As filed with the Securities and Exchange Commission
on December 23, 1998
Registration No. 333-________
================================================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
- ----------------------------------------------------------------
FORM N-14
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 |X|
Pre-Effective Amendment No. ___ |_|
Post-Effective Amendment No. ___ |_|
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1940 |_|
Amendment No. ___ |_|
(Check appropriate box or boxes)
------------------------
NATIONS FUND, 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. W. Bruce McConnel, III, Esq.
Marco E. Adelfio, Esq. Michael P. Malloy, Esq.
Morrison & Foerster LLP Drinker Biddle & Reath LLP
2000 Pennsylvania Ave., N.W. Philadelphia National Bank
Suite 5500 Building
Washington, D.C. 20006 1345 Chestnut Street
Philadelphia, PA 19107-2700
It is proposed that this filing will become effective on January 22, 1999
pursuant to Rule 488.
No filing fee is required under the Securities Act of 1933 because an indefinite
number of shares of beneficial interest in the Registrant, without par value,
has previously been registered pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended. The Registrant filed on June 25, 1998, the
notice required by Rule 24f-2 for its fiscal year ended March 31, 1998 (File No.
33-4038; 811-4614).
<PAGE>
Nations Fund, Inc.
Cross-Reference Sheet
PART A
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1 Beginning of Registration COVER PAGE OF REGISTRATION
Statement and Outside STATEMENT; CROSS-REFERENCE SHEET;
Front Cover Page of FRONT COVER PAGE OF PROXY
Prospectus STATEMENT/PROSPECTUS
2 Beginning and Outside TABLE OF CONTENTS
Back Cover Page of
Prospectus
3 Fee Table, Synopsis APPENDIX II--EXPENSE SUMMARIES OF PACIFIC
Information, and Risk HORIZON FUNDS AND THE CORRESPONDING
Factors NATIONS FUNDS; SUMMARY--PROPOSED
REORGANIZATION; SUMMARY--OVERVIEW OF THE
FUNDS; SUMMARY--FEDERAL INCOME TAX
CONSEQUENCES; SUMMARY--NATIONS AND PACIFIC
HORIZON BOARD CONSIDERATION;
SUMMARY--PRINCIPAL
RISK FACTORS; SUMMARY--VOTING
INFORMATION; SUMMARY--FEES AND
EXPENSES.
4 Information About the THE REORGANIZATION--DESCRIPTION OF
Transaction THE AGREEMENT; THE
REORGANIZATION--PACIFIC HORIZON
BOARD CONSIDERATION; THE
REORGANIZATION--CAPITALIZATION; THE
REORGANIZATION--FEDERAL INCOME TAX
CONSIDERATIONS.
5 Information About the COMPARISON OF PACIFIC HORIZON AND
Registrant NATIONS; ADDITIONAL INFORMATION
ABOUT NATIONS
<PAGE>
6 Information About the COMPARISON OF PACIFIC HORIZON AND
Company Being Acquired NATIONS; ADDITIONAL INFORMATION
ABOUT PACIFIC HORIZON
7 Voting Information VOTING MATTERS
8 Interest of Certain NOT APPLICABLE
Persons and Experts
9 Additional Information NOT APPLICABLE
Required for Reoffering
by Persons Deemed to be
Underwriters
PART B
- ------
Statement of Additional
Item No. Item Caption Information Caption
- -------- ------------ -------------------
10 Cover Page COVER PAGE
11 Table of Contents TABLE OF CONTENTS
12 Additional Information INCORPORATION OF DOCUMENTS BY
About the Registrant REFERENCE IN STATEMENT OF
ADDITIONAL INFORMATION
13 Additional Information NOT APPLICABLE
About the Company Being
Acquired
14 Financial Statements EXHIBITS TO STATEMENT OF ADDITIONAL
INFORMATION
PART C
- ------
Item No.
- --------
15-17 Information required to be included in Part C is set forth under the
appropriate Item, so numbered, in Part C of this
Registration Statement.
<PAGE>
The following items are hereby incorporated by reference into various parts of
this registration statement:
Nations Fund, Inc. ("Nations")
From Post-Effective Amendment Nos. ___ and ___ of Nations' Registration
Statement, filed _________, 1998 and ______________, 1998, respectively (SEC
File Nos. 33-4038; 811-4614):
Prospectuses for the Investor A, Investor B and Investor C Shares of
Nations International Equity Fund and Nations Small Company Growth Fund,
dated August 1, 1998, as supplemented.
Prospectuses for the Investor A and Investor C Shares of Nations
Government Securities Fund, dated August 1, 1998, as supplemented.
Statement of Additional Information for the Nations Government Securities
Fund, Nations International Equity Fund and Nations Small Company Growth
Fund, dated August 1, 1998.
The audited financial statements and related independent accountants' reports
for the Nations Government Securities Fund, Nations International Equity Fund
and Nations Small Company Growth Fund, contained in the Annual Report for the
fiscal year ended March 31, 1998.
The unaudited financial statements for the Nations Government Securities Fund,
Nations International Equity Fund and Nations Small Company Growth Fund,
contained in the Semi-Annual Report for the fiscal period ended September 30,
1998.
Pacific Horizon Funds, Inc. ("Pacific Horizon")
From Post-Effective Amendment No. 60 of Pacific Horizon's Registration
Statement, filed July 1, 1998 (SEC File Nos. 2-81110; 811-4293):
Prospectus for the A Shares, B Shares and K Shares of the International
Equity Fund and the Aggressive Growth Fund, dated July 1, 1998, as
supplemented.
Statement of Additional Information for the Aggressive Growth Fund,
International Equity Fund and U.S. Government Securities Fund, dated July
1, 1998.
The audited financial statements and related independent accountants' reports
for the Aggressive Growth Fund, International Equity Fund and U.S. Government
Securities Fund, contained in the Annual Report for the fiscal year ended
February 28, 1998.
<PAGE>
The unaudited financial statements for the Aggressive Growth Fund, International
Equity Fund and U.S. Government Securities Fund, contained in the Semi-Annual
Report for the fiscal period ended August 31, 1998.
<PAGE>
PACIFIC HORIZON FUNDS, INC.
Aggressive Growth Fund
International Equity Fund
U.S. Government Securities Fund
400 Bellevue Parkway
Wilmington, Delaware 19809
February 1, 1999
Dear Shareholder:
On behalf of the Board of Directors of Pacific Horizon Funds, Inc.
("Pacific Horizon"), we are pleased to invite you to a special meeting of
shareholders of the Pacific Horizon Funds named above to be held at 10:00 a.m.
(Eastern time) on April 12, 1999, at 400 Bellevue Parkway, Wilmington, Delaware
(the "Meeting"). At the Meeting, you will be asked to approve a proposed
Agreement and Plan of Reorganization, dated as of January __, 1999 (the
"Reorganization Agreement"), by and between Pacific Horizon and Nations Fund,
Inc. ("Nations"), which contemplates the reorganization of your Pacific Horizon
Fund into a corresponding fund of Nations, and the reorganization of Pacific
Horizon as a whole.
Background. As you may recall, BankAmerica Corporation recently merged
with NationsBank Corporation to form the new BankAmerica Corporation
("BankAmerica"). As a result of the merger, both Bank of America National Trust
and Savings Association ("Bank of America"), the investment adviser to the
Pacific Horizon Funds, and NationsBanc Advisors, Inc. ("NBAI"), the investment
adviser to Nations, are indirect, wholly owned subsidiaries of BankAmerica. Bank
of America has decided to consolidate its mutual fund investment advisory
operations with those of NBAI.
At the upcoming Meeting, you will be asked to approve the reorganization
of your Pacific Horizon Fund into a corresponding Nations Fund (the
"Reorganization"). If all approvals are obtained, the Pacific Horizon Funds will
be reorganized into corresponding Nations Funds in May 1999, when your Pacific
Horizon Fund shares will be exchanged for shares of the corresponding Nations
Funds of equal value.
[PACIFIC HORIZON'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
TO APPROVE THE PROPOSED REORGANIZATION.]
In considering these matters, you should note:
o SIMILAR OBJECTIVES AND POLICIES
The Pacific Horizon Funds are proposed to be reorganized into Nations Funds
with investment policies and objectives that are, in general, substantially
similar to those of the corresponding Pacific Horizon Funds.
<PAGE>
o ENHANCED ACCESS AND SERVICE ARRANGEMENTS
Following the Reorganization, you will enjoy access to Nations Funds through
enhanced distribution, transaction and shareholder servicing arrangements.
Among other things, the new BankAmerica has the most comprehensive
distribution network of any banking organization in the country.
o SAME VALUE OF SHARES
The total dollar value of the Nations Fund shares you receive in the
Reorganization will be the same as the total dollar value of the Pacific
Horizon Fund shares that you held immediately before the Reorganization. The
exchange of Pacific Horizon Fund shares for Nations Fund shares will be
tax-free under federal law, and no front-end or contingent deferred sales
loads will be charged as a result of the exchange.
o THE PROPOSED REORGANIZATION IS EXPECTED TO BENEFIT PACIFIC HORIZON FUND
shareholders by:
Offering actual or potential reductions in total operating expense ratios for
certain funds;
Offering shareholders the opportunity to become part of a larger and more
diverse family of more than seventy mutual funds. Many of you will be able to
exchange your shares among most or all of those funds;
Offering access to a broader array of investment products, including a line
of fund-of-funds, and investment services including a mutual fund
marketplace; and
Providing opportunities for enhanced returns through combined investment
portfolios.
The formal Notice of Special Meeting, a Combined Proxy
Statement/Prospectus and a Proxy Ballot are enclosed. If you own shares in more
than one of the Pacific Horizon Funds named above, more than one Proxy Ballot
accompanies these materials. If you own shares in one or more of the Pacific
Horizon Funds not named above, you will be receiving separately a set of proxy
materials (including Proxy Ballot(s)) for the other funds(s).
Whether or not you plan to attend the Special Meeting, you may vote by
proxy in any of the following ways:
1. Mark, sign, date and return the enclosed Proxy Ballot(s) in the
enclosed postage-paid envelope;
2. Mark, sign, date and fax the enclosed Proxy Ballot to ADP Proxy
Services at (704) 388-2641; or
3. Follow the instructions below to vote on-line or by telephone.
2
<PAGE>
Please return your Proxy Ballot(s), or fax it to us or follow the
instructions below to vote on-line or by telephone so that your vote will be
counted.
YOUR VOTE IS IMPORTANT TO US REGARDLESS OF THE NUMBER OF SHARES THAT YOU
OWN. PLEASE VOTE BY RETURNING YOUR PROXY BALLOT(S) TODAY, EITHER IN THE ENCLOSED
POSTAGE-PAID ENVELOPE OR BY TELEFACSIMILE AT (704) 388-2641. YOU MAY ALSO VOTE
YOUR PROXY INSTANTLY BY A TOLL-FREE PHONE CALL OR BY VOTING ON-LINE.
PLEASE SEE BELOW.
The proposed Reorganization and the reasons for the Pacific Horizon
Board's unanimous recommendation are discussed in detail in the enclosed
materials, which you should read carefully. If you have any questions about the
Reorganization, please do not hesitate to contact Pacific Horizon toll free at
1-800-___-___.
We look forward to seeing you at the Meeting or receiving your Proxy
Ballot(s) or your on-line or telephone instructions so that your shares may be
voted at the Meeting.
Sincerely,
Dr. Cornelius J. Pings
President
3
<PAGE>
PACIFIC
TWO QUICK AND EASY WAYS TO VOTE YOUR PROXY HORIZON
INSTANTLY FUNDS
As a valued Pacific Horizon Funds shareholder, your proxy vote is important to
us. That's why we've made it faster and easier to vote your proxy at your
convenience, 24 hours a day. After reviewing the enclosed Proxy Statement, which
outlines important issues affecting your funds, select one of the following
quick and easy methods to register your vote - accurately and immediately.
VOTE ON-LINE VOTE BY TOLL-FREE PHONE CALL
1. Read the enclosed Proxy Statement 1. Read the enclosed Proxy Statement
and have your Proxy Ballot(s)* at and have your Proxy Ballot(s)* at
hand. hand.
2. Go to Web site www.proxyvote.com 2. Call toll-free 1-800-690-6903.
3. Enter the 12-digit Control Number 3. Enter the 12-digit Control Number
found on your Proxy Ballot(s). found on your Proxy Ballot(s).
4. Cast your vote using the 4. Cast your vote using the
easy-to-follow instructions. easy-to-follow instructions.
* DO NOT MAIL THE PROXY BALLOT(S) IF VOTING BY INTERNET OR TELEPHONE.
4
<PAGE>
PACIFIC HORIZON FUNDS, INC.
Aggressive Growth Fund
International Equity Fund
U.S. Government Securities Fund
400 Bellevue Parkway
Wilmington, Delaware 19809
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
To Be Held On April 12, 1999
To Pacific Horizon Fund Shareholders:
NOTICE IS GIVEN THAT a special meeting of the shareholders (the "Meeting")
of the Pacific Horizon Funds named above (each a "Pacific Horizon Fund" and
together, the "Pacific Horizon Funds"), each of which is a series of Pacific
Horizon Funds, Inc. ("Pacific Horizon"), will be held at 10:00 a.m., Eastern
time, on April 12, 1999, at 400 Bellevue Parkway, Wilmington, Delaware, for
purpose of considering and voting upon:
ITEM 1. A proposal to approve an Agreement and Plan of Reorganization,
which provides for (a) the transfer of the assets and liabilities of each
Pacific Horizon Fund to a corresponding fund of Nations Fund, Inc. in
exchange for shares of designated classes of the corresponding Nations
fund of equal value, (b) the distribution of the shares of designated
classes of the corresponding Nations fund to shareholders of each Pacific
Horizon Fund; and (c) the dissolution under state law and the
deregistration under the Investment Company Act of 1940, as amended, of
Pacific Horizon.
ITEM 2. Such other business as may properly come before the Meeting or any
adjournment(s).
[Item 1 is described in the attached Combined Proxy Statement/Prospectus.
YOUR DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE PROPOSAL.]
Shareholders of record as of the close of business on January 14, 1999 are
entitled to notice of, and to vote at, the Meeting or any adjournment(s)
thereof.
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY CARD, WHICH IS BEING SOLICITED BY THE
PACIFIC HORIZON BOARD OF DIRECTORS. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
MEETING. SHAREHOLDERS ALSO MAY RETURN PROXIES BY 1)FACSIMILE AT (704) 388-2641;
OR 2) TOUCHTONE VOTING BY DIALING (800) 690-6903; OR 3) VOTING ON-LINE AT WEB
SITE WWW.PROXYVOTE.COM. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE
EXERCISED BY SUBMITTING TO PACIFIC HORIZON A WRITTEN NOTICE OF REVOCATION OR A
SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
<PAGE>
By Order of the Board of Directors,
----------------------------
W. Bruce McConnel, III
Secretary
WE NEED YOUR PROXY VOTE IMMEDIATELY. A SHAREHOLDER MAY THINK HIS OR HER
VOTE IS NOT IMPORTANT, BUT IT IS VITAL. BY LAW, THE SPECIAL MEETING WILL HAVE TO
BE ADJOURNED WITHOUT CONDUCTING ANY BUSINESS IF LESS THAN A MAJORITY OF THE
SHARES ELIGIBLE TO VOTE ARE REPRESENTED. IN THAT EVENT, THE COMPANY WOULD
CONTINUE TO SOLICIT VOTES IN AN ATTEMPT TO ACHIEVE A QUORUM. YOUR VOTE COULD BE
CRITICAL IN ALLOWING THE COMPANY TO HOLD THE MEETING AS SCHEDULED, SO PLEASE
RETURN YOU PROXY BALLOT(S) IMMEDIATELY OR VOTE ON-LINE OR BY TELEPHONE.
2
<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
February 1, 1999
PACIFIC HORIZON FUNDS, INC.
400 Bellevue Parkway
Wilmington, Delaware 19809
1-800-346-2087
NATIONS FUND, INC.
One NationsBank Plaza, 33rd Floor
Charlotte, North Carolina 28255
1-800-[___-____]
This combined proxy statement/prospectus ("Proxy/Prospectus") is being
sent to shareholders of the Pacific Horizon Aggressive Growth Fund, Pacific
Horizon International Equity Fund and Pacific Horizon U.S. Government Securities
Fund (each a "Pacific Horizon Fund" and collectively the "Pacific Horizon
Funds"). The Board of Directors of Pacific Horizon Funds, Inc. ("Pacific
Horizon") has called a Special Meeting of Shareholders (the "Meeting") at 10:00
a.m. (Eastern time) on April 12, 1999 at 400 Bellevue Parkway, Wilmington,
Delaware, 19809. At the Meeting, shareholders will be asked:
o To approve a proposed Agreement and Plan of Reorganization dated as
of January--, 1999 (the "Reorganization Agreement") by and between
Pacific Horizon and Nations Fund, Inc. ("Nations") which provides
for (a) the transfer of the assets and liabilities of each Pacific
Horizon Fund to a corresponding Fund of Nations Fund, Inc. in
exchange for shares of designated classes of the corresponding
Nations Fund of equal value; (b) the distribution of the shares of
designated classes of the corresponding Nations Fund to shareholders
of each Pacific Horizon Fund; and (c) the dissolution under state
law and the deregistration under the Investment Company Act of 1940,
as amended (the "1940 Act"), of Pacific Horizon.
The Reorganization Agreement, a copy of which is attached as Appendix I,
provides for the transfer of assets and liabilities of each Pacific Horizon Fund
to a corresponding fund of Nations (each a "Nations Fund" and collectively the
"Nations Funds") in exchange for shares ("Shares") of designated classes of the
corresponding Nations Fund of equal value (the "Reorganization"). Pacific
Horizon and Nations are both registered open-end management investment companies
(mutual funds).
As a result of the Reorganization, shareholders of the Pacific Horizon
Funds will become shareholders of the Nations Funds (the Pacific Horizon Funds
and Nations Funds are sometimes referred to as "Funds"). Table I below shows
each class of each Pacific Horizon Fund and the designated class of each
corresponding Nations Fund:
1
<PAGE>
Table I
- ------------------------------------- --------------------------------------
Pacific Horizon Fund/Share Class Corresponding Nations Fund/Share Class
- ------------------------------------- --------------------------------------
Aggressive Growth Fund Nations Small Company Growth Fund
A Shares Investor A Shares
B Shares Investor B Shares
K Shares Investor C Shares
- ------------------------------------- --------------------------------------
International Equity Fund Nations International Equity Fund
A Shares Investor A Shares
B Shares Investor B Shares
K Shares Investor C Shares
- ------------------------------------- --------------------------------------
U.S. Government Securities Fund Nations Government Securities Fund
A Shares Investor A Shares
K Shares Investor C Shares
- ------------------------------------- --------------------------------------
Pacific Horizon also offers shares in other funds that are not part of
this Proxy/Prospectus. Pacific Horizon shareholders of those funds are voting on
similar agreements and plans of reorganization, that, in a like manner, would
provide for their reorganization into designated classes and corresponding
portfolios of two other registered investment companies - Nations Fund Trust and
Nations Institutional Reserves (together with Nations, the "Nations Funds
Family"). If the Reorganization Agreement and the agreements and plans of
reorganization affecting the other funds of Pacific Horizon are approved and
consummated, Pacific Horizon will transfer all of its assets and liabilities and
deregister as a registered investment company and be dissolved under Maryland
law.
This Proxy/Prospectus sets forth concisely the information that a Pacific
Horizon Fund shareholder should know before voting, and should be retained for
future reference. It is both Pacific Horizon's proxy statement for the Meeting
and a prospectus for each Nations Fund.
Additional information is set forth in the statement of additional
information relating to this Proxy/Prospectus and in the prospectus dated July
1, 1998, as supplemented, for the Pacific Horizon Funds, both of which are
incorporated herein by reference. Each of these documents is on file with the
Securities and Exchange Commission (the "SEC"), and is available without charge
by calling or writing Pacific Horizon at the telephone number or address stated
above. The information contained in the Nations Funds prospectuses for the
designated share classes, dated August 1, 1998, as supplemented, also is
incorporated by reference into this Proxy/Prospectus. In addition, a prospectus
for the designated share classes of the Nations Funds accompanies this
Proxy/Prospectus. The Annual Report for the year ended March 31, 1998 and the
Semi-Annual Report for the period ended September 30, 1998 for the Nations Funds
are available without charge by calling or writing Nations at the telephone
number or address stated above. Each of these documents is also available on the
SEC's website at www.sec.gov.
2
<PAGE>
This Proxy/Prospectus is expected to be first sent to shareholders on or
about February 1, 1999.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS
THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROXY/PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
SHARES OF THE PACIFIC HORIZON FUNDS AND NATIONS FUNDS ARE NOT DEPOSITS OR
OBLIGATIONS OF OR GUARANTEED OR ENDORSED BY BANK OF AMERICA NATIONAL TRUST AND
SAVINGS ASSOCIATION, NATIONSBANK, N.A. OR ANY OF THEIR AFFILIATES OR ANY OTHER
BANK. SUCH SHARES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL DEPOSIT
INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THE DISTRIBUTOR OF THE PACIFIC HORIZON FUNDS IS
PROVIDENT DISTRIBUTORS, INC. THE DISTRIBUTOR OF THE NATIONS FUNDS IS STEPHENS
INC.
3
<PAGE>
TABLE OF CONTENTS
FEE TABLES............................................................x
Table II.....................................................x
SUMMARY...............................................................x
Proposed Reorganization.........................................x
Overview of the Funds...........................................x
Federal Income Tax Consequences.................................x
Nations and Pacific Horizon Board Consideration.................x
Principal Risk Factors..........................................x
Voting Information..............................................x
Management's Discussion of Nations Fund Performance.............x
Fees and Expenses...............................................x
THE REORGANIZATION....................................................x
Reasons for the Reorganization..................................x
Description of the Reorganization Agreement.....................x
Pacific Horizon Board Consideration.............................x
Capitalization..................................................x
Table III....................................................x
Federal Income Tax Considerations...............................x
Other Matters...................................................x
COMPARISON OF PACIFIC HORIZON AND NATIONS.............................x
Investment Objectives and Policies..............................x
Investment Advisory Services....................................x
Other Service Providers for
Pacific Horizon and Nations..................................x
Distribution and Shareholder Servicing Arrangements
for the Pacific Horizon Funds...............................x
Distribution and Shareholder Servicing Arrangements
for the Nations Funds........................................x
Administration Agreements.......................................x
Shareholder Transactions and Services...........................x
Share Structure.................................................x
VOTING MATTERS........................................................x
General Information.............................................x
Shareholder and Board Approvals.................................x
Table IV(A)..................................................x
Table IV(B)..................................................x
Quorum..........................................................x
Annual Meeting and Shareholder Meetings.........................x
ADDITIONAL INFORMATION ABOUT NATIONS..................................x
4
<PAGE>
ADDITIONAL INFORMATION ABOUT PACIFIC HORIZON..........................x
FINANCIAL STATEMENTS..................................................x
OTHER BUSINESS........................................................x
SHAREHOLDER INQUIRIES.................................................x
APPENDICES I AGREEMENT AND PLAN OF REORGANIZATION
II EXPENSE SUMMARIES OF PACIFIC HORIZON FUNDS AND THE
CORRESPONDING NATIONS FUNDS
III INVESTMENT OBJECTIVES, LIMITATIONS AND
CERTAIN SIGNIFICANT INVESTMENT POLICIES
OF THE NATIONS FUNDS AND THE
CORRESPONDING PACIFIC HORIZON FUNDS
IV SHAREHOLDER TRANSACTIONS AND SERVICES
OF THE NATIONS FUNDS AND THE CORRESPONDING PACIFIC
HORIZON FUNDS
V MANAGEMENT'S DISCUSSION OF NATIONS FUND PERFORMANCE
VI INTERNATIONAL EQUITY FUND--NEW INVESTMENT SUB-ADVISORY
ARRANGEMENTS
5
<PAGE>
FEE TABLES
The following table shows, as of September 30, 1998, (i) the current
annualized total expense ratio of the Pacific Horizon Funds before and after fee
waivers and/or expense reimbursements and (ii) the pro forma annualized total
expense ratio of the corresponding Nations Funds, before and after fee waivers
and/or expense reimbursements, based upon the fee arrangements that will be in
place upon consummation of the Reorganization. This table shows that the Nations
Funds' pro forma expense ratios before waivers and reimbursements are lower than
those of the corresponding Pacific Horizon Funds, and that taking into account
voluntary waivers and reimbursements, are higher than those of the corresponding
Pacific Horizon Funds. Detailed pro forma expense information for each proposed
reorganization is included in Appendix II.
TABLE II
Total Expense Information
<TABLE>
<CAPTION>
- ------------------------------ -------------------------------------- ---------------------------------------
Pro Forma
Pacific Total Corresponding Total Combined Fund/Share Total
Horizon Fund/ Operating Nations Fund/Share Class Operating Class Post-Reorganization Operating
Share Class Expenses Expenses Expenses
Before/After Before/After Before/After
Waivers Waivers Waivers
- ------------------------------ -------------------------------------- ---------------------------------------
<S> <C> <C> <C> <C> <C>
Aggressive Growth Fund Nations Small Company Growth Fund Nations Small Company Growth Fund
A Shares 1.59%/1.59% Investor A Shares 1.48%/1.48% Investor A Shares 1.48%/1.48%
B Shares 2.34%/2.34% Investor B Shares 2.23%/2.23% Investor B Shares 2.23%/2.23%
K Shares 2.34%/2.09% Investor C Shares 2.23%/2.23% Investor C Shares 2.23%/2.23%
- ------------------------------ -------------------------------------- ---------------------------------------
International Equity Fund Nations International Equity Fund Nations International Equity Fund
A Shares 2.09%/1.25% Investor A Shares 1.40%/1.40% Investor A Shares 1.40%/1.40%
B Shares 2.84%/2.00% Investor B Shares 2.15%/2.15% Investor B Shares 2.15%/2.15%
K Shares 2.84%/1.75% Investor C Shares 2.15%/2.15% Investor C Shares 2.15%/2.15%
- ------------------------------ -------------------------------------- ---------------------------------------
U.S. Government Securities Fund Nations Government Securities Fund Nations Government Securities Fund
A Shares 1.37%/0.85% Investor A Shares 1.10%/1.10% Investor A Shares 1.10%/1.10%
K Shares 2.12%/1.35% Investor C Shares 1.85%/1.85% Investor C Shares 1.85%/1.85%
- ------------------------------ -------------------------------------- ---------------------------------------
</TABLE>
SUMMARY
The following is a summary of certain information relating to the proposed
Reorganization. More complete information is contained elsewhere in this
Proxy/Prospectus, the Prospectuses and Statements of Additional Information of
Pacific Horizon and Nations, and the Appendices attached hereto.
6
<PAGE>
Proposed Reorganization. The Reorganization Agreement provides for: (1)
the transfer of all of the assets and liabilities of each Pacific Horizon Fund
to a corresponding Nations Fund in exchange for Shares of designated classes of
the corresponding Nations Fund of equal value; (2) the distribution of the
Nations Fund Shares to the shareholders of the Pacific Horizon Funds in
liquidation of the Pacific Horizon Funds and (3) the dissolution under state law
and the deregistration under the 1940 Act, of Pacific Horizon. The
Reorganization is subject to a number of conditions, including Pacific Horizon
Fund shareholder approval.
The exchange of shares in the Reorganization will be tax-free under
federal law and shareholders will not pay any sales charge as a result of the
Reorganization. As a result of the proposed Reorganization, a Pacific Horizon
Fund shareholder will become a shareholder of the corresponding Nations Fund and
will hold, immediately after the Reorganization, Nations Fund Shares having a
total dollar value equal to the total dollar value of the shares of the Pacific
Horizon Fund that the shareholder held immediately before the Reorganization.
The Reorganization is expected to occur in May 1999, or such later date as may
be determined pursuant to the Reorganization Agreement. For more information
about the Reorganization and the Reorganization Agreement, see "The
Reorganization--Description of the Reorganization Agreement."
NBAI has advised Pacific Horizon and Nations Funds that NationsBank and its
affiliates intend, with respect to certain of their fiduciary accounts and
currently hold A Shares of a Pacific Horizon Fund, to exchange the Investor A
Shares that such accounts would be entitled to receive as a result of the
Reorganization for Primary A Shares of the same Fund of equal value at or
shortly after Closing.
Overview of the Funds. The investment objectives, policies and
restrictions of the Pacific Horizon Funds are, in general, substantially similar
to those of their corresponding Nations Fund. There are, however, differences.
For example, the average duration of the Pacific Horizon U.S. Government Fund's
portfolio securities typically ranges from two to four years, while the duration
of the Nations Government Securities Fund's portfolio securities is typically
six years. For additional information, see "Comparison of Pacific Horizon and
Nations--Investment Objectives and Policies" and Appendix III.
NationsBanc Advisors, Inc. ("NBAI") currently serves as the investment
adviser to the Nations Funds. Bank of America National Trust and Savings
Association ("Bank of America") currently serves as the investment adviser to
the Pacific Horizon Funds. TradeStreet Investment Associates, Inc.
("TradeStreet") currently serves as investment sub-adviser to the Nations
Government Securities Fund and the Nations Small Company Growth Fund. While
Gartmore Global Partners ("Gartmore") currently serves as the investment
sub-adviser to Nations International Equity Fund, it is expected that the Fund
will be served by three investment sub-advisers prior to the
Reorganization--Gartmore, Putnam Investment Management, Inc. ("Putnam") and
INVESCO Global Asset Management (N.A.), Inc. ("INVESCO"). Wellington Management
Company, LLP ("Wellington") serves as investment sub-adviser to the Pacific
Horizon International Equity Fund. For more information, see "Comparison of
Pacific Horizon and Nations--Investment Advisory Services."
NBAI, TradeStreet and Bank of America are indirect, wholly owned
subsidiaries of BankAmerica Corporation. Each Nations Fund's contractual
advisory fee is higher than the corresponding Pacific Horizon Fund's contractual
advisory fee, though advisory fees are only one type of fees and expenses paid
by mutual funds. Total operating expenses (before waivers and reimbursements)
are lower for each Nations Fund compared with its corresponding Pacific Horizon
Fund; total operating expenses (after waivers and reimbursements) for a
majority, but not all, of Nations Fund share classes are higher. For a more
detailed summary of fees and expenses, see Appendix II. The Pacific Horizon
Funds and Nations Funds have different administrators, distributors, transfer
agents and other service providers. For a detailed description of the management
of the Nations Funds, including NBAI, TradeStreet and other service providers to
the Nations Funds, see the Nations Fund prospectus accompanying this
Proxy/Prospectus.
7
<PAGE>
The purchase, redemption, dividend and other policies and procedures of
the Pacific Horizon Funds and the Nations Funds are generally similar. See
"Comparison of Pacific Horizon and Nations - Shareholder Transactions and
Services" and - "Share Structure" and Appendix IV to this Proxy/Prospectus.
Please note that no front-end or contingent deferred sales loads will be imposed
on any of the shareholders of the Pacific Horizon Funds as a result of the
issuance of shares in the exchange of shares in the Reorganization.
Federal Income Tax Consequences. The Reorganization is not expected to
result in the recognition, for federal income tax purposes, of gain or loss by
the Pacific Horizon Funds, the Nations Funds or their respective shareholders.
The sale of securities by the Pacific Horizon Funds prior to the Reorganization,
whether in the ordinary course of business or in anticipation of the
Reorganization, could result in a taxable capital gains distribution prior to
the Reorganization. See "The Reorganization Agreement--Federal Income Tax
Considerations" for additional information.
Pacific Horizon and Nations Board Consideration. During its deliberations,
Pacific Horizon's Board of Directors (with the advice and assistance of its
counsel) reviewed, among other things: (1) the potential effect of the
Reorganization on the shareholders of the Pacific Horizon Funds; (2) the
capabilities, practices and resources of NBAI and the Nations Funds' other
service providers; (3) the investment advisory and other fees paid by the
Nations Funds, and the historical and projected expense ratios of the Nations
Funds as compared with those of the Pacific Horizon Funds and industry peer
groups; (4) the expected cost-savings for certain of the Pacific Horizon Funds,
including Pacific Horizon funds not part of this Proxy/Prospectus, as a result
of the reorganization of Pacific Horizon; (5) the investment objectives,
policies and limitations of the Nations Funds and their relative compatibility
with those of the Pacific Horizon Funds; (6) the historical investment
performance records of the Pacific Horizon Funds and the Nations Funds, relative
to each other and relative to peer groups; (7) the shareholder services offered
by Nations; (8) the terms and conditions of the Reorganization Agreement,
including those provisions that were intended to avoid dilution of the interests
of Pacific Horizon Fund shareholders; (9) the anticipated tax consequences of
the Reorganization for the respective Pacific Horizon Funds and their
shareholders; (10) the number of investment portfolio options that would be
available to shareholders after the Reorganization; (11) the viability of any
Pacific Horizon Fund on a stand-alone basis apart from the Nations Funds Family;
and (12) the potential benefits of the Reorganization to other persons,
especially NBAI and its affiliates. The Board also considered NBAI's belief that
the Reorganization would eliminate certain duplicative shareholder costs and
market overlap, facilitate consolidation of NBAI's managerial resources and
enhance generally operational efficiencies and focus with respect to the mutual
funds advised by NBAI. For additional information, see "The
Reorganization--Pacific Horizon Board Consideration."
8
<PAGE>
[Based upon their evaluation of the information presented to them, and in
light of their fiduciary duties under federal and state law, the Board of
Directors of Pacific Horizon, including all of the non-interested members of the
Board, determined that the proposed Reorganization is in the best interests of
the shareholders of each class of each Pacific Horizon Fund, and that the
interests of such shareholders will not be diluted as a result of the
Reorganization. PACIFIC HORIZON'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT
PACIFIC HORIZON FUND SHAREHOLDERS APPROVE THE REORGANIZATION AGREEMENT.]
After considering the relevant factors, the Nations Board similarly found
that participation in the Reorganization is in the best interests of the Nations
Funds and that the interests of the shareholders of the Nations Funds will not
be diluted as a result of the Reorganization.
Principal Risk Factors. Because of the general similarities of the
investment objectives, policies and restrictions of the Pacific Horizon Funds
and their corresponding Nations Funds, an investment in a Nations Fund involves
risks that are similar to those of the corresponding Pacific Horizon Fund.
Pacific Horizon Aggressive Growth Fund and its corresponding Nations Small
Company Growth Fund. An investment in the Funds involves risks typically
associated with investing in a portfolio of 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. The U.S. stock markets tend to by
cyclical, with periods when stock prices generally rise and periods when prices
generally decline. As of the date of this Proxy/Prospectus, domestic stock
markets were trading at or close to record high levels and there can be no
guarantee that such levels will continue. Moreover, the securities of smaller
companies in which the Funds invest may be subject to more abrupt or erratic
market movements than larger, more established companies, both because the
securities typically are traded in lower volume and because the issuers
typically are subject to a greater degree to changes in earnings.
Pacific Horizon International Equity Fund and its corresponding Nations
International Equity Fund. An investment in the Funds involves risks typically
associated with investing in a portfolio of foreign equity securities, which are
generally stock market risks and foreign investment risk. 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. Many stock markets tend
to by cyclical, with periods when stock prices generally rise and periods when
prices generally decline.
9
<PAGE>
In addition to stock market risks, the Funds are subject to foreign
investment risk. These include, but are not limited to restrictions on foreign
investment and repatriation of capital; fluctuations in currency exchange rates,
which can significantly affect a Fund's share price; costs of converting foreign
currency into U.S. dollars and U.S. dollars into foreign currencies; greater
price volatility and less liquidity; settlement practices, including delays,
which may differ from those customary in U.S. markets; exposure to political and
economic risks, including the risk of nationalization, expropriation of assets
and war; possible impositions of foreign taxes and exchange control and currency
restrictions; lack of uniform accounting, auditing and financial reporting
standards; less governmental supervision of securities markets, brokers and
issuers of securities; less financial information available to investors; and
difficulty in enforcing legal rights outside the United States.
Certain of the above risks associated with investments by a Fund in
foreign securities are heightened with respect to investment in developing
countries and emerging markets countries. Political and economic structures in
many emerging markets countries may be undergoing significant evolution and
rapid development, and may lack the social, political and economic stability
characteristic of more developed countries. Investing in emerging markets
securities also involves risks beyond the usual risks inherent in international
investing. Some emerging countries may have fixed or managed currencies that are
not free-floating against the U.S. dollar. Further, certain currencies may not
be traded internationally and some countries with emerging securities markets
have sustained long periods of substantially high inflation or rapid
fluctuations in inflation rates which can have negative effects on a country's
economy or securities markets.
Pacific Horizon U.S. Government Securities Fund and its corresponding
Nations Government Securities Fund. An investment in the Funds involves risks
typically associated with fixed-income securities, which includes both interest
rate risk and credit risk. Interest rate risk is the risk that the value of a
security will tend to decrease when market interest rates rise and increase when
market interest rates fall. In general, longer-term debt instruments tend to
fluctuate in value more than shorter-term debt instruments in response to market
interest rate movements. Credit risk is the risk that the issuer of a
fixed-income instrument will be unable to pay principal or interest when due.
Also, both funds will invest in mortgage-backed securities, the value of which
may decline when interest rates rise. In addition, a mortgage-backed security's
maturity may be shortened by unscheduled prepayments on underlying mortgages
and, therefore, it is not possible to accurately predict the security's return
to the Funds.
Voting Information. This Proxy/Prospectus is being furnished in connection
with the solicitation of proxies by Pacific Horizon's Board of Directors. Only
shareholders of record at the close of business on January 14, 1999 will be
entitled to vote at the Meeting. Shares represented by a properly executed proxy
will be voted in accordance with the instructions thereon. If no instruction is
made, the named proxies will vote in favor of each proposal set forth in the
Notice of Meeting. Proxies may be revoked at any time before they are exercised
by submitting to Pacific Horizon a written notice of revocation or a
subsequently executed proxy or by attending the Meeting and voting in person.
For additional information, see "Information Relating to Voting Matters."
10
<PAGE>
THE REORGANIZATION
Significant features of the Reorganization are summarized below. This
summary is qualified in its entirety by reference to the Reorganization
Agreement, a copy of which is attached as Appendix I.
The proposed Reorganization is expected to benefit Pacific Horizon Fund
shareholders by, among other things:
(i) Offering shareholders the opportunity to become part of a larger and
more diverse family of more than seventy mutual funds. Many of you
will be able to exchange your shares among most or all of those
funds;
(ii) Offering access to a broader array of investment products, including
a line of fund-of-funds, and investment services including a mutual
fund marketplace; and
(iii) Offering enhanced access and servicing arrangements; and
(iv) Providing opportunities for enhanced returns through combined
investment portfolios.
Description of the Reorganization Agreement. The Reorganization Agreement
provides that, at the Closing, the Fund Assets and Liabilities (as those terms
are defined in the Reorganization Agreement) of the Pacific Horizon Funds will
be transferred to Nations in exchange for full and fractional Shares of the
designated classes of the corresponding Nations Funds, as shown in Table I (see
page xx of this Proxy/Prospectus).
The Shares issued by each Nations Fund will have an aggregate dollar value
equal to the aggregate dollar value of the shares of the respective Pacific
Horizon Fund that are outstanding immediately before the Closing. Immediately
after the Closing, each Pacific Horizon Fund will distribute the Shares of the
Nations Fund received in the Reorganization to its shareholders in liquidation
of the Pacific Horizon Fund. Each shareholder owning shares of a particular
Pacific Horizon Fund at the Closing will receive Shares of the designated class
of the corresponding Nations Fund, and will receive any unpaid dividends or
distributions that were declared before the Closing on Pacific Horizon Fund
shares. Nations will establish an account for each former shareholder of the
Pacific Horizon Funds reflecting the number of Nations Fund Shares distributed
to that shareholder. The Shares issued in the Reorganization will be in
uncertificated form. NBAI has advised Pacific Horizon and Nations Funds that
NationsBank and its affiliates intend, with respect to certain of their
fiduciary accounts that currently hold A Shares of a Pacific Horizon Fund, to
exchange the Investor A Shares that such accounts would be entitled to receive
as a result of the Reorganization for Primary A Shares of the same Fund of equal
value at or shortly after Closing.
11
<PAGE>
As indicated above, shareholders of other Pacific Horizon funds are voting
on similar agreements and plans of reorganization that, in a like manner, would
provide for the reorganization of those Pacific Horizon funds into designated
classes of corresponding portfolios of Nations Fund Trust and Nations
Institutional Reserves--other registered investment companies that, together
with Nations, comprise a significant part of the "Nations Funds Family." Please
note that a vote for or against the approval of the Reorganization Agreement
includes a vote for or against the reorganization of Pacific Horizon into the
Nations Funds Family. If the Reorganization Agreement and the agreements and
plans of reorganization affecting the other Pacific Horizon funds are approved
and consummated, Pacific Horizon will transfer all of its assets and
liabilities, as of the Closing, and all outstanding shares of the Pacific
Horizon Funds will be redeemed and canceled in exchange for shares of the
Nations Funds Family, and Pacific Horizon will wind up its affairs and apply to
be deregistered as an investment company under the 1940 Act and thereafter
dissolved under Maryland law.
The Reorganization is subject to a number of conditions, including
approval of the Reorganization Agreement and the related matters described in
this Proxy/Prospectus by Pacific Horizon Fund shareholders; approval of the
Reorganization of Pacific Horizon by a majority of all the shares of the funds
of Pacific Horizon voting in the aggregate; the receipt of certain legal
opinions described in the Reorganization Agreement (which include an opinion of
Nations' counsel addressed to Pacific Horizon that the Nations Fund Shares
issued in the Reorganization will be validly issued, fully paid and
non-assessable); the receipt of certain certificates from the parties concerning
the continuing accuracy of the representations and warranties in the
Reorganization Agreement; the receipt of certain letters from independent
accountants regarding various financial matters; the receipt of any necessary
exemptive relief or no-action assurances requested from the SEC or its staff
with respect to Section 17(a) and 17(d) of the 1940 Act and Rule 17d-1
thereunder; and the parties' performance in all material respects of their
respective covenants and undertakings in the Reorganization Agreement. It is
possible that a majority of a Pacific Horizon Fund's shareholders may approve
the Reorganization Agreement while a sufficient majority of all shareholders of
all Pacific Horizon funds does not approve the reorganization of Pacific
Horizon. In such a case, the Board of Directors will contemplate what further
action is appropriate.
The Reorganization Agreement also provides that NBAI or an affiliate has
agreed to assume all customary expenses associated with the Reorganization. The
Reorganization Agreement also provides, among other things, that the
Reorganization may be abandoned at any time prior to the Closing upon the mutual
consent of both Pacific Horizon and Nations, or by either Nations or Pacific
Horizon under certain conditions; and that officers of Nations and of Pacific
Horizon may amend, modify or supplement the Reorganization Agreement, provided
however, that following the Meeting, no such amendment may have the effect of
changing the provisions for determining the number of Shares of the
corresponding Nations Fund to be issued to the shareholders of any Pacific
Horizon Fund without obtaining the Pacific Horizon Fund shareholders' further
approval.
12
<PAGE>
Pacific Horizon Board Consideration. [At meetings held on July 26 and 27,
1998, the Pacific Horizon Board of Directors was advised that Bank of America
and NBAI were considering recommending a consolidation of Pacific Horizon with
the Nations Fund Family following the September 30, 1998 merger of NationsBank
Corporation with BankAmerica Corporation. The Pacific Horizon Board then met
again on October 27th-28th, November 23rd, December 7th and December 14th and
January ___ to consider the Reorganization proposal offered by management of
Nations, NBAI and its affiliates. In preparation for each meeting, the Directors
were provided with detailed information about the Reorganization, the Nations
Funds and NBAI. These materials summarized the principal features of the
Reorganization, including the intention that the Reorganization be consummated
on a tax-free basis for each Fund and its shareholders. In addition, the Pacific
Horizon Directors received comparative information about the Pacific Horizon
Funds and the corresponding Nations Funds, including but not limited to the
following matters: (1) investment objectives and policies; (2) advisory
distribution and other servicing arrangements; (3) expenses (with and without
giving effect to current expense limitations), including pro forma expenses
relative to peer groups and (4) performance relative to peer groups. The Pacific
Horizon directors were also provided with information about NationsBank and its
investment advisory organizations, including information regarding those
individuals with responsibility for managing each Nations Fund.
The Reorganization was unanimously approved by the Pacific Horizon Board
of Directors on January ___, 1999.
During its deliberations, Pacific Horizon's Board of Directors (with the
advice and assistance of its counsel) reviewed, among other things: (1) the
potential effect of the Reorganization on the shareholders of the Pacific
Horizon Funds; (2) the capabilities, practices and resources of NBAI and the
Nation Funds' other service providers; (3) the investment advisory and other
fees paid by the Nations Funds, and the historical and projected expense ratios
of the Nations Funds as compared with those of the Pacific Horizon Funds and
industry peer groups; (4) the expected cost-savings for certain of the Pacific
Horizon Funds, including Pacific Horizon funds not part of this
Proxy/Prospectus, as a result of the reorganization of Pacific Horizon; (5) the
investment objectives, policies and limitations of the Nations Funds and their
relative compatibility with those of the Pacific Horizon Funds; (6) the
historical investment performance records of the Pacific Horizon Funds and the
Nations Funds, relative to each other and relative to peer groups; (7) the
shareholder services offered by Nations; (8) the terms and conditions of the
Reorganization Agreement, including those provisions that were intended to avoid
dilution of the interests of Pacific Horizon Fund shareholders; (9) the
anticipated tax consequences of the Reorganization for the respective Pacific
Horizon Funds and their shareholders; (10) the number of investment portfolio
options that would be available to shareholders after the Reorganization; (11)
the viability of any Pacific Horizon Fund on a stand-alone basis apart from the
Nations Funds Family; and (12) the potential benefits of the Reorganization to
other persons, especially NBAI and its affiliates. The Board also considered
NBAI's belief that the Reorganization would eliminate certain duplicative
shareholder costs and market overlap, facilitate consolidation of NBAI's
managerial resources and enhance generally operational efficiencies and focus
with respect to the mutual funds advised by NBAI.
13
<PAGE>
With respect to each Nations Fund, Pacific Horizon's Directors further
noted that the per share annualized total operating expense ratios after the
Reorganization, taking into account voluntary fee waivers, would be higher than
those of the corresponding Pacific Horizon Funds before the Reorganization. It
also noted that NBAI would assume all customary expenses associated with the
Reorganization and that it would commit to waive fees and/or reimburse expenses
as needed to ensure that, for one year from the Reorganization, the Nations
Funds total operating expense ratios will not exceed the pro forma after waiver
expense ratios shown in Table II, absent extraordinary circumstances or a
reduction in Fund assets that impacts expense levels.
After consideration of the foregoing and other factors, the Pacific
Horizon Directors unanimously determined that the Reorganization is in the best
interest of the shareholders of each Pacific Horizon Fund, and that the interest
of the shareholders of each Pacific Horizon Fund will not be diluted as a result
of such Reorganization.]
Capitalization. The following table sets forth, as of September 30, 1998:
(1) the capitalization of each of the Pacific Horizon Funds; (2) the
capitalization of each of the corresponding Nations Funds; and (3) the pro forma
capitalization of each of the Nations Funds as adjusted to give effect to the
Reorganization. The capitalization of each Pacific Horizon Fund and Nations Fund
is likely to be different at the Closing as a result of daily share purchase and
redemption activity in the Pacific Horizon Funds and Nations Funds as well as
the effects of the other ongoing operations of the respective Funds prior to
Closing.
Table III
Capitalization (as of September 30, 1998)
1. The table below reflects current and pro forma capitalization
information for the combination of the Pacific Horizon Aggressive Growth Fund
with Nations Small Company Growth Fund.
- -----------------------------------------------------------------------------
Net Asset
Total Net Shares Value
Assets Outstanding Per Share
- -----------------------------------------------------------------------------
Pacific Horizon Aggressive $161,891,898 9,724,276 $16.65
Growth Fund (A Shares) (A Shares) (A Shares)
$227,442 13,673 $16.63
(B Shares (B Shares) (B Shares
$3,052,866 185,539 $16.45
(K Shares) (K Shares) (K Shares)
- -----------------------------------------------------------------------------
14
<PAGE>
- -----------------------------------------------------------------------------
Net Asset
Total Net Shares Value
Assets Outstanding Per Share
- -----------------------------------------------------------------------------
Nations Small Company $14,507,000 1,389,496 $10.44
Growth Fund (Investor A) (Investor A) (Investor A)
$4,343,000 421,682 $10.30
(Investor B) (Investor B) (Investor B)
$1,909,000 183,252 $10.42
(Investor C) (Investor C) (Investor C)
- -----------------------------------------------------------------------------
Pro Forma Combined Fund $176,398,898 16,896,383 $10.44
(A Shares/ (A Shares/ (A Shares/
Investor A) Investor A) Investor A)
$4,570,442 443,764 $10.30
(B Shares/ (B Shares/ (B Shares/
Investor B) Investor B) Investor B)
$4,961,866 476,233 $10.42
(K Shares/ (K Shares/ (K Shares/
Investor C) Investor C) Investor C)
- -----------------------------------------------------------------------------
2. The table below reflects current and pro forma capitalization
information for the combination of the Pacific Horizon International Equity Fund
with Nations International Equity Fund.
- -----------------------------------------------------------------------------
Net Asset
Total Net Shares Value
Assets Outstanding Per Share
- -----------------------------------------------------------------------------
Pacific Horizon $36,332,776 3,914,562 $9.28
International Equity Fund (A Shares) (A Shares) (A Shares)
$144,691 15,632 $9.26
(B Shares (B Shares) (B Shares
$693,669 75,649 $9.17
(K Shares) (K Shares) (K Shares)
- -----------------------------------------------------------------------------
Nations International $9,836,000 772,963 $12.73
Equity Fund (Investor A) (Investor A) (Investor A)
$27,251,000 2,165,645 $12.58
(Investor B) (Investor B) (Investor B)
$768,000 61,956 $12.40
(Investor C) (Investor C) (Investor C)
- -----------------------------------------------------------------------------
Pro Forma Combined Fund $46,168,776 3,627,070 $12.73
(A Shares/ (A Shares/ (A Shares/
Investor A) Investor A) Investor A)
$27,395,691 2,177,147 $12.58
(B Shares/ (B Shares/ (B Shares/
Investor B) Investor B) Investor B)
$1,461,669 117,897 $12.40
(K Shares/ (K Shares/ (K Shares/
Investor C) Investor C) Investor C)
- -----------------------------------------------------------------------------
3. The table below reflects current and pro forma capitalization
information for the combination of the Pacific Horizon U.S. Government
Securities Fund with Nations Government Securities Fund.
15
<PAGE>
- -----------------------------------------------------------------------------
Total Net Shares Net Asset Value
Assets Outstanding Per Share
- -----------------------------------------------------------------------------
Pacific Horizon U.S. $66,988,100 6,989,633 $9.58
Government Securities Fund (A Shares) (A Shares) (A Shares)
$1,289,612 134,497 $9.59
(K Shares) (K Shares) (K Shares)
- -----------------------------------------------------------------------------
Nations Government $22,349,000 2,167,616 $10.31
Securities Fund (Investor A) (Investor A) (Investor A)
$250,000 24,209 $10.31
(Investor C) (Investor C) (Investor C)
- -----------------------------------------------------------------------------
Pro Forma Combined Fund $89,337,100 8,665,007 $10.31
(A Shares/ (A Shares/ (A Shares/
Investor A) Investor A) Investor A)
$1,539,612 149,293 $10.31
(K Shares/ (K Shares/ (K Shares/
Investor C) Investor C) Investor C)
- -----------------------------------------------------------------------------
Federal Income Tax Considerations. Each Nations Fund and each Pacific
Horizon Fund intends to qualify as of the Closing, as a separate "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Accordingly, each Pacific Horizon Fund and each corresponding Nations
Fund has been, and expects to continue to be, relieved of federal income tax
liability.
Consummation of the Reorganization with respect to each Pacific Horizon
Fund and the corresponding Nations Fund is subject to the condition that Pacific
Horizon and Nations receive an opinion from Morrison & Foerster LLP
substantially to the effect that, for federal income tax purposes: (i) the
transfer of all of the Fund Assets and Liabilities of a Pacific Horizon Fund to
the corresponding Nations Fund in exchange for the Nations Fund Shares, and the
distribution of those Nations Fund Shares to shareholders of the Pacific Horizon
Fund, will constitute a "reorganization" within the meaning of Section 368(a) of
the Code, and the Pacific Horizon Fund and the Nations Fund will each be a
"party to a reorganization" within the meaning of Section 368(b) of the Code in
respect of the Reorganization; (ii) no gain or loss will be recognized by the
Pacific Horizon Fund upon the transfer of its Fund Assets and Liabilities to the
Nations Fund solely in exchange for the Nations Fund Shares; (iii) no gain or
loss will be recognized by the Nations Fund upon the receipt of the Fund Assets
and assumption of Liabilities of the Pacific Horizon Fund solely in exchange for
the Nations Fund Shares; (iv) the basis of the Funds Assets received by the
Nations Fund pursuant to the Reorganization will be the same as the basis of
those assets in the hands of the Pacific Horizon Fund immediately prior to the
Reorganization; (v) the holding period of the Pacific Horizon Fund's assets in
the hands of the Nations Fund will include the period for which such assets have
been held by the Pacific Horizon Fund; (vi) no gain or loss will be recognized
by the Pacific Horizon Fund on the distribution to its shareholders of the
Nations Fund Shares; (vii) no gain or loss will be recognized by the
shareholders of the Pacific Horizon Fund upon their receipt of the Nations Fund
Shares in exchange for such shareholders' shares of the Pacific Horizon Fund;
(viii) the basis of the Nations Fund Shares received by the shareholders of the
Pacific Horizon Fund will be the same as the basis of the Pacific Horizon Fund
shares surrendered by such shareholders pursuant to the Reorganization; (ix) the
holding period for the Nations Fund Shares received by the Pacific Horizon Fund
shareholders will include the period during which such shareholders held the
Pacific Horizon Fund shares surrendered in exchange therefor, provided that such
Pacific Horizon Fund shares are held as a capital asset in the hands of the
Pacific Horizon Fund shareholders on the date of the exchange; and (x) each
Nations Fund will succeed to and take into account the tax attributes described
in Section 381(c) of the Code of the Pacific Horizon Fund as of the Closing
Date, subject to the conditions and limitations specified in the Code.
Shareholders of the Pacific Horizon Funds should note, however that the sale of
securities by the Pacific Horizon Funds prior to the Closing whether in the
ordinary course of business or in anticipation of the Closing, could result in a
taxable capital gains distribution prior to the Closing.
16
<PAGE>
Nations and Pacific Horizon have not sought, and will not seek, a private
ruling from the Internal Revenue Service ("IRS") with respect to the federal
income tax consequences of the Reorganization. The opinion of Morrison &
Foerster LLP with respect to the tax consequences of the Reorganization is not
binding on the IRS and does not preclude the IRS from adopting a contrary
position. Shareholders should consult their own advisers concerning the
potential tax consequences of the Reorganization to them, including any
applicable foreign, state or local income tax consequences.
OTHER MATTERS
Under a retirement plan approved by the Pacific Horizon Board, each Pacific
Horizon Director who has been in office for a specified period of time is
entitled to retirement benefits following death, resignation or termination. The
payment terms and the formula for calculating the amount of the retirement
benefits are set forth in Pacific Horizon's statement of additional information.
Because the Reorganization contemplates the dissolution of Pacific Horizon, it
is being considered a termination with respect to those Directors who are not
succeeding to the Nations Board. Such Directors will, therefore, receive
retirement benefits following the Reorganization.
COMPARISON OF PACIFIC HORIZON AND NATIONS
Investment Objectives and Policies. The investment objectives, policies
and restrictions of the Pacific Horizon Funds are, in general, substantially
similar to those of their corresponding Nations Fund. They are summarized in
Appendix III. There are, however, certain differences. A brief summary of the
more significant differences follows.
Pacific Horizon Aggressive Growth Fund/Nations Small Company Growth Fund.
The objectives, policies and restrictions for these Funds are substantially
similar. Both Funds invest in equity securities, typically of
smaller-capitalization companies and both Funds may invest in debt securities,
although the Nations Small Company Growth Fund will typically not invest more
than 10% of its assets in debt securities. The Pacific Horizon Aggressive Growth
Fund does not limit its investments in debt securities during temporary
defensive periods.
Pacific Horizon International Equity Fund/Nations International Equity
Fund. While the Pacific Horizon Fund will, under normal circumstances, invest at
least 80% of its assets in foreign equity securities and may invest up to 20% of
its total assets in convertible bonds and debt securities, the Nations Fund may
invest only 65% of its assets in foreign equity securities, and may invest up to
35% of its assets in debt securities. As noted in more detail below (see
"Comparison of Pacific Horizon and Nations - Investment Advisory Services"), it
is anticipated that the Nations International Equity Fund would be served by
three investment sub-advisers prior to the Reorganization. However, no material
change in the Fund's investment objective[, policies or restrictions] is
expected.
17
<PAGE>
Pacific Horizon U.S. Government Securities Fund/Nations Government
Securities Fund. Under normal conditions, the Nations Fund expects to maintain
an average dollar-weighted portfolio maturity of between 5 and 30 years. The
typical duration of the portfolio securities in the Pacific Horizon Fund is
between 2 and 4 years.
The investment objectives, strategies and policies of the Pacific Horizon
Funds and Nations Funds are more fully discussed in Appendix III. Additional
information about the investment policies and restrictions of the Nations Funds
and the Pacific Horizon Funds is included in their respective prospectuses and
statements of additional information, which have been incorporated herein by
reference.
Management's Discussion of Nations Fund Performance. A discussion by Fund
management of the Nations Funds' recent performance can be found at Appendix V.
Investment Advisory Services. Currently NBAI serves as investment adviser
to the Nations Funds and TradeStreet serves as investment sub-adviser to the
Nations Small Company Growth Fund and Nations Government Securities Fund.
Nations International Equity Fund is currently sub-advised by Gartmore. Both
NBAI and TradeStreet are wholly owned subsidiaries of NationsBank, which in turn
is an indirect wholly owned banking subsidiary of BankAmerica Corporation.
Gartmore is a joint venture structured as a general partnership between NB
Partner Corp., a wholly owned subsidiary of NationsBank and Gartmore U.S.
Limited, an indirect wholly owned subsidiary of Gartmore Investment Management
plc, a UK company. The Strategic Growth Management Team of TradeStreet is
responsible for the day-to-day management of Nations Small Company Growth Fund.
Scott A. Billeadeau, who is responsible for managing the Pacific Horizon
Aggressive Growth Fund, is a member of The Strategic Growth Management Team of
TradeStreet, which is managing Nations Small Company Growth Fund. The Fixed
Income Management Team of TradeStreet is responsible for the day-to-day
management of Nations Government Securities Fund. Philip Ehrmann and Seok Teoh
of Gartmore are co-portfolio managers of Nations International Equity Fund.
Gartmore Global Partners currently serves as the investment sub-advisor to
Nations International Equity Fund. At a Nations Board Meeting held on December
2, 1998, new investment sub-advisory arrangements were proposed and approved for
Nations International Equity Fund whereby the Fund would be sub-advised by three
investment sub-advisors. Pursuant to the new arrangements, Gartmore Global
Partners, INVESCO Global Asset Management (N.A.), Inc. and Putnam Investment
Management, Inc. would each be responsible for managing approximately one-third
of the Fund's assets and each investment sub-adviser would receive fees based
upon the actual amount of assets managed by such investment sub-adviser. The
fees to each investment sub-adviser would be paid by NBAI and the new
arrangements would not result in an increase in Nations International Equity
Fund's advisory fee level. These new investment sub-advisory arrangements have
been submitted to the shareholders of Nations International Equity Fund for
their approval. If the shareholders approve the new arrangements, they would
become effective prior to the Closing. If the shareholders do not approve the
new arrangements, the current arrangement would remain in effect. Information
about Gartmore Global Partners and the current investment sub-advisory
arrangement is included in the prospectus for the International Equity Fund.
Information about INVESCO Global Asset Management (N.A.), Inc, and Putnam
Investment Management, Inc. and the new investment sub-advisory arrangements is
included in Appendix VI.
18
<PAGE>
NBAI is entitled to receive advisory fees, computed daily and paid
monthly, at the annual rate of: 1.00% of the average daily net assets of the
Nations Small Company Growth Fund; 0.90% of the average daily net assets of
Nations International Equity Fund; and 0.65% of the first $100 million of
Nations Government Securities Fund's average daily net assets, plus 0.55% of the
fund's average daily net assets in excess of $100 million and up to $250
million, plus 0.50% of the Fund's average daily net assets in excess of $250
million. (Although contractual advisory fee rates for each Nations Fund are
currently 0.10% higher with respect to the Nations Small Company Growth and
Nations International Equity Fund and 0.15% higher with respect to the Nations
Government Securities Fund than those shown in Appendix II, the contractual
rates shown throughout this Proxy/Prospectus will become effective at the time
of the Reorganization.) For the fiscal year ended March 31, 1998, and for
services provided pursuant to an investment sub-advisory agreement, NBAI paid
TradeStreet sub-advisory fees, computed daily and paid monthly, 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 Government Securities
Fund. NBAI paid Gartmore 0.70% of the average daily net assets of Nations
International Equity Fund.
Bank of America serves as investment adviser to the Pacific Horizon Funds.
Like NBAI and TradeStreet, Bank of America is also an indirect wholly owned
subsidiary of BankAmerica Corporation. With respect to the Pacific Horizon
Funds, Bank of America is currently entitled to receive a fee at the annual rate
of 0.60%, 0.75% and 0.35% of the average daily net assets of the Aggressive
Growth Fund, International Equity Fund and U.S. Government Securities Fund.
Wellington is entitled to a fee, payable by Bank of America, at the rate of:
0.40% of the Fund's first $50 million of average month-end net assets; 0.30% on
the next $100 million, 0.25% on the next $350 million and 0.20% on any assets in
excess of $500 million.
Other Service Providers for
Pacific Horizon and Nations
Pacific Horizon and Nations have different service providers. Upon
completion of the Reorganization, Nations will continue to engage its existing
service providers. In all cases, the types of services provided to the Funds
under these service arrangements are substantially similar.
19
<PAGE>
<TABLE>
<CAPTION>
Pacific Horizon Funds Nations Funds
--------------------- -------------
<S> <C> <C>
Distributor Provident Distributors, Inc. Stephens Inc.
Administrator Bank of America Stephens Inc. and
NationsBanc Advisors, Inc.
Sub-Administrator PFPC, Inc. The Bank of New York
Transfer Agent PFPC, Inc. First Data Investor
Services Group, Inc.
Sub-Transfer Agent N/A The Bank of New York
Custodian The Bank of New York The Bank of New York
(National Municipal Bond
Fund Only)
PFPC Trust Company (All
Others)
Independent Accountants PricewaterhouseCoopers LLP PricewaterhouseCoopers LLP
</TABLE>
[Stephens currently serves as the Nations Funds' distributor. Pursuant to
Section 9(a) of the 1940 Act, Stephens could be disqualified from serving as
such. The SEC has granted a temporary exemption from the provisions of Section
9(a). Stephens has applied for a permanent exemption and anticipates receiving
such an exemption shortly.]
Distribution and Shareholder Servicing Arrangements for the Pacific
Horizon Funds
A Shares. Pacific Horizon has adopted a Shareholder Services Plan for A
Shares, under which the A Shares of each Pacific Horizon Fund reimburse Pacific
Horizon's distributor--Provident Distributors, Inc. ("Provident") for
shareholder servicing fees that Provident pays to various service organizations
whose customers own A Shares. Payments made under the Shareholder Services Plan
for A Shares, also cover shareholder services provided by Provident and for
support services provided to the beneficial owners of Pacific Horizon Fund
shares. Under the Plan, payments by a Pacific Horizon Fund may not exceed 0.25%
(annualized) of the average daily net assets of such Fund's A Shares. Excluded
from this calculation, however, are all shares acquired via a transfer of assets
from trust and agency accounts at Bank of America. Class A Shares charge a
front-end sales load. The maximum front-end sales load charged for each Pacific
Horizon Fund's A Shares is set forth in Appendix II. Sales load reduction and
waiver categories, which differ from those applicable to Investor A Shares of
the corresponding Nations Funds, are described in Appendix III. Certain
purchases of A Shares are subject to a contingent deferred sales charge ("CDSC")
if redeemed within a specific time period after purchase; Investor A shares of
the corresponding Nations Funds received in exchange for such shares will be
subject to same CDSC if redeemed within the specified time period. All former
shareholders of A Shares will be credited for the period of time from the
original date of purchase of their shares for purposes of determining the amount
of their CDSC, if any.
20
<PAGE>
B Shares. Pacific Horizon has adopted a Distribution and Services Plan for
B Shares, under which the B Shares of each Pacific Horizon Fund reimburse Bank
of America for distribution related expenses and for shareholder servicing
expenses. Distribution expenses include expenses incurred in connection with
advertising and marketing the Funds' B Shares; payments to service organizations
for assistance in connection with the distribution of B Shares; and expenses
incurred in connection with preparing, printing and distributing prospectuses
for the Funds except those used for regulatory purposes or distributed to
existing shareholders. Under the Distribution Plan, payments by a Pacific
Horizon Fund for distribution expenses may not exceed 0.75% (annualized), of the
average daily net assets of such Fund's B Shares.
K Shares. Pacific Horizon also has adopted a Distribution Plan pursuant to
Rule 12b-1 under the 1940 Act, under which K Shares of a Pacific Horizon Fund
reimburse Provident for services rendered and costs incurred in connection with
distribution of K Shares. Distribution expenses include expenses incurred in
connection with advertising and marketing the Funds' K Shares; payments to
service organizations for assistance in connection with the distribution of K
Shares; and expenses incurred in connection with preparing, printing and
distributing prospectuses for the Funds except those used for regulatory
purposes or distributed to existing shareholders. Under the Distribution Plan,
payments by a Pacific Horizon Fund for distribution expenses may not exceed
0.75% (annualized), of the average daily net assets of such Fund's K Shares.
Pacific Horizon also has adopted an Administrative and Shareholder
Services Plan for K Shares, under which K Shares of a Pacific Horizon Fund
reimburse Provident for administrative and shareholder servicing fees that
Provident pays to various services organizations whose customers own K Shares.
Administrative servicing expenses include expenses incurred in connection with
administrative services provided by Provident and payments to service
organizations for the provision of administrative services to beneficial owners
of K shares, such as establishing and maintaining accounts and records relating
to their clients who invest in K Shares, providing information to the Funds
necessary for accounting or sub-accounting and providing statements periodically
to clients showing their position in K Shares. Under the Administrative and
Shareholder Services Plan for K Shares and the Distribution and Services Plan
for B Shares, payments for shareholder servicing expenses may not exceed 0.25%
(annualized) of the average daily net assets of a Fund's B Shares or K Shares,
respectively and payments for administrative servicing expenses may not exceed
0.75% (annualized) of the average daily net assets of the Fund's K Shares.
21
<PAGE>
The total of all fees under the distribution plan and the administrative
and shareholder services plan may not exceed, in the aggregate, 1.00%
(annualized) of the average daily net assets of a Fund's B Shares or K Shares.
Distribution and Shareholder Servicing Arrangements for the Nations Funds.
Investor A Shares. Nations has adopted a Shareholder Servicing and
Distribution Plan (the "Investor A Plan") pursuant to Rule 12b-1 under the 1940
Act with respect to each Fund's Investor A Shares. The Investor A Plan provides
that each Fund may pay its distributor Stephens Inc. ("Stephens") banks,
broker/dealers or other financial institutions that offer Shares of the Fund and
that have entered into a Sales Support Agreement with Stephens ("Selling
Agents") or a Shareholder Servicing Agreement with Nations ("Servicing Agents"),
up to 0.25% (annualized) of the average daily net asset value of the Investor A
Shares. Investor A Shares charge a front-end sales load. The maximum front-end
sales load charged for each Nations Fund's Investor A Shares is set forth in
Appendix II. Sales load reduction and waiver categories, which differ from those
applicable to Class A Shares of the corresponding Pacific Horizon Funds, are
described in Appendix III and the accompanying Prospectus(es).
Investor B Shares. Nations has adopted a Distribution Plan and a
Shareholder Servicing Plan with respect to Investor B Shares of the Nations
Funds. Pursuant to the Distribution Plan, the Funds may compensate or reimburse
Stephens for any activities or expenses primarily intended to result in the sale
of the Funds' Investor B Shares. Payments under the Distribution Plan will be
calculated daily and paid monthly at a rate or rates set from time to time by
the Directors, provided that the annual rate may not exceed 0.75% of the average
daily net asset value of the Funds' Investor B Shares. The fees payable under
the Distribution Plan are used to, among other things, compensate Selling Agents
for providing sales support assistance relating to Investor B Shares. The
Directors of Nations also have approved a Shareholder Servicing Plan for the
Nations Funds which permits the Fund to compensate Servicing Agents for services
provided to their customers that own Investor B Shares. Payments under the
Shareholder Servicing Plan are calculated daily and paid monthly at a rate or
rates set from time to time by the Funds, provided that the annual rate may not
exceed 0.25% of the average daily net asset value of the Funds' Investor B
Shares.
Investor C Shares. Nations has adopted a Distribution Plan with respect to
Investor C Shares of the Nations Funds. Pursuant to the Distribution Plan, the
Funds may compensate or reimburse Stephens for any activities or expenses
primarily intended to result in the sale of the Funds' Investor C Shares.
Payments under the Distribution Plan will be calculated daily and paid monthly
at a rate or rates set from time to time by the Directors of Nations, provided
that the annual rate may not exceed 0.75% of the average daily net assets of the
Funds' Investor C Shares. The fees payable under the Distribution Plan are used
to, among other things, compensate Selling Agents for providing sales support
assistance relating to Investor C Shares. The Directors of Nations also have
approved a shareholder servicing plan ("Servicing Plan") for the Funds which
permits the Fund to compensate Servicing Agents for services provided to their
customers that own Investor C Shares. Payments under the Servicing Plan are
calculated daily and paid monthly at a rate or rates set from time to time by
the Funds, provided that the annual rate may not exceed 0.25% of the average
daily net asset value of the Funds' Investor C Shares. However, Investor C
Shares purchased after January ___, 1999 are subject to a CDSC of 1% (if
redeemed within one year of purchase. No CDSC will apply to Investor C Shares
issued in the Reorganization.
[Administrative Agreements. The Pacific Horizon Funds have entered into an
administration agreement with Bank of America. Stephens Inc. ("Stephens") serves
as administrator to Nations Funds pursuant to an administration agreement.
Effective December 1, 1998, NBAI began serving as co-administrator to Nations
Funds with Stephens, and The Bank of New York began serving as
sub-administrator. Under the new administration arrangements, which will become
effective for the Nations Funds on a Fund by Fund basis during the fourth
quarter of 1998 and first quarter of 1999. Stephens and NBAI provide various
administrative, accounting and corporate secretarial services and The Bank of
New York assists NBAI in performing certain administrative and accounting
services.]
22
<PAGE>
Shareholder Transactions and Services. The Pacific Horizon Funds and the
corresponding Nations Funds offer generally similar shareholder services and
transactions. There are however, some differences. For example, the minimum
initial investment for A, B and K Shares of the Pacific Horizon Funds is
generally $500 while the minimum initial investment for the corresponding
Investor A, Investor B and Investor C Shares of the Nations Funds, respectively,
is generally $1,000. Also, redemptions from a Pacific Horizon Fund Account
generally requires a $500 minimum balance, while Nations requires a $1,000
minimum balance. Another difference is that Pacific Horizon provides
check-writing privileges on all A, B and K Shares of the U.S. Government
Securities Fund, while Nations does not provide check-writing privileges on
Investor A, Investor B and Investor C Shares of the Nations Funds (although
Nations does provide check-writing privileges on certain shares of its money
market funds). Additionally, Nations does not offer Teletrade--a service
currently offered Pacific Horizon Fund shareholders that allows shareholders to
authorize electronic transfers of money to purchase shares in or redeem shares
from an established Fund account. For a detailed comparison of shareholder
transactions and services see Appendix IV.
Fees and Expenses. Shareholders of A Shares and B Shares of the Pacific
Horizon Aggressive Growth Fund will experience lower fees after the
Reorganization. Shareholders of the International Equity Fund and U.S.
Government Securities Fund, will experience higher fees after the Reorganization
because certain Pacific Horizon Fund service providers currently waive fees
and/or reimburse expenses. For example, Bank of America currently waives all of
the fees that it is entitled to receive for providing investment advisory
services to the Pacific Horizon International Equity Fund and a substantial
portion of its fees that it is entitled to receive for services provided to the
Pacific Horizon U.S. Government Securities Fund. For K Shares of the Pacific
Horizon Aggressive Growth Fund, Bank of America has completely waived fees
entitled to it under the Administrative and Shareholder Services and
Distribution Plan. This subsidization results in Bank of America and other
service providers furnishing services to certain classes of the Pacific Horizon
Funds at a loss.
The subsidization has benefited those Pacific Horizon International Equity
and U.S. Government Securities Funds shareholders in that they have enjoyed
total operating expenses well below the median ratios of other comparable mutual
funds. Bank of America has informed Pacific Horizon that Bank of America would
have reduced this subsidization as the Funds reached larger asset levels, such
as the asset levels that will likely be attained by the Nations Funds after the
Reorganization. NBAI has informed Pacific Horizon that for this reason, NBAI
will not waive fees or reimburse expenses to the same extent as Bank of America
has for the Pacific Horizon Funds.
23
<PAGE>
Due to reductions in waivers and/or reimbursements, most Pacific Horizon
Fund shareholders are expected to experience higher total fund operating
expenses after the Reorganization. It is important, however, to consider that
all total operating expense ratios for the Nations Funds are within industry
norms. Moreover, NBAI has undertaken to waive fees and/or reimburse expenses as
needed to ensure that, for at least one year from the Reorganization, the
Nations Funds' total operating expense ratios, will not exceed the pro forma
after waiver ratios shown in Table II above, absent extraordinary circumstances
or a reduction in Fund assets that impacts expense levels. For detailed pro
forma expense information, see Appendix II.
Share Structure. Both Pacific Horizon and Nations are registered as
open-end management investment companies under the 1940 Act. Currently, Pacific
Horizon offers seventeen funds. The Nations Fund complex, which includes
numerous registered investment companies, will offer over seventy funds
immediately after the Reorganization.
Pacific Horizon was organized as a Maryland corporation on October 27,
1982. It is subject to the provisions of its Charter, and By-Laws. Like Pacific
Horizon, Nations also is a Maryland corporation and was organized on December 3,
1983 (although it had no operations until December 15, 1986) and is subject to
the provisions of its Articles of Incorporation and By-Laws. Both Pacific
Horizon and Nations' charter documents authorizes their respective Board of
Directors to issue full and fractional shares of capital stock ($0.001 par value
per share) and to classify and reclassify any authorized and unissued shares
into one or more classes of shares. Shares of both the Pacific Horizon Funds and
Nations Funds are entitled to one vote for each full share held and fractional
votes for fractional shares held.
Pacific Horizon Fund shareholders generally have cumulative voting rights
to the extent that may be required by applicable law. Additionally, shareholders
will vote in the aggregate and not by class or series, except as required by law
(or when permitted by the Board of Directors). Nations shareholders do not have
cumulative voting rights, and therefore the holders of more than 50% of the
outstanding shares of all funds voting together for the election of Directors
may elect all of the members of the Board of Directors of Nations.
Additional information concerning the attributes of the shares issued by
the Pacific Horizon Funds and Nations Funds is included in their respective
prospectuses, which are incorporated herein by reference. Information about the
dividend and distribution policies of both the Pacific Horizon Funds and Nations
Funds can be found in Appendix IV.
VOTING MATTERS
General Information. This Proxy/Prospectus is being furnished in connection
with the solicitation of proxies for the Meeting by the Board of Directors of
Pacific Horizon. It is expected that the solicitation of proxies will be
primarily by mail. [Officers and service contractors of Pacific Horizon and
Nations also may solicit proxies by telefacsimile, touchtone voting and on-line
voting]. In this connection, Pacific Horizon has retained ADP Proxy Services to
assist in the solicitation of proxies for the Reorganization. Shareholders may
vote (1) by mail, by marking, signing, dating and returning the enclosed Proxy
Ballot in the enclosed postage-paid envelope; (2) by telefacsimile, by marking,
signing, dating and faxing the enclosed Proxy Ballot to ADP Proxy Services at
(704) 388-2641; or (3) by touchtone voting at (800) 690-6903; or 4) on-line
voting at www.proxyvote.com. Any shareholder giving a proxy may revoke it at any
time before it is exercised by submitting to Pacific Horizon a written notice or
revocation of a subsequently executed proxy or by attending the Meeting and
voting in person.
24
<PAGE>
Any expenses incurred as a result of hiring ADP Proxy Services or any
other proxy solicitation agent will be borne by NBAI.
Only shareholders of record at the close of business on January 14, 1999
will be entitled to vote at the Meeting. On that date, the following Pacific
Horizon Shares were outstanding and entitled to be voted.
Name of Pacific Horizon Fund and Class Shares Entitled to Vote
- -------------------------------------- -----------------------
Aggressive Growth Fund
A Shares
B Shares
K Shares
International Equity Fund
A Shares
B Shares
K Shares
U.S. Government Securities Fund
A Shares
K Shares
Each whole and fractional share of a Pacific Horizon Fund is entitled to a
whole or fractional vote.
If the accompanying proxy is executed and returned in time for the
Meeting, the Shares covered thereby will be voted in accordance with the proxy
on all matters that may properly come before the Meeting.
Shareholder and Board Approvals. The Reorganization Agreement is being
submitted for approval at the Meeting by Pacific Horizon's shareholders pursuant
to Pacific Horizon's Charter and By-Laws, and was approved by the Pacific
Horizon Board of Directors at a meeting held on January __, 1999. The
Reorganization Agreement must be approved by a majority of the outstanding
shares of the Pacific Horizon Funds voting separately on a
portfolio-by-portfolio basis and the reorganization of Pacific Horizon
contemplated therein must be approved by a majority of the shares outstanding
and entitled to vote, voting in the aggregate, of all the series of Pacific
Horizon, including those funds that are not part of this Proxy/Prospectus. A
vote for the Reorganization Agreement includes a vote for the reorganization of
Pacific Horizon; correspondingly, a vote against the Reorganization Agreement is
a vote against the reorganization of Pacific Horizon. Separate proxy
solicitation materials are being mailed to the shareholders of all other series
of Pacific Horizon seeking the approval of similar agreements and plans of
reorganization and also Pacific Horizon's reorganization.
25
<PAGE>
The Reorganization Agreement provides that in the event the Reorganization
Agreement is approved with respect to less than all of the Pacific Horizon
Funds, the failure of a Pacific Horizon Fund to consummate the transactions
contemplated by the Reorganization Agreement shall not affect the consummation
or validity of the Reorganization with respect to any other Pacific Horizon
Funds. It is possible that a majority of a Pacific Horizon Fund's shareholders
may approve the Reorganization Agreement while a sufficient majority of all
shareholders of all Pacific Horizon series voting in the aggregate does not vote
to approve the reorganization of Pacific Horizon. In such a case, the Board of
Directors will contemplate what further action is appropriate.
With respect to the approval of the Reorganization Agreement, the term
"majority of the outstanding shares" of Pacific Horizon or a Pacific Horizon
Fund means more than 50% of the outstanding shares of Pacific Horizon or the
particular Pacific Horizon Fund. The vote of the shareholders of the Nations
Funds is not being solicited, since their approval or consent is not necessary
for the Reorganization.
As of January 14, 1999, the officers and Directors of Pacific Horizon as a
group owned less than 1% of any Pacific Horizon Funds. As of January 14, 1999,
the officers and Directors of Nations as a group owned less than 1% of any
Nations Fund. Table IV(A) shows the name, address and share ownership of each
person known to Pacific Horizon to have beneficial or record ownership with
respect to 5% or more of a class of a Pacific Horizon Fund as of January 14,
1999. Table IV(B) shows the name, address and share ownership of each person
known to Nations to have beneficial or record ownership with respect to 5% or
more of a class of a Nations Fund as of January 14, 1999.
TABLE IV(A)
-----------
Class;
Amount of
Pacific Shares Percentage
Horizon Name Owned; Type Percentage Percentage of Fund
Fund and Address of Ownership of Class of Fund Post-Closing
---- ----------- ------------ -------- ------- ------------
TABLE IV(B)
Class;
Amount of
Shares Percentage
Nations Name Owned; Type Percentage Percentage of Fund
Fund and Address of Ownership of Class of Fund Post-Closing
---- ----------- ------------ -------- ------- ------------
26
<PAGE>
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder of more than 25% of a class, or is identified as the holder of record of
more than 25% of a class and has voting and/or investment power, it may be
presumed to control such class.
Nations and Pacific Horizon have been advised by Bank of America that the
shares of each Pacific Horizon Fund over which Bank of America and its
affiliates have voting power may be voted: by Bank of America itself in its
capacity as fiduciary; by Bank of America pursuant to instruction from
underlying beneficial holders; or by one or more independent fiduciaries.
Quorum. In the event that a quorum is not present at the Meeting, or in
the event that a quorum is present at the Meeting but sufficient votes to
approve the Reorganization Agreement are not received by one or more of the
Pacific Horizon Funds, one or more adjournment(s) may be proposed to permit
further solicitation of proxies. Any adjourned session or sessions may be held,
after the date set for the original Meeting without notice except announcement
at the Meeting, but, under Maryland law, no more than 120 days after the record
date. Any such adjournment(s) will require the affirmative vote of a majority of
those shares affected by the adjournment(s) that are represented at the Meeting
in person or by proxy. If a quorum is present, the persons named as proxies will
vote those proxies which they are entitled to vote FOR the particular proposal
for which a quorum exists in favor of such adjournment(s), and will vote those
proxies required to be voted AGAINST such proposal against any adjournment(s). A
shareholder vote may be taken with respect to one or more Pacific Horizon Funds
(but not the other Pacific Horizon Funds) on some or all matters before any such
adjournment(s) if a quorum and sufficient votes have been received for approval.
A quorum is constituted with respect to Pacific Horizon or a Pacific
Horizon Fund by the presence in person or by proxy of the holders of more than
50% of the outstanding shares of Pacific Horizon or the Pacific Horizon Fund
entitled to vote at the Meeting. For purposes of determining the presence of a
quorum for transacting business at the Meeting, abstentions will be treated as
shares that are present at the Meeting but which have not been voted.
Abstentions will have the effect of a "no" vote for purposes of obtaining the
requisite approvals of the Reorganization Agreement. Broker "non-votes" (that
is, proxies from brokers or nominees indicating that such persons have not
received instructions from the beneficial owners or other persons entitled to
vote shares on a particular matter with respect to which the brokers or nominees
do not have discretionary power) will be treated the same as abstentions.
27
<PAGE>
Annual Meetings and Shareholder Meetings. Neither Nations nor Pacific
Horizon presently intends to hold annual meetings of shareholders for the
election of directors and other business unless otherwise required by the 1940
Act. Under certain circumstances, however, holders of at least 10% of the
outstanding shares of either Pacific Horizon or Nations have the right to call a
meeting of shareholders.
ADDITIONAL INFORMATION ABOUT NATIONS
Additional information about the Nations Funds is included in their
prospectuses and statements of additional information dated August 1, 1998, as
supplemented through the date hereof, copies of which, to the extent not
included herewith, may be obtained without charge by writing or calling Nations
at the address and telephone number set forth on the first page of this
Proxy/Prospectus. Nations is subject to the informational requirements of the
Securities Exchange Act of 1934, as amended, and the 1940 Act, and in accordance
therewith it files reports, proxy materials and other information with the SEC.
Reports and other information filed by Nations can be inspected and copied at
the Public Reference Facilities maintained by the SEC at 450 Fifth Street, N.W.,
Washington, D.C. 20549 and at the offices of Nations listed above. In addition,
these materials can be inspected and copied at the SEC's Regional Offices at 7
World Trade Center, Suite 1300, New York, New York 10048, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials also can be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates.
Officers of Nations are elected by, and serve at the pleasure of, the
Board of Directors. Officers of Nations receive no remuneration from Nations for
their services in such capacities.
Information included in this Proxy/Prospectus concerning Nations was
provided by Nations.
ADDITIONAL INFORMATION ABOUT PACIFIC HORIZON
Additional information about the Pacific Horizon Funds is included in
their prospectuses and statements of additional information, dated July 1, 1998
as supplemented through the date hereof, which have been filed with the SEC.
Copies of these prospectuses and the related statements of additional
information may be obtained without charge by writing or calling Pacific Horizon
at the address and telephone number set forth on the first page of this
Proxy/Prospectus. Reports and other information filed by Pacific Horizon can be
inspected and copied at the Public Reference Facilities maintained by the SEC at
450 Fifth Street, N.W., Washington, D.C. 20549 and at the offices of Pacific
Horizon listed above. In addition, these materials can be inspected and copied
at the SEC's Regional Offices at 7 World Trade Center, Suite 1300, New York, New
York 10048, and Northwestern Atrium Center, 500 West Madison Street, Suite 1400,
Chicago, Illinois 60661. Copies of such materials also can be obtained from the
Public Reference Branch, Office of Consumer Affairs and Information Services,
Securities and Exchange Commission, Washington, D.C. 20549, at prescribed rates.
28
<PAGE>
Information included in this Proxy/Prospectus concerning Pacific Horizon
was provided by Pacific Horizon.
FINANCIAL
The unaudited financial statements and financial highlights for shares of
the Nations Funds for the semi-annual period ended September 30, 1998 are
included or incorporated by reference in their prospectuses or statements of
additional information, or in the statement of additional information related to
this Proxy/Prospectus. The unaudited financial statements and financial
highlights for shares of the Pacific Horizon Funds for the semi-annual period
ended August 31, 1998 are included or incorporated by reference in their
prospectuses or statements of additional information or in the statement of
additional information related to this Proxy/Prospectus, or are included herein.
The annual financial statements and financial highlights of the Nations
Funds for the year ended March 31, 1998 have been audited by
PricewaterhouseCoopers LLP, independent accountants, to the extent indicated in
their reports thereon, and have been incorporated by reference in the Statement
of Additional Information to this Proxy/Prospectus, in reliance upon such
reports given upon the authority of such firm as an expert in accounting and
auditing.
The annual financial statements and financial highlights of the Pacific
Horizon Funds for the year ended February 28, 1998 have been audited by
PricewaterhouseCoopers LLP, independent accountants, to the extent indicated in
their reports thereon, and have been incorporated by reference in the Statement
of Additional Information to this Proxy/Prospectus, in reliance upon such
reports given upon the authority of such firm as an expert in accounting and
auditing.
OTHER BUSINESS
Pacific Horizon's Board of Directors knows of no other business to be
brought before the Meeting. However, if any other matters properly come before
the Meeting, it is the intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
SHAREHOLDER INQUIRIES
Shareholder inquiries may be addressed to Pacific Horizon or to Nations in
writing at the address(es), or by phone at the phone number(s), on the cover
page of this Proxy/Prospectus.
29
<PAGE>
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED
TO MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. SHAREHOLDERS
ALSO MAY RETURN PROXIES BY TELEFACSIMILE OR VOTE ON-LINE OR BY TELEPHONE.
PACIFIC HORIZON WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS FEBRUARY 28,
1998 ANNUAL REPORTS, OR AUGUST 31, 1998 SEMI-ANNUAL REPORTS, TO ANY SHAREHOLDER
UPON REQUEST ADDRESSED TO: PACIFIC HORIZON FUNDS AT P.O. BOX 8968, WILMINGTON,
DE 19899 OR BY TELEPHONE AT 1-800-346-2087.
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APPENDIX I
FORM OF AGREEMENT
AND
PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of this _____ day of _______, 1999, by and between Nations Fund, Inc.
("Nations Funds"), a Maryland corporation, for itself and on behalf of Nations
Government Securities Fund, Nations International Equity Fund and Nations Small
Company Growth Fund (each an "Acquiring Fund" and collectively the "Acquiring
Funds"), each a portfolio of Nations Funds, and Pacific Horizon Funds, Inc.
("Pacific Horizon Funds"), a Maryland corporation, for itself and on behalf of
the Pacific Horizon Aggressive Growth Fund, Pacific Horizon International Equity
Fund and Pacific Horizon U.S. Government Securities Fund (each an "Acquired
Fund" and collectively the "Acquired Funds"), each a portfolio of Pacific
Horizon Funds.
In accordance with the terms and conditions set forth in this
Agreement, the parties desire that all of the Fund Assets (as defined in
paragraph 1.2.a.) of each Acquired Fund be transferred to each Acquiring Fund
corresponding thereto, as set forth in the table attached hereto as Schedule A,
in exchange for shares of specified classes of the corresponding Acquiring Fund
("Acquiring Fund Shares") and the assumption by each Acquiring Fund of the
Liabilities (as defined in paragraph 1.3) of each corresponding Acquired Fund,
and that such Acquiring Fund Shares be distributed immediately after the
Closing(s), as defined in this Agreement, by each Acquired Fund to its
shareholders in liquidation of each Acquired Fund. The parties intend that each
Reorganization (as defined herein) qualify as a "reorganization," within the
meaning of Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and that each of the Acquiring Funds and the Acquired Funds qualify as
a "party to a reorganization," within the meaning of Section 368(b) of the Code,
with respect to such Reorganization.
In consideration of the promises and of the covenants and agreements
hereinafter set forth, the parties hereto, intending to be legally bound hereby,
covenant and agree as follows:
1. REORGANIZATION OF ACQUIRED FUNDS
1.1. Subject to the terms and conditions herein set forth, and on the
basis of the representations and warranties contained herein, each
Acquired Fund shall assign, deliver and otherwise transfer its
assets as set forth in paragraph 1.2.a (the "Fund Assets") to its
corresponding Acquiring Fund identified in Schedule A, and such
corresponding Acquiring Fund shall, as consideration therefor, on
the Closing Date (as defined in paragraph 3.1), (i) deliver to each
corresponding Acquired Fund the full and fractional number of shares
of each of its share classes calculated by dividing the value of the
Fund Assets less the Liabilities of the corresponding Acquired Fund
that are so conveyed and are attributable to each of the Acquiring
Fund's respective share classes set forth in Schedule A, computed in
the manner and as of the time and date set forth in this Agreement,
by the net asset value of one Acquiring Fund share of the particular
share class that is to be delivered with respect thereto, computed
in the manner and as of the time and date set forth in this
Agreement; and (ii) assume all of such Acquired Fund's Liabilities
(as defined in paragraph 1.3). Such transfer, delivery and
assumption shall take place at the closing(s) provided for in
paragraph 3.1 (hereinafter sometimes referred to as the
"Closing(s)"). Promptly after the Closing(s), each Acquired Fund
shall distribute the Acquiring Fund Shares to the shareholders of
the respective share classes of the Acquired Fund in liquidation of
the Acquired Fund as provided in paragraph 1.4 hereof. Such
transaction(s) are hereinafter sometimes collectively referred to as
the "Reorganization(s)."
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1.2.a. With respect to each Acquired Fund, the Fund Assets shall consist
of all property and assets of any nature whatsoever, including,
without limitation, all cash, cash equivalents, securities, claims
(whether absolute or contingent, known or unknown, accrued or
unaccrued) and receivables (including dividend and interest
receivables) owned by each Acquired Fund, and any prepaid expenses
shown as an asset on each Acquired Fund's books on the Closing Date.
1.2.b. At least fifteen (15) business days prior to the Closing Date, each
Acquired Fund will provide the corresponding Acquiring Fund with a
schedule of its securities and other assets and Liabilities of which
it is aware, and such Acquiring Fund will provide the Acquired Fund
with a copy of the current investment objective and policies
applicable to each Acquiring Fund. Each Acquired Fund reserves the
right to sell any of the securities or other assets shown on the
list of the Fund's Assets prior to the Closing Date but will not,
without the prior approval of the corresponding Acquiring Fund,
acquire any additional securities other than securities which the
Acquiring Fund is permitted to purchase in accordance with its
stated investment objective and policies. At least ten (10) business
days prior to the Closing Date, the Acquiring Fund will advise the
corresponding Acquired Fund of any investments of such Acquired Fund
shown on such schedule which the Acquiring Fund would not be
permitted to hold, pursuant to its stated investment objective and
policies or otherwise. In the event that the Acquired Fund holds any
investments that its corresponding Acquiring Fund would not be
permitted to hold under its stated investment objective or policies,
the Acquired Fund, if requested by the Acquiring Fund and, to the
extent permissible and consistent with the Acquired Fund's own
investment objective and policies, will dispose of such securities
prior to the Closing Date. In addition, if it is determined that the
portfolios of the Acquired Fund and the Acquiring Fund, when
aggregated, would contain investments exceeding certain percentage
limitations to which the Acquiring Fund is or will be subject with
respect to such investments, the Acquired Fund, if requested by the
Acquiring Fund and, to the extent permissible and consistent with
the Acquired Fund's own investment objective and policies, will
dispose of and/or reinvest a sufficient amount of such investments
as may be necessary to avoid violating such limitations as of the
Closing Date.
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1.3. Each Acquired Fund will endeavor to discharge all of its known
liabilities and obligations prior to the Closing Date. Each
Acquiring Fund will assume all liabilities and obligations of the
corresponding Acquired Fund, accrued, absolute, contingent or
otherwise existing, as of the Closing Date, which liabilities and
obligations shall include any obligation of the Pacific Horizon
Funds to indemnify Pacific Horizon Funds current and former
Directors and officers, acting in their capacities as such, to the
fullest extent permitted by law and the Pacific Horizon Funds'
Charter, as in effect as of the date of this Agreement and any
obligations of the Pacific Horizon Funds to pay any retirement
benefits to current and former Directors pursuant to Pacific Horizon
Fund's retirement plan ("Liabilities"). Without limiting the
foregoing, each Acquired Fund agrees that all rights to
indemnification and retirement benefits and all limitations of
liability existing in favor of the Pacific Horizon Funds' current
and former Directors and officers, acting in their capacities as
such, under Pacific Horizon Funds' Charter as in effect as of the
date of this Agreement shall survive the Reorganization and shall
continue in full force and effect, without any amendment thereto,
and shall constitute rights which may be asserted against Nations
Funds, its successors or assigns. The Liabilities assumed by Nations
Funds, its successors or assigns, on behalf of an Acquiring Fund
shall be separate Liabilities of such Acquiring Fund, and not joint
or joint and several liabilities of any other Acquiring Fund.
1.4. Prior to the Closing(s), Nations Funds and Pacific Horizon Funds
shall file appropriate Articles of Transfer pursuant to the laws of
the State of Maryland, effective as of the Closing(s).
1.5. Promptly after the Closing(s) with respect to each Acquired Fund,
the Acquired Fund will distribute the shares of the Acquiring Fund
class received by the Acquired Fund pursuant to paragraph 1.1 to its
shareholders of record determined as of the close of business on the
Closing Date ("Acquired Fund Investors") in complete liquidation of
the Acquired Fund. Acquired Fund Investors will be credited with
full and fractional shares of the class that is issued by the
corresponding Acquiring Fund under this Agreement with respect to
the shares of the Acquired Fund that are held by the Acquired Fund
Investors. Such distribution will be accomplished by an instruction,
signed by an appropriate officer of Pacific Horizon Funds, to
transfer the Acquiring Fund Shares then credited to the Acquired
Fund's account on the books of the Acquiring Fund and to open
accounts on the books of the Acquiring Fund established and
maintained by the Acquiring Fund's transfer agent in the names of
record of the Acquired Fund Investors and representing the
respective number of shares of the Acquiring Fund due such Acquired
Fund Investors. In exchange for Acquiring Fund Shares distributed,
all issued and outstanding shares of common stock of the Acquired
Fund will be redeemed and canceled simultaneously therewith on the
Acquired Fund's books; any outstanding share certificates
representing interests in the Acquired Fund thereafter will
represent the right to receive such number of Acquiring Fund Shares
after the Closing(s) as determined in accordance with Section 1.1.
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1.6. If a request shall be made for a change of the registration of
shares of an Acquiring Fund to another person from the account of
the shareholder in which name the shares are registered in the
records of the corresponding Acquired Fund, it shall be a condition
of such registration of shares that there be furnished to the
Acquiring Fund an instrument of transfer properly endorsed,
accompanied by appropriate signature guarantees and otherwise in
proper form for transfer and, if any of such shares are outstanding
in certificated form, the certificates representing such shares, and
that the person requesting such registration shall pay to such
Acquiring Fund any transfer or other taxes required by reason of
such registration or establish to the reasonable satisfaction of the
Acquiring Fund that such tax has been paid or is not applicable.
1.7. Following the transfer of assets by each Acquired Fund to the
corresponding Acquiring Fund, the assumption of the Acquired Fund's
Liabilities by the Acquiring Fund, and the distribution by the
Acquired Fund of the Acquiring Fund Shares received by it pursuant
to paragraph 1.4, Pacific Horizon Funds shall terminate the
qualification, classification and registration of such Acquired Fund
at all appropriate federal and state agencies. All reporting and
other obligations of Pacific Horizon Funds shall remain the
exclusive responsibility of Pacific Horizon Funds up to and
including the date on which the particular Acquired Fund is
terminated and deregistered, subject to any reporting or other
obligations described in paragraph 4.9. Subject to the provisions of
Section 1.8 and comparable provisions of similar Agreements and
Plans of Reorganizations being entered into between Pacific Horizon
Funds and Nations Funds Trust and Nations Institutional Reserves, at
an appropriate time as determined by Pacific Horizon Funds, upon the
advice of counsel, Pacific Horizon Funds will be dissolved under the
laws of the State of Maryland.
1.8. Subject to the conditions set forth in this Agreement, the failure
of one Acquired Fund to consummate the transactions contemplated
hereby shall not affect the consummation or validity of a
Reorganization with respect to any other Acquired Fund, and the
provisions of this Agreement shall be construed to effect this
intent, including, without limitation, as the context requires,
construing the terms "Acquiring Fund" and "Acquired Fund" as meaning
only those series of Nations Funds and Pacific Horizon Funds,
respectively, which are involved in a Reorganization as of a Closing
Date.
2. VALUATION
2.1.a. With respect to each Acquired Fund, the value of the Fund Assets
shall be the value of such assets computed as of the time at which
its net asset value is calculated on the Closing Date (such time and
date being herein called the "Applicable Valuation Date"). The net
asset value of the Fund Assets to be transferred by the Acquired
Funds shall be computed by Pacific Horizon Funds and shall be
subject to adjustment by the amount, if any, agreed to by Nations
Funds and the respective Acquired Funds. In determining the value of
the securities transferred by the Acquired Funds to the Acquiring
Funds, except as provided in sub-paragraph 2.1.b., each security
shall be priced in accordance with the pricing policies and
procedures of the Acquiring Funds as described in its then current
prospectuses and statements of additional information. For such
purposes, price quotations and the security characteristics relating
to establishing such quotations shall be determined by Pacific
Horizon Funds, provided that such determination shall be subject to
the approval of Nations Funds. Pacific Horizon Funds and Nations
Funds agree to use all commercially reasonable efforts to resolve
any material pricing differences between the prices of portfolio
securities determined in accordance with the pricing policies and
procedures of Pacific Horizon Funds and those determined in
accordance with the pricing policies and procedures of the Acquiring
Funds prior to the Applicable Valuation Date.
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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.
3. CLOSING(S) AND CLOSING DATE
3.1. Prior to the Closing(s), Nations Funds and Pacific Horizon Funds
shall execute and file Articles of Transfer, effective as of the
Closing(s) with respect to the transactions contemplated hereby with
the Department of Assessments and Taxation of the State of Maryland
(the "Department of Assessments"). The Closing for the Acquiring
Funds and their corresponding Acquired Fund(s), shall occur on May
14, 1999, and/or on such other date(s) as may be mutually agreed
upon in writing by the officers of the parties hereto (a "Closing
Date"). The Closing(s) shall be held at the offices of Stephens
Inc., 111 Center Street, Suite 300, Little Rock, Arkansas 72201 or
at such other location as is mutually agreeable to the parties. All
acts taking place at the Closing(s) shall be deemed to take place
simultaneously as of 4:00 p.m. Eastern time on the Closing Date
unless otherwise provided.
3.2. Each Acquiring Fund's custodian shall deliver at the Closing(s) a
certificate of an authorized officer stating that: (a) each Acquired
Fund's portfolio securities, cash and any other assets have been
delivered in proper form to the corresponding Acquiring Fund on the
Closing Date and (b) all necessary taxes including all applicable
federal and state stock transfer stamps, if any, have been paid, or
provision for payment shall have been made, by such Acquired Fund in
conjunction with the delivery of portfolio securities. Proper
delivery of cash shall be by wire to The Bank of New York, the
Acquiring Funds' Custodian, pursuant to instruction to be delivered
prior to the Closing(s).
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3.3. Notwithstanding anything herein to the contrary, in the event that
on the Applicable Valuation Date (a) the New York Stock Exchange
shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on such exchange or
elsewhere shall be disrupted so that, in the judgment of Nations
Funds and Pacific Horizon Funds, accurate appraisal of the value of
the net assets of an Acquiring Fund or an Acquired Fund is
impracticable, the Applicable Valuation Date and Closing Date shall
be postponed until the first business day after the day when trading
shall have been fully resumed without restriction or disruption and
reporting shall have been restored.
3.4. With respect to each Acquired Fund, Pacific Horizon Funds shall
provide Nations Funds and its transfer agents with immediate access
from and after the Closing Date to (a) the computer, electronic or
such other forms of records containing the names, addresses and
taxpayer identification numbers of all of the Acquired Fund
Investors and the number and percentage ownership of outstanding
Acquired Fund shares owned by such Acquired Fund Investor, all as of
the Applicable Valuation Date, and (b) all original documentation
(including all applicable Internal Revenue Service forms,
certificates, certifications and correspondence) relating to the
Acquired Fund Investors' taxpayer identification numbers and their
liability for or exemption from back-up withholding. Each
corresponding Acquiring Fund shall issue and deliver to the
Secretary or Assistant Secretary of Pacific Horizon Funds, acting on
behalf of the Acquired Fund, a confirmation evidencing the Acquiring
Fund Shares credited on the Closing Date or shall provide evidence
satisfactory to each Acquired Fund that such Acquiring Fund Shares
have been credited to each Acquired Fund's account on the books of
each Acquiring Fund. At the Closing(s), each party shall deliver to
the other such bills of sale, checks, assignments, assumptions of
liability share certificates, if any, receipts or other documents of
transfer, assignment or conveyance as such other party or its
counsel may reasonably request.
3.5. Within twenty (20) days after the Closing Date, each Acquired Fund
shall deliver, in accordance with Article 1 hereof, to the
corresponding Acquiring Fund a statement of the Fund Assets and
Liabilities, together with a list of such Acquired Fund's portfolio
securities and other assets showing the respective adjusted bases
and holding periods thereof for income tax purposes, as of the
Closing Date, certified by an appropriate officer of Pacific Horizon
Funds.
4. COVENANTS WITH RESPECT TO THE ACQUIRING FUNDS AND THE ACQUIRED FUNDS
4.1. Pacific Horizon Funds has called or will call a meeting of the
Acquired Fund shareholders to consider and act upon this Agreement,
and to take such other actions reasonably necessary to obtain the
approval of the transactions contemplated herein, including approval
for each Acquired Fund's liquidating distribution of the Acquiring
Fund Shares contemplated hereby, and for Pacific Horizon Funds to
terminate each Acquired Fund's qualification, classification and
registration if requisite approvals are obtained with respect to
each Acquired Fund. Nations Funds and Pacific Horizon Funds will
jointly prepare the notice of meeting, form of proxy and proxy
statement (collectively, "Proxy Materials") to be used in connection
with such meeting; provided that Nations Funds has furnished or will
furnish Pacific Horizon Funds, with a current, effective prospectus,
including any supplements, relating to the class of shares of each
Acquiring Fund corresponding to the class of shares of each Acquired
Fund then outstanding for incorporation within and/or distribution
with the Proxy Materials, and with such other information relating
to the Acquiring Funds as is reasonably necessary for the
preparation of the Proxy Materials.
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4.2. Pacific Horizon Funds, on behalf of each Acquired Fund, covenants
that each Acquired Fund shall not sell or otherwise dispose of any
Acquiring Fund Shares to be received in the transactions
contemplated herein, except in distribution to its shareholders in
accordance with the terms of this Agreement.
4.3. Pacific Horizon Funds, on behalf of each Acquired Fund, will assist
the corresponding Acquiring Fund in obtaining such information as
the Acquiring Fund reasonably requests concerning the record and
beneficial ownership of shares of each class of each Acquired Fund.
4.4. Subject to the provisions hereof, Nations Funds, on its own behalf
and on behalf of each Acquiring Fund, and Pacific Horizon Funds, on
its own behalf and on behalf of each Acquired Fund, will take, or
cause to be taken, all actions, and do, or cause to be done, all
things reasonably necessary, proper or advisable to consummate and
make effective the transactions contemplated herein.
4.5. Pacific Horizon Funds, on behalf of each Acquired Fund, shall
furnish to its corresponding Acquiring Fund on the Closing Date, a
statement of the total amount of each Acquired Fund's assets and
Liabilities as of the Closing Date, which statement shall be
certified by an appropriate officer of Pacific Horizon Funds as
being determined in accordance with generally accepted accounting
principles consistently applied and as being valued in accordance
with paragraph 2.1 hereof. As promptly as practicable, but in any
case within sixty (60) days after the Closing Date, Pacific Horizon
Funds, on behalf of each Acquired Fund, shall furnish its
corresponding Acquiring Fund, in such form as is reasonably
satisfactory to Nations Funds, on behalf of each Acquiring Fund, a
statement certified by an officer of Pacific Horizon Funds of such
Acquired Fund's federal income tax attributes and the tax bases in
its assets that will be carried over to the corresponding Acquiring
Fund in the Reorganization pursuant to Section 381 of the Code.
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4.6. Nations Funds has prepared and filed, or will prepare and file, with
the Securities and Exchange Commission ("SEC") and the appropriate
state securities commissions a post-effective amendment (the "N-1A
Post-Effective Amendment") to its registration statement on Form
N-1A (File Nos. 33-33144; 811-6030), as promptly as practicable so
that all Acquiring Funds and their shares are registered under the
Securities Act of 1933, as amended (the "1933 Act"), the Investment
Company Act of 1940, as amended (the "1940 Act"), and applicable
state securities laws. In addition, Nations Funds, on behalf of each
Acquiring Fund, has prepared and filed, or will prepare and file
with the SEC a registration statement on Form N-14 under the 1933
Act, relating to the Acquiring Fund Shares, which, without
limitation, shall include a proxy statement of Pacific Horizon Funds
and the prospectuses of the Acquiring Funds of Nations Funds
relating to the transactions contemplated by this Agreement (the
"Registration Statement"). Pacific Horizon Funds, on behalf of each
Acquired Fund, has provided or will provide each corresponding
Acquiring Fund with the materials and information necessary to
prepare the N-1A Post-Effective Amendment and the Proxy Materials
for inclusion in the Registration Statement, prepared in accordance
with paragraph 4.1, and with such other information and documents
relating to each Acquired Fund as are requested by the corresponding
Acquiring Fund and as are reasonably necessary for the preparation
of the N-1A Post-Effective Amendment and the Registration Statement.
4.7. As soon after the Closing Date as is reasonably practicable, Pacific
Horizon Funds, on behalf of each Acquired Fund shall prepare and
file all federal and other tax returns and reports of each Acquired
Fund required by law to be filed with respect to all periods ending
on or before the Closing Date but not theretofore filed.
4.8. With respect to each Acquiring Fund, Nations Funds agrees to use all
reasonable efforts to operate in accordance with its then current
prospectus and statement of additional information prepared in
accordance with Form N-1A, as may be modified from time to time,
including qualifying as a "regulated investment company" under the
Code, for at least one (1) year following the Closing Date.
4.9. With respect to each Acquired Fund, Pacific Horizon Funds agrees to
use all reasonable efforts to operate in accordance with its then
current prospectus and statement of additional information prepared
in accordance with Form N-1A, as may be modified from time to time,
including qualifying as a "regulated investment company" under the
Code, up to the Closing Date.
4.10. Following the transfer of assets by each Acquired Fund to the
corresponding Acquiring Fund in exchange for Acquiring Fund Shares
and the assumption of all Liabilities of the Acquired Fund as
contemplated herein, Pacific Horizon Funds will file any final
regulatory reports, including but not limited to any Form N-SAR and
Rule 24f-2 filings with respect to such Acquired Fund(s), promptly
after the Closing Date. As soon as practicable after the Closing
Date and further subject to Section 1.8 hereof and comparable
provisions of similar Agreements and Plans of Reorganization between
Pacific Horizon Funds and Nations Fund Trust and Nations
Institutional Reserves, Pacific Horizon Funds shall file an
application pursuant to Section 8(f) of the 1940 Act for an order
declaring that it has ceased to be an investment company; shall file
Articles of Dissolution for recordation with the Department of
Assessments, and shall take, in accordance with Maryland General
Corporation Law, all other steps necessary and proper to effect its
complete dissolution.
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4.11. Nations Fund, on behalf of each Acquiring Fund, shall use its best
efforts to satisfy the conditions of the statutory exemption set
forth in Section 15(f) of the 1940 Act, as an assumption of the
stated expectation of the Pacific Horizon Funds as set forth in the
proxy statement of Pacific Horizon Funds dated May 15, 1998.
5. REPRESENTATIONS AND WARRANTIES
5.1. Nations Funds, on behalf of itself and each Acquiring Fund,
represents and warrants to the Pacific Horizon Funds as follows:
5.1.a. Nations Funds was duly created pursuant to its Charter 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 Charter
directs the Directors to manage the affairs of Nations Funds
and grants them all powers necessary or desirable to carry
out such responsibility, including administering Nations
Funds business as currently conducted by Nations Funds and as
described in the current prospectuses of Nations Funds;
Nations Funds is registered as an investment company
classified as an open-end management company under the 1940
Act, and its registration with the SEC as an investment
company is in full force and effect;
5.1.b. The Registration Statement, including the current
prospectuses and statement of additional information of each
Acquiring Fund, conform or will conform, at all times up to
and including the Closing Date, in all material respects to
the applicable requirements of the 1933 Act and the 1940 Act
and the regulations thereunder and do not include or will not
include any untrue statement of a material fact or omit to
state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
5.1.c. Each Acquiring Fund is not in violation of, and the
execution, delivery and performance of this Agreement by
Nations Funds for itself and on behalf of each Acquiring Fund
does not and will not (i) violate Nations Funds' Charter or
By-Laws, or (ii) result in a breach or violation of, or
constitute a default under any material agreement or material
instrument, to which Nations Funds is a party or by which its
properties or assets are bound;
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5.1.d. Except as previously disclosed in writing to the Pacific
Horizon Funds, no litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or, to Nations Funds' knowledge, threatened
against Nations Funds or its business, the Acquiring Funds or
any of their properties or assets, which, if adversely
determined, would materially and adversely affect Nations
Funds or an Acquiring Fund's financial condition or the
conduct of their business, and Nations Funds knows of no
facts that might form the basis for the institution of any
such proceeding or investigation, and no Acquiring Fund is a
party to or subject to the provisions of any order, decree or
judgment of any court or governmental body which materially
and adversely affects, or is reasonably likely to materially
and adversely affect, its business or its ability to
consummate the transactions contemplated herein;
5.1.e. All issued and outstanding shares, including shares to be
issued in connection with the Reorganization, of each
Acquiring Fund class will, as of the Closing Date, be duly
authorized and validly issued and outstanding, fully paid and
non-assessable by Nations Funds and the Acquiring Fund does
not have outstanding any option, warrants or other rights to
subscribe for or purchase any of its shares;
5.1.f. The execution, delivery and performance of this Agreement on
behalf of each Acquiring Fund will have been duly authorized
prior to the Closing Date by all necessary action on the part
of Nations Funds and the Directors, and this Agreement
constitutes a valid and binding obligation of Nations Funds
and each Acquiring Fund enforceable in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar
laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
5.1.g. The Acquiring Fund Shares to be issued and delivered to the
corresponding Acquired Fund for the account of the Acquired
Fund Investors, pursuant to the terms hereof, will have been
duly authorized as of the Closing Date and, when so issued
and delivered, will be duly and validly issued, fully paid
and non-assessable, and the shares of the class of the
Acquiring Fund issued and outstanding prior to the Closing
Date were offered and sold in compliance with the applicable
registration requirements, or exemptions therefrom, of the
1933 Act, and all applicable state securities laws, and the
regulations thereunder, and no shareholder of an Acquiring
Fund shall have any preemptive right of subscription or
purchase in respect thereto;
5.1.h. From the effective date of the Registration Statement,
through the time of the meeting of the Acquired Fund
shareholders and on the Closing Date, any written information
furnished by Nations Funds with respect to an Acquiring Fund
for use in the Proxy Materials, the Registration Statement or
any other materials provided in connection with the
Reorganization does not and will not contain any untrue
statement of a material fact or omit to state a material fact
necessary to make the information provided not misleading;
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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
Funds, for itself and on behalf of each Acquiring Fund, or
the performance of the Agreement by Nations Funds, for itself
and on behalf of each Acquiring Fund, except for the
effectiveness of the Registration Statement, any necessary
exemptive relief or no-action assurances requested from the
SEC or its staff with respect to Sections 17(a) and 17(d) of
the 1940 Act and Rule 17d-1 thereunder, and such other
consents, approvals, authorizations and filings as have been
made or received, and except for such consents, approvals,
authorizations and filings as may be required subsequent to
the Closing Date;
5.1.j. The Statement of Assets and Liabilities, Statement of
Operations and Statement of Changes in Net Assets of Nations
Small Company Growth Fund, Nations International Equity Fund
and Nations Government Securities Fund as of and for the year
ended March 31, 1998, audited by PricewaterhouseCoopers LLP
(copies of which have been or will be furnished to the
corresponding Acquired Fund), and the unaudited Statement of
Net Assets, Statement of Operations and Statement of Changes
in Net Assets of Nations Small Company Growth Fund, Nations
International Equity Fund and Nations Government Securities
Fund as of and for the six-month period ended September 30,
1998 (copies of which have been or will be furnished to the
corresponding Acquired Fund), present fairly, in all material
respects, the financial position of Nations Small Company
Growth Fund, Nations International Equity Fund and Nations
Government Securities Fund as of such date and the results of
its operations and the changes in its Net Assets for the
period then ended in accordance with generally accepted
accounting principles consistently applied, and as of such
date there were no Liabilities of Nations Small Company
Growth Fund, Nations International Equity Fund and Nations
Government Securities Fund known to Nations Funds that were
not disclosed therein but that would be required to be
disclosed therein in accordance with generally accepted
accounting principles;
5.1.k. Since the date of the most recent audited financial
statements, there has not been any material adverse change in
any Acquiring Fund's financial position, assets, liabilities
or business, other than changes occurring in the ordinary
course of business, or any incurrence by an Acquiring Fund of
indebtedness maturing more than one year from the date such
indebtedness was incurred, except as otherwise disclosed in
writing to and accepted by the corresponding Acquired Fund,
prior to the Closing Date (for the purposes of this
subparagraph (k), neither a decline in an Acquiring Fund's
net asset value per share nor a decrease in an Acquiring
Fund's size due to redemptions shall be deemed to constitute
a material adverse change);
I-11
<PAGE>
5.1.l. All federal and other tax returns and reports of Nations
Funds and each Acquiring Fund required by law to be filed on
or before the Closing Date have been or will be filed, and
all federal and other taxes owed by Nations Funds on behalf
of the Acquiring Funds have been or will be paid so far as
due, and to the best of Nations Funds' knowledge, no such
return is currently under audit and no assessment has been
asserted with respect to any such return;
5.1.m. At the Closing Date, the Acquiring Funds will have good and
marketable title to their assets and full right, power and
authority to assign, deliver and otherwise transfer such
assets; and
5.1.n. Each Acquiring Fund intends to qualify as a "regulated
investment company" under the Code, and each Acquiring Fund
that has conducted material investment operations prior to
the Closing Date has elected to qualify and has qualified as
a "regulated investment company" under the Code, as of and
since its first taxable year; has been a "regulated
investment company" under the Code at all times since the end
of its first taxable year when it so qualified; and qualifies
and shall continue to qualify as a "regulated investment
company" under the Code for its current taxable year.
5.2. Pacific Horizon Funds, on behalf of itself and each Acquired Fund,
represents and warrants to Nations Funds as follows:
5.2.a. Pacific Horizon Funds was duly incorporated under the laws of
the State of Maryland for the purpose of acting as a
management investment company under the 1940 Act and is
validly existing under the laws of the State of Maryland, and
its Charter and the laws of the State of Maryland provide
that the affairs of Pacific Horizon Funds shall be managed
under the direction of the Directors and grants them all
powers necessary or desirable to carry out such
responsibility, including administering Pacific Horizon Funds
business as currently conducted by Pacific Horizon Funds and
as described in the current prospectuses of Pacific Horizon
Funds; Pacific Horizon Funds is registered as an investment
company classified as an open-end management company under
the 1940 Act, and its registration with the SEC as an
investment company is in full force and effect;
5.2.b. All of the issued and outstanding shares of common stock of
each Acquired Fund have been offered and sold in compliance
in all material respects with applicable registration
requirements of the 1933 Act and state securities laws;
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<PAGE>
5.2.c. The Acquired Funds are not in violation of, and the
execution, delivery and performance of this Agreement by
Pacific Horizon Funds for itself and on behalf of each
Acquired Fund does not and will not (i) violate Pacific
Horizon Funds' Charter or By-Laws, or (ii) result in a breach
or violation of, or constitute a default under any material
agreement or material instrument, to which Pacific Horizon
Funds is a party or by which its properties or assets are
bound, except as otherwise previously disclosed in writing to
the Acquiring Funds;
5.2.d. Except as previously disclosed in writing to Nations Funds,
no litigation or administrative proceeding or investigation
of or before any court or governmental body is presently
pending or, to Pacific Horizon Funds' knowledge, threatened
against any Acquired Fund or any of its properties or assets
which, if adversely determined, would materially and
adversely affect such Acquired Fund's financial condition or
the conduct of its business, and Pacific Horizon Funds knows
of no facts that might form the basis for the institution of
any such proceeding or investigation, and no Acquired Fund is
a party to or subject to the provisions of any order, decree
or judgment of any court or governmental body that materially
and adversely affects, or is reasonably likely to materially
and adversely affect, its business or its ability to
consummate the transactions contemplated herein;
5.2.e. The Statement of Assets and Liabilities, Statement of
Operations and Statement of Changes in Net Assets of each
Acquired Fund as of and for the year ended February 28, 1998,
audited by PricewaterhouseCoopers LLP (copies of which have
been or will be furnished to the corresponding Acquiring
Fund) and the unaudited Statement of Assets and Liabilities,
Statement of Operations and Statement of Changes in Net
Assets of each Acquired Funds as of and for the six-month
period ended August 31, 1998 (copies of which have been or
will be furnished to the corresponding Acquiring Fund)
present fairly, in all material respects, the financial
position of each Acquired Fund as of such date and the
results of its operations and the changes in its Net Assets
for such period in accordance with generally accepted
accounting principles consistently applied, and as of such
date there were no Liabilities of any Acquired Fund known to
Pacific Horizon Funds that were not disclosed therein but
that would be 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);
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<PAGE>
5.2.g. All federal and other tax returns and reports of Pacific
Horizon Funds and each Acquired Fund required by law to be
filed on or before the Closing Date, have been or will be
filed, and all federal and other taxes owed by Pacific
Horizon Funds on behalf of the Acquired Funds, have been or
will be paid so far as due, and to the best of Pacific
Horizon Funds' knowledge, no such return is currently under
audit and no assessment has been asserted with respect to any
such return;
5.2.h. Each Acquired Fund has elected to qualify and has qualified
as a "regulated investment company" under the Code, as of and
since its first taxable year; has been a "regulated
investment company" under the Code at all times since the end
of its first taxable year when it so qualified; and qualifies
and shall continue to qualify as a "regulated investment
company" under the Code for its taxable year ending upon its
liquidation;
5.2.i. All issued and outstanding shares of each Acquired Fund are,
and on the Closing Date will be, duly authorized and validly
issued and outstanding, and fully paid and non-assessable by
Pacific Horizon Funds, and all such shares will, at the time
of the Closing(s), be held by the persons and in the amounts
set forth in the list of Acquired Fund Investors provided to
each corresponding Acquiring Fund, pursuant to paragraph 3.4,
and no Acquired Fund has outstanding any options, warrants or
other rights to subscribe for or purchase any of its shares,
nor is there outstanding any security convertible into any of
its shares;
5.2.j. At the Closing Date, each Acquired Fund will have good and
marketable title to its Fund Assets and full right, power and
authority to assign, deliver and otherwise transfer such Fund
Assets hereunder, and upon delivery and payment for such Fund
Assets as contemplated herein and the filing of Articles of
Transfer pursuant to the laws of the State of Maryland, the
corresponding Acquiring Fund will acquire good and marketable
title thereto, subject to no restrictions on the ownership or
transfer thereof other than such restrictions as might arise
under the 1933 Act or state securities laws, and except for
any liens or transfer tax liens arising in connection with
the transfer of Fund Assets pursuant to this Agreement;
5.2.k. The execution, delivery and performance of this Agreement on
behalf of the Acquired Funds will have been duly authorized
prior to the Closing Date by all necessary action on the part
of Pacific Horizon Funds and the Directors, and this
Agreement constitutes a valid and binding obligation of
Pacific Horizon Funds and each Acquired Fund enforceable in
accordance with its terms, subject as to enforcement, to
bankruptcy, insolvency, reorganization, arrangement,
moratorium and other similar laws of general applicability
relating to or affecting creditors' rights and to general
equity principles;
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<PAGE>
5.2.l. From the effective date of the Registration Statement,
through the time of the meeting of the Pacific Horizon Funds
shareholders, and on the Closing Date, the Registration
Statement insofar as it relates to materials provided by
Pacific Horizon Funds or the Acquired Funds, used in
connection with the preparation of the Registration
Statement: (i) will comply in all material respects with the
applicable provisions of the 1933 Act, the 1934 Act and the
1940 Act and the regulations thereunder and (ii) will not
contain any untrue statement of a material fact or omit to
state a material fact required to be stated therein or
necessary to make the statements therein not misleading, and
as of such dates and times, any written information furnished
by Pacific Horizon Funds, on behalf of the Acquired Funds,
for use in the Registration Statement or in any other manner
that may be necessary in connection with the transactions
contemplated hereby does not contain any untrue statement of
a material fact or omit to state a material fact necessary to
make the information provided not misleading; and
5.2.m. No governmental consents, approvals, authorizations or
filings are required under the 1933 Act, the 1934 Act, the
1940 Act or Maryland law for the execution of this Agreement
by Pacific Horizon Funds, for itself and on behalf of each
Acquired Fund, or the performance of the Agreement by Pacific
Horizon Funds for itself and on behalf of each Acquired Fund,
except for the effectiveness of the Registration Statement,
any necessary exemptive relief or no-action assurances
requested from the SEC or its staff with respect to Section
17(a) and 17(d) of the 1940 Act and Rule 17d-1 thereunder and
the filing of Articles of Transfer pursuant to Maryland law,
and except for such other consents, approvals, authorizations
and filings as have been made or received, and such consents,
approvals, authorizations and filings as may be required
subsequent to the Closing Date, it being understood, however,
that this Agreement and the transactions contemplated herein
must be approved by the shareholders of the Acquired Funds as
described in paragraph 8.1.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRED FUNDS
The obligations of Pacific Horizon Funds to consummate the
Reorganization with respect to each Acquired Fund shall be subject to the
performance by Nations Funds, for itself and on behalf of each Acquiring Fund,
of all the obligations to be performed by it hereunder on or before the Closing
Date and, in addition thereto, the following conditions with respect to each
corresponding Acquiring Fund:
I-15
<PAGE>
6.1. All representations and warranties of Nations Funds with respect to
each Acquiring Fund contained herein shall be true and correct in
all material respects as of the date hereof and, except as they may
be affected by the transactions contemplated herein, as of the
Closing Date with the same force and effect as if made on and as of
the Closing Date.
6.2. Nations Funds, on behalf of each Acquiring Fund, shall have
delivered to Pacific Horizon Funds at the Closing(s) a certificate
executed on behalf of each corresponding Acquiring Fund by Nations
Funds' President, Secretary, Assistant Secretary, or other
authorized officer, in a form and substance reasonably satisfactory
to Pacific Horizon Funds and dated as of the Closing Date, to the
effect that the representations and warranties of Nations Funds with
respect to each Acquiring Fund made herein are true and correct at
and as of the Closing Date, except as they may be affected by the
transactions contemplated herein, and as to such other matters as
such Acquired Fund shall reasonably request.
6.3. Each Acquired Fund shall have received at the Closing(s) a favorable
opinion of Morrison & Foerster LLP, counsel to Nations Funds (based
upon or subject to such representations, assumptions, limitations or
opinions of local counsel as such counsel may deem appropriate or
necessary), dated as of the Closing Date, in a form (including the
representations, assumptions, limitations or opinions of local
counsel upon which it is based or to which it is subject) reasonably
satisfactory to each Acquired Fund, substantially to the effect
that:
6.3.a. Nations Funds is a duly registered, open-end, management
investment company, and its registration with the SEC as an
investment company under the 1940 Act is in full force and
effect;
6.3.b. each Acquiring Fund is a portfolio of Nations Funds, which is
a corporation duly incorporated, duly created pursuant to its
Charter, validly existing and in good standing under the laws
of the State of Maryland and the Charter provide that the
Directors manage the affairs of Nations Funds and grant them
all powers necessary or desirable to carry out such
responsibility, including administering Nations Funds'
business as described in the current prospectuses of Nations
Funds;
6.3.c. this Agreement has been duly authorized, executed and
delivered on behalf of Nations Funds and each Acquiring Fund
and, assuming due authorization, execution and delivery of
this Agreement on behalf of the Acquired Funds, is a valid
and binding obligation of Nations Funds enforceable against
Nations Funds in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization,
arrangement, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights and
to general equity principles;
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<PAGE>
6.3.d. the Acquiring Fund Shares to be issued to the Acquired Funds
Investors pursuant to this Agreement are duly registered
under the 1933 Act on the appropriate form, and are duly
authorized and upon such issuance will be validly issued and
outstanding and fully paid and non-assessable, and no
shareholder of an Acquiring Fund has any preemptive rights to
subscription or purchase in respect thereof;
6.3.e. the N-1A Post-Effective Amendment and the Registration
Statement have become effective with the SEC and, to the best
of such counsel's knowledge, no stop order suspending the
effectiveness thereof has been issued and no proceedings for
that purpose have been instituted or are pending or
threatened;
6.3.f. except for the filing of Articles of Transfer pursuant to
Maryland law no consent, approval, authorization, filing or
order of any court or governmental authority of the United
States or any state is required for the consummation by
Nations Funds of the Reorganization with respect to each
Acquiring Fund;
6.3.g. to such counsel's knowledge, the execution and delivery of
the Agreement and the performance of its terms by Nations
Funds, and each Acquiring Fund, do not violate or result in a
violation of the Nations Funds Charter or By-Laws, or any
judgment, order or decree known to such counsel, of any court
or arbiter, to which Nations Funds is a party, and, to such
counsel's knowledge, will not constitute a material breach of
the terms, conditions or provisions of, or constitute a
default under, any contract, undertaking, indenture or other
agreement by which Nations Funds is now bound or to which it
is now a party;
6.3.h. to such counsel's knowledge, (a) no legal or governmental
proceedings existing on or before the date of mailing the
combined proxy statement/prospectus ("Combined
Proxy/Prospectus"), involving Nations Funds or the Acquiring
Funds, are required to be described in the Combined
Proxy/Prospectus which are not described as required and (b)
there are no contracts or documents relating to Nations Funds
or the Acquiring Funds, known to such counsel, of a character
required to be described in the Combined Proxy/Prospectus or
to be filed as an exhibit to the Registration Statement that
are not described or filed as required; and
6.3.i. to such counsel's knowledge, except as otherwise disclosed in
the Registration Statement, no litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or threatened against
Nations Funds or an Acquiring Fund or any of their properties
or assets and neither Nations Funds nor any Acquiring Fund is
a party to or subject to the provisions of any order, decree
or judgment of any court or governmental body that materially
and adversely affects, or would materially and adversely
affect, its business.
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<PAGE>
6.4. As of the Closing Date with respect to the Reorganization of each
Acquired Fund, there shall have been no material change in the
investment objective, policies and restrictions nor any material
change in the investment management fees, fee levels payable
pursuant to the 12b-1 plan of distribution, other fees payable for
services provided to the Acquiring Funds, fee waiver or expense
reimbursement undertakings, or sales loads of the Acquiring Funds
from those fee amounts, undertakings and sales load amounts
described in the prospectus of each Acquiring Fund delivered to the
corresponding Acquired Fund pursuant to paragraph 4.1 and in the
notice of meeting, form of proxy and Combined Proxy/Prospectus
(collectively, "Proxy Materials").
6.5. With respect to each Acquiring Fund, the Board of Directors of
Nations Funds, 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.
6.6. For the period beginning at the Closing Date of the last
Reorganization to occur and ending not less than six years
thereafter, Nations Funds, its successor or assigns shall provide,
or cause to be provided, liability coverage at least as comparable
to the liability coverage currently applicable to both former and
current Directors and officers of Pacific Horizon Funds, covering
the actions of such Directors and officers of Pacific Horizon Funds
for the period they served as such.
6.7. NBAI shall have delivered to Pacific Horizons Fund, no later than
April 15, 1999, a certificate, in form and substance reasonably
satisfactory to Pacific Horizon Funds, to the effect that NBAI
believes that, as of such date, The Bank of New York ("BONY") is
capable of satisfactorily providing accounting services for the
Acquired Funds and Acquiring funds, on a combined basis, following
the Reorganization ("Accounting Services"). Such certificate shall
be based on a certificate from BONY to NBAI to the effect that BONY
is capable of satisfactorily providing the Accounting Services.
6.8. Stephens Inc., the principal underwriter for the Nations Funds, no
later than the Closing Date, shall have received an exemptive order
under Section 9(c) of the 1940 Act, authorizing such company to
serve as the principal underwriter for the Nations Funds, or
otherwise shall be authorized to serve in such capacity.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING FUNDS
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<PAGE>
The obligations of Nations Funds to consummate the Reorganization
with respect to each Acquiring Fund shall be subject to the performance by
Pacific Horizon Funds of all the obligations to be performed by it hereunder,
with respect to each corresponding Acquired Fund, on or before the Closing Date
and, in addition thereto, the following conditions:
7.1. All representations and warranties of Pacific Horizon Funds with
respect to the Acquired Funds contained herein shall be true and
correct in all material respects as of the date hereof and, except
as they may be affected by the transactions contemplated by this
Agreement, as of the Closing Date, with the same force and effect as
if made on and as of the Closing Date.
7.2. Pacific Horizon Funds, on behalf of each Acquired Fund, shall have
delivered to each corresponding Acquiring Fund at the Closing(s) a
certificate executed on behalf of each Acquired Fund, by Pacific
Horizon Funds' President, Secretary or Assistant Secretary, or other
authorized officer, in form and substance reasonably satisfactory to
the Acquiring Funds and dated as of the Closing Date, to the effect
that the representations and warranties of Pacific Horizon Funds
with respect to each Acquired Fund made herein are true and correct
at and as of the Closing Date, except as they may be affected by the
transactions contemplated herein and as to such other matters as
each Acquiring Fund shall reasonably request.
7.3. Each Acquiring Fund shall have received at the Closing(s) a
favorable opinion of Drinker Biddle & Reath LLP, counsel to Pacific
Horizon Funds (based upon or subject to such representations,
assumptions, limitations or opinions of local counsel as such
counsel may deem appropriate or necessary), dated as of the Closing
Date, in a form (including the representations, assumptions,
limitations or opinions of local counsel upon which it is based or
to which it is subject) reasonably satisfactory to such Acquiring
Fund, substantially to the effect that:
7.3.a. Pacific Horizon Funds is a duly registered, open-end
investment company, and its registration with the SEC as an
investment company under the 1940 Act is in full force and
effect;
7.3.b. each Acquired Fund is a portfolio of Pacific Horizon Funds;
Pacific Horizon Funds is a corporation duly incorporated,
validly existing and in good standing under the laws of the
State of Maryland, and the Charter and the laws of the State
of Maryland provide that the affairs of Pacific Horizon Funds
shall be managed under the direction of the Directors and
grants them all powers necessary or desirable to carry out
such responsibility, including administering Pacific Horizon
Funds' business as described in the current prospectuses of
Pacific Horizon Funds;
7.3.c. this Agreement has been duly authorized, executed and
delivered by Pacific Horizon Funds, for itself and on behalf
of the Acquired Funds and, assuming due authorization,
execution and delivery of this Agreement on behalf of each
Acquiring Fund, is a valid and binding obligation of Pacific
Horizon Funds, enforceable against Pacific Horizon Funds in
accordance with its terms, subject to the effect of
bankruptcy, insolvency, reorganization, arrangement,
moratorium and other similar laws of general applicability
relating to or affecting creditors' rights and court
decisions with respect thereto, and such counsel will express
no opinion with respect to the application of equitable
principles in any proceeding, whether at law or in equity;
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<PAGE>
7.3.d. no consent, approval, authorization, filing or order of any
governmental authority or to such counsel's knowledge, order
of any court of the United States or any state is required
for the consummation of the Reorganization by Pacific Horizon
Funds with respect to each Acquired Fund, except for such
consents, approvals, authorizations and filings as have been
made or received, and except for such consents, approvals,
authorizations and filings as may be required subsequent to
the Closing Date;
7.3.e. to such counsel's knowledge, the execution and delivery of
the Agreement and the performance of its terms by Pacific
Horizon Funds, and each Acquired Fund, do not violate or
result in a violation of the Pacific Horizon Funds' Charter
or By-Laws, or any judgment, order or decree known to such
counsel, of any court or arbiter, to which Pacific Horizon
Funds is a party, and, to such counsel's knowledge, will not
constitute a material breach of the terms, conditions or
provisions of, or constitute a default under, any contract,
undertaking, indenture or other agreement by which Pacific
Horizon Funds is now bound or to which it is now a party;
7.3.f. to such counsel's knowledge, (a) no legal or governmental
proceedings existing on or before the date of mailing the
Combined Proxy/Prospectus involving Pacific Horizon Funds or
the Acquired Funds, are required to be described in the
Combined Proxy/Prospectus which are not described as required
and (b) there are no contracts or documents relating to
Pacific Horizon Funds or the Acquired Funds, known to such
counsel, of a character required to be described in the
Combined Proxy/Prospectus or to be filed as an exhibit to the
Registration Statement that are not described or filed as
required; and
7.3.g. to such counsel's knowledge, except as otherwise disclosed in
the Registration Statement, no litigation or administrative
proceeding or investigation of or before any court or
governmental body is presently pending or threatened against
Pacific Horizon Funds or an Acquired Fund or any of their
properties or assets and neither Pacific Horizon Funds nor an
Acquired Fund is a party to or subject to the provisions of
any order, decree or judgment of any court or governmental
body that materially and adversely affects, or would
materially and adversely affect, its business.
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<PAGE>
7.4. Nations Funds, on behalf of each Acquiring Fund, shall have received
from PricewaterhouseCoopers LLP a letter addressed to Nations Funds,
on behalf of each Acquiring Fund, and dated as of the Closing Date
with respect to the Acquired Funds, in form and substance
satisfactory to Nations Funds, to the effect that:
7.4.a. they are independent accountants with respect to Pacific
Horizon Funds and each Acquired Fund within the meaning of
the 1933 Act and the applicable regulations thereunder;
7.4.b. in their opinion, the audited financial statements and the
per share data provided in accordance with Item 3 in Form
N-1A (the "Per Share Data") of the Acquired Fund included or
incorporated by reference in the Registration Statement
previously reported on by them comply as to form in all
material aspects with the applicable accounting requirements
of the 1933 Act and the published rules and regulations
thereunder;
7.4.c. on the basis of limited procedures agreed upon by Nations
Funds, on behalf of the Acquiring Funds and Pacific Horizon
Funds, on behalf of the Acquired Funds, and described in such
letter (but not an examination in accordance with generally
accepted auditing standards), the data with respect to the
acquiring funds used in the calculation of any figure
expressed numerically or in dollars or percentages of that
appear in the Registration Statement under: (a) "Table II --
Total Expense Information" in the Combined Proxy
Statement/Prospectus; (b) "Table III --Capitalization (as of
September 30, 1998) in the Combined Proxy
Statement/Prospectus; (c) "Appendix II -- Expense Summaries
of Pacific Horizon Funds and the Corresponding Nations Funds"
in the Combined Proxy Statement/Prospectus; and (d) the pro
forma financial statements in the Statement of Additional
Information, agree with the underlying accounting records of
the Acquired Funds or with written estimates provided by
officers of Pacific Horizon Funds having responsibility for
financial and reporting matters, and were fund to be
mathematically correct.
7.5. Pacific Horizon Funds shall have delivered to the Acquiring Funds,
pursuant to paragraph 5.2(e), copies of financial statements of each
Acquired Fund as of and for the year ended February 28, 1999,
audited by PricewaterhouseCoopers LLP.
7.6. With respect to each Acquired Fund, the Board of Directors of
Pacific Horizon Funds, including a majority of "non-interested"
Directors, has determined that the Reorganization is in the best
interests of each Acquired Fund and that the interests of the
existing investors in each Acquired Fund would not be diluted as a
result of the Reorganization.
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<PAGE>
8. FURTHER CONDITIONS PRECEDENT TO OBLIGATIONS OF THE ACQUIRING FUNDS AND THE
ACQUIRED FUNDS
The obligations of each Acquiring Fund and of each corresponding
Acquired Fund herein are subject to the further conditions that on or before the
Closing Date with respect to each Acquiring Fund and each corresponding Acquired
Fund:
8.1. This Agreement and the transactions contemplated herein shall have
been approved by the requisite vote of the holders of the
outstanding shares of common stock of Pacific Horizon Funds and of
each Acquired Fund, consistent with the provisions of the laws of
the State of Maryland, Pacific Horizon Funds' Charter and the 1940
Act, and certified copies of the resolutions evidencing such
approval shall have been delivered to each corresponding Acquiring
Fund. Approval of this Agreement by the requisite vote of the
holders of the outstanding shares of common stock in an Acquired
Fund shall constitute approval of all of the transactions
contemplated herein, including the reorganization of all investment
portfolios of Pacific Horizon Funds with the Nations Family of Funds
and the dissolution of Pacific Horizon Funds, subject to the
approval under Maryland law and the Charter of Pacific Horizon Funds
by the requisite vote of the holders of the outstanding shares of
common stock of Pacific Horizon Funds.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or any of the transactions
contemplated herein.
8.3. All consents of other parties and all other consents, orders,
approvals and permits of federal, state and local regulatory
authorities (including, without limitation, those of the SEC and of
state securities authorities) deemed necessary by Nations Funds, on
behalf of the Acquiring Funds or by Pacific Horizon Funds, on behalf
of the Acquired Funds, to permit consummation, in all material
respects, of the transactions contemplated herein shall have been
obtained, except where failure to obtain any such consent, order or
permit would not, in the opinion of the party asserting that the
condition to closing has not been satisfied, involve a risk of a
material adverse effect on the assets or properties of any of an
Acquiring Fund or its corresponding Acquired Fund.
8.4. The N-1A Post-Effective Amendment and the Registration Statement
shall have become effective under the 1933 Act, no stop orders
suspending the effectiveness thereof shall have been issued and, to
the best knowledge of the parties hereto, no investigation or
proceeding for that purpose shall have been instituted or be
pending, threatened or contemplated under the 1933 Act.
8.5. Except to the extent prohibited by Rule 19b-1 promulgated under the
1940 Act, each Acquired Fund that has conducted material investment
operations prior to the Closing Date shall have declared a dividend
or dividends, with a record date and ex-dividend date prior to the
Applicable Valuation Date, which, together with all previous
dividends, shall have the effect of distributing to each Acquired
Fund's shareholders substantially all of its net investment company
taxable income, if any, for all taxable periods or years ending on
or prior to the Closing Date (computed without regard to any
deduction for dividends paid) and substantially all of its net
capital gain, if any, realized for all taxable periods or years
ending on or prior to the Closing Date (after reduction for any
capital loss carry forward.)
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<PAGE>
8.6. Nations Funds, on behalf of each Acquiring Fund, and Pacific Horizon
Funds, on behalf of each Acquired Fund, shall have received from
PricewaterhouseCoopers LLP a letter dated as of the Closing Date, in
form and substance satisfactory to Nations Funds and to Pacific
Horizon Funds, to the effect that on the basis of limited procedures
agreed upon by Nations Funds, on behalf of the Acquiring Funds and
Pacific Horizon Funds, on behalf of the Acquired Funds (but not an
examination in accordance with generally accepted auditing
standards), the data with respect to the acquiring funds used in the
calculation of any figure expressed numerically or in dollars or
percentages that appear in the Registration Statement under: (a)
"Table II -- Total Expense Information" in the Combined Proxy
Statement/Prospectus; (b) "Table III -- Capitalization (as of
September 30, 1998)" in the Combined Proxy Statement/Prospectus, (c)
"Appendix II -- Expense Summaries of Pacific Horizon Funds and the
Corresponding Nations Funds" in the Combined Proxy
Statement/Prospectus; and (d) the pro forma financial statements in
the Statement of Additional Information, agree with the underlying
accounting records of the Acquiring Funds or with written estimates
provided by officers of Nations Funds having responsibility for
financial and reporting matters, and were found to be mathematically
correct.
8.7. Nations Funds and Pacific Horizon Funds shall have received an
opinion of Morrison & Foerster LLP addressed to both Nations Funds
and Pacific Horizon Funds in a form reasonably satisfactory to them,
and dated as of the Closing Date, substantially to the effect that
on the basis of facts, representations, and assumptions set forth in
such opinion:
8.7.a. each Reorganization will constitute a "reorganization" within
the meaning of Section 368(a) of the Code, and each Acquiring
Fund and the corresponding Acquired Fund will each be a
"party to a reorganization" within the meaning of Section
368(b) of the Code with respect to such Reorganization.
8.7.b. no gain or loss will be recognized by an Acquired Fund upon
the transfer of its assets and Liabilities to the
corresponding Acquiring Fund solely in exchange for the
Acquiring Fund Shares;
I-23
<PAGE>
8.7.c. no gain or loss will be recognized by an Acquiring Fund upon
the receipt of the assets and assumption of Liabilities of
the corresponding Acquired Fund solely in exchange for the
Acquiring Fund Shares;
8.7.d. the basis of an Acquired Fund's assets received by the
corresponding Acquiring Fund pursuant to the Reorganization
will be the same as the basis of those assets in the hands of
the Acquired Fund immediately prior to the Reorganization;
8.7.e. the holding period of an Acquired Fund's assets in the hands
of the corresponding Acquiring Fund will include the period
for which such assets have been held by the Acquired Fund;
8.7.f. no gain or loss will be recognized by an Acquired Fund on the
distribution to its shareholders of the Acquiring Fund Shares
to be received by the Acquired Fund in the Reorganization;
8.7.g. no gain or loss will be recognized by the shareholders of an
Acquired Fund upon their receipt of the corresponding
Acquiring Fund Shares in exchange for such shareholders'
shares of the Acquired Fund;
8.7.h. the basis of the Acquiring Fund Shares received by the
shareholders of the corresponding Acquired Fund will be the
same as the basis of the Acquired Fund shares surrendered by
such shareholders pursuant to the Reorganization;
8.7.i. the holding period for the Acquiring Fund Shares received by
the Acquired Fund shareholders will include the period during
which such shareholders held the Acquired Fund shares
surrendered therefor, provided that such Acquired Fund shares
are held as a capital asset in the hands of the Acquired Fund
shareholders on the date of the exchange; and
8.7.j. each Acquiring Fund will succeed to and take into account the
tax attributes described in Section 381(c) of the Code of the
corresponding Acquired Fund as of the Closing Date, subject
to the conditions and limitations specified in the Code.
In rendering such opinion described in this paragraph 8.7, Morrison
& Foerster LLP may require and, to the extent they deem necessary and
appropriate, may rely upon representations made in certificates of Nations Funds
and Pacific Horizon Funds, their affiliates, and principal shareholders.
Notwithstanding anything herein to the contrary, neither an Acquiring Fund nor
its corresponding Acquired Fund may waive the condition set forth in this
paragraph 8.7.
8.8. Nations Funds and Pacific Horizon Funds shall have received (a) a
memorandum addressed to Nations Funds and the Pacific Horizon Funds,
in form reasonably satisfactory to them, prepared by Morrison &
Foerster LLP concerning the filing of notices and/or other
documents, and the payment of fees, in connection with the shares to
be issued by Nations Funds pursuant to this Agreement under
applicable state securities laws or the exemption from such filing
and payment requirements under such laws, and (b) assurance
reasonably satisfactory to each of them that all permits and other
authorizations necessary under state securities laws to consummate
the transactions contemplated by this Agreement have been obtained.
I-24
<PAGE>
8.9. The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act.
8.10. Pacific Horizon Funds' agreements with each of its service
contractors have terminated before or at the Closing, and each party
has received reasonable assurance that no claim for damages
(liquidated or otherwise) will arise as a result of such
termination.
9. FINDER'S FEES AND EXPENSES
9.1. Nations Funds, for itself and on behalf of the Acquiring Funds and
Pacific Horizon Funds, on behalf of itself and on behalf of the
Acquired Funds, represent and warrant that there are no brokers or
finders entitled to receive any payments in connection with the
transactions provided for herein.
9.2. NationsBanc Advisors, Inc. shall bear, or shall cause one of its
affiliates to bear, the customary expenses associated with the
transactions contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. This Agreement constitutes the entire agreement between the parties
and supersedes any prior or contemporaneous understanding or
arrangement with respect to the subject matter hereof.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in
connection herewith shall survive the consummation of the
transactions contemplated herein.
11. TERMINATION
11.1. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
I-25
<PAGE>
11.1.a. by the mutual written consent of Nations Funds and Pacific
Horizon Funds;
11.1.b. by either Nations Funds or Pacific Horizon Funds by notice
to the other, without liability to the terminating party on
account of such termination (provided any such termination
shall not excuse the terminating party from any liability
arising out of a default or breach of this Agreement by such
terminating party) if such Closing(s) shall not have
occurred on or before December 31, 1999, or such other date
as may be agreed to by the parties; or
11.1.c. by either of Nations Funds or the Pacific Horizon Funds, in
writing without liability to the terminating party on
account of such termination (provided any such termination
shall not excuse the terminating party from any liability
arising out of a material default or breach of this
Agreement by such terminating party), if (i) the other party
shall fail to perform in any material respect its agreements
contained herein required to be performed prior to the
Closing Date, (ii) the other party materially breaches or
shall have materially breached any of its representations,
warranties or covenants contained herein, or (iii) any other
express condition precedent to the obligations of the
terminating party has not been met and it reasonably appears
that it will not or cannot be met.
11.2. Termination of this Agreement pursuant to paragraphs 11.1(a) or (b)
shall terminate all obligations of the parties hereunder with
respect to the Acquired Fund and Acquiring Fund affected by such
termination, or with respect to Nations Funds and Pacific Horizon
Funds, as the case may be, and there shall be no liability for
damages on the part of Nations Funds or Pacific Horizon Funds or the
Directors or officers of Nations Funds or Directors or officers of
Pacific Horizon Funds, on account of termination pursuant to
paragraphs 11.1(a) or (b), except as provided in paragraphs 11.1(a)
or (b); provided, however, that notwithstanding any termination of
this Agreement pursuant to paragraph 11.1, such termination shall
not relieve or NationsBanc Advisors, Inc. of its obligations
pursuant to Section 9.2 hereof.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
Nations Funds, acting on behalf of each Acquiring Fund and the authorized
officers of Pacific Horizon Funds, acting on behalf of each Acquired Fund;
provided, however, that following the meeting of the shareholders of the
Acquired Funds, no such amendment may have the effect of changing the provisions
for determining the number of shares of the corresponding Acquiring Funds to be
issued to the Acquired Fund Investors under this Agreement to the detriment of
such Acquired Fund Investors, or otherwise materially and adversely affecting
such Acquired Fund, without the Acquired Fund obtaining the Pacific Horizon
Fund(s)' shareholders further approval except that nothing in this paragraph 12
shall be construed to prohibit any Acquiring Fund and the corresponding Acquired
Fund from amending this Agreement to change the Closing Date or Applicable
Valuation Date by mutual agreement.
I-26
<PAGE>
At any time prior to or (to the fullest extent permitted by law)
after approval of this Agreement by the shareholders of Pacific Horizon Funds
either party may waive any breach by the other party or the failure to satisfy
any of the conditions to its obligations (such waiver to be in writing and
authorized by the Board of Directors of the waiving party, or any appropriate
officer of either party, with or without the approval of such party's
shareholders).
13. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, certified mail or overnight express courier addressed to:
For Nations Funds, on behalf of itself and each Acquiring Fund:
Richard H. Blank, Jr.
Secretary
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
With copies to:
Robert M. Kurucza and
Marco E. Adelfio
Morrison & Foerster LLP
2000 Pennsylvania Avenue, N.W., Suite 5500
Washington, D.C. 20006
For Pacific Horizon Funds, on behalf of itself and each Acquired
Fund:
c/o W. Bruce McConnel, III
Secretary
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107-3496
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
I-27
<PAGE>
14.1. The article and paragraph headings contained herein are for
reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. All references herein to
articles, paragraphs, subparagraphs or Schedules shall be construed
as referring to articles, paragraphs or subparagraphs hereof or
Schedules hereto, respectively. Whenever the terms hereto,
hereunder, herein or hereof are used in this Agreement, they shall
be construed as referring to this entire Agreement, rather than to
any individual article, paragraph, subparagraph or sentence.
14.2. This Agreement may be executed in any number of counterparts, each
of which shall be deemed an original.
14.3. This Agreement shall be governed by and construed in accordance with
the laws of the State of Maryland, without giving effect to the
conflicts of laws principles otherwise applicable therein.
14.4. This Agreement shall bind and inure to the benefit of the parties
hereto and their respective successors and assigns, but no
assignment or transfer hereof or of any rights or obligations
hereunder shall be made by any party without the written consent of
the other parties. Nothing herein expressed or implied is intended
or shall be construed to confer upon or give any person, firm or
corporation, other than the parties hereto and their respective
successors and assigns, any rights or remedies under or by reason of
this Agreement.
14.5. It is expressly agreed that the obligations of Nations Funds
hereunder shall not be binding upon any of the Directors,
shareholders, nominees, officers, agents, or employees of Nations
Funds personally, but shall bind only the assets and the property of
the respective Acquiring Fund of Nations Funds, as provided in its
Charter. The execution and delivery by such officers shall not be
deemed to have been made by any of them individually or to impose
any liability on any of them personally, but shall bind only the
assets and the property of the respective Acquiring Fund of Nations
Funds as provided in its Charter.
14.6. No Acquired Fund shall have any liability for the obligations of any
other Acquired Fund hereunder and no Acquiring Fund shall have any
liability for the obligation of any other Acquiring Fund hereunder.
14.7. The names "Pacific Horizon Funds" and "Directors of Pacific Horizon
Funds" refer respectively to the corporation created and the
Directors, as directors but not individually or personally, acting
from time to time under Pacific Horizon Funds' Charter, which is
hereby referred to and a copy of which is on file at the Department
of Assessments and at the principal office of the Corporation. The
obligations of "Pacific Horizon Funds" entered into in the name or
on behalf thereof by any of the Directors, representatives or agents
are made not individually, but in such capacities, and are not
binding upon any of the Directors, shareholders, or representatives
of the Corporation personally, but bind only the corporate property,
and all persons dealing with any class of shares of the Corporation
must look solely to the corporate property belonging to such class
for the enforcement of any claims against the Corporation.
I-28
<PAGE>
14.8. Any announcement or similar publicity with respect to this Agreement
or the transactions contemplated herein shall be made only at such
time and in such manner as the parties shall agree; provided that
nothing herein shall prevent either party upon notice to the other
party from making such public announcements as such party's counsel
may consider advisable in order to satisfy the party's legal and
contractual obligations in such regard.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed by their authorized officers, and attested by their Secretaries
as of the day and year first written above.
NATIONS FUND, INC., for itself and on
ATTEST: behalf of each Acquiring Fund
By: _____________________________
______________________________ A. Max Walker
Richard H. Blank, Jr. President and Chairman of the
Secretary Board of Directors
PACIFIC HORIZON FUNDS, INC., for
itself and on behalf of each Acquired
ATTEST: Fund
By: _____________________________
_____________________________ Dr. Cornelius J. Pings
W. Bruce McConnel, III President and Chairman of the
Secretary Board of Directors
NATIONSBANC ADVISORS, INC., hereby
joins in this Agreement with respect
to, and agrees to be bound by Section
ATTEST: 9.2 and 11.2 hereof
_____________________________ By: _____________________________
I-29
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
- ------------------------------------------------------- --------------------------------------
Pacific Horizon Fund/Share Class Corresponding Nations Fund/Share Class
- ------------------------------------------------------- --------------------------------------
Aggressive Growth Fund Nations Small Company Growth Fund
<S> <C>
A Shares (Class D Common Stock) Investor A Shares
B Shares (Class D - Special Series 3 Common Stock) Investor B Shares
K Shares (Class D - Special Series 5 Common Stock) Investor C Shares
- ------------------------------------------------------- --------------------------------------
International Equity Fund Nations International Equity Fund
A Shares (Class T Common Stock) Investor A Shares
B Shares (Class T - Special Series 3 Common Stock) Investor B Shares
K Shares (Class T - Special Series 5 Common Stock) Investor C Shares
- ------------------------------------------------------- --------------------------------------
U.S. Government Securities Fund Nations Government Securities Fund
A Shares (Class E Common Stock) Investor A Shares
K Shares (Class E - Special Series 3 Common Stock) Investor C Shares
- ------------------------------------------------------- --------------------------------------
</TABLE>
A-1
<PAGE>
APPENDIX II
Expense Summaries of the Pacific Horizon Funds
and Corresponding Nations Funds
-----------------------------------------------
The following tables (a) compare the fees and expenses as of September 30,
1998, for the respective Pacific Horizon Funds and their corresponding Nations
Funds and (b) show the estimated fees and expenses for the corresponding Nations
Funds on a pro forma basis after giving effect to the reorganization. The
Nations Funds' management fees as of September 30, 1998, have been adjusted to
reflect a Board-approved reduction in the contractual fee rates under the
management contracts. The contractual management fees shown become effective
upon consummation of the Reorganization. The purpose of these tables is to
assist shareholders in understanding the various costs and expenses that
investors in these portfolios will bear as shareholders. The tables do not
reflect any charges that may be imposed by institutions directly on their
customer accounts in connection with investments in the portfolios. The fund
operating expense levels shown in this Proxy/Prospectus assume current net asset
levels; pro forma expense levels shown should not be considered an actual
representation of future expenses or performance. Such pro forma expense levels
project anticipated levels but may be greater or less than those shown.
II-1
<PAGE>
AGGRESSIVE GROWTH FUND-CLASS A SHARES
NATIONS SMALL COMPANY GROWTH FUND-INVESTOR A SHARES
Nations
Small Combined
Aggressive Company Fund
Growth Fund Growth Fund Pro Forma
----------- ----------- ---------
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases ....................... 5.75% 5.75% 5.75%
Maximum Sales Load Imposed on
Reinvested Dividends............. None None None
Maximum Deferred Sales Load
(as a percentage of redemption
proceeds)(1)..................... 1.00% 1.00% 1.00%
Redemption Fees .................... None None None
Exchange Fee ....................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees .................... 0.60% 0.90% 0.90%
12b-1 Fees/Shareholder Servicing Fees 0.25% 0.25% 0.25%
Other Expenses ..................... 0.74% 0.33% 0.33%
---- ---- ----
Total Fund Operating Expenses: 1.59% 1.48% 1.48%
==== ==== ====
- --------------------
(1) Certain Class A Shares and Investor A Shares that are purchased at net
asset value are subject to a Deferred Sales Load if redeemed within a specified
time after purchase.
Example:(2)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
Nations
Small Combined
Aggressive Company Fund
Growth Fund Growth Fund Pro Forma
----------- ----------- ---------
1 year ............................ 73 72 72
3 years ........................... 105 102 102
5 years ........................... 139 134 134
10 years .......................... 236 225 225
- --------------------
(2) This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return
is hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the
assumed amount. This example assumes that all dividends and other
distributions are reinvested and that the percentage amounts listed under
Total Fund Operating Expenses above remain the same in the years shown.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly.
II-2
<PAGE>
AGGRESSIVE GROWTH FUND-CLASS B SHARES
NATIONS SMALL COMPANY GROWTH FUND-INVESTOR B SHARES
Nations
Small Combined
Aggressive Company Fund
Growth Fund Growth Fund Pro Forma
----------- ----------- ---------
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases ....................... None None None
Maximum Sales Load Imposed on
Reinvested Dividends............. None None None
Maximum Deferred Sales Load
(as a percentage of redemption
proceeds) ....................... 5.00% 5.00% 5.00%
Redemption Fees .................... None None None
Exchange Fee ....................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees .................... 0.60% 0.90% 0.90%
12b-1 Fees/Shareholder Servicing Fees 1.00% 1.00% 1.00%
Other Expenses...................... 0.74% 0.33% 0.33%
---- ---- ----
Total Fund Operating Expenses: 2.34% 2.23% 2.23%
==== ==== ====
- --------------------
Example:(1)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
Nations
Small Combined
Aggressive Company Fund
Growth Fund Growth Fund Pro Forma
----------- ----------- ---------
1 year ............................ 74 73 73
3 years ........................... 103 100 100
5 years ........................... 145 139 139
10 years .......................... 268 238 238
You would pay the following expenses on a $1,000 investment, assuming a 5%
gross annual return and no redemption.
Nations
Small Combined
Aggressive Company Fund
Growth Fund Growth Fund Pro Forma
----------- ----------- ---------
1 year ............................ 24 23 23
3 years ........................... 73 70 70
5 years ........................... 125 119 119
10 years .......................... 268 238 238
- --------------------
(1) These examples should not be considered a representation of future
expenses which may be more or less than those shown. The assumed 5% annual
return is hypothetical and should not be considered a representation of
past or future annual return; actual return may be greater or less than
the assumed amount. These examples assume that all dividends and other
distributions are reinvested and that the percentage amounts listed under
Total Fund Operating Expenses above remain the same in the years shown.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly.
II-3
<PAGE>
AGGRESSIVE GROWTH FUND-CLASS K SHARES
NATIONS SMALL COMPANY GROWTH FUND-INVESTOR C SHARES
Nations Combined
Aggressive Municipal Fund
Growth Fund Reserves Pro Forma
----------- -------- ---------
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases ....................... None None None
Maximum Sales Load Imposed on
Reinvested Dividends............. None None None
Maximum Deferred Sales Load
(as a percentage of redemption
proceeds) ....................... None 1.00% 1.00%
Redemption Fees .................... None None None
Exchange Fee ....................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees .................... 0.60% 0.90% 0.90%
12b-1 Fees/Shareholder Servicing Fees(1) 0.75% 1.00% 1.00%
Other Expenses...................... 0.74% 0.33% 0.33%
---- ---- ----
Total Fund Operating Expenses:(2) 2.09% 2.23% 2.23%
==== ==== ====
- --------------------
(1) 12b-1/Shareholder Servicing Fees (absent waivers) would be 1.00% for
the Aggressive Growth Fund.
(2) Total Fund Operating Expenses (absent waivers) would be a 2.34% for
the Aggressive Growth Fund.
Example:(3)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
Nations
Small Combined
Aggressive Company Fund
Growth Fund Growth Fund Pro Forma
----------- ----------- ---------
1 year ............................ 21 33 33
3 years ........................... 65 70 70
5 years ........................... 112 119 119
10 years .......................... 242 258 258
You would pay the following expenses on a $1,000 investment, assuming (1)
a 5% gross annual return and (2) no redemption.
Nations
Small Combined
Aggressive Company Fund
Growth Fund Growth Fund Pro Forma
----------- ----------- ---------
1 year ............................ 21 23 23
3 years ........................... 65 70 70
5 years ........................... 112 119 119
10 years .......................... 242 258 258
II-4
<PAGE>
- -------------------
(3) These examples should not be considered a representation of future expenses
which may be more or less than those shown. the assumed 5% annual return is
hypothetical and should not be considered a representation of past or future
annual return; actual return may be greater or less than the assumed amount.
these examples assumes that all dividends and other distributions are reinvested
and that the percentage amounts listed under total fund operating expenses above
remain the same in the years shown.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly.
II-5
<PAGE>
INTERNATIONAL EQUITY FUND-CLASS A SHARES
NATIONS INTERNATIONAL EQUITY FUND-INVESTOR A SHARES
Nations Combined
International International Fund
Equity Fund Equity Fund Pro Forma
----------- ----------- ---------
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price) .......................... 5.75% 5.75% 5.75%
Maximum Sales Load Imposed on
Reinvested Dividends............. None None None
Maximum Deferred Sales Load(1)...... 1.00% 1.00% 1.00%
Redemption Fees .................... None None None
Exchange Fee ....................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net
assets)
Management Fees(2).................. 0.00% 0.80% 0.80%
12b-1/Shareholder Servicing Fees.... 0.25% 0.25% 0.25%
Other Expenses(3)................... 1.00% 0.35% 0.35%
---- ---- ----
Total Fund Operating Expenses(4):...... 1.25% 1.40% 1.40%
==== ==== =====
- ----------------------------------------
(1) Certain Class A Shares and Investor A Shares that are purchased at net
asset value are subject to a Deferred Sales Load if redeemed within a specified
time after purchase.
(2) Management Fees (absent waivers) would be 0.75% for the International
Equity Fund.
(3) Other Expenses (absent waivers) would be 1.09% for the International
Equity Fund.
(4) Total Fund Operating Expenses (absent waivers) would be 2.09% for the
International Equity Fund.
Example:(5)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
Nations Combined
International International Fund
Equity Fund Equity Fund Pro Forma
----------- ----------- ---------
1 year ............................ 70 71 71
3 years ........................... 95 99 99
5 years ........................... 122 130 130
10 years .......................... 200 216 216
- --------------------
(5) These examples should not be considered a representation of future
expenses which may be more or less than those shown. The assumed 5% annual
return is hypothetical and should not be considered a representation of
past or future annual return; actual return may be greater or less than
the assumed amount. These examples assume that all dividends and other
distributions are reinvested and that the percentage amounts listed under
Total Fund Operating Expenses above remain the same in the years shown.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly.
II-6
<PAGE>
INTERNATIONAL EQUITY FUND-CLASS B SHARES
NATIONS INTERNATIONAL EQUITY FUND-INVESTOR B SHARES
Nations Combined
International International Fund
Equity Fund Equity Fund Pro Forma
----------- ----------- ---------
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases
(as a percentage of offering
price) .......................... None None None
Maximum Sales Load Imposed on
Reinvested Dividends............. None None None
Maximum Deferred Sales Load ........ 5.00% 5.00% 5.00%
Redemption Fees .................... None None None
Exchange Fee ....................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net
assets)
Management Fees(1).................. 0.00% 0.80% 0.80%
12b-1/Shareholder Servicing Fees.... 1.00% 1.00% 1.00%
Other Expenses(2)................... 1.00% 0.35% 0.35%
---- ---- ----
Total Fund Operating Expenses(3):...... 2.00% 2.15% 2.15%
==== ==== =====
- ----------------------------------------
(1) Management Fees (absent waivers) would be 0.75% for the International
Equity Fund.
(2) Other Expenses (absent waivers) would be 1.09% for the International
Equity Fund.
(3) Total Fund Operating Expenses (absent waivers) would be 2.84% for the
International Equity Fund.
Example:(4)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
Nations Combined
International International Fund
Equity Fund Equity Fund Pro Forma
----------- ----------- ---------
1 year ............................ 70 72 72
3 years ........................... 93 97 97
5 years ........................... 128 135 135
10 years .......................... 233 229 229
You would pay the following expenses on a $1,000 investment, assuming (1)
5% annual return and (2) no redemption:
Nations Combined
International International Fund
Equity Fund Equity Fund Pro Forma
----------- --------------- -----
1 year ............................ 20 22 22
3 years ........................... 63 67 67
5 years ........................... 108 115 115
10 years .......................... 233 -- --
- --------------------
(4) These examples should not be considered a representation of future
expenses which may be more or less than those shown. The assumed 5% annual
return is hypothetical and should not be considered a representation of
past or future annual return; actual return may be greater or less than
the assumed amount. These examples assume that all dividends and other
distributions are reinvested and that the percentage amounts listed under
Total Fund Operating Expenses above remain the same in the years shown.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly.
II-7
<PAGE>
INTERNATIONAL EQUITY FUND-CLASS K SHARES
NATIONS INTERNATIONAL EQUITY FUND-INVESTOR C SHARES
Nations Combined
International International Fund
Equity Fund Equity Fund Pro Forma
----------- ----------- ---------
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on
Purchases
(as a percentage of offering
price) .......................... None None None
Maximum Sales Load Imposed on
Reinvested Dividends............. None None None
Maximum Deferred Sales Load ........ None 1.00% 1.00%
Redemption Fees .................... None None None
Exchange Fee ....................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net
assets)
Management Fees(1).................. 0.00% 0.80% 0.80%
12b-1/Shareholders Servicing Fees(2) 0.75% 1.00% 1.00%
Other Expenses(3)................... 1.00% 0.35% 0.35%
---- ---- ----
Total Fund Operating Expenses(4):...... 1.75% 2.15% 2.15%
==== ==== =====
- ----------------------------------------
(1) Management Fees (absent waivers) would be 0.75% for the International
Equity Fund.
(2) Distribution and Servicing Fees (absent waivers) would be 1.00% for
the International Equity Fund.
(3) Other Expenses (absent waivers) would be 1.09% for the International
Equity Fund.
(4) Total Fund Operating Expenses (absent waivers) would be 2.84% for the
International Equity Fund.
Example:(5)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
Nations Combined
International International Fund
Equity Fund Equity Fund Pro Forma
----------- --------------- -----
1 year ............................ 18 32 32
3 years ........................... 55 67 67
5 years ........................... 95 115 115
10 years .......................... 206 249 249
You would pay the following expenses on a $1,000 investment, assuming (1)
a 5% annual return and (2) no redemption:
Nations Combined
International International Fund
Equity Fund Equity Fund Pro Forma
----------- --------------- -----
1 year ............................ 18 22 22
3 years ........................... 55 67 67
5 years ........................... 95 115 115
10 years........................... 206 249 249
- --------------------
(5) These examples should not be considered a representation of future
expenses which may be more or less than those shown. The assumed 5% annual
return is hypothetical and should not be considered a representation of
past or future annual return; actual return may be greater or less than
the assumed amount. This example assume that all dividends and other
distributions are reinvested and that the percentage amounts listed under
Total Fund Operating Expenses above remain the same in the years shown.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly.
II-8
<PAGE>
U.S. GOVERNMENT SECURITIES FUND-CLASS A SHARES
NATIONS GOVERNMENT SECURITIES FUND-INVESTOR A SHARES
U.S. Nations
Government Government Combined
Securities Securities Fund
Fund Fund Pro Forma
---- ---- ---------
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price) .......................... 4.75% 4.75% 4.75%
Maximum Sales Load Imposed on
Reinvested Dividends............. None None None
Deferred Sales Load(1).............. 1.00% 1.00% 1.00%
Redemption Fees .................... None None None
Exchange Fee ....................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(2).................. 0.11% 0.50% 0.50%
12b-1 Fees/Shareholder Servicing(3). 0.10% 0.25% 0.25%
Other Expenses(4)................... 0.64% 0.35% 0.35%
---- ---- ----
Total Fund Operating Expenses(5):...... 0.85% 1.10% 1.10%
==== ==== =====
- ----------------------------------------
(1) Certain Class A Shares and Investor A Shares that are purchased at net
asset value are subject to a Deferred Sales Load if redeemed within a
specified time after purchase.
(2) Management Fees (absent waivers) would be 0.35% for the U.S. Government
Securities Fund.
(3) 12b-1 Fees/shareholder Servicing Fees (absent waivers) would be 0.25% for
the U.S. Government Securities Fund.
(4) Other Expenses (absent waivers) would be 0.77% for the U.S. Government
Securities Fund.
(5) Total Fund Operating Expenses (absent waivers) would be 1.37% for the U.S.
Government Securities Fund.
Example:(6)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
U.S. Nations
Government Government Combined
Securities Securities Fund
Fund Fund Pro Forma
---- ---- ---------
1 year ............................ 56 58 58
3 years ........................... 73 81 81
5 years ........................... 92 105 105
10 years .......................... 148 175 175
- --------------------
(6) This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return
is hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the
assumed amount. This example assumes that all dividends and other
distributions are reinvested and that the percentage amounts listed under
Total Fund Operating Expenses above remain the same in the years shown.
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly.
II-9
<PAGE>
U.S. GOVERNMENT SECURITIES FUND-CLASS K SHARES
NATIONS GOVERNMENT SECURITIES FUND-INVESTOR C SHARES
U.S. Nations
Government Government Combined
Securities Securities Fund
Fund Fund Pro Forma
---- ---- ---------
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases
(as a percentage of offering
price) .......................... None None None
Maximum Sales Load Imposed on
Reinvested Dividends............. None None None
Maximum Deferred Sales Load ........ None 1.00% 1.00%
Redemption Fees .................... None None None
Exchange Fee ....................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(1).................. 0.11% 0.50% 0.50%
12b-1 Fees/Shareholder Servicing Fees(2) 0.60% 1.00% 1.00%
Other Expenses(3)................... 0.64% 0.35% 0.35%
---- ---- ----
Total Fund Operating Expenses(4):...... 1.35% 1.85% 1.85%
==== ==== =====
- ----------------------------------------
(1) Management Fees (absent waivers) would be 0.35% for the U.S. Government
Securities Fund.
(2) 12-b/Servicing Fees (absent waivers) would be 1.00% for the U.S.
Government Securities Fund.
(3) Other Expenses (absent waivers) would be 0.77% for the U.S. Government
Securities Fund.
(4) Total Fund Operating Expenses (absent waivers) would be 2.12% for the U.S.
Government Securities Fund.
Example:(5)
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
U.S. Nations
Government Government Combined
Securities Securities Fund
Fund Fund Pro Forma
---- ---- ---------
1 year ............................ 14 29 29
3 years ........................... 43 58 58
5 years ........................... 74 100 100
10 years .......................... 163 218 218
You would pay the following expenses on a $1,000 investment, assuming a 5%
gross return and no redemption:
U.S. Nations
Government Government Combined
Securities Securities Fund
Fund Fund Pro Forma
---- ---- ---------
1 year ............................ 14 19 19
3 years ........................... 43 58 58
5 years ........................... 74 100 100
10 years .......................... 163 218 218
- --------------------
(5) These examples should not be considered a representation of future
expenses which may be more or less than those shown. The assumed 5% annual
return is hypothetical and should not be considered a representation of
past or future annual return; actual return may be greater or less than
the assumed amount. These examples assume that all dividends and other
distributions are reinvested and that the percentage amounts listed under
Total Fund Operating Expenses above remain the same in the years shown.
II-10
<PAGE>
The purpose of the foregoing tables is to assist an investor in understanding
the various costs and expenses that an investor in the Funds will bear directly
or indirectly.
II-11
<PAGE>
APPENDIX III
Investment Objectives, Limitations and Certain Significant Investment
Policies of the Pacific Horizon Funds and Corresponding Nations Funds
This Appendix highlights the investment objectives, and certain
significant similarities and differences among the investment counterparts into
which they will be recognized, limitations and investment policies of the three
Pacific Horizon Funds and the 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 Pacific Horizon Funds and the
corresponding Nations Funds which are incorporated by reference in this
Proxy/Prospectus.
I. PACIFIC HORIZON AGGRESSIVE GROWTH FUND/NATIONS SMALL COMPANY GROWTH FUND
Investment Objectives.
1. Pacific Horizon Aggressive Growth Fund: to seek to achieve maximum
capital appreciation.
2. Nations Small Company Growth Fund: to seek long-term capital growth
by investing primarily in equity securities.
Comment: Both Funds will invest 65% of their assets in equity securities.
The Pacific Horizon Fund's holdings will consist primarily of common stock of
domestic companies, most of which will be small-capitalization companies that
the investment adviser expects will achieve above average growth in earnings and
price. Similarly, the Nations Fund will invest at least 65% of its assets in
companies with a market capitalization of $1 billion or less, although up to 35%
of its assets may be invested in securities of issuers with capitalization
greater than $1 billion.
While both Funds may invest in debt securities, the Nations Fund limits
its investment in such securities to 35% of total assets (and typically will not
invest more than 10% of its assets in debt securities), while the Pacific
Horizon Fund may invest in debt securities during temporary defensive periods
without limit.
Both Funds limit any investment in foreign securities to 20% of total
assets.
II. PACIFIC HORIZON INTERNATIONAL EQUITY FUND/NATIONS INTERNATIONAL EQUITY
FUND
Investment Objectives.
1. Pacific Horizon International Equity Fund: to seek long term capital
growth by investing primarily in foreign equity securities.
III-1
<PAGE>
2. Nations International Equity Fund: to seek long-term capital growth
by investing in equity securities of non-United States companies in
Europe, Australia, the Far East and other regions, including
developing countries.
Comment: Both Funds typically will invest their assets in foreign equity
securities. While the Nations Fund will invest at least 60% of its assets in
such securities, the Pacific Horizon Fund will invest at least 80% of its assets
in foreign equity securities. Both Funds intend to diversify their holdings
across companies in at least three different countries. While the Nations Fund
may invest up to 35% of its assets in other types of securities, such as foreign
debt obligations, the Pacific Horizon Fund may invest in such securities without
limitation, but only under unusual market conditions.
Both Funds may invest in futures and options for the purpose of hedging
currency fluctuations. In addition, both Funds may invest in U.S.
dollar-denominated instruments or obligations and in the U.S. stock markets for
temporary defensive purposes.
While the Pacific Horizon Fund may purchase bank obligations, including
certificates of deposit and bankers' acceptances and make interest bearing
savings account deposits in commercial banks in amounts not exceeding 5% of
total assets, the Nations Fund has no intention to so invest.
III. PACIFIC HORIZON U.S. GOVERNMENT SECURITIES FUND/NATIONS GOVERNMENT
SECURITIES FUND
Investment Objectives.
1. Pacific Horizon U.S. Government Securities Fund: to seek high
current income consistent with relative stability of principal.
2. Nations Government Securities Fund: to seek high current income
consistent with moderate fluctuation of principal.
Comment: Both Funds typically will invest their assets in U.S. Government
obligations, which are securities issued or guaranteed by the U.S. Government,
its agencies or instrumentalities. The Pacific Horizon Fund will always have at
least 65% so invested, while the Nations Fund will so invest under normal market
conditions.
Both Funds may invest up to 35% of their total assets in non-government
related fixed income securities, although the Nations Fund may invest such
percentage in a broader category of securities, including foreign securities and
real estate investment trusts. While the Pacific Horizon Fund may invest only in
non-governmental debt securities that are in the highest rating category by a
nationally recognized statistical rating organization, the Nations Fund may
invest in debt securities that are rated in any of the top four investment grade
categories.
III-2
<PAGE>
Both Funds may invest without limit, for temporary defensive purposes, in
cash or cash equivalents.
III-3
<PAGE>
APPENDIX IV
Shareholder Transactions and Services of the Nations Funds and the
Corresponding Pacific Horizon Funds
-----------------------------------------------
This Appendix compares the shareholder transactions and services of the
Pacific Horizon Funds and the corresponding Nations Funds. The following is
qualified in its entirety by the more detailed information included in the
prospectuses for the Pacific Horizon Funds and Nations Funds which are
incorporated by reference in this Proxy/Prospectus. Unless otherwise indicated,
terms used herein and not otherwise defined have the same meanings as are given
to them in such prospectuses. Please note that after the Reorganization, Nations
will continue to honor any standing instructions regarding the corresponding
Pacific Horizon Fund classes, under arrangements such as automatic withdrawal
plans, systematic investment plans or dividend reinvestment plans. In such
cases, standing instructions will be subject to the same or similar terms (e.g.,
minimum investments, account balances and minimum transaction amounts) currently
in effect, except that there may be exceptions with respect to the timing of
transactions which may need to be altered to comport with Nations procedures.
Shareholders will be notified of any such exceptions. After the Reorganization,
any instructions given with respect to any new account will be subject to the
terms of the applicable Nations Fund class.
I. Pacific Horizon Funds - A Shares
Corresponding Nations Funds - Investor A Shares
A. Sales Charges and Exemptions
There is a maximum sales charge of 5.50% on A Shares of the Pacific
Horizon Funds. The sales charge on the A Shares of the Pacific Horizon Funds may
decrease as the amount a shareholder invests increases. Also there is no sales
charge on purchases of A shares of $1 million or more. However, unless a Pacific
Horizon Fund shareholder participates in the Bank of America Daily Advantage(R)
or Advantage Plus(TM) programs, a contingent deferred sales charge will be
imposed as follows: 1% on redemptions made within 1 year of purchases made on or
after November 16, 1998, declining to 0.50% in the second year, and eliminated
thereafter, or 1% on redemptions made within 18 months of purchases made before
November 16, 1998. An investor may be entitled to reduced sales charges on A
Shares through rights of accumulation, letters of intent, quantity discounts, or
through certain affiliations with BankAmerica Corporation.
IV-1
<PAGE>
There is a maximum sales charge of 5.75% on Investor A Shares of Nations
Small Company Growth Fund and Nations International Equity Fund and 4.75% on
Nations Government Securities Fund. Sales charges are reduced as the amount
invested increases. An investor also may be entitled to reduced sales charges on
Investor A Shares through Rights of Accumulation, a Letter of Intent, Quantity
Discounts or through certain affiliations with BankAmerica Corporation. Investor
A Shares of each of the Nations Funds that are purchased at net asset value have
in addition a 1.00% and 0.50% maximum deferred sales charge which is imposed
only if shares are redeemed within the first and second years of purchase,
respectively. An investor may be entitled to reduced sales charges on Investor A
through rights of accumulation, letters of intent, quantity discounts, or
through certain affiliations with BankAmerica Corporation.
B. Purchase Policies
Pacific Horizon Funds Nations Funds
--------------------- -------------
Minimum initial investment $500 for a regular $1,000 for a regular
account; $100 for account; $500 for IRA
investors purchasing investors; $250 for
through BofA or its non-working spousal
affiliates*; $500 for IRA IRAs; $100 for investors
or SEP IRA investors; participating in the
$250 for non-working Systematic Investment
spousal IRAs; $2500 for Plan; no minimum
SEP-IRAs with more than investment for 401(k)
one participant. plans, simplified
employee pension plans
("SEPs"), Savings
Incentives Method Plans
for Employees ("SIMPLE
IRAs") and salary
reduction-IRAs
("SAR-IRAs").**
Minimum subsequent $50 for regular accounts $100; $50 for subsequent
investments and $0 for investors investments made through
purchasing through BofA the Systematic
or its affiliates; for Investment Plan.
IRA or Roth IRA investors; for non-working spousal
IRAs; or for 401(k) Plans, Qualified Retirement
Plans and SEP-IRAs.
- -----------------------
* The minimum investment is $100 for purchases made through BofA or its
affiliates' trust and agency accounts or a Service Organization whose clients
have made aggregate minimum purchases of $1 million. The minimum investment is
$200 for BankAmerica cardholders with an appropriate award certificate.
** The assets of such plans must reach an asset value of $1,000 ($500 for SEPs,
SAR-SEPs, simple IRAs and SAR-IRAs) within one year of the account open date. If
the assets of such plans do not reach the minimum asset size within one year,
Nations reserves the right to redeem the Shares held by such plans on 60 days'
written notice.
IV-2
<PAGE>
Purchase methods Through Bank of America; Through Selling Agents,
Service Organizations; in Servicing Agents, a
person; by wire; by Nations Fund Personal
telephone; or Teletrade. Investment Planner
account; by mail; by
wire; by telephone# and
a Systematic Investment
Plan.
C. Redemption Procedures
Pacific Horizon Funds Nations Funds
--------------------- -------------
Through an authorized Yes Yes
selling or servicing agent
By mail Yes Yes
By telephone Yes Yes#
By wire Yes Yes
Check writing feature Yes+ No
By automatic withdrawal Yes (net asset value of Yes (net asset value of
plan account must be $5,000) account must be $10,000)@
Due to the high cost of maintaining fund accounts with small balances,
Nations Funds may redeem Investor A Shares and Pacific Horizon may redeem A
Shares, if the balance in a shareholder's account with the Fund drops below $500
as a result of redemptions, and the shareholder does not increase the balance to
at least $500 on 60 days' written notice. Share balances also may be redeemed at
the direction of an agent pursuant to arrangements between the agent and its
customer. Nations and Pacific Horizon also may redeem shares of the Nations
Funds and Pacific Horizon Funds involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.
D. Additional Shareholder Services
Pacific Horizon Funds Nations Funds
--------------------- -------------
- -------------------------
# Telephone transactions for the Nations Funds, consisting of purchases,
exchanges and redemptions, are limited to $50,000.
# Telephone transactions for the Nations Funds, consisting of purchases,
exchanges and redemptions, are limited to $50,000.
+ Transaction minimum: $500.
@ Shares of Nations Funds redeemed under the automatic withdrawal plan will not
be subject to a contingent deferred sales charge, provided that the shares so
redeemed do not exceed, on an annual basis, 12% of the net asset value of the
respective shares in the account.
IV-3
<PAGE>
Systematic/automatic Yes ($50 or more) Yes (in any amount from
investment plan $50 to $100,000).
E. Share Exchanges
Pacific Horizon Funds Nations Funds
--------------------- -------------
By mail Yes Yes
By telephone Yes Yes
Minimum The A Shares exchanged The Investor A Shares
must have a current value exchanged must have a
of at least $500. current value of at
least $1,000
Automatic exchange feature No Yes. A shareholder may
automatically exchange
at least $25 on a
monthly or quarterly
basis.
Investor A Shares of a Nations Fund may be exchanged for Investor A Shares
of any other Nations Fund (except Nations index funds). Exchanges are subject to
the minimum investment requirements imposed.
A Shares of a Pacific Horizon Fund may be exchanged for A Shares of any
other Pacific Horizon Fund or Time Horizon Fund. Exchanges are subject to the
minimum investment requirements imposed.
II. Pacific Horizon Funds - B Shares
Corresponding Nations Funds - Investor B Shares
A. Sales Charges and Exemptions
There is a maximum deferred sales charge of 5.00% on Investor B Shares of
each of the Pacific Horizon Funds and the Nations Funds if such shares are
redeemed within a specified number of years of the initial purchase. The
deferred sales charge is reduced as the number of years the shares are held
increases, and there is no deferred sales charge on shares held for seven years
or longer.
IV-4
<PAGE>
B. Purchase Policies
Pacific Horizon Funds Nations Funds
--------------------- -------------
Minimum initial investment $500 for a regular $1,000 for a regular
account; $100 for account; $500 for IRA
investors purchasing investors; $250 for
through BofA or its non-working spousal
affiliates*; $500 for IRA IRAs; $100 for investors
or SEP IRA investors; participating in the
$250 for non-working Systematic Investment
spousal IRAs; $2500 for Plan; no minimum
SEP-IRAs with more than investment for 401(k)
one participant. plans, simplified
employee pension plans
("SEPs"), Savings
Incentives Method Plans
for Employees ("SIMPLE
IRAs") and salary
reduction-IRAs
("SAR-IRAs").**
Minimum subsequent $50 for regular accounts $100; $50 for subsequent
investments and $0 for investors investments made through
purchasing through BofA the Systematic
or its affiliations; for Investment Plan.
IRA or Roth IRA investors; for non-working spousal
IRAs; or for 401(k) Plans, Qualified Retirement
Plans and SEP-IRAs.
Purchase methods Through Bank of America; Through Selling Agents,
Service Organizations; by Servicing Agents, a
mail; by wire; by Nations Fund Personal
telephone; or Teletrade. Investment Planner
account; by mail; by
wire; by telephone# and
a Systematic Investment
Plan.
- ----------------------
* The minimum investment is $100 for purchases made through BofA or its
affiliates' trust and agency accounts or a Service Organization whose clients
have made aggregate minimum purchases of $1 million. The minimum investment is
$200 for BankAmerica cardholders with an appropriate award certificate.
** The assets of such plans must reach an asset value of $1,000 ($500 for SEPs,
SAR-SEPs and SAR-IRAs) within one year of the account open date. If the assets
of such plans do not reach the minimum asset size within one year, Nations
reserves the right to redeem the Shares held by such plans on 60 days' written
notice.
# Telephone transactions for the Nations Funds, consisting of purchases,
exchanges and redemptions, are limited to $50,000. # Telephone transactions for
the Nations Funds, consisting of purchases, exchanges and redemptions, are
limited to $50,000.
IV-5
<PAGE>
C. Redemption Procedures
Pacific Horizon Funds Nations Funds
--------------------- -------------
Through an authorized Yes Yes
selling or servicing agent
By mail Yes Yes
By telephone Yes Yes#
By wire Yes Yes
Check writing feature Yes+ No
By automatic withdrawal Yes (net asset value of Yes (net asset value of
plan account must be $5,000) account must be $10,000)@
Due to the high cost of maintaining fund accounts with small balances,
Nations Funds may redeem Investor B Shares and Pacific Horizon may redeem B
Shares, if the balance in a shareholder's account with the Fund drops below $500
as a result of redemptions, and the shareholder does not increase the balance to
at least $500 on 60 days' written notice. Share balances also may be redeemed at
the direction of an agent pursuant to arrangements between the agent and its
customer. Nations and Pacific Horizon also may redeem shares of the Nations
Funds and Pacific Horizon Funds involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.
D. Additional Shareholder Services
Pacific Horizon Funds Nations Funds
--------------------- -------------
Systematic/automatic Yes Yes (in any amount from
investment plan --- $50 to $100,000).
Conversion feature Yes (to A Shares in 9 Yes (to Investor A
years) shares in 8 years)
E. Share Exchanges
- ----------------------
# Telephone transactions for the Nations Funds, consisting of purchases,
exchanges and redemptions, are limited to $50,000.
+ Transaction minimum: $500.
@ Shares of Nations Funds redeemed under the automatic withdrawal plan will not
be subject to a contingent deferred sales charge, provided that the shares so
redeemed do not exceed, on an annual basis, 12% of the net asset value of the
respective shares in the account.
IV-6
<PAGE>
Pacific Horizon Funds Nations Funds
--------------------- -------------
By mail Yes Yes
By telephone Yes Yes
Minimum The B Shares exchanged The Investor B Shares
must have a current value exchanged must have a
of at least $500. current value of at
least $1,000
Automatic exchange feature No Yes. A shareholder may
automatically exchange
at least $25 on a
monthly or quarterly
basis.
Investor B Shares of a Nations Fund may be exchanged for Investor B Shares
of any other Nations Fund. Exchanges are subject to the minimum investment
requirements imposed.
B Shares of a Pacific Horizon Fund may be exchanged for B Shares of any
other Pacific Horizon Fund or Time Horizon Fund or the Y Shares of Pacific
Horizon's Prime Fund. Exchanges are subject to the minimum investment
requirements imposed.
III. Pacific Horizon Fund - K Shares
Corresponding Nations Fund - Investor C Shares
A. Sales Charges and Exemptions
Pacific Horizon's K Shares and Nations Funds' Investor C Shares are
offered at net asset value with no front-end sales charges, although a 1.00%
deferred sales charge will apply to all redemptions of Nations Funds' Investor C
Shares made within one year of purchase.
IV-7
<PAGE>
B. Purchase Policies
Pacific Horizon Funds Nations Funds
--------------------- -------------
Minimum initial investment $500 for a regular $1,000 for a regular
account; $100 for account; $500 for IRA
investors purchasing investors; $250 for
through BofA or its non-working spousal
affiliates*; $500 for IRA IRAs; $100 for investors
or SEP IRA investors; participating in the
$250 for non-working Systematic Investment
spousal IRAs; $2500 for Plan; no minimum
SEP-IRAs with more than investment for 401(k)
one participant. plans, simplified
employee pension plans
("SEPs"), Savings
Incentives Method Plans
for Employees ("SIMPLE
IRAs") and salary
reduction-IRAs
("SAR-IRAs").**
Minimum subsequent $50 for regular accounts $100; $50 for subsequent
investments and $0 for investors investments made through
purchasing through BofA the Systematic
or its affiliates; for Investment Plan.
IRA or SEP IRA investors;
for non-working spousal
IRAs; or SEP-IRAs.
Purchase methods Through Bank of America; Through Selling Agents,
Service Organizations; in Servicing Agents, a
person; by mail; by wire; Nations Fund Personal
by telephone; or Investment Planner
Teletrade. account; by mail; by
wire; by telephone# and
a Systematic Investment
Plan.
- ---------------------
* The minimum investment is $100 for purchases made through BofA or its
affiliates' trust and agency accounts or a Service Organization whose clients
have made aggregate minimum purchases of $1 million. The minimum investment is
$200 for BankAmerica cardholders with an appropriate award certificate.
** The assets of such plans must reach an asset value of $1,000 ($500 for SEPs,
SAR-SEPs and SAR-IRAs) within one year of the account open date. If the assets
of such plans do not reach the minimum asset size within one year, Nations
reserves the right to redeem the Shares held by such plans on 60 days' written
notice.
# Telephone transactions for the Nations Funds, consisting of purchases,
exchanges and redemptions, are limited to $50,000.
IV-8
<PAGE>
C. Redemption Procedures
Pacific Horizon Funds Nations Funds
--------------------- -------------
Through an authorized Yes Yes
selling or servicing agent
By mail Yes Yes
By telephone Yes Yes#
By wire Yes Yes
Check writing feature Yes+ No
By automatic withdrawal Yes (net asset value of Yes (net asset value of
plan account must be $5,000) account must be $10,000)@
Due to the high cost of maintaining fund accounts with small balances,
Nations Funds may redeem Investor C Shares and Pacific Horizon may redeem K
Shares, if the balance in a shareholder's account with the Fund drops below $500
as a result of redemptions, and the shareholder does not increase the balance to
at least $500 on 60 days' written notice. Share balances also may be redeemed at
the direction of an agent pursuant to arrangements between the agent and its
customer. Nations and Pacific Horizon also may redeem shares of the Nations
Funds and Pacific Horizon Funds involuntarily or make payment for redemption in
readily marketable securities or other property under certain circumstances in
accordance with the 1940 Act.
D. Additional Shareholder Services
Pacific Horizon Funds Nations Funds
--------------------- -------------
Systematic/automatic Yes ($50 or more) Yes (in any amount from
investment plan $50 to $100,000).
E. Share Exchanges
Pacific Horizon Funds Nations Funds
--------------------- -------------
- --------------------
# Telephone transactions for the Nations Funds, consisting of purchases,
exchanges and redemptions, are limited to $50,000.
+ Transaction minimum: $500.
@ Shares of Nations Funds redeemed under the automatic withdrawal plan will not
be subject to a contingent deferred sales charge, provided that the shares so
redeemed do not exceed, on an annual basis, 12% of the net asset value of the
respective shares in the account.
IV-9
<PAGE>
By mail Yes Yes
By telephone Yes Yes
Minimum The K Shares exchanged The Investor C Shares
must have a current value exchanged must have a
of at least $500. current value of at
least $1,000
Automatic exchange feature No Yes. A shareholder may
automatically exchange
at least $25 on a
monthly or quarterly
basis.
Investor C Shares of a Nations Fund may be exchanged for Investor C Shares
of any other Nations Fund non-money market fund or Daily Shares of a money
market fund. Exchanges are subject to the minimum investment requirements
imposed.
K Shares of a Pacific Horizon Fund may be exchanged for K Shares of any
other Pacific Horizon Fund or Time Horizon Fund. Exchanges are subject to the
minimum investment requirements imposed.
IV. Any dividends from net investment income for the Pacific Horizon
Aggressive Growth Fund, Nations Small Company Growth Fund, Pacific Horizon
U.S. Government Securities Fund, Nations Government Securities Fund and
Pacific Horizon International Equity Fund are paid monthly, and any net
realized gains are distributed at least annually. Any dividends from net
investment income for the Nations International Equity Fund are declared
and paid quarterly, and any net realized gains are distributed at least
annually.
IV-10
<PAGE>
APPENDIX V
Management's Discussion of Nations Fund Performance
-----------------------------------------------
Nations
International Equity
Fund Portfolio Manager Commentary*
IN THE FOLLOWING INTERVIEW, MR. WATSON SHARES HIS VIEWS
ON NATIONS INTERNATIONAL EQUITY FUND'S PERFORMANCE FOR
THE 12-MONTH PERIOD ENDED MARCH 31, 1998 AND HIS CURRENT
OUTLOOK.
<TABLE>
<S> <C>
PORTFOLIO MANAGER PLEASE DESCRIBE THE FUND'S PHILOSOPHY AND STYLE.
Stephen Watson is Principal The Fund emphasizes growth at a reasonable price in
Portfolio Manager of Nations selecting regions, countries and stocks. By combining good
International Equity Fund and growth stock selection with active regional and country
is the Head of the allocation, we aim to build a portfolio that strategically
International and Global overweights growing markets while tactically avoiding those
Portfolio Team for Gartmore with less favorable prospects. The investment process is
Global Partners, investment driven by fundamental research that includes both
sub-adviser to the Fund. macroeconomic and company-level analysis, carried out by
INVESTMENT OBJECTIVE regionally focused investment teams.
The Fund seeks long-term WHAT WERE INTERNATIONAL ECONOMIC AND MARKET CONDITIONS LIKE
capital growth by investing DURING THE REPORTING PERIOD?
primarily in equity securities Global equity markets had a tumultuous ride over the 12
of non-United States companies months ended March 31, 1998. The ups and downs of the
in Europe, Australia, the Far markets during this period reflected a combination of
East and other regions, extraordinary political and economic developments,
including developing countries. particularly -- but not entirely -- in the Far East. The
PERFORMANCE REVIEW spring of 1997 was marked by two significant political
For the 12-month period ended milestones: the buildup to Britain's handover of Hong Kong
March 31, 1998, Nations to China on July 1, 1997, and, in the United Kingdom, the
International Equity Fund May 1997 election of a new Labour government, ending 19
Primary A Shares provided a years of Conservative Party rule.
total return of 16.06%. The reporting period began with stock markets in the Far
East in a positive mode, a situation that quickly changed
following the devaluation of Thailand's currency, the baht,
on July 2, 1997. The weakness of the Thai baht precipitated
the first of successive rounds of currency devaluations and
stock market declines across the Pacific Rim.
*The outlook of this Fund's portfolio manager may differ
from that presented for other Nations Funds mutual funds.
Source for all statistical data -- Gartmore Global Partners.
INVESTING IN INTERNATIONAL INVESTMENTS MAY INVOLVE SPECIAL
RISKS, INCLUDING FOREIGN TAXATION, CURRENCY RISKS, RISKS
ASSOCIATED WITH POSSIBLE DIFFERENCES IN FINANCIAL STANDARDS
AND OTHER MONETARY AND POLITICAL RISKS ASSOCIATED WITH
FUTURE POLITICAL AND ECONOMIC DEVELOPMENTS.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
V-1
<PAGE>
Nations
International Equity
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
By the end of September 1997, Japan, which had been the star
performer among major non-U.S. stock markets the previous
calendar quarter, had become the worst-performing market
represented in the benchmark Morgan Stanley Capital
International Europe, Australasia and Far East (MSCI EAFE)
Index.** Depreciation of the yen, weak consumer spending and
the economic and financial turmoil of its Pacific Rim
neighbors all contributed to the slide in the Japanese stock
market.
While events in Asia hurt stock markets globally, most of
the impact outside the Pacific Rim was confined to the third
quarter of the reporting period and primarily affected
companies with exposure to Asia in terms of revenue.
Otherwise, stock markets in the U.K. and Continental
Europe -- particularly those in Italy, Spain and Portugal,
which are aiming to benefit from participation in Economic
and Monetary Union (EMU) -- rose throughout most of the
period, fueled by increasing merger and acquisition
activity, positive corporate news and favorable economic
data.
In the emerging markets, Latin America was initially hit
harder by the Asian downturn than were most developed
markets. However, Latin American stock markets generally
recovered enough to post modest gains by the end of the
reporting period. Asian stock markets also staged partial
recoveries in the first three months of 1998.
THE FUND'S UNDERWEIGHT POSITION WHAT COUNTRY OR REGIONAL ALLOCATION DECISIONS CONTRIBUTED
IN JAPAN RELATIVE TO THE MSCI THE MOST TO THE FUND'S PERFORMANCE?
EAFE INDEX PROVIDED THE MOST The Fund's underweight position in Japan relative to the
BENEFIT FROM A REGIONAL MSCI EAFE Index provided the most benefit from a regional
ALLOCATION PERSPECTIVE. allocation perspective. Our emphasis on emerging markets
outside of the Far East, specifically Brazil and Mexico,
also added value. In Europe, an overweight stance toward
Switzerland also helped performance.
WHAT COUNTRY OR REGIONAL ALLOCATION DECISIONS DETRACTED FROM
THE FUND'S PERFORMANCE?
The decision to maintain an overweight position in the Far
East through the first half of the reporting period had a
negative impact on performance, as this region
underperformed the benchmark MSCI EAFE Index. However, we
reduced the Fund's exposure to Southeast Asia during the
period, focusing on markets such as Hong Kong and Australia,
where the potential for long-term appreciation was
considered stronger.
In Europe, the Fund's underweighting in France detracted
from performance, as the French market outperformed the MSCI
EAFE Index. Also dampening the Fund's returns was its
underweight stance toward the U.K., although we
substantially increased exposure to this market over the
period.
**Morgan Stanley Capital International Europe, Australasia
and Far East Index is an unmanaged, capitalization-weighted
index that tracks stocks traded on sixteen exchanges in
Europe, Australia and the Far East. It is unavailable for
investment.
</TABLE>
V-2
<PAGE>
Nations
International Equity
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
DID ANY PARTICULAR SECTOR DECISIONS CONTRIBUTE TO THE FUND'S
PERFORMANCE?
Our heavy emphasis on the pharmaceutical sector in
Switzerland added value, with both Novartis and Roche
Holding outperforming the Swiss market index. In Italy, the
Fund's significant holdings in telecommunication
stocks -- through Telecom Italia Mobile and its parent,
Telecom Italia -- benefited the Fund, as the share prices of
both companies outperformed the MSCI Italy Index.***
IN EUROPE, THE FUND WAS HELPED WHAT ARE SOME EXAMPLES OF STOCKS HELD BY THE FUND THAT
BY HEAVY EXPOSURE TO SOME OF PERFORMED PARTICULARLY WELL?
THE BEST PERFORMING SECTORS. In Europe, the Fund was helped by heavy exposure to some of
the best performing sectors, including insurance, support
services, electronics, pharmaceuticals and
telecommunications. Individually, shares in Bank of Ireland,
Lloyds TSB Group, the German software company SAP and
Britain's mobile telephone company, Vodafone Group,
substantially outperformed the benchmark MSCI EAFE Index.
Elsewhere, the Fund took profits on Australia's News Corp.
Ltd. (parent company of motion picture studio 20th Century
Fox), whose share price was boosted by the success of the
movie Titanic.
WHAT IMPACT DID CURRENCY HAVE ON THE FUND'S PERFORMANCE?
A broadly stronger U.S. dollar throughout most of the
reporting period had a negative impact on performance.
However, the British pound ended the period a fraction
stronger against the dollar than it had been at the start of
the period, providing some benefit to U.S. investors. The
Fund was particularly vulnerable to further drops in the
Japanese yen relative to the dollar, so in November 1997, we
placed a currency hedge on the Fund's yen exposure as a
protective measure. We removed the hedge in January 1998 as
the Japanese government's efforts to stimulate the economy
caused the yen to rally. This hedging strategy benefited
Fund performance.
WHAT IS YOUR INTERNATIONAL ECONOMIC AND MARKET OUTLOOK FOR
THE YEAR AHEAD?
The primary concern is the impact of the Asian slowdown on
companies not only within the region, but also in Europe and
Latin America. In Japan, it has become clear that the
government's repeated attempts to stimulate economic growth
through fiscal policy will not provide a long-term solution
to the stagnant Japanese economy. Instead, Japan needs to
make serious efforts to deregulate and open up its economy
to foreign investors. In the meantime, with weakening
domestic demand combined with close trade and investment
links with the rest of the Pacific region, the outlook for
Japanese corporate earnings has been revised downward.
***Portfolio holdings were current as of March 31, 1998, are
subject to change and may not be representative of current
holdings.
</TABLE>
V-3
<PAGE>
Nations
International Equity
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
In Continental Europe, the pending transition to Economic
and Monetary Union in 1999 should continue to temper
government spending plans and encourage more cross-border
equity investment. The upcoming September 1998 election in
Germany, while important, is unlikely to disrupt stock
markets because both candidates favor a strong, unified
Europe. Overall, Europe should continue to experience a
positive interest-rate environment, corporate restructurings
and improving earnings -- all contributing to a favorable
investment backdrop for stocks.
WHAT INVESTMENT OPPORTUNITIES DO YOU ANTICIPATE IN THIS
ENVIRONMENT?
We believe that major investment opportunities will be found
in Continental Europe and the U.K. Although the U.K. economy
is experiencing a slowdown in the manufacturing sector, the
services industry is booming. On the Continent, the economic
climate remains buoyant heading into EMU, with peripheral
markets such as Spain and Italy particularly strong because
of increasingly favorable macroeconomic environments.
Mergers and acquisitions across many sectors -- particularly
in banking, insurance and pharmaceuticals -- should also
help support European stock markets. In addition, the
electronics and technology services sector appears poised
for continued success due to increased demand related to the
millennium computer "bug" and the transition to EMU.
Elsewhere, we see growth opportunities in Latin America,
especially in Brazil, where valuations appear reasonable and
the privatization process is on track.
HOW ARE YOU POSITIONING THE FUND TO TAKE ADVANTAGE OF THESE
ANTICIPATED DEVELOPMENTS?
We are presently increasing the Fund's exposure to both the
U.K. and Continental Europe, concentrating investments in
growth sectors such as financial services,
telecommunications, services and pharmaceuticals. Outside of
Europe, we continue to favor Latin America over the Pacific
Rim and expect to concentrate on large-capitalization stocks
that are likely to benefit from positive economic
conditions. We will, however, selectively seek opportunities
in the Far East among companies that offer a combination of
inexpensive valuations, reasonable growth prospects and
sound balance sheets.
</TABLE>
V-4
<PAGE>
Nations
International Equity
Fund
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/98)
[PIE CHART]
20.9% Great Britain
2.6% Australia
2.6% Mexico
2.9% Spain
3.8% Brazil
3.6% Sweden
4.0% Italy
7.0% Netherlands
7.9% Germany
8.0% Switzerland
15.0% Other
10.2% France
11.5% Japan
<TABLE>
<C> <S> <C>
TOP TEN HOLDINGS
(AS A % OF NET ASSETS AS OF 3/31/98)
-----------------------------------------
1 Novartis AG 2.7%
-----------------------------------------
2 Schweiz Ruckversicherungs 2.3%
-----------------------------------------
3 TOTAL, "B" Shares ord 1.7%
-----------------------------------------
4 Pinault-Printemps-Redoute SA 1.7%
-----------------------------------------
5 ING Groep N.V. 1.6%
-----------------------------------------
6 Telecom Italia Mobile Spa 1.5%
-----------------------------------------
7 Banco de Santander SA ord 1.5%
-----------------------------------------
8 Bank of Ireland 1.5%
-----------------------------------------
9 Lloyds TSB Group plc 1.5%
-----------------------------------------
10 Aegon N.V. 1.4%
-----------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT AS
OF MARCH 31, 1998, ARE SUBJECT TO
CHANGE AND MAY NOT BE REPRESENTATIVE
OF CURRENT HOLDINGS.
V-5
<PAGE>
Nations
International Equity
Fund Performance
GROWTH OF $10,000 INVESTMENT
Primary A Shares (as of 3/31/98)
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period 'MSCI
(Fiscal Year Covered) 'International Equity $16,727' EAFE Index $18,516'
<S> <C> <C>
Dec. 2, 1991 10000 10000
1991 10416 10520
9700 9279
10171 9484
9934 9636
1992 9523 9273
10071 10393
10393 11447
11338 12214
1993 12114 12328
12023 12767
12310 13428
12771 13450
1994 12429 13322
11876 13580
12147 13690
13034 14271
1995 13479 14861
14225 15301
14463 15555
14421 15547
1996 14621 15806
14413 15570
16094 17602
15729 17490
1997 14807 16131
Mar. 31 1998 16727 18516
</TABLE>
Investor B Shares (as of 3/31/98)*
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period 'MSCI
(Fiscal Year Covered) 'International Equity $14,787' EAFE Index $15,927'
<S> <C> <C>
June 7, 1993 10000 10000
9747 9846
10581 10506
1993 11279 10604
11174 10982
11406 11550
11808 11569
1994 11479 11459
10942 11681
11167 11775
11967 12276
1995 12351 12782
13005 13161
13193 13379
13114 13373
1996 13264 13595
13040 13392
14535 15141
14169 15044
1997 13299 13875
Mar. 31, 1998 14787 15927
</TABLE>
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
Primary A Shares
SINCE INCEPTION
(12/2/91 through 3/31/98) 8.47%
The charts to the left show the growth
in value of a hypothetical $10,000
investment in Primary A and Investor B
Shares of Nations International Equity
Fund from the date each class of shares
was first offered. The Morgan Stanley
Capital International Europe,
Australasia and Far East Index ("MSCI
EAFE Index") is an unmanaged,
capitalization-weighted index that
tracks stocks traded on sixteen
exchanges in Europe, Australia and the
Far East. It is unavailable for
investment. The performance shown
reflects the performance of Primary A
and Investor B Shares. The performance
of Primary B, Investor A and Investor C
Shares may vary based on the
differences in sales loads and fees
paid by the shareholders investing in
each class.
AVERAGE ANNUAL TOTAL RETURN
Investor B Shares
SINCE INCEPTION NAV CDSC*
(6/7/93 through 3/31/98) 8.77% 8.47%
</TABLE>
TOTAL RETURN (AS OF 3/31/98)
<TABLE>
<CAPTION>
PRIMARY A PRIMARY B INVESTOR A INVESTOR B INVESTOR C
<S> <C> <C> <C> <C> <C> <C>
Inception Date 12/2/91 6/28/96 6/3/92 6/7/93 6/17/92
NAV CDSC*
- ---------------------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 16.06% 15.09% 15.77% 14.93% 9.93% 15.05%
- ---------------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
3 Years 12.09% NA 11.81% 11.06% 10.24% 11.23%
5 Years 10.68% NA 10.41% NA NA 9.69%
Since Inception 8.47% 7.93% 8.15% 8.77% 8.47% 8.00%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
*Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
Figures at net asset value (NAV) do not reflect any sales charges.
V-6
<PAGE>
Nations
Small Company Growth
Fund Portfolio Manager Commentary*
IN THE FOLLOWING INTERVIEW, MR. BILLEADEAU SHARES HIS
VIEWS ON NATIONS SMALL COMPANY GROWTH FUND'S PERFORMANCE
FOR THE 12-MONTH PERIOD ENDED MARCH 31, 1998, AND HIS
CURRENT OUTLOOK.
<TABLE>
<S> <C>
PORTFOLIO MANAGER PLEASE DESCRIBE THE FUND'S INVESTMENT PHILOSOPHY AND STYLE.
Scott Billeadeau, CFA, is Our approach to small-capitalization investing emphasizes a
Senior Portfolio Manager of rigorous, disciplined and fundamental-based process that
Nations Small Company Growth identifies successful companies at the early stages of their
Fund and a Director of Equity economic life cycle, long before they are recognized by the
Management for TradeStreet greater investing public.
Investment Associates, Inc.,
investment sub-adviser to the HOW DID THE FUND PERFORM UNDER THE MARKET CONDITIONS THAT
Fund. PREVAILED OVER THE LAST 12 MONTHS?
INVESTMENT OBJECTIVE It was a volatile period for small-company stocks. Due to
The Fund seeks long-term underperformance in April 1997, small-capitalization stocks
capital growth by investing appeared "cheap" relative to larger-company stocks. Relative
primarily in equity securities. valuations were close to an all-time low June through
PERFORMANCE REVIEW September 1997, making small-capitalization stocks
For the 12-month period ended attractive. So overall, May through September proved to be
March 31, 1998, Nations Small strong months. Then the Asian financial crisis sent
Company Growth Fund Primary A investors toward the purchase of large-capitalization
Shares provided a total return blue-chip stocks rather than small-capitalization stocks
of 49.41%.** during the third fiscal quarter. With a total return of
49.41%, the Fund (Primary A Shares) outperformed its peer
group, the Lipper SmallCap Funds Universe which returned
43.53%.***
WHAT PARTICULAR SECTORS OR STOCKS WERE FAVORABLE FOR THE
FUND?+
Sectors that were favorable for Nations Small Company Growth
Fund were financial services, technology and consumer
cyclicals.
Small capitalization stocks from the financial sector did
well due to low interest rates, a strong economy and
consolidation in that industry. During the fiscal year,
several banks in the portfolio were taken over by or merged
into larger banks. That type of activity significantly added
to the Fund's performance. The stocks of City National,
SouthWest Securities, OnBanc and US Bancorp performed
particularly well.
*The outlook for this Fund may differ from that presented
for other Nations Funds mutual funds.
**The performance shown includes the effect of fee waivers
by the investment adviser, which has the effect of
increasing total return.
***Lipper Analytical Services, Inc. is an independent mutual
fund monitor. Funds included in the Lipper SmallCap Funds
Universe invest primarily in companies with market
capitalizations less than $1 billion at time of purchase.
+Portfolio holdings were current as of March 31, 1998, are
subject to change and may not be representative of current
holdings.
Source for all statistical data -- TradeStreet Investment
Associates, Inc.
BECAUSE SMALL COMPANIES OFTEN HAVE NARROWER MARKETS AND
LIMITED FINANCIAL RESOURCES AND THEIR STOCKS ARE NOT AS
ACTIVELY TRADED AS LARGE COMPANY STOCKS, THEIR SHARE PRICES
WILL BE MORE VOLATILE.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
V-7
<PAGE>
Nations
Small Company Growth
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
The consumer cyclicals sector benefited in the third fiscal
quarter because those small company stocks are domestic in
nature and, thus, were not impacted by the Asian financial
crisis. Add to that a good domestic economy, and it's
obvious why those securities benefited. In particular, the
stocks of retailers Ethan Allen Retailers and Pacific
Sunwear performed well.
Adding to the positive annual return was the Fund's
underweighting in several underperforming sectors. For
example, the health care sector has underperformed in the
small-capitalization universe, especially when compared to
large-capitalization health care stocks which profited from
mergers and consolidation. In addition, smaller health care
companies tend to be one-product companies which carry much
more risk than well-diversified larger companies. (The same
is true for technology.) Due to these factors, we have
significantly underweighted the Fund in health care against
the benchmark.
Normally, small-capitalization growth funds own more health
care stocks than the Fund does, but because of the inherent
risk, we were particularly selective. That philosophy
benefitted the Fund because it was underweighted in a sector
that underperformed.
SMALL CAPITALIZATION STOCKS WHAT PARTICULAR SECTORS OR STOCKS WERE UNFAVORABLE FOR THE
FROM THE FINANCIAL SECTOR DID FUND?
WELL DUE TO LOW INTEREST RATES, Small-capitalization technology stocks, in general, showed
A STRONG ECONOMY AND poor returns, especially those with Asian exposure. These
CONSOLIDATION IN THAT INDUSTRY. companies may not have direct exposure to the Asian markets,
but because they supply companies that do, they were
affected by the Asian financial crisis.
We've had to identify the technology companies that do have
this indirect exposure and evaluate the Fund's positions in
them. Many have stayed the course and are now beginning to
rebound. However, we are selling those that have significant
Asian exposure. Basically, it comes down to whether we
consider the underperformance as a short-term disruption to
the company or as having a lasting fundamental effect on the
stock.
Other stocks that didn't meet expectations included Delta
Woodside Industries and Proxim, Inc.
THE MARKET IS BEGINNING TO WHAT ECONOMIC FACTORS INFLUENCED THE FUND'S PERFORMANCE AND
FAVOR GROWTH STOCKS, WHAT DO YOU ANTICIPATE IN THE COMING YEAR?
PARTICULARLY THOSE OF MEDIUM- The first and second fiscal quarters of 1997 were favorable
AND SMALL-SIZED COMPANIES. to small-capitalization investors. The third fiscal quarter
was lackluster as a result of the Asian financial crisis,
which caused liquidity to dry up in the small-
capitalization universe as investors moved toward
larger-capitalization stocks. Consequently,
large-capitalization stocks have grown to an all-time high
in terms of the number of investors choosing them over
small-capitalization stocks.
</TABLE>
V-8
<PAGE>
Nations
Small Company Growth
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
However, the market is beginning to favor growth stocks,
particularly those of medium- and small-sized companies. In
fact, during the first calendar quarter of 1998, mid- and
small-capitalization stocks have comprised the largest
percentage of companies reporting better-than-expected
earnings. Also, although the economy is strong, we believe
it will begin to slow. That should favor the growth
universe, and we believe growth stocks will outperform value
stocks.
To capitalize, we'll identify and purchase stocks of
companies that we believe have visible and sustainable
earnings growth. In total, we believe that the market shift
toward growth stocks and the Fund's anticipated return on
investment should reward shareholders in the long run.
</TABLE>
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/98)
[PIE CHART]
4.0% Apparel and Textiles
4.3% Medical Products and Supplies
4.4% Retail -- Specialty
4.5% Computer Software
5.2% Electronics
5.8% Professional Services
7.6% Telecommunications
64.2% Other
<TABLE>
<C> <S> <C>
TOP TEN HOLDINGS (AS A % OF NET ASSETS AS
OF 3/31/98)
-----------------------------------------
1 REMEC, Inc. 2.0%
-----------------------------------------
2 Core Laboratories N.V. 1.9%
-----------------------------------------
3 Cybex Computer Products
Corporation 1.8%
-----------------------------------------
4 SCB Computer Technology, Inc. 1.7%
-----------------------------------------
5 Stanford Telecommunications,
Inc. 1.6%
-----------------------------------------
6 Henry Schein, Inc. 1.6%
-----------------------------------------
7 Quicksilver 1.6%
-----------------------------------------
8 Orthodontic Centers of
America 1.5%
-----------------------------------------
9 Lason Holdings Inc. 1.4%
-----------------------------------------
10 Rogue Wave Software 1.4%
-----------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT
AS OF MARCH 31, 1998, ARE SUBJECT
TO CHANGE AND MAY NOT BE REPRESENTATIVE
OF CURRENT HOLDINGS.
V-9
<PAGE>
Nations
Small Company Growth
Fund Performance
GROWTH OF $10,000 INVESTMENT
Primary A Shares (as of 3/31/98)
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period Russell
(Fiscal Year Covered) Small Company Growth $16,832 2000 Index $16,103 Lipper SmallCap Funds Universe $16,214
<S> <C> <C> <C>
Dec. 12 1995 10000 10000 10000
1995 9875 10264 10169
10470 10788 10802
11159 11327 11611
11283 11366 11836
1996 11909 11957 12148
11266 11339 11352
13512 13177 13257
15584 15138 15419
1997 14272 14631 14633
Mar. 31 1998 16832 16103 16214
</TABLE>
Investor B Shares (as of 3/31/98)*
Assumes the reinvestment of all distributions.
<TABLE>
<CAPTION>
Measurement Period Small Company Growth Russell
(Fiscal Year Covered) $16,459 2000 Index $16,103 Lipper SmallCap Funds Universe $16,214
<S> <C> <C> <C>
Dec. 12 1995 10000 10000 10000
1995 9881 10264 10169
10439 10788 10802
11096 11327 11611
11199 11366 11836
1996 11795 11957 12148
11122 11339 11352
13304 13177 13257
15315 15138 15419
1997 13978 14631 14633
Mar. 31 1998 16459 16103 16214
</TABLE>
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
Primary A Shares
Since Inception
(12/12/95 through 3/31/98) 25.39%
The charts to the left show the growth
in value of a hypothetical $10,000
investment in Primary A and Investor B
Shares of Nations Small Company Growth
Fund from the date each class of shares
was first offered. Figures for the
Russell 2000 Index, an unmanaged
capitalization-weighted index that
includes 2,000 of the smallest stocks,
representing approximately 11% of the
U.S. equity market, include
reinvestment of dividends. Funds
included in the Lipper SmallCap Funds
Universe invest primarily in companies
with market capitalization less than $1
billion at the time of purchase. It is
not possible to invest in an index or
Lipper universe. The performance shown
reflects the performance of Primary A
and Investor B Shares. The performance
of Investor A and Investor C Shares may
vary based on the differences in sales
loads and fees paid by the shareholders
investing in each class.
AVERAGE ANNUAL TOTAL RETURN
Investor B Shares
Since
Inception NAV CDSC*
(12/12/95 through
3/31/98) 24.18% 23.19%
[CHART LEGEND]
</TABLE>
TOTAL RETURN (AS OF 3/31/98)
<TABLE>
<CAPTION>
PRIMARY A INVESTOR A INVESTOR B INVESTOR C
Inception Date 12/12/95 12/12/95 12/12/95 9/22/97
NAV CDSC*
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
1 YEAR PERFORMANCE 49.41% 49.15% 47.99% 42.99% NA
- ------------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
Since Inception 25.39% 24.94% 24.18% 23.19% 8.75%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
The performance shown reflects the performance of the Pilot Small Capitalization
Equity Fund, which was reorganized into Nations Small Company Growth Fund on May
23, 1997.
The performance shown includes the effect of fee waivers by the investment
adviser, which has the effect of increasing total return.
*Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
Figures at net asset value (NAV) do not reflect any sales charges.
V-10
<PAGE>
Nations
Government Securities
Fund Portfolio Manager Commentary*
IN THE FOLLOWING INTERVIEW, MR. GUNSTER SHARES HIS VIEWS
ON NATIONS GOVERNMENT SECURITIES FUND'S PERFORMANCE FOR
THE 12-MONTH PERIOD ENDED MARCH 31, 1998 AND HIS CURRENT
OUTLOOK.
<TABLE>
<S> <C>
PORTFOLIO MANAGER PLEASE DESCRIBE THE FUND'S INVESTMENT STYLE AND PHILOSOPHY.
Christopher G. Gunster is The Fund invests primarily in U.S. Treasuries,
Portfolio Manager of Nations mortgage-backed securities and government agency bonds. The
Government Securities Fund and Fund moves strategically among these sectors and along the
Portfolio Manager, Fixed Income yield curve to provide both a high level of current income
Management for TradeStreet and capital appreciation.
Investment Associates, Inc., WHAT WERE ECONOMIC AND MARKET CONDITIONS LIKE DURING THE
the investment sub-adviser to REPORTING PERIOD?
the Fund. During the period, economic growth was well above the most
INVESTMENT OBJECTIVE optimistic expectations of long-term sustainable levels,
The Fund seeks high current productivity rates were high and unemployment rates were at
income consistent with moderate 30-year lows. In addition, inflation continued to fall and
fluctuation of principal. The budget deficits declined, providing a favorable backdrop for
Fund invests primarily in financial assets.
intermediate-term securities In this economic environment, the U.S. Federal Reserve Board
issued or guaranteed by the (the Fed) opted to keep the Federal Funds rate steady at
U.S. Government, its agencies 5.5%. The benchmark 30-year U.S. Treasury bond started the
or instrumentalities. period at just over 7%, traded in a fairly tight range until
PERFORMANCE REVIEW August 1997 and then declined in yield in reaction to the
For the 12-month period ended Asian financial crisis, ending the period at just under 6%.
March 31, 1998, Nations (Bond yields move in the opposite direction of bond prices,
Government Securities Fund so that when yields go down, prices generally go up.)
Primary A Shares provided a Early in the reporting period, the economy experienced
total return of 11.65%.** impressive overall growth and little inflationary pressures.
However, in August 1997, the market retreated somewhat as
the unemployment rate continued to decline, consumer
confidence remained high and the U.S. dollar declined from
its then year-to-date highs. But with favorable inflation
reports, the market accurately anticipated that the Fed
would not act to raise interest rates. Accordingly, bond
yields declined slightly in September.
*The outlook of this Fund's portfolio manager may differ
from that presented for other Nations Funds mutual funds.
**The performance shown includes the effects of fee waivers
by the investment adviser, which has the effect of
increasing total return.
Source for all statistical data -- TradeStreet Investment
Associates, Inc.
PAST PERFORMANCE IS NO GUARANTEE OF FUTURE RESULTS.
</TABLE>
V-11
<PAGE>
Nations
Government Securities
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
In the final quarter of 1997, Asian stock markets plunged to
levels not seen in several years, creating fears of a
financial crisis that would affect the world's markets. As
investor confidence deteriorated, the U.S. bond market
benefited from a massive "flight to quality," with investors
selling off foreign securities and buying U.S. bonds. Within
the U.S. bond market, investors fled from corporate,
mortgage-backed and asset-backed securities into U.S.
Treasuries. As a result, any fund with large holdings in
U.S. Treasuries did well.
In early 1998, Fed Chairman Alan Greenspan discussed the
possibility of disinflationary shocks from the problems in
Asia. This caused the bond market yield curve to steepen
dramatically with yields on short maturity instruments
declining and the yields on long-term bonds remaining
relatively stable. In February 1998, as the strength of the
U.S. economy became a concern, the market experienced a
sell-off and investors again entertained the possibility
that the Fed might raise interest rates to get ahead of
inflation and influence growth.
HOW DID YOU MANAGE THE FUND IN THIS ENVIRONMENT?***
Until the Asian financial crisis hit in October 1997, the
Fund invested primarily in mortgage-backed and U.S. Treasury
securities. As the Asian crisis unfolded, interest rates
declined and U.S. Treasury securities did well; however,
mortgage-backed securities did not. To minimize the negative
effect of homeowners' refinancing due to lower interest
rates and to capitalize on the strengthening U.S. Treasury
market, we reduced the Fund's holdings in mortgage-backed
securities and emphasized U.S. Treasuries. This sector
allocation performed well as rates continued to decline
through January 1998.
When interest rates increased at the end of February and
beginning of March 1998, we reduced the Fund's exposure to
U.S. Treasuries and invested in other
higher-income-producing securities. Specifically, we focused
on prepaid mortgage-backed securities that have historically
provided solid performance in this type of environment.
Because they are less likely to be refinanced, these
securities provide more income potential than U.S. Treasury
and agency securities, and less risk than other
mortgage-backed securities.
***Portfolio characteristics were current as of March 31,
1998, are subject to change and may not be representative of
current characteristics.
</TABLE>
V-12
<PAGE>
Nations
Government Securities
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
WHAT INVESTMENT DECISIONS CONTRIBUTED TO THE FUND'S
PERFORMANCE?
Our decision to overweight U.S. Treasury securities in
October 1997 benefited the Fund, helping it make up
significant ground relative to its underperformance during
the beginning of the period. In addition, because
longer-term U.S. Treasuries perform particularly well when
markets rally, the Fund's longer duration boosted
performance.
WHAT INVESTMENT DECISIONS HINDERED OVERALL PORTFOLIO
PERFORMANCE DURING THE PERIOD?
At the beginning of the fiscal year, we felt that the
nation's strong economic growth rate, combined with low
unemployment expectations and a rise in manufacturing, could
lead to inflationary pressures that would prompt the Fed to
raise interest rates.
While we were accurate in our forecast of exceptional
economic growth, we were incorrect on the direction of
inflation. The Fund's defensive stance on
duration -- investing in securities with shorter maturities
in preparation for higher interest rates -- hurt its overall
performance because this prevented the Fund from fully
participating in the bond market rally. While the Fund's
duration standpoint hurt us in the first part of the year,
it benefited the Fund later on.
WHAT ECONOMIC DEVELOPMENTS DO YOU ANTICIPATE DURING THE REST
OF 1998?
We anticipate the financial crisis in Asia to have an impact
on the U.S. economy, which may affect our markets in the
third or fourth quarter of 1998. If this occurs, we expect
the economy to slow, prompting the labor market to ease and
the Fed to reduce interest rates. However, we do not expect
the slowdown to be so severe as to cause a recession.
If, however, the Asian situation does not have a significant
impact and economic growth remains strong, then the Fed will
likely raise rates. Either way, we expect interest rates to
remain stable in the short term as this debate continues.
</TABLE>
V-13
<PAGE>
Nations
Government Securities
Fund Portfolio Manager Commentary continued...
<TABLE>
<S> <C>
In the coming months, we expect HOW IS THE FUND POSITIONED TO TAKE ADVANTAGE OF THESE
to maintain the Fund's current ANTICIPATED DEVELOPMENTS?
stance, which emphasizes In the coming months, we expect to maintain the Fund's
prepaid mortgages that should current stance, which emphasizes prepaid mortgage-backed
provide the potential for solid securities that should provide the potential for solid
performance in this performance in this environment. With the Fed on hold and
environment. the effects of the Asian financial crisis still unclear, we
believe that short-term rates will not change significantly.
As a result, we will be overweighting mortgage-backed and
agency-backed securities -- higher income producing
bonds -- relative to U.S. Treasuries.
</TABLE>
PORTFOLIO BREAKDOWN (AS A % OF NET ASSETS AS OF 3/31/98)
[PIE CHART]
<TABLE>
<S> <C>
Other Assets and Liabilities (Net) 0.2%
Municipal Bonds 14.0%
U.S. Treasury Obligations 23.9%
Mortgage-Backed Securities 61.9%
</TABLE>
<TABLE>
<C> <S> <C>
TOP TEN HOLDINGS
(AS A % OF NET ASSETS AS OF 3/31/98)
------------------------------------------
1 Federal National Mortgage
Association (FNMA)
Certificates 36.5%
------------------------------------------
2 Government National Mortgage
Association (GNMA)
Certificates 17.1%
------------------------------------------
3 U.S. Treasury Bond
6.125% 11/15/27 17.0%
------------------------------------------
4 U.S. Treasury Strip Principal
only 05/15/13 6.9%
------------------------------------------
5 Texas State Department of
Housing and Community Affairs,
Series C, 6.800% 09/01/29 6.5%
------------------------------------------
6 Chicago, Illinois, Public
Building 7.000% 01/01/07 6.4%
------------------------------------------
7 Freddie Mac Certificate,
Series 1999, Class PB
6.300% 01/15/17 6.0%
------------------------------------------
8 Federal Home Loan Mortgage
Corporation Certificates 2.2%
------------------------------------------
9 Portsmouth Virginia, Taxable
Ref., 6.630% 07/15/14 1.1%
------------------------------------------
10 Government National Mortgage
Association II (GNMA II)
Certificate, 11.000% 10/20/20 0.1%
------------------------------------------
THE TOP TEN HOLDINGS ARE PRESENTED TO
ILLUSTRATE EXAMPLES OF THE INDUSTRIES AND
SECURITIES IN WHICH THE FUND MAY INVEST.
</TABLE>
PORTFOLIO HOLDINGS WERE CURRENT AS OF
MARCH 31, 1998, ARE SUBJECT TO CHANGE
AND MAY NOT BE REPRESENTATIVE OF CURRENT HOLDINGS.
V-14
<PAGE>
Nations
Government Securities
Fund Performance
GROWTH OF $10,000 INVESTMENT
Primary A Shares (as of 3/31/98)
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Government Securities $15,649 Salomon Brothers Mortgage Index $17,406
Assumes the reinvestment of all distributions.
<S> <C> <C>
April 11 1991 10000 10000
10118 10203
10647 10768
1991 11178 11245
10983 11185
11419 11637
11794 11980
1992 11782 12074
12136 12427
12378 12691
12673 12807
1993 12685 12923
12303 12652
12096 12583
12033 12683
1994 12037 12739
12635 13410
13221 14105
13449 14390
1995 13876 14875
13599 14820
13585 14920
13812 15234
1996 14228 15674
14017 15693
14516 16265
14894 16734
1997 15445 17126
Mar. 31 1998 15649 17406
<CAPTION>
Measurement Period
(Fiscal Year Covered) Lehman Brothers Intermediate Treasury Index $16,514
Assumes the reinvestment of all distributions.
<S> <C>
April 11 1991 10000
10167
10651
1991 11170
11047
11476
11988
1992 11945
12395
12640
12908
1993 12927
12685
12615
12711
1994 12697
13222
13842
14051
1995 14526
14423
14516
14765
1996 15106
15095
15514
15912
1997 16268
Mar. 31 1998 16514
</TABLE>
Investor B Shares (as of 3/31/98)*
<TABLE>
<CAPTION>
Measurement Period
(Fiscal Year Covered) Government Securities $12,144 Salomon Brothers Mortgage Index $13,849
Assumes the reinvestment of all distributions.
<S> <C> <C>
June 7 1993 10000 10000
10073 10097
10296 10190
1993 10289 10282
9963 10066
9779 10012
9713 10091
1994 9700 10136
10166 10670
10620 11222
10786 11450
1995 11110 11835
10871 11791
10842 11871
11005 12121
1996 11318 12471
11132 12486
11510 12941
11787 13314
1997 12197 13627
Mar. 31 1998 12144 13849
<CAPTION>
Measurement Period
(Fiscal Year Covered) Lehman Brothers Intermediate Treasury Index $13,257
Assumes the reinvestment of all distributions.
<S> <C>
June 7 1993 10000
10147
10362
1993 10377
10184
10128
10205
1994 10193
10614
11112
11280
1995 11661
11579
11654
11854
1996 12127
12118
12454
12774
1997 13059
Mar. 31 1998 13257
</TABLE>
<TABLE>
<S> <C>
AVERAGE ANNUAL TOTAL RETURN
Primary A Shares
Since Inception
(4/11/91 through 3/31/98) 6.64%
The charts to the left show the growth
in value of a hypothetical $10,000
investment in Primary A and Investor B
Shares of Nations Government Securities
Fund from the date each class of shares
was first offered. Figures for the
Lehman Intermediate Treasury Index
track the market value of U.S. Treasury
securities with maturities of 3 to 10
years. The Salomon Brothers Mortgage
Index is comprised of 30-year and
15-year GNMA, FNMA and FHLMC
securities, and FNMA and FHLMC balloon
mortgages. Both indices are unmanaged
and include reinvestment of dividends.
Both indices are unavailable for
investment. The performance shown
reflects the performance of Primary A
and Investor B Shares. The performance
of Primary B, Investor A and Investor C
Shares may vary based on the
differences in sales loads and fees
paid by the shareholders investing in
each class.
AVERAGE ANNUAL TOTAL RETURN
Investor B Shares
Since Inception NAV CDSC*
(6/7/93 through 3/31/98) 4.45% 4.12%
</TABLE>
TOTAL RETURN (AS OF 3/31/98)
<TABLE>
<CAPTION>
Primary A Primary B Investor A Investor B Investor C
<S> <C> <C> <C> <C> <C> <C>
Inception Date 4/11/91 6/28/96 4/17/91 6/7/93 7/6/92
NAV CDSC*
- -----------------------------------------------------------------------------------------------------------------------
1 YEAR PERFORMANCE 11.65% 11.23% 11.37% 10.78% 5.78% 10.84%
- -----------------------------------------------------------------------------------------------------------------------
AVERAGE ANNUAL TOTAL RETURNS
3 Years 7.39% NA 7.13% 6.65% 5.76% 6.71%
5 Years 5.22% NA 5.00% NA NA 4.50%
Since Inception 6.64% 7.93% 6.40% 4.45% 4.12% 4.76%
</TABLE>
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN THEIR ORIGINAL COST. Average annual total returns are
historical in nature and measure net investment income and capital gain or loss
from portfolio investments assuming reinvestment of dividends.
The performance shown includes the effects of fee waivers by the investment
adviser, which has the effect of increasing total return.
*Figures at CDSC reflect the maximum applicable contingent deferred sales
charge.
Figures at net asset value (NAV) do not reflect any sales charges.
V-15
<PAGE>
APPENDIX VI
This Appendix provides information about INVESCO Global Asset
Management (N.A.), Inc. ("Invesco") and Putnam Investment Management, Inc.
("Putnam"), the two investment advisers that provide investment sub-advisory
services to Nations International Equity Fund with Gartmore Global Partners.
Pursuant to the sub-advisory arrangements, each of the three investment
sub-advisers are responsible for approximately one-third of the Nations
International Equity Fund's assets and each investment sub-adviser receives fees
based on the actual amount of assets managed by such investment sub-adviser. The
aggregate fees, computed daily and payable monthly, paid by NBAI to the three
investment sub-advisers, will not exceed [.65%] on an annual basis of the
average daily net assets of Nations International Equity Fund.
I. INVESCO GLOBAL ASSET MANAGEMENT (N.A.), INC.
Invesco, with principal offices located at 1315 Peachtree Street, N.E.,
Atlanta, Georgia 30309, was founded in 1997 as a division of INVESCO Global a
publicly traded investment management firm located in London, England, and a
wholly owned subsidiary of AMVESCAP PLC, a publicly traded UK financial holding
company also located in London, England that, through its subsidiaries, engages
in international investment management. Prior to May 8, 1997 AMVESCO PLC was
named AMVESCO and prior to March 3, 1997 was named INVESCO PLC. INVESCO PLC
changed its name to AMVESCO PLC as part of a merger between a direct subsidiary
of INVESCO PLC and AIM Management Group, Inc.
The International Equity Portfolio Management Team of Invesco is
responsible for the day-to-day management of the assets allocated to Invesco of
the Nations International Equity Fund.
II. PUTNAM INVESTMENT MANAGEMENT, INC.
Putnam, with principal offices located at One Post Office Square,
Boston, Massachusetts 02109, is a wholly owned subsidiary of Putnam Investment,
Inc., an investment management firm founded in 1937 and a majority-owned
subsidiary of Marsh & McLennan Companies, a publicly traded professional
services firm that engages, through its subsidiaries in the business of
investment management.
The Core International Equity Group of Putnam is responsible for the
day-to-day management of the assets allocated to Putnam of the Nations
International Equity Fund.
VI-1
<PAGE>
Statement of Additional Information
Dated February 1, 1999
PACIFIC HORIZON FUNDS, INC.
P.O. Box 8968
Wilmington, Delaware 19899
1-800-[___-____]
NATIONS FUND, INC.
One NationsBank Plaza, 33rd Floor
Charlotte, North Carolina 28255
1-800-321-7854
(April 12, 1999 Special Meeting of Shareholders of Pacific Horizon Funds)
This Statement of Additional Information is not a prospectus but should be
read in conjunction with the Proxy/Prospectus dated the date hereof, for the
Special Meeting of Shareholders of Pacific Horizon to be held on April 12, 1999.
Copies of the Proxy/Prospectus may be obtained at no charge by writing or
calling Pacific Horizon or Nations at the addresses or telephone numbers set
forth above. Unless otherwise indicated, capitalized terms used herein and not
otherwise defined have the same meanings as are given to them in the
Proxy/Prospectus.
Incorporation of Documents by Reference in Statement of Additional Information
Further information about the Investor A, Investor B and Investor C Shares
of Nations Small Company Growth Fund and Nations International Equity Fund and
the Investor A and C Shares of Nations Government Securities Fund, is contained
in and incorporated herein by reference to the statement of additional
information for Nations Small Company Growth Fund, Nations International Equity
Fund and Nations Government Securities Fund, dated August 1, 1998, as
supplemented.
Further information about the A Shares, B Shares and K Shares of the
Pacific Horizon Aggressive Growth Fund and Pacific Horizon International Equity
Fund, and the A Shares and K Shares of the Pacific Horizon U.S. Government
Securities Fund, is contained in and incorporated herein by reference to the
statement of additional information for Aggressive Growth Fund and Pacific
Horizon International Equity Fund and the Pacific Horizon U.S. Government
Securities Fund, dated July 1, 1998.
The audited financial statements and related Report of Independent
Auditors for the year ended March 31, 1998 and the unaudited financial statement
for the semi-annual period ended September 30, 1998 for the Nations Small
Company Growth Fund, Nations International Equity Fund and Nations Government
Securities Fund are incorporated herein by reference. No other parts of the
annual and semi-annual reports are incorporated herein by reference.
1
<PAGE>
The audited financial statements and related Report of Independent
Accountants for the year ended February 28, 1998 and the unaudited financial
statements for the semi-annual period ended August 31, 1998 for the Pacific
Horizon Aggressive Growth, International Equity and U.S. Government Securities
Fund are incorporated herein by reference. No other parts of the annual and
semi-annual reports are incorporated herein by reference.
2
<PAGE>
Table of Contents
General Information........................................................ 4
Introductory Note to Pro Forma Financial Information....................... 5
3
<PAGE>
General Information
The Reorganization contemplates the transfer of all of the assets and
liabilities of each Pacific Horizon Fund to a corresponding Nations Fund in
exchange for Shares of designated classes of the corresponding Nations Fund.
The Shares issued by Nations will have an aggregate value equal to the
aggregate value of the shares of the respective Pacific Horizon Funds that were
outstanding immediately before the Closing.
After the transfer of their assets and liabilities in exchange for Shares
of the Nations Funds, the Pacific Horizon Funds will distribute the Shares of
the Nations Funds to their shareholders in liquidation of the Pacific Horizon
Funds. Each shareholder owning shares of a particular Pacific Horizon Fund at
the Closing will receive Shares of the corresponding Nations Fund of equal
value, and will receive any unpaid dividends or distributions that were declared
before the Closing on shares of the Pacific Horizon Funds. Nations will
establish an account for each former shareholder of the Pacific Horizon Funds
reflecting the appropriate number of Nations Fund Shares distributed to the
shareholder. These accounts will be substantially identical to the accounts
maintained by Pacific Horizon for each shareholder. Upon completion of the
reorganization with respect to all Pacific Horizon funds, all outstanding shares
of the Pacific Horizon Funds will have been redeemed and cancelled in exchange
for Shares of the Nations Funds distributed, and Pacific Horizon will wind up
its affairs and be deregistered as an investment company under the 1940 Act and
dissolved under Maryland law.
For further information about the transaction, see the Proxy/Prospectus.
4
<PAGE>
Introductory Note to Pro Forma Financial Information
The following unaudited pro forma information gives effect to the proposed
transfer of the assets and liabilities of the Pacific Horizon Funds to the
Nations Funds, accounted for as if each transfer had occurred as of September
30, 1998. In addition, each pro-forma combined statement has been prepared based
upon 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 Pacific Horizon Funds
and Nations Funds included or incorporated herein by reference in this Statement
of Additional Information. Each combination of the above Pacific Horizon Funds
and Nations Funds will be accounted for as a tax-free reorganization.
Pro forma financial information is not shown for the combination of the
Pacific Horizon International Equity Fund and Nations International Equity Fund
because, as of December 23, 1998, the aggregate net assets of the Pacific
Horizon International Equity Fund are less than 10% of the aggregate net assets
of the Nations International Equity Fund.
5
<PAGE>
- --------------------------------------------------------------------------------
Nations Small Company Growth Fund / Pacific Horizon Aggressive Growth Fund
- --------------------------------------------------------------------------------
Pro Forma Combining Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------
September 30,1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nations Pacific Pro Security Description Pro
Small Horizon Forma Nations Pacific Forma
Company Aggressive Shares Small Horizon Market
Shares Growth Company Aggressive Value
Shares Market Growth
Value Market
Value
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
ADR'S - 1.52%
AMSOUTH BANCORPORATION
- - - - - -
SCB COMPUTER TECHNOLOGY INC
450 359 809 3,488 2,781 6,269
SELECT APPOINTMENTS HOLDINGS
- 84 84 PUBLIC LIMITED CO. - 1,452 1,452
450 442 893 3,488 4,233 7,721
COMMON STOCK - 94.79%
1-800 CONTACTS INC
- 60 60 - 354 354
3D LABS INC LIMITED
294 - 294 1,231 - 1,231
ACUSON
116 - 116 1,979 - 1,979
ADVANCED LIGHTING TECHS
328 - 328 2,790 - 2,790
AEROFLEX INC
374 - 374 3,696 - 3,696
AHL SERVICES INC
89 11 100 2,918 344 3,262
AIR EXPRESS INTERNATIONAL CORP
152 - 152 2,431 - 2,431
ALASKA AIRGROUP INCORPORATED
- 32 32 - 1,097 1,097
ALBERTO CULVER
164 - 164 3,822 - 3,822
ALFACELL CORP
24 - 24 17 - 17
ALLEGIANCE CORPORATION
- 59 59 - 1,755 1,755
ALLEN TELECOM INC
408 - 408 2,731 - 2,731
ALTERA CORPORATION
- 34 34 - 1,184 1,184
AMCOL INTERNATIONAL CORP
190 101 291 2,159 1,145 3,304
AMERICAN DISPOSAL SERVICES
56 - 56 2,177 - 2,177
AMERICAN POWER CONVERSION
- 65 65 - 2,461 2,461
<PAGE>
ANALYSTS INTL CORP
101 67 167 3,023 1,995 5,018
ANAREN MICROWAVE INC
292 - 292 3,397 - 3,397
ANTEC CORP COMM
415 233 648 6,384 3,581 9,965
APPLIED POWER INC
147 65 213 4,026 1,778 5,804
ASHLAND INC
- 24 24 - 1,105 1,105
ASTROPOWER INC
191 - 191 1,287 - 1,287
AVID TECHNOLOGY INC.
110 101 211 2,624 2,405 5,029
BARRA INC
204 50 254 4,176 1,025 5,201
BE AEROSPACE INC
96 70 166 2,110 1,531 3,641
BEC ENERGY COM
- 52 52 - 2,283 2,283
BED BATH & BEYOND INC
- 134 134 - 3,142 3,142
BEST BUY COMPANY INC
- 95 95 - 3,934 3,934
BIOGEN INC
- 53 53 - 3,495 3,495
BLUE RHINO CORP
192 - 192 1,944 - 1,944
BMC SOFTWARE INC
- 101 101 - 6,048 6,048
BON-TON STORES
135 - 135 1,013 - 1,013
CADENCE DESIGN SYSTEM
- 85 85 INCORPORATED - 2,160 2,160
CANANDAIGUA WINE COMPANY
- 27 27 INCORPORATED-CLASS A - 1,047 1,047
CAREER EDUCATION CORP
220 - 220 4,813 - 4,813
C-COR ELECTRONICS
295 - 295 3,792 - 3,792
CELLSTAR CORP
292 - 292 1,261 - 1,261
CENTENNIAL HEALTH CORP
112 - 112 890 - 890
CENTURY TELEPHONE ENTERPRISE
- 30 30 - 1,403 1,403
CHAMPION ENTERPRISES INC
45 - 45 1,049 - 1,049
CIBER INC
- 29 29 - 579 579
CINCINNATI BELL INC
- 74 74 - 1,911 1,911
CITRIX SYSTEMS INC
- 20 20 - 1,420 1,420
CITY NATIONAL CORP
163 - 163 5,098 - 5,098
<PAGE>
CKE RESTAURANTS INC
- 57 57 - 1,705 1,705
COCA-COLA ENTERPRISES
- - - - - -
COHERENT INC.
171 - 171 1,597 - 1,597
COLTEC INDUSTRIES
153 - 153 2,316 - 2,316
COMPUWARE CORPORATION
- 94 94 - 5,511 5,511
COMVERSE TECHNOLOGY INC.
- 6 6 - 233 233
CORE LABORATORIES
202 - 202 3,478 - 3,478
CPS SYSTEMS INC.
- 57 57 - 191 191
CULP INC
77 - 77 613 - 613
CYBEX CORP
208 - 208 5,215 - 5,215
CYLINK CORPORATION
- 52 52 - 235 235
DAIL CORPORATION
- 73 73 - 1,499 1,499
DELPHI FINANCIAL GROUP CL A
95 - 95 3,741 - 3,741
DIONEX CORP
121 - 121 2,806 - 2,806
DOLE FOOD COMPANY
- 17 17 - 611 611
DURA PHARMACEUTICALS INC.
209 181 390 2,284 1,981 4,265
EARTHGRAINS
- 27 27 - 820 820
EL PASO ENERGY CORPORATION
- 11 11 - 363 363
ENERGY EAST CORPPRATION
- 42 42 - 2,162 2,162
ESTERLINE TECHNOLOGIES CORP
179 20 199 3,521 390 3,911
ETHAN ALLEN INTERIORS INC
67 - 67 2,417 - 2,417
EXEL LIMITED
- 5 5 - 337 337
FAMILY DOLLAR STORES
- - - - - -
FEDERAL-MOGUL CORPORATION
- 37 37 - 1,716 1,716
FILENET CORPORATION
- 41 41 - 578 578
FIRST REPUBLIC BANK
180 72 252 5,478 2,193 7,671
FIRSTFED FINANCIAL CORP
120 - 120 2,051 - 2,051
FOSSIL INC
190 162 352 2,594 2,209 4,802
<PAGE>
GALEY & LORD INC
223 - 223 2,658 - 2,658
GARDEN FRESH RESTAURANTS
189 - 189 2,784 - 2,784
GARDNER DENVER MACHINERY
131 99 230 1,844 1,404 3,248
GILAT COMMUNICATIONS LTD
314 - 314 2,057 - 2,057
GILAT SATELLITE NETWORKS LTD
202 - 202 9,068 - 9,068
GOLDEN STATE BANCORP., INC.
141 - 141 2,805 - 2,805
GROUP MAINTENANCE AMER. CORP.
403 - 403 5,815 - 5,815
HA-LO INDUSTRIES
216 59 276 6,331 1,729 8,060
HARMONIC LIGHTWAVES INC
336 - 336 4,110 - 4,110
HENRY SCHEIN INC
109 - 109 3,802 - 3,802
HILLENBRAND INDUSTRIES
- 60 60 - 2,930 2,930
HON INDUSTRIES
- 46 46 - 1,096 1,096
HORIZON OFFSHORE INC
318 - 318 2,105 - 2,105
HOUGHTON MIFFLIN COMPANY
- 51 51 - 1,590 1,590
HUMAN GENOME SCIENCES INC
106 - 106 3,165 - 3,165
HUNT TRANSPORT SERVICES INC
- 36 36 - 523 523
HYPERION SOLUTIONS CORP.
157 - 157 3,409 - 3,409
IMC MORTGAGE COMPANY
405 - 405 797 - 797
INACOM CORP
144 141 285 2,714 2,663 5,377
INTERFACE INC
222 185 407 2,658 2,224 4,882
INTERSTATE BAKERIES
- 74 74 - 2,279 2,279
INVACARE CORP
189 21 210 4,445 491 4,936
JO-ANN STORES INC-CL A
103 - 103 2,293 - 2,293
JONES APPAREL GROUP INC
- 5 5 - 108 108
KAUFMAN & BROAD HOME CORPORATI
154 - 154 3,619 - 3,619
KAYDON CORP
81 - 81 2,126 - 2,126
KEANE INC
- 21 21 - 727 727
KINDER MORGAN ENERGY PARTNERS
161 - 161 5,343 - 5,343
<PAGE>
LASON INC
98 34 132 5,002 1,753 6,755
LENNAR CORP
69 - 69 1,540 - 1,540
LEVEL ONE COMMUNICATIONS, INC
- 41 41 - 821 821
LEXMARK INTERNATIONAL GROUP,
- 48 48 INCL CL-A - 3,313 3,313
MARTEK BIOSCIENCES CORP
249 - 249 2,055 - 2,055
MARTIN MARIETTA MATERIALS INC
- 30 30 - 1,309 1,309
MAXIM INTERGRATED PRODUCTS
- 62 62 - 1,714 1,714
MCCLATCHY NEWSPAPERS CL A
52 - 52 1,555 - 1,555
MCKESSON CORP
- 28 28 - 2,538 2,538
MESABA HOLDINGS, INC.
- 10 10 - 151 151
METRIKA SYSTEMS CORPORATION.
- 82 82 - 774 774
MIDWAY AIRLINES CORP
236 - 236 2,331 - 2,331
MILLER (HERMAN) INC
- 59 59 - 1,157 1,157
MOHAWK INDUSTRIES INCORPORATED
- - - - - -
NEWPARK RES INC
208 - 208 1,430 - 1,430
NORTHLAND CRAMBERRIES INC CL A
316 - 316 3,183 - 3,183
NOVA CORP GEORGIA
201 - 201 6,181 - 6,181
NOVACARE INC
197 - 197 603 - 603
OLD KENT FINANCIAL CORP
- 23 23 - 678 678
ORTEL CORP
416 - 416 6,662 - 6,662
ORTHALLIANCE INC-CL A
311 - 311 2,527 - 2,527
ORTHODONTIC CENTERS OF AMERICA
342 213 554 5,700 3,549 9,250
OUTBACK STEAKHOUSE, INC.
- 38 38 - 1,008 1,008
OWENS-ILLINOIS, INC
- 40 40 - 990 990
PAINE WEBBER GROUP INCORPORATED
- 39 39 - 1,179 1,179
PERCEPTRON INC
311 - 311 1,866 - 1,866
PERSONNEL GROUP AMER INC
288 156 443 3,540 1,917 5,457
PHILLIPS-VANHEUSEN CORP
266 - 266 2,530 - 2,530
<PAGE>
PHYSICIAN RELIANCE NETWORK
362 127 489 4,256 1,495 5,751
PHYSICIANS SPECIALTY CORP
332 - 332 2,368 - 2,368
PITTSON BRINK'S GROUP
- 38 38 - 1,313 1,313
PLEXUS CORP
63 - 63 1,215 - 1,215
PROMUS HOTEL CORPORATION
- 39 39 - 1,072 1,072
PROVINCE HEALTHCARE CO
156 40 195 5,297 1,349 6,646
PROXIM INC COM
378 - 378 4,908 - 4,908
PSS WORLD MEDICAL INC.
- 99 99 - 1,826 1,826
PULTE CORP
112 - 112 2,756 - 2,756
QUICKSILVER
247 223 470 4,487 4,061 8,548
RALCORP HOLDINGS INC
- 76 76 - 1,067 1,067
REMEC INC
480 - 480 3,821 - 3,821
RESPIRONICS INC
276 - 276 3,101 - 3,101
RF MICRO DEVICES INC
217 - 217 3,924 - 3,924
ROGUE WAVE SOFTWARE INC
407 - 407 2,948 - 2,948
ROMAC INTERNATIONAL INC
223 57 280 4,005 1,033 5,038
SAFESKIN CORPORATION
- 36 36 - 1,130 1,130
SAWTEK INC
257 - 257 3,630 - 3,630
SCORE BOARD INC
1 - 1 - - -
SDL INC
325 - 325 4,065 - 4,065
SEGUE SOFTWARE INC
212 - 212 3,498 - 3,498
SERVICE EXPERTS INC
163 - 163 4,531 - 4,531
SHIRE PHARMACEUTICALS GR-ADR
166 - 166 3,640 - 3,640
SHOPKO STORES INC
87 66 153 2,828 2,158 4,986
SIEBEL SYSTEMS INC
- 43 43 - 1,219 1,219
SIPEX CORPORATION
161 - 161 4,085 - 4,085
SMARTTALK TELESERVICES INC
345 - 345 2,562 - 2,562
SOLECTRON CORP.
- 64 64 - 3,067 3,067
<PAGE>
SOLUTIA INCORPORATION
- 53 53 - 1,200 1,200
SOMNUS MEDICAL TECHNOLOGIES
333 - 333 1,039 - 1,039
SOUTHDOWN INCORPORATED
- 29 29 - 1,283 1,283
SPECTRIAN CORP
175 - 175 2,123 - 2,123
STANFORD TELECOMMUNICATIONS
456 - 456 4,213 - 4,213
STEEL TECHNOLOGIES INC
116 - 116 844 - 844
SUNAMERICA INCORPORATED
- 28 28 - 1,684 1,684
SYMANTEC CORP
311 - 311 4,108 - 4,108
SYMBOL TECHNOLOGIES
- 50 50 INCORPORATED - 2,560 2,560
SYNOPSYS INCORPORATED
- 26 26 - 869 869
SYSTEMS & COMPUTER TECH CORP.
111 92 202 1,423 1,181 2,603
TEFRON LTD
374 - 374 2,947 - 2,947
TRAMMELL CROW CO
69 - 69 1,770 - 1,770
TRIAD GUARANTY INC
80 71 151 2,048 1,798 3,845
TRISTAR AEROSPACE CO
170 - 170 1,634 - 1,634
UNIPHASE CORPORATION
- 33 33 - 1,333 1,333
VIAD CORP
- - - - - -
VICAL INC
206 - 206 2,271 - 2,271
WASHINGTON POST CLASS B
- 3 3 - 1,482 1,482
WATSON PHARMACEUTICAL
- 55 55 INCORPORATED - 2,766 2,766
WHITMAN CORPORATION
- 88 88 - 1,409 1,409
WIDMERE DURABLE HOLDINGS
119 74 193 671 417 1,088
WILLIS LEASE FINANCE
- 49 49 CORPORATION - 806 806
22,524 5,877 28,401 328,615 152,109 480,724
Investment Companies - 3.39%
CASH RESERVE CAPITAL
17,164 - 17,164 17,164 - 17,164
17,164 - 17,164 17,164 - 17,164
<PAGE>
Total Investments-99.69%
40,138 6,320 46,458 (Cost $436,331, $170,178, 349,267 156,342 505,609
$606,509 respectively)
</TABLE>
- --------------------------------------------------------------------------------
Nations Small Company Growth Fund / Pacific Horizon Aggressive Growth Fund
- --------------------------------------------------------------------------------
Pro Forma Combining Statement of Net Assets (unaudited)
- --------------------------------------------------------------------------------
September 30,1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Nations Pacific Adjustments Pro Forma
Small Horizon to Pro Forma Combined
Company Aggressive
Growth Fund Growth Fund
- -----------------------------------------------------------------------------------
(in 000's) (in 000's) (in 000's) (in 000's)
- -----------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Investments $349,267 $156,342 $ - $ 505,609
- -----------------------------------------------------------------------------------
Other Assets and Liabilities:
- -----------------------------------------------------------------------------------
Other assets and liabilities, net (7,298) 8,830 - 1,532
- -----------------------------------------------------------------------------------
Total Other Assets and
Liabilities (7,298) 8,830 - 1,532
- -----------------------------------------------------------------------------------
Net Assets $341,969 $165,172 $ - $507,141
- -----------------------------------------------------------------------------------
Net Assets by Class:
- -----------------------------------------------------------------------------------
Primary A $321,210 $ - $ - $321,210
- -----------------------------------------------------------------------------------
Investor A / Class A 14,507 161,892 - 176,399
Investor B / Class B 4,343 227 - 4,570
Investor C / Class K 1,909 3,053 - 4,962
- -----------------------------------------------------------------------------------
$341,969 $165,172 $ - $507,141
- -----------------------------------------------------------------------------------
Shares Outstanding by Class:
- -----------------------------------------------------------------------------------
Primary A 30,602 - - 30,602
- -----------------------------------------------------------------------------------
<PAGE>
Investor A / Class A 1,389 9,724 5,783 16,896
Investor B / Class B 422 14 8 444
Investor C / Class K 183 185 108 476
32,596 9,923 5,899 48,418
- -----------------------------------------------------------------------------------
Net Asset Value per Share by Class:
- -----------------------------------------------------------------------------------
Primary A $10.50 $ - $ - $10.50
- -----------------------------------------------------------------------------------
Investor A / Class A $10.44 $ 16.65 $ - $10.44
Investor B / Class B $10.30 $ 16.63 $ - $10.30
Investor C / Class K $10.42 $ 16.45 $ - $10.42
- -----------------------------------------------------------------------------------
</TABLE>
See Notes to Pro Forma Financial Statements
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Nations Small Company Growth Fund / Pacific Horizon Aggressive Growth Fund
- --------------------------------------------------------------------------------
Pro Forma Combining Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
Twelve Month Period Ending September 30,1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------
Nations Pacific Adjustments Pro Forma
Small Horizon to Pro Forma Combined
Company Aggressive
Growth Fund Growth Fund
- -----------------------------------------------------------------------------------------------------------
(in 000's) (in 000's) (in 000's) (in 000's)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
- -----------------------------------------------------------------------------------
Interest $ 568 $ 683 $ 0 $ 1,251
- -----------------------------------------------------------------------------------------------------------
Dividends 1,209 384 -- 1,593
- -----------------------------------------------------------------------------------------------------------
Securities lending 139 -- -- 139
- -----------------------------------------------------------------------------------------------------------
Total Investment Income 1,916 1,067 -- 2,983
- -----------------------------------------------------------------------------------------------------------
EXPENSES:
- -----------------------------------------------------------------------------------------------------------
Investment Advisory 2,812 1,972 706(a) 5,490
- -----------------------------------------------------------------------------------------------------------
Administration 281 987 135(a) 1,403
- -----------------------------------------------------------------------------------------------------------
Transfer Agent 123 687 (544) (b) 266
- -----------------------------------------------------------------------------------------------------------
Custodian (d) 28 14 (b) 42
- -----------------------------------------------------------------------------------------------------------
Legal and Audit Fees 25 55 (27) (b) 53
- -----------------------------------------------------------------------------------------------------------
Registration & Filing 119 52 (40) 131
- -----------------------------------------------------------------------------------------------------------
Trustees' Fees 6 5 (4) (b) 7
- -----------------------------------------------------------------------------------------------------------
Interest Expense 8 -- -- 8
- -----------------------------------------------------------------------------------------------------------
Other expenses 36 184 (141) (b) 79
- -----------------------------------------------------------------------------------------------------------
Subtotal 3,438 3,956 85 7,479
- -----------------------------------------------------------------------------------------------------------
Shareholder Servicing and
Distribution Fees
- -----------------------------------------------------------------------------------------------------------
Investor A / Class A 26 813 -- 839
Investor B / Class B 33 -- -- 33
Investor C / Class K 25 33 -- 58
- -----------------------------------------------------------------------------------------------------------
Subtotal 84 846 -- 930
- -----------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------
Fees waived and/or reimbursed by investment --
- -----------------------------------------------------------------------------------------------------------
<PAGE>
- -----------------------------------------------------------------------------------------------------------
advisor, administrator and/or
distributor (759) (8) 767 (c) --
- -----------------------------------------------------------------------------------------------------------
Total Expenses 2,763 4,794 852 8,409
- -----------------------------------------------------------------------------------------------------------
NET INVESTMENT INCOME (847) (3,727) (852) (5,426)
- -----------------------------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
- -----------------------------------------------------------------------------------------------------------
Net realized gain/(loss) on
investments 22,787 26,494 -- 49,281
- -----------------------------------------------------------------------------------------------------------
Net change in unrealized
appreciation/
- -----------------------------------------------------------------------------------------------------------
(depreciation) of investments (147,948) 30,492 -- (117,456)
- -----------------------------------------------------------------------------------------------------------
Net realized and unrealized
gain/(loss)
- -----------------------------------------------------------------------------------------------------------
on investments (125,161) 56,986 -- (68,175)
- -----------------------------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
- -----------------------------------------------------------------------------------------------------------
RESULTING FROM OPERATIONS ($126,008) $ 53,259 ($ 852) ($ 73,601)
- -----------------------------------------------------------------------------------------------------------
Legend:
- -------------------------------------------------------------------------------------
(a) Reflects adjustment to the acquiring fund
contractual fee obligation.
(b) Adjustment reflects expected savings when the two funds become one.
(c) Reflects adjustment to the level of the acquiring fund's voluntary expense
reimbursement.
(d) Net of expense offset arrangements amounts to less than .01% of average net
assets.
- -------------------------------------------------------------------------------------
See Notes to Pro Forma Financial Statements
- -------------------------------------------------------------------------------------
</TABLE>
Nations Small Company Growth Fund
Pacific Horizon Aggressive Growth Fund
Notes to Pro Forma Combining 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, 1998 the Company offers nine separate
<PAGE>
portfolios. The unaudited Pro Forma Combining Statement of Net Assets assumes
the exchange described in the next paragraph occurred as of September 30,1998
and the unaudited Pro Forma Combining Statement of Operations assumes the
exchange occurred as of October 1,1997. These statements have been derived from
books and records utilized in calculating daily net asset value of each fund at
September 30,1998 and for the twelve month period then ended.
The pro forma statements give effect to the proposed transfer of the assets and
stated lilabilities of the Pacific Horizon Aggressive Growth Fund in exchange
for shares of Nations Small Company Growth Fund. Under generally accepted
accounting principles, the historical cost of investment securities will be
carried forward to the surving entity and the results of operations of the
Pacific Horizon Aggressive Growth 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 unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
2. Pro Forma Operations
Pro forma operating expenses include the actual expenses of each fund and the
combined fund, with certain expenses adjusted to reflect the expected expenses
of the combined entity. The investment advisory and administration fees and
Investor C shareholder servicing and distribution fees have been calculated for
the combined fund based on the contractual rates expected to be in effect for
the Nations Small Company Growth Fund at the time of the Reorganization at the
combined level of average net assets for the twelve month period ended September
30, 1998.
<PAGE>
- --------------------------------------------------------------------------------
Nations Government Securities Fund /
Pacific Horizon U.S. Government Securities Fund
- --------------------------------------------------------------------------------
Pro Forma Combining Schedule of Investments (unaudited)
- --------------------------------------------------------------------------------
September 30,1998
- ------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Pro Pacific
Pacific Forma Horizon Pro
Nations Horizon Combined Nations US Forma
Government US Government Government Combined
Securities Government Securities
Fund Securities Description Fund Securities
Fund Fund
Principal Principal Principal
Amount Amount Amount Value Value Value
(in 000's) (in 000's) (in 000's) (in 000's) (in 000's) (in 000's)
- -----------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Agency Bonds - 6.26%
Export Funding Trust, 8.210%, 12/29/06
1,591 1,591 1,913
1,913
Federal Home Loan Mortgage Corporation
5,000 5,000 (FHLMC) Certificate, 7.440%, 9/1/06 5,370 5,370
Federal National Mortgage Association (FNMA)
5,000 5,000 Certificate, 6.875%, 9/24/12 5,656 5,656
Federal National Mortgage Association (FNMA)
2,000 2,000 Certificate, 6.960%, 9/5/12 2,271 2,271
- -------------------------------- -----------------------------
13,591 - 13,591 15,210 - 15,210
- -------------------------------- -----------------------------
Non Agency Mortgage-Backed Securities - 4.62%
10,000 10,000 Allied Capital Commercial Mortgage 10,406 10,406
Trust 6.600%, 7/25/04
29,000 29,000 VENDE 98-3 CLASS IO 03/15/29 326 326
36,160 36,160 VENDEE MORTGAGE TRUST IO 09/15/27 497 497
- -------------------------------- -----------------------------
10,000 65,160 75,160 10,406 823 11,229
- -------------------------------- -----------------------------
U.S Government Agency Mortgage-Backed
Securities - 79.73%
100 100 FHLMC 10.000%, 9/1/18 106 106
980 980 FHLMC 6.500%, 3/1/00 - 1/1/09 995 995
15,000 15,000 FHLMC 7.000%, 11/13/98 TBA 15,394 15,394
11,523 11,523 FHLMC 7.000%, 12/1/27 11,829 11,829
218 218 FHLMC 7.500%, 6/1/09 - 8/1/08 225 225
604 604 FHLMC 8.000%, 8/1/07 - 5/1/17 626 626
1,137 1,137 FHLMC 8.500%, 9/1/01 - 6/1/17 1,168 1,168
693 693 FHLMC 9.000%, 2/1/02 - 12/1/16 725 725
306 306 FHLMC 9.500%, 9/1/20 - 6/1/21 332 332
<PAGE>
2,000 2,000 FHLMC Series 1466, Class PI, REMIC, 2,082 2,082
7.000%, 8/15/20
5,000 5,000 FHLMC Series 1999, Class PB, 7.500%, 5,206 5,206
10/15/24
FHLMC Series 2023, Class B, 6.500%,
4,931 4,931 1/15/13 4,952 4,952
FHLMC Series 2054, Class UA, 6.500%,
11,850 11,850 9/15/25 12,139 12,139
534 534 FNMA 6.000%, 5/1/01 535 535
6,597 6,597 FNMA 6.500%, 5/1/13 - 6/1/28 6,715 6,715
4,762 4,762 FNMA 6.750%, 3/18/28 4,814 4,814
1,799 1,799 FNMA 6.990%, 6/1/23 1,952 1,952
12,900 12,900 FNMA 7.000%, 2/25/04 - 8/1/25 13,250 13,250
5,940 5,940 FNMA 7.500%, 9/1/27 6,127 6,127
162 162 FNMA 8.000%, 4/1/06 166 166
136 136 FNMA 8.250%, 4/1/09 142 142
578 578 FNMA 8.500%, 11/1/01 - 7/1/21 598 598
203 203 FNMA 9.000%, 12/1/16 211 211
671 671 FNMA POOL # 345858 8/01/36 691 691
77 77 GNMA 11.750, 9/15/00 - 12/15/00 (2 Pools) 79 79
73 73 GNMA 13.000%, 1/15/11 - 4/15/11 (4 Pools) 84 84
348 348 GNMA 6.00% 416028 12/15/10 355 355
13,974 13,974 GNMA 6.5000%, 11/15/27 14,302 14,302
6,288 28,835 35,123 GNMA 7.000%, 12/15/08 - 5/15/28 6,491 29,884 36,375
9,992 16,590 26,582 GNMA 7.500%, 5/15/13 - 7/15/28 10,349 17,301 27,650
815 5,830 6,645 GNMA 8.000%, 6/15/22 - 7/15/26 851 6,110 6,961
3,681 3,681 GNMA, 8.50%, 10/15/09 - 12/15/22 3,922 3,922
31 142 173 GNMA 9.000%, 6/15/01 - 6/15/18 33 150 183
159 317 476 GNMA 9.500%, 3/15/01 - 2/15/06 166 334 500
22 605 627 GNMA, 10.00%, 9/15/00 - 11/15/20 24 649 673
129 895 1,024 GNMA, 10.50%, 1/15/99 - 4/15/21 142 959 1,101
19 125 144 GNMA, 11.00%, 3/15/01 - 8/15/18 20 142 162
2 2 GNMA 11.50% 126288 2/15/00 2 2
55 44 99 GNMA II 11.000%, 7/20/19 - 10/20/20 60 50 110
45 45 GNMA II 9.0% 205616 2/20/02 48 48
461 461 GNMA II, 9.50%, 2/20/01 - 4/20/06 482 482
9,733 9,733 RFM 6.750%, 6/25/28 9,842 9,842
- -------------------------------- -----------------------------
129,320 58,591 187,911 132,733 61,079 193,812
- -------------------------------- -----------------------------
<PAGE>
U.S. Treasury Obligations - 2.02%
2,200 2,200 STRIP 1,781 1,781
1,850 1,850 STRIPS 0.00% 08/15/23 500 500
600 600 STRIPS 0.00% 5/15/07 405 405
1,675 1,675 U.S. TREASURY STRIP 5/15/09 1,012 1,012
2,500 2,500 US STRIP 0.00% 02/15/13 1,207 1,207
- -------------------------------- -----------------------------
- 8,825 8,825 - 4,905 4,905
- -------------------------------- -----------------------------
Municipal Bonds - 3.86%
Portsmouth Virginia, Taxable Ref.,
1,315 1,315 6.630%, 7/15/14 1,418 1,418
7,480 7,480 Texas State Department of Housing and
Community Affairs, Single Family 7,971 7,971
Revenue, (Teams-Taxable-Mortgage),
Series C, (MBIA Insured),
6.800%, 9/1/29
- -------------------------------- -----------------------------
8,795 - 8,795 9,389 - 9,389
- -------------------------------- -----------------------------
Investment Company - 0.64%
Shares Shares
(in 000's) (in 000's)
Nations Cash Reserves
1,574 1,574 1,574 1,574
- -------------------------------- -----------------------------
1,574 - 1,574 1,574 - 1,574
- -------------------------------- -----------------------------
- -------------------------------- -----------------------------
Total Investments - 97.13% (Cost
$164,893, $65,144, $230,037,
163,280 132,576 295,856 respectively) 169,312 66,807 236,119
- -------------------------------- -----------------------------
</TABLE>
- --------------------------------------------------------------------------------
Nations Government Securities Fund /
Pacific Horizon U.S. Government Securities Fund
- --------------------------------------------------------------------------------
Pro Forma Combining Statement of Net Assets (unaudited)
- --------------------------------------------------------------------------------
September 30,1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------------
Nations Pacific Adjustments Pro Forma
Government Horizon to Pro Forma Combined
Securities U.S.
Fund Government
Securities
Fund
- --------------------------------------------------------------------------------------
(in 000's) (in 000's) (in 000's) (in 000's)
- --------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Total Investments $169,312 $ 66,807 $ - $236,119
<PAGE>
- --------------------------------------------------------------------------------------
Other Assets and Liabilities:
- --------------------------------------------------------------------------------------
Receivable for Fund shares sold 51,050 - - 51,050
- --------------------------------------------------------------------------------------
Payable for Securities Purchased (45,265) - - (45,265)
- --------------------------------------------------------------------------------------
Other assets and liabilities, net (290) 1,471 - 1,181
- --------------------------------------------------------------------------------------
Total Other Assets and Liabilities 5,495 1,471 - 6,966
- --------------------------------------------------------------------------------------
Net Assets $174,807 $ 68,278 $ - $ 243,085
- --------------------------------------------------------------------------------------
Net Assets by Class:
- --------------------------------------------------------------------------------------
Primary A $119,903 $ - $ - $ 119,903
- --------------------------------------------------------------------------------------
Investor A / Class A 22,349 66,988 - 89,337
Investor B 32,305 - - 32,305
Investor C / Class K 250 1,290 - 1,540
- --------------------------------------------------------------------------------------
$174,807 $ 68,278 $ - $ 243,085
- --------------------------------------------------------------------------------------
Shares Outstanding by Class:
- --------------------------------------------------------------------------------------
Primary A 11,629 - - 11,629
- --------------------------------------------------------------------------------------
Investor A / Class A 2,168 6,990 (493) 8,665
Investor B 3,133 - - 3,133
Investor C / Class K 24 134 (9) 149
- --------------------------------------------------------------------------------------
16,954 7,124 (502) 23,576
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
Net Asset Value per Share by
Class:
- --------------------------------------------------------------------------------------
Primary A $ 10.31 $ - $ - $ 10.31
- --------------------------------------------------------------------------------------
Investor A / Class A $ 10.31 $ - $ - $ 10.31
- --------------------------------------------------------------------------------------
Investor B $ 10.31 $ - $ - $ 10.31
- --------------------------------------------------------------------------------------
<PAGE>
- --------------------------------------------------------------------------------------
Investor C / Class K $ 10.31 $ 9.59 $ - $ 10.31
- --------------------------------------------------------------------------------------
- --------------------------------------------------------------------------------------
See Notes to Pro Forma Financial Statements
- --------------------------------------------------------------------------------------
</TABLE>
- --------------------------------------------------------------------------------
Nations Government Securities Fund /
Pacific Horizon U.S. Government Securities Fund
- --------------------------------------------------------------------------------
Pro Forma Combining Statement of Operations (unaudited)
- --------------------------------------------------------------------------------
Twelve Month Period Ending September 30,1998
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------
Nations Pacific Adjustments Pro Forma
Government Horizon to Pro Forma Combined
Securities U.S.
Fund Government
Securities
Fund
- ---------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
(in 000's) (in 000's) (in 000's) (in 000's)
- ---------------------------------------------------------------------------------------
INVESTMENT INCOME:
- ---------------------------------------------------------------------------------------
Interest $9,194 $7,978 $0 $17,172
- ---------------------------------------------------------------------------------------
Dividends 222 216 - 438
- ---------------------------------------------------------------------------------------
Total Investment Income 9,416 8,194 - 17,610
- ---------------------------------------------------------------------------------------
EXPENSES:
- ---------------------------------------------------------------------------------------
Investment Advisory 911 403 (4) (a) 1,310
- ---------------------------------------------------------------------------------------
Administration 147 231 198 (a) 576
- ---------------------------------------------------------------------------------------
Transfer Agent 110 198 (187) (b) 121
- ---------------------------------------------------------------------------------------
Custodian (d) 46 93 (93) (b) 46
- ---------------------------------------------------------------------------------------
Legal and Audit Fees 49 41 (23) (b) 67
- ---------------------------------------------------------------------------------------
Registration & Filing 72 48 (40) (b) 80
- ---------------------------------------------------------------------------------------
Directors Fees 2 1 - 3
- ---------------------------------------------------------------------------------------
Interest Expense 3 - - 3
- ---------------------------------------------------------------------------------------
Other expenses (6) 154 (117) (b) 31
- ---------------------------------------------------------------------------------------
Subtotal 1,334 1,169 (266) 2,237
- ---------------------------------------------------------------------------------------
<PAGE>
- ---------------------------------------------------------------------------------------
Shareholder Servicing and
Distribution Fees
- ---------------------------------------------------------------------------------------
Primary B 1 - - 1
- ---------------------------------------------------------------------------------------
Investor A / Class A 36 285 - 321
- ---------------------------------------------------------------------------------------
Investor B 306 - 306
- ---------------------------------------------------------------------------------------
Investor C / Class K 7 13 - 20
- ---------------------------------------------------------------------------------------
Subtotal 350 298 - 648
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
Fees waived and/or reimbursed by
investment
- ---------------------------------------------------------------------------------------
advisor, administrator and/or
distributor (197) (605) 802 (c) -
- ---------------------------------------------------------------------------------------
Total Expenses 1,487 862 536 2,885
- ---------------------------------------------------------------------------------------
- ---------------------------------------------------------------------------------------
NET INVESTMENT INCOME 7,929 7,332 (536) 14,725
- ---------------------------------------------------------------------------------------
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS:
- ---------------------------------------------------------------------------------------
Net realized gain/(loss) on
investments 8,134 846 - 8,980
- ---------------------------------------------------------------------------------------
Net change in unrealized
appreciation/
- ---------------------------------------------------------------------------------------
(depreciation) of investments 2,131 2,822 - 4,953
- ---------------------------------------------------------------------------------------
Net realized and unrealized
gain/(loss)
- ---------------------------------------------------------------------------------------
on investments 10,265 3,668 - 13,933
- ---------------------------------------------------------------------------------------
NET INCREASE/(DECREASE) IN NET ASSETS
- ---------------------------------------------------------------------------------------
RESULTING FROM OPERATIONS $18,194 $11,000 ($536) $28,658
- ---------------------------------------------------------------------------------------
</TABLE>
Legend:
- ------
(a) Reflects adjustment to the acquiring fund
contractual fee obligation.
(b) Adjustment reflects expected savings when the two funds become one.
(c) Reflects adjustment to the level of the acquiring fund's voluntary expense
reimbursement.
<PAGE>
(d) Net of expense offset arrangements amounts to less than .01% of average net
assets.
- --------------------------------------------------------------------------------
See Notes to Pro Forma Financial Statements
- --------------------------------------------------------------------------------
Nations Government Securities Fund
Pacific Horizon U.S. Government Securities Fund
Notes to Pro Forma Combining 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, 1998 the Company offers nine separate portfolios. The unaudited
Pro Forma Combining Statement of Net Assets assumes the exchange described in
the next paragraph occurred as of September 30,1998 and the unaudited Pro Forma
Combining Statement of Operations assumes the exchange occurred as of October
1,1997. These statements have been derived from books and records utilized in
calculating daily net asset value of each fund at September 30,1998 and for the
twelve month period then ended.
The pro forma statements give effect to the proposed transfer of the assets and
stated lilabilities of the Pacific Horizon U.S. Government Securities Fund in
exchange for shares of Nations Government Securities 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 Pacific Horizon 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 unaudited Pro Forma Combining Financial Statements should be read in
conjunction with the historical financial statements of the funds incorporated
by reference in the Statement of Additional Information.
2. Pro Forma Operations
Pro forma operating expenses include the actual expenses of each fund and the
combined fund, with certain expenses adjusted to reflect the expected expenses
of the combined entity. The investment advisory and administration fees and
Investor C shareholders servicing and distribution fees have been calculated for
the combined fund based on the contractual rates expected to be in effect for
the Nations Government Securities Fund at the time of the Reorganization at the
combined level of average net assets for the twelve month period ended September
30, 1998.
<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 Nations Fund, Inc.'s
("Nations") Articles of Incorporation and By-Laws, incorporated by reference as
Exhibits (1) and 2 hereto, provides for the indemnification of Nations directors
and employees. Indemnification of Nation's principal underwriter, custodian, and
transfer agent is provided for, respectively, in Nations':
1. Administration Agreement with Stephens Inc.;
2. Co-Administration Agreement with First Data Investors Services Group,
Inc.;
3. Distribution Agreement with Stephens Inc.;
4. Custody Agreement with The Bank of New York;
5. Transfer Agency and Registrar Agreement with First Data Investors
Services Group, Inc.
Nations has entered into a Cross Indemnification Agreement with Nations
Fund Trust (the "Trust") and Nations Fund Portfolios, Inc. ("Portfolios") dated
June 27, 1995. The Trust and/or Portfolios will indemnify and hold Nations
harmless against any losses, claims, damages or liabilities, to which Nations
may become subject, under the Securities Act of 1933, as amended (the "1933
Act") and Investment Company Act, as amended (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
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 Nations by the Trust and/or Portfolios expressly for use therein; and will
reimburse Nations for any legal or other expenses reasonably incurred by Nations
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 Nations 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.
Nations has obtained from a major insurance carrier a directors' and
officers' liability policy covering certain types of errors and omissions. In no
event will Nations 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 Nations. Nations will comply with Rule 484 under the 1933 Act and Release
No. 11330 under the 1940 Act, in connection with any indemnification.
Insofar as indemnification for liability arising under the 1933 Act may be
permitted to directors, officers, and controlling persons of Nations pursuant to
the foregoing provisions, or otherwise, Nations has been advised that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the 1933 Act and is, therefore,
unenforceable. In the event that a claim for indemnification against such
liabilities (other than the payment by Nations of expenses incurred or paid by a
director, officer, or controlling person of Nations 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, Nations
will, unless in the opinion of its counsel the matter has been settled by
controlling precedent, submit to a court of appropriate jurisdiction the
question whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of such
issue.
Item 16. Exhibits.
All references to the "Registration Statement" in the following list of
Exhibits refer to Nations' Registration Statement on Form N-1A (File Nos.
33-4038; 811-4614). All references to "Pacific Horizon's Registration Statement"
in the following list of Exhibits refer to Pacific Horizon Funds' ("Pacific
Horizon") Registration Statement on Form N-1A (File Nos. 2-81110; 811-4293).
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 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.
C-3
<PAGE>
EXHIBIT NUMBER DESCRIPTION
(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.
(1)(o) Articles Supplementary dated February 4, 1998 are to
be filed by amendment.
(2)(a) Amendment to By-Laws dated January 5, 1995, is
incorporated by reference to Post-Effective Amendment
No. 11, filed on September 30, 1991.
(2)(b) Amended and Restated By-Laws are incorporated by
reference to Post-Effective Amendment No. 36, filed
June 1, 1998.
(3) Not Applicable.
(4) Form of Agreement and Plan of Reorganization, filed
herewith as Appendix II to the Combined
Prospectus/Proxy Statement.
(5) Not Applicable.
(6)(a) Investment Advisory Agreement between NBAI and
Nations is incorporated by reference to
Post-Effective Amendment No. 28, filed January 29,
1996.
(6)(b) Sub-Investment Advisory Agreement between TradeStreet
and Nations is incorporated by reference to
Post-Effective Amendment No. 28, filed January 29,
1996.
(6)(c) Sub-Advisory Agreement between Gartmore Global Partners and
Nations is incorporated by reference to Post-Effective
Amended No. 31, filed July 25, 1996.
C-4
<PAGE>
EXHIBIT NUMBER DESCRIPTION
(6)(d) Sub-Advisory Agreement between Boatmen's Capital
Management, Inc. ("Boatmen's") and Registrant are
incorporated by reference to Post-Effective Amendment
No. 36, filed June 1, 1998.
(6)(e) Sub-Advisory Agreement between Brandes Investment
Partners, L.P. and Registrant are incorporated by
reference to Post-Effective Amendment No. 36, filed
June 1, 1998.
(7) Distribution Agreement between Nations and Stephens
dated March 31, 1993, is incorporated by reference to
Post-Effective Amendment No. 39, filed on November 5,
1998.
(8) Not Applicable.
(9)(a) Distribution Agreement between Registrant and
Stephens Inc. dated March 31, 1993, is incorporated
by reference to Post-Effective Amendment No. 39 filed
on November 5, 1998.
(9)(b) Global Custody Agreement between Nations, 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. 39, filed on November 5,
1998.
(l0)(b) Form of Shareholder Servicing Agreement, relating to
the Primary B Shares, is incorporated by reference to
Post-Effective Amendment No. 39, filed on November 5,
1998.
C-5
<PAGE>
EXHIBIT NUMBER DESCRIPTION
(l0)(c) Shareholder Servicing Plan for Investor A Shares
incorporated by reference to Post-Effective Amendment
No. 39, filed on November 5, 1998.
(l0)(d) Forms of Shareholder Servicing Agreement for Investor
A Shares are incorporated by reference to
Post-Effective Amendment No. 39, filed on November 5,
1998.
(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. 39, filed on November 5, 1998.
(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. 39, filed on November 5, 1998.
(l0)(g) Shareholder Servicing Plan for Investor C Shares of the
Money Market Funds and Investor B Shares (formerly Investor
N Shares) of the Non-Money Market Funds is incorporated by
reference to Post-Effective Amendment No. 39 filed on
November 5, 1998.
(10)(h) Forms of Shareholder Servicing Agreement for Investor
C Shares of the Money Market Funds and Investor B
Shares (formerly Investor N Shares) of the Non-Money
Market Funds are incorporated by reference to
Post-Effective Amendment No. 39 filed on November 5,
1998.
(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. 39, filed on November 5,
1998.
(10)(k) Form of Sales Support Agreement, relating to Investor
A Shares is incorporated by reference to
Post-Effective Amendment No. 39, filed on November 5,
1998.
C-6
<PAGE>
EXHIBIT NUMBER DESCRIPTION
(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. 39, filed on November
5, 1998.
(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. 39, filed on November 5,
1998.
(10)(n) Distribution Plan relating to the non-money market funds'
Investor B Shares (formerly Investor N Shares) is
incorporated by reference to Post-Effective Amendment No.
39 filed on November 5, 1998.
(10)(o) Form of Sales Support Agreement, relating to
non-money market funds' Investor B Shares (formerly
Investor N Shares) is incorporated by reference to
Post-Effective Amendment No. 39 filed on November 5,
1998.
(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. 39, filed on November 5, 1998.
(10)(r) Transfer Agency and Registrar Agreement, dated June 1,
1992, between Nations and The Shareholder Servicing Group,
Inc., relating to Investor Shares, is incorporated by
reference to Post-Effective Amendment No. 39, filed on
November 5, 1998.
C-7
<PAGE>
EXHIBIT NUMBER DESCRIPTION
(l0)(s) Amendment No. 1 dated February 3, 1993, to the
Transfer Agency and Registrar Agreement between
Nations 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 Nations 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. 39, filed
on November 5, 1998.
(l0)(u) Cross-Indemnification dated June 27, 1995 among
Nations, Nations Fund Trust and Nations Fund
Portfolios, Inc. is incorporated by reference to
Post-Effective Amendment No. 39, filed on November 5,
1998.
(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 and Nations 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 Nations 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 Accountants - PricewaterhouseCoopers
LLP, filed herewith.
14(b) Consent of Independent Accountants - PricewaterhouseCoopers
LLP, filed herewith.
C-8
<PAGE>
EXHIBIT NUMBER DESCRIPTION
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) Forms of Proxy Ballot, filed herewith.
17(c)(i) Prospectuses and Statements of Additional Information
for Investor A and Investor C Shares of Nations Government
Securities Fund, and Investor A, B, and C Shares of Nations
Small Company Growth Fund and Nations International Equity
Fund, dated August 1, 1998, are incorporated by reference
to Post-Effective Amendment No. 37 to the Registration
Statement, as filed on July 31, 1998.
17(c)(ii) Prospectuses and Statements of Additional Information for
the A Shares, B Shares, and K Shares of Pacific Horizon
International Equity Fund and the Pacific Horizon
Aggressive Growth Fund, dated July 1, 1998, are
incorporated by reference to Post-Effective Amendment No.
60 to the Pacific Horizon Registration Statement, as filed
on July 1, 1998.
17(c)(iii) Prospectuses and Statements of Additional Information for
the A Shares and K Shares of the Pacific Horizon U.S.
Government Securities Fund dated July 1, 1998, are
incorporated by reference to Post-Effective Amendment No.
60 to the Pacific Horizon Registration Statement, as filed
on July 1, 1998.
17(c)(iv) Annual Reports for Nations Government Securities Fund,
Nations Small Company Growth Fund, and Nations
International Equity Fund for the fiscal year ended March
31, 1998, filed on ______, 1998.
17(c)(v) Annual Reports for Pacific Horizon International Equity
Fund, Aggressive Growth Fund, and the U.S. Government
Securities Fund for the fiscal year ended February 28,
1998, filed on __________, 1998.
C-9
<PAGE>
EXHIBIT NUMBER DESCRIPTION
17(c)(vi) Semi-Annual Reports for Nations Government Securities Fund,
Nations Small Company Growth Fund, and Nations
International Equity Fund for the period ended September
30, 1998, filed on __________, 199_.
Item 17. Undertakings.
(1) Nations 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.
(2) The undersigned registrant agrees that every prospectus that is
filed under paragraph (1) above will be filed as part of an
amendment to the registration statement and will not be used
until the amendment is effective, and that, in determining any
liability under the Securities Act of 1933, each post-effective
amendment shall be deemed to be a new registration statement for
the securities offered therein, and the offering of the
securities at that time shall be deemed to be the initial bona
fide offering of them.
(3) The undersigned Registrant agrees to file, by post-effective
amendment, an opinion of counsel or a copy of an IRS ruling
supporting the tax consequences of the Reorganization within a
reasonable time after receipt of such opinion or ruling.
C-10
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement on Form N-14 to be signed on its
behalf by the undersigned, thereunto duly authorized, in the City of Little
Rock, State of Arkansas on the 23 day of December, 1998.
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 Chairman December 23, 1998
- -------------------------- of the Board of Directors
(A. Max Walker) (Principal Executive Officer)
/s/ Richard H. Blank, Jr. Treasurer December 23, 1998
- -------------------------- (Principal Financial and
(Richard H. Blank, Jr.) Accounting Officer)
* Director December 23, 1998
- --------------------------
(Edmund L. Benson, III)
* Director December 23, 1998
- --------------------------
(James Ermer)
* Director December 23, 1998
- --------------------------
(William H. Grigg)
* Director December 23, 1998
- --------------------------
(Thomas F. Keller)
* Director December 23, 1998
- --------------------------
(Carl E. Mundy, Jr.)
* Director December 23, 1998
- --------------------------
(Charles B. Walker)
* Director December 23, 1998
- --------------------------
(Thomas S. Word)
* Director December 23, 1998
- --------------------------
(James B. Sommers)
/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) Consent of Accountants --
PricewaterhouseCoopers LLP
Ex-99.14(b) Consent of Accountants --
PricewaterhouseCoopers LLP
Ex-99.16 Powers of Attorney
Ex-99.17 Form of Proxy Ballot
Ex-99.11
[MORRISON & FOERSTER LLP LETTERHEAD]
December 23, 1998
Nations Fund, 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 Proxy
Statement/Prospectus included in the Registration Statement, the Shares will be
legally issued, fully paid and nonassessable.
<PAGE>
Nations Fund, Inc.
December 23, 1998
Page Two
We consent to the inclusion of this opinion as an exhibit to the
Registration Statement.
In addition, we hereby consent to the use of our name and to the
description of advice rendered by our firm under the headings "The
Reorganization--Federal Income Tax Considerations" in the Combined Proxy
Statement/Prospectus, under the heading "How The Funds Are Managed" in the
Prospectuses, and under the heading "Counsel" in the Statement of Additional
Information, which are incorporated by reference into the Registration
Statement.
Very truly yours,
/s/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
EXH.99.14(a)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Combined Proxy
Statement/Prospectus constituting part of this Registration Statement on Form
N-14 (the "Registration Statement") of our report dated April 21, 1998, relating
to the financial statements and financial highlights appearing in the February
28, 1998 Annual Report of the Pacific Horizon Aggressive Growth Fund, Pacific
Horizon U.S. Government Securities Fund and Pacific Horizon International Equity
Fund (three of the seventeen portfolios constituting Pacific Horizon Funds,
Inc., hereafter referred to as the "Funds") which financial statements and
financial highlights are also incorporated by reference into the Combined Proxy
Statement/Prospectus and included in the Registration Statement. We also consent
to the incorporation by reference in the Prospectuses and Statement of
Additional Information of the Funds dated July 1, 1998, of our report dated
April 21, 1998, relating to the financial statements and financial highlights
appearing in the February 28, 1998 Annual Report of the Funds, which
Prospectuses and Statement of Information are also incorporated by reference in
the Registration Statement. We further consent to the references to us under the
headings "Financial Statements", "Other Service Providers for the Pacific
Horizon Funds and Nations Funds" and in paragraphs 5.2.e. and 7.4 of the
Agreement and Plan of Reorganization in such Combined Proxy Statement/Prospectus
and to the references to us under the headings "Financial Highlights" in the
Prospectuses dated July 1, 1998 for the Funds and under the headings
"Independent Accountants" and "Financial Statements" in the Statements of
Additional Information dated July 1, 1998 for the Funds.
PricewaterhouseCoopers LLP
New York, New York
December 23, 1998
Exhibit 99.14(b)
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Combined Proxy
Statement/ Prospectus and Statement of Additional Information constituting parts
of this Registration Statement on Form N-14 (the "Registration Statement") of
our reports dated May 28, 1998, relating to the financial statements and
financial highlights of Nations Small Company Growth Fund, Nations International
Equity Fund and Nations Government Securities Fund appearing in the March 31,
1998 Annual Reports to Shareholders, which financial statements and financial
highlights are also incorporated by reference into the Registration Statement.
We also consent to the references to us under the headings "Financial
Statements" and "Other Service Providers for the Pacific Horizon Funds and
Nations Funds" and in paragraphs 5.1.j. and 8.6 of the Agreement and Plan of
Reorganization in such Combined Proxy Statement/Prospectus. We further consent
to the references to us under the headings "Financial Highlights" and "How The
Funds Are Managed Other Service Providers" in the Prospectuses of the Funds
dated August 1, 1998, as supplemented, and under the heading "Independent
Accountants and Reports" in the Statement of Additional Information of the Funds
dated August 1, 1998 which are incorporated by reference into the Registration
Statement.
PricewaterhouseCoopers LLP
Boston, Massachusetts
December 23, 1998
Exhibit 99.16
POWER OF ATTORNEY
-----------------
Edmund L. Benson, III, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund, 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: December 23, 1998
/s/ Edmund L. Benson, III
-------------------------
Edmund L. Benson, III
<PAGE>
Exhibit 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: December 23, 1998
/s/ James Ermer
---------------
James Ermer
<PAGE>
Exhibit 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: December 23, 1998
/s/ William H. Grigg
--------------------
William H. Grigg
<PAGE>
Exhibit 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: December 23, 1998
/s/ Thomas F. Keller
--------------------
Thomas F. Keller
<PAGE>
Exhibit 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: December 23, 1998
/s/ A. Max Walker
-----------------
A. Max Walker
<PAGE>
Exhibit 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: December 23, 1998
/s/ Charles B. Walker
---------------------
Charles B. Walker
<PAGE>
Exhibit 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: December 23, 1998
/s/ Thomas S. Word
------------------
Thomas S. Word, Jr.
<PAGE>
Exhibit 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: December 23, 1998
/s/ Richard H. Rose
-------------------
Richard H. Rose
<PAGE>
Exhibit 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: December 23, 1998
/s/ Carl E. Mundy, Jr.
-----------------------
Carl E. Mundy, Jr.
<PAGE>
Exhibit 99.16
POWER OF ATTORNEY
-----------------
James B. Sommers, whose signature appears below, does hereby constitute
and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M. Kurucza, Marco
E. Adelfio and Steven G. Cravath, each individually, his true and lawful
attorneys and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund, 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: December 23, 1998
/s/ James B. Sommers
--------------------
James. B. Sommers
PROXY CARD
PACIFIC HORIZON FUNDS, INC.
AGGRESSIVE GROWTH FUND
Special Meeting of Shareholders-April 12, 1999
The undersigned hereby appoints ________ and ________ (the "Proxies") and
each of them, attorneys and proxies of the undersigned, each with power of
substitution and resubstitution, to attend, vote and act for the undersigned at
the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific
Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00
a.m. (Eastern time), on Monday, April 12, 1999, and at any adjournment or
adjournments thereof. The proxies will cast votes according to the number of
shares of the Pacific Horizon Aggressive Growth Fund (the "Fund") which the
undersigned may be entitled to vote with respect to the proposals set forth
below, in accordance with the specification indicated, if any, and with all the
powers which the undersigned would possess if personally present. The
undersigned hereby revokes any prior proxy to vote at such meeting, and hereby
ratifies and confirms all that said attorneys and Proxies, or either of them,
may lawfully do by virtue thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1,
1999.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH
UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY
(1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641; OR (2)
TOUCHTONE VOTING AT (800) 690-6903; OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM;
OR (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU
MARK, SIGN AND DATE YOUR PROXY CARD.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION
WILL BE VOTED IN FAVOR OF THE PROPOSAL.
To approve an Agreement and Plan of Reorganization, attached to the
Combined Proxy Statement/Prospectus for the Meeting, which provides for
(a) the transfer of all of the assets and liabilities of the Fund to a
corresponding fund of Nations Fund, Inc. in exchange for shares of a
designated class of such Nations Fund of equal value; (b) the
distribution of the shares of designated classes of the corresponding
Nations Fund to shareholders of each Pacific Horizon Fund; and (c) the
dissolution under state law and the deregistration under the Investment
Company Act of 1940, as amended, of Pacific Horizon.
|_|YES |_|NO |_|ABSTAIN
<PAGE>
THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON.
In their discretion, the Proxies, and either of them, are authorized to
vote upon any other business that may properly come before the meeting, or any
adjournment(s) thereof, including any adjournment(s) necessary to obtain
requisite quorums and/or approvals.
-----------------------------
_____________________________, 1999
Please sign above exactly as your name(s) appear(s) hereon. Corporate proxies
should be signed in full corporate name by an authorized officer. Each joint
owner should sign personally. Fiduciaries should give full titles as such.
(Please Date)
<PAGE>
PROXY CARD
PACIFIC HORIZON FUNDS, INC.
INTERNATIONAL EQUITY FUND
Special Meeting of Shareholders-April 12, 1999
The undersigned hereby appoints ________ and ________ (the "Proxies") and
each of them, attorneys and proxies of the undersigned, each with power of
substitution and resubstitution, to attend, vote and act for the undersigned at
the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific
Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00
a.m. (Eastern time), on Monday, April 12, 1999, and at any adjournment or
adjournments thereof. The proxies will cast votes according to the number of
shares of the Pacific Horizon International Equity Fund (the "Fund") which the
undersigned may be entitled to vote with respect to the proposals set forth
below, in accordance with the specification indicated, if any, and with all the
powers which the undersigned would possess if personally present. The
undersigned hereby revokes any prior proxy to vote at such meeting, and hereby
ratifies and confirms all that said attorneys and Proxies, or either of them,
may lawfully do by virtue thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1,
1999.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH
UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY
(1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641; OR (2)
TOUCHTONE VOTING AT (800) 690-6903; OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM;
OR (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU
MARK, SIGN AND DATE YOUR PROXY CARD.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION
WILL BE VOTED IN FAVOR OF THE PROPOSAL.
To approve an Agreement and Plan of Reorganization, attached to the
Combined Proxy Statement/Prospectus for the Meeting, which provides for
(a) the transfer of all of the assets and liabilities of the Fund to a
corresponding fund of Nations Fund, Inc. in exchange for shares of a
designated class of such Nations Fund of equal value; (b) the
distribution of the shares of designated classes of the corresponding
Nations Fund to shareholders of each Pacific Horizon Fund; and (c) the
dissolution under state law and the deregistration under the Investment
Company Act of 1940, as amended, of Pacific Horizon.
|_|YES |_|NO |_|ABSTAIN
<PAGE>
THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON.
In their discretion, the Proxies, and either of them, are authorized to
vote upon any other business that may properly come before the meeting, or any
adjournment(s) thereof, including any adjournment(s) necessary to obtain
requisite quorums and/or approvals.
-----------------------------
_____________________________, 1999
Please sign above exactly as your name(s) appear(s) hereon. Corporate proxies
should be signed in full corporate name by an authorized officer. Each joint
owner should sign personally. Fiduciaries should give full titles as such.
(Please Date)
<PAGE>
PROXY CARD
PACIFIC HORIZON FUNDS, INC.
U.S. GOVERNMENT SECURITIES FUND
Special Meeting of Shareholders-April 12, 1999
The undersigned hereby appoints ________ and ________ (the "Proxies") and
each of them, attorneys and proxies of the undersigned, each with power of
substitution and resubstitution, to attend, vote and act for the undersigned at
the Special Meeting of Shareholders of Pacific Horizon Funds, Inc. ("Pacific
Horizon") to be held at 400 Bellevue Parkway, Wilmington, Delaware, at 10:00
a.m. (Eastern time), on Monday, April 12, 1999, and at any adjournment or
adjournments thereof. The proxies will cast votes according to the number of
shares of the Pacific Horizon U.S. Government Securities Fund (the "Fund") which
the undersigned may be entitled to vote with respect to the proposals set forth
below, in accordance with the specification indicated, if any, and with all the
powers which the undersigned would possess if personally present. The
undersigned hereby revokes any prior proxy to vote at such meeting, and hereby
ratifies and confirms all that said attorneys and Proxies, or either of them,
may lawfully do by virtue thereof.
THE UNDERSIGNED HEREBY ACKNOWLEDGES RECEIPT OF THE NOTICE OF SPECIAL MEETING OF
SHAREHOLDERS AND THE COMBINED PROXY STATEMENT/PROSPECTUS, DATED FEBRUARY 1,
1999.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF PACIFIC HORIZON, WHICH
UNANIMOUSLY RECOMMENDS THAT YOU VOTE IN FAVOR OF THE PROPOSAL. YOU MAY VOTE BY
(1) FAXING THE PROXY BALLOT TO A.D.P. PROXY SERVICES AT (704) 388-2641; OR (2)
TOUCHTONE VOTING AT (800) 690-6903; OR (3) ON-LINE VOTING AT WWW.PROXYVOTE.COM;
OR (4) BY MAILING IT IN THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU
MARK, SIGN AND DATE YOUR PROXY CARD.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSAL. PROXIES RETURNED WITHOUT ANY SPECIFICATION
WILL BE VOTED IN FAVOR OF THE PROPOSAL.
To approve an Agreement and Plan of Reorganization, attached to the
Combined Proxy Statement/Prospectus for the Meeting, which provides for
(a) the transfer of all of the assets and liabilities of the Fund to a
corresponding fund of Nations Fund, Inc. in exchange for shares of a
designated class of such Nations Fund of equal value; (b) the
distribution of the shares of designated classes of the corresponding
Nations Fund to shareholders of each Pacific Horizon Fund; and (c) the
dissolution under state law and the deregistration under the Investment
Company Act of 1940, as amended, of Pacific Horizon.
|_|YES |_|NO |_|ABSTAIN
<PAGE>
THIS PROPOSAL HAS BEEN PROPOSED BY PACIFIC HORIZON.
In their discretion, the Proxies, and either of them, are authorized to
vote upon any other business that may properly come before the meeting, or any
adjournment(s) thereof, including any adjournment(s) necessary to obtain
requisite quorums and/or approvals.
-----------------------------
_____________________________, 1999
Please sign above exactly as your name(s) appear(s) hereon. Corporate proxies
should be signed in full corporate name by an authorized officer. Each joint
owner should sign personally. Fiduciaries should give full titles as such.
(Please Date)
