (b) shall terminate all obligations of the parties
hereunder with respect to the Acquired Fund and Acquiring Fund
affected by such termination,
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<PAGE>
or with respect to Nations Fund and Pilot Funds, as the case
may be, and there shall be no liability for damages on the
part of Nations Fund or Pilot Funds or the Directors/Trustees
or officers of Nations Fund or Pilot Funds, to any other party
or its Directors/Trustees or officers on account of
termination pursuant to paragraphs 11.1(a) or (b); provided,
however, that notwithstanding any termination of this
Agreement pursuant to paragraph 11.1, such termination shall
not relieve either party of its respective obligations
pursuant to Section 9.2 hereof.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in
such manner as may be mutually agreed upon in writing by the authorized officers
of Nations Fund, acting on behalf of each Acquiring Fund and the authorized
officers of Pilot Funds, acting on behalf of the shareholders of each Acquired
Fund; provided, however, that following the meeting of the shareholders of the
Acquired Funds, no such amendment may have the effect of changing the provisions
for determining the number of shares of the corresponding Acquiring Funds to be
issued to the Acquired Fund Investors under this Agreement to the detriment of
such Acquired Fund Investors, or otherwise materially and adversely affecting
such Acquired Fund, without the Acquired Fund obtaining the Acquired Fund
Investors' further approval except that nothing in this paragraph 12 shall be
construed to prohibit any Acquiring Fund and the corresponding Acquired Fund
from amending this Agreement to change the Closing Date or Applicable Valuation
Date by mutual agreement.
13. NOTICES
Any notice, report, statement or demand required or permitted
by any provision of this Agreement shall be in writing and shall be given by
prepaid telegraph, telecopy, certified mail or overnight express courier
addressed to:
For Nations Fund, on behalf of itself and each
Acquiring Fund:
Richard H. Blank, Jr.
Secretary
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
I-29
<PAGE>
With copies to:
Robert M. Kurucza and
Marco E. Adelfio
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W., Suite 5500
Washington, D.C. 20006
For Pilot Funds, on behalf of itself and each Acquired
Fund:
Elizabeth Bruce
Boatmen's Trust Company
The Boatmen's Tower
1000 North Broadway, 3rd Floor
St. Louis, Missouri 63178
with copies to:
Philip H. Newman
Goodwin, Procter & Hoar LLP
53 State Street, Exchange Place
Boston, MA 02109-2881
I-30
<PAGE>
14. INDEMNIFICATION
14.1 Each Acquiring Fund will indemnify and hold harmless, out of
its assets but no other assets, the corresponding Acquired
Fund and such Fund's Trustees (for purposes of this paragraph
14.1, the "Indemnified Parties") against any and all expenses,
losses, claims, damages and liabilities at any time imposed
upon or reasonably incurred by any one or more of the
Indemnified Parties in connection with, arising out of, or
resulting from any claim, action, suit or proceeding in which
any one or more of the Indemnified Parties may be involved or
with which any one or more of the Indemnified Parties may be
threatened by reason of (i) any untrue statement or alleged
untrue statement of a material fact, provided or made by
Nations Fund or the Acquiring Fund, and relating to Nations
Fund or the Acquiring Fund contained in the Registration
Statement, or any amendment or supplement thereto, or arising
out of, or based upon, the omission or alleged omission to
state in the foregoing Registration Statement a material fact
relating to Nations Fund or the Acquiring Fund, required to be
stated therein or necessary to make the statements therein not
misleading; (ii) a breach of any representation or warranty
made in this Agreement by the Acquiring Fund; or (iii) any
other circumstance not involving (a) negligence or willful
misconduct in connection with the discharge of, or reckless
disregard of, any duties or responsibilities of the
Indemnified Party seeking indemnification hereunder; (b) a
circumstance pursuant to which such Indemnified Party would
have an obligation to provide an indemnification under Section
14.2; or (c) a breach of any of the representations or
warranties of Pilot Funds made in this Agreement. The
Acquiring Funds' obligation to indemnify an Indemnified Party
pursuant to this Section 14.1 shall include any amounts paid
by any one or more of the Indemnified Parties in a reasonable
compromise or settlement of any such claim, action, suit or
proceeding, or threatened claim, action, suit or proceeding
made with the consent of the Acquiring Fund.
Each Acquiring Fund will not indemnify or hold harmless the
Indemnified Parties, identified in this paragraph 14.1, for
any expenses, losses, claims, damages and liabilities at any
time imposed upon or reasonably incurred by any one or more of
the Indemnified Parties in connection with, arising out of, or
resulting from any claim, action, suit or proceeding in which
any one or more of the Indemnified Parties may be involved or
with which any one or more of the Indemnified Parties may be
threatened by reason of any untrue statement or alleged
I-31
<PAGE>
untrue statement of a material fact relating to Pilot Funds or
the Acquired Fund contained in the representations, warranties
and covenants of this Agreement or arising out of or based
upon the omission or alleged omission to state in the
foregoing representations, warranties and covenants, a
material fact relating to Pilot Funds or the Acquired Fund
required to be stated therein or necessary to make the
statements therein not misleading.
The Indemnified Parties will notify the Acquiring Fund in
writing within ten days after the receipt by any one or more
of the Indemnified Parties of any notice of legal process or
any suit brought against or claim made against such
Indemnified Party as to any matters covered by this paragraph
14.1. The Acquiring Fund shall be entitled to participate at
its own expense in the defense of any claim, action, suit or
proceeding covered by this paragraph 14.1, or, if it so
elects, to assume at its expense by counsel satisfactory to
the Indemnified Parties the defense of any such claim, action,
suit or proceeding, and, if the Acquiring Fund elects to
assume such defense, the Indemnified Parties shall be entitled
to participate in the defense of any such claim, action, suit
or proceeding at their own expense. The Acquiring Fund's
obligation under this paragraph 14.1 to indemnify and hold
harmless the Indemnified Parties shall constitute a guarantee
of payment so that the Acquiring Fund will pay in the first
instance any expenses, losses, claims, damages and liabilities
required to be paid by it under this paragraph 14.1 without
the necessity of the Indemnified Parties' first paying the
same.
14.2 Each Acquired Fund will indemnify and hold harmless, out of
its assets but no other assets, the corresponding Acquiring
Fund and such Fund's Directors (for purposes of this paragraph
14.2, the "Indemnified Parties") against any and all expenses,
losses, claims, damages and liabilities at any time imposed
upon or reasonably incurred by any one or more of the
Indemnified Parties in connection with, arising out of, or
resulting from any claim, action, suit or proceeding in which
any one or more of the Indemnified Parties may be involved or
with which any one or more of the Indemnified Parties may be
threatened by reason of any untrue statement or alleged untrue
statement of a material fact, provided or made by Pilot Funds
or the Acquired Fund, and relating to Pilot Funds or the
Acquired Fund, contained in the Registration Statement, or any
amendment or supplement thereto, or arising out of or based
upon the omission or alleged omission to state in the
foregoing Registration Statement a material fact relating to
Pilot Funds or the Acquired Fund, required to
I-32
<PAGE>
be stated therein or necessary to make the statements therein
not misleading, including, any amounts paid by any one or more
of the Indemnified Parties in a reasonable compromise or
settlement of any such claim, action, suit or proceeding, or
threatened claim, action, suit or proceeding made with the
consent of the Acquired Fund.
Each Acquired Fund, however, will not indemnify or hold
harmless the Indemnified Parties, identified in this paragraph
14.2, for any expenses, losses, claims, damages and
liabilities at any time imposed upon or reasonably incurred by
any one or more of the Indemnified Parties in connection with,
arising out of, or resulting from any claim, action, suit or
proceeding in which any one or more of the Indemnified Parties
may be involved or with which any one or more of the
Indemnified Parties may be threatened by reason of any untrue
statement or alleged untrue statement of a material fact
relating to Nations Fund or the Acquiring Fund contained in
the representations, warranties and covenants of this
Agreement or arising out of or based upon the omission or
alleged omission to state in the foregoing representations,
warranties and covenants, a material fact relating to Nations
Fund or the Acquiring Fund required to be stated therein or
necessary to make the statements relating to the Nations Fund
or the Acquiring Fund therein not misleading.
The Indemnified Parties will notify the Acquired Fund in
writing within ten days after the receipt by any one or more
of the Indemnified Parties of any notice of legal process or
any suit brought against or claim made against such
Indemnified Parties as to any matters covered by this
paragraph 14.2. The Acquired Fund shall be entitled to
participate at its own expense in the defense of any claim,
action, suit or proceeding covered by this paragraph 14.2, or,
if it so elects, to assume at its expense by counsel
satisfactory to the Indemnified Parties the defense of any
such claim, action, suit or proceeding, and if the Acquired
Fund elects to assume such defense, the Indemnified Parties
shall be entitled to participate in the defense of any such
claim, action, suit or proceeding at their own expense. The
Acquired Fund's obligation under this paragraph 14.2 to
indemnify and hold harmless the Indemnified Parties shall
constitute a guarantee of payment so that the Acquired Fund
will pay in the first instance any expenses, losses, claims,
damages and liabilities required to be paid by it under this
paragraph 14.2 without the necessity of the Indemnified
Parties' first paying the same.
I-33
<PAGE>
15. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF
LIABILITY
15.1. The article and paragraph headings contained herein are for
reference purposes only and shall not affect in any way the
meaning or interpretation of this Agreement. All references
herein to Articles, paragraphs, subparagraphs or Exhibits
shall be construed as referring to Articles, paragraphs or
subparagraphs hereof or Exhibits hereto, respectively.
Whenever the terms hereto, hereunder, herein or hereof are
used in this Agreement, they shall be construed as referring
to this entire Agreement, rather than to any individual
Article, paragraph, subparagraph or sentence.
15.2. This Agreement may be executed in any number of counterparts,
each of which shall be deemed an original.
15.3. This Agreement shall be governed by and construed in
accordance with the laws of the state of Maryland.
15.4. This Agreement shall bind and inure to the benefit of the
parties hereto and their respective successors and assigns,
but no assignment or transfer hereof or of any rights or
obligations hereunder shall be made by any party without the
written consent of the other parties. Nothing herein expressed
or implied is intended or shall be construed to confer upon or
give any person, firm or corporation, other than the parties
hereto and their respective successors and assigns, any rights
or remedies under or by reason of this Agreement.
15.5. It is expressly agreed that the obligations of Nations Fund
hereunder shall not be binding upon any of the Directors,
shareholders, nominees, officers, agents, or employees of
Nations Fund personally, but shall bind only the assets and
the property of the respective Acquiring Fund of Nations Fund,
as provided in its Articles of Incorporation. The execution
and delivery by such officers shall not be deemed to have been
made by any of them individually or to impose any liability on
any of them personally, but shall bind only the assets and the
property of the respective Acquiring Fund of Nations Fund as
provided in its Articles of Incorporation.
15.6. No Acquired Fund shall have any liability for the obligations
of any other Acquired Fund hereunder and no Acquiring Fund
shall have any liability for the obligation of any other
Acquiring Fund hereunder.
I-34
<PAGE>
15.7. It is expressly agreed that the obligations of Pilot Funds
hereunder shall not be binding upon any of the Trustees,
shareholders, nominees, officers, agents, or employees of
Pilot Funds personally, but shall bind only the assets and the
property of the respective Acquired Fund of Pilot Funds, as
provided in its Agreement and Declaration of Trust. The
execution and delivery by such officers shall not be deemed to
have been made by any of them individually or to impose any
liability on any of them individually or to impose any
liability on any of them personally, but shall bind only the
assets and the property of the respective Acquired Fund of
Pilot Funds as provided in its Agreement and Declaration of
Trust.
I-35
<PAGE>
IN WITNESS WHEREOF, the of the parties hereto has caused this
Agreement to be duly executed by its authorized officer, and attested by its
Secretary.
NATIONS FUND, INC., for itself and on
behalf of each Acquiring Fund
ATTEST:
_____________________________ By: _________________________
Richard H. Blank, Jr. A. Max Walker
Secretary President and Chairman of the
Board of Directors
THE PILOT FUNDS, for itself and on
behalf of each Acquired Fund
ATTEST:
____________________________ By: ________________________
George O. Martinez William J. Tomko
Secretary President
Agreed to and Acknowledged as to
Section 9.2 only:
NATIONSBANC ADVISORS, INC.
By: _________________________
Mark H. Williamson
President
I-36
<PAGE>
SCHEDULE A
ACQUIRED FUND ACQUIRING FUND
Pilot Short-Term U.S. Treasury Fund Nations Treasury Fund
Pilot Shares Primary A Shares
Investor Shares Daily Shares
Administration Shares Investor B Shares
Pilot Short-Term Diversified Assets Fund Nations Prime Fund
Pilot Shares Primary A Shares
Investor Shares Daily Shares
Administration Shares Investor B Shares
Pilot Equity Income Fund Nations Equity Income Fund
Class A Shares Investor A Shares
Class B Shares Investor N Shares
Pilot Shares Primary A Shares
Pilot International Equity Fund Nations International Growth Fund
Class A Shares Investor A Shares
Class B Shares Investor N Shares
Pilot Shares Primary A Shares
Pilot Small Capitalization Equity Fund Nations Small Company Growth Fund
Class A Shares Investor A Shares
Class B Shares Investor N Shares
Pilot Shares Primary A Shares
Pilot U.S. Government Securities Fund Nations U.S. Government Bond Fund
Class A Shares Investor A Shares
Class B Shares Investor N Shares
Pilot Shares Primary A Shares
I-37
<PAGE>
APPENDIX II
Expense Summaries of Pilot Funds
and the Corresponding Nations Funds
-----------------------------------------------
The following tables (a) compare the fees and expenses as of November 30,
1996 for the respective Pilot Funds and their corresponding Nations Funds and
(b) show the estimated fees and expenses for the corresponding Nations Funds on
a pro forma basis after giving effect to the reorganization. The 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.
NBAI has committed to maintain current (after waiver) expense ratios for all
Nations Fund share classes for a period of at least two years after the Closing,
absent extraordinary circumstances or a reduction in fund assets that impacts
fee levels.
II-1
<PAGE>
PILOT EQUITY INCOME FUND-CLASS A SHARES
NATIONS EQUITY INCOME FUND-INVESTOR A SHARES
<TABLE>
<CAPTION>
Pilot Equity Nations Equity
Income Fund Income Fund Pro Forma
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ............ 4.50% None None
Maximum Sales Load Imposed on
Reinvested Dividends .......................... None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees (after waivers or reimbursements)*.. 0.50% 0.68% 0.68%
12b-1 Fees.......................................... 0.25% 0.25% 0.25%
Other Expenses...................................... 0.23% 0.21% 0.19%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.98% 1.14% 1.12%
===== ==== ====
</TABLE>
- --------------------
* Management Fees (before waivers or reimbursements) would be: 0.75%
for Pilot Equity Income Fund.
** Total Fund Operating Expenses (before waivers or reimbursements) would
be: 1.23% for Pilot Equity Income Fund.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Equity Nations Equity
Income Fund Income Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 55 $ 12 $ 11
3 years ........................................... 75 36 36
5 years ........................................... 97 63 62
10 years .......................................... 160 139 136
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-2
<PAGE>
PILOT EQUITY INCOME FUND-CLASS B SHARES
NATIONS EQUITY INCOME FUND-INVESTOR N SHARES
<TABLE>
<CAPTION>
Pilot Equity Nations Equity
Income Fund Income Fund Pro Forma
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends ........................... None None None
Deferred Sales Load (as a percentage of redemption 4.50% None None
proceeds)* .....................................
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees (after waivers or reimbursements)**. 0.50% 0.68% 0.68%
12b-1 Fees.......................................... 1.00% 0.75% 0.75%
Other Expenses (after waivers or reimbursements) ... 0.23% 0.21% 0.19%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)***................ 1.73% 1.64% 1.62%
==== ===== ====
</TABLE>
- --------------------
* Although Investor N Shares do not impose a contingent deferred sales
charge, Pilot Shareholders will remain subject to the contingent
deferred sales charge structure applicable to their Class B shares
originally purchased.
** Management Fees (before waivers or reimbursements) would be: 0.75%
for Pilot Equity Income Fund.
*** Total Fund Operating Expenses (before waivers or reimbursements) would
be: 1.98% for Pilot Equity Income Fund.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Equity Nations Equity
Income Fund Income Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 63 $ 17 $ 16
3 years ........................................... 89 52 51
5 years ........................................... 119 89 88
10 years .......................................... 204 194 192
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-3
<PAGE>
PILOT EQUITY INCOME FUND-PILOT SHARES
NATIONS EQUITY INCOME FUND-PRIMARY A SHARES
<TABLE>
<CAPTION>
Pilot Equity Nations Equity
Income Fund Income Fund Pro Forma
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends .......................... None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers or reimbursements)*... 0.50% 0.68% 0.68%
Other Expenses ..................................... 0.23% 0.21% 0.19%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.73% 0.89% 0.87%
==== ==== ====
</TABLE>
- --------------------
* Management Fees (before waivers or reimbursements) would be: 0.75%
for Pilot Equity Income Fund.
** Total Fund Operating Expenses (before waivers or reimbursements) would
be: 0.98% for Pilot Equity Income Fund.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Equity Nations Equity
Income Fund Income Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 7 $ 9 $ 9
3 years ........................................... 23 28 28
5 years ........................................... 41 49 48
10 years .......................................... 91 110 107
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-4
<PAGE>
PILOT INTERNATIONAL EQUITY FUND-CLASS A SHARES
NATIONS INTERNATIONAL GROWTH FUND-INVESTOR A SHARES
<TABLE>
<CAPTION>
Pilot Nations
International International
Equity Fund Growth Fund Pro Forma
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ............ 4.50% None None
Maximum Sales Load Imposed on
Reinvested Dividends ........................... None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees..................................... 0.80% 0.90% 0.90%
12b-1 Fees.......................................... 0.25% 0.25% 0.25%
Other Expenses ..................................... 0.32% 0.22% 0.22%
---- ---- ----
Total Fund Operating Expenses............................ 1.37% 1.37% 1.37%
==== ===== ====
</TABLE>
- --------------------
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Nations
International International
Equity Fund Growth Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 58 $ 14 $ 14
3 years ........................................... 86 43 43
5 years ........................................... 117 75 75
10 years .......................................... 202 165 165
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-5
<PAGE>
PILOT INTERNATIONAL EQUITY FUND-CLASS B SHARES
NATIONS INTERNATIONAL GROWTH FUND-INVESTOR N SHARES
<TABLE>
<CAPTION>
Pilot Nations
International International
Equity Fund Growth Fund Pro Forma
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ........... None None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None None
Deferred Sales Load(as a percentage of redemption 4.50% None None
proceeds)* .....................................
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees .................................... 0.80% 0.90% 0.90%
12b-1 Fees.......................................... 1.00% 1.00% 1.00%
Other Expenses...................................... 0.32% 0.22% 0.22%
---- ---- ----
Total Fund Operating Expenses............................ 2.12% 2.12% 2.12%
==== ==== ====
</TABLE>
- --------------------
* Although Investor N Shares do not impose a contingent deferred sales
charge, Pilot Shareholders will remain subject to the contingent deferred
sales charge structure applicable to their Class B shares originally
purchased.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Nations
International International
Equity Fund Growth Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 67 $ 22 $ 22
3 years ........................................... 101 66 66
5 years ........................................... 139 114 114
10 years .......................................... 245 245 245
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-6
<PAGE>
PILOT INTERNATIONAL EQUITY FUND-PILOT SHARES
NATIONS INTERNATIONAL GROWTH FUND-PRIMARY A SHARES
<TABLE>
<CAPTION>
Pilot Nations
International International
Equity Fund Growth Fund Pro Forma
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases............. None None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees..................................... 0.80% 0.90% 0.90%
Other Expenses ..................................... 0.32% 0.22% 0.22%
---- ---- ----
Total Fund Operating Expenses: 1.12% 1.12% 1.12%
==== ==== ====
</TABLE>
- --------------------
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Nations
International International
Equity Fund Growth Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 11 $ 11 $ 11
3 years ........................................... 36 36 36
5 years ........................................... 62 62 62
10 years .......................................... 136 136 136
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-7
<PAGE>
PILOT SHORT-TERM DIVERSIFIED ASSETS FUND-PILOT SHARES
NATIONS PRIME FUND-PRIMARY A SHARES
<TABLE>
<CAPTION>
Pilot
Short-Term Nations Prime
Diversified Fund Pro Forma
Assets Fund
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers or reimbursements)* .. 0.15% 0.16% 0.17%
Other Expenses ..................................... 0.16% 0.14% 0.13%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.31% 0.30% 0.30%
==== ==== ====
</TABLE>
- --------------------
* Management Fees (before waivers or reimbursements) would be: 0.20%
and 0.20% for Nations Prime Fund and Pro Forma,
respectively.
** Total Fund Operating Expenses (before waivers or reimbursements) would
be: 0.34% and 0.33% for Nations Prime Fund and Pro
Forma, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Short-Term
Diversified Nations Prime
Assets Fund Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 3 $ 3 $ 3
3 years ........................................... 10 10 10
5 years ........................................... 17 17 17
10 years .......................................... 39 38 38
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-8
<PAGE>
PILOT SHORT-TERM DIVERSIFIED ASSETS FUND-INVESTOR SHARES
NATIONS PRIME FUND-DAILY SHARES
<TABLE>
<CAPTION>
Pilot
Short-Term Nations Prime
Diversified Fund Pro Forma
Assets Fund
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ........... None None None
Maximum Sales Load Imposed on
Reinvested Dividends ........................... None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees (after waivers or reimbursements)* . 0.15% 0.16% 0.17%
12b-1 Fees.......................................... 0.50% 0.50% 0.50%
Other Expenses...................................... 0.16% 0.14% 0.13%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.81% 0.80% 0.80%
==== ==== ====
</TABLE>
- --------------------
* Management Fees (before waivers or reimbursements) would be: 0.20%
and 0.20% for Nations Prime Fund and Pro Forma,
respectively.
** Total Fund Operating Expenses (before waivers or reimbursements) woul
be: 0.84% and 0.83% for Nations Prime Fund and Pro
Forma, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Short-Term
Diversified Nations Prime
Assets Fund Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 8 $ 8 $ 8
3 years ........................................... 26 26 26
5 years ........................................... 45 44 44
10 years .......................................... 100 99 99
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-9
<PAGE>
PILOT SHORT-TERM DIVERSIFIED ASSETS FUND-ADMINISTRATION SHARES
NATIONS PRIME FUND-INVESTOR B SHARES
<TABLE>
<CAPTION>
Pilot
Short-Term Nations Prime
Diversified Fund Pro Forma
Assets Fund
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends ........................... None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees (after waivers or reimbursements)*.. 0.15% 0.16% 0.17%
12b-1 Fees.......................................... 0.25% 0.25% 0.25%
Other Expenses...................................... 0.16% 0.14% 0.13%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.56% 0.55% 0.55%
==== ==== ====
</TABLE>
- --------------------
* Management Fees (before waivers or reimbursements) would be: 0.20%
and 0.20% for Nations Prime Fund and Pro Forma,
respectively.
** Total Fund Operating Expenses (before waivers or reimbursements) would
be: 0.59% and 0.58% for Nations Prime Fund and Pro
Forma, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Short-Term
Diversified Nations Prime
Assets Fund Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 6 $ 6 $ 6
3 years ........................................... 18 18 18
5 years ........................................... 31 31 31
10 years .......................................... 70 69 69
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-10
<PAGE>
PILOT SHORT-TERM U.S. TREASURY FUND-PILOT SHARES
NATIONS TREASURY FUND-PRIMARY A SHARES
<TABLE>
<CAPTION>
Pilot
Short-Term Nations
U.S. Treasury Treasury Fund Pro Forma
Fund
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends ........................... None None None
Deferred Sales Load ............................... None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers or reimbursements)*... 0.15% 0.16% 0.17%
Other Expenses ..................................... 0.18% 0.14% 0.13%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.33% 0.30% 0.30%
==== ==== ====
</TABLE>
- --------------------
* Management Fees (before waivers or reimbursements) would be: 0.20%
and 0.20% for Nations Treasury Fund and Pro Forma,
respectively.
** Total Fund Operating Expenses (before waivers or reimbursements) would
be: 0.34% and 0.33% for Nations Treasury Fund and
Pro Forma, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Short-Term
U.S. Treasury Nations
Fund Treasury Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 3 $ 3 $ 3
3 years ........................................... 11 10 10
5 years ........................................... 19 17 17
10 years .......................................... 42 38 38
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-11
<PAGE>
PILOT SHORT-TERM U.S. TREASURY FUND-INVESTOR SHARES
NATIONS TREASURY FUND-DAILY SHARES
<TABLE>
<CAPTION>
Pilot
Short-Term Nations
U.S. Treasury Treasury Fund Pro Forma
Fund
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends ........................... None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers or reimbursements)* .. 0.15% 0.16% 0.17%
12b-1 Fees.......................................... 0.50% 0.50% 0.50%
Other Expenses ..................................... 0.18% 0.14% 0.13%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.83% 0.80% 0.80%
==== ==== ====
</TABLE>
- --------------------
* Management Fees (before waivers or reimbursements) would be: 0.20%
and 0.20% for Nations Treasury Fund and Pro Forma,
respectively.
** Total Fund Operating Expenses (before waivers or reimbursements) would
be: 0.84% and 0.83% for Nations Treasury Fund and
Pro Forma, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Short-Term
U.S. Treasury Nations
Fund Treasury Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 8 $ 8 $ 8
3 years ........................................... 26 26 26
5 years ........................................... 46 44 44
10 years .......................................... 103 99 99
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-12
<PAGE>
PILOT SHORT-TERM U.S. TREASURY FUND-ADMINISTRATION SHARES
NATIONS TREASURY FUND-INVESTOR B SHARES
<TABLE>
<CAPTION>
Pilot
Short-Term Nations
U.S. Treasury Treasury Fund Pro Forma
Fund
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None None
Deferred Sales Load................................. None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers or reimbursements)* .. 0.15% 0.16% 0.17%
12b-1 Fees.......................................... 0.25% 0.25% 0.25%
Other Expenses ..................................... 0.18% 0.14% 0.13%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.58% 0.55% 0.55%
==== ==== ====
</TABLE>
- --------------------
* Management Fees (before waivers or reimbursements) would be: 0.20%
and 0.20% for Nations Treasury Fund and Pro Forma,
respectively.
** Total Fund Operating Expenses (before waivers or reimbursements) would
be: 0.59% and 0.58% for Nations Treasury Fund and
Pro Forma, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Short-Term
U.S. Treasury Nations
Fund Treasury Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 6 $ 6 $ 6
3 years ........................................... 19 18 18
5 years ........................................... 32 31 31
10 years .......................................... 73 69 69
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-13
<PAGE>
PILOT SMALL CAPITALIZATION EQUITY FUND-CLASS A SHARES
NATIONS SMALL COMPANY GROWTH FUND-INVESTOR A SHARES
<TABLE>
<CAPTION>
Pilot Small Nations Small
Capitalization Company Growth
Equity Fund Fund Pro Forma
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ............ 4.50% None None
Maximum Sales Load Imposed on
Reinvested Dividends .......................... None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees (after waivers or reimbursements)*.. 0.75% 0.75% 0.75%
12b-1 Fees.......................................... 0.25% 0.25% 0.25%
Other Expenses...................................... 0.20% 0.20% 0.20%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 1.20% 1.20% 1.20%
==== ==== ====
</TABLE>
- --------------------
* Management Fees (before waivers or reimbursements) would be: 1.00%,
1.00% and 1.00%, respectively.
** Total Fund Operating Expenses (before waivers or reimbursements) would
be: 1.56%, 1.45% and 1.45%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Small Nations Small
Capitalization Company Growth
Equity Fund Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 57 $ 12 $ 12
3 years ........................................... 81 38 38
5 years ........................................... 108 66 66
10 years .......................................... 184 145 145
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-14
<PAGE>
PILOT SMALL CAPITALIZATION EQUITY FUND-CLASS B SHARES
NATIONS SMALL COMPANY GROWTH FUND-INVESTOR N SHARES
<TABLE>
<CAPTION>
Pilot Small Nations Small
Capitalization Company Growth
Equity Fund Fund Pro Forma
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends ........................... None None None
Deferred Sales Load (as a percentage of redemption 4.50% None None
proceeds)* .....................................
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees (after waivers or reimbursements)** 0.75% 0.75% 0.75%
12b-1 Fees.......................................... 1.00% 0.75% 0.75%
Other Expenses...................................... 0.20% 0.20% 0.20%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)***................ 1.95% 1.70% 1.70%
==== ==== ====
</TABLE>
- --------------------
* Although Investor N Shares do not impose a contingent deferred sales
charge, Pilot Shareholders will remain subject to the contingent
deferred sales charge structure applicable to their Class B shares
originally purchased.
** Management Fees (before waivers or reimbursements) would be: 1.00%,
1.00% and 1.00%, respectively.
*** Total Fund Operating Expenses (before waivers or reimbursements) would
be: 2.31%, 1.95% and 1.95%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Small Nations Small
Capitalization Company Growth
Equity Fund Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 65 $ 17 $ 17
3 years ........................................... 96 54 54
5 years ........................................... 130 92 92
10 years .......................................... 227 201 201
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-15
<PAGE>
PILOT SMALL CAPITALIZATION EQUITY FUND-PILOT SHARES
NATIONS SMALL COMPANY GROWTH FUND-PRIMARY A SHARES
<TABLE>
<CAPTION>
Pilot Small Nations Small
Capitalization Company Growth
Equity Fund Fund Pro Forma
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends ........................... None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers or reimbursements)*... 0.75% 0.75% 0.75%
Other Expenses ..................................... 0.20% 0.20% 0.20%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.95% 0.95% 0.95%
==== ==== ====
</TABLE>
- --------------------
* Management Fees (before waivers or reimbursements) would be: 1.00%,
1.00% and 1.00%, respectively.
** Total Fund Operating Expenses (before waivers or reimbursements) would
be: 1.31%, 1.20% and 1.20%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot Small Nations Small
Capitalization Company Growth
Equity Fund Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 10 $ 10 $ 10
3 years ........................................... 30 30 30
5 years ........................................... 53 53 53
10 years .......................................... 117 117 117
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-16
<PAGE>
PILOT U.S. GOVERNMENT SECURITIES FUND-CLASS A SHARES
NATIONS U.S. GOVERNMENT BOND FUND-INVESTOR A SHARES
<TABLE>
<CAPTION>
Pilot U.S. Nations U.S.
Government Government
Securities Fund Bond Fund Pro Forma
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering price) ............ 4.50% None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers or reimbursements)*... 0.40% 0.40% 0.40%
12b-1 Fees.......................................... 0.25% 0.25% 0.25%
Other Expenses ..................................... 0.21% 0.20% 0.20%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.86% 0.85% 0.85%
==== ==== ====
</TABLE>
- --------------------
* Management Fees (before waivers or reimbursements) would be: 0.55%,
0.60% and 0.60%, respectively.
** Total Fund Operating Expenses (before waivers or reimbursements) would
be: 1.01%, 1.05% and 1.05%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot U.S. Nations U.S.
Government Government Bond
Securities Fund Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 53 $ 9 $ 9
3 years ........................................... 71 27 27
5 years ........................................... 91 47 47
10 years .......................................... 146 105 105
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-17
<PAGE>
PILOT U.S. GOVERNMENT SECURITIES FUND-CLASS B SHARES
NATIONS U.S. GOVERNMENT BOND FUND-INVESTOR N SHARES
<TABLE>
<CAPTION>
Pilot U.S. Nations U.S.
Government Government
Securities Fund Bond Fund Pro Forma
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends ........................... None None None
Deferred Sales Load (as a percentage of redemption 4.50% None None
proceeds)* .....................................
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers or reimbursements)**.. 0.40% 0.40% 0.40%
12b-1 Fees.......................................... 1.00% 0.65% 0.65%
Other Expenses ..................................... 0.21% 0.20% 0.20%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)***................ 1.61% 1.25% 1.25%
==== ==== ====
</TABLE>
- --------------------
* Although Investor N Shares do not impose a contingent deferred sales
charge, Pilot Shareholders will remain subject to the contingent
deferred sales charge structure applicable to their Class B shares
originally purchased.
** Management Fees (before waivers or reimbursements) would be: 0.55%,
0.60% and 0.60%, respectively.
*** Total Fund Operating Expenses (before waivers or reimbursements)
would be: 1.76%, 1.45% and 1.45%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot U.S. Nations U.S.
Government Government Bond
Securities Fund Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 61 $ 13 $ 13
3 years ........................................... 86 40 40
5 years ........................................... 113 69 69
10 years .......................................... 191 151 151
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-18
<PAGE>
PILOT U.S. GOVERNMENT SECURITIES FUND-PILOT SHARES
NATIONS U.S. GOVERNMENT BOND FUND-PRIMARY A SHARES
<TABLE>
<CAPTION>
Pilot U.S. Nations U.S.
Government Government
Securities Fund Bond Fund Pro Forma
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends .......................... None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers or reimbursements)*... 0.40% 0.40% 0.40%
Other Expenses ..................................... 0.21% 0.20% 0.20%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.61% 0.60% 0.60%
===== ===== =====
</TABLE>
- --------------------
* Management Fees (before waivers or reimbursements) would be: 0.55%,
0.60% and 0.60%, respectively.
** Total Fund Operating Expenses (before waivers or reimbursements)
would be: 0.76%, 0.80% and 0.80%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Pilot U.S. Nations U.S.
Government Government Bond
Securities Fund Fund Pro Forma
<S> <C> <C> <C>
1 year ............................................ $ 6 $ 6 $ 6
3 years ........................................... 20 19 19
5 years ........................................... 34 33 33
10 years .......................................... 76 75 75
</TABLE>
- --------------------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the fund will bear directly
or indirectly.
II-19
<PAGE>
APPENDIX III
Investment Objectives, Limitations and Certain Significant Investment
Policies of the Operating Nations Funds and the Corresponding
Pilot Funds
-----------------------------------------------
This Appendix sets forth the investment objectives, fundamental and certain
nonfundamental limitations and significant investment policies of the three
Pilot Funds that will be reorganized into the three Operating Nations Funds, as
well as the investment objectives, fundamental and nonfundamental limitations
and significant investment policies of these Operating Nations Funds. The
following is qualified in its entirety by the more detailed information included
in the prospectuses and statements of additional information for the Operating
Nations Funds and the corresponding Pilot Funds which are incorporated by
reference in this Combined Proxy Statement/Prospectus.
I. PILOT EQUITY INCOME FUND/NATIONS EQUITY INCOME FUND
A. Investment Objectives.
1. Pilot Equity Income Fund: to seek current income and, secondarily,
capital appreciation through investments primarily in common stocks of above
average financial quality and securities convertible into common stock.
2. Nations Equity Income Fund: to seek current income and growth of capital
by investing primarily in companies with above average dividend yields.
Comment:
Both Funds invest primarily in equity securities which are typically
common stocks, preferred stocks and debt securities that are convertible into
common stocks (though the emphasis for both Funds is common stocks).
The Pilot Equity Income Fund will, under normal market conditions,
invest at least 65% of its total assets in equity securities that are believed
by the investment adviser to demonstrate sound management, future growth
potential and the ability to pay dividends. The Fund will attempt to achieve a
yield that is greater than the published composite yield of the securities
comprising the Standard & Poor's 500 Composite Stock Price Index ("S&P 500
Index").
III-1
<PAGE>
Similarly, Nations Equity Income Fund will, under normal circumstances,
invest at least 65% of its assets in income-producing common stocks, including
securities convertible into or ultimately exchangeable for common stock (i.e.,
convertible bonds or convertible preferred stock), whose prospects for dividend
growth and capital appreciation are considered favorable by the investment
adviser. The securities held by the Fund generally will be listed on a national
exchange or, if not so listed, will usually have an established over-the-counter
market. The Fund's investment program seeks to produce returns in excess of the
S&P 500 Index on a comparable risk basis by generally purchasing equity
securities that: (i) are income producing; (ii) appear undervalued relative to
the S&P 500 Index on a risk adjusted basis; (iii) have favorable trends in
personal stock ownership by the underlying company's officers and/or directors.
Both Funds may invest in other types of securities in order to maintain
adequate liquidity for redemption requests, other cash management needs, or for
temporary purposes. The investments that the Funds may purchase include: Shares
of other mutual funds, repurchase agreements, commercial paper, short-term U.S.
dollar-denominated obligations of foreign banks (including domestic branches),
U.S. Government obligations, floating- and variable-rate instruments, fixed
income securities, preferred stocks, warrants, futures, options, investment
grade debt securities (i.e., securities rated in the top four investment
categories by Standard & Poor's or Moody's Investor Services, or if not rated,
are of equivalent investment quality).
II. PILOT SHORT-TERM U.S. TREASURY FUND/
NATIONS TREASURY FUND
A. Investment Objectives.
1. Pilot Short-Term U.S. Treasury Fund: to maximize current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity by investing exclusively in high quality money market instruments.
2. Nations Treasury Fund: the maximization of current income to the extent
consistent with the preservation of capital and maintenance of liquidity.
Comment: Each of these Funds is a money market fund and seeks to maintain a
net asset value of $1.00 per share, although there is no assurance that they
will be able to do so. The Pilot Short-Term U.S. Treasury Fund and Nations
Treasury Fund generally invest in securities issued or guaranteed by the U.S.
Treasury and other high quality money market instruments. Under normal
circumstances it is the intention of the Pilot Short-Term U.S. Treasury Fund to
invest at least 90% of its total assets in securities issued or guaranteed by
the U.S. Treasury and repurchase agreements relating to such securities. Under
normal market conditions, Nations Treasury Fund invests at least 65% of its
total assets in U.S. Treasury bills, notes and bonds and other instruments
issued directly by the U.S. Government and in repurchase agreements secured by
such obligations. The Funds
III-2
<PAGE>
also may invest in other U.S. Government obligations, variable- or floating-rate
obligations, certain municipal securities, U.S. dollar-denominated obligations
of domestic and foreign banks, Shares of other investment companies, forward
commitments and when-issued securities, and certain repurchase agreements.
Each Fund is a money market fund and, in accordance with Rule 2a-7 under
the 1940 Act, may invest in instruments with remaining maturities not exceeding
13 months, and the Funds' dollar-weighted average portfolio maturity must not
exceed 90 days. As provided for and defined in Rule 2a-7, each Fund may only
purchase "Eligible Securities" and only if, immediately after such purchase: the
Fund would have no more than 5% of its total assets in "First Tier Securities"
of any one issuer, excluding government securities and except as otherwise
permitted for temporary purposes and for certain guarantees and unconditional
puts; the Fund would own no more than 10% of the voting securities of any one
issuer; the Fund would have no more than 5% of its total assets in "Second Tier
Securities"; and the Fund would have no more than the greater of $1 million or
1% of its total assets in "Second Tier Securities" of any one issuer.
III. PILOT SHORT-TERM DIVERSIFIED ASSETS FUND/
NATIONS PRIME FUND
A. Investment Objectives.
1. Pilot Short-Term Diversified Assets Fund: to maximize current income to
the extent consistent with the preservation of capital and the maintenance of
liquidity by investing exclusively in high quality money market instruments.
2. Nations Prime Fund: to seek the maximization of current income to the
extent consistent with the preservation of capital and the maintenance of
liquidity.
Comment: Each of these Funds is a money market fund and seek to maintain a
net asset value of $1.00 per share, although there is no assurance that they
will be able to do so. The Pilot Short-Term Diversified Assets Fund pursues its
objective by investing in a broad range of government, bank and corporate
obligations, both rated and unrated asset backed securities, participation
interests and repurchase agreements. Nations Prime Fund invests in U.S. Treasury
bills, notes, bonds and other instruments issued directly by the U.S.
Government, other obligations issued or guaranteed as to payment of principal
and interest by the U.S. Government, its agencies or instrumentalities. The
Nations Prime Fund also may invest in high quality short-term taxable
obligations issued by state and local governments, guaranteed investment
contracts and in instruments issued by certain trusts, partnerships or other
special purpose issuers, including pass-through certificates representing
participations in, or debt instruments backed by, the securities and other
assets owned by such issuers.
III-3
<PAGE>
However, unlike Nations Prime Fund the Pilot Short-Term Diversified Assets
Fund concentrates in the banking industry by investing 25% or more of the value
of its total assets in bank obligations.
The Funds also may invest in other U.S. Government obligations, commercial
paper, certain asset-backed securities, variable- or floating-rate obligations,
certain municipal securities, U.S. dollar-denominated obligations of domestic
and foreign banks, Shares of other investment companies, forward commitments and
when-issued securities, and certain repurchase agreements.
Each Fund is a money market fund and, in accordance with Rule 2a-7 under
the 1940 Act, may invest in instruments with remaining maturities not exceeding
13 months, and the Funds' dollar-weighted average portfolio maturity must not
exceed 90 days. As provided for and defined in Rule 2a-7, each Fund may only
purchase "Eligible Securities" and only if, immediately after such purchase: the
Fund would have no more than 5% of its total assets in "First Tier Securities"
of any one issuer, excluding government securities and except as otherwise
permitted for temporary purposes and for certain guarantees and unconditional
puts; the Fund would own no more than 10% of the voting securities of any one
issuer; the Fund would have no more than 5% of its total assets in "Second Tier
Securities"; and the Fund would have no more than the greater of $1 million or
1% of its total assets in "Second Tier Securities" of any one issuer.
III-4
<PAGE>
APPENDIX IV
Shareholder Transactions and Services of the Nations Funds
and the Corresponding Pilot Funds
-----------------------------------------------
This Appendix compares the shareholder transactions and services of the
Pilot Funds and the corresponding Nations Funds. The following is qualified in
its entirety by the more detailed information included in the prospectuses for
the Pilot Funds and Nations Funds which are incorporated by reference in this
Combined Proxy Statement/Prospectus. Unless otherwise indicated, terms used
herein and not otherwise defined have the same meanings as are given to them in
such prospectuses.
I. Pilot Funds - Class A Shares (Pilot Equity Income Fund, Pilot International
Equity Fund, Pilot Small Capitalization Equity Fund and Pilot U.S. Government
Securities Fund).
Corresponding Nations Funds - Investor A Shares (Nations Equity Income
Fund, Nations International Growth Fund, Nations Small Company Growth Fund and
Nations U.S. Government Bond Fund).
A. Sales Charges and Exemptions
The front-end sales charge on purchases of Class A Shares of the Pilot
Funds* varies with the size of the purchase made according to the following
schedule:
<TABLE>
<CAPTION>
Front-End Sales Charge
As A Percentage of:
Dealer Re-Allowance
Public As A Percentage of
Offering Price Net Asset Value Offering Price
<S> <C> <C> <C>
Amount of Investment
Less than $100,000.......................... 4.50% 4.71% 4.00%
$100,000 but less than $250,000............. 3.75% 3.90% 3.25%
</TABLE>
IV-1
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C> <C>
$250,000 but less than $500,000............. 3.00% 3.09% 2.50%
$500,000 but less than $1,000,000........... 2.00% 2.04% 1.75%
$1,000,000 but less than $2,500,000......... 1.00% 1.01% 0.90%
$2,5000,000 and greater..................... None None None
</TABLE>
- --------------------
*In certain circumstances or for certain individuals or entities, the front-end
sales charge for Class A Shares of the Pilot Funds may be waived either because
of the nature of the investor or the reduced sales efforts required to attract
such investments.
There is no front-end sales charge on Investor A Shares of the Nations Funds.
B. Purchase Policies
<TABLE>
<CAPTION>
Nations Funds Pilot Funds
<S> <C> <C>
Minimum initial investment $1,000 for a regular account; $500 $1,000 for a regular account; $100
for IRA investors; $250 for for the Automatic Investment Plan;
non-working spousal IRAs; and $100 $500 for employee-regular accounts;
for investors participating in the $100 form employee-Automatic
Systematic Investment Plan; no Investment Plan; $500 for
minimum investment for 401(k) plans, tax-sheltered retirement plans;
simplified employee pension plans $1,000 for exchange transactions.
("SEPs"), salary
reduction-simplified employee
pension plans ("SAR-SEPs") or salary
reduction-IRAs ("SAR-IRAs).*
Minimum subsequent investments $100; $25 for subsequent investments $100 for a regular account; $100 for
made through the Systematic the Automatic Investment Plan; $100
Investment Plan. for employee-regular accounts; $50
form employee-Automatic Investment Plan; $50 for
tax-sheltered retirement plans; $500 for exchange
transactions.
Purchase methods Through Servicing Agents, Selling Through BISYS Fund Services in
Agents, a Nations Fund person; by mail; by wire;
</TABLE>
IV-2
<PAGE>
<TABLE>
<CAPTION>
<C> <C>
Personal Investment Planner account; by Automatic Investment
by mail; by wire; by Plan; by telephone.
telephone.
</TABLE>
*The assets of such plans must reach an asset value of $1,000 ($500 for SEPs,
SAR-SEPs and SAR-IRAs) within one year of the account open date. If the assets
of such plans do not reach the minimum asset size within one year, Nations
reserves the right to redeem the Shares held by such plans on 60 days' written
notice.
C. Redemption Procedures
<TABLE>
<CAPTION>
Nations Funds Pilot Funds
<S> <C> <C>
Through an authorized selling or Yes Yes
servicing agent
By mail Yes Yes
By telephone Yes Yes
By wire Yes Yes
Check writing feature No No
By automatic withdrawal plan Yes (net asset value of account must Yes (net asset value of account must
be $10,000) be at least $5,000)
</TABLE>
Due to the high cost of maintaining fund accounts with small balances,
Nations reserves the right to close a shareholder's account and send the
shareholder the proceeds if the balance falls below $500. Share balances also
may be redeemed at the direction of an agent pursuant to arrangements between
the agent and its customers. Nations also may redeem Shares of the Nations Funds
involuntarily or make payment for redemption in readily marketable securities or
other property under certain circumstances in accordance with the 1940 Act.
Pilot similarly may, subject to certain restrictions, redeem
involuntarily, upon thirty days' written notice, Shares of a shareholder whose
account decreases to a value below $1,000.
D. Additional Shareholder Services
<TABLE>
<CAPTION>
Nations Funds Pilot Fund
<S> <C> <C>
Systematic/automatic investment plan Yes (in any amount from $25 to Yes (minimum amount $100)
$100,000)
</TABLE>
IV-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Cross reinvestment privilege No Yes*
Reinstatement privilege Yes** Yes***
</TABLE>
* A shareholder's dividends', capital gains distributions, or both, may be
automatically reinvested in Shares of any other fund or any of the Pilot's other
investment portfolios.
** Within 120 days of a redemption, a shareholder may reinvest a portion of the
proceeds of such redemption in Investor A Shares of the same fund. The amount
reinvested is limited to an amount up to, but not exceeding, the redemption
proceeds (or to the nearest full share if fractional Shares are not purchased).
A reinstatement request must be submitted within 120 days after the redemption.
*** May be used once annually. A reinstatement request must be submitted within
90 days after the redemption. Class A Shareholders may reinvest all or a portion
of the redemption proceeds (plus the amount necessary to acquire a fractional
share to round off the purchase to the nearest full share) in Class A Shares of
any other fund without paying a sales load.
E. Share Exchanges
<TABLE>
<CAPTION>
Nations Funds Pilot Funds
<S> <C> <C>
By mail Yes Yes
By telephone Yes Yes
Minimum The Investor A Shares exchanged $1,000 for initial exchange;
must have a current value of at least $100 minimum for subsequent
$1,000 exchanges
Automatic exchange feature Yes. A shareholder may No
automatically exchange at least $25
on a monthly or quarterly basis
</TABLE>
Class A Shares of a Pilot fund may be exchanged for Class A
Shares of any other Pilot fund. Class A Shares purchased with a front-end sales
charge may be exchanged without the need to pay any additional front-end sales
charge on the Shares acquired through the exchange. If a shareholder has a
qualified trust, agency or custodian account with Boatmen's or its affiliates,
and the Shares are held in that account, the shareholder may also exchange your
current Class A Shares of a Pilot fund for Pilot Shares in the same Pilot fund.
Exchanges are subject to the minimum investment requirements imposed.
IV-4
<PAGE>
Investor A Shares of a Nations Fund may be exchanged for
Investor A Shares of any other Nations fund. Exchanges are subject to the
minimum investment requirements imposed.
II. Pilot Funds - Class B Shares (Pilot Equity Income Fund, Pilot International
Equity Fund, Pilot Small Capitalization Equity Fund and Pilot U.S. Government
Securities Fund).
Corresponding Nations Funds - Investor N Shares (Nations Equity Income
Fund, Nations International Growth Fund, Nations Small Company Growth Fund and
Nations U.S. Government Bond Fund).
A. Sales Charges and Exemptions
The contingent-deferred sales charge on purchases of Class B Shares of the
Pilot Funds* varies with the number of years elapsed since purchase according to
the following schedule:
Contingent Deferred Sales
Charge (as a percentage
of dollar amount subject to
the charge
Number of Years Elapsed Since Purchase
One................................................ 4.50%
Two................................................ 4.00%
Three.............................................. 3.50%
Four............................................... 3.00%
Five............................................... 2.50%
Six................................................ 1.75%
After Six Years.................................... None
There is no contingent-deferred sales charge on Investor N Shares of the
Nations Funds, however, after the Reorganization, former Pilot Fund shareholders
will remain subject to the contingent deferred sales charges applicable as
listed above. Former Pilot Fund Shareholders will receive credit for the period
of time that they held their Class B Shares. .
B. Purchase Policies
IV-5
<PAGE>
<TABLE>
<CAPTION>
Nations Funds Pilot Funds
<S> <C> <C>
Minimum initial investment $1,000 for a regular account; $500 $1,000 for a regular account; $100
for IRA investors; $250 for for the Automatic Investment Plan;
non-working spousal IRAs; and $100 $500 for employee-regular accounts;
for investors participating in the $100 form employee-Automatic
Systematic Investment Plan; no Investment Plan; $500 for
minimum investment for 401(k) plans, tax-sheltered retirement plans;
simplified employee pension plans $1,000 for exchange transactions.
("SEPs"), salary
reduction-simplified employee
pension plans ("SAR-SEPs") or salary
reduction-IRAs ("SAR-IRAs).*
Minimum subsequent investments $100; $25 for subsequent investments $100 for a regular account; $100 for
made through the Systematic the Automatic Investment Plan; $100
Investment Plan. for employee-regular accounts; $50
form employee-Automatic
Investment Plan;
$50 for tax-sheltered
retirement plans; $500 for
exchange transactions.
Purchase methods Through Servicing Agents, Selling Through BISYS Fund Services in
Agents; by mail; by wire; by person; by mail; by wire; by
telephone. Automatic Investment Plan; by
telephone.
</TABLE>
*The assets of such plans must reach an asset value of $1,000 ($500 for SEPs,
SAR-SEPs and SAR-IRAs) within one year of the account open date. If the assets
of such plans do not reach the minimum asset size within one year, Nations
reserves the right to redeem the Shares held by such plans on 60 days' written
notice.
C. Redemption Procedures
<TABLE>
<CAPTION>
Nations Funds Pilot Funds
<S> <C> <C>
Through an authorized selling or Yes Yes
servicing agent
By mail Yes Yes
</TABLE>
IV-6
<TABLE>
<CAPTION>
<S> <C> <C>
By telephone Yes Yes
By wire Yes Yes
Check writing feature No No
By automatic withdrawal plan Yes (net asset value of account must Yes (net asset value of account must
be $10,000 or more) be at least $5,000)
</TABLE>
Due to the high cost of maintaining Fund accounts with small balances,
Nations reserves the right to close a shareholder's account and send the
shareholder the proceeds if the balance falls below $500. Share balances also
may be redeemed at the direction of an agent pursuant to arrangements between
the agent and its customers. Nations also may redeem Shares of the Nations Funds
involuntarily or make payment for redemption in readily marketable securities or
other property under certain circumstances in accordance with the 1940 Act.
Pilot similarly may, subject to certain restrictions, redeem
involuntarily, upon thirty days' written notice, Shares of a shareholder whose
account decreases to a value below $1,000.
D. Additional Shareholder Services
<TABLE>
<CAPTION>
Nations Funds Pilot Funds
<S> <C> <C>
Systematic/automatic investment plan Yes (in any amount from $25 to Yes (minimum amount $100)
$100,000)
Cross reinvestment privilege No Yes*
Reinstatement privilege Yes** No
</TABLE>
* A shareholder's dividends, capital gains distributions, or both, may be
automatically reinvested in Shares of any other fund or any of the Pilot's other
investment portfolios.
** Within 120 days of a redemption, may reinvest a portion of the proceeds of
such redemption in Investor A Shares of the same fund at the net asset value
next determined after a reinstatement request is received by the Transfer Agent,
together with the proceeds. The amount reinvested is limited to an amount up to,
but not exceeding, the redemption proceeds (or to the nearest full share if
fractional Shares are not purchased).
E. Share Exchanges
IV-7
<PAGE>
Nations Funds Pilot Funds
By mail Yes Yes
By telephone Yes Yes
Minimum The Investor N Shares $1,000 for initial exchange;
exchanged must have $100 minimum for
a current value of at least subsequent exchanges
$1,000
Automatic exchange No No
feature
Class B Shares of a Pilot fund may be exchanged for Class B
Shares of any other Pilot fund. Class B Shares may be exchanged without the
payment of any contingent-deferred sales charge at the time the exchange is
made. In determining the holding period for calculating the contingent-deferred
sales charge payable on redemption of Class B Shares, the holding period of the
Shares originally held will be added to the holding period of the Shares
acquired through exchange. Exchanges are subject to the minimum investment
requirements imposed.
Investor N Shares of a Nations fund may be exchanged for Investor N
Shares of any other Nations fund (except Nations Short-Term Income Fund and
Nations Short-Term Municipal Income Fund), Investor A Shares of the Nations
Short-Term Income Fund or Nations Short-Term Municipal Income Fund, or Investor
C Shares of a Nations money market fund. Exchanges are subject to the minimum
investment requirements imposed.
III. Pilot Funds - Pilot Shares (Pilot Equity Income Fund, Pilot International
Equity Fund, Pilot Short-Term Diversified Assets Fund, Pilot Short-Term Treasury
Fund, Pilot Small Capitalization Equity Fund and Pilot U.S. Government
Securities Fund).
Corresponding Nations Funds - Primary A Shares (Nations Equity Income
Fund, Nations International Growth Fund, Nations Prime Fund, Nations Small
Company Growth Fund, Nations Treasury Fund and Nations U.S. Government Bond
Fund).
A. Sales Charges and Exemptions
There is no front-end or contingent-deferred sales charge on the Pilot
Shares of the Pilot Funds.
IV-8
<PAGE>
There is no front-end or contingent-deferred sales charge on the Primary A
Shares of the Nations Funds.
B. Purchase Policies
<TABLE>
<CAPTION>
Nations Funds Pilot Funds
<S> <C> <C>
Minimum initial investment $500,000 for each record holder $500,000 (except for the money
market funds, in which case there is
no minimum)
Minimum subsequent investments None None
Purchase methods Primary A Shares may be sold to Institutions may place orders
NationsBank and its affiliates through the Pilot Funds' transfer
acting on behalf of bona fide trust agent.
customers. Primary A Shares also
may be sold to employee benefit
plans, charitable foundations,
endowments and to other funds in the
Nations Fund family.
</TABLE>
C. Redemption Procedures
Nations Funds Pilot Funds
Through the transfer agent Yes Yes
By telephone Yes Yes
By wire Yes Yes
Check writing No Yes
Due to the high cost of maintaining fund accounts with small balances,
Nations reserves the right to close a shareholder's account and send the
shareholder the proceeds if the balance falls below $500. Share balances also
may be redeemed at the direction of an agent pursuant to arrangements between
the agent and its customers. Nations also may redeem Shares of the Nations Funds
involuntarily or make payment for redemption in readily marketable securities or
other property under certain circumstances in accordance with the 1940 Act.
IV-9
<PAGE>
D. Additional Shareholder Services
None.
E. Share Exchanges
Nations Funds Pilot Funds
By mail Yes Yes
By telephone Yes Yes
Minimum None None
Pilot Shares may be exchanged for Class A Shares of the same
Pilot Fund without payment of a sales charge in connection with the distribution
of assets held in a qualified trust, agency or custodial account maintained with
Boatmen's or its affiliates. Pilot Shares of a Pilot fund may also be exchanged
for Pilot Shares of any of the other investment portfolios of the Pilot Funds.
Primary A Shares of a Nations fund may be exchanged for
Primary A Shares of any other Nations fund. Exchanges are subject to the minimum
investment requirements imposed.
IV. Pilot Funds - Investor Shares (Pilot Short-Term Diversified Assets Fund,
Pilot Short-Term Treasury Fund).
Corresponding Nations Funds - Daily Shares (Nations Prime Fund, Nations
Treasury Fund).
A. Sales Charges and Exemptions
There is no front-end or contingent-deferred sales charge on the Investor
Shares of the Pilot Funds.
There is no front-end or contingent-deferred sales charge on the Daily
Shares of the Nations Funds.
B. Purchase Policies
<TABLE>
<CAPTION>
Nations Funds Pilot Funds
<S> <C> <C>
Minimum initial investment $1,000 for a regular account; $500 $1,000
for IRA investors; $250 for
non-working spousal IRAs;
</TABLE>
IV-10
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
and $100 for investors participating
in the Systematic Investment Plan; no
minimum investment for 401(k) plans,
simplified employee pension plans
("SEPs"), salary reduction-simplified
employee pension plans ("SAR-SEPs") or
salary reduction-IRAs ("SAR-IRAs).*
Minimum subsequent investments $100; $25 for subsequent investments $100 ($500 for subsequent
made through the Systematic investments made through the a
Investment Plan. systematic investment plan; $50 for
each subsequent investment made
through the plan)
Purchase methods Through banks, broker-dealers or Through a service organization,
other financial institution, which which includes Boatmen's, by
includes NationsBank by wire or by wiring funds to Pilot's Custodian.
telephone.
</TABLE>
C. Redemption Procedures
<TABLE>
<CAPTION>
Nations Funds Pilot Funds
<S> <C> <C>
Through an authorized selling or Yes Yes
servicing agent
By mail Yes Yes
By telephone Yes Yes
By wire Yes Yes
Check writing feature No No
By automatic withdrawal plan Yes (net asset value of account must Yes (net asset value of account must
be $10,000 or more) be $10,000 or more)
</TABLE>
Due to the high cost of maintaining fund accounts with small balances,
Nations reserves the right to close a shareholder's account and send the
shareholder the proceeds if the balance falls below $500. Share balances also
may be redeemed at the direction of
IV-II
<PAGE>
an agent pursuant to arrangements between the agent and its customers. Nations
also may redeem Shares of the Nations funds involuntarily or make payment for
redemption in readily marketable securities or other property under certain
circumstances in accordance with the 1940 Act.
D. Additional Shareholder Services
Nations Funds Pilot Funds
Reinstatement privilege Yes* No
* Within 120 days of a redemption, may reinvest a portion of the proceeds of
such redemption in Investor A Shares of the same fund. The amount reinvested is
limited to an amount up to, but not exceeding, the redemption proceeds (or to
the nearest full share if fractional Shares are not purchased). A reinstatement
request must be submitted within 120 days after the redemption.
E. Share Exchanges
Nations Funds Pilot Funds
By mail Yes Yes
By telephone Yes Yes
Minimum $1,000 None
Investor Shares may be exchanged for Class B Shares of any
other Pilot fund, at the net asset value plus any applicable sales charge.
However, if a sales charge was previously paid on the investment represented by
the exchanged Shares, the exchange will be made at net asset value. Investor
Shares may also be exchanged for other Investor shares of the Pilot money market
funds.
Daily Shares of a Nations Fund may be exchanged for Investor C
Shares of non-money market Nations fund or Daily Shares of another Nations money
market fund. Exchanges are subject to the minimum investment requirements
imposed.
V. Pilot Funds - Administration Shares (Pilot Short-Term Diversified Assets
Fund, Pilot Short-Term Treasury Fund).
Corresponding Nations Funds - Investor B Shares (Nations Prime Fund,
Nations Treasury Fund).
IV-12
<PAGE>
A. Sales Charges and Exemptions
There is no front-end or contingent-deferred sales charge on the
Administration Shares of the Pilot Funds.
There is no front-end or contingent-deferred sales charge on the Investor B
Shares of the Nations Funds.
B. Purchase Policies
<TABLE>
<CAPTION>
Nations Funds Pilot Funds
<S> <C> <C>
Minimum initial investment $25,000 $1,000
Minimum subsequent investments $1,000; $500 for subsequent $100 ($500 for subsequent
investments made through the investments made through the a
Systematic Investment Plan. systematic investment plan; $50 for
each subsequent investment made
through the plan)
Purchase methods Through banks, broker-dealers or Through a service organization,
other financial institution, which which includes Boatmen's, by wiring
includes NationsBank by wire or by funds to Pilot's Custodian.
telephone.
</TABLE>
C. Redemption Procedures
<TABLE>
<CAPTION>
Nations Funds Pilot Funds
<S> <C> <C>
Through an authorized selling or Yes Yes, if in accordance with the
servicing agent service organization account
By mail Yes Yes, if in accordance with the
service organization account
By telephone Yes Yes, if in accordance with the
service organization account
By wire No Yes, if in accordance with the
service organization account
Check writing feature Yes No
</TABLE>
IV-13
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
By automatic withdrawal plan Yes (net asset value of account must Yes (net asset value of account must
be $10,000 or more) be $10,000 or more)
</TABLE>
Due to the high cost of maintaining fund accounts with small balances,
Nations reserves the right to close a shareholder's account and send the
shareholder the proceeds if the balance falls below $500. Share balances also
may be redeemed at the direction of an agent pursuant to arrangements between
the agent and its customers. Nations also may redeem Shares of the Nations funds
involuntarily or make payment for redemption in readily marketable securities or
other property under certain circumstances in accordance with the 1940 Act.
D. Additional Shareholder Services
<TABLE>
<CAPTION>
Nations Funds Pilot Funds
<S> <C> <C>
Systematic investment plan Yes (In any amount from $500) Yes ($500 initial investment and $50
for any subsequent investment)
</TABLE>
E. Share Exchanges
Nations Funds Pilot Funds
By mail Yes Yes
By telephone Yes Yes
Minimum None None
Administration Shares may be exchanged for Class A Shares of
any other Pilot fund, at the net asset value plus any applicable sales charge.
However, if a sales charge was previously paid on the investment represented by
the exchanged Shares, the exchange will be made at net asset value.
Administration Shares can be exchanged for other Administration Shares of the
Pilot money market funds.
Investor B Shares of a Nations Fund may be exchanged for
Investor B Shares of money market Nations fund. Exchanges are subject to the
minimum investment requirements imposed.
VI. Dividends and Distributions
IV-14
<PAGE>
All Nations Funds and Pilot Funds distribute their net capital
gains to shareholders at least annually. The following table shows the funds'
policies concerning the declaration and payment of dividends from net investment
income.
A. Dividends Declared Daily/Paid Monthly
Pilot Fund Nations Fund
Pilot Short-Term Diversified Assets Fund Nations Prime Fund
Pilot U.S. Government Securities Fund Nations U.S. Government Bond Fund
Pilot Short-Term U.S. Treasury Fund Nations Treasury Fund
B. Dividends Declared Monthly/Paid Monthly
Pilot Fund Nations Fund
Pilot Equity Income Fund None
Pilot Small Capitalization Equity Fund
C. Dividends Declared Quarterly/Paid Quarterly
Pilot Fund Nations Fund
None Nations Equity Income Fund
Nations Small Company Growth Fund
Nations International Growth Fund
D. Dividends Declared and Paid At Least Annually
Pilot Fund Nations Fund
Pilot International Equity Fund None
IV-15
<PAGE>
Statement of Additional Information
Dated March 22, 1997
The Pilot Funds
3435 Stelzer Road
Columbus, Ohio 43219
(800) 71-PILOT
Nations Fund, Inc.
One NationsBank Plaza
Charlotte, NC 28255
(800) 626-2275
(April 21, 1997 Special Meeting of Shareholders of The Pilot
Funds)
This Statement of Additional Information is not a prospectus
but should be read in conjunction with the Combined
Prospectus/Proxy Statement dated the date hereof, for the Special
Meeting of Shareholders of Pilot to be held April 21, 1997.
Copies of the Combined Prospectus/Proxy Statement may be obtained
at no charge by writing or calling Pilot or Nations at the
addresses or telephone numbers set forth above. Unless otherwise
indicated, capitalized terms used herein and not otherwise
defined have the same meanings as are given to them in the
Combined Prospectus/Proxy Statement.
Incorporation of Documents by Reference in Statement of
Additional Information
Further information about the Investor A, Investor N and
Primary A Shares of the Nations Equity Income Fund is contained
in and incorporated herein by reference to the statement of
additional information for Investor A, Investor N and Primary A
Shares of the Nations Equity Income Fund dated July 31, 1996.
Further information about the Primary B, Daily and Primary A
Shares of the Nations Prime Fund and Nations Treasury Fund is
contained in and incorporated herein by reference to the
statement of additional information for the Primary B, Daily and
Primary A Shares of the Nations Prime Fund and Nations Treasury
Fund dated July 31, 1996.
Information contained in said statements of additional
information under is generally applicable with regard to the New
Nations Funds.
The audited financial statements and related independent
auditors' report for the Nations Equity Income Fund, Nations
Prime Fund and Nations Treasury Fund contained in the Annual
Report for the year ended March 31, 1996 are hereby incorporated
by reference. No other parts of the Annual Report are
incorporated by reference.
Further information about the Class A, Class B and Pilot
Shares of the Pilot Equity Income Fund, Pilot International
Equity Fund, Pilot Small Capitalization Equity Fund and Pilot
1
<PAGE>
U.S. Government Securities Fund is contained in and incorporated
hererin by reference to the statement of additional information
for the Class A, Class B and Pilot Shares of the Pilot Equity
Income Fund, Pilot International Equity Fund, Pilot Small
Capitalization Equity Fund and Pilot U.S. Government Securities
Fund dated January 2, 1997.
Further information about the Investor, Administration and
Pilot Shares of the Pilot Short-Term U.S. Treasury Fund and Pilot
Short-Term Diversified Assets Fund is contained in and
incorporated hererin by reference to the statement of additional
information for the Investor, Administration and Pilot Shares
dated January 2, 1997.
The audited financial statements and related independent
auditors' report for the Pilot Equity Income Fund, Pilot
International Equity Fund, Pilot Small Capitalization Equity
Fund, Pilot U.S. Government Securities Fund, Pilot Short-Term
U.S. Treasury Fund and Pilot Short-Term Diversified Assets Fund
contained in the Annual Report for the year ended August 31, 1996
are hereby incorporated by reference. No other parts of the
Annual Report are incorporated by reference.
2
<PAGE>
Table of Contents
General
Information...................................................4
Pro Forma Financial Information...............................5
3
<PAGE>
General Information
The proposed Reorganization contemplates: (i) the transfer of
all of the assets and stated liabilities of each Pilot Fund to a
corresponding Nations Fund in exchange for Shares of comparable
classes of the corresponding Nations Fund; and (ii) the
distribution of Nations Fund Shares to the shareholders of the
Pilot Funds in liquidation of the Pilot Funds. The
Reorganization is subject to a number of conditions with respect
to each Pilot Fund, including shareholder approval. Following
the Reorganization, Pilot will wind up its affairs and deregister
as an investment company under the 1940 Act.
As a result of the proposed Reorganization, a Pilot Fund
shareholder will become a shareholder of its corresponding
Nations Fund and will hold, immediately after the Closing(s),
Shares of the comparable class of the corresponding Nations Fund
having a total dollar value equal to the total dollar value of
the Shares of the Pilot Fund that the shareholder held
immediately before the Closing(s).
4
<PAGE>
Introductory Note to Pro Forma Financial Information
The following unaudited pro forma information gives effect
to the proposed transfer of the assets and stated liabilities of
the Pilot Funds to the Nations Funds listed under Table 1 of this
Statement of Additional Information, accounted for as if each
transfer had occurred as of December 31, 1996 and as if the
Nations Funds had operated for the periods then ended. In
addition, each pro forma combining statement has been prepared
based upon the structure of the proposed fee and expense
structure of the applicable surviving Nations Fund.
The pro forma financial information should be read in
conjunction with the historical financial statements and notes
thereto of the Pilot Funds and Nations Funds included or
incorporated by reference in this Statement of Additional
Information. Each combination of the above Pilot Funds and
Nations Funds will be accounted for as a tax-free reorganization.
5
<PAGE>
NATIONS FUND
Nations Equity Income Fund
Pilot Equity Income Fund
Combined Portfolio of Investments
September 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Security Nations
Equity Pilot Descriptions Equity Pilot
Income Equity Income Income Equity Income
Fund Fund Combined Fund Fund Combined
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS - 74.3%
Aerospace and Defense - 0.3%
25,100 0 25,100 Raytheon Company $1,396,187 $ 0 $1,396,187
------------------------------------
Apparel and Textiles - 0.5%
46,600 0 46,600 V.F. Corporation 2,801,825 0 2,801,825
------------------------------------
Automobile and Truck Manufacturers - 0.7%
0 115,271 115,271 Ford Motor Company 0 3,602,219 3,602,219
------------------------------------
Automobile Parts Manufacturers - 2.7%
150,600 0 150,600 Cooper Tire & Rubber Company 3,256,725 0 3,256,725
0 55,000 55,000 Eaton Corporation 0 3,320,625 3,320,625
77,100 0 77,100 Echlin Inc. 2,419,013 0 2,419,013
111,900 0 111,900 Genuine Parts Company 4,895,625 0 4,895,625
------------------------------------
10,571,363 3,320,625 13,891,988
------------------------------------
Banks - 5.3%
0 100,000 100,000 Banc One Corporation 0 4,100,000 4,100,000
0 46,000 46,000 BankAmerica Corporation 0 3,777,750 3,777,750
0 43,288 43,288 Bankers Trust N.Y. Corporation 0 3,403,519 3,403,519
30,500 0 30,500 Chase Manhattan Corporation 2,443,813 0 2,443,813
56,600 0 56,600 CoreStates Financial Corporation 2,447,950 0 2,447,950
117,100 0 117,100 Fleet Financial Group Inc. 5,210,950 0 5,210,950
32,400 0 32,400 Mellon Bank Corporation 1,919,700 0 1,919,700
0 41,000 41,000 Morgan (J.P.) & Company, Inc. 0 3,643,875 3,643,875
------------------------------------
12,022,413 14,925,144 26,947,557
------------------------------------
Beverages - 0.8%
144,000 0 144,000 PepsiCo Inc. 4,068,000 0 4,068,000
------------------------------------
Chemicals - Basic - 1.8%
0 48,000 48,000 Dow Chemical Company 0 3,852,000 3,852,000
40,500 0 40,500 Imperial Chemical Industries, Plc, ADR 2,136,375 0 2,136,375
105,400 0 105,400 Lubrizol Corporation 3,030,250 0 3,030,250
------------------------------------
5,166,625 3,852,000 9,018,625
------------------------------------
Communication Equipment - 0.3%
34,900 0 34,900 Nokia Corporation, Class A, ADR 1,544,325 0 1,544,325
------------------------------------
Computer Related - 0.6%
23,700 0 23,700 International Business Machines Corporation 2,950,650 0 2,950,650
------------------------------------
Computer Software - 1.0%
206,300 0 206,300 Autodesk, Inc. 5,338,013 0 5,338,013
------------------------------------
Containers - 0.6%
63,600 0 63,600 Crown Cork & Seal Inc. 2,933,550 0 2,933,550
------------------------------------
Diversified - 1.9%
359,000 0 359,000 Hanson, Plc, ADR 4,442,625 0 4,442,625
2,980 0 2,980 Imation Corporation + 73,010 0 73,010
29,800 0 29,800 Minnesota Mining & Manufacturing Company 2,082,275 0 2,082,275
60,000 0 60,000 Tenneco Inc. 3,007,500 0 3,007,500
------------------------------------
9,605,410 0 9,605,410
------------------------------------
</TABLE>
<PAGE>
NATIONS FUND
Nations Equity Income Fund
Pilot Equity Income Fund
Combined Portfolio of Investments
September 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Security Nations
Equity Pilot Descriptions Equity Pilot
Income Equity Income Income Equity Income
Fund Fund Combined Fund Fund Combined
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Drugs - 2.5%
0 70,294 70,294 American Home Products Corporation $ 0 $4,481,243 $4,481,243
17,755 35,359 53,114 Bristol-Myers Squibb Company 1,711,138 3,407,724 5,118,862
24,900 0 24,900 Glaxo Wellcome Plc, ADR 775,012 0 775,012
0 35,288 35,288 Merck & Company Inc. 0 2,483,393 2,483,393
------------------------------------
2,486,150 10,372,360 12,858,510
------------------------------------
Electric Power - 7.6%
131,400 0 131,400 Baltimore Gas & Electric Company 3,432,825 0 3,432,825
149,700 0 149,700 Central & South West Corporation 3,892,200 0 3,892,200
117,100 0 117,100 CINergy Corporation 3,615,462 0 3,615,462
0 115,000 115,000 Consolidated Edison Company New York Inc. 0 3,191,250 3,191,250
95,900 0 95,900 New York State Electric & Gas Company 2,109,800 0 2,109,800
0 110,000 110,000 Oklahoma Gas & Electric Company 0 4,400,000 4,400,000
108,300 179,660 287,960 PacifiCorp 2,233,688 3,705,487 5,939,175
239,600 0 239,600 PECO Energy Company 5,690,500 0 5,690,500
0 141,154 141,154 Unicom Corporation 0 3,546,494 3,546,494
0 100,000 100,000 Western Resources, Inc. 0 2,912,500 2,912,500
------------------------------------
20,974,475 17,755,731 38,730,206
------------------------------------
Electronics - 2.6%
121,900 0 121,900 AMP Inc. 4,723,625 0 4,723,625
79,006 0 79,006 Avnet, Inc. 3,831,791 0 3,831,791
58,400 0 58,400 Harris Corporation 3,803,300 0 3,803,300
15,400 0 15,400 Motorola, Inc. 795,025 0 795,025
------------------------------------
13,153,741 0 13,153,741
------------------------------------
Environmental - 0.4%
80,300 0 80,300 Browning-Ferris Industries Inc. 2,007,500 0 2,007,500
------------------------------------
Financial Services - 1.2%
15,800 0 15,800 American General Corporation 596,450 0 596,450
29,000 30,000 59,000 Marsh & McLennan Companies Inc. 2,816,625 2,913,750 5,730,375
------------------------------------
3,413,075 2,913,750 6,326,825
------------------------------------
Food Producers - 6.4%
80,300 0 80,300 Chiquita Brands International Inc. 983,675 0 983,675
0 98,763 98,763 ConAgra, Inc. 0 4,864,078 4,864,078
27,300 0 27,300 CPC International Inc. 2,044,088 0 2,044,088
131,000 0 131,000 Dean Foods Company Inc. 3,700,750 0 3,700,750
37,100 60,000 97,100 General Mills Inc. 2,239,912 3,622,500 5,862,412
247,000 0 247,000 McCormick & Company 5,773,625 0 5,773,625
130,700 0 130,700 Nabisco Holdings Corporation, Class A 4,133,387 0 4,133,387
73,900 0 73,900 Quaker Oats Company 2,706,588 0 2,706,588
22,400 0 22,400 Ralston-Purina Group 1,534,400 0 1,534,400
5,700 0 5,700 Unilever NV, ADR 898,462 0 898,462
------------------------------------
24,014,887 8,486,578 32,501,465
------------------------------------
Food Retailers - 1.1%
199,800 0 199,800 Supervalu Inc. 5,494,500 0 5,494,500
------------------------------------
Household Products - 0.5%
0 100,000 100,000 Rubbermaid, Inc. 0 2,450,000 2,450,000
------------------------------------
Insurance - 3.8%
38,000 0 38,000 General Re Corporation 5,386,500 0 5,386,500
87,200 0 87,200 ITT Hartford Group Inc. 5,144,800 0 5,144,800
68,300 0 68,300 Lincoln National Corporation Ltd. 2,996,663 0 2,996,663
108,000 0 108,000 St. Paul Companies Inc. 5,994,000 0 5,994,000
------------------------------------
19,521,963 0 19,521,963
------------------------------------
</TABLE>
<PAGE>
NATIONS FUND
Nations Equity Income Fund
Pilot Equity Income Fund
Combined Portfolio of Investments
September 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Security Nations
Equity Pilot Descriptions Equity Pilot
Income Equity Income Income Equity Income
Fund Fund Combined Fund Fund Combined
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Machinery and Equipment - 3.0%
93,000 0 93,000 Briggs & Stratton Corporation $4,126,875 $ 0 $4,126,875
21,300 0 21,300 Dover Corporation 1,017,075 0 1,017,075
35,100 0 35,100 Foster Wheeler Corporation 1,535,625 0 1,535,625
239,000 0 239,000 Keystone International, Inc. 4,690,375 0 4,690,375
116,100 0 116,100 Trinity Industries Inc. 3,874,837 0 3,874,837
------------------------------------
15,244,787 0 15,244,787
------------------------------------
Medical Products and Supplies - 2.2%
114,400 0 114,400 Bausch & Lomb Inc. 4,204,200 0 4,204,200
44,400 0 44,400 Becton, Dickinson & Company 1,964,700 0 1,964,700
118,000 0 118,000 Mallinckrodt Group Inc. 4,911,750 0 4,911,750
------------------------------------
11,080,650 0 11,080,650
------------------------------------
Metals and Mining - 1.0%
186,200 0 186,200 Cyprus Amax Minerals Company 4,003,300 0 4,003,300
16,000 0 16,000 Phelps Dodge Corporation 1,026,000 0 1,026,000
------------------------------------
5,029,300 0 5,029,300
------------------------------------
Office Equipment - 0.5%
53,400 0 53,400 Pitney Bowes Inc. 2,810,175 0 2,810,175
------------------------------------
Oil - Domestic - 3.7%
0 33,524 33,524 Amoco Corporation 0 2,363,442 2,363,442
88,600 0 88,600 Ashland Oil, Inc. 3,521,850 0 3,521,850
0 19,409 19,409 Atlantic Richfield Company 0 2,474,648 2,474,648
137,100 0 137,100 Occidental Petroleum Corporation 3,204,712 0 3,204,712
226,875 0 226,875 Sun Company, Inc. 5,218,125 0 5,218,125
86,200 0 86,200 USX-Marathon Group 1,864,075 0 1,864,075
------------------------------------
13,808,762 4,838,090 18,646,852
------------------------------------
Oil - International - 3.7%
46,380 27,645 74,025 Exxon Corporation 3,861,135 2,301,446 6,162,581
31,300 0 31,300 Mobil Corporation 3,622,975 0 3,622,975
16,300 20,000 36,300 Royal Dutch Petroleum Company, ADR 2,544,837 3,122,500 5,667,337
0 37,645 37,645 Texaco, Inc. 0 3,463,340 3,463,340
------------------------------------
10,028,947 8,887,286 18,916,233
------------------------------------
Oil Services - 0.8%
141,700 0 141,700 Dresser Industries, Inc. 4,215,575 0 4,215,575
------------------------------------
Paper and Forest Products - 2.6%
0 50,000 50,000 Kimberly-Clark Corporation 0 4,406,250 4,406,250
90,780 0 90,780 Potlatch Corporation 3,517,725 0 3,517,725
0 60,000 60,000 Temple-Inland Inc. 0 3,165,000 3,165,000
0 50,000 50,000 Union Camp Corporation 0 2,443,750 2,443,750
------------------------------------
3,517,725 10,015,000 13,532,725
------------------------------------
Printing and Publishing - 1.2%
49,400 0 49,400 Dun & Bradstreet Corporation 2,945,475 0 2,945,475
0 80,000 80,000 Readers Digest Association Inc., Class A 0 3,270,000 3,270,000
------------------------------------
2,945,475 3,270,000 6,215,475
------------------------------------
Professional Services - 0.4%
73,000 0 73,000 Block (H&R) Inc. 2,171,750 0 2,171,750
------------------------------------
Retail - General - 1.6%
89,200 0 89,200 May Department Stores Company 4,337,350 0 4,337,350
0 70,000 70,000 Penney, (J.C.) Companies Inc. 0 3,788,750 3,788,750
------------------------------------
4,337,350 3,788,750 8,126,100
------------------------------------
Tobacco - 1.4%
0 49,404 49,404 Philip Morris Companies Inc. 0 4,434,009 4,434,009
0 90,000 90,000 UST Inc. 0 2,666,250 2,666,250
------------------------------------
0 7,100,259 7,100,259
------------------------------------
</TABLE>
<PAGE>
NATIONS FUND
Nations Equity Income Fund
Pilot Equity Income Fund
Combined Portfolio of Investments
September 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Security Nations
Equity Pilot Descriptions Equity Pilot
Income Equity Income Income Equity Income
Fund Fund Combined Fund Fund Combined
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Utilities - Natural Gas - 2.2%
110,400 0 110,400 Brooklyn Union Gas Company $ 3,077,400 $ 0 $ 3,077,400
21,500 0 21,500 Consolidated Natural Gas Company 1,152,938 0 1,152,938
92,300 0 92,300 Equitable Resources Inc. 2,630,550 0 2,630,550
0 123,800 123,800 NICOR, Inc. 0 4,178,250 4,178,250
------------------------------------------
6,860,888 4,178,250 11,039,138
------------------------------------------
Utilities - Telephone - 7.4%
61,600 0 61,600 Ameritech Corporation 3,241,700 0 3,241,700
42,300 0 42,300 AT&T Corporation 2,210,175 0 2,210,175
35,300 0 35,300 Bell Atlantic Corporation 2,113,587 0 2,113,587
76,000 0 76,000 BellSouth Corporation 2,812,000 0 2,812,000
16,700 0 16,700 British Telecommunications, Plc, ADR 933,112 0 933,112
135,300 100,000 235,300 Frontier Corporation 3,602,363 2,662,500 6,264,863
112,700 73,519 186,219 GTE Corporation 4,338,950 2,830,481 7,169,431
49,000 24,702 73,702 NYNEX Corporation 2,131,500 1,074,537 3,206,037
103,000 0 103,000 SBC Communications Inc. 4,956,875 0 4,956,875
43,100 0 43,100 Sprint Corporation 1,675,512 0 1,675,512
50,700 63,000 113,700 U.S. West Inc. 1,508,325 1,874,250 3,382,575
----------------------------------------
29,524,099 8,441,768 37,965,867
----------------------------------------
---------------------------------------------------------------------------------
TOTAL COMMON STOCKS 261,040,135 118,197,810 379,237,945
---------------------------------------------------------------------------------
CONVERTIBLE PREFERRED STOCKS - 3.3%
Food Producers - 0.9%
90,700 0 90,700 Chiquita Brands International Inc,
$3.750, Conv., Series B 4,716,400 0 4,716,400
-----------------------------------------
Insurance - 0.7%
0 50,590 50,590 Aetna Services, Inc., 6.250%, Conv. 0 3,686,746 3,686,746
-----------------------------------------
Oil - Domestic - 0.8%
0 61,288 61,288 Ashand, Inc., $3.125, Conv. 0 3,853,483 3,853,483
-----------------------------------------
Paper and Forest Products - 0.7%
0 70,000 70,000 International Paper, 5.250%, Conv. ++ 0 3,298,750 3,298,750
-----------------------------------------
Technology - 0.2%
0 1,000,000 1,000,000 Analog Devices, 3.500%, Conv. 0 1,200,000 1,200,000
-----------------------------------------
---------------------------------------------------------------------------------
TOTAL CONVERTIBLE PREFERRED STOCKS 4,716,400 12,038,979 16,755,379
---------------------------------------------------------------------------------
Principal Amount CONVERTIBLE BONDS AND NOTES - 7.4%
Airlines - 0.2%
$1,100,000 $ 0 $ 1,100,000 Airborne Freight, Conv. Note,
6.750% 08/15/01 1,072,500 0 1,072,500
-----------------------------------------
Electrical - 0.8%
0 3,922,000 3,922,000 Cooper Industries, Inc., Conv Sub. Deb.,
7.050% due 01/01/15 0 4,284,785 4,284,785
-----------------------------------------
Health Care - 0.3%
1,933,000 0 1,933,000 Ivax Corporation, Conv. Note,
6.500% 11/15/11 1,730,035 0 1,730,035
-----------------------------------------
</TABLE>
<PAGE>
NATIONS FUND
Nations Equity Income Fund
Pilot Equity Income Fund
Combined Portfolio of Investments
September 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
Nations Security Nations
Equity Pilot Descriptions Equity Pilot
Income Equity Income Income Equity Income
Fund Fund Combined Fund Fund Combined
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Housing and Furnishings - 0.2%
$ 0 $ 1,000,000 $ 1,000,000 Masco Corporation, Conv. Deb.,
5.250% due 02/15/12 $ 0 $ 950,000 $ 950,000
------------------------------------------
Oil - Domestic - 2.5%
0 2,000,000 2,000,000 Pennzoil Company, Conv. Note,
4.750% due 10/01/03 0 2,190,000 2,190,000
10,975,000 0 10,975,000 USX-Marathon Group, Conv. Sub. Deb.,
7.000% 06/15/17 10,398,813 0 10,398,813
------------------------------------------
10,398,813 2,190,000 12,588,813
------------------------------------------
Retail - General - 0.3%
1,341,000 0 1,341,000 Costco Wholesale Corporation, Conv. Note,
5.750% 05/15/02 1,243,778 0 1,243,778
------------------------------------------
Other - 3.1%
6,175,000 0 6,175,000 General Signal Corporation, Conv. Sub. Note,
5.750% 06/01/02 6,985,469 0 6,985,469
5,300,000 0 5,300,000 Integrated Health Services, Conv. Sub. Deb.,
5.750% 01/01/01 5,134,375 0 5,134,375
3,500,000 0 3,500,000 Unisys Corporation, Conv. Sub. Note,
8.250% 03/15/06 3,885,000 0 3,885,000
------------------------------------------
16,004,844 0 16,004,844
--------------------------------------------------------------------------------
TOTAL CONVERTIBLE BONDS AND NOTES 30,449,970 7,424,785 37,874,755
--------------------------------------------------------------------------------
U.S. TREASURY SECURITIES - 10.4%
U.S. Treasury Bond - 9.4%
51,550,000 0 51,550,000 5.625% 02/15/06 47,852,834 0 47,852,834
------------------------------------------
U.S. Treasury Note - 1.0%
4,950,000 0 4,950,000 5.625% 02/28/01 4,796,848 0 4,796,848
------------------------------------------
--------------------------------------------------------------------------------
TOTAL U.S. TREASURY SECURITIES 52,649,682 0 52,649,682
--------------------------------------------------------------------------------
Repurchase Agreements - 4.6%
0 3,278,950 3,278,950 Lehman Brothers
5.200% 10/01/96 0 3,278,950 3,278,950
20,290,000 0 20,290,000 Smith Barney
5.680% 10/01/96 20,290,000 0 20,290,000
------------------------------------------
20,290,000 3,278,950 23,568,950
------------------------------------------
--------------------------------------------------------------------------------
TOTAL INVESTMENTS (Cost $463,372,877) $369,146,187 $140,940,524 $510,086,711
--------------------------------------------------------------------------------
</TABLE>
+ Non-income producing security
++ Security transaction exempt from registration under Rule 144A of the
Securities Act of 1933. These securities may be resold in transactions
exempt from registration to qualified institutional purchasers.
<PAGE>
NATIONS EQUITY INCOME FUND
PILOT EQUITY INCOME FUND
Pro Forma Combining Statement of Assets and Liabilities
September 30, 1996
<TABLE>
<CAPTION>
Nations Equity Pilot Equity Adjustments Pro Forma
Income Fund Income Fund to Proforma Combined (Note 1)
<S> <C> <C> <C> <C>
ASSETS:
Investments at Value (cost $345,058,288,
$118,314,589 and $463,372,877) $369,146,187 $140,940,524 - $510,086,711
Cash 8,996 - - 8,996
Income Receivable 1,673,884 580,686 - 2,254,570
Receivable for Fund Shares Sold 1,611,329 - - 1,611,329
Receivable for Investments Sold 5,111,044 - - 5,111,044
Receivable Due From Advisor - - 61,915 (a) 61,915
Prepaid and Other Assets 4,629 - - 4,629
Unamortized Organization Costs - 61,915 (61,915)(a) 0
Total Assets 377,556,069 141,583,125 0 519,139,194
LIABILITIES
Income Distribution Payable - 455,697 - 455,697
Payable for Investments Purchased 2,730,864 - - 2,730,864
Payable for Fund Shares Redeemed 1,980,770 - - 1,980,770
Accrued Expenses 363,369 152,296 - 515,665
Total Liabilities 5,075,003 607,993 0 5,682,996
Net Assets Applicable to Shares Outstanding $372,481,066 $140,975,131 $0 $513,456,197
Net Assets by Class:
Primary A $216,872,242 $135,210,484 $352,082,726
Primary B 1,797,515 n/a 1,797,515
Investor A 43,671,195 2,134,781 45,805,976
Investor C 4,857,575 n/a 4,857,575
Investor N $105,282,539 $3,629,866 $108,912,405
Shares Outstanding by Class:
Primary A $15,760,721 $10,560,660 ($734,531) $25,586,850
Primary B 130,626 n/a n/a 130,626
Investor A 3,181,328 165,671 (10,158) 3,336,841
Investor C 351,704 n/a n/a 351,704
Investor N 7,674,437 281,958 (17,363) 7,939,031
Primary A Shares:
Net Asset Value per Share $13.76 $12.80 $13.76
Primary B Shares:
Net Asset Value per Share $13.76 n/a $13.76
Investor A Shares:
Net Asset Value per Share $13.73 $12.89 $13.73
Investor C Shares:
Net Asset Value per Share $13.81 n/a $13.81
Investor N Shares:
Net Asset Value per Share: $13.72 $12.87 $13.72
</TABLE>
See Notes to Proforma Financial Statements
(a) Unamortized Organization Costs of the acquired fund will be borne by the
Advisor.
<PAGE>
NATIONS EQUITY INCOME FUND
PILOT EQUITY INCOME FUND
Pro Forma Statement of Operations (Unaudited)
For the Twelve Month Period Ending September 30, 1996
<TABLE>
<CAPTION>
Nations Equity Pilot Equity Adjustments Pro Forma
Income Fund Income Fund to Proforma Combined (Note 1)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends and Interest $15,702,314 $5,491,980 $21,194,294
Total Investment Income 15,702,314 5,491,980 21,194,294
EXPENSES:
Investment Advisory 2,747,027 908,151 (182,469)(a) 3,472,709
Administration 407,698 137,202 (16,115)(a) 528,785
Portfolio Accounting Fee - 8,006 (8,006)(a) 0
Transfer Agent 232,358 35,540 - 267,898
Custodian 63,451 44,676 (11,169)(b) 96,958
Legal and Audit Fees 62,443 26,596 (13,298)(b) 75,741
Trustees' Fees 10,268 5,898 (5,898)(b) 10,268
Amortization of Organization Costs 9,618 19,914 (19,914)(c) 9,618
Other Expenses 80,118 45,877 (11,469)(b) 114,526
Subtotal 3,612,981 1,231,860 (268,338) 4,576,503
Shareholder Servicing and Distribution Fees
Primary B 1,586 - N/A 1,586
Investor A 103,393 2,435 N/A 105,828
Investor C 28,406 - N/A 28,406
Investor N 771,453 19,188 (4,797)(a) 785,844
Fees Waived and/or Reimbursed by
Investment Advisor - (331,140) 331,140 (d) 0
Total Expenses 4,517,819 922,343 58,005 5,498,167
NET INVESTMENT INCOME 11,184,495 4,569,637 (58,005) 15,696,127
Net Realized and Unrealized Gain/(Loss)
on Investments:
Realized Gain/(Loss) on Securities 62,823,862 3,211,757 66,035,619
Change in Unrealized Appreciation/
(Depreciation) on Securities (7,376,686) 9,052,093 1,675,407
Net Realized and Unrealized gain/(Loss)
on Investments 55,447,176 12,263,850 67,711,026
Net Increase/(Decrease) in Assets
Resulting from Operations $66,631,671 $16,833,487 ($58,005) $83,407,153
</TABLE>
Legend:
(a) Reflects adjustment to the acquiring fund contractual fee obligation.
(b) Adjustment reflects expected savings when the two funds became one.
(c) Organization expense of the acquired fund is not an expense of the combined
fund.
(d) Reflects adjustment to the level of the acquiring fund's voluntary expense
reimbursement.
See Notes to Proforma Financial Statements
<PAGE>
Nations Equity Income Fund
Pilot Equity Income Fund
Notes to Pro Forma Financial Statements (Unaudited)
1. Basis of Combination
Nations Funds, Inc. (the "Company") is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As
of September 30, 1996 the Company offers five separate portfolios. The unaudited
Pro Forma Combining Portfolio of Investments and Statement of Assets and
Liabilities and the Statement of Operations reflect the accounts of the Nations
Equity Income Fund and the Pilot Equity Income Fund for the twelve month period
ended September 30, 1996. These statements have been derived from books and
records utilized in calculating daily net asset value at September 30, 1996.
The pro forma statements give effect to the proposed transfer of the assets and
stated liabilities of the Pilot Equity Income Fund in exchange for shares of the
Nations Equity Income Fund. Under generally accepted accounting principles, the
historical cost of investment securities will be carried forward to the
surviving entity and the results of operations of the Pilot Equity Income Fund
for pre-combination periods will not be restated. The pro forma statements do
not reflect the expenses of either fund in carrying out its obligations under
the proposed Agreement and Plan of Reorganization.
The Pro Forma Combining Portfolio of Investments and Statement of Assets and
Liabilities and the Statement of Operations should be read in conjunction with
the historical financial statements of the funds incorporated by reference in
the Statement of Additional Information.
For the twelve month period ended September 30, 1996, the Nations Equity Income
Fund's investment advisory fee was computed based on the annual
<PAGE>
Nations Equity Income Fund
Pilot Equity Income Fund
Notes to Pro Forma Financial Statements (Unaudited)
rate of 0.75% of average daily net assets up to $100 million, 0.70% of average
daily net assets between $100 million and $250 million and 0.60% of average
daily net assets exceeding $250 million. The administration fee was computed
based on the annual rate of 0.10% of average daily net assets of the Company and
the investment portfolios of Nations Fund Trust and Nations Fund Portfolios,
Inc. (two other registered open-end investment companies which are part of the
Nations Fund family) on a combined basis.
The Company has adopted a shareholder administration plan ("Administration
Plan") for the Primary B Shares of the Nations Equity Income Fund. Under the
Administration Plan, aggregate payments may not exceed 0.50%, on an annualized
basis, of the average daily net assets of the Fund's Primary B Shares.
The Company has also adopted a shareholder servicing and distribution plan
("Investor A Plan") pursuant to Rule 12b-1 under the 1940 Act for the Investor A
Shares of the Nations Equity Income Fund. Under the Investor A Plan, aggregate
payments may not exceed 0.25%, on an annualized basis, of the average daily net
assets of the Fund's Investor A Shares.
The Company has also adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act with respect to Investor C Shares ("Investor C Distribution Plan")
and Investor N Shares ("Investor N Distribution Plan") of the Nations Equity
Income Fund. Under the Investor C Distribution Plan and Investor N Distribution
Plan, aggregate payments may not exceed 0.25% and 0.50%, on an annualized basis,
of the average daily net assets of the Investor C Shares and Investor N Shares
respectively, of the Fund.
The Trust has also adopted a shareholder servicing plan with respect to Investor
C Shares ("Investor C Servicing Plan") and Investor N Shares ("Investor N
Servicing Plan") of the Nations Equity Income Fund. Under the Investor C
Servicing Plan and Investor N Servicing Plan, aggregate payments
2
<PAGE>
Nations Equity Income Fund
Pilot Equity Income Fund
Notes to Pro Forma Financial Statements (Unaudited)
may not exceed 0.25% on an annualized basis of the average daily net assets of
the Investor C Shares and Investor N Shares of the Fund.
2. Portfolio Valuation
Securities of Nations Equity Income Fund which are traded on a recognized stock
exchange are valued at the last sale price on the securities exchange on which
such securities are primarily traded or at the last sale price on the national
securities market. Securities traded only on over-the-counter markets are valued
on the basis of the closing over-the-counter bid prices or, if no sale occurred
on such day, at the mean of the current bid and asked prices. Certain securities
may be valued by one or more principal market makers. Restricted securities, if
any, securities for which market quotations are not readily available and other
assets are valued at fair market value under the supervision of the Board of
Directors. Short-term investments that mature in 60 days or less are valued at
amortized cost. Pilot Equity Income Fund uses similar rules for determining
portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of Nations Equity Income Fund which would have been issued at September
30, 1996 in connection with the proposed reorganization. The pro forma number of
shares outstanding of 37,345,053 consists of 10,246,237 shares assumed issued in
the reorganization plus 27,098,816 shares of Nations Equity Income Fund at
September 30, 1996.
3
NATIONS FUND TRUST
NATIONS INTERNATIONAL GROWTH FUND
PILOT INTERNATIONAL EQUITY FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
====================================================================================================================================
NATIONS PILOT NATIONS PILOT
INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL
GROWTH EQUITY GROWTH EQUITY
FUND FUND COMBINED FUND FUND COMBINED
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
COMMON STOCKS - 93.4%
ARGENTINA - 0.7%
0 36,000 36,000 Banco Frances del Rio de la Plata S.A. $0 $ 940,500 $ 940,500
0 269,966 269,966 CIA Naviera Perez 0 1,701,004 1,701,004
0 182,300 182,300 Quilmes Industrial S.A., ADR 0 1,891,363 1,891,363
-----------
0 4,532,867 4,532,867
-----------
AUSTRIA - 0.4%
0 20,000 20,000 VA Technologie AG 0 2,609,006 2,609,006
-----------
AUSTRALIA - 3.5%
0 140,000 140,000 Brambles Industries Ltd. 0 2,270,843 2,270,843
0 209,000 209,000 Broken Hill Properties Company Ltd. 0 2,678,961 2,678,961
0 475,000 475,000 Commonwealth Bank of Australia 0 2,803,739 2,803,739
0 400,000 400,000 Mayne Nickless Ltd. 0 2,706,022 2,706,022
0 2,070,000 2,070,000 MIM Holdings Ltd. 0 2,522,297 2,522,297
0 565,000 565,000 News Corporation Ltd. 0 2,963,924 2,963,924
0 2,000,000 2,000,000 Sydney Harbour Casino Holdings 0 2,737,671 2,737,671
0 501,250 501,250 WMC Ltd. 0 3,224,409 3,224,409
-------------------------------
0 21,907,866 21,907,866
-------------------------------
BELGIUM - 0.5%
0 83,000 83,000 GIB NPV 0 3,447,972 3,447,972
-----------
BRAZIL - 1.0%
0 7,000,000 7,000,000 Brasmotor S.A. 0 2,234,967 2,234,967
0 55,694 55,694 Cemig S.A. 0 1,663,653 1,663,653
0 32,300,000 32,300,000 Telec Brasilieiras S.A. 0 2,108,425 2,108,425
-------------------------------
0 6,007,045 6,007,045
-------------------------------
CHILE - 0.7%
0 85,000 85,000 Banco O'Higgins, ADR 0 1,986,875 1,986,875
0 52,000 52,000 Enersis S.A., ADR 0 1,677,000 1,677,000
0 280,000 280,000 Five Arrow Chile Investment Trust 0 824,600 824,600
-------------------------------
0 4,488,475 4,488,475
-------------------------------
COLOMBIA - 0.2%
0 72,200 72,200 Banco Industrial Colombiano, ADR 0 1,344,725 1,344,725
-----------
DENMARK - 0.2%
0 32,000 32,000 Tele Danmark AS, Class B 0 1,518,988 1,518,988
-----------
FRANCE - 7.6%
0 31,941 31,941 Accor SA 0 3,948,337 3,948,337
0 20,231 20,231 Castorama DuBois Investisse 0 3,668,920 3,668,920
0 50,000 50,000 Companie Bancaire 0 5,221,602 5,221,602
0 17,058 17,058 Groupe Danone 0 2,491,980 2,491,980
0 46,000 46,000 LaFarge-Coppee 0 2,713,877 2,713,877
0 20,000 20,000 LVMH Moet Vuitton 0 4,343,908 4,343,908
0 20,054 20,054 Lyonnaise des Eaux 0 1,795,096 1,795,096
</TABLE>
<PAGE>
NATIONS FUND TRUST
NATIONS INTERNATIONAL GROWTH FUND
PILOT INTERNATIONAL EQUITY FUND
COMBINED PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
==============================================================================================================================
NATIONS PILOT NATIONS PILOT
INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL
GROWTH EQUITY GROWTH EQUITY
FUND FUND COMBINED FUND FUND COMBINED
==============================================================================================================================
<S> <C> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
FRANCE (CONTINUED)
0 40,000 40,000 Peugeot SA $ 0 $ 4,409,784 $ 4,409,784
0 18,500 18,500 Roussel-Uclaf 0 4,462,581 4,462,581
0 60,000 60,000 Societe Elf Aquitane SA 0 4,695,373 4,695,373
0 50,000 50,000 Strafor-Facom SA 0 3,970,937 3,970,937
0 33,000 33,000 Television Francaise 0 3,663,647 3,663,647
0 200,000 200,000 Unisor Sacilor SA 0 3,088,398 3,088,398
-----------------------------------
0 48,474,440 48,474,440
-----------------------------------
FINLAND - 0.7%
0 250,000 250,000 Finnair OY 0 1,773,382 1,773,382
0 370,000 370,000 Enso OY 0 2,900,026 2,900,026
-----------------------------------
0 4,673,408 4,673,408
-----------------------------------
GERMANY - 4.8%
0 100,000 100,000 Deutsche Bank AG 0 4,704,101 4,704,101
0 87,900 87,900 Deutsche Pfandbrief und Hypotheken 0 3,400,130 3,400,130
0 100,000 100,000 Gehe AG 0 6,687,363 6,687,363
0 75,000 75,000 Henkel KGAA Vorzug 0 3,260,089 3,260,089
0 38,260 38,260 Hochtief AG 0 1,806,060 1,806,060
0 19,000 19,000 Lufthansa AG 0 2,690,680 2,690,680
0 1,500 1,500 Munchener Ruckversicherungs 0 3,399,737 3,399,737
0 13,000 13,000 Preussag AG 0 3,260,089 3,260,089
0 4,000 4,000 Weru AG 0 1,547,272 1,547,272
---------------------------------
0 30,755,521 30,755,521
---------------------------------
GREAT BRITAIN - 9.9%
0 250,000 250,000 BOC Group Plc Ord. 0 3,421,889 3,421,889
0 400,000 400,000 EMAP Plc 0 4,680,816 4,680,816
0 403,354 403,354 Granada Group Plc 0 5,401,117 5,401,117
0 600,000 600,000 Inchcape Plc Ord. 0 2,546,777 2,546,777
0 1,000,000 1,000,000 Invesco Plc 0 3,697,439 3,697,439
0 567,638 567,638 Morgan Crucible Company Plc 0 4,206,488 4,206,488
0 415,789 415,789 Premier Farnell Plc 0 4,345,545 4,345,545
0 411,000 411,000 Reckitt & Colman Plc 0 4,600,708 4,600,708
0 349,000 349,000 Reuters Holdings Plc 0 4,029,450 4,029,450
0 285,281 285,281 Royal Bank of Scotland 0 2,180,979 2,180,979
0 961,500 961,500 Securicor Plc 0 4,073,694 4,073,694
0 343,000 343,000 Shell Transport & Trading Company 0 5,228,397 5,228,397
0 407,512 407,512 Standard Chartered Plc 0 4,437,428 4,437,428
0 1,425,000 1,425,000 WPP Group Plc 0 5,224,293 5,224,293
0 200,000 200,000 Zeneca Plc 0 4,965,355 4,965,355
----------------------------------
0 63,040,375 63,040,375
----------------------------------
----------------------------------
HONG KONG - 5.2%
0 2,612,000 2,612,000 Giordano International Ltd. 0 2,296,852 2,296,852
0 3,400,000 3,400,000 Guangdong Investments 0 2,396,218 2,396,218
0 409,400 409,400 HSBC Holdings Plc 0 7,597,150 7,597,150
0 650,000 650,000 Hutchison Whampoa 0 4,370,868 4,370,868
0 1,500,000 1,500,000 Shangri-La Asia Ltd. 0 1,997,926 1,997,926
0 400,000 400,000 Sun Hung Kai Properties 0 4,254,484 4,254,484
0 450,000 450,000 Swire Pacific Ltd., Class A 0 4,029,798 4,029,798
0 440,000 440,000 Television Broadcasts 0 1,635,843 1,635,843
0 1,060,000 1,060,000 Wharf Holdings 0 4,386,386 4,386,386
---------------------------------
0 32,965,525 32,965,525
---------------------------------
HUNGARY - 0.2%
0 30,000 30,000 Gedeon Richter 0 1,561,800 1,561,800
-----------
0 INDIA - 0.5%
0 60,000 60,000 Hindanalco Industries, GDR 0 1,777,500 1,777,500
0 85,500 85,500 Tata Engineering & Locomotive, GDR 0 1,121,760 1,121,760
---------------------------------
0 2,899,260 2,899,260
---------------------------------
INDONESIA - 0.3%
0 464,000 464,000 Gudang Garam 0 1,748,869 1,748,869
-----------
IRELAND - 0.7%
0 404,557 404,557 C.R.H. Plc 4,185,466 4,185,466
-----------
</TABLE>
<PAGE>
NATIONS FUND TRUST
NATIONS INTERNATIONAL GROWTH FUND
PILOT INTERNATIONAL EQUITY FUND
COMBINED PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
===============================================================================================================================
NATIONS PILOT NATIONS PILOT
INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL
GROWTH EQUITY GROWTH EQUITY
FUND FUND COMBINED FUND FUND COMBINED
===============================================================================================================================
<S> <C> <C> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
ITALY - 2.1%
0 200,000 200,000 Edison SpA $0 $1,247,002 $1,247,002
0 500,000 500,000 Italgas Ord. 0 1,872,474 1,872,474
0 50,000 50,000 Luxottica Group SpA, ADR 0 3,637,500 3,637,500
0 660,000 660,000 Sasib Italian Ord. 0 2,178,970 2,178,970
0 1,300,000 1,300,000 Stet-Societa Finanz 0 4,513,977 4,513,977
-------------------------------------------
0 13,449,923 13,449,923
-------------------------------------------
JAPAN - 29.2%
0 860,000 860,000 Asahi Chemical Industry 0 5,598,203 5,598,203
0 282,000 282,000 Bank of Tokyo Mitsubishi 0 6,152,726 6,152,726
0 209,000 209,000 Canon Sales 0 5,685,925 5,685,925
0 500,000 500,000 Citizen Watch 0 4,031,425 4,031,425
0 266,000 266,000 Dai-Ichi Pharmaceuticals 0 4,203,456 4,203,456
0 900,000 900,000 Dai Nippon Ink & Chemical Company 0 3,903,030 3,903,030
0 200,000 200,000 Fuji Bank 0 3,914,702 3,914,702
0 600,000 600,000 Fujitsu Ltd. 0 5,710,437 5,710,437
0 600,000 600,000 Hitachi Ltd. 0 5,818,181 5,818,181
0 194,000 194,000 House Foods Industry 0 3,431,470 3,431,470
0 200,000 200,000 Hoya Corporation 0 6,554,432 6,554,432
0 164,000 164,000 Inax Company 0 1,560,853 1,560,853
0 41,000 41,000 Ito Yokado 0 2,330,235 2,330,235
0 483,000 483,000 Kao Corporation 0 6,028,013 6,028,013
0 44,000 44,000 Keyence Ord. 0 5,451,851 5,451,851
0 63,000 63,000 Kyocera Corporation 0 4,496,969 4,496,969
0 250,000 250,000 Marui 0 4,826,037 4,826,037
0 300,000 300,000 Matsushita Electric Industrial 0 5,037,036 5,037,036
0 800,000 800,000 Mitsubishi Heavy Industries 0 6,514,926 6,514,926
0 260,000 260,000 Mori Seiki 0 4,015,263 4,015,263
0 400,000 400,000 NGK Spark Plug Company 0 4,166,105 4,166,105
0 400,000 400,000 Nikon Company 0 4,776,655 4,776,655
0 400,000 400,000 Nippon Consys Company 0 5,387,205 5,387,205
0 600,000 600,000 Nippon Express Company 0 5,494,949 5,494,949
0 1,650,000 1,650,000 Nippon Steel Corporation 0 5,125,925 5,125,925
0 355,000 355,000 Ricoh Company, Ltd. 0 3,633,670 3,633,670
0 240,000 240,000 Sanwa Bank 0 4,331,313 4,331,313
0 800,000 800,000 Sanyo Electric Company 0 4,302,581 4,302,581
0 100,000 100,000 Secom 0 6,329,965 6,329,965
0 400,000 400,000 Sharp Company 0 6,644,219 6,644,219
0 225,000 225,000 Shimano, Ord. 0 4,181,818 4,181,818
0 250,000 250,000 Shin-Etsu Chemical Company 0 4,489,337 4,489,337
0 100,000 100,000 TDK Company 0 6,222,221 6,222,221
0 600,000 600,000 Tokio Marine & Fire Company 0 7,111,110 7,111,110
0 500,000 500,000 Toppan Printing 0 7,048,259 7,048,259
0 300,000 300,000 Toyota Motor Company 0 7,676,767 7,676,767
0 96,500 96,500 York Benimaru 0 3,621,728 3,621,728
-------------------------------------------
0 185,808,997 185,808,997
-------------------------------------------
KOREA - 0.5%
0 40,000 40,000 Korea Electric, ADR 0 755,000 755,000
0 55,000 55,000 Korea Fund Inc. 0 1,003,750 1,003,750
</TABLE>
<PAGE>
NATIONS FUND TRUST
NATIONS INTERNATIONAL GROWTH FUND
PILOT INTERNATIONAL EQUITY FUND
COMBINED PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
====================================================================================================================================
NATIONS PILOT NATIONS PILOT
INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL
GROWTH EQUITY GROWTH EQUITY
FUND FUND COMBINED FUND FUND COMBINED
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
KOREA (CONTINUED)
0 35,000 35,000 Pohang Iron & Steel Ltd., ADR $0 $748,125 $748,125
0 552 552 Samsung Electronics 0 27,186 27,186
0 3,212 3,212 Samsung Electronics 0 77,891 77,891
0 166 166 Samsung Electronics 0 8,176 8,176
0 10,661 10,661 Samsung Electronics, Non-voting, GDR 0 258,529 258,529
--------------------------------------
0 2,878,657 2,878,657
--------------------------------------
MALAYSIA - 1.0%
0 145,000 145,000 Genting Berhad 0 1,052,852 1,052,852
0 440,000 440,000 Public Bank Berhad 0 814,514 814,514
0 130,000 130,000 Sime Darby Malaysia 0 430,477 430,477
0 160,000 160,000 Telekom Malaysia 0 1,410,719 1,410,719
0 300,000 300,000 United Engineers Berhad 0 2,321,941 2,321,941
--------------------------------------
0 6,030,503 6,030,503
--------------------------------------
MEXICO - 1.6%
0 110,552 110,552 Desc S.A., Series A 0 2,459,782 2,459,782
0 115,000 115,000 Cemex S.A. 0 869,722 869,722
0 60,000 60,000 Cemex S.A. de C.V. 0 497,478 497,478
0 1,030,000 1,030,000 Cifra S.A. de C.V., ADR 0 1,421,400 1,421,400
0 75,220 75,220 Empresa Nacional, ADR 0 1,419,778 1,419,778
0 10,000 10,000 Empresa Nacional Electricidad, ADR 0 593,750 593,750
0 600,000 600,000 Grupo Financiero Banamex, Class B 0 1,300,129 1,300,129
0 49,300 49,300 Grupo Televisa S.A. 0 1,423,538 1,423,538
0 108,500 108,500 Invercorpacion S.A. 0 14,515 14,515
--------------------------------------
0 10,000,092 10,000,092
--------------------------------------
MOROCCO - 0.0% #
0 10,000 10,000 Banque Morocaine du Commerce, GDR 0 152,500 152,500
--------------------------------------
NETHERLANDS - 5.0%
0 20,000 20,000 DSM N.V. 0 1,963,821 1,963,821
0 248,128 248,128 Getronics N.V. 0 6,294,021 6,294,021
0 138,162 138,162 Koninklijke Ahold 0 7,824,833 7,824,833
0 115,760 115,760 Philips Electronics N.V. 0 4,181,284 4,181,284
0 92,000 92,000 Randstad Holdings 0 7,259,125 7,259,125
0 25,000 25,000 Royal Dutch Petroleum Company N.V. 0 3,908,647 3,908,647
--------------------------------------
0 31,431,731 31,431,731
--------------------------------------
NORWAY - 0.3%
0 25,074 25,074 Kvaerner AS, Class A 0 948,730 948,730
0 28,000 28,000 Kvaerner AS, Class B 0 973,308 973,308
--------------------------------------
0 1,922,038 1,922,038
--------------------------------------
PAKISTAN - 0.2%
0 50,000 50,000 Hub Power Company, GDR 0 1,050,000 1,050,000
--------------------------------------
</TABLE>
<PAGE>
NATIONS FUND TRUST
NATIONS INTERNATIONAL GROWTH FUND
PILOT INTERNATIONAL EQUITY FUND
COMBINED PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
=============================================================================================================================
NATIONS PILOT NATIONS PILOT
INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL
GROWTH EQUITY GROWTH EQUITY
FUND FUND COMBINED FUND FUND COMBINED
=============================================================================================================================
<S> <C> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
PERU - 0.4%
0 40,000 40,000 Credicorp Ltd. $0 $760,000 $760,000
0 76,900 76,900 Telefonica del Peru 0 1,759,088 1,759,088
--------------------------------------
0 2,519,088 2,519,088
--------------------------------------
PHILIPPINES - 0.9%
0 587,000 587,000 Ayala Land, Inc., Class B 0 715,990 715,990
0 38,350 38,350 Manila Electric Company 0 1,361,425 1,361,425
0 84,500 84,500 Manila Electric Company, Class B 0 624,852 624,852
0 36,700 36,700 Philippine Long Distance, ADR 0 2,293,750 2,293,750
0 50,000 50,000 Philippine National Bank 0 824,281 824,281
--------------------------------------
0 5,820,298 5,820,298
--------------------------------------
POLAND - 0.4%
0 190,000 190,000 Elektrim S.A. 0 1,877,200 1,877,200
0 280,000 280,000 Mostosstal Export SA 0 797,399 797,399
--------------------------------------
0 2,674,599 2,674,599
--------------------------------------
PORTUGAL - 0.6%
0 40,000 40,000 Banco Espirito Santo 0 669,997 669,997
0 32,600 32,600 Companhia de Seguros Tranquildade 0 632,642 632,642
0 44,000 44,000 Corticeira Amorim 0 477,431 477,431
0 62,000 62,000 Engil 0 581,606 581,606
0 9,100 9,100 Jeronimo Martins & Filho 0 828,419 828,419
0 29,000 29,000 Portugal Telecom S.A. 0 746,011 746,011
--------------------------------------
0 3,936,106 3,936,106
--------------------------------------
SINGAPORE - 3.1%
0 375,000 375,000 City Development 0 3,195,685 3,195,685
0 290,687 290,687 Development Bank of Singapore 0 3,571,273 3,571,273
0 300,000 300,000 Fraser and Neave 0 3,089,162 3,089,162
0 185,000 185,000 Genting Berhad 0 1,326,919 1,326,919
0 450,000 450,000 Keppel Corporation 0 3,483,296 3,483,296
0 120,000 120,000 Singapore Press Holdings 0 2,190,109 2,190,109
0 1,200,000 1,200,000 Singapore Technologies 0 2,846,290 2,846,290
--------------------------------------
0 19,702,734 19,702,734
--------------------------------------
SOUTH AFRICA - 0.2%
0 80,000 80,000 Barlow Ltd., ADR 0 775,920 775,920
0 50,000 50,000 Impala Platinum Holdings Ltd., ADR 0 619,965 619,965
--------------------------------------
0 1,395,885 1,395,885
--------------------------------------
SPAIN - 2.8%
0 100,000 100,000 Corporacion Bancaria de Espana 0 4,143,140 4,143,140
0 183,318 183,318 Corporacion Financiera 0 1,287,809 1,287,809
0 76,000 76,000 Empresa Nacional Electridad 0 4,474,592 4,474,592
0 20,000 20,000 Gas Natural SDG S.A. 0 3,532,572 3,532,572
0 125,000 125,000 Repsol S.A. 0 4,108,095 4,108,095
--------------------------------------
0 17,546,208 17,546,208
</TABLE>
<PAGE>
NATIONS FUND TRUST
NATIONS INTERNATIONAL GROWTH FUND
PILOT INTERNATIONAL EQUITY FUND
COMBINED PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
==================================================================================================================================
NATIONS PILOT NATIONS PILOT
INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL
GROWTH EQUITY GROWTH EQUITY
FUND FUND COMBINED FUND FUND COMBINED
==================================================================================================================================
<S> <C> <C> <C> <C> <C>
COMMON STOCKS (CONTINUED)
SWEDEN - 1.1%
0 200,000 200,000 Atlas Copca AB, Class A $0 $4,121,361 $4,121,361
0 100,000 100,000 Ericsson (L.M.) Telephone 0 2,521,126 2,521,126
---------------------------------------------
0 6,642,487 6,642,487
---------------------------------------------
SWITZERLAND - 4.7%
0 4,000 4,000 ABB AG 0 4,894,898 4,894,898
0 40,000 40,000 Credit Suisse Group 0 3,956,763 3,956,763
0 3,856 3,856 Nestle 0 4,300,337 4,300,337
0 970 970 Roche Holdings 0 7,146,065 7,146,065
0 1,500 1,500 SGS Holdings 0 3,392,366 3,392,366
0 42,500 42,500 Swiss Corporation for Microelectronics 0 6,424,754 6,424,754
---------------------------------------------
0 30,115,183 30,115,183
---------------------------------------------
TAIWAN - 0.4%
0 198,000 198,000 Advanced Semiconducting Engineering, GDR 0 1,485,000 1,485,000
0 120,000 120,000 Republic of China Taiwan Fund 0 1,290,000 1,290,000
---------------------------------------------
0 2,775,000 2,775,000
---------------------------------------------
THAILAND - 1.1%
0 160,000 160,000 Bangkok Bank 0 2,089,900 2,089,900
0 440,000 440,000 Electricity Generating Public Company 0 1,384,873 1,384,873
0 147,200 147,200 Land and House 0 1,818,465 1,818,465
0 600,000 600,000 Telecomasia Corporation Public Company 0 1,215,698 1,215,698
0 168,000 168,000 TFE Polene 0 406,492 406,492
---------------------------------------------
0 6,915,428 6,915,428
---------------------------------------------
TURKEY - 0.3%
0 4,818,325 4,818,325 Arcelik AS 0 503,589 503,589
0 704,700 704,700 Migros Turk Tas 0 629,111 629,111
0 16,579,163 16,579,163 Trakya Cam Sanayii 0 1,046,886 1,046,886
---------------------------------------------
0 2,179,586 2,179,586
---------------------------------------------
VENEZUELA - 0.4%
0 72,000 72,000 Corimos S.A. 0 50,666 50,666
0 222,937 222,937 Mavesa S.A., ADR 0 1,457,919 1,457,919
0 270,000 270,000 Siderurgica Venezuela, ADR 0 979,992 979,992
---------------------------------------------
0 2,488,577 2,488,577
---------------------------------------------
--------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 0 593,597,228 593,597,228
--------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NATIONS FUND TRUST
NATIONS INTERNATIONAL GROWTH FUND
PILOT INTERNATIONAL EQUITY FUND
COMBINED PORTFOLIO OF INVESTMENTS (CONTINUED)
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
====================================================================================================================================
NATIONS PILOT NATIONS PILOT
INTERNATIONAL INTERNATIONAL INTERNATIONAL INTERNATIONAL
GROWTH EQUITY GROWTH EQUITY
FUND FUND COMBINED FUND FUND COMBINED
====================================================================================================================================
<S> <C> <C> <C> <C> <C>
PREFERRED STOCKS - 1.1%
BRAZIL - 0.4%
0 276,644,578 276,644,578 Banco Bradesco S.A. $0 $2,343,656 $2,343,656
0 11,306 11,306 Companhia Energietica de Mina Gerais, 144A 0 337,725 337,725
-----------------------------------------
0 2,681,381 2,681,381
-----------------------------------------
GERMANY - 0.7%
0 50,000 50,000 Fielmann AG 0 2,084,882 2,084,882
0 6,875 6,875 GEA AG 0 2,285,259 2,285,259
-----------------------------------------
0 4,370,141 4,370,141
-----------------------------------------
----------------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS 0 7,051,522 7,051,522
----------------------------------------------------------------------------------------
RIGHTS - 0.0% #
SINGAPORE - 0.0% #
0 43,200 43,200 Fraser and Neave 0 220,886 220,886
----------------------------------------------------------------------------------------
WARRANTS - 0.0% #
SWITZERLAND - 0.0% #
0 970 970 Roche Holdings 0 23,601 23,601
----------------------------------------------------------------------------------------
MUTUAL FUNDS - 5.5%
0 34,546,152 34,546,152 Banker's Trust Money Fund 0 34,546,152 34,546,152
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $560,998,911) $0 $635,439,389 $635,439,389
----------------------------------------------------------------------------------------
</TABLE>
- -------------------------------------
# Amount represents less than 0.1%.
<PAGE>
NATIONS INTERNATIONAL GROWTH FUND
PILOT INTERNATIONAL EQUITY FUND
Pro Forma Combining Statement of Assets and Liabilities
September 30, 1996
<TABLE>
<CAPTION>
Nations
International
Growth Pilot International Adjustments Pro Forma
Fund Equity Fund to Proforma Combined (Note 1)
<S> <C> <C> <C> <C>
ASSETS:
Investments at Value (cost $0, $560,998,911
and $560,998,911) - $635,439,389 - $635,439,389
Income Receivable - 2,282,307 - 2,282,307
Foreign Taxes Receivable - 442,345 - 442,345
Receivable for Fund Shares Sold - 50 - 50
Unrealized FX Gains - 551,358 - 551,358
Receivable Due From Investment Advisor - - 96,888 (a) 96,888
Other Assets - 159,855 - 159,855
Unamortized Organization Costs - 96,888 (96,888)(a) 0
Total Assets 0 638,972,191 0 638,972,191
LIABILITIES
Income Distribution Payable - 337 - 337
Payable for Investments Purchased - 4,580,114 - 4,580,114
Unrealized FX Losses - 6,993 - 6,993
Payabled Due to Custodian - 105,475 - 105,475
Other Payables - 178,714 - 178,714
Accrued Expenses - 383,957 - 383,957
Total Liabilities 0 5,255,589 0 5,255,589
Net Assets Applicable to Shares Outstanding $0 $633,716,602 $0 $633,716,602
Net Assets by Class:
Primary A/Pilot Shares - $606,134,774 $606,134,774
Primary B - n/a n/a
Investor A/Admin. Class A Share - 27,249,257 27,249,257
Investor C - n/a n/a
Investor N/Investor Class Shares - 332,571 332,571
Shares Outstanding by Class:
Primary A/Pilot Shares - 34,820,482 34,820,482
Primary B - n/a n/a
Investor A/Admin. Class A Share - 1,579,190 1,579,190
Investor C - n/a n/a
Investor N/Investor Class Shares - 19,154 19,154
Primary A Shares/Pilot Shares:
Net Asset Value per Share n/a $17.41 $17.41
Primary B Shares:
Net Asset Value per Share n/a n/a n/a
Investor A Shares/Admin Class A Shares:
Net Asset Value per Share n/a $17.26 $17.26
Investor C Shares:
Net Asset Value per Share n/a n/a n/a
Investor N Shares/Investor Class Shares:
Net Asset Value per Share: n/a $17.36 $17.36
See Notes to Proforma Financial Statements
(a) Unamortized Organization Costs of the acquired fund will be borne by the Advisor.
</TABLE>
<PAGE>
NATIONS INTERNATIONAL GROWTH FUND
PILOT INTERNATIONAL EQUITY FUND
Pro Forma Statement of Operations (Unaudited)
For the Twelve Month Period Ending September 30, 1996
<TABLE>
<CAPTION>
Nations
International
Growth Pilot International Adjustments Pro Forma
Fund Equity Fund to Proforma Combined (Note 1)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends (net of foreign taxes of $1,234,207) - $7,804,191 - $7,804,191
Interest - 1,034,718 - 1,034,718
Total Investment Income - 8,838,909 8,838,909
EXPENSES:
Investment Advisory - 4,019,089 502,386 (a) 4,521,475
Administration - 555,894 (53,508)(a) 502,386
Accounting Fee - 38,229 (38,229)(a) 0
Transfer Agent - 55,708 - 55,708
Custodian - 330,631 (55,000)(c) 275,631
Legal and Audit Fees - 105,288 (40,000)(c) 65,288
Trustees' Fees - 17,352 - 17,352
Amortization of Organization Costs - 43,806 (43,806)(b) 0
Other Expenses - 282,739 (80,000)(c) 202,739
Subtotal 5,448,736 191,843 5,640,579
Shareholder Servicing and Distribution Fees
Adminstrative Class A/Investor - 67,452 n/a 67,452
Investor C - - n/a n/a
Investor Class Shares/Investor N - 362 n/a 362
Fees Waived and/or Reimbursed by
Investment Advisor - - - 0
Total Expenses 0 5,516,550 191,843 5,708,393
NET INVESTMENT INCOME 0 3,322,359 (191,843) 3,130,516
Net Realized and Unrealized Gain/(Loss)
on Investments:
Realized Gain/(Loss) on Securities and Future Tr - 11,637,385 11,637,385
Net Realized Gains from Foreign Currency Transactions - 4,700,976 4,700,976
Change in Unrealized Appreciation/
(Depreciation) on Securities and Futures - 34,514,021 34,514,021
Net Realized and Unrealized Gain/(Loss)
on Investments and Futures 0 50,852,382 50,852,382
Net Increase/(Decrease) in Assets
Resulting from Operations $0 $54,174,741 ($191,843) $53,982,898
Legend:
(a) Reflects adjustment to the acquiring fund contractual fee obligation.
(b) Organization expense of the acquired fund is not an expense of the combined fund.
(c) Adjustment reflects expected savings when the two funds become one.
See Notes to Proforma Financial Statements
</TABLE>
<PAGE>
Nations International Growth Fund
Pilot International Equity Fund
Notes to Pro Forma Financial Statements (Unaudited)
1. Basis of Combination
Nations Fund, Inc. (the "Company") is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management investment
company. As of September 30, 1996 the Company offered five separate portfolios.
On February 7, 1997, the Board of Directors of the Company created Nations
International Growth Fund for the purpose of this proposed business combination.
The unaudited Pro Forma Combining Portfolio of Investments and Statement of
Assets and Liabilities and the Statement of Operations reflect the accounts of
the Pilot International Equity Fund for the twelve month period ended September
30, 1996 conformed to the proposed Nations International Growth Fund expense
structure. These statements have been derived from books and records utilized in
calculating daily net asset value at September 30, 1996.
The pro forma statements give effect to the proposed transfer of the assets and
stated liabilities of the Pilot International Equity Fund in exchange for shares
of the Nations International Growth Fund. Under generally accepted accounting
principles, the historical cost of investment securities will be carried forward
to the surviving entity and the results of operations of the Pilot International
Equity Fund for pre-combination periods will not be restated. The pro forma
statements do not reflect the expenses of either fund in carrying out its
obligations under the proposed Agreement and Plan of Reorganization.
The Pro Forma Combining Portfolio of Investments and Statement of Assets and
Liabilities and the Statement of Operations should be read in conjunction with
the historical financial statements of the funds incorporated by reference in
the Statement of Additional Information.
<PAGE>
Nations International Growth Fund
Pilot International Equity Fund
Notes to Pro Forma Financial Statements (Unaudited)
The advisory fee for the Nations International Growth Fund was computed using an
annual rate of 0.90% of average daily net assets. The subadviser, Kleinwort
Benson Investment Management Americas Inc., will be paid a subadviser fee by the
adviser at an annual rate of 0.40% of average daily net assets up to and
including $325 million and 0.25% of average daily net assets in excess of $325
million. The administration fee was computed based on the annual rate of 0.10%
of average daily net assets of the Company and the investment portfolios of
Nations Fund Trust and Nations Fund Portfolios, Inc. (two other registered
open-end investment companies that are part of the Nations Fund Family) on a
combined basis.
The Company has adopted a shareholder administration plan ("Administration
Plan") for the Primary B Shares of the Nations International Growth Fund. Under
the Administration Plan, aggregate payments may not exceed 0.50%, on an
annualized basis, of the average daily net assets of the Fund's Primary B
Shares.
The Company has also adopted a shareholder servicing and distribution plan
("Investor A Plan") pursuant to Rule 12b-1 under the 1940 Act for the Investor A
Shares of the Nations International Growth Fund. Under the Investor A Plan,
aggregate payments may not exceed 0.25%, on an annualized basis, of the average
daily net assets of the Fund's Investor A Shares.
The Company has also adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act with respect to Investor C Shares ("Investor C Distribution Plan")
and Investor N Shares ("Investor N Distribution Plan") of the Nations
International Growth Fund. Under the Investor C Distribution Plan and Investor N
Distribution Plan, aggregate payments may not exceed 0.25% and 0.75%, on an
annualized basis, of the average daily net assets of the Investor C Shares and
Investor N Shares, respectively, of the Fund.
2
<PAGE>
Nations International Growth Fund
Pilot International Equity Fund
Notes to Pro Forma Financial Statements (Unaudited)
The Company has also adopted a shareholder servicing plan with respect to
Investor C Shares ("Investor C Servicing Plan") and Investor N Shares ("Investor
N Servicing Plan") of the Nations International Growth Fund. Under the Investor
C Servicing Plan and Investor N Servicing Plan, aggregate payments may not
exceed 0.25%, on an annualized basis, of the average daily net assets of the
Investor C Shares and Investor N Shares of the Fund.
2. Portfolio Valuation
Securities of Nations International Growth Fund which are traded on a recognized
stock exchange are valued at the last sale price on the securities exchange on
which such securities are primarily traded or, lacking any sales on a particular
day, at the mean between the closing bid and asked prices on that day. If there
are no such bid and asked quotations, the most recent bid quote is used. Each
security traded in the over-the-counter market (but not including securities
reported on the NASDAQ National Market System) is valued at the mean between the
last available bid and asked prices based upon quotes furnished by principal
market makers for such securities. The valuation of international securities
which trade on foreign exchanges are provided by an independent pricing service
approved by the Board of Directors. Each security reported on the NASDAQ
National Market System is valued at the last sales price on the valuation date.
Debt obligations are valued on the basis of prices provided by an independent
pricing service. Prices provided by the pricing service may be determined
without exclusive reliance on quoted prices, and may reflect appropriate factors
such as yield, type of issue, coupon rate, maturity and general market
conditions. Certain securities may be valued by one or more principal market
makers. Securities for which market quotations are not readily available are
valued at fair market value under the supervision of the Board of Directors.
Short-term investments that mature in 60 days or less are valued at amortized
cost. Pilot
3
<PAGE>
Nations International Growth Fund
Pilot International Equity Fund
Notes to Pro Forma Financial Statements (Unaudited)
International Equity Fund uses similar rules for determining portfolio
valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of shares of
Nations International Growth Fund which would have been issued at September 30,
1996 in connection with the proposed reorganization. The pro forma number of
shares outstanding of 36,418,825 consists of 36,418,825 shares assumed issued in
the reorganization.
4
NATIONS FUND
NATIONS PRIME FUND
PILOT SHORT-TERM DIVERSIFIED ASSETS FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
====================================================================================================================================
PILOT SECURITY PILOT
SHORT-TERM DESCRIPTIONS SHORT-TERM
NATIONS DIVERSIFIED NATIONS DIVERSIFIED
PRIME ASSETS PRIME ASSETS
FUND FUND COMBINED FUND FUND COMBINED
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
BANK OBLIGATIONS - 16.2%
BANKERS ACCEPTANCE - 0.5%
$ 30,000,000 $ 0 $ 30,000,000 Sanwa Bank Ltd.,
Discount note 10/25/96 $ 29,892,600 $ 0 $ 29,892,600
------------------------------------------
CERTIFICATES OF DEPOSIT - DOMESTIC - 5.4%
0 50,000,000 50,000,000 American National Life Insurance Co.,
5.630%+ 10/01/96 +++ 0 50,000,000 50,000,000
50,000,000 0 50,000,000 Bank of New York, (Delaware),
5.775%+ 10/25/96 50,000,000 0 50,000,000
0 45,000,000 45,000,000 Banque Nationale de Paris,
5.350% 10/21/96 0 45,000,476 45,000,476
Chase Manhattan Corp.:
0 25,000,000 25,000,000 5.500% 11/04/96 0 25,000,000 25,000,000
0 21,000,000 21,000,000 5.850% 01/08/97 0 21,016,808 21,016,808
0 40,000,000 40,000,000 Morgan Guaranty Trust Co.,
5.520% 01/06/97 0 40,001,056 40,001,056
0 50,000,000 50,000,000 NationBank of Texas, NA,
5.650% 11/01/96 0 50,005,080 50,005,080
0 32,000,000 32,000,000 SMM Trust,
5.719%+ 12/26/96 +++ 0 32,000,000 32,000,000
------------------------------------------
50,000,000 263,023,420 313,023,420
------------------------------------------
CERTIFICATE OF DEPOSIT - EURO - 0.9%
0 25,000,000 25,000,000 Commerzbank A.G.,
5.320% 10/22/96 0 25,000,000 25,000,000
27,000,000 0 27,000,000 Morgan Guaranty Trust Company,
4.920% 02/12/97 26,982,109 0 26,982,109
------------------------------------------
26,982,109 25,000,000 51,982,109
------------------------------------------
CERTIFICATES OF DEPOSIT - YANKEE - 9.4%
Bank of Tokyo, Mitsibushi (New York):
25,000,000 0 25,000,000 5.660% 02/12/97 25,000,000 0 25,000,000
30,000,000 0 30,000,000 5.860% 03/10/97 30,000,000 0 30,000,000
30,000,000 0 30,000,000 5.730% 03/27/97 30,000,000 0 30,000,000
0 25,000,000 25,000,000 Barclays Bank,
5.680% 01/03/97 0 25,000,641 25,000,641
100,000,000 0 100,000,000 Bayerische Landesbank, (New York),
5.7875%+ 08/01/97 100,000,000 0 100,000,000
Bayerische Vereinsbank AG, (New York):
50,000,000 0 50,000,000 5.320% 02/24/97 50,000,000 0 50,000,000
30,000,000 0 30,000,000 5.300% 03/04/97 30,000,000 0 30,000,000
60,000,000 0 60,000,000 Deutsche Bank, (New York),
5.700% 09/17/97 60,000,000 0 60,000,000
0 50,000,000 50,000,000 Landesbank Hessen - Thuringen,
5.440% 12/09/96 0 50,000,000 50,000,000
Royal Bank of Canada:
0 13,000,000 13,000,000 5.620% 11/29/96 0 13,002,142 13,002,142
0 20,000,000 13,000,000 5.390%+ 12/13/96 0 19,996,742 19,996,742
Sanwa Bank Ltd. of New York:
20,000,000 0 20,000,000 5.590% 10/16/96 19,999,548 0 19,999,548
30,000,000 0 30,000,000 5.700% 10/16/96 30,000,123 0 30,000,123
50,000,000 0 50,000,000 5.650% 01/15/97 50,000,000 0 50,000,000
0 10,000,000 10,000,000 Societe Generale,
5.390% 11/22/96 0 10,000,427 10,000,427
------------------------------------------
424,999,671 117,999,952 542,999,623
------------------------------------------
--------------------------------------------------------------------------
TOTAL BANK OBLIGATIONS $531,874,380 $406,023,372 $937,897,752
--------------------------------------------------------------------------
</TABLE>
<PAGE>
NATIONS FUND
NATIONS PRIME FUND
PILOT SHORT-TERM DIVERSIFIED ASSETS FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
====================================================================================================================================
PILOT SECURITY PILOT
SHORT-TERM DESCRIPTIONS SHORT-TERM
NATIONS DIVERSIFIED NATIONS DIVERSIFIED
PRIME ASSETS PRIME ASSETS
FUND FUND COMBINED FUND FUND COMBINED
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
CORPORATE OBLIGATIONS - 54.1%
COMMERCIAL PAPER - 36.1%
$ 0 $25,000,000 $25,000,000 ABN Amro,
Discount note 12/04/96 $ 0 $24,768,000 $24,768,000
Aetna Services, Inc.:
20,000,000 0 20,000,000 Discount note 04/10/97 19,384,555 0 19,384,555
20,000,000 0 20,000,000 Discount note 04/11/97 19,379,200 0 19,379,200
American Home Food Products Inc.:
0 50,000,000 50,000,000 Discount note(a) 10/02/96 0 49,992,542 49,992,542
81,000,000 0 81,000,000 Discount note(a) 10/03/96 80,975,700 0 80,975,700
0 12,000,000 12,000,000 Discount note(a) 10/15/96 0 11,973,400 11,973,400
20,000,000 0 20,000,000 Ameritech Corporation,
Discount note(a) 12/30/96 19,724,000 0 19,724,000
Asset Securitization Cooperative Corporation:
25,000,000 0 25,000,000 Discount note(a) 10/01/96 24,977,208 0 24,977,208
30,000,000 0 30,000,000 Discount note 10/15/96 29,936,767 0 29,936,767
7,500,000 0 7,500,000 Associates Corporation of N.A.,
Discount note 10/01/96 7,500,000 0 7,500,000
Bankers Trust Company:
60,000,000 0 60,000,000 Discount note 02/18/97 58,733,000 0 58,733,000
25,000,000 0 25,000,000 Discount note 03/05/97 24,388,611 0 24,388,611
20,000,000 0 20,000,000 BTM Capital Corporation,
Discount note(a) 10/28/96 19,916,300 0 19,916,300
10,300,000 0 10,300,000 Caterpillar Financial Services
Corporation, Discount note 10/01/96 10,300,000 0 10,300,000
Countrywide Home Loans, Inc.:
20,300,000 0 20,300,000 Discount note 10/02/96 20,297,000 0 20,297,000
12,200,000 0 12,200,000 Discount note 10/30/96 12,146,930 0 12,146,930
0 50,000,000 50,000,000 Dresdner U.S. Financial Inc.,
Discount note 10/03/96 0 49,985,194 49,985,194
Finova Capital Corporation:
15,000,000 0 15,000,000 Discount note 10/18/96 14,961,042 0 14,961,042
45,500,000 0 45,500,000 Discount note 10/21/96 45,361,092 0 45,361,092
50,000,000 0 50,000,000 Discount note 10/28/96 49,798,625 0 49,798,625
30,000,000 0 30,000,000 Discount note 11/13/96 29,806,500 0 29,806,500
25,000,000 0 25,000,000 Discount note 11/27/96 24,778,333 0 24,778,333
24,000,000 0 24,000,000 First Data Corporation,
Discount note 11/19/96 23,822,620 0 23,822,620
0 25,000,000 25,000,000 Ford Motor Credit Corporation,
Discount note 12/02/96 0 24,769,222 24,769,222
General Motors Acceptance Corporation:
0 50,000,000 50,000,000 Discount note 11/04/96 0 49,746,417 49,746,417
25,000,000 0 25,000,000 Discount note 11/26/96 24,805,556 0 24,805,556
12,000,000 0 12,000,000 Discount note 12/04/96 11,882,240 0 11,882,240
30,000,000 0 30,000,000 Discount note 12/13/96 29,671,500 0 29,671,500
25,000,000 0 25,000,000 Discount note 12/17/96 24,701,090 0 24,701,090
30,000,000 0 30,000,000 Discount note 02/19/97 29,353,750 0 29,353,750
24,300,000 0 24,300,000 Discount note 03/12/97 23,687,640 0 23,687,640
0 10,000,000 10,000,000 Glaxo Welcome Plc.,
Discount note 10/01/96 0 10,000,000 10,000,000
0 50,000,000 50,000,000 Goldman Sachs Group L.P.,
Discount note 10/02/96 0 49,992,542 49,992,542
International Securitization Corporation:
30,000,000 0 30,000,000 Discount note(a) 10/22/96 29,903,750 0 29,903,750
13,000,000 0 13,000,000 Discount note(a) 12/24/96 12,836,200 0 12,836,200
Lehman Brothers Holdings Inc.:
50,000,000 0 50,000,000 Discount note 11/05/96 49,763,264 0 49,763,264
26,000,000 0 26,000,000 Discount note 01/07/97 25,595,152 0 25,595,152
0 50,000,000 50,000,000 Merrill Lynch & Co., Inc.,
Discount note 01/13/97 0 49,208,445 49,208,445
Mitsubishi International Corporation:
20,000,000 0 20,000,000 Discount note 10/09/96 19,975,511 0 19,975,511
30,000,000 0 30,000,000 Discount note 10/10/96 29,958,750 0 29,958,750
0 50,000,000 50,000,000 Morgan (J.P.) & Company, Inc.,
Discount note 01/06/97 0 49,272,500 49,272,500
</TABLE>
<PAGE>
NATIONS FUND
NATIONS PRIME FUND
PILOT SHORT-TERM DIVERSIFIED ASSETS FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
====================================================================================================================================
PILOT SECURITY PILOT
SHORT-TERM DESCRIPTIONS SHORT-TERM
NATIONS DIVERSIFIED NATIONS DIVERSIFIED
PRIME ASSETS PRIME ASSETS
FUND FUND COMBINED FUND FUND COMBINED
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
CORPORATE OBLIGATIONS - (CONTINUED)
COMMERCIAL PAPER - (CONTINUED)
$ 0 $50,000,000 $ 50,000,000 Morgan Stanley Inc.,
Discount note 10/08/96 $ 0 $ 49,948,375 $ 49,948,375
National Bank of Canada:
25,000,000 0 25,000,000 Discount note 11/21/96 24,825,042 0 24,825,042
25,000,000 0 25,000,000 Discount note 11/22/96 24,824,139 0 24,824,139
25,000,000 0 25,000,000 Discount note 11/29/96 24,793,090 0 24,793,090
15,000,000 0 15,000,000 Discount note 03/07/97 14,630,396 0 14,630,396
35,000,000 0 35,000,000 Discount note 06/02/97 33,626,483 0 33,626,483
New Center Asset Trust:
25,000,000 0 25,000,000 Discount note 10/07/96 24,977,708 0 24,977,708
30,000,000 0 30,000,000 Discount note 11/05/96 29,841,625 0 29,841,625
25,000,000 0 25,000,000 Discount note 11/12/96 24,839,875 0 24,839,875
35,000,000 0 35,000,000 Discount note 11/22/96 34,729,528 0 34,729,528
0 25,000,000 25,000,000 NYNEX Corp.,
Discount note 10/07/96 0 24,977,500 24,977,500
ODC Capital Corporation:
23,500,000 0 23,500,000 Discount note(a) 10/07/96 23,479,046 0 23,479,046
38,000,000 0 38,000,000 Discount note(a) 10/21/96 37,884,944 0 37,884,944
28,283,000 0 28,283,000 Discount note(a) 10/28/96 28,168,454 0 28,168,454
15,000,000 0 15,000,000 Orix America Inc.,
Sanwa LOC
Discount note(a) 11/15/96 14,898,938 0 14,898,938
16,000,000 0 16,000,000 Renault Credit
International,
Discount note 12/20/96 15,801,956 0 15,801,956
Sears Roebuck Acceptance Corp.:
0 25,000,000 25,000,000 Discount note 10/02/96 0 24,996,257 24,996,257
0 30,000,000 30,000,000 Discount note 10/15/96 0 29,938,050 29,938,050
Sumitomo Corporation of America:
24,500,000 0 24,500,000 Discount note 10/01/96 24,500,000 0 24,500,000
20,000,000 0 20,000,000 Discount note 10/01/96 20,000,000 0 20,000,000
25,000,000 0 25,000,000 Discount note 10/07/96 24,976,625 0 24,976,625
20,000,000 0 20,000,000 Discount note 10/10/96 19,972,400 0 19,972,400
15,000,000 0 15,000,000 Discount note 10/15/96 14,968,208 0 14,968,208
25,000,000 0 25,000,000 Discount note 11/08/96 24,856,445 0 24,856,445
25,000,000 0 25,000,000 Discount note 11/12/96 24,840,166 0 24,840,166
10,000,000 0 10,000,000 Discount note 11/18/96 9,926,933 0 9,926,933
17,752,000 0 17,752,000 Discount note 12/02/96 17,585,378 0 17,585,378
25,000,000 0 25,000,000 Discount note 12/30/96 24,647,500 0 24,647,500
Tri-Lateral Capital (USA) Inc.:
10,838,000 0 10,838,000 Discount note(a) 10/15/96 10,815,029 0 10,815,029
23,800,000 0 23,800,000 Discount note(a) 10/21/96 23,726,220 0 23,726,220
23,500,000 0 23,500,000 Discount note(a) 10/25/96 23,414,617 0 23,414,617
22,450,000 0 22,450,000 Discount note(a) 11/18/96 22,287,462 0 22,287,462
17,450,000 0 17,450,000 Discount note(a) 11/18/96 17,323,197 0 17,323,197
10,140,000 0 10,140,000 Discount note(a) 12/13/96 10,024,854 0 10,024,854
29,200,000 0 29,200,000 Discount note(a) 12/16/96 28,856,024 0 28,856,024
0 25,000,000 25,000,000 UBS Financial Inc.,
Discount note 10/01/96 0 25,000,000 25,000,000
0 20,000,000 20,000,000 Whirlpool Financial
Corporation,
Discount note 10/15/96 0 19,958,000 19,958,000
-----------------------------------------------
1,548,364,168 544,526,444 2,092,890,612
-----------------------------------------------
CORPORATE NOTES - 18.0%
Abbey National Treasury Services:
30,000,000 0 30,000,000 5.080% 02/27/97 29,995,482 0 29,995,482
25,000,000 0 25,000,000 5.045% 03/03/97 24,988,953 0 24,988,953
25,000,000 0 25,000,000 5.110% 03/17/97 24,984,585 0 24,984,585
Bankers Trust Company of New York:
100,000,000 0 100,000,000 5.380%+ 10/01/96+++100,000,000 0 100,000,000
325,000 0 325,000 7.250% 11/01/96 325,325 0 325,325
</TABLE>
<PAGE>
NATIONS FUND
NATIONS PRIME FUND
PILOT SHORT-TERM DIVERSIFIED ASSETS FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
====================================================================================================================================
PILOT SECURITY PILOT
SHORT-TERM DESCRIPTIONS SHORT-TERM
NATIONS DIVERSIFIED NATIONS DIVERSIFIED
PRIME ASSETS PRIME ASSETS
FUND FUND COMBINED FUND FUND COMBINED
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
CORPORATE OBLIGATIONS - (CONTINUED)
CORPORATE NOTES - (CONTINUED)
Bear Stearns & Company, Inc.:
$50,000,000 $ 0 $50,000,000 5.3800%+ 10/01/96 +++ $ 50,000,000 $ 0 $ 50,000,000
25,000,000 0 25,000,000 5.4000%+ 10/01/96 +++ 25,000,000 0 25,000,000
35,000,000 0 35,000,000 5.4875%+ 10/04/96 +++ 35,000,000 0 35,000,000
50,000,000 0 50,000,000 5.0250% 02/10/97 50,000,000 0 50,000,000
25,000,000 0 25,000,000 5.2500% 02/26/97 25,000,000 0 25,000,000
15,000,000 0 15,000,000 5.1150% 02/28/97 15,000,000 0 15,000,000
MTN:
0 25,000,000 25,000,000 5.600% 03/18/97 0 25,000,000 25,000,000
0 25,000,000 25,000,000 5.472%+ 06/03/97 +++ 0 25,000,000 25,000,000
Beta Finance Inc.:
75,000,000 0 75,000,000 5.560%+ 10/01/96 +++ 75,000,000 0 75,000,000
25,000,000 0 25,000,000 5.730%+ 10/01/96 +++ 25,000,000 0 25,000,000
Chrysler Financial Corporation:
16,890,000 0 16,890,000 8.125% 12/16/96 16,969,461 0 16,969,461
14,750,000 0 14,750,000 7.630% 02/24/97 14,888,397 0 14,888,397
10,000,000 0 10,000,000 6.390% 10/03/97 10,018,928 0 10,018,928
CS First Boston:
25,000,000 0 25,000,000 5.360%+ 10/01/96 +++ 25,000,000 0 25,000,000
25,000,000 0 25,000,000 5.340%+ 10/01/96 +++ 25,000,000 0 25,000,000
25,000,000 0 25,000,000 5.380%+ 10/01/96 +++ 25,000,000 0 25,000,000
0 50,000,000 50,000,000 MTN,
5.610%+ 05/12/97 +++ 0 50,000,000 50,000,000
5,000,000 0 5,000,000 Ford Motor Credit Corporation,
8.000% 10/01/96 5,000,000 0 5,000,000
0 50,000,000 50,000,000 General American Life Insurance, MTN,
5.860%+ 10/01/96 +++ 0 50,000,000 50,000,000
General Motors Acceptance Corporation:
165,000 0 165,000 8.000% 10/01/96 165,009 0 165,009
1,000,000 0 1,000,000 5.250% 11/15/96 999,241 0 999,241
50,000,000 0 50,000,000 5.380%+ 10/01/96 +++ 49,992,384 0 49,992,384
Lehman Brothers Holdings Inc.:
18,530,000 0 18,530,000 8.3750% 04/01/97 18,800,391 0 18,800,391
50,000,000 0 50,000,000 5.5727%+ 10/08/96 +++ 50,000,000 0 50,000,000
Merrill Lynch & Company Inc.:
25,000,000 0 25,000,000 5.440%+ 10/03/96 25,000,000 0 25,000,000
10,000,000 0 10,000,000 5.120% 02/27/97 9,966,802 0 9,966,802
50,000,000 0 50,000,000 5.360%+ 10/01/96 +++ 50,000,000 0 50,000,000
25,000,000 0 25,000,000 5.370%+ 10/01/96 +++ 25,000,000 0 25,000,000
0 8,000,000 8,000,000 6.360% 12/16/96 0 8,011,847 8,011,847
2,835,000 0 2,835,000 Philip Morris Companies Inc.,
8.750% 12/01/96 2,849,420 0 2,849,420
0 45,000,000 45,000,000 USL Capital Corp.,
5.602%+ 10/31/96 +++ 0 45,004,601 45,004,601
------------------------------------------------
834,944,378 203,016,448 1,037,960,826
------------------------------------------------
-----------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS $2,383,308,546 $ 747,542,892 $3,130,851,438
-----------------------------------------------------------------------------
GUARANTEED INVESTMENT CONTRACTS - 7.8%
Allstate Life Insurance Company:
25,000,000 0 25,000,000 5.629%** 12/29/96# 25,000,000 0 25,000,000
25,000,000 0 25,000,000 5.629%** 12/29/96# 25,000,000 0 25,000,000
25,000,000 0 25,000,000 Anchor National Life Insurance Company,
5.718%** 12/29/96# 25,000,000 0 25,000,000
Commonwealth Life Insurance Company, Inc.:
10,000,000 0 10,000,000 5.670%** 03/29/97# 10,000,000 0 10,000,000
62,000,000 0 62,000,000 5.670%** 03/29/97# 62,000,000 0 62,000,000
50,000,000 0 50,000,000 General American Life Insurance Company,
5.610%** 10/07/96# 50,000,000 0 50,000,000
Life Insurance Company of Georgia,
60,000,000 0 60,000,000 5.700%** 03/29/97# 60,000,000 0 60,000,000
</TABLE>
NATIONS FUND
NATIONS PRIME FUND
PILOT SHORT-TERM DIVERSIFIED ASSETS FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
====================================================================================================================================
PILOT SECURITY PILOT
SHORT-TERM DESCRIPTIONS SHORT-TERM
NATIONS DIVERSIFIED NATIONS DIVERSIFIED
PRIME ASSETS PRIME ASSETS
FUND FUND COMBINED FUND FUND COMBINED
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
GUARANTEED INVESTMENT CONTRACTS - (CONTINUED)
Life Insurance Company of Virginia:
$ 50,000,000 $ 0 $ 50,000,000 5.420%**+ 10/07/96# $ 50,000,000 $ 0 $ 50,000,000
25,000,000 0 25,000,000 5.469%**+ 10/07/96# 25,000,000 0 25,000,000
25,000,000 0 25,000,000 5.469%**+ 10/07/96# 25,000,000 0 25,000,000
20,000,000 0 20,000,000 Peoples Security Life Insurance Company,
5.670%**+ 03/29/97# 20,000,000 0 20,000,000
50,000,000 0 50,000,000 Sun Life Insurance Company of America,
5.770%**+ 03/29/97# 50,000,000 0 50,000,000
25,000,000 0 25,000,000 Travelers Life Insurance Company,
5.119%**+ 10/01/96 +++ 25,000,000 0 25,000,000
------------------------------------------
---------------------------------------------------------------------------
TOTAL GUARANTEED INVESTMENT
CONTRACTS $452,000,000 $ 0 $452,000,000
---------------------------------------------------------------------------
MUNICIPAL BONDS - 0.8%
22,800,000 0 22,800,000 Indiana (State of), Financing Authority, Economic
Development Revenue, Qualitech Steel, National City
Bank, Indiana LOC,
5.570%+ 10/02/96 +++ 22,800,000 0 22,800,000
24,500,000 0 24,500,000 Missouri (State of), Economic Development Revenue, Export and
Infrastructure Board, (Biocraft Laboratories Inc. Project),
PNC Bank LOC,
5.450%+ 10/02/96 +++ 24,500,000 0 24,500,000
------------------------------------------
---------------------------------------------------------------------------
TOTAL MUNICIPAL BONDS $ 47,300,000 $ 0 $ 47,300,000
------------------------------------------
TIME DEPOSITS - 2.1%
TIME DEPOSITS - DOMESTIC - 1.6%
50,000,000 0 50,000,000 Societe Generale,
5.875% 10/01/96 50,000,000 0 50,000,000
0 40,000,000 40,000,000 Suntrust Bank,
5.875% 10/01/96 0 40,000,000 40,000,000
------------------------------------------
50,000,000 40,000,000 90,000,000
------------------------------------------
TIME DEPOSIT - EURO - 0.5%
30,000,000 0 30,000,000 First Union National Bank,
5.750% 10/01/96 30,000,000 0 30,000,000
------------------------------------------
---------------------------------------------------------------------------
TOTAL TIME DEPOSITS $ 80,000,000 $ 40,000,000 $120,000,000
---------------------------------------------------------------------------
U.S. GOVERNMENT OBLIGATIONS - 6.5%
FEDERAL FARM CREDIT BANK - 0.4%
0 25,000,000 25,000,000 4.950% 03/03/97 0 24,979,644 24,979,644
------------------------------------------
FEDERAL HOME LOAN BANK - 1.2%
50,000,000 0 50,000,000 5.360% + 10/01/96 +++ 50,000,000 0 50,000,000
18,000,000 0 18,000,000 4.619%++ 10/29/96 +++ 18,000,000 0 18,000,000
------------------------------------------
68,000,000 0 68,000,000 STUDENT LOAN MARKETING ASSOCIATION FLOATING RATE NOTES - 4.9%
50,000,000 0 50,000,000 5.480%+ 10/01/96 +++ 50,000,000 0 50,000,000
20,000,000 0 20,000,000 5.490%+ 10/01/96 +++ 20,000,000 0 20,000,000
11,600,000 0 11,600,000 5.510%+ 10/01/96 +++ 11,560,876 0 11,560,876
12,000,000 0 12,000,000 5.510%+ 10/01/96 +++ 12,000,000 0 12,000,000
47,500,000 0 47,500,000 5.530%+ 10/01/96 +++ 47,335,263 0 47,335,263
21,000,000 0 21,000,000 5.530%+ 10/01/96 +++ 20,981,173 0 20,981,173
70,000,000 0 70,000,000 5.620%+ 10/01/96 +++ 70,000,000 0 70,000,000
10,000,000 40,700,000 50,700,000 5.670%+ 10/01/96 +++ 10,000,000 40,773,012 50,773,012
------------------------------------------
241,877,312 40,773,012 282,650,324
------------------------------------------
---------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS $309,877,312 $ 65,752,656 $375,629,968
---------------------------------------------------------------------------
</TABLE>
<PAGE>
NATIONS FUND
NATIONS PRIME FUND
PILOT SHORT-TERM DIVERSIFIED ASSETS FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
====================================================================================================================================
PILOT SECURITY PILOT
SHORT-TERM DESCRIPTIONS SHORT-TERM
NATIONS DIVERSIFIED NATIONS DIVERSIFIED
PRIME ASSETS PRIME ASSETS
FUND FUND COMBINED FUND FUND COMBINED
====================================================================================================================================
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 1.0%
U.S.TREASURY NOTES - 1.0%
$25,000,000 $0 $25,000,000 6.750% 02/28/97 $25,166,387 $0 $25,166,387
35,000,000 0 35,000,000 6.875% 02/28/97 35,239,818 0 35,239,818
----------------------------------------------------
--------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS $60,406,205 $0 $60,406,205
--------------------------------------------------------------------------------------
SHARES MONEY MARKET FUNDS - 0.1%
------
6,086,000 0 6,086,000 AIM Liquid Asset Portfolio 6,086,000 0 6,086,000
1,000,000 0 1,000,000 AIM Prime Fund 1,000,000 0 1,000,000
1,005,000 0 1,005,000 Dreyfus Cash Management Plus Fund 1,005,000 0 1,005,000
39,000 0 39,000 Fidelty Institutional Cash Portfolio 39,000 0 39,000
----------------------------------------------------
--------------------------------------------------------------------------------------
TOTAL MONEY MARKET FUNDS $8,130,000 $0 $8,130,000
--------------------------------------------------------------------------------------
PRINCIPAL AMOUNT REPURCHASE AGREEMENTS - 11.4%
----------------
$80,000,000 $0 $80,000,000 GOLDMAN SACHS & COMPANY,
5.820% 10/01/96 80,000,000 0 80,000,000
0 129,689,330 129,689,330 LEHMAN BROTHERS INC.,
5.240% 10/01/96 0 129,689,330 129,689,330
180,000,000 0 180,000,000 LEHMAN BROTHERS INC.,
5.900% 10/01/96 180,000,000 0 180,000,000
0 150,184,325 150,184,325 MERRILL LYNCH & COMPANY INC.,
5.210% 10/01/96 0 150,184,325 150,184,325
0 46,742,824 46,742,824 MORGAN (J.P.) & COMPANY INC.,
5.200% 10/01/96 0 46,742,824 46,742,824
75,000,000 0 75,000,000 MORGAN STANLEY GROUP INC.,
5.800% 10/01/96 75,000,000 0 75,000,000
----------------------------------------------------
--------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS $335,000,000 $326,616,479 $661,616,479
--------------------------------------------------------------------------------------
--------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $5,793,831,842) 4,207,896,443 $1,585,935,399 $5,793,831,842
--------------------------------------------------------------------------------------
</TABLE>
** Restricted security.
+ Floating / variable rate note. The interest rate shown reflects the
rate in effect at September 30, 1996.
++ Variable rate security. The interest rate shown is tied to the Cost of
Funds Index and resets on a delayed basis.
+++ Reset date. Interest rates reset either daily, weekly, monthly, quarterly
or semi-annually.
# Security subject to a demand feature which allows the Fund to put the
security back to the issuer from 7 to 180 calendar days.
(a) Securities are not registered under the Securities Act of 1933. These
securities may be resold in transactions exempt from registration to
qualified institutional buyers.
ABBREVIATION:
LOC Letter of Credit
MTN Medium Term Note
<PAGE>
NATIONS PRIME FUND
PILOT SHORT-TERM DIVERSIFIED ASSETS FUND
Pro Forma Combining Statement of Assets and Liabilities
September 30, 1996
<TABLE>
<CAPTION>
Nations Pilot Short-Term Adjustments Pro Forma
Prime Fund Diversified Fund to Proforma Combined (Note 1)
<S> <C> <C> <C> <C>
ASSETS:
Investments at Value (cost $4,207,896,443
$1,585,935,399 and $5,793,831,842) $4,207,896,443 $1,585,935,399 - $5,793,831,842
Income Receivable 25,845,625 9,070,769 - 34,916,394
Receivable for Fund Shares Sold 8,458,214 - - 8,458,214
Prepaid and Other Assets 60,281 - - 60,281
Total Assets 4,242,260,563 1,595,006,168 - 5,837,266,731
LIABILITIES
Income Distribution Payable 11,981,449 6,728,730 - 18,710,179
Payable Due to Custodian 46,566,503 - - 46,566,503
Payable for Fund Shares Redeemed 13,578,604 - - 13,578,604
Accrued Expenses 1,548,722 503,411 - 2,052,133
Total Liabilities 73,675,278 7,232,141 80,907,419
6651.55
Net Assets Applicable to Shares Outstanding $4,168,585,285 $1,587,774,027 $5,756,359,312
Net Assets by Class:
Primary A $2,494,705,981 $1,284,648,572 $3,779,354,553
Primary B 194,974,081 n/a 194,974,081
Investor A 1,067,016,964 n/a 1,067,016,964
Investor B 329,251,105 242,686,137 571,937,242
Investor C 82,307,215 n/a 82,307,215
Investor D 329,939 60,439,317 60,769,256
Shares Outstanding by Class:
Primary A 2,494,982,131 1,284,902,636 3,779,884,767
Primary B 194,995,481 n/a 194,995,481
Investor A 1,067,134,079 n/a 1,067,134,079
Investor B 329,287,243 242,730,396 572,017,639
Investor C 82,316,249 n/a 82,316,249
Investor D 329,977 60,450,937 60,780,914
Primary A Shares:
Net Asset Value per Share $1.00 $1.00 $1.00
Primary B Shares:
Net Asset Value per Share $1.00 n/a $1.00
Investor A Shares:
Net Asset Value per Share $1.00 n/a $1.00
Investor B Shares:
Net Asset Value per Share $1.00 $1.00 $1.00
Investor C Shares:
Net Asset Value per Share $1.00 n/a $1.00
Investor D Shares:
Net Asset Value per Share: $1.00 $1.00 $1.00
</TABLE>
See Notes to Proforma Financial Statements
<PAGE>
NATIONS PRIME FUND
PILOT SHORT-TERM DIVERSIFIED ASSETS FUND
Pro Forma Statement of Operations (Unaudited)
For the Twelve Month Period Ending September 30, 1996
<TABLE>
<CAPTION>
Nations Pilot Short-Term Adjustments Pro Forma
Prime Fund Diversified Fund to Proforma Combined (Note 1)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $233,170,534 $81,508,290 $314,678,824
Total Investment Income 233,170,534 81,508,290 314,678,824
EXPENSES:
Investment Advisory 8,372,890 2,213,684 648,213 (a) 11,234,787
Administration 4,141,604 1,624,782 (148,993)(a) 5,617,393
Portfolio Accounting Fee - 72,932 (72,932)(a) 0
Transfer Agent 862,471 13,945 - 876,416
Custodian 577,553 100,566 (25,142)(b) 652,978
Legal and Audit Fees 516,340 151,118 (151,118)(b) 516,340
Trustees' Fees 119,067 74,801 (74,801)(b) 119,067
Amortization of Organization Costs 0 40,687 (40,687)(c) 0
Other Expenses 800,354 209,211 (52,303)(b) 957,262
Subtotal 15,390,279 4,501,726 82,238 19,974,243
Shareholder Servicing and Distribution Fees
Primary B 400,832 - n/a 400,832
Investor A 3,627,686 - n/a 3,627,686
Investor B 818,635 578,877 n/a 1,397,512
Investor C 186,529 - n/a 186,529
Investor D 862 206,340 n/a 207,202
Fees Waived and/or Reimbursed by
Investment Advisor (2,945,587) (463,815) 287,339 (d) (3,122,063)
Total Expenses 17,479,236 4,823,128 369,577 22,671,941
NET INVESTMENT INCOME 215,691,298 76,685,162 (369,577) 292,006,883
Net Realized and Unrealized Gain/(Loss)
on Investments:
Realized Gain/(Loss) on Securities (25,675) (514,757) (540,432)
Net Realized and Unrealized Gain/(Loss)
on Investments (25,675) (514,757) (540,432)
Net Increase/(Decrease) in Assets
Resulting from Operations $215,665,623 $76,170,405 ($369,577) $291,466,451
</TABLE>
Legend:
(a) Reflects adjustment to the acquiring fund contractual fee obligation.
(b) Adjustment reflects expected savings when the two funds become one.
(c) Organizaton expense of the acquired fund is not an expense of the combined
fund.
(d) Reflects adjustment to the level of the acquiring fund's voluntary expense
reimbursement.
See Notes to Proforma Financial Statements
<PAGE>
Nations Prime Fund
Pilot Short-Term Diversified Assets Fund
Notes to Pro Forma Financial Statements (Unaudited)
1. Basis of Combination
Nations Fund, Inc. (the "Company") is a Maryland corporation registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
investment company. As of September 30, 1996 the Company offers five separate
portfolios. The unaudited Pro Forma Combining Portfolio of Investments and
Statement of Assets and Liabilities and the Statement of Operations reflect the
accounts of the Nations Prime Fund and the Pilot Short-Term Diversified Assets
Fund for the period ended September 30, 1996. These statements have been derived
from books and records utilized in calculating daily net asset value at
September 30, 1996.
The pro forma statements give effect to the proposed transfer of the assets and
stated liabilities of the Pilot Short-Term Diversified Assets Fund in exchange
for shares of Nations Prime Fund. Under generally accepted accounting
principles, the historical cost of investment securities will be carried forward
to the surviving entity and the results of operations of the Pilot Short-Term
Diversified Assets Fund for pre-combination periods will not be restated. The
pro forma statements do not reflect the expenses of either fund in carrying out
its obligations under the proposed Agreement and Plan of Reorganization.
The Pro Forma Combining Portfolio of Investments and Statement of Assets and
Liabilities and the Statement of Operations should be read in conjunction with
the historical financial statements of the funds incorporated by reference in
the Statement of Additional Information.
<PAGE>
Nations Prime Fund
Pilot Short-Term Diversified Assets Fund
Notes to Pro Forma Financial Statements (Unaudited)
For the twelve month period ended September 30, 1996, the Nations Prime Fund's
investment advisory fee was computed based on the combined average daily net
assets of the Nations Prime Fund and the Nations Treasury Fund using 0.25% of
combined average daily net assets up to $250 million and 0.20% of combined
average daily net assets exceeding $250 million. The administration fee was
computed based on the annual rate of 0.10% of average daily net assets of the
Company and the investment portfolios of Nations Fund Trust and Nations Fund
Portfolios, Inc. (two other registered open-end investment companies that are
part of the Nations Fund Family) on a combined basis.
The Company has adopted a shareholder servicing plan for the Primary B Shares
("Primary B Servicing Plan"), Investor A Shares ("Investor A Servicing Plan"),
Investor B Shares ("Investor B Servicing Plan"), Investor C Shares ("Investor C
Servicing Plan") and Investor D Shares ("Investor D Servicing Plan") of Nations
Prime Fund. Under the Primary B Servicing Plan, Investor A Servicing Plan,
Investor B Servicing Plan, Investor C Servicing Plan and Investor D Servicing
Plan, aggregate payments may not exceed 0.25%, 0.25%, 0.25%, 0.25% and 0.25%, on
an annualized basis, of the average daily net assets of the Primary B Shares,
Investor A Shares, Investor B Shares, Investor C Shares and Investor D Shares,
respectively, of the Fund.
The Company has adopted a distribution plan pursuant to Rule 12b-1 under the
1940 Act for the Investor A Shares ("Investor A Distribution Plan") and Investor
D Shares ("Investor D Distribution Plan") of the Nations Prime Fund. Under the
Investor A Distribution Plan and Investor D Distribution Plan, aggregate
payments may not exceed 0.10% and 0.25%, on an annualized basis, of the average
daily net assets of the Investor A Shares and Investor D Shares, respectively,
of the Fund.
2
<PAGE>
Nations Prime Fund
Pilot Short-Term Diversified Assets Fund
Notes to Pro Forma Financial Statements (Unaudited)
2. Portfolio Valuation
Securities of Nations Prime Fund are valued on the basis of amortized cost,
which approximates market value. Amortized cost valuation involves initially
valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, as long as the effect of
fluctuating interest rates on the fair market value of the instrument is not
significant. Pilot Short-Term Diversified Assets Fund uses similar rules for
determining portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of Nations Prime Fund which would have been issued at September 30, 1996
in connection with the proposed reorganization. The pro forma number of shares
outstanding of 5,757,129,130 consists of 1,588,083,970 shares assumed issued in
the reorganization plus 4,169,045,160 shares of Nations Prime Fund at September
30, 1996.
3
<PAGE>
<PAGE>
NATIONS FUND
NATIONS SMALL COMPANY GROWTH FUND
PILOT SMALL CAPITALIZATION EQUITY FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
NATIONS PILOT SECURITY NATIONS PILOT
SMALL SMALL DESCRIPTIONS SMALL SMALL
COMPANY CAPITALIZATION COMPANY CAPITALIZATION
GROWTH EQUITY GROWTH EQUITY
FUND FUND COMBINED FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCKS - 87.3%
ADVERTISING - 0.8%
0 23,400 23,400 HA-LO Industries, Inc. $0 $678,600 $678,600
---------------------------------------------
AEROSPACE AND DEFENSE - 0.8%
0 7,900 7,900 Watkins-Johnson Company 0 159,975 159,975
0 40,400 40,400 Gencorp, Inc. 0 570,650 570,650
---------------------------------------------
0 730,625 730,625
---------------------------------------------
AIRLINES - 0.8%
0 15,900 15,900 Air Express International Corporation 0 449,175 449,175
0 16,200 16,200 US Air Group, Inc. 0 267,300 267,300
---------------------------------------------
0 716,475 716,475
---------------------------------------------
APPAREL AND TEXTILES - 1.3%
0 43,700 43,700 Culp, Inc. 0 611,800 611,800
0 19,600 19,600 Quiksilver, Inc. 0 490,000 490,000
---------------------------------------------
0 1,101,800 1,101,800
---------------------------------------------
AUTOMOBILE PARTS MANUFACTURERS - 1.8%
0 19,300 19,300 Kaydon Corporation 0 829,900 829,900
0 28,000 28,000 Standard Products Company 0 707,000 707,000
---------------------------------------------
0 1,536,900 1,536,900
---------------------------------------------
BANKS - 4.8%
0 15,400 15,400 Brenton Banks, Inc. 0 381,150 381,150
0 54,600 54,600 City National Corporation 0 989,625 989,625
0 12,300 12,300 Deposit Guaranty Corporation 0 593,475 593,475
0 40,400 40,400 First Republic Bancorp, Inc. 0 631,250 631,250
0 18,100 18,100 ONBANCorp, Inc. 0 626,712 626,712
0 24,800 24,800 U.S. Bancorp 0 954,800 954,800
---------------------------------------------
0 4,177,012 4,177,012
---------------------------------------------
BEVERAGES - 1.3%
0 33,500 33,500 Robert Mondavi Corporation 0 1,097,125 1,097,125
---------------------------------------------
BIOTECHNOLOGY - 0.8%
0 19,800 19,800 Human Genome Sciences, Inc. 0 747,450 747,450
---------------------------------------------
CHEMICALS - 3.2%
0 24,250 24,250 Bio-Rad Laboratories, Inc. 0 697,187 697,187
0 49,200 49,200 Calgon Carbon Corporation 0 510,450 510,450
0 61,200 61,200 Crompton & Knowles Corporation 0 1,002,150 1,002,150
0 50,600 50,600 International Specialty Products, Inc. 0 506,000 506,000
0 3,837 3,837 Tuscarora, Inc. 0 85,373 85,373
---------------------------------------------
0 2,801,160 2,801,160
---------------------------------------------
</TABLE>
<PAGE>
NATIONS FUND
NATIONS SMALL COMPANY GROWTH FUND
PILOT SMALL CAPITALIZATION EQUITY FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
NATIONS PILOT SECURITY NATIONS PILOT
SMALL SMALL DESCRIPTIONS SMALL SMALL
COMPANY CAPITALIZATION COMPANY CAPITALIZATION
GROWTH EQUITY GROWTH EQUITY
FUND FUND COMBINED FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCKS - (CONTINUED)
COMPUTER SOFTWARE - 1.7%
0 31,800 31,800 Exabyte Corporation $0 $477,000 $477,000
0 7,200 7,200 Filenet Corporation 0 183,600 183,600
0 35,450 35,450 Marcam Corporation 0 416,537 416,537
0 13,300 13,300 Software Spectrum, Inc. 0 399,000 399,000
---------------------------------------------
0 1,476,137 1,476,137
---------------------------------------------
CONSTRUCTION - 4.0%
0 29,800 29,800 Champion Enterprises, Inc. 0 674,225 674,225
0 57,600 57,600 Kaufman & Broad Home Corporation 0 748,800 748,800
0 24,500 24,500 NCI Building Systems, Inc. 0 796,250 796,250
0 28,400 28,400 Oakwood Homes Corporation 0 781,000 781,000
0 21,700 21,700 Pulte Corporation 0 556,063 556,063
---------------------------------------------
0 3,556,338 3,556,338
---------------------------------------------
COSMETICS AND TOILETRY - 2.2%
0 19,800 19,800 Alberto-Culver Company, Class B 0 858,825 858,825
0 46,100 46,100 Paragon Trade Brands, Inc. 0 1,077,587 1,077,587
---------------------------------------------
0 1,936,412 1,936,412
---------------------------------------------
DRUGS - 0.6%
0 30,300 30,300 NBTY, Inc. 0 499,950 499,950
---------------------------------------------
ELECTRIC POWER - 6.1%
0 24,100 24,100 CalEnergy Company 0 768,187 768,187
0 20,400 20,400 Central Hudson Gas and
Electric Corporation 0 606,900 606,900
0 11,900 11,900 Central Maine Power Company 0 145,775 145,775
0 18,000 18,000 Commonwealth Energy
Systems Company 0 418,500 418,500
0 30,400 30,400 DT Industries, Inc. 0 1,026,000 1,026,000
0 8,600 8,600 IES Industries, Inc. 0 261,225 261,225
0 18,400 18,400 Northwestern Public Service Company 0 549,700 549,700
0 38,900 38,900 Pioneer Standard Electronics, Inc. 0 437,625 437,625
0 30,300 30,300 TNP Enterprises, Inc. 0 749,925 749,925
0 25,300 25,300 Tucson Electric Power Company 0 426,937 426,937
---------------------------------------------
0 5,390,774 5,390,774
---------------------------------------------
ELECTRICAL EQUIPMENT - 1.2%
0 13,900 13,900 Coherent, Inc. 0 489,975 489,975
0 39,900 39,900 Core Industries, Inc. 0 543,637 543,637
---------------------------------------------
0 1,033,612 1,033,612
---------------------------------------------
ELECTRONICS - 2.3%
0 42,200 42,200 Credence Systems Corporation 0 664,650 664,650
0 20,300 20,300 Dionex Corporation 0 771,400 771,400
0 15,700 15,700 Electro Scientific Industries, Inc. 0 290,450 290,450
0 20,000 20,000 Network Equipment Technologies, Inc. 0 272,500 272,500
---------------------------------------------
0 1,999,000 1,999,000
---------------------------------------------
</TABLE>
<PAGE>
NATIONS FUND
NATIONS SMALL COMPANY GROWTH FUND
PILOT SMALL CAPITALIZATION EQUITY FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
NATIONS PILOT SECURITY NATIONS PILOT
SMALL SMALL DESCRIPTIONS SMALL SMALL
COMPANY CAPITALIZATION COMPANY CAPITALIZATION
GROWTH EQUITY GROWTH EQUITY
FUND FUND COMBINED FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCKS - (CONTINUED)
ENVIROMENTAL - 0.9%
0 36,000 36,000 Zurn Industries, Inc. $0 $805,500 $805,500
---------------------------------------------
EXPLORATION AND DRILLING - 7.1%
0 27,400 27,400 Brown (Tom), Inc. 0 517,175 517,175
0 70,550 70,550 Comstock Resources, Inc. 0 784,869 784,869
0 47,546 47,546 Forest Oil Corporation 0 612,155 612,155
0 26,700 26,700 Giant Industries, Inc. 0 383,813 383,813
0 32,000 32,000 Parker Drilling Company 0 204,000 204,000
0 38,100 38,100 Reading and Bates Corporation 0 1,033,463 1,033,463
0 12,500 12,500 Seacor Holdings, Inc. 0 634,375 634,375
0 69,700 69,700 Texas Meridian Resources Corporation 0 1,036,788 1,036,788
0 9,282 9,282 Ultramar Corporation 0 280,782 280,782
0 28,600 28,600 Vintage Petroleum, Inc. 0 840,125 840,125
---------------------------------------------
0 6,327,545 6,327,545
---------------------------------------------
FINANCIAL SERVICES - 6.2%
0 11,400 11,400 Aames Financial Corporation 0 574,275 574,275
0 16,100 16,100 Advanta, Class A 0 740,600 740,600
0 20,400 20,400 Bay View Capital Corporation 0 726,750 726,750
0 37,550 37,550 Capstead Mortgage Corporation 0 774,469 774,469
0 13,300 13,300 Cole Taylor Financial Group, Inc. 0 399,000 399,000
0 17,400 17,400 Commercial Federal Corporation 0 748,200 748,200
0 31,100 31,100 Resource Mortgage Capital Corporation 0 738,625 738,625
0 67,700 67,700 Southwest Securities Group, Inc. 0 778,550 778,550
---------------------------------------------
0 5,480,469 5,480,469
---------------------------------------------
FOOD PRODUCERS - 1.0%
0 18,000 18,000 Eskimo Pie Corporation 0 297,000 297,000
0 23,800 23,800 Riser Foods, Inc. 0 618,800 618,800
---------------------------------------------
0 915,800 915,800
---------------------------------------------
FURNITURE AND APPLIANCES - 0.7%
0 66,000 66,000 O'Sullivan Industries Holdings, Inc. 0 585,750 585,750
---------------------------------------------
INSURANCE - 4.5%
0 24,600 24,600 Avemco Corporation 0 384,375 384,375
0 14,200 14,200 Berkley (W.R.) Corporation 0 649,650 649,650
0 14,579 14,579 Delphi Financial Group, Inc. 0 408,206 408,206
0 13,800 13,800 Executive Risk, Inc. 0 531,300 531,300
0 27,200 27,200 First American Financial Corporation 0 955,400 955,400
0 26,140 26,140 Frontier Insurance Group, Inc. 0 1,042,333 1,042,333
---------------------------------------------
0 3,971,264 3,971,264
---------------------------------------------
</TABLE>
<PAGE>
NATIONS FUND
NATIONS SMALL COMPANY GROWTH FUND
PILOT SMALL CAPITALIZATION EQUITY FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
NATIONS PILOT SECURITY NATIONS PILOT
SMALL SMALL DESCRIPTIONS SMALL SMALL
COMPANY CAPITALIZATION COMPANY CAPITALIZATION
GROWTH EQUITY GROWTH EQUITY
FUND FUND COMBINED FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCKS - (CONTINUED)
MACHINERY AND EQUIPMENT - 3.0%
0 9,500 9,500 Applied Power, Inc. $0 $302,813 $302,813
0 15,100 15,100 Blount International, Inc. 0 507,738 507,738
0 12,900 12,900 Esterline Technologies Corporation 0 278,963 278,963
0 21,200 21,200 Gardner Denver Machinery, Inc. 0 646,600 646,600
0 88,800 88,800 Worldtex, Inc. 0 666,000 666,000
0 8,760 8,760 Wyman-Gordon Company 0 200,385 200,385
---------------------------------------------
0 2,602,499 2,602,499
---------------------------------------------
MEDICAL PRODUCTS AND SUPPLIES - 2.0%
0 11,300 11,300 Ballard Medical Products 0 220,350 220,350
0 19,300 19,300 Bergen Brunswig Corporation 0 612,775 612,775
0 26,236 26,236 Steris Corporation 0 888,745 888,745
---------------------------------------------
0 1,721,870 1,721,870
---------------------------------------------
MEDICAL SERVICES - 0.5%
0 32,400 32,400 Amco International Corporation 0 445,500 445,500
---------------------------------------------
OFFICE EQUIPMENT - 0.4%
0 16,400 16,400 American Business Products, Inc. 0 364,900 364,900
---------------------------------------------
PRINTING AND PUBLISHING - 0.9%
0 14,300 14,300 Pulitzer Publishing Company 0 816,887 816,887
---------------------------------------------
PROFESSIONAL SERVICES - 3.7%
0 29,300 29,300 Bush Industries, Inc. 0 538,387 538,387
0 10,600 10,600 Corrections Corporation of America 0 331,250 331,250
0 28,300 28,300 Inacom Corporation 0 969,275 969,275
0 18,100 18,100 Komag, Inc. 0 380,100 380,100
0 30,100 30,100 Logicom, Inc. 0 1,057,262 1,057,262
---------------------------------------------
0 3,276,274 3,276,274
---------------------------------------------
RECREATION - 2.5%
0 19,025 19,025 International Family Entertainment,
Class B 0 311,534 311,534
0 50,800 50,800 Sodak Gaming, Inc. 0 1,168,400 1,168,400
0 36,000 36,000 Sturm, Ruger and Company, Inc. 0 706,500 706,500
---------------------------------------------
0 2,186,434 2,186,434
---------------------------------------------
RESTAURANT AND LODGING - 2.1%
0 21,800 21,800 Rio Hotel & Casino 0 343,350 343,350
0 21,100 21,100 Sbarro, Inc. 0 545,963 545,963
0 35,100 35,100 WMS Industries, Inc. 0 947,700 947,700
---------------------------------------------
0 1,837,013 1,837,013
---------------------------------------------
</TABLE>
<PAGE>
NATIONS FUND
NATIONS SMALL COMPANY GROWTH FUND
PILOT SMALL CAPITALIZATION EQUITY FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
NATIONS PILOT SECURITY NATIONS PILOT
SMALL SMALL DESCRIPTIONS SMALL SMALL
COMPANY CAPITALIZATION COMPANY CAPITALIZATION
GROWTH EQUITY GROWTH EQUITY
FUND FUND COMBINED FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
COMMON STOCKS - (CONTINUED)
RETAIL-GENERAL - 5.8%
0 19,500 19,500 Brown Group, Inc. $0 $453,375 $453,375
0 38,300 38,300 Chronimed, Inc. 0 531,412 531,412
0 23,800 23,800 Fabri-Centers of America, Inc. 0 306,425 306,425
0 27,300 27,300 Nieman Marcus Group, Inc. 0 962,325 962,325
0 27,800 27,800 Pacific Sunwear of California 0 913,925 913,925
0 21,600 21,600 Proffitts, Inc. 0 853,200 853,200
0 14,500 14,500 Ross Stores, Inc. 0 522,000 522,000
0 23,700 23,700 Waban, Inc. 0 542,137 542,137
---------------------------------------------
0 5,084,799 5,084,799
---------------------------------------------
RETAIL-SPECIALTY - 1.9%
0 45,370 45,370 Eagle Hardware and Garden, Inc. 0 1,224,990 1,224,990
0 113,400 113,400 Venture Stores, Inc. 0 481,950 481,950
---------------------------------------------
0 1,706,940 1,706,940
---------------------------------------------
STEEL - 4.4%
0 62,700 62,700 National Steel Corporation 0 697,537 697,537
0 44,000 44,000 Olympic Steel, Inc. 0 1,182,500 1,182,500
0 27,500 27,500 Rouge Steel Company 0 598,125 598,125
0 54,900 54,900 Steel Technologies, Inc. 0 686,250 686,250
0 69,700 69,700 WHX Corporation 0 705,712 705,712
---------------------------------------------
0 3,870,124 3,870,124
---------------------------------------------
TELECOMMUNICATIONS - 1.9%
0 61,500 61,500 Compression Laboratories, Inc. 0 399,750 399,750
0 22,400 22,400 Proxim, Inc. 0 644,000 644,000
0 37,700 37,700 Xircom, Inc. 0 612,625 612,625
---------------------------------------------
0 1,656,375 1,656,375
---------------------------------------------
UTILITIES-NATURAL GAS - 2.4%
0 15,100 15,100 Connecticut Natural Gas Corporation 0 366,175 366,175
0 33,900 33,900 Piedmont Natural Gas Company, Inc. 0 817,838 817,838
0 27,070 27,070 Southeastern Michigan Gas, Inc. 0 500,795 500,795
0 28,800 28,800 Southwestern Energy Company 0 428,400 428,400
---------------------------------------------
0 2,113,208 2,113,208
---------------------------------------------
OTHER - 1.7%
0 54,000 54,000 Foamex International, Inc. 0 877,500 877,500
0 56,900 56,900 Fossil, Inc. 0 654,350 654,350
---------------------------------------------
0 1,531,850 1,531,850
---------------------------------------------
---------------------------------------------------------------------------------------------
TOTAL COMMON STOCKS 0 76,780,371 76,780,371
---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NATIONS FUND
NATIONS SMALL COMPANY GROWTH FUND
PILOT SMALL CAPITALIZATION EQUITY FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
SHARES VALUE
- ------------------------------------------------------------------------------------------------------------------------------
NATIONS PILOT SECURITY NATIONS PILOT
SMALL SMALL DESCRIPTIONS SMALL SMALL
COMPANY CAPITALIZATION COMPANY CAPITALIZATION
GROWTH EQUITY GROWTH EQUITY
FUND FUND COMBINED FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. TREASURY BILL - 0.4%
$0 $400,000 $400,000 discount note due 12/12/96 $0 $396,024 $396,024
---------------------------------------------
REPURCHASE AGREEMENTS - 6.3%
0 2,701,807 2,701,807 Lehman Brothers
5.200% 10/01/96 0 2,701,807 2,701,807
0 2,805,116 2,805,116 Morgan (J.P.) & Company
0.000% 10/01/96 0 2,805,116 2,805,116
---------------------------------------------
------------------------------------------------
TOTAL REPURCHASE AGREEMENTS 0 5,506,923 5,506,923
---------------------------------------------------------------------------------------------
NUMBER OF
CONTRACTS
--------------
FUTURES CONTRACTS - LONG POSITION - 6.0%
0 29 29 S&P Midcap Index Futures,
December 1996 0 3,537,275 3,537,275
0 5 5 S&P 500 Index Futures,
December 1996 0 1,728,500 1,728,500
---------------------------------------------------------------------------------------------
TOTAL FUTURES CONTRACTS - LONG POSITION 0 5,265,775 5,265,775
---------------------------------------------------------------------------------------------
---------------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $82,752,935) $0 $87,949,093 $87,949,093
---------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NATIONS SMALL COMPANY GROWTH FUND
PILOT SMALL CAPITALIZATION EQUITY FUND
Pro Forma Combining Statement of Assets and Liabilities
September 30, 1996
<TABLE>
<CAPTION>
Nations
Small
Company Pilot Small
Growth Company Adjustments to Pro Forma
Fund Growth Fund Proforma Combined (Note 1)
<S> <C> <C> <C> <C>
ASSETS:
Investments at Value (cost $0, $82,752,935 - $87,949,093 - $87,949,093
and $82,752,935)
Income Receivable - 92,686 - 92,686
Receivable for Fund Shares Sold - 698 - 698
Receivable for Investments Sold - 92,475 - 92,475
Receivable due from Investment Advisor - - 18,054 (a) 18,054
Unamortized Organization Costs - 18,054 (18,054)(a) -
Total Assets 0 88,153,006 0 88,153,006
LIABILITIES:
Income Distribution Payable - 85,781 - 85,781
Payable for Fund Shares Redeemed - 24,500 - 24,500
Accrued Expenses - 68,723 - 68,723
Total Liabilities 0 179,005 0 179,005
Net Assets Applicable to Shares Outstanding $0 $87,974,001 $0 $87,974,001
Net Assets by Class:
Primary A/Pilot Shares - $77,718,075 $77,718,075
Primary B - n/a n/a
Investor A/Admin. Class A Shares - $ 2,858,518 $ 2,858,518
Investor C - n/a n/a
Investor N/Investor Class Shares - $ 2,131,634 $ 2,131,634
Shares Outstanding by Class:
Primary A/Pilot Shares - 6,949,562 6,949,562
Primary B - n/a n/a
Investor A/Admin. Class A Shares - 255,867 255,867
Investor C - n/a n/a
Investor N/Investor Class Shares 0 190,604 190,604
Primary A Shares/Pilot Shares:
Net Asset Value per Share n/a $ 11.18 $ 11.18
Primary B Shares:
Net Asset Value per Share n/a n/a n/a
Investor A Shares/Admin. Class A Shares:
Net Asset Value per Share n/a $ 11.17 $ 11.17
Investor C Shares:
Net Asset Value per Share n/a n/a n/a
Investor N Shares/Investor Class Shares:
Net Asset Value per Share n/a $ 11.18 $ 11.18
</TABLE>
See Notes to Proforma Financial Statements.
(a) Unamortized Organization Costs of the acquired fund will be borne by the
Advisor.
<PAGE>
NATIONS SMALL COMPANY GROWTH FUND
PILOT SMALL CAPITALIZATION EQUITY FUND
Pro Forma Combining Statement of Operations (Unaudited)
For the Twelve Month Period Ending September 30, 1996
<TABLE>
<CAPTION>
Nations
Small
Company Pilot Small
Growth Capitalization Adjustments to Pro Forma
Fund Equity Fund Proforma Combined (Note 1)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends - $103,779 $103,779
Interest - 684,344 684,344
Total Investment Income 0 788,123 788,123
EXPENSES:
Investment Advisory - 360,029 - 360,029
Administration - 41,352 (5,349)(a) 36,003
Accounting Fee - 5,565 (5,565)(a) 0
Transfer Agent - 16,177 - 16,177
Custodian - 34,327 (8,582)(d) 25,745
Legal and Audit Fees - 21,016 - 21,016
Trustee's Fees - 2,821 - 2,821
Amortization of organization costs - 5,751 (5,751)(b) 0
Other expenses - 67,038 (16,760)(d) 50,279
Subtotal 0 554,076 (42,006) 512,070
SHAREHOLDER SERVICING AND DISTRIBUTION FEES
Administration Class A/Investor A - 2,525 N/A 2,525
Investor C - - N/A N/A
Investor Class Shares/Investor N - 7,743 (1,936)(a) 5,807
Fees waived and/or reimbursed by
investment advisor - (177,867) 8,653 (c) (169,214)
TOTAL EXPENSES 0 386,477 (35,289) 351,188
NET INVESTMENT INCOME 0 401,646 35,289 436,935
NET REALIZED AND UNREALIZED GAIN/(LOSS)
ON INVESTMENTS:
Realized Gain/(Loss) on securities and future
transactions - (166,487) (166,487)
Change in unrealized appreciation/
(depreciation) on securities and futures - 5,196,159 5,196,159
Net Realized and Unrealized gain/(loss) 0 5,029,672 5,029,672
on investments and futures
NET INCREASE/(DECREASE) IN ASSSETS
RESULTING FROM OPERATIONS $0 $5,431,318 $35,289 $5,466,607
</TABLE>
LEGEND:
* REPRESENTS THE PERIOD FROM DECEMBER 12, 1995 (COMMENCEMENT OF OPERATIONS)
THROUGH SEPTEMBER 30, 1996.
(A) REFLECTS ADJUSTMENT TO THE ACQUIRING FUND CONTRACTUAL FEE OBLIGATION.
(B) ORGANIZATION EXPENSE OF THE ACQUIRED FUND IS NOT AN EXPENSE OF THE
COMBINED FUND.
(C) REFLECTS ADJUSTMENT TO THE LEVEL OF THE ACQUIRING FUND'S VOLUNTARY EXPENSE
REIMBURSEMENT.
(D) ADJUSTMENT REFLECTS ECONOMIES OF SCALE GAINED BY THE BUSINESS COMBINATION.
See Notes to Proforma Financial Statements.
<PAGE>
Nations Small Company Growth Fund
Pilot Small Capitalization Equity Fund
Notes to Pro Forma Financial Statements (Unaudited)
1. Basis of Combination
Nations Fund, Inc. (the "Company") is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end management investment
company. As of September 30, 1996 the Company offered five separate portfolios.
On February 6, 1997, the Board of Directors of the Company created Nations Small
Company Growth Fund for the purpose of this proposed business
combination. The unaudited Pro Forma Combining Portfolio of Investments and
Statement of Assets and Liabilities and the Statement of Operations reflect the
accounts of the Pilot Small Capitalization Equity Fund for the twelve month
period ended September 30, 1996 conformed to the proposed Nations Small
Company Growth Fund expense structure. These statements have been derived from
books and records utilized in calculating daily net asset value at
September 30, 1996.
The pro forma statements give effect to the proposed transfer of the assets and
stated liabilities of the Pilot Small Capitalization Equity Fund in exchange for
shares of the Nations Small Company Growth Fund. Under generally accepted
accounting principles, the historical cost of investment securities will be
carried forward to the surviving entity and the results of operations of the
Pilot Small Capitalization Equity Fund for pre-combination periods will not be
restated. The pro forma statements do not reflect the expenses of either fund in
carrying out its obligations under the proposed Agreement and Plan of
Reorganization.
The Pro Forma Combining Portfolio of Investments and Statement of Assets and
Liabilities and the Statement of Operations should be read in conjunction with
the historical financial statements of the funds incorporated by reference in
the Statement of Additional Information.
<PAGE>
Nations Small Company Growth Fund
Pilot Small Capitalization Equity Fund
Notes to Pro Forma Financial Statements (Unaudited)
The advisory fee for the Nations Small Company Growth Fund was computed using a
net annual rate of 0.75% of average daily net assets (1.00% gross adviser fee
less 0.25% waiver). The subadviser, Boatmen's Trust Company, will be paid a
subadviser fee by the adviser at an annual rate of 0.25% of average daily net
assets. The administration fee was computed based on the annual rate of 0.10% of
average daily net assets of the Company and the investment portfolios of Nations
Fund Trust and Nations Fund Portfolios, Inc. (two other registered open-end
investment companies that are part of the Nations Fund Family) on a combined
basis.
The Company has adopted a shareholder administration plan ("Administration
Plan") for the Primary B Shares of the Nations Small Company Growth Fund. Under
the Administration Plan, aggregate payments may not exceed 0.50%, on an
annualized basis, of the average daily net assets of the Fund's Primary B
Shares.
The Company has also adopted a shareholder servicing and distribution plan
("Investor A Plan") pursuant to Rule 12b-1 under the 1940 Act for the Investor A
Shares of the Nations Small Company Growth Fund. Under the Investor A Plan,
aggregate payments may not exceed 0.25%, on an annualized basis, of the
average daily net assets of the Fund's Investor A Shares.
The Company has also adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act with respect to Investor C Shares ("Investor C Distribution Plan")
and Investor N Shares ("Investor N Distribution Plan") of the Nations Small
Company Growth Fund. Under the Investor C Distribution Plan and Investor N
Distribution Plan, aggregate payments may not exceed 0.25% and 0.50%, on an
annualized basis, of the average daily net assets of the Investor C Shares and
Investor N Shares, respectively, of the Fund.
The Company has also adopted a shareholder servicing plan with respect to
Investor C Shares ("Investor C Servicing Plan") and Investor N Shares
2
<PAGE>
Nations Small Company Growth Fund
Pilot Small Capitalization Equity Fund
Notes to Pro Forma Financial Statements (Unaudited)
("Investor N Servicing Plan") of the Nations Small Company Growth Fund. Under
the Investor C Servicing Plan and Investor N Servicing Plan, aggregate
payments may not exceed 0.25%, on an annualized basis, of the average daily net
assets of the Investor C Shares and Investor N Shares of the Fund.
2. Portfolio Valuation
Securities of Nations Small Company Growth Fund which are traded on a
recognized stock exchange are valued at the last sale price on the securities
exchange on which such securities are primarily traded or at the last sale price
on the national securities market. Securities traded only on over-the-counter
markets are valued on the basis of the closing over-the-counter bid prices or,
if no sale occurred on such day, at the mean of the current bid and asked
prices. Certain securities may be valued by one or more principal market makers.
Restricted securities, if any, securities for which market quotations are not
readily available and other assets are valued at fair market value under the
supervision of the Board of Directors. Short-term investments that mature in 60
days or less are valued at amortized cost. Pilot Small Capitalization Equity
Fund uses similar rules for determining portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of shares of
Nations Small Company Growth Fund which would have been issued at
September 30, 1996 in connection with the proposed reorganization. The pro forma
number of shares outstanding of 7,396,033 consists of 7,396,033 shares assumed
issued in the reorganization.
3
NATIONS FUND
NATIONS TREASURY FUND
PILOT SHORT-TERM U.S. TREASURY FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
SECURITY
PILOT DESCRIPTIONS PILOT
NATIONS SHORT-TERM NATIONS SHORT-TERM
TREASURY U.S. TREASURY TREASURY U.S. TREASURY
FUND FUND COMBINED FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 27.0%
U.S. TREASURY BILLS - 11.0%
$0 $165,000,000 $165,000,000 Discount note 10/03/96 $0 $164,956,734 $164,956,734
0 25,000,000 25,000,000 Discount note 10/10/96 0 24,969,781 24,969,781
45,000,000 0 45,000,000 Discount note# 10/17/96 44,893,911 0 44,893,911
40,000,000 0 40,000,000 Discount note# 11/14/96 39,761,422 0 39,761,422
160,000,000 0 160,000,000 Discount note# 02/06/97 157,150,667 0 157,150,667
0 25,000,000 25,000,000 Discount note 02/06/97 0 24,574,666 24,574,666
20,000,000 0 20,000,000 Discount note# 04/03/97 19,458,222 0 19,458,222
25,000,000 0 25,000,000 Discount note# 05/01/97 24,187,333 0 24,187,333
30,000,000 0 30,000,000 Discount note# 08/21/97 28,509,600 0 28,509,600
------------------------------------------------
313,961,155 214,501,181 528,462,336
------------------------------------------------
U.S. TREASURY NOTES - 15.6%
0 350,000,000 350,000,000 7.250% 11/30/96 0 351,020,210 351,020,210
0 100,000,000 100,000,000 7.500% 12/31/96 0 100,517,969 100,517,969
10,000,000 0 10,000,000 8.000%# 01/15/97 10,079,469 0 10,079,469
0 100,000,000 100,000,000 7.500% 01/31/97 0 100,653,522 100,653,522
15,000,000 0 15,000,000 6.750%# 02/28/97 15,096,055 0 15,096,055
15,000,000 0 15,000,000 6.875%# 02/28/97 15,106,039 0 15,106,039
0 50,000,000 50,000,000 6.875% 02/28/97 0 50,315,505 50,315,505
25,000,000 0 25,000,000 6.625%# 03/31/97 25,118,520 0 25,118,520
65,000,000 0 65,000,000 6.500%# 04/30/97 65,274,628 0 65,274,628
20,000,000 0 20,000,000 6.125%# 05/31/97 20,049,674 0 20,049,674
--------------------------------------------------
150,724,385 602,507,206 753,231,591
------------------------------------------------
U.S. TREASURY STRIP - 0.4%
20,000,000 0 20,000,000 Zero coupon 11/15/96 19,872,788 0 19,872,788
------------------------------------------------
-----------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS 484,558,328 817,008,387 1,301,566,715
-----------------------------------------------------------------------------------------
REPURCHASE AGREEMENTS - 70.6%
REPURCHASE AGREEMENTS - FIXED RATE - 66.5%
625,000,000 0 625,000,000 BANKERS TRUST N.Y. CORPORATION
5.750% 10/01/96 625,000,000 0 625,000,000
130,000,000 0 130,000,000 CIBC WOOD GUNDY SECURITIES CORPORATION
5.700% 10/01/96 130,000,000 0 130,000,000
436,327,000 0 436,327,000 CS FIRST BOSTON CORPORATION
Interest is payable monthly.
The agreement is terminable by
the Fund daily. The final 436,327,000 0 436,327,000
maturity date of the agreement
is 07/01/97
55,000,000 0 55,000,000 DEAN WITTER, DISCOVER & COMPANY
5.650% 10/01/96 55,000,000 0 55,000,000
130,000,000 0 130,000,000 DEUTSCHE BANK FINANCIAL INC.
5.700% 10/01/96 130,000,000 0 130,000,000
130,000,000 0 130,000,000 DRESDNER BANK INC.
5.680% 10/01/96 130,000,000 0 130,000,000
130,000,000 0 130,000,000 GOLDMAN, SACHS & COMPANY
5.790% 10/01/96 130,000,000 0 130,000,000
130,000,000 0 130,000,000 HSBC SECURITIES
5.850% 10/01/96 130,000,000 0 130,000,000
0 404,984,581 404,984,581 J. P. MORGAN
5.200% 10/01/96 0 404,984,581 404,984,581
0 389,678,975 389,678,975 LEHMAN BROTHERS INC.
5.200% 10/01/96 0 389,678,975 389,678,975
30,000,000 0 30,000,000 LEHMAN BROTHERS INC.
5.750% 10/01/96 30,000,000 0 30,000,000
0 71,693,581 71,693,581 MERRILL LYNCH SECURITIES
5.150% 10/01/96 0 71,693,581 71,693,581
130,000,000 0 130,000,000 MERRILL LYNCH SECURITIES
5.750% 10/01/96 130,000,000 0 130,000,000
</TABLE>
<PAGE>
NATIONS FUND
NATIONS TREASURY FUND
PILOT SHORT-TERM U.S. TREASURY FUND
COMBINED PORTFOLIO OF INVESTMENTS
SEPTEMBER 30, 1996
<TABLE>
<CAPTION>
PRINCIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
SECURITY
PILOT DESCRIPTIONS PILOT
NATIONS SHORT-TERM NATIONS SHORT-TERM
TREASURY U.S. TREASURY TREASURY U.S. TREASURY
FUND FUND COMBINED FUND FUND COMBINED
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
REPURCHASE AGREEMENTS - (CONTINUED)
REPURCHASE AGREEMENTS - FIXED
RATE - (CONTINUED)
$130,000,000 $0 $130,000,000 MORGAN (J.P.) SECURITIES INC.
5.700% 10/01/96 $130,000,000 $0 $130,000,000
130,000,000 0 130,000,000 MORGAN STANLEY GROUP INC.
5.800% 10/01/96 130,000,000 0 130,000,000
30,000,000 0 30,000,000 SMITH BARNEY
5.750% 10/01/96 30,000,000 0 30,000,000
130,000,000 0 130,000,000 UBS SECURITIES, INC.
5.730% 10/01/96 130,000,000 0 130,000,000
----------------------------------------------------
2,346,327,000 866,357,137 3,212,684,137
----------------------------------------------------
REPURCHASE AGREEMENTS - TERM - 4.1%
100,000,000 0 100,000,000 LEHMAN BROTHERS INC.**
5.270% 10/01/96 100,000,000 0 100,000,000
100,000,000 0 100,000,000 SMITH BARNEY**
5.360% 10/03/96 100,000,000 0 100,000,000
----------------------------------------------------
200,000,000 0 200,000,000
----------------------------------------------------
------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENTS 2,546,327,000 866,357,137 3,412,684,137
------------------------------------------------------------------------------------------
SHARES
MONEY MARKET FUNDS - 2.4%
45,603,000 0 45,603,000 AIM Treasury Fund 45,603,000 0 45,603,000
23,438,000 0 23,438,000 Dreyfus Treasury Cash Management Fund 23,438,000 0 23,438,000
45,530,000 0 45,530,000 Fidelity Institutional Cash Portfolio 45,530,000 0 45,530,000
--------------------------------------------
----------------------------------------------------------------------------------
TOTAL MONEY MARKET FUNDS 114,571,000 0 114,571,000
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
TOTAL INVESTMENTS
(COST $4,828,821,852) $3,145,456,328 $1,683,365,524 $4,828,821,852
----------------------------------------------------------------------------------
</TABLE>
+ Effective yield.
** Illiquid security.
# Denotes security subject to repurchase under reverse repurchase agreement
as of September 30, 1996.
## Securities segregated as collateral for reverse repurchase agreement.
<PAGE>
NATIONS TREASURY FUND
PILOT SHORT-TERM U.S. TREASURY FUND
Pro Forma Combining Statement of Assets and Liabilities
September 30, 1996
<TABLE>
<CAPTION>
Nations Treasury Pilot Short-Term Adjustments Pro Forma
Fund U.S. Treasury Fund to Proforma Combined (Note 1)
<S> <C> <C>
ASSETS:
Investments at Value (cost $3,145,456,328
$1,683,365,524 and $4,828,821,852) $3,145,456,328 $1,683,365,524 - $4,828,821,852
Cash 670 - - 670
Income Receivable 4,107,843 12,213,726 - 16,321,569
Receivable for Fund Shares Sold 8,452,263 - - 8,452,263
Receivable Due From Advisor - - 37,142 37,142
Prepaid and Other Assets 76,673 - - 76,673
Unamortized Organization Costs - 37,142 (37,142)(a) 0
Total Assets 3,158,093,777 1,695,616,391 0 4,853,710,168
LIABILITIES
Income Distribution Payable 9,340,674 6,669,158 - 16,009,832
Payable for Repurchase Agreements 436,327,000 - - 436,327,000
Payable for Fund Shares Redeemed 304,193,708 - - 304,193,708
Accrued Expenses 1,164,583 380,663 - 1,545,246
Total Liabilities 751,025,965 7,049,821 0 758,075,786
Net Assets Applicable to Shares Outstanding $2,407,067,812 $1,688,566,570 $0 $4,095,634,382
Net Assets by Class:
Primary A $791,442,488 $1,300,062,453 $2,091,504,941
Primary B 55,337,169 n/a 55,337,169
Investor A 112,291,259 n/a 112,291,259
Investor B 1,431,255,010 200,166,041 1,631,421,051
Investor C 16,739,400 n/a 16,739,400
Investor D 2,486 188,338,076 188,340,562
Shares Outstanding by Class:
Primary A 791,439,679 1,300,234,714 2,091,674,393
Primary B 55,336,973 n/a 55,336,973
Investor A 112,290,861 n/a 112,290,861
Investor B 1,431,249,932 200,190,560 1,631,440,492
Investor C 16,739,341 n/a 16,739,341
Investor D 2,485 188,359,571 188,362,056
Primary A Shares:
Net Asset Value per Share $1.00 $1.00 $1.00
Primary B Shares:
Net Asset Value per Share $1.00 n/a $1.00
Investor A Shares:
Net Asset Value per Share $1.00 n/a $1.00
Investor B Shares:
Net Asset Value per Share $1.00 $1.00 $1.00
Investor C Shares:
Net Asset Value per Share $1.00 n/a $1.00
Investor D Shares:
Net Asset Value per Share: $1.00 $1.00 $1.00
See Notes to Proforma Financial Statements
(a) Unamortized Organization Costs of the acquired fund will be borne by the Advisor.
</TABLE>
<PAGE>
NATIONS TREASURY FUND
PILOT SHORT-TERM U.S. TREASURY FUND
Pro Forma Combining Statement of Operations (Unaudited)
For the Twelve Month Period Ending September 30, 1996
<TABLE>
<CAPTION>
Nations Treasury Pilot Short-Term Adjustments to Pro forma
Fund U.S. Treasury Fund Proforma Combined (Note 1)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $146,617,166 $92,302,345 $238,919,511
Total Investment Income 146,617,166 92,302,345 238,919,511
EXPENSES:
Investment Advisory 5,350,433 2,563,531 950,789 (a) 8,864,753
Administration 2,717,272 1,886,615 (171,510)(a) 0
Portfolio Accounting Fee -- 81,811 (81,811)(a) 0
Transfer Agent 709,075 15,049 -- 724,124
Custodian 511,272 117,800 (29,450)(b) 599,622
Legal and Audit Fees 419,163 169,041 (169,041)(b) 419,163
Trustees' Fees 95,031 63,688 (63,688)(b) 95,031
Amortization of organization costs 0 9,377 (9,377)(c) 0
Other expenses 501,876 359,588 (89,897)(b) 771,567
Subtotal 10,304,122 5,266,500 336,015 15,906,637
Shareholder servicing and distribution
fees
Primary B 173,586 -- N/A 173,586
Investor A 411,772 -- N/A 411,772
Investor B 3,115,911 529,975 N/A 3,645,886
Investor C 23,756 -- N/A 23,756
Investor D 328 818,903 N/A 819,231
Fees waived and/or reimbursed by
investment advisor (2,358,851) (590,872) 340,216(d) (2,609,507)
Total Expenses 11,670,624 6,024,506 676,231 18,371,361
NET INVESTMENT INCOME 134,946,542 86,277,839 (676,231) 220,548,150
Net Realized and Unrealized
Gain/(Loss) on Investments:
Realized Gain/(Loss) on securities (39,120) (61,942) (101,062)
Net Realized and Unrealized gain/(loss)
on investments (39,120) (61,942) (101,062)
Net Increase/(Decrease) in assets
resulting from operations $134,907,422 $86,215,897 $(676,231) $220,447,088
</TABLE>
Legend:
(a) Reflects adjustment to the acquiring fund contractual fee obligation.
(b) Adjustment reflects expected savings when the two funds become one.
(c) Organization expense of the acquired fund is not an expense of the combined
fund.
(d) Reflects adjustment to the level of the acquiring fund's voluntary expense
reimbursement.
See Notes to Proforma Financial Statements
<PAGE>
Nations Treasury Fund
Pilot Short-Term U.S. Treasury Fund
Notes to Pro Forma Financial Statements (Unaudited)
1. Basis of Combination
Nations Fund, Inc. (the "Company") is a Maryland corporation registered under
the Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
investment company. As of September 30, 1996 the Company offers five separate
portfolios. The unaudited Pro Forma Combining Portfolio of Investments and
Statement of Assets and Liabilities and the Statement of Operations reflect the
accounts of the Nations Treasury Fund and the Pilot Short-Term U.S. Treasury
Fund for the period ended September 30, 1996. These statements have been derived
from books and records utilized in calculating daily net asset value at
September 30, 1996.
The pro forma statements give effect to the proposed transfer of the assets and
stated liabilities of the Pilot Short-Term U.S. Treasury Fund in exchange for
shares of Nations Treasury Fund. Under generally accepted accounting principles,
the historical cost of investment securities will be carried forward to the
surviving entity and the results of operations of the Pilot Short-Term U.S.
Treasury Fund for pre-combination periods will not be restated. The pro forma
statements do not reflect the expenses of either fund in carrying out its
obligations under the proposed Agreement and Plan of Reorganization.
The Pro Forma Combining Portfolio of Investments and Statement of Assets and
Liabilities and the Statement of Operations should be read in conjunction with
the historical financial statements of the funds incorporated by reference in
the Statement of Additional Information.
<PAGE>
Nations Treasury Fund
Pilot Short-Term U.S. Treasury Fund
Notes to Pro Forma Financial Statements (Unaudited)
For the twelve month period ended September 30, 1996, the Nations Treasury
Fund's investment advisory fee was computed based on the combined average daily
net assets of the Nations Prime Fund and the Nations Treasury Fund using 0.25%
of combined average daily net assets up to $250 million and 0.20% of combined
average daily net assets exceeding $250 million. The administration fee was
computed based on the annual rate of 0.10% of average daily net assets of the
Company and the investment portfolios of Nations Fund Trust and Nations Fund
Portfolios, Inc. (two other registered open-end investment companies that are
part of the Nations Fund Family) on a combined basis.
The Company has adopted a shareholder servicing plan for the Primary B Shares
("Primary B Servicing Plan"), Investor A Shares ("Investor A Servicing Plan"),
Investor B Shares ("Investor B Servicing Plan"), Investor C Shares ("Investor C
Servicing Plan") and Investor D Shares ("Investor D Servicing Plan") of Nations
Treasury Fund. Under the Primary B Servicing Plan, Investor A Servicing Plan,
Investor B Servicing Plan, Investor C Servicing Plan and Investor D Servicing
Plan, aggregate payments may not exceed 0.25%, 0.25%, 0.25%, 0.25% and 0.25%, on
an annualized basis, of the average daily net assets of the Primary B Shares,
Investor A Shares, Investor B Shares, Investor C Shares and Investor D Shares,
respectively, of the Fund.
The Company has adopted a distribution plan pursuant to Rule 12b-1 under the
1940 Act for the Investor A Shares ("Investor A Distribution Plan") and Investor
D Shares ("Investor D Distribution Plan") of the Nations Treasury Fund. Under
the Investor A Distribution Plan and Investor D Distribution Plan, aggregate
payments may not exceed 0.10% and 0.25%, on an annualized basis, of the average
daily net assets of the Investor A Shares and Investor D Shares, respectively,
of the Fund.
2
<PAGE>
Nations Treasury Fund
Pilot Short-Term U.S. Treasury Fund
Notes to Pro Forma Financial Statements (Unaudited)
2. Portfolio Valuation
Securities of Nations Treasury Fund are valued on the basis of amortized cost,
which approximates market value. Amortized cost valuation involves initially
valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, as long as the effect of
fluctuating interest rates on the fair market value of the instrument is not
significant. Pilot Short-Term U.S. Treasury Fund uses similar rules for
determining portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of Nations Treasury Fund which would have been issued at September 30,
1996 in connection with the proposed reorganization. The pro forma number of
shares outstanding of 4,095,844,116 consists of 1,688,784,845 shares assumed
issued in the reorganization plus 2,407,059,271 shares of Nations Treasury Fund
at September 30, 1996.
3
NATIONS FUND
NATIONS U.S. GOVERNMENT BOND FUND
PILOT U.S. GOVERNMENT SECURITIES FUND
COMBINED PORTFOLIO OF INVESTMENTS
<TABLE>
<CAPTION>
SEPTEMBER 30, 1996
PRICIPAL
AMOUNT VALUE
- ------------------------------------------------------------------------------------------------------------------------------------
NATIONS PILOT NATIONS PILOT
U.S. U.S. SECURITY U.S. U.S.
GOVERNMENT GOVERNMENT DESCRIPTIONS GOVERNMENT GOVERNMENT
BOND SECURITIES BOND SECURITIES
FUND FUND COMBINED FUND FUND COMBINED
- -----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 98.0%
U.S. TREASURY BOND - 25.1%
$0 $35,000,000 $35,000,000 7.500% 11/15/16 $0 $36,656,900 $36,656,900
------------------------------------
U.S. TREASURY NOTES - 72.9%
0 30,000,000 30,000,000 6.875% 02/28/97 0 30,178,200 30,178,200
0 10,500,000 10,500,000 6.500% 04/30/97 0 10,554,180 10,554,180
0 20,000,000 20,000,000 5.625% 11/15/98 0 19,740,600 19,740,600
0 11,000,000 11,000,000 5.625% 11/30/00 0 10,680,340 10,680,340
0 25,000,000 25,000,000 5.750% 08/15/03 0 23,847,750 23,847,750
0 11,500,000 11,500,000 6.500% 08/15/05 0 11,352,685 11,352,685
------------------------------------
0 106,353,755 106,353,755
------------------------------------
-----------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS 0 143,010,655 143,010,655
-----------------------------------------------------------------------------------------
REPURCHASE AGREEMENT - 2.0%
0 2,844,447 2,844,447 Lehman Brothers Inc.,
5.200% 10/01/96 0 2,844,447 2,844,447
------------------------------------
-----------------------------------------------------------------------------------------
TOTAL INVESTMENTS (COST $145,982,568) $0 $145,855,102 $145,855,102
-----------------------------------------------------------------------------------------
</TABLE>
<PAGE>
NATIONS U.S. GOVERNMENT BOND FUND
PILOT U.S. GOVERNMENT SECURITIES FUND
Pro Forma Combining Statement of Assets and Liabilities
September 30, 1996
<TABLE>
<CAPTION>
Nations
U.S. Government
Bond Pilot U.S. Government Adjustments to Pro Forma
Fund Securities Fund Proforma Combined (Note 1)
<S> <C> <C> <C> <C>
ASSETS:
Investments at Value
(cost $0, $145,982,568
and $145,982,568) -- $145,855,102 -- $145,855,102
Income Receivable -- 2,397,902 -- 2,397,902
Receivable for Investments Sold -- 2,529,883 -- 2,529,883
Receivable due from Investment Advisor -- -- 60,699 (a) 60,699
Unamortized Organization Costs -- 60,699 (60,699)(a) --
Total Assets 0 150,843,586 0 150,843,586
LIABILITIES:
Income Distribution Payable -- 684,456 -- 684,456
Other Liabilities -- 18,459 -- 18,459
Accrued Expenses -- 161,304 -- 161,304
Total Liabilities 0 864,219 0 864,219
Net Assets Applicable to Shares
Outstanding $0 $149,979,367 $0 $149,979,367
Net Assets by Class:
Primary A/Pilot Shares -- $147,847,958 $147,847,958
Primary B -- n/a n/a
Investor A/Admin. Class A
Shares -- $633,898 $633,898
Investor C -- n/a n/a
Investor N/Investor Class
Shares -- $1,497,511 $1,497,511
Shares Outstanding by Class:
Primary A/Pilot Shares -- 13,890,099 13,890,099
Primary B -- n/a n/a
Investor A/Admin. Class
A Shares -- 59,505 59,505
Investor C -- n/a n/a
Investor N/Investor Class
Shares -- 140,744 140,744
Primary A Shares/Pilot
Shares:
Net Asset Value per Share n/a $10.64 $10.64
Primary B Shares:
Net Asset Value per Share n/a n/a n/a
Investor A Shares/Admin.
Class A Shares:
Net Asset Value per Share n/a $10.65 $10.65
Investor C Shares:
Net Asset Value per Share n/a n/a n/a
Investor N Shares/Investor
Class Shares:
Net Asset Value per Share n/a $10.64 $10.64
</TABLE>
See Notes to Proforma Financial Statements
(a) Unamortized Organization Costs of the acquired fund will be borne by the
Advisor.
<PAGE>
NATIONS U.S. GOVERNMENT BOND FUND
PILOT U.S. GOVERNMENT SECURITIES FUND
Pro Forma Statement of Operations (Unaudited)
For the Twelve Month Period Ending September 30, 1996
<TABLE>
<CAPTION>
Nations
U.S. Government
Bond Pilot U.S. Government Adjustments to Pro Forma
Fund Securities Fund Proforma Combined (Note 1)
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest -- $8,798,062 $8,798,062
Total Investment
Income 0 8,798,062 8,798,062
EXPENSES:
Investment Advisory -- 758,375 68,943 (a) 827,318
Administration -- 156,478 (18,592)(a) 137,886
Accounting Fee -- 7,666 (7,666)(a) 0
Transfer Agent -- 35,304 -- 35,304
Custodian -- 39,856 (9,964)(d) 29,892
Legal and Audit Fees -- 22,201 -- 22,201
Trustees' Fees -- 7,567 -- 7,567
Amortization of organization
costs -- 19,884 (19,884)(b) 0
Other expenses -- 84,086 (21,022)(d) 63,065
Subtotal 0 1,131,417 (8,184) 1,123,233
Shareholder servicing
and distribution fees
Investor A -- 928 N/A 928
Investor C -- -- N/A N/A
Investor N -- 8,185 (2,865)(a) 5,320
Fees waived and/or reimbursed
by investment advisor -- (215,601) 75,172(c) (290,773)
Total Expenses 0 924,929 64,123 838,709
NET INVESTMENT INCOME 0 7,873,133 (64,123) 7,959,353
Net Realized and Unrealized
Gain/(Loss) on Investments:
Realized Gain/(Loss) on
securities and future
transactions -- 7,218,997 7,218,997
Change in unrealized
appreciation/(depreciation)
on securities and futures -- (9,455,737) (9,455,737)
Net Realized and Unrealized
gain/(loss) on investments
and futures 0 (2,236,740) (2,236,740)
Net Increase/(Decrease) in
assets resulting from
operations $0 $5,636,393 ($64,123) $5,722,613
</TABLE>
Legend:
(a) Reflects adjustment to the acquiring fund contractual fee obligation.
(b) Organization expense of the acquired fund is not an expense of the combined
fund.
(c) Reflects adjustment to the level of the acquiring fund's voluntary expense
reimbursement.
(d) Adjustment reflects economies of scale gained by the business combination.
See Notes to Proforma Financial Statements.
<PAGE>
Nations U.S. Government Bond Fund
Pilot U.S. Government Securities Fund
Notes to Pro Forma Financial Statements (Unaudited)
1. Basis of Combination
Nations Fund, Inc. (the "Company") is registered under the Investment Company
Act of 1940, as amended (the "1940 Act"), as an open-end investment company. As
of September 30, 1996, the Company offered five separate portfolios. On February
6, 1997, the Board of Directors of the Company created the Nations U.S.
Government Bond Fund for the purpose of this proposed business combination.
The unaudited Pro Forma Combining Portfolio of Investments and Statement of
Assets and Liabilities and the Statement of Operations reflect the accounts of
the Pilot U.S. Government Securities Fund for the twelve month period ended
September 30, 1996 conformed to the proposed Nations U.S. Government Bond Fund
expense structure. These statements have been derived from books and records
utilized in calculating daily net asset value at September 30, 1996.
The pro forma statements give effect to the proposed transfer of the assets and
stated liabilities of the Pilot U.S. Government Securities Fund in exchange for
shares of Nations U.S. Government Bond Fund. Under generally accepted
accounting principles, the historical cost of investment securities will be
carried forward to the surviving entity and the results of operations of the
Pilot U.S. Government Securities Fund for pre-combination periods will not be
restated. The pro forma statements do not reflect the expenses of either fund in
carrying out its obligations under the proposed Agreement and Plan of
Reorganization.
The Pro Forma Combining Portfolio of Investments and Statement of Assets and
Liabilities and the Statement of Operations should be read in conjunction
<PAGE>
Nations U.S. Government Bond Fund
Pilot U.S. Government Securities Fund
Notes to Pro Forma Financial Statements (Unaudited)
with the historical financial statements of the funds incorporated by reference
in the Statement of Additional Information.
The advisory fee for the Nations U.S. Government Bond Fund was computed using
a net annual rate of 0.40% of average daily net assets (0.60% gross adviser fee
less 0.20% waiver). The subadviser, Boatmen's Trust Company, will be paid a
subadviser fee by the adviser at an annual rate of 0.15% of average daily net
assets. The administration fee was computed based on the annual rate of 0.10% of
average daily net assets of the Company and the investment portfolios of Nations
Fund Trust and Nations Fund Portfolios, Inc. (two other registered open-end
investment companies that are part of the Nations Fund Family) on a combined
basis.
The Company has adopted a shareholder administration plan ("Administration
Plan") for the Primary B Shares of the Nations U.S. Government Bond Fund.
Under the Administration Plan, aggregate payments may not exceed 0.50%, on an
annualized basis, of the average daily net assets of the Fund's Primary B
Shares.
The Company has also adopted a shareholder servicing and distribution plan
("Investor A Plan") pursuant to Rule 12b-1 under the 1940 Act for the Investor A
Shares of the Nations U.S. Government Bond Fund. Under the Investor A Plan,
aggregate payments may not exceed 0.25% on an annualized basis, of the average
daily net assets of the Fund's Investor A Shares.
The Company has also adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act with respect to Investor C Shares ("Investor C Distribution Plan")
and Investor N Shares ("Investor N Distribution Plan") of the Nations U.S.
Government Bond Fund. Under the Investor C Distribution Plan and Investor N
Distribution Plan, aggregate payments may not exceed 0.25% and 0.40%, on an
annualized basis, of the average daily net assets of the Investor C Shares and
Investor N Shares, respectively, of the Fund.
2
<PAGE>
Nations U.S. Government Bond Fund
Pilot U.S. Government Securities Fund
Notes to Pro Forma Financial Statements (Unaudited)
The Company has also adopted a shareholder servicing plan with respect to
Investor C Shares ("Investor C Servicing Plan") and Investor N Shares ("Investor
N Servicing Plan") of the Nations U.S. Government Bond Fund. Under the
Investor C Servicing Plan and Investor N Servicing Plan, aggregate payments may
not exceed 0.25%, on an annualized basis, of the average daily net assets of the
Investor C Shares and Investor N Shares of the Fund.
2. Portfolio Valuation
Securities of Nations U.S. Government Bond Fund are valued using broker
quotations or prices provided by a pricing service. Certain securities are
valued using broker quotations that are based on a matrix pricing system which
considers such factors as security prices, yields and maturities. The value of
mortgage-backed securities can be significantly affected by changes in interest
rates. Certain securities may be valued by one or more principal market makers.
Restricted securities, if any, securities for which market quotations are not
readily available and other assets are valued at fair value under the
supervision of the Board of Directors. Short-term investments that mature in 60
days or less are valued at amortized cost. Pilot U.S. Government Securities Fund
uses similar rules for determining portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of shares of
Nations Short-Intermediate Government Fund which would have been issued at
September 30, 1996 in connection with the proposed reorganization. The pro forma
number of shares outstanding of 14,090,347 consists of 14,090,347 shares assumed
issued in the reorganization.
3
<PAGE>
NATIONS FUND, INC.
ONE NATIONSBANK PLAZA
33rd Floor
Charlotte, NC 28255
1-800-626-2275
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification.
Under the terms of the Maryland Corporation Law and the
Registrant's Charter and By-Laws, incorporated by reference as
Exhibits (1) and 2(a) hereto, provides for the indemnification of
Registrant's directors and employees. Indemnification of
Registrant's principal underwriter, custodian, and transfer agent
is provided for, respectively, in the Registrant's:
1. Administration Agreement with Stephens Inc.;
2.Co-Administration Agreement with First Data Investors
Services Group, Inc.;
3. Distribution Agreement with Stephens;
4. Mutual Fund Custody and Sub-Custody Agreement with
NationsBank Texas and The Bank of New York;
5. Custody Agreement with Bank of New York;
6. Transfer Agency Agreement with NationsBank Texas; and
7. Transfer Agency and Registrar Agreement with First Data
Investors Services Group, Inc.
The Registrant has entered into a Cross Indemnification Agreement
with Nations Fund Trust (the "Trust") and Nations Portfolios,
Inc. ("Portfolios") dated June 27, 1995. The Trust and/or the
Portfolios will indemnify and hold harmless the Company against
any losses, claims, damages or liabilities, to which the Company
may become subject, under the Securities Act of 1933 (the "Act")
and the 1940 Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any Prospectuses, any
Preliminary Prospectuses, the Registration Statements, any other
Prospectuses relating to the securities, or any amendments or
supplements to the foregoing (hereinafter referred to
collectively as the "Offering Documents"), or arise out of or are
based upon the omission to state therein a material fact required
to be stated
C-1
<PAGE>
therein or necessary to make the statements therein
not misleading, in each case to the extent, but only to the
extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in the Offering Documents
in reliance upon and in conformity with written information
furnished to the Company by the Trust and/or Portfolios expressly
for use therein; and will reimburse the Company for any legal or
other expenses reasonably incurred by the Company in connection
with investigating or defending any such action or claim;
provided, however, that the Trust and/or Portfolios shall not be
liable in any such case to the extent that any such loss, claim,
damage, or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged
omission made in the Offering Documents in reliance upon and in
conformity with written information furnished to the Trust and/or
Portfolios by the Company expressly for use in the Offering
Documents.
Promptly after receipt by an indemnified party above of notice of
the commencement of any action, such indemnified party shall, if
a claim in respect thereof is to be made against the indemnifying
party under such subsection, notify the indemnifying party in
writing of the commencement thereof; but the omission to so
notify the indemnifying party shall not relieve it from any
liability which it may have to any indemnified party otherwise
than under such subsection. In case any such action shall be
brought against any indemnified party and it shall notify the
indemnifying party of the commencement thereof, the indemnifying
party shall be entitled to participate therein and, to the extent
that it shall wish, to assume the defense thereof, with counsel
satisfactory to such indemnified party, and, after notice from
the indemnifying party to such indemnified party of its election
so to assume the defense thereof, the indemnifying party shall
not be liable to such indemnified party under such subsection for
any legal expenses of other counsel or any other expenses, in
each case subsequently incurred by such indemnified party, in
connection with the defense thereof other than reasonable costs
of investigation.
Registrant has obtained from a major insurance carrier a
directors' and officers' liability policy covering certain types
of errors and omissions. In no event will Registrant indemnify
any of its directors, officers, employees, or agents against any
liability to which such person would otherwise be subject by
reason of his/her willful misfeasance, bad faith, gross
negligence in the performance of his/her duties, or by reason of
his/her reckless disregard of the duties involved in the conduct
of his/her office or arising under his agreement with Registrant.
Registrant will comply with Rule 484 under the Act and Release
No. 11330 under the 1940 Act, in connection with any
indemnification.
Insofar as indemnification for liability arising under the Act
may be permitted to directors, officers, and controlling persons
of Registrant pursuant to the foregoing provisions, or otherwise,
Registrant has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such
liabilities (other than the payment by Registrant of expenses
incurred or paid by a director, officer, or controlling person of
Registrant in the successful defense of any action, suit, or
proceeding) is asserted by such director, officer, or controlling
person in connection with the securities being registered,
Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
C-2
<PAGE>
appropriate jurisdiction the question whether such
indemnification by it is against public policy as expressed in
the Act and will be governed by the final adjudication of such
issue.
Item 16. Exhibits.
All references to the "Registration Statement" in the
following list of Exhibits refer to the Registrant's Registration
Statement on Form N-1A (File Nos. 33-4038; 811-4614). All
references to the "Pilot Registration Statement" in the following
list of Exhibits refer to the Pilot Funds' Registration Statement
on Form N-1A (File Nos. 2-78440; 811-3517).
Exhibit
Number Description
(1)(a) Articles of Incorporation dated December 9,
1983 and filed December 13, 1983, are
incorporated by reference to Post-Effective
Amendment No. 29 filed on March 19, 1996.
(1)(b) Articles of Amendment dated March 10, 1986
and filed March 11, 1986 are incorporated by
reference to Post-Effective Amendment No. 29
filed on March 19, 1996.
(1)(c) Articles of Amendment dated July 31, 1986 are
incorporated by reference to Post-Effective
Amendment No. 29 filed on March 19, 1996.
(1)(d) Articles Supplementary dated July 31, 1986
are incorporated by reference to
Post-Effective Amendment No. 29 filed on
March 19, 1996.
(1)(e) Articles of Amendment dated October 4, 1989
are incorporated by reference to
Post-Effective Amendment No. 29 filed on
March 19, 1996.
(1)(f) Articles Supplementary dated November 30,
1989 are incorporated by reference to
Post-Effective Amendment No. 29 filed on
March 19, 1996.
(1)(g) Articles Supplementary dated March 26, 1991
are incorporated by reference to
Post-Effective Amendment No. 29 filed on
March 19, 1996.
(1)(h) Articles Supplementary dated April 15, 1992
and filed April 24, 1992, are incorporated by
reference to Post-Effective Amendment No. 29
filed on March 19, 1996.
(1)(i) Articles Supplementary filed September 22,
1992 are incorporated by reference to
Post-Effective Amendment No. 29 filed on
C-3
<PAGE>
Exhibit
Number Description
March 19, 1996.
(1)(j) Articles Supplementary dated February 18,
1993 are incorporated by reference to
Post-Effective Amendment No. 29 filed on
March 19, 1996.
(1)(k) Articles Supplementary dated July 9, 1993 and
filed July 12, 1993 are incorporated by
reference to Post-Effective Amendment No. 29
filed on March 19, 1996.
(1)(1) Articles Supplementary dated March 21, 1994
are incorporated by reference to
Post-Effective Amendment No. 29 filed on
March 19, 1996.
(1)(m) Articles Supplementary filed December 21,
1994 are incorporated by reference to
Post-Effective Amendment No. 29 filed on
March 19, 1996.
(1)(n) Articles Supplementary dated March 18, 1996
are incorporated by reference to
Post-Effective Amendment No. 29 filed on
March 19, 1996.
(2)(a) By-Laws are incorporated by reference to
Registrant's Registration Statement, filed
March 17, 1986.
(2)(b) Amended and Restated By-Laws effective as of
October 2, 1989, are incorporated by
reference to Post-Effective Amendment No. 5,
filed August 1, 1989.
(2)(c) Amendment to By-Laws dated September 6, 1991,
is incorporated by reference to Post-
Effective Amendment No. 11, filed September
30, 1991.
(3) Not Applicable.
(4) Form of Agreement and Plan of Reorganization,
filed herewith as Appendix I to the Combined
Prospectus/Proxy Statement.
(5) Not Applicable.
(6)(a) Investment Advisory Agreement between
NationsBanc Advisors, Inc ("NBAI") and
Registrant is incorporated by reference to
Post-Effective Amendment No. 28, filed
January 29, 1996. to Post-Effective Amendment
No. 41, filed January 29, 1996.
C-4
<PAGE>
Exhibit
Number Description
(6)(b) Sub-Investment Advisory Agreement between
TradeStreet Investment Associates, Inc.
("TradeStreet") and Registrant is
incorporated by reference to Post-Effective
Amendment No. 28, filed January 29, 1996.
(6)(c) Sub-Advisory Agreement between Gartmore
Global Partners ("Gartmore") and Registrant
is incorporated by reference to Post-
Effective Amended No. 31, filed July 25,
1996.
(6)(d) Form of Sub-Advisory Agreement between
Boatmen's Trust Company ("Boatmen's") and
Registrant shall be filed by amendment.
(6)(e) Form of Sub-Advisory Agreement between
Kleinwort Benson Investment Management
Americas Inc. ("Kleinwort") and Registrant
shall be filed by amendment.
(7) Distribution Agreement between Registrant and
Stephens Inc. dated March 31, 1993, is
incorporated by reference to Post-Effective
Amendment No. 18, filed March 26, 1993.
(8) Not Applicable.
(9)(a) Mutual Fund Custody and Sub-Custody Agreement
between Registrant, NationsBank of Texas,
N.A. and The Bank of New York dated,
October 18, 1996 shall be filed by amendment.
(9)(b) Global Custody Agreement between the
Registrant, on behalf of Nations
International Equity Fund, and Morgan
Guaranty Trust Company of New York is
incorporated by reference to post-Effective
Amendment No. 2, filed September 28, 1995.
(10)(a) Shareholder Services Plan relating to the
Primary B Shares, is incorporated by
reference to Post-Effective Amendment No. 13,
filed April 30, 1992.
(l0)(b) Form of Shareholder Servicing Agreement,
relating to the Primary B Shares, is
incorporated by reference to Post-Effective
Amendment No. 19 to its Registration
Statement, filed May 27, 1993.
(l0)(c) Shareholder Servicing Plan for Investor A
Shares incorporated by reference to Post-
Effective Amendment No. 21, filed March 29,
1994.
C-5
<PAGE>
Exhibit
Number Description
(l0)(d) Forms of Shareholder Servicing Agreement for
Investor A Shares are incorporated by
reference to Post-Effective Amendment No. 21,
filed March 29, 1994.
(l0)(e) Amended and Restated Shareholder Servicing
Plan for Investor B Shares of the Money
Market Funds and Investor C Shares (formerly
Investor B Shares) of the Non-Money Market
Funds is incorporated by reference to Post-
Effective Amendment No. 21, filed March 29,
1994.
(l0)(f) Forms of Shareholder Servicing Agreement for
Investor B Shares of the Money Market Funds
and Investor C Shares (formerly Investor B
Shares) of the Non-Money Market Funds are
incorporated by reference to Post-Effective
Amendment No. 21, filed March 29, 1994.
(l0)(g) Shareholder Servicing Plan for Investor C
Shares of the Money Market Funds and
Investor N Shares (formerly Investor C
Shares) of the Non-Money Market Funds is
incorporated by reference to Post-Effective
Amendment No. 21, filed March 29, 1994.
(10)(h) Forms of Shareholder Servicing Agreement for
Investor C Shares of the Money Market Funds
and Investor N Shares (formerly Investor C
Shares) of the Non-Money Market Funds are
incorporated by reference to Post-Effective
Amendment No. 21, filed March 29, 1994.
(l0)(i) Shareholder Administration Agreement for
Primary B Shares is incorporated by reference
to Post-Effective Amendment No. 28, filed
January 29, 1996.
(10)(j) Amended and Restated Shareholder Servicing
and Distribution Plan pursuant to Rule 12b-1,
relating to Investor A Shares, is
incorporated by reference to Post-Effective
Amendment No. 21, filed March 29, 1994.
(10)(k) Form of Sales Support Agreement, relating to
Investor A Shares is incorporated by
reference to Post-Effective Amendment No. 21,
filed March 29, 1994.
(10)(l) Amended and Restated Distribution Plan,
relating to Investor B Shares of the Money
Market Funds and Investor C Shares (formerly
Investor B Shares) of the Non-Money Market
Funds is incorporated by reference to Post-
Effective Amendment No. 21,
C-6
<PAGE>
Exhibit
Number Description
filed March 29, 1994.
(10)(m) Form of Sales Support Agreement relating to
Investor B Shares of the Money Market Funds
and Investor C Shares (formerly Investor B
Shares) of the Non-Money Market Funds is
incorporated by reference to Post-Effective
Amendment No. 21, filed March 29, 1994.
(10)(n) Distribution Plan relating to the non-money
market funds' Investor N Shares (formerly
Investor C Shares) is incorporated by
reference to Post-Effective Amendment No. 21,
filed March 29, 1994.
(10)(o) Form of Sales Support Agreement, relating to non-
money market funds' Investor N Shares (formerly
Investor C Shares) is incorporated by reference to
Post-Effective Amendment No. 21, filed March 29,
1994.
(10)(p) Shareholder Administration Plan for Primary B
Shares is incorporated by reference to Post-
Effective Amendment No. 28, filed January 29,
1996.
(l0)(q) Transfer Agency Agreement between Registrant
and NCNB Texas National Bank, dated October
1, 1991, relating to Institutional Classes
(currently known as Primary Shares), is
incorporated by reference to Post-Effective
Amendment No. 14, filed July 30, 1992.
(10)(r) Transfer Agency and Registrar Agreement,
dated June 1, 1992, between Registrant and
The Shareholder Servicing Group, Inc.,
relating to Investor Shares, is incorporated
by reference to Post-Effective Amendment
No. 14, filed July 30, 1992.
(l0)(s) Amendment No. 1 dated February 3, 1993, to
the Transfer Agency and Registrar Agreement
between Registrant and The Shareholder
Services Group, Inc. dated April 25, 1992,
relating to the Money Market Funds' Investor
B Shares and the Non-Money Market Funds'
Investor C Shares of the Company, is
incorporated by reference to Post-Effective
Amendment No. 20, filed March 26, 1993.
(l0)(t) Amendment No. 2 to the Transfer Agency and
Registrar Agreement between Registrant and
The Shareholder Services Group, Inc. dated
April 25, 1992, relating to the addition of
the Investor C Shares to the Money Market
Funds of the Company, is incorporated by
reference to Post-Effective Amendment No. 20,
C-7
<PAGE>
Exhibit
Number Description
filed March 26, 1993.
(l0)(u) Cross-Indemnification dated June 27, 1995
between the Company, Nations Fund Trust and
Nations Fund Portfolios, Inc. is incorporated
by reference to Post-Effective Amendment No.
26, filed June 30, 1995.
(11) Opinion and Consent of Morrison & Foerster
LLP, filed herewith.
(12) See Item 17(3) of this Part C.
(13)(a) Prototype Individual Retirement Account Plan,
is incorporated by reference to Amendment
No. 20, filed March 26, 1993.
(13)(b) Administration Agreement between Stephens
Inc. and Registrant is incorporated by
reference to Post-Effective Amendment No. 30,
filed March 31, 1995.
(13)(c) Co-Administration Agreement between The
Boston Company Advisors, Inc. and Registrant
is incorporated by reference to Post-
Effective Amendment No. 30, filed March 31,
1995.
(13)(d) Shareholder Administration Agreement for
Trust B Shares (now known as Primary B
Shares) is incorporated by reference to Post-
Effective Amendment No. 28, filed January 29,
1996.
14(a) Consent of Independent Auditors - Price
Waterhouse LLP, filed herewith.
14(b) Consent of Independent Auditors - Ernst &
Young LLP, filed herewith.
15 Not Applicable
16 Powers of Attorney, filed herewith.
17(a) Declaration, pursuant to Rule 24f-2 under
the Investment Company Act of 1940, of the
Registrant, filed herewith.
17(b) Form of Proxy Ballot, filed herewith.
17(c)(i) Prospectuses for Primary A, Investor A and
Investor N Shares of Nations Equity Income
Fund, Nations Treasury Fund and Nations
Prime Fund, incorporated by reference to
Post-Effective Amendment No. 31 to the
Registration Statement, as filed on July
C-8
<PAGE>
Exhibit
Number Description
25, 1996.
17(c)(ii) Forms of Prospectus for the Primary A,
Primary B, Investor A, Investor C and
Investor N Shares of Nations International
Growth Fund, Nations Small Company Growth
Fund and Nations U.S. Government Bond Fund,
incorporated by reference to Post-Effective
Amendment No. 32 to the Registration
Statement, as filed on February 2, 1997.
17(c)(iii) Prospectus for Class A, Class B and Pilot
Shares for Pilot Equity Income Fund, Pilot
International Equity Fund, Pilot Small
Capitalization Equity Fund and Pilot U.S.
Government Securities Fund, and Prospectuses
for Administration, Investor and Pilot
Shares of Pilot Short-Term U.S. Treasury
Fund and Pilot Short-Term Diversified Assets
Fund, incorporated by reference to Post-
Effective Amendment No. 33 to the Pilot
Registration Statement, as filed on November
12, 1996.
17(c)(iv) Annual Reports for Nations Equity Income
Fund, Nations Treasury Fund and Nations
Prime Fund for the year ended March 31,
1996, filed on May 30, 1996.
17(c)(v) Annual Reports for Pilot Equity Income Fund,
Pilot International Equity Fund, Pilot Short-
Term U.S. Treasury Fund, Pilot Short-Term
Diversified Assets Fund, Pilot Small
Capitalization Equity Fund and Pilot U.S.
Government Securities Fund for the year
ended August 31, 1996, filed on November 13,
1996.
17(c)(vi) Semi-Annual Reports for Nations Equity
Income Fund, Nations Treasury Fund and
Nations Prime Fund for the period ended
September 30, 1996, filed on December 5,
1996.
Item 17. Undertakings.
(1) Registrant agrees that, prior to any public
reoffering of the securities registered through the
use of a prospectus which is a part of this
registration statement by any person or party who
is deemed to be an underwriter within the meaning
of Rule 145(c) of the Securities Act of 1933, the
reoffering prospectus will contain the information
called for by the applicable registration form for
the reofferings by persons who may be deemed
underwriters, in addition to the information called
for by the other items of the applicable form.
C-9
<PAGE>
(2) The undersigned registrant agrees that every
prospectus that is filed under paragraph (1) above
will be filed as part of an amendment to the
registration statement and will not be used until
the amendment is effective, and that, in
determining any liability under the Securities Act
of 1933, each post-effective amendment shall be
deemed to be a new registration statement for the
securities offered therein, and the offering of the
securities at that time shall be deemed to be the
initial bona fide offering of them.
(3) The undersigned Registrant agrees to file, by post-
effective amendment, an opinion of counsel or a
copy of an IRS ruling supporting the tax
consequences of the Reorganization within a
reasonable time after receipt of such opinion or
ruling.
C-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of
1933, the Registrant has duly caused his Registration Statement
on Form N-14 to be signed on its behalf by the undersigned,
thereunto duly authorized, in the City of Little Rock, State of
Arkansas on the 17th day of February, 1997.
NATIONS FUND, INC.
By: *
_____________________________
A. Max Walker
President and Chairman of
the Board
of Directors
By: /s/ Richard H. Blank, Jr.
_____________________________
Richard H. Blank, Jr.
*Attorney-in-Fact
Pursuant to the requirements of the Securities Act of
1933, this Registration Statement on Form N-14 has been signed
below by the following persons in the capacities and on the date
indicated:
SIGNATURES TITLE DATE
President and February 17, 1997
* Chairman of the
_______________________ Board of Directors
(A. Max Walker) (Principal Executive
Officer)
* Treasurer and Vice February 17, 1997
_______________________ President
(Richard H. Rose) (Principal Financial
and Accounting
Officer)
* Director February 17, 1997
_______________________
(Edmund L. Benson, III)
* Director February 17, 1997
_______________________
(James Ermer)
* Director February 17, 1997
_______________________
(William H. Grigg)
* Director February 17, 1997
_______________________
(Thomas F. Keller)
* Director February 17, 1997
_______________________
(Carl E. Mundy, Jr.)
* Director February 17, 1997
_______________________
(Charles B. Walker)
* Director February 17, 1997
_______________________
(Thomas S. Word, Jr.)
/s/ Richard H. Blank, Jr.
_______________________
Richard H. Blank, Jr.
*Attorney-In-Fact
<PAGE>
Nations Fund, Inc.
File Nos. 33-4038; 811-4614
Exhibit Number Description
Ex-99.11 Opinion and Consent of Morrison
& Foerster LLP
Ex-99.14(a) Opinion and Consent of Auditors
- Price Waterhouse LLP
Ex-99.14(b) Opinion and Consent of Auditors
- Arthur Andersen LLP
Ex-99.16 Powers of Attorney
Ex-99.17(a) Declaration pursuant to Rule
24f-2 under the Investment
Company Act of 1940 of the
Registrant
Ex-99.17(b) Form of Proxy Ballot
<PAGE>
Ex-99.11
[MORRISON & FOERSTER LLP LETTERHEAD]
February 20, 1997
Nations Fund, Inc.
One NationsBank Plaza
Charlotte, NC 28255
Re:Shares of Common Stock of Nations Fund, Inc.
Ladies/Gentlemen:
We refer to the Registration Statement on Form N-14
(the "Registration Statement") of Nations Fund, Inc. (the
"Company") relating to the registration of an indefinite
number of shares of common stock, par value $.001 per share
(the "Shares"), of certain Funds of the Company ("Funds").
We have been requested by the Company to furnish this
opinion as Exhibit 11 to the Registration Statement.
We have examined documents relating to the
organization of the Company and the authorization and
issuance of the Shares. We have also made such inquiries
of the Company and examined such questions of law as we
have deemed necessary for the purpose of rendering the
opinion set forth herein. We have assumed the genuineness
of all signatures and the authenticity of all items
submitted to us as originals and the conformity with
originals of all items submitted to us as copies.
Based upon and subject to the foregoing, we are of the
opinion that:
The issuance of the Shares by the Company has been
duly and validly authorized by all appropriate corporate
action and, assuming delivery in accordance with the
description set forth in the Combined Prospectus/Proxy
Statement included in the Registration Statement, the
Shares will be legally issued, fully paid and
nonassessable.
<PAGE>
Nations Fund, Inc.
February 20, 1997
Page Two
We consent to the inclusion of this opinion as an
exhibit to the Registration Statement.
In addition, we hereby consent to the use of our name
and to the description of advice rendered by our firm under
the heading "Comparison of Nations and Pilot -- Nations
Funds' Advisory Contracts" in the Combined Prospectus/Proxy
Statement, under the heading "How The Funds Are Managed" in
the Prospectuses, and under the heading "Counsel" in the
Statement of Additional Information, which are incorporated
by reference into the Registration Statement.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
<PAGE>
Ex-99.14(a)
[PRICE WATERHOUSE LLP LETTERHEAD]
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Combined Prospectus/Proxy
Statement constituting part of this registration statement on
Form N-14 (the "Registration Statement") of our reports dated May
17, 1996, relating to the financial statements and financial
highlights of Nations Treasury Fund, Nations Prime Fund and
Nations Equity Income Fund, each a portfolio constituting part of
Nations Fund, Inc., which are also incorporated by reference in
the Registration Statement. We also consent to us under the
heading "Financial Statements" in such Registration Statement.
PRICE WATERHOUSE LLP
Boston, Massachusetts
February 18, 1997
<PAGE>
Ex-99.14(b)
[ARTHUR ANDERSEN LLP LETTERHEAD]
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation by reference of our report for The Pilot Funds
dated October 21, 1996 (and to all references to our firm)
included or incorporated by reference in the Nations Fund,
Inc./Pilot Funds Form N-14.
Arthur Andersen LLP
Boston, Massachusetts
February 14, 1997
<PAGE>
Ex-99.16
POWER OF ATTORNEY
Edmund L. Benson, III, whose signature appears below, does
hereby constitute and appoint R. Gregory Feltus, Richard H.
Blank, Jr., Robert M. Kurucza, Marco E. Adelfio and Steven G.
Cravath, each individually, his true and lawful attorneys and
agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments
which said attorneys and agents, each individually, may deem
necessary or advisable or which may be required to enable Nations
Fund, Inc. (the "Company") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "1933 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the
Company's Registration Statement(s) on Form N-14 pursuant to the
1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in
the name and on behalf of the undersigned as a director of the
Company, such Registration Statement(s), and any and all
amendments thereto, filed with the Securities and Exchange
Commission under the 1933 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, individually or
collectively, shall do or cause to be done by virtue thereof.
Dated: February 6, 1997
/s/ Edmund L. Benson, III
Edmund L. Benson, III
<PAGE>
Ex-99.16
POWER OF ATTORNEY
James Ermer, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr.,
Robert M. Kurucza, Marco E. Adelfio and Steven G. Cravath, each
individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts
and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or
advisable or which may be required to enable Nations Fund, Inc.
(the "Company") to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended (the
"1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Company's
Registration Statement(s) on Form N-14 pursuant to the 1933 Act,
and to qualify or register for sale any securities in any state
including specifically, but without limiting the generality of
the foregoing, the power and authority to sign, in the name and
on behalf of the undersigned as a director of the Company, such
Registration Statement(s), and any and all amendments thereto,
filed with the Securities and Exchange Commission under the 1933
Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said
attorneys and agents, individually or collectively, shall do or
cause to be done by virtue thereof.
Dated: February 6, 1997
/s/ James Ermer
James Ermer
<PAGE>
Ex-99.16
POWER OF ATTORNEY
William H. Grigg, whose signature appears below, does
hereby constitute and appoint R. Gregory Feltus, Richard H.
Blank, Jr., Robert M. Kurucza, Marco E. Adelfio and Steven G.
Cravath, each individually, his true and lawful attorneys and
agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments
which said attorneys and agents, each individually, may deem
necessary or advisable or which may be required to enable Nations
Fund, Inc. (the "Company") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "1933 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the
Company's Registration Statement(s) on Form N-14 pursuant to the
1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in
the name and on behalf of the undersigned as a director of the
Company, such Registration Statement(s), and any and all
amendments thereto, filed with the Securities and Exchange
Commission under the 1933 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, individually or
collectively, shall do or cause to be done by virtue thereof.
Dated: February 6, 1997
/s/ William H. Grigg
William H. Grigg
<PAGE>
Ex-99.16
POWER OF ATTORNEY
Thomas F. Keller, whose signature appears below, does
hereby constitute and appoint R. Gregory Feltus, Richard H.
Blank, Jr., Robert M. Kurucza, Marco E. Adelfio and Steven G.
Cravath, each individually, his true and lawful attorneys and
agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments
which said attorneys and agents, each individually, may deem
necessary or advisable or which may be required to enable Nations
Fund, Inc. (the "Company") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "1933 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the
Company's Registration Statement(s) on Form N-14 pursuant to the
1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in
the name and on behalf of the undersigned as a director of the
Company, such Registration Statement(s), and any and all
amendments thereto, filed with the Securities and Exchange
Commission under the 1933 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, individually or
collectively, shall do or cause to be done by virtue thereof.
Dated: February 6, 1997
/s/ Thomas F. Keller
Thomas F. Keller
<PAGE>
Ex-99.16
POWER OF ATTORNEY
A. Max Walker, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr.,
Robert M. Kurucza, Marco E. Adelfio and Steven G. Cravath, each
individually, his true and lawful attorneys and agents, with
power of substitution or resubstitution, to do any and all acts
and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or
advisable or which may be required to enable Nations Fund, Inc.
(the "Company") to comply with the Investment Company Act of
1940, as amended, and the Securities Act of 1933, as amended (the
"1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in
connection with the filing and effectiveness of the Company's
Registration Statement(s) on Form N-14 pursuant to the 1933 Act,
and to qualify or register for sale any securities in any state
including specifically, but without limiting the generality of
the foregoing, the power and authority to sign, in the name and
on behalf of the undersigned as an officer of the Company, such
Registration Statement(s), and any and all amendments thereto,
filed with the Securities and Exchange Commission under the 1933
Act, and any other instruments or documents related thereto, and
the undersigned does hereby ratify and confirm all that said
attorneys and agents, individually or collectively, shall do or
cause to be done by virtue thereof.
Dated: February 6, 1997
/s/ A. Max Walker
A. Max Walker
<PAGE>
Ex-99.16
POWER OF ATTORNEY
Charles B. Walker, whose signature appears below, does
hereby constitute and appoint R. Gregory Feltus, Richard H.
Blank, Jr., Robert M. Kurucza, Marco E. Adelfio and Steven G.
Cravath, each individually, his true and lawful attorneys and
agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments
which said attorneys and agents, each individually, may deem
necessary or advisable or which may be required to enable Nations
Fund, Inc. (the "Company") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "1933 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the
Company's Registration Statement(s) on Form N-14 pursuant to the
1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in
the name and on behalf of the undersigned as a director of the
Company, such Registration Statement(s), and any and all
amendments thereto, filed with the Securities and Exchange
Commission under the 1933 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, individually or
collectively, shall do or cause to be done by virtue thereof.
Dated: February 6, 1997
/s/ Charles B. Walker
Charles B. Walker
<PAGE>
Ex-99.16
POWER OF ATTORNEY
Thomas S. Word, Jr., whose signature appears below, does
hereby constitute and appoint R. Gregory Feltus, Richard H.
Blank, Jr., Robert M. Kurucza, Marco E. Adelfio, and Steven G.
Cravath, each individually, his true and lawful attorneys and
agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments
which said attorneys and agents, each individually, may deem
necessary or advisable or which may be required to enable Nations
Fund, Inc. (the "Company") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "1933 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the
Company's Registration Statement(s) on Form N-14 pursuant to the
1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in
the name and on behalf of the undersigned as a director of the
Company, such Registration Statement(s), and any and all
amendments thereto, filed with the Securities and Exchange
Commission under the 1933 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, individually or
collectively, shall do or cause to be done by virtue thereof.
Dated: February 6, 1997
/s/ Thomas S. Word, Jr.
Thomas S. Word, Jr.
<PAGE>
Ex-99.16
POWER OF ATTORNEY
Richard H. Rose, whose signature appears below, does
hereby constitute and appoint R. Gregory Feltus, Richard H.
Blank, Jr., Robert M. Kurucza, Marco E. Adelfio and Steven G.
Cravath, each individually, his true and lawful attorneys and
agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments
which said attorneys and agents, each individually, may deem
necessary or advisable or which may be required to enable Nations
Fund, Inc. (the "Company") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "1933 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the
Company's Registration Statement(s) on Form N-14 pursuant to the
1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in
the name and on behalf of the undersigned as an officer of the
Company, such Registration Statement(s), and any and all
amendments thereto, filed with the Securities and Exchange
Commission under the 1933 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, individually or
collectively, shall do or cause to be done by virtue thereof.
Dated: February 6, 1997
/s/ Richard H.Rose
Richard H. Rose
<PAGE>
Ex-99.16
POWER OF ATTORNEY
Carl E. Mundy, Jr., whose signature appears below, does
hereby constitute and appoint R. Gregory Feltus, Richard H.
Blank, Jr., Robert M. Kurucza, Marco E. Adelfio and Steven G.
Cravath, each individually, his true and lawful attorneys and
agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments
which said attorneys and agents, each individually, may deem
necessary or advisable or which may be required to enable Nations
Fund, Inc. (the "Company") to comply with the Investment Company
Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "1933 Act"), and any rules, regulations or
requirements of the Securities and Exchange Commission in respect
thereof, in connection with the filing and effectiveness of the
Company's Registration Statement(s) on Form N-14 pursuant to the
1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in
the name and on behalf of the undersigned as a director of the
Company, such Registration Statement(s), and any and all
amendments thereto, filed with the Securities and Exchange
Commission under the 1933 Act, and any other instruments or
documents related thereto, and the undersigned does hereby ratify
and confirm all that said attorneys and agents, individually or
collectively, shall do or cause to be done by virtue thereof.
Dated: February 6, 1997
/s/ Carl E. Mundy, Jr.
Carl E. Mundy, Jr.
<PAGE>
Ex-99.17(a)
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 24F-2: Annual Notice of Securities Sold, Pursuant to
Rule 24F-2
Read instructions at end of Form before preparing Form. Please print or type.
1. Name and address of issuer:
Nations Fund, Inc.
111 Center Street
Little Rock, AR 72201
2. Name of each series or class of funds for which this notice is filed:
Nations Equity Income Fund-Primary A Shares. Nations Equity Income Fund-Investor
A Shares. Nations Equity Income Fund-Investor C Shares. Nations Equity Income
Fund-Investor N Shares. Nations Government Securities Fund-Primary A Shares.
Nations Government Securities Fund-Investor A Shares. Nations Government
Securities Fund-Investor C Shares. Nations Government Securities Fund-Investor N
Shares. Nations International Equity Fund-Primary A Shares. Nations
International Equity Fund-Investor A Shares. Nations International Equity
Fund-Investor C Shares. Nations International Equity Fund-Investor N Shares.
Nations Prime Fund-Primary A Shares. Nations Prime Fund-Primary B Shares.
Nations Prime Fund-Investor A Shares. Nations Prime Fund-Investor B Shares.
Nations Prime Fund-Investor C Shares. Nations Prime Fund-Investor D Shares.
Nations Treasury Fund-Primary A Shares. Nations Treasury Fund-Primary B Shares.
Nations Treasury Fund-Investor A Shares. Nations Treasury Fund-Investor B
Shares. Nations Treasury Fund-Investor C Shares. Nations Treasury Fund-Investor
D Shares.
3. Investment Company Act File Number: 811-4614
Securities Act File Number: 33-4038
4. Last day of fiscal year for which this notice is filed:
March 31, 1996
5. Check box if this notice is being filed more than 180 days after the close
of the issuer's fiscal year end for purposes of reporting securities sold
after the close of the fiscal year but before termination of the issuer's
24f-2 declaration: [ ]
6. Date of termination of issuer's declaration under Rule 24f-2(a)(1), if
applicable (see Instruction A.6):
<PAGE>
N/A
7. Number and amount of securities of the same class or series which had been
registered under the Securities Act of 1933 other than pursuant to Rule 24f-2
in a prior fiscal year, but which remained unsold at the beginning of the
fiscal year:
N/A
8. Number and amount of securities registered during the fiscal year other
than pursuant to Rule 24f-2:
N/A
9. Number and aggregate sale price of securities sold during the fiscal year:
Number: 19,932,731,631 shares
Sale Price: $20,321,696,966.97
10. Number and aggregate sale price of securities sold during the fiscal year
in reliance upon registration pursuant to Rule 24f-2:
Number: 19,932,731,631 shares
Sale Price: $20,321,696,966.97
2
<PAGE>
11. Number and aggregate sale price of securities issued during the fiscal
year in connection with dividend reinvestment plans, if applicable (see
Instruction B.7):
Number: 59,496,499 shares
Sale Price: $75,205,884.00
12. Calculation of registration fee:
(i) Aggregate sale price of securities sold during the fiscal year
in reliance on Rule 24f-2 (from Item 10):
$20,321,696,966.97
(ii) Aggregate price of shares issued in connection with
dividend reinvestment plans (from Item 11, if applicable):
+75,205,884.00
(iii) Aggregate price of shares redeemed or repurchased during
the fiscal year (if applicable):
- 20,698,095,188.00
(iv) Aggregate price of shares redeemed or repurchased and
previously applied as a reduction to filing fees pursuant to Rule 24e-2
(if applicable):
0.00
(v) Net aggregate price of securities sold and issued during
the fiscal year in reliance on Rule 24f-2 [line (i), plus line (ii),
less line (iii), plus line (iv)] (if applicable):
($301,192,337.03)
(vi) Multiplier prescribed by Section 6(b) of the Securities
Act of 1933 or other applicable law or regulation (see Instruction C.6):
x 1/29 of 1%
(vii) Fee due [line (i) or line (v) multiplied by line (vi)]:
($103,859.43)
Instruction: Issuers should complete lines (ii), (iii), (iv) and (v) only if the
form is being filed within 60 days after the close of the issuer's fiscal year.
See Instruction C.3.
Check box if fees are being remitted to the Commission's lockbox depository as
described in Section 3a of the Commission's Rule of Informal and Other
Procedures (17 CFR 202.3a). [ ]
3
<PAGE>
Date of mailing or wire transfer of filing fees to the Commission's lockbox
depository:
N/A
SIGNATURES
This report has been signed below by the following persons on behalf of the
issuer and in the capacities and on the dates indicated.
By: \s\ James Edward Banks, Jr.
Assistant Secretary
Date: May 24, 1996
4
<PAGE>
MORRISON & FOERSTER LLP LETTERHEAD
May 24, 1996
Nations Fund, Inc.
111 Center Street
Little Rock, Arkansas 72201
Re: Issuance and Sale of Shares of Nations Fund, Inc.;
Registration on Form N-1A Pursuant to Rule 24f-2
Ladies and Gentlemen:
Nations Fund, Inc. (the "Company") has requested our opinion in connection
with the sale or issuance by the Company of 19,992,228,130 shares of common
stock (the "Shares"), in the aggregate, of all classes of Shares of all
portfolios of the Company (collectively, the "Funds").
We have examined documents relating to the organization of the Company and
the authorization for registration and sale of Shares of each of the Funds. The
opinion given below only relates to the law of the State of Maryland, the state
of incorporation of the Company, and is subject to the condition that the
Company is in compliance with the provisions of any applicable laws, regulations
and permits of any state or foreign country in which any Shares of any of the
Funds are sold.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance and sale of the Shares by the Company have been duly
and validly authorized by all appropriate action and, assuming delivery by sale
or in accord with the Funds' dividend reinvestment plan was in accordance with
the description set forth in the Company's current prospectuses under the
Securities Act of 1933, the Shares have been legally issued, fully paid and are
non-assessable.
We consent to the submission of a copy of this opinion to the Securities
and Exchange Commission in connection with the filing of the Company's Rule
24f-2 Notice under the Investment Company Act of 1940, as amended.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
<PAGE>
Ex-99.17(b)
FORM OF PROXY CARD
PILOT EQUITY INCOME FUND
Special Meeting of Shareholders-April 21, 1997
The undersigned hereby appoints _____________ and
_____________, 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 The Pilot Funds ("Pilot Funds") to be
held at the offices of Pilot Funds, 3435 Stelzer Road, Columbus
Ohio 43219-3025, at 10:00 a.m. (Eastern time), April 21, 1997,
and at any adjournment or adjournments thereof, casting votes
according to the number of shares of each class of the Pilot
Equity Income Fund (the "Fund") which the undersigned may be
entitled to vote with respect to the proposal set forth below, in
accordance with the specification indicated, if any, and with all
the powers which the undersigned would possess if personally
present, hereby revoking any prior proxy to vote at such meeting,
and hereby ratifying and confirming all that said 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 OF PILOT FUNDS AND THE COMBINED
PROSPECTUS/PROXY STATEMENT, DATED MARCH 20, 1997.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES ON BEHALF OF THE
FUND AND PILOT FUNDS. PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE
ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. IN THE ABSENCE OF
ANY SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF THE
PROPOSAL.
PROPOSAL:
To approve the Agreement and Plan of Reorganization
("Plan"), and the transactions contemplated thereby,
which include (a) the transfer of all of the assets
of the designated class of the Fund to the
corresponding class of Nations Equity Income Fund
("Acquiring Fund") of Nations Fund, Inc. in exchange
for shares of the Acquiring Fund and the assumption
by the Acquiring Fund of stated liabilities of the
Fund; and (b) the distribution to Fund shareholders,
shares of the Acquiring Fund so received.
[ ] YES [ ] NO [ ] ABSTAIN
<PAGE>
In their discretion, the Proxies, and either of them, are
authorized to vote upon any other business that may properly come
before the meeting, or any adjournment(s) thereof, including any
adjournment(s) necessary to obtain requisite quorums and/or
approvals.
Please sign above exactly as your name(s) appear(s) hereon.
Fiduciaries should give full titles as such.
_____________________________
_____________________________, 1997
(Please Date)
<PAGE>
Ex-99.17(b)
FORM OF PROXY CARD
PILOT INTERNATIONAL EQUITY FUND
Special Meeting of Shareholders-April 21, 1997
The undersigned hereby appoints _____________ and
_____________, 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 The Pilot Funds ("Pilot Funds") to be
held at the offices of Pilot Funds, 3435 Stelzer Road, Columbus
Ohio 43219-3025, at 10:00 a.m. (Eastern time), April 21, 1997,
and at any adjournment or adjournments thereof, casting votes
according to the number of shares of each class of the Pilot
International Equity Fund (the "Fund") which the undersigned may
be entitled to vote with respect to the proposal set forth below,
in accordance with the specification indicated, if any, and with
all the powers which the undersigned would possess if personally
present, hereby revoking any prior proxy to vote at such meeting,
and hereby ratifying and confirming all that said 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 OF PILOT FUNDS AND THE COMBINED
PROSPECTUS/PROXY STATEMENT, DATED MARCH 20, 1997.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES ON BEHALF OF THE
FUND AND PILOT FUNDS. PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE
ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. IN THE ABSENCE OF
ANY SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF THE
PROPOSAL.
PROPOSAL:
To approve the Agreement and Plan of Reorganization
("Plan"), and the transactions contemplated thereby,
which include (a) the transfer of all of the assets
of the designated class of the Fund to the
corresponding class of Nations International Growth
Fund ("Acquiring Fund") of Nations Fund, Inc. in
exchange for shares of the Acquiring Fund and the
assumption by the Acquiring Fund of stated
liabilities of the Fund; and (b) the distribution to
Fund shareholders, shares of the Acquiring Fund so
received.
[ ] YES [ ] NO [ ] ABSTAIN
<PAGE>
In their discretion, the Proxies, and either of them, are
authorized to vote upon any other business that may properly come
before the meeting, or any adjournment(s) thereof, including any
adjournment(s) necessary to obtain requisite quorums and/or
approvals.
Please sign above exactly as your name(s) appear(s) hereon.
Fiduciaries should give full titles as such.
_____________________________
_____________________________, 1997
(Please Date)
<PAGE>
Ex-99.17(b)
FORM OF PROXY CARD
PILOT SHORT-TERM U.S. TREASURY FUND
Special Meeting of Shareholders-April 21, 1997
The undersigned hereby appoints _____________ and
_____________, 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 The Pilot Funds ("Pilot Funds") to be
held at the offices of Pilot Funds, 3435 Stelzer Road, Columbus
Ohio 43219-3025, at 10:00 a.m. (Eastern time), April 21, 1997,
and at any adjournment or adjournments thereof, casting votes
according to the number of shares of each class of the Pilot
Short-Term U.S. Treasury Fund (the "Fund") which the undersigned
may be entitled to vote with respect to the proposal set forth
below, in accordance with the specification indicated, if any,
and with all the powers which the undersigned would possess if
personally present, hereby revoking any prior proxy to vote at
such meeting, and hereby ratifying and confirming all that said
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 OF PILOT FUNDS AND THE COMBINED
PROSPECTUS/PROXY STATEMENT, DATED MARCH 20, 1997.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES ON BEHALF OF THE
FUND AND PILOT FUNDS. PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE
ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. IN THE ABSENCE OF
ANY SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF THE
PROPOSAL.
PROPOSAL:
To approve the Agreement and Plan of Reorganization
("Plan"), and the transactions contemplated thereby,
which include (a) the transfer of all of the assets
of the designated class of the Fund to the
corresponding class of Nations Treasury Fund
("Acquiring Fund") of Nations Fund, Inc. in exchange
for shares of the Acquiring Fund and the assumption
by the Acquiring Fund of stated liabilities of the
Fund; and (b) the distribution to Fund shareholders,
shares of the Acquiring Fund so received.
[ ] YES [ ] NO [ ] ABSTAIN
<PAGE>
In their discretion, the Proxies, and either of them, are
authorized to vote upon any other business that may properly come
before the meeting, or any adjournment(s) thereof, including any
adjournment(s) necessary to obtain requisite quorums and/or
approvals.
Please sign above exactly as your name(s) appear(s) hereon.
Fiduciaries should give full titles as such.
_____________________________
_____________________________, 1997
(Please Date)
<PAGE>
Ex-99.17(b)
FORM OF PROXY CARD
PILOT SHORT-TERM DIVERSIFIED ASSETS FUND
Special Meeting of Shareholders-April 21, 1997
The undersigned hereby appoints _____________ and
_____________, 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 The Pilot Funds ("Pilot Funds") to be
held at the offices of Pilot Funds, 3435 Stelzer Road, Columbus
Ohio 43219-3025, at 10:00 a.m. (Eastern time), April 21, 1997,
and at any adjournment or adjournments thereof, casting votes
according to the number of shares of each class of the Pilot
Short-Term Diversified Assets Fund (the "Fund") which the
undersigned may be entitled to vote with respect to the proposal
set forth below, in accordance with the specification indicated,
if any, and with all the powers which the undersigned would
possess if personally present, hereby revoking any prior proxy to
vote at such meeting, and hereby ratifying and confirming all
that said 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 OF PILOT FUNDS AND THE COMBINED
PROSPECTUS/PROXY STATEMENT, DATED MARCH 20, 1997.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES ON BEHALF OF THE
FUND AND PILOT FUNDS. PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE
ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. IN THE ABSENCE OF
ANY SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF THE
PROPOSAL.
PROPOSAL:
To approve the Agreement and Plan of Reorganization
("Plan"), and the transactions contemplated thereby,
which include (a) the transfer of all of the assets
of the designated class of the Fund to the
corresponding class of Nations Prime Fund
("Acquiring Fund") of Nations Fund, Inc. in exchange
for shares of the Acquiring Fund and the assumption
by the Acquiring Fund of stated liabilities of the
Fund; and (b) the distribution to Fund shareholders,
shares of the Acquiring Fund so received.
[ ] YES [ ] NO [ ] ABSTAIN
<PAGE>
In their discretion, the Proxies, and either of them, are
authorized to vote upon any other business that may properly come
before the meeting, or any adjournment(s) thereof, including any
adjournment(s) necessary to obtain requisite quorums and/or
approvals.
Please sign above exactly as your name(s) appear(s) hereon.
Fiduciaries should give full titles as such.
_____________________________
_____________________________, 1997
(Please Date)
<PAGE
Ex-99.17(b)
FORM OF PROXY CARD
PILOT SMALL CAPITALIZATION EQUITY FUND
Special Meeting of Shareholders-April 21, 1997
The undersigned hereby appoints _____________ and
_____________, 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 The Pilot Funds ("Pilot Funds") to be
held at the offices of Pilot Funds, 3435 Stelzer Road, Columbus
Ohio 43219-3025, at 10:00 a.m. (Eastern time), April 21, 1997,
and at any adjournment or adjournments thereof, casting votes
according to the number of shares of each class of the Pilot
Small Capitalization Equity Fund (the "Fund") which the
undersigned may be entitled to vote with respect to the proposal
set forth below, in accordance with the specification indicated,
if any, and with all the powers which the undersigned would
possess if personally present, hereby revoking any prior proxy to
vote at such meeting, and hereby ratifying and confirming all
that said 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 OF PILOT FUNDS AND THE COMBINED
PROSPECTUS/PROXY STATEMENT, DATED MARCH 20, 1997.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES ON BEHALF OF THE
FUND AND PILOT FUNDS. PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE
ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. IN THE ABSENCE OF
ANY SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF THE
PROPOSAL.
PROPOSAL:
To approve the Agreement and Plan of Reorganization
("Plan"), and the transactions contemplated thereby,
which include (a) the transfer of all of the assets
of the designated class of the Fund to the
corresponding class of Nations Small Company Growth
Fund ("Acquiring Fund") of Nations Fund, Inc. in
exchange for shares of the Acquiring Fund and the
assumption by the Acquiring Fund of stated
liabilities of the Fund; and (b) the distribution to
Fund shareholders, shares of the Acquiring Fund so
received.
[ ] YES [ ] NO [ ] 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.
Please sign above exactly as your name(s) appear(s) hereon.
Fiduciaries should give full titles as such.
_____________________________
_____________________________, 1997
(Please Date)
<PAGE>
Ex-99.17(b)
FORM OF PROXY CARD
PILOT U.S. GOVERNMENT SECURITIES FUND
Special Meeting of Shareholders-April 21, 1997
The undersigned hereby appoints _____________ and
_____________, 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 The Pilot Funds ("Pilot Funds") to be
held at the offices of Pilot Funds, 3435 Stelzer Road, Columbus
Ohio 43219-3025, at 10:00 a.m. (Eastern time), April 21, 1997,
and at any adjournment or adjournments thereof, casting votes
according to the number of shares of each class of the Pilot U.S.
Government Securities Fund (the "Fund") which the undersigned may
be entitled to vote with respect to the proposal set forth below,
in accordance with the specification indicated, if any, and with
all the powers which the undersigned would possess if personally
present, hereby revoking any prior proxy to vote at such meeting,
and hereby ratifying and confirming all that said 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 OF PILOT FUNDS AND THE COMBINED
PROSPECTUS/PROXY STATEMENT, DATED MARCH 20, 1997.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES ON BEHALF OF THE
FUND AND PILOT FUNDS. PLEASE MARK, SIGN, DATE AND RETURN THIS
PROXY CARD PROMPTLY IN THE ENCLOSED POSTAGE-PAID ENVELOPE.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE
ACTION TO BE TAKEN ON THE FOLLOWING PROPOSAL. IN THE ABSENCE OF
ANY SPECIFICATION, THIS PROXY WILL BE VOTED IN FAVOR OF THE
PROPOSAL.
PROPOSAL:
To approve the Agreement and Plan of Reorganization
("Plan"), and the transactions contemplated thereby,
which include (a) the transfer of all of the assets
of the designated class of the Fund to the
corresponding class of Nations U.S. Government Bond
Fund ("Acquiring Fund") of Nations Fund, Inc. in
exchange for shares of the Acquiring Fund and the
assumption by the Acquiring Fund of stated
liabilities of the Fund; and (b) the distribution to
Fund shareholders, shares of the Acquiring Fund so
received.
[ ] YES [ ] NO [ ] ABSTAIN
<PAGE>
In their discretion, the Proxies, and either of them, are
authorized to vote upon any other business that may properly come
before the meeting, or any adjournment(s) thereof, including any
adjournment(s) necessary to obtain requisite quorums and/or
approvals.
Please sign above exactly as your name(s) appear(s) hereon.
Fiduciaries should give full titles as such.
_____________________________
_____________________________, 1997
(Please Date)
<PAGE>
