As filed with the Securities and Exchange Commission
on February 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. Jeffrey A. Dalke, Esq.
Marco E. Adelfio, Esq. Drinker Biddle & Reath LLP
Morrison & Foerster LLP Philadelphia National Bank
2000 Pennsylvania Ave., N.W. Building
Suite 5500 1345 Chestnut Street
Washington, D.C. 20006 Philadelphia, PA 19107-2700
It is proposed that this filing will become effective on March 25, 1998 pursuant
to Rule 488.
No filing fee is required under the Securities Act of 1933 because an indefinite
number of shares of beneficial interest in the Registrant, without par value,
has previously been registered pursuant to Rule 24f-2 under the Investment
Company Act of 1940, as amended. The Registrant filed on May 21, 1997, the
notice required by Rule 24f-2 for its fiscal year ended March 31, 1997 (File No.
33-4038; 811-4614).
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Nations Fund, Inc.
Cross-Reference Sheet
PART A
Item No. Item Caption Prospectus Caption
- -------- ------------ ------------------
1 Beginning of 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 III-- EXPENSE SUMMARIES OF
Information, and Risk EMERALD FUNDS AND THE CORRESPONDING
Factors NATIONS FUNDS; SUMMARY -- PROPOSALS
1 AND 2 -- APPROVAL OF THE INTERIM ADVISORY
AGREEMENTS; SUMMARY -- PROPOSAL 3 --
APPROVAL OF THE REORGANIZATION AGREEMENT;
SUMMARY -- PRINCIPAL RISK FACTORS
4 Information About the INFORMATION RELATING TO PROPOSALS 1
Transaction AND 2 -- APPROVAL OF THE INTERIM
ADVISORY AGREEMENT AND INTERIM
SUB-ADVISORY AGREEMENT; INFORMATION
RELATING TO PROPOSAL 3 -- APPROVAL
OF THE REORGANIZATION AGREEMENT
5 Information About the COMPARISON OF EMERALD AND NATIONS;
Registrant ADDITIONAL INFORMATION ABOUT NATIONS
6 Information About the COMPARISON OF EMERALD AND NATIONS;
Company Being Acquired ADDITIONAL INFORMATION ABOUT EMERALD
7 Voting Information INFORMATION RELATING TO VOTING
<PAGE>
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:
Nations Fund, Inc. ("Nations")
From Post-Effective Amendment No. 34 of the Nations Registration Statement,
filed July 31, 1997 (SEC File Nos. 33-4038; 811-4614):
Prospectuses for the Primary A and Investor A Shares of the Nations
Government Securities Fund and Nations Small Company Growth Fund, dated
August 1, 1997.
Prospectuses for the Primary A, Investor A and Daily Class Shares of the
Nations Prime Fund and Nations Treasury Fund, dated August 1, 1997.
Statement of Additional Information for the Primary A and Investor A
Shares of the Nations Government Securities Fund and Nations Small Company
Growth Fund, dated August 1, 1997.
Statement of Additional Information for the Primary A, Investor A and
Daily Class Shares of the Nations Prime Fund and Nations Treasury Fund,
dated August 1, 1997.
The audited financial statements and related independent accountants' reports
for the Nations Government Securities Fund, Nations Prime Fund and Nations
Treasury Fund, contained in the Annual Report for the fiscal year ended March
31, 1997.
The audited financial statements and related independent public accountants'
report for Pilot Small Capitalization Equity Fund (a predecessor to Nations
Small Company Growth Fund) contained in the Annual Report for the fiscal year
ended May 16, 1997.
The unaudited financial statements for the Nations Government Securities Fund,
Nations Prime Fund, Nations Small Company Growth Fund and Nations Treasury Fund,
contained in the Semi-Annual Report for the six-month period ended September 30,
1997.
Emerald Funds ("Emerald")
From Post-Effective Amendment No. 21 of the Emerald Registration Statement,
filed March 31, 1997 (SEC File Nos. 33-20658; 811-5515):
Prospectuses for the Institutional and Retail Shares of the Emerald
International Equity Fund, Emerald Small Capitalization Fund and Emerald
U.S. Government Securities Fund, dated April 1, 1997.
Prospectuses for the Institutional, Retail and Service Shares of the
Emerald Prime Fund and Emerald Treasury Fund, dated April 1, 1997.
<PAGE>
Statement of Additional Information for the Institutional and Retail
Shares of the Emerald International Equity Fund, Emerald Small
Capitalization Fund and Emerald U.S. Government Securities Fund, dated
April 1, 1997.
Statement of Additional Information for the Institutional, Retail and
Service Shares of the Emerald Prime Fund and Emerald Treasury Fund, dated
April 1, 1997.
From Post-Effective Amendment No. 22 of the Emerald Registration Statement,
filed January 30, 1998 (SEC File Nos. 33-20658; 811-5515):
Prospectuses for the Institutional and Retail Shares of the Emerald
International Equity Fund, Emerald Small Capitalization Fund and Emerald
U.S. Government Securities Fund, dated _______________.
Prospectuses for the Institutional, Retail and Service Shares of the
Emerald Prime Fund and Emerald Treasury Fund, dated _______________.
Statement of Additional Information for the Institutional and Retail
Shares of the Emerald International Equity Fund, Emerald Small
Capitalization Fund and Emerald U.S. Government Securities Fund, dated
______________.
Statement of Additional Information for the Institutional, Retail and
Service Shares of the Emerald Prime Fund and Emerald Treasury Fund, dated
_____________.
The audited financial statements and related independent auditors' reports for
the Emerald International Equity Fund, Emerald Prime Fund, Emerald Small
Capitalization Fund, Emerald Treasury Fund and Emerald U.S. Government
Securities Fund, contained in the Annual Report for the fiscal year ended
November 30, 1997.
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EMERALD FUNDS
Emerald International Equity Fund
Emerald Prime Fund
Emerald Small Capitalization Fund
Emerald Treasury Fund
Emerald U.S. Government Securities Fund
3435 Stelzer Road
Columbus, Ohio 43219-3035
March 30, 1998
Dear Shareholder:
On behalf of the Board of Trustees of Emerald Funds ("Emerald"), we are
pleased to invite you to a special meeting of shareholders of the Emerald Funds
named above (each an "Emerald Fund" and together, the "Emerald Funds") to be
held at 10:00 a.m. Eastern time on May 4, 1998 at Emerald's offices located at
3435 Stelzer Road, Columbus, Ohio (the "Meeting"). At the Meeting, you will be
asked:
(1) to ratify and approve an interim investment advisory agreement between
your Fund and Barnett Capital Advisors, Inc. ("Barnett") for the period
from January 9, 1998 forward (an "Interim Advisory Agreement"), and, for
Emerald International Equity Fund shareholders only, to ratify and approve
an interim investment sub-advisory agreement with Brandes Investment
Partners, L.P. ("Brandes") for the period from January 9, 1998 forward
(the "Interim Sub-Advisory Agreement"); and
(2) to consider a proposed reorganization of your Emerald Fund into a
corresponding portfolio of Nations Fund, Inc. (each a "Nations Fund" and
together, the "Nations Funds"), including the reorganization of Emerald as
a whole.
Background. As you may recall, Barnett Banks, Inc. recently merged into a
wholly-owned subsidiary of NationsBank Corporation ("NationsBank"). As a result
of the merger, Barnett, the investment adviser to the Emerald Funds, became an
indirect wholly-owned subsidiary of NationsBank. This merger may have caused
each of the two separate existing investment advisory agreements to terminate.
To avoid any potential disruption in advisory services, the Board of Trustees of
Emerald approved two separate Interim Advisory Agreements with Barnett and an
Interim Sub-Advisory Agreement with Brandes (relevant to Emerald International
Equity Fund shareholders only), and agreed to submit them to shareholders for
their ratification and
<PAGE>
approval. The terms and conditions of the Interim Advisory Agreements and
Interim Sub-Advisory Agreement (including fee levels) are unchanged from the
prior agreement, except for the effective date and termination date, and the
creation of a temporary fee escrow.
At the upcoming Meeting, management also is asking you to approve a
reorganization of your Emerald Fund into a corresponding Nations Funds
portfolio. The Nations Funds are portfolios of an open-end investment company
advised by NationsBanc Advisors, Inc., a subsidiary of NationsBank, N.A. If all
approvals are obtained, the Emerald Funds will be reorganized into the
corresponding Nations Funds on or about May 15, 1998 (except Emerald
International Equity Fund) when your Emerald Funds portfolio shares will be
exchanged for shares of the corresponding Nations Funds portfolio of equal
value. Emerald International Equity Fund will be reorganized on or about May 29,
1998.
EMERALD'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO
APPROVE AN INTERIM ADVISORY AGREEMENT, THE INTERIM SUB-ADVISORY AGREEMENT AND
THE PROPOSED REORGANIZATION.
Please note that Emerald Shareholders who hold shares of Emerald Funds
other than those listed above will receive additional proxy materials under
separate cover with respect to similar proposals affecting the funds.
Shareholders should fill out the proxy card(s) for each of the Emerald Funds in
which they hold shares in order to vote those shares.
Proposed Reorganization--Additional Considerations
In considering the proposed reorganization, you should note:
o Similar Objectives and Policies
The Emerald Funds are proposed to be reorganized into Nations Funds
portfolios with investment policies and objectives that are substantially
similar and, in the case of Nations International Value Fund substantially
identical, to those of the corresponding Emerald Funds.
o Similar Access Arrangements
Following the reorganization, you will enjoy access to Nations Funds
through distribution, transaction and shareholder servicing arrangements
that are substantially similar to the Emerald Funds' current arrangements.
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o Same Value of Shares
The total dollar value of the Nations Funds shares you receive in the
reorganization will be the same as the total dollar value of the Emerald
Funds shares that you held immediately before the reorganization. The
reorganization will be tax-free under federal law, and no sales loads will
be charged in connection with the exchange of Emerald Funds shares for
Nations Funds shares.
o Operating Expenses Ratios
The annual fund operating expense ratio (after waivers) for the
corresponding Nations Funds portfolio classes after the reorganization is
expected, in most cases, to be no higher than the annual fund operating
expense ratio of your Emerald Funds portfolio class. Please see the
enclosed materials for further detail.
The proposed reorganization is expected to benefit Emerald Fund shareholders by:
o offering shareholders the opportunity to exchange their shares within a
larger and more diverse family of more than 50 mutual fund portfolios; and
o providing opportunities for enhanced returns through combined investment
portfolios.
General
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 Emerald Funds named above, more than one Proxy Ballot
accompanies these materials. If you own shares in one or more of the Emerald
Funds not named above, you will be receiving separately a set of proxy materials
(including Proxy Ballot(s)) for the other fund(s).
Whether or not you plan to attend the Special Meeting, you may vote by
proxy in either of the following ways:
1. Mark, sign, date and return the enclosed Proxy Ballot in the enclosed
postage-paid envelope; or
2. Mark, sign, date and fax the enclosed Proxy Ballot to ADP Proxy
Services at (XXX) XXX-XXXX.
<PAGE>
Please return your Proxy Ballot or fax it to us 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 TODAY, EITHER IN THE ENCLOSED
POSTAGE-PAID ENVELOPE OR BY TELEFAX (XXX) XXX-XXXX.
The proposed reorganization and the reasons for the Emerald 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 Emerald Funds toll free at
1-800-XXX-XXXX.
We look forward to seeing you at the Meeting or receiving your proxy so
that your shares may be voted at the Meeting.
Sincerely,
____________________
<PAGE>
EMERALD FUNDS
Emerald International Equity Fund
Emerald Prime Fund
Emerald Small Capitalization Fund
Emerald Treasury Fund
Emerald U.S. Government Securities Fund
3435 Stelzer Road
Columbus, Ohio 43219
NOTICE OF SPECIAL SHAREHOLDERS MEETING
To Be Held On May 4, 1998
To Emerald Funds Shareholders:
NOTICE IS GIVEN THAT a special meeting of the shareholders (the "Meeting")
of the Emerald International Equity Fund, Emerald Prime Fund, Emerald Small
Capitalization Fund, Emerald Treasury Fund and Emerald U.S. Government
Securities Fund (each an "Emerald Fund" and together, the "Emerald Funds"), each
of which is a series of Emerald Funds ("Emerald"), will be held at the Emerald
offices located at 3435 Stelzer Road, Columbus, Ohio, on May 4, 1998 at 10:00
a.m., Eastern time, for the purpose of considering and voting upon:
ITEM 1. A proposal to ratify and approve interim investment advisory
agreements between the Emerald Funds and Barnett Capital Advisors, Inc.,
and, with respect to the Emerald International Equity Fund only, to ratify
and approve an interim investment sub-advisory agreement between Barnett
Capital and Brandes Investment Partners, L.P., for the period January 9,
1998 forward.
ITEM 2. A proposal to approve an Agreement and Plan of Reorganization that
provides for the transfer of the assets and liabilities of each Emerald
Fund to a corresponding fund of Nations Fund, Inc. in exchange for shares
of designated classes of the corresponding Nations fund, and which
contemplates the reorganization of Emerald.
ITEM 3. Such other business as may properly come before the Meeting or any
adjournment(s).
Item 1 and Item 2 are described in the attached Combined Proxy
Statement/Prospectus. YOUR TRUSTEES UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR
OF THE PROPOSALS.
Shareholders of record as of the close of business on March 16, 1998 are
entitled to notice of, and to vote at, the Meeting or any adjournment(s)
thereof.
<PAGE>
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY CARD, WHICH IS BEING SOLICITED BY THE
EMERALD BOARD OF TRUSTEES. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE MEETING.
SHAREHOLDERS ALSO MAY RETURN PROXIES BY TELEFAX. PROXIES MAY BE REVOKED AT ANY
TIME BEFORE THEY ARE EXERCISED BY SUBMITTING TO EMERALD A WRITTEN NOTICE OF
REVOCATION OR A SUBSEQUENTLY EXECUTED PROXY OR BY ATTENDING THE MEETING AND
VOTING IN PERSON.
By Order of the Trustees,
_________________________
Jeffrey A. Dalke
Secretary
<PAGE>
COMBINED PROXY STATEMENT/PROSPECTUS
Dated March 30, 1998
EMERALD FUNDS
3435 Stelzer Road
Columbus, Ohio 43219-3035
1-800-637-3759
NATIONS FUND, INC.
One NationsBank Plaza, 33rd Floor
Charlotte, North Carolina 28255
1-800-321-7854
In connection with the solicitation of proxies by the Board of Trustees of
Emerald Funds ("Emerald"), this combined proxy statement/prospectus
("Proxy/Prospectus") is furnished to shareholders of the Emerald International
Equity Fund, Emerald Prime Fund, Emerald Small Capitalization Fund, Emerald
Treasury Fund and Emerald U.S. Government Securities Fund (each an "Emerald
Fund" and collectively the "Emerald Funds"). The Board of Trustees has called a
Special Meeting of Shareholders (the "Meeting") at 10:00 a.m. (Eastern time) on
May 4, 1998 at Emerald's offices located at 3435 Stelzer Road, Columbus, Ohio.
At the Meeting, shareholders will be asked:
(1) to ratify and approve interim investment advisory agreements
("Interim Advisory Agreements") with Barnett Capital Advisors, Inc. for
the period from January 9, 1998 forward, and, for shareholders of the
Emerald International Equity Fund only, to ratify and approve an interim
investment sub-advisory agreement (the "Interim Sub-Advisory Agreement")
with Brandes Investment Partners, L.P. ("Brandes") for the period from
January 9, 1998 forward; and
(2) to approve a proposed Agreement and Plan of Reorganization dated
as of February [insert], 1998 (the "Reorganization Agreement") by and
between Emerald and Nations Fund, Inc. ("Nations"), which also
contemplates the reorganization of Emerald into the Nations Funds Family
(as defined below).
Copies of the Interim Advisory Agreements and Interim Sub-Advisory
Agreement, sometimes collectively referred to as the "Interim Agreements," are
attached as Appendix I. The Reorganization Agreement is attached as Appendix II.
Emerald and Nations are both registered open-end management investment
companies (mutual funds). Emerald and the Nations Funds Family offer money
market, bond, equity and international equity investment portfolios. The
Reorganization Agreement provides for the transfer of Fund Assets and
Liabilities (as those terms are defined in the Reorganization Agreement) of each
Emerald Fund to a corresponding
1
<PAGE>
investment portfolio of Nations (each a "Nations Fund" and collectively the
"Nations Funds") in exchange for shares ("Shares") of designated classes of the
corresponding Nations Fund having equal value (the "Reorganization").
In addition to offering shares in the Nations Funds and Emerald Funds,
Nations and Emerald each also offer shares in other series not part of this
Proxy/Prospectus. Emerald shareholders of those series are voting on similar
agreements and plans of reorganization that, in a like manner, would provide for
the reorganization of those series of Emerald into designated classes of
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 series of Emerald are approved and
consummated, Emerald will have transferred all of its assets and liabilities to
the Nations Funds family and will deregister as a registered investment company.
As a result of the Reorganization, shareholders of the Emerald Funds will
become shareholders of the Nations Funds. Table I below shows each class of each
Emerald Fund and the designated class of each corresponding Nations Fund:
Table I
Emerald Fund/Share Class Corresponding Nations Fund/ Share Class
- ------------------------ ---------------------------------------
Emerald International Equity Fund Nations International Value Fund
Retail Shares Investor A Shares
Institutional Shares Primary A Shares
Emerald Prime Fund Nations Prime Fund
Retail Shares Daily Shares
Institutional Shares Primary A Shares
Service Shares Investor A Shares
Emerald Small Capitalization Fund Nations Small Company Growth Fund
Retail Shares Investor A Shares
Institutional Shares Primary A Shares
Emerald Treasury Fund Nations Treasury Fund
Retail Shares Daily Shares
Institutional Shares Primary A Shares
Service Shares Investor A Shares
Emerald U.S. Government Securities Fund Nations Government Securities Fund
Retail Shares Investor A Shares
Institutional Shares Primary A Shares
This Proxy/Prospectus sets forth concisely the information that an Emerald
Fund shareholder should know before voting, and should be retained for future
reference. It is both Emerald's proxy statement for the Meeting and also a
prospectus for the Nations
2
<PAGE>
Funds, except Nations International Value Fund. This is not a prospectus for
Nations International Value Fund because this Nations Fund was created to
continue the business of the Emerald International Equity Fund.
Additional information is set forth in the statement of additional
information relating to this Proxy/Prospectus which is incorporated herein by
reference, and in the prospectuses dated April 1, 1997, as supplemented, for the
Emerald Funds. Each of these documents, along with the most recent annual report
for the Nations Funds is on file with the Securities and Exchange Commission
(the "SEC"), and is available without charge by calling or writing Emerald or
Nations at the respective telephone numbers or addresses stated on the cover
sheet of this Proxy/Prospectus. The information contained in the Nations Fund
prospectuses (except Nations International Value Fund), dated August 1, 1997 and
the prospectuses for the Emerald Funds is incorporated by reference into this
Proxy/Prospectus. In addition, except for the Nations International Value Fund,
a copy of the current prospectus for the designated share class of corresponding
Nations Fund accompanies this Proxy/Prospectus.
The following summarizes the proposals to be voted on by Emerald Fund
shareholders at the Meeting:
Proposal Shareholders Solicited
-------- ----------------------
1. To ratify and approve Interim Shareholders of each Emerald Fund
Advisory Agreements and, with respect voting separately on the Interim
to the International Equity Fund only, Advisory Agreements, and
an Interim Sub-Advisory Agreement, for shareholders of the Emerald
the period from January 9, 1998 International Equity Fund voting
forward. separately on the Interim
Sub-Advisory Agreement.
2. To approve a Reorganization Each Emerald Fund voting
Agreement, which provides for the separately on the Reorganization
transfer of the Fund Assets and Agreement and, with respect to the
Liabilities of the Emerald Funds to reorganization of Emerald,
corresponding Nations Funds in shareholders of all series of
exchange for Shares of designated Emerald voting in the aggregate.
classes of the corresponding Nations
Funds, and which also contemplates the
reorganization of Emerald into the
Nations Funds Family.
This Proxy/Prospectus is expected to be first sent to shareholders on or
about March [30], 1998.
3
<PAGE>
THE SECURITIES OF THE NATIONS FUNDS OFFERED HEREBY HAVE NOT BEEN APPROVED
OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
COMMISSION NOR HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROXY/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS OTHER THAN THOSE CONTAINED IN THIS PROXY/PROSPECTUS AND IN THE
MATERIALS EXPRESSLY INCORPORATED HEREIN BY REFERENCE AND, IF GIVEN OR MADE, SUCH
OTHER INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY EMERALD, NATIONS OR THEIR RESPECTIVE DISTRIBUTORS.
EACH MONEY MARKET FUND SEEKS TO MAINTAIN A NET ASSET VALUE OF $1.00 PER
SHARE. AN INVESTMENT IN A MONEY MARKET FUND IS NEITHER INSURED NOR GUARANTEED BY
THE U.S. GOVERNMENT. THERE CAN BE NO ASSURANCE THAT A MONEY MARKET FUND WILL BE
ABLE TO MAINTAIN A STABLE NET ASSET VALUE OF $1.00 PER SHARE.
SHARES OF EMERALD AND NATIONS ARE NOT DEPOSITS OR OBLIGATIONS OF OR
GUARANTEED OR ENDORSED BY, NATIONSBANK, N.A. OR ANY OF ITS AFFILIATES OR ANY
OTHER BANK. SUCH SHARES ARE NOT INSURED BY THE U.S. GOVERNMENT, THE FEDERAL
DEPOSIT INSURANCE CORPORATION, THE FEDERAL RESERVE BOARD OR ANY OTHER GOVERNMENT
AGENCY. MUTUAL FUND SHARES INVOLVE CERTAIN INVESTMENT RISKS, INCLUDING THE
POSSIBLE LOSS OF PRINCIPAL. THE DISTRIBUTOR OF THE EMERALD FUNDS IS EMERALD
ASSET MANAGEMENT, INC. THE DISTRIBUTOR OF THE NATIONS FUNDS IS STEPHENS INC.
4
<PAGE>
TABLE OF CONTENTS
FEE TABLES.....................................................................7
SUMMARY........................................................................7
PROPOSAL 1--APPROVAL OF THE INTERIM AGREEMENTS............................7
Interim Agreements....................................................7
Emerald Board Consideration...........................................8
PROPOSAL 2--APPROVAL OF THE REORGANIZATION AGREEMENT......................9
Proposed Reorganization...............................................9
Overview of Emerald and Nations......................................10
Federal Income Tax Consequences......................................11
Nations and Emerald Boards' Consideration............................11
Principal Risk Factors...............................................12
Voting Information...................................................13
INFORMATION RELATING TO PROPOSAL 1--APPROVAL OF THE
INTERIM AGREEMENTS............................................................13
The Merger of Barnett Banks, Inc. into NB Holdings Corporation.......13
The Interim Advisory Agreements and Interim Sub-Advisory Agreement...15
Information Regarding Barnett Capital and Brandes....................17
Payments to Barnett Capital or Brandes Affiliates....................19
Affiliated Broker Commissions........................................19
Approval of Emerald's Board of Trustees..............................20
INFORMATION RELATING TO PROPOSAL 2--APPROVAL OF THE
REORGANIZATION AGREEMENT......................................................22
Description of the Reorganization Agreement..........................22
Emerald Board Consideration..........................................23
Capitalization.......................................................25
Federal Income Tax Considerations....................................31
Other Information....................................................32
COMPARISON OF EMERALD AND NATIONS.............................................32
Investment Objectives and Policies...................................32
Investment Adviser and Other Service Providers.......................32
Emerald Funds' Advisory and Sub-Advisory Agreements..................34
Nations Funds' Advisory Agreements...................................34
Nations Small Company Growth Fund...............................35
Nations Government Securities Fund..............................35
Other Service Providers..............................................36
Share Structure......................................................37
Distribution Plan and Shareholder Servicing Arrangements.............38
Primary A Shares.....................................................39
Investor A Shares....................................................39
Daily Shares.........................................................39
Administration Agreements............................................40
Shareholder Transactions and Services................................40
INFORMATION RELATING TO VOTING MATTERS........................................41
General Information..................................................41
Shareholder and Board Approvals......................................42
Quorum...............................................................44
Annual Meetings and Shareholder Meetings.............................45
ADDITIONAL INFORMATION ABOUT NATIONS..........................................45
ADDITIONAL INFORMATION ABOUT EMERALD..........................................46
FINANCIAL STATEMENTS..........................................................46
OTHER BUSINESS................................................................47
SHAREHOLDER INQUIRIES.........................................................47
APPENDICES I INTERIM INVESTMENT ADVISORY AGREEMENTS
AND INTERIM SUB-ADVISORY AGREEMENT
II AGREEMENT AND PLAN OF REORGANIZATION
III EXPENSE SUMMARIES OF EMERALD FUNDS
AND THE CORRESPONDING NATIONS FUNDS
IV INVESTMENT OBJECTIVES, LIMITATIONS AND
CERTAIN SIGNIFICANT INVESTMENT POLICIES
OF THE OPERATING NATIONS FUNDS AND THE
CORRESPONDING EMERALD FUNDS
V SHAREHOLDER TRANSACTIONS AND SERVICES
OF THE NATIONS FUNDS AND THE CORRESPONDING
EMERALD FUNDS
5
<PAGE>
FEE TABLES
Retail shareholders of all five Emerald Funds, along with Service
shareholders of the Emerald Prime Fund and Emerald Treasury Fund and
Institutional Class shareholders of the Emerald Prime Fund, Emerald Small
Capitalization Equity Fund and Emerald Treasury Fund, are expected to experience
lower annualized per share total operating expense ratios after the
Reorganization. The Institutional Class shares of the Emerald International
Equity Fund and Emerald U.S. Government Securities Fund are projected to have
annualized per share total operating expense ratios that are lower than those of
the designated classes of the corresponding Nations Funds. Such projections take
into account voluntary fee waivers and/or expense reimbursements, both of which
may be terminated at any time. For detailed information regarding pro forma
expense information, see both Table III and Appendix III to this
Proxy/Prospectus.
SUMMARY
The following is a summary of certain information relating to the Interim
Agreements and the proposed Reorganization, and is qualified by reference to the
more complete information contained elsewhere in this Proxy/Prospectus, the
Prospectuses and Statements of Additional Information of Emerald and Nations,
and the Appendices attached hereto.
PROPOSAL 1-APPROVAL OF THE INTERIM AGREEMENTS
Interim Agreements. On January 9, 1998, Barnett Banks, Inc. merged with
and into NB Holdings Corporation, a subsidiary of NationsBank Corporation (the
"Holding Company Merger"). As a result of the Holding Company Merger, Barnett
Capital Advisors, Inc. ("Barnett Capital"), the investment adviser to the
Emerald Funds, became an indirect wholly-owned subsidiary of NationsBank
Corporation. As of January 9, 1998, Barnett Capital served as the Emerald Funds'
investment adviser pursuant to two separate investment advisory agreements
between Barnett Capital and Emerald, on behalf of the Emerald Funds; and Brandes
served as the investment sub-adviser to the Emerald International Equity Fund
pursuant to an investment sub-advisory agreement between Barnett Capital and
Brandes. Barnett Capital, Brandes and Emerald considered the effect that the
Holding Company Merger would have on Emerald and the possibility that under
Barnett Capital's investment advisory agreement with the Emerald Funds and
Brandes' investment sub-advisory agreement with Barnett Capital with respect to
the Emerald International Equity Fund, and under the Investment Company Act of
1940 (the "1940 Act"), the Holding Company Merger might result in the automatic
and immediate termination of each agreement. See "Information Relating to
Proposal 1-Approval of the Interim Agreements."
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To ensure that these potential automatic terminations would not disrupt
the investment advisory and sub-advisory services provided to the Emerald Funds,
Emerald, Barnett Capital and Brandes obtained an exemptive order from the SEC
(the "Order") permitting Barnett Capital to continue to act as investment
adviser to the Emerald Funds, and Brandes to continue to act as investment
sub-adviser to the Emerald International Equity Fund, under the Interim
Agreements. In accordance with the Order, the Interim Agreements are subject to
ratification and approval by the shareholders of the Emerald Funds at a meeting
to be held within 120 days of January 9, 1998 (the "Interim Period"), or no
later than May 9, 1998.
The Trustees of Emerald propose that the shareholders of each Emerald Fund
ratify and approve the Interim Advisory Agreements, and that shareholders of the
Emerald International Equity Fund ratify and approve the Interim Sub-Advisory
Agreement. The advisory and sub-advisory fee rates payable under the Interim
Advisory Agreements and the Interim Sub-Advisory Agreement are identical to
those under the corresponding former agreements. Pending ratification and
approval of the Interim Advisory Agreements and the Interim Sub-Advisory
Agreement, all fees payable to Barnett Capital and Brandes are being held in
escrow. The fees escrowed for a particular Emerald Fund will be received by
Barnett Capital and Brandes only if the Interim Advisory Agreement and (for the
International Equity Fund) the Interim Sub-Advisory Agreement for that Fund are
ratified and approved by the Fund's shareholders. See "Information Relating to
Proposal 1-Approval of the Interim Agreements-Approval of Emerald's Board of
Trustees."
If the Interim Agreements are ratified and approved by a Fund's
shareholders and the Reorganization of that Fund is approved and consummated,
the Interim Agreements will remain in effect through the consummation of the
Reorganization. If the Interim Agreements are ratified and approved by a Fund's
shareholders and the Reorganization of that Fund is not approved or consummated,
the Interim Agreements will remain in effect until November 30, 1998, and
thereafter, for so long as the Board of Trustees of Emerald continues to renew
and approve such agreements at least annually. If the Interim Agreements for an
Emerald Fund are not ratified and approved by that Fund's shareholders, the fees
held in escrow with respect to that Fund will be returned to the Fund, and
Emerald's Board of Trustees will consider what actions should be taken with
respect to management of the assets of that Fund until new investment advisory
arrangements are approved by the Fund's shareholders.
Emerald Board Consideration. A meeting of the Board of Trustees of Emerald
was held on November 13-14, 1997, at which time the Holding Company Merger and
its implications for the Emerald Funds were discussed. The Board met again on
December 8, 1997, and, after a full evaluation unanimously approved the Interim
Agreements. EMERALD'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
OF EACH EMERALD FUND APPROVE THE INTERIM ADVISORY AGREEMENTS AND THAT
SHAREHOLDERS OF THE EMERALD INTERNATIONAL EQUITY FUND APPROVE THE INTERIM
SUB-ADVISORY AGREEMENT.
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<PAGE>
At the December 8, 1997 meeting, the Board determined that payment of the
advisory fees to be earned during the Interim Period by Barnett Capital under
the Interim Advisory Agreements and by Brandes under the Interim Sub-Advisory
Agreement would be fair, based on the fact that (1) the fees payable under these
Interim Agreements, and the services to be provided therefor, would be unchanged
from the fees payable under the former investment advisory agreements and
investment sub-advisory agreement, (2) the fees will be maintained in an
interest-bearing escrow account until payment is approved or disapproved by
shareholders of a particular Emerald Fund, and (3) the nonpayment of fees earned
during that period would constitute an extreme inequity to Barnett Capital and
Brandes in view of the substantial services to be provided by Barnett Capital to
the Emerald Funds and Brandes to the Emerald International Equity Fund, and the
expenses incurred in connection with such provision of services, under the
Interim Agreements.
PROPOSAL 2-APPROVAL OF THE REORGANIZATION AGREEMENT
Proposed Reorganization. The Reorganization Agreement provides for: (1)
the transfer of all of the Fund Assets and Liabilities (as those terms are
defined in the Reorganization Agreement, which is attached hereto as Appendix
II) of each Emerald Fund to a corresponding Nations Fund in exchange for Shares
of designated classes of the corresponding Nations Fund; and (2) the
distribution of Nations Fund Shares to the shareholders of the Emerald Funds in
liquidation of the Emerald Funds. The Reorganization is subject to a number of
conditions with respect to each Emerald Fund, including Emerald Fund shareholder
approval. As noted above, the Reorganization Agreement also contemplates the
reorganization of Emerald into the Nations Funds Family, so a vote for or
against the approval of the Reorganization Agreement includes a vote for or
against the reorganization of Emerald into the Nations Funds Family. Following
the reorganization of all series of Emerald, Emerald will wind up its affairs
and deregister as an investment company under the 1940 Act. It is possible that
a majority of an Emerald Fund's shareholders may approve the Reorganization
Agreement while a sufficient majority of all shareholders of all Emerald series
voting does not approve the reorganization of Emerald. In such a case, the Board
of Trustees will contemplate what further action is appropriate action.
As a result of the proposed Reorganization, an Emerald Fund shareholder
will become a shareholder of the corresponding Nations Fund and will hold,
immediately after the Closing(s) (as defined in the Reorganization Agreement),
Shares of the designated classes of the corresponding Nations Fund having a
total dollar value equal to the total dollar value of the shares of the Emerald
Fund that the shareholder held immediately before the Closing(s). The exchange
of each Emerald Fund's Fund Assets and Liabilities is expected to occur in May
1998, or such later date as may be provided in the Reorganization Agreement.
Overview of Emerald and Nations. The investment objectives, policies and
restrictions of the Emerald International Equity Fund are substantially
identical to those of
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the corresponding Nations International Value Fund. The objectives, policies and
restrictions of the other Emerald Funds are, in general, substantially similar
to those of their corresponding Nations Fund. There are, however, differences.
For example, the Emerald U.S. Government Securities Fund expects to maintain a
dollar-weighted average portfolio maturity of between five and ten years, while
the corresponding Nations Government Securities Fund expects to maintain a
maturity of between three and ten years, with an expected duration in the range
of 3.5 to 6 years. Additionally, while the Emerald Small Capitalization Fund may
invest up to 25% of its assets in securities of foreign issuers, the
corresponding Nations Small Company Growth Fund intends to limit such
investments to 5% of total assets. For additional information, see "Comparison
of Emerald and Nations-Investment Objectives and Policies" and Appendix IV to
this Proxy/Prospectus.
NationsBanc Advisors, Inc. ("NBAI") currently serves as the investment
adviser to the Nations Funds. TradeStreet Investment Associates, Inc.
("TradeStreet") currently serves as investment sub-adviser to the Nations Funds.
See "Comparison of Emerald and Nations-Investment Adviser and Other Service
Providers."
Table III, under "Comparison of Emerald and Nations-Investment Adviser and
Other Service Providers," shows the current annualized per share total operating
expense ratio for each class of the Emerald Funds along with the pro forma total
operating expenses ratios that could be expected for each designated class of
shares of the corresponding Nations Fund after the Reorganization. Appendix III
to this Proxy/Prospectus provides additional information about the fees and
expenses for each of the Emerald Funds and corresponding Nations Funds. The
Emerald Funds and Nations Funds have a different administrator, distributor,
transfer agent, independent auditor and different trustees/directors. See
"Comparison of Emerald and Nations-Investment Adviser and Other Service
Providers."
Nations International Value Fund, Nations Small Company Growth Fund and
Nations Government Securities Fund will each issue two classes of Shares in the
Reorganization: Investor A Shares and Primary A Shares. In addition, Nations
Prime Fund and Nations Treasury Fund will issue three classes of Shares in the
Reorganization: Daily Shares, Investor A Shares and Primary A Shares. See
"Comparison of Emerald and Nations-Share Structure."
The purchase, redemption, dividend and other policies and procedures of
the Emerald Funds and the Nations Funds are generally similar. See "Comparison
of Emerald and Nations-Shareholder Transactions and Services" and Appendix V to
this Proxy/Prospectus. Similarly, the Nations funds share classes being issued
in the Reorganization and Emerald Funds are sold at net asset value per share,
with no front-end or contingent deferred sales load. No front-end or contingent
deferred sales loads will be imposed on any of the shareholders of Emerald Funds
in connection with the Reorganization.
9
<PAGE>
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 Emerald Funds, the Nations Funds or their respective shareholders. The sale
of securities by the Emerald Funds prior to the Closing(s), whether in the
ordinary course of business or in anticipation of the Closing(s), could result
in a taxable capital gains distribution prior to the Closing(s). See
"Information Relating to Proposal 2-Approval of the Reorganization
Agreement-Federal Income Tax Considerations" for additional information.
Nations and Emerald Boards' Consideration. In considering the
Reorganization Agreement, the Board of Nations, including the non-interested
Directors thereof, were advised by legal counsel, as well as separate legal
counsel, as to their fiduciary duties under the 1940 Act and the required
determinations that the Board should make under the 1940 Act in connection with
the Reorganization. After considering relevant factors, the Nations Board, on
behalf of the Nations Funds, including a majority of the non-interested
Directors, found that participation in the Reorganization, as contemplated by
the Reorganization Agreement, 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.
In reviewing the proposed Reorganization, the Board of Emerald considered
the potential impact of the Reorganization on its shareholders, including (1)
the terms and conditions of the Reorganization Agreement, including provisions
intended to avoid the dilution of shareholder interests; (2) the capabilities,
practices and resources of the organizations that provide investment advisory
and certain other services to the Nations Funds, and the terms on which these
services are provided; (3) the shareholder services provided to Emerald
shareholders, compared with the shareholder services provided to Nations
shareholders; (4) the investment objectives, policies and limitations of the
Emerald Funds and the Nations Funds; (5) the historical Funds investment
performance of the Emerald Funds and the Nations Funds; (6) the historical and
projected operating expenses of the Emerald Funds and the Nations Funds; and (7)
the anticipated tax consequences of the Reorganization. See "Information
Relating to Proposal 2-Approval of the Proposed Reorganization-Emerald Board
Consideration."
Based upon their evaluation of the information presented to them, and in
light of their fiduciary duties under federal and state law, the Board of
Trustees of Emerald, including all of the non-interested members of the Board,
have determined that the proposed Reorganization is in the best interests of the
shareholders of each class of each Emerald Fund, and that the interests of such
shareholders will not be diluted as a result of the Reorganization. EMERALD'S
BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT EACH EMERALD FUND'S SHAREHOLDERS
APPROVE THE REORGANIZATION AGREEMENT.
Principal Risk Factors. Because of the general similarities of the
investment objectives, policies and restrictions of the Emerald Funds and their
corresponding Nations Funds, an investment in a Nations Fund involves risks that
are similar to those of the corresponding Emerald Fund. These investment risks,
in general, are those typically
10
<PAGE>
associated with investing in a portfolio of small capitalization common stocks
in the case of the Emerald Small Capitalization Fund and Nations Small Company
Growth Fund, a portfolio of fixed-income securities in the case of the Emerald
U.S. Government Securities Fund and Nations Government Securities Fund and
portfolios of high quality, short-term money market instruments in the case of
the Emerald Prime Fund and Nations Prime Fund, and the Emerald Treasury Fund and
Nations Treasury Fund.
The principal risks associated with Nations Small Company Growth Fund (and
its corresponding Emerald Small Capitalization Fund) are those associated with
investments in common stocks and other equity securities, which are generally
stock market risks. Stock values fluctuate in response to the activities of
individual companies and in response to general market and economic conditions
and, accordingly, the value of the stocks that a Fund holds may decline over
short or extended periods. The U.S. stock markets tend to be 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. In addition, the companies in which each Fund invests
typically pay low or no dividends, have smaller market capitalizations, have
less market liquidity, have no or relatively short operating histories, have
aggressive capital structures, including high debt levels, and have net asset
values that tend to fluctuate more than other funds.
An investment in Nations Government Securities Fund (and its corresponding
Emerald U.S. Government Securities Fund) involves risks typically associated
with investing in a portfolio of fixed-income securities, including principally
the risk that the value of that security will tend to decline when interest
rates rise and increase when interest rates fall. In general, longer-term debt
instruments tend to fluctuate in value more than shorter-term debt instruments
in response to interest rate movements. For example, because the average
weighted maturity of the Nations Government Securities Fund can be less than
that of Emerald U.S. Government Securities Fund, the share price of the Emerald
Fund may fluctuate more in response to interest rate changes than that of the
Nations Fund.
An investment in Nations Prime Fund (and its corresponding Emerald Prime
Fund) and in Nations Treasury Fund (and its corresponding Emerald Treasury Fund)
involves risks typically associated with investing in a portfolio of high
quality, short-term money market instruments. These money market funds attempt
to maintain a stable net asset value of $1.00, although there is no assurance
that they will be able to do so. Additionally, while the Emerald Treasury Fund
and Emerald Prime Fund, and the corresponding Nations Treasury Fund and Nations
Prime Fund may invest in instruments backed by the full faith and credit of the
U.S. Government, shares of neither fund are themselves issued or guaranteed by
the U.S. Government or any of its agencies.
Because Nations International Value Fund is being created to continue the
operations of the Emerald International Equity Fund, the risks involved in an
investment in each Fund are substantially identical.
11
<PAGE>
Voting Information. This Proxy/Prospectus is being furnished in
connection with the solicitation of proxies by Emerald's Board of Trustees at
the Meeting. Only shareholders of record at the close of business on March [16],
1998 will be entitled to vote at the Meeting. Each whole or fractional share is
entitled to a whole or fractional vote, respectively. Shares represented by a
properly executed proxy will be voted in accordance with the instructions
thereon or, if no specification is made, the persons named as proxies will vote
in favor of each proposal set forth in the Notice of Meeting. Proxies may be
revoked at any time before they are exercised by submitting to Emerald a written
notice of revocation or a subsequently executed proxy or by attending the
Meeting and voting in person. For additional information, see "Information
Relating to Voting Matters."
INFORMATION RELATING TO PROPOSAL 1-APPROVAL OF THE INTERIM AGREEMENTS
The Merger of Barnett Banks, Inc. into NB Holdings Corporation. On January
9, 1998, Barnett Banks, Inc. merged into NB Holdings Corporation, a wholly-owned
subsidiary of NationsBank Corporation. As a result of this Holding Company
Merger, Barnett Capital became a wholly-owned subsidiary of NationsBank
Corporation. Barnett Capital and Emerald considered the effect that the Holding
Company Merger would have on Emerald, and the possibility that under the terms
of the Emerald Funds' investment advisory agreements and the Emerald
International Equity Fund's investment sub-advisory agreement, and under the
1940 Act, the Holding Company Merger might result in the automatic and immediate
termination of those agreements.
Prior to the Holding Company Merger, Barnett Capital served as investment
adviser to the Emerald Funds pursuant to two separate investment advisory
agreements. The investment advisory agreement with respect to the Emerald
International Equity Fund, Emerald Small Capitalization Fund and Emerald U.S.
Government Securities Fund was originally dated June 28, 1991 (and subsequently
amended), was approved by the shareholders of the Emerald U.S. Government
Securities Fund on October 16, 1992 for the purpose of complying with certain
conditions imposed by the 1940 Act as well as by the SEC at that time, by the
sole shareholder of the Emerald Small Capitalization Fund on January 3, 1994
prior to that Fund's initial public offering, and by the shareholders of the
Emerald International Equity Fund on August 19, 1996 prior to that Fund's
initial public offering, and was last approved by the Emerald Board of Trustees
on November 13, 1997. Under the agreement, Barnett was entitled to receive
advisory fees at the annual rates of 1.00% of the average net assets of the
Emerald International Equity Fund, 1.00% of the average net assets of the Small
Capitalization Fund and 0.40% of the average net assets of the U.S. Government
Securities Fund. For the fiscal year ended November 30, 1997, Barnett Capital
received advisory fees (after waivers) at the effective annual rates of 1.00%,
1.00% and .40% of the average net assets of the Emerald International Equity
Fund, Emerald Small Capitalization Fund and Emerald U.S. Government Securities
Fund, respectively, representing $400,141 with respect to the Emerald
International Equity
12
<PAGE>
Fund, $1,549,153 with respect to the Emerald Small Capitalization Fund and
$265,439 with respect to the Emerald U.S. Government Securities Fund.
The investment advisory agreement with respect to the Emerald Prime Fund
and Emerald Treasury Fund was dated December 7, 1988, was last approved by
shareholders of the Funds on April 21, 1989 for the purpose of complying with
certain conditions imposed by the SEC at that time, and was last approved by the
Emerald Board of Trustees on November 13, 1997. Under the agreement, Barnett
Capital was entitled to receive advisory fees at the annual rate of 0.25% of
each Fund's average net assets. For the fiscal year ended November 30, 1997,
Barnett Capital received advisory fees (after waivers) at the effective annual
rates of .22% and .24% of the average net assets of the Emerald Prime Fund and
Emerald Treasury Fund, respectively, representing $4,946,560 with respect to the
Emerald Prime Fund and $2,246,028 with respect to the Emerald Treasury Fund.
The investment sub-advisory agreement with respect to the Emerald
International Equity Fund was dated August 19, 1996, was approved by
shareholders of the Fund on August 19, 1996 prior to the Fund's initial public
offering, and was last approved by the Emerald Board of Trustees on November 13,
1997. Under the agreement, Brandes was entitled to receive sub-advisory fees
from Barnett Capital at the annual rate of 0.50% of the Emerald International
Equity Fund's average net assets. For the fiscal year ended November 30, 1997,
Brandes received sub-advisory fees (after waivers) at the effective annual rate
of .50% of the Emerald International Equity Fund's average net assets,
representing $200,070.
To ensure that the Holding Company Merger would not disrupt the investment
advisory and sub-advisory services provided to the Emerald Funds, Emerald,
Barnett Capital and Brandes obtained an exemptive Order from the SEC permitting
Barnett Capital and Brandes to continue to act as investment adviser and
sub-adviser, respectively, through the Interim Period, but prior to obtaining
the approval of the Interim Advisory Agreements by the shareholders of the
Emerald Funds and approval of the Interim Sub-Advisory Agreement by the
shareholders of the Emerald International Equity Fund. The Order also permits
Barnett Capital and Brandes to receive fees for the Interim Period from each
Emerald Fund, subject to approval by the Emerald Fund shareholders entitled to
vote at a meeting to be held for the Interim Period. In applying for the Order,
Barnett Capital and Brandes agreed to take steps to ensure that the scope and
quality of the investment advisory services will be the same during the Interim
Period as previously provided to the Emerald Funds.
The Interim Advisory Agreements and Interim Sub-Advisory Agreement. The
terms and condition of the Interim Advisory Agreements and Interim Sub-Advisory
Agreement are the same as those of the former investment advisory agreements and
investment sub-advisory agreement with Barnett Capital and Brandes,
respectively, except for provisions relating to (1) the effective date (January
9, 1998), (2) the termination date (November 30, 1998) and (3) certain escrow
provisions, that are described above.
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<PAGE>
Under the Interim Advisory Agreements, Barnett is responsible for
providing a continuous investment program for each Emerald Fund, including
investment research and management with respect to all securities, investments,
cash and cash equivalents in the Funds, and is responsible for determining what
securities and other investments will be purchased, retained or sold by each of
the Funds and for maintaining all books and records with respect to each Fund's
securities transactions.
With respect to the Emerald International Equity Fund, some of Barnett
Capital's responsibilities under the Interim Advisory Agreement are performed by
a sub-adviser. Subject to the oversight and supervision of Barnett Capital and
the Emerald Board of Trustees, Brandes provides a continuous investment program
for the Emerald International Equity Fund, including investment management and
research with respect to all securities and investments, except for cash
balances which are managed by Barnett Capital. Brandes provides sub-advisory
services to the Emerald International Equity Fund in accordance with investment
criteria and policies established from time to time by Barnett Capital and the
Fund's investment objective, policies and restrictions.
The Interim Agreements also include provisions relating to other matters,
such as portfolio trading practices, expenses and standard of care. For example,
the Interim Agreements provide that in executing portfolio transactions and
selecting brokers or dealers, Barnett Capital and Brandes are to seek the best
overall terms available, and that investment decisions for the Emerald Funds are
to be made independently from those for other investment companies and accounts
managed by Barnett Capital and Brandes. Such other investment companies and
accounts may, however, invest in the same securities as the Funds. In such
cases, simultaneous transactions are inevitable. Under the Interim Agreements,
Barnett Capital and Brandes may aggregate, to the extent permitted by law, the
securities to be sold or purchased for the Funds with those to be sold or
purchased by other investment companies or accounts in executing transactions.
In addition, the Interim Agreements provide that to the extent the purchase or
sale of securities or other investments of the same issuer may be deemed to be
suitable for two or more accounts managed by Barnett Capital or Brandes, the
available securities or investments may be allocated in a manner believed by
Barnett Capital or Brandes to be equitable to each account. In some instances,
this investment procedure may adversely affect the price paid or received by a
Fund or the size of the position obtainable for or disposed of by a Fund.
Although expected to be infrequent, Barnett Capital and Brandes are
allowed under the Interim Agreements to consider the amount of Emerald Fund
shares sold by broker-dealers and others (including those who may be connected
with Barnett Capital or Brandes) in allocating orders for purchases and sales of
portfolio securities. This allocation may involve the payment of brokerage
commissions or dealer concessions. Barnett Capital and Brandes will not engage
in this practice unless the execution capability of, and the amount received by,
such broker-dealer or other company is believed to be comparable to what another
qualified firm could offer. Portfolio securities may not be purchased from or
sold to Barnett Capital, Brandes, the Emerald Funds' distributor, or
14
<PAGE>
any affiliated person of any of them or Emerald, acting as principal in the
transaction, except as permitted by the SEC.
The Interim Agreements provide that Barnett Capital and Brandes will pay
all expenses incurred by them in connection with their activities under the
respective Agreements other than the cost of securities and other investments
(including brokerage commissions and other transaction costs, if any) purchased
or sold for the Emerald Funds.
The Interim Agreements provide that Barnett Capital and Brandes will not
be liable for any error of judgment or mistake of law or for any loss suffered
by the Emerald Funds in connection with the performance of the respective
Agreements, except a loss resulting from a breach of fiduciary duty with respect
to the receipt of compensation for services or loss resulting from willful
misfeasance, bad faith or negligence on their part in the performance of their
duties or from reckless disregard by them of their obligations and duties
thereunder.
Each Interim Agreement provides that, if approved by the shareholders of
an Emerald Fund, the Interim Agreement will continue in effect with respect to
that Fund until November 30, 1998. Thereafter, the Interim Agreements will
continue in effect with respect to that Fund for successive annual periods,
provided that its continuance is approved at least annually (1) by the vote of a
majority of those members of Emerald's Board of Trustees who are not "interested
persons" (as that term is defined in the 1940 Act) of any party to the Agreement
cast in person at a meeting called for the purpose of voting on such approval,
and (2) by the Board or by vote of a majority of the outstanding shares of the
Fund.
Each Interim Agreement will terminate automatically in the event of its
assignment or with respect to the Interim Sub-Advisory Agreement, upon
termination of Barrett's Interim Advisory Agreement with respect to the Emerald
International Equity Fund. Each Interim Agreement also provides that it is
terminable with respect to any Emerald Fund, without payment of any penalty, by
Emerald (by vote of Emerald's Board of Trustees or by vote of a majority of the
outstanding voting securities of such Fund), by Barnett Capital or, in the case
of the Interim Sub-Advisory Agreement, by Barnett Capital or Brandes on 60 days'
written notice.
The Interim Advisory Agreement with respect to the Emerald International
Equity Fund, Emerald Small Capitalization Fund and Emerald U.S. Government
Securities Fund permits Barnett Capital (subject to any shareholder approval
required by law) to retain a sub-adviser in connection with the performance of
its advisory services, as stated above. Except with respect to the Emerald
International Equity Fund for which Barnett Capital has retained a sub-adviser
as described above, Barnett Capital intends to provide all of the services
stated in the Interim Advisory Agreements. In addition, the Interim Advisory
Agreement with respect to the Emerald International Equity Fund, Emerald Small
Capitalization Fund and Emerald U.S. Government Securities Fund expressly
permits the
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<PAGE>
Interim Advisory Agreement to be amended with respect to the Emerald
International Equity Fund without shareholder approval to the extent allowed by
the 1940 Act.
The advisory fees payable by each Emerald Fund under the Interim Advisory
Agreements, as described below, are the separate obligation of that particular
Fund (and not the joint obligation of all Emerald Funds). Sub-advisory fees
payable to Brandes with respect to the Emerald International Equity Fund are
paid by Barnett Capital and not by the Fund.
Information Regarding Barnett Capital and Brandes. Prior to the Holding
Company Merger, Barnett Capital was a wholly owned subsidiary of Barnett Bank,
N.A. which, in turn, was a wholly owned subsidiary of Barnett Banks, Inc., which
was a publicly held bank holding company located in Jacksonville, Florida. Upon
consummation of the Holding Company Merger, Barnett Capital became a
wholly-owned subsidiary of NB Holdings Corporation which, in turn is a wholly
owned subsidiary of NationsBank Corporation. As of February 15, 1998, no person
owned beneficially or of record 10% or more of any class of issued and
outstanding voting securities of NationsBank Corporation:
Barnett Capital is organized as a corporation under the laws of the State
of Florida and is registered as an investment adviser with the SEC under the
Investment Advisers Act of 1940. In addition to serving as investment adviser to
the Emerald Funds, Barnett Capital acts as investment adviser to individuals,
trusts, estates and institutions and as investment adviser to Emerald's other
investment portfolios, including the Emerald Prime Advantage Institutional,
Emerald Treasury Advantage Institutional and Emerald Tax-Exempt Funds, three
other money market portfolios whose net assets at ___________, 1998 were
$______, $______ and $______, respectively. Under the terms of the investment
advisory agreements relating to these portfolios, Barnett Capital is entitled to
an advisory fee at the annual rate of .10% of the average net assets of each of
the Emerald Prime Advantage Institutional Fund and Emerald Treasury Advantage
Institutional Fund and at the annual rate of .25% of the average net assets of
the Emerald Tax-Exempt Fund. Barnett Capital has agreed to pay the Emerald
Tax-Exempt Fund's sub-adviser a sub-advisory fee at the annual rate of .15% of
the portfolio's net assets. Emerald has been advised that, until further notice,
Barnett Capital will voluntarily waive all advisory fees with respect to the
Emerald Tax-Exempt Fund in excess of the sub-advisory fees payable by it to the
portfolio's sub-adviser.
As of ____________, 1998, Barnett Capital had approximately $__ billion of
assets under management. Barnett Capital's principal offices are located at 9000
Southside Boulevard, Building 100, Jacksonville, Florida 32256. The name and
principal occupation of the principal executive officer and each director of
Barnett Capital as of _______________, 1998 were as follows: The name and
principal occupation of the principal executive officer and each director of
Barnett Capital as of ________________, 1998 were as follows: Jack A. Ablin,
Director, President and Chief Executive Officer; Holly D. Deem, Director and
___________________; Martin E. Gaet, III, Director and
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<PAGE>
________________; and Richard S. Gershin, Director and ________________________.
All of the above persons may be reached c/o Barnett Capital Advisers, Inc., 9000
Southside Boulevard, Building 100, Jacksonville, Florida 32256.
_____________________________________________________________________. All of
the above persons may be reached c/o Barnett Capital Advisers, Inc., 9000
Southside Boulevard, Building 100, Jacksonville, Florida 32256.
Brandes is organized as a California limited partnership and is registered
as an investment adviser with the SEC under the Investment Advisers Act of 1940.
In addition to serving as sub-adviser to the Emerald International Equity Fund,
Brandes also serves as investment adviser or sub-adviser to the following U.S.
registered investment companies that have similar investment objectives: Brandes
Institutional International Equity Fund, the Northstar International Value Fund
and the Northstar Variable Trust International Value Portfolio which, as of
January 31, 1998, had net assets equal to $81,372,561.63, $219,734,615.73 and
$6,315,629.77, respectively. Under the terms of the investment advisory
agreement for the Brandes Institutional International Equity Fund, Brandes
receives a management fee at the annual rate of 1.0-0% of the average net assets
of the fund. Under the terms of the sub-investment advisory agreement for the
Northstar International Value Fund and the Northstar Variable Trust
International Value Portfolio, Brandes receives a sub-advisory fee equal to 50%
of the management fee received by each fund's investment adviser, Northstar
Investment Management Corporation. The Northstar International Value Fund and
the Northstar Variable Trust International Value Portfolio each currently pays
Northstar a management fee of 1.00% of the average net assets of the respective
fund.
As of January 31, 1998, Brandes had approximately $16 billion in assets
under management. Brandes' principal offices are located at 12750 High Bluff
Drive, San Diego, California 92130. Brandes Investment Partners, Inc. owns a
controlling interest in Brandes and serves as its General Partner. Charles
Brandes is the controlling shareholder of Brandes Investment Partners, Inc.
Brandes Investment Partners, Inc. and Charles Brandes may be reached c/o Brandes
Investment Partners, L.P., 12750 High Bluff Drive, San Diego, California 92130.
At the time of their approval of the Interim Advisory Agreements, three of
the six members of Emerald's Board of Trustees were considered to be
"interested" Trustees within the meaning of the 1940 Act for the following
reasons. Marshall M. Criser, Chairman of the Emerald Board of Trustees, was a
director of Barnett Banks, Inc., owned shares of Barnett Banks, Inc. and
maintained money market deposit accounts with a Barnett Banks, Inc. banking
subsidiary, and is currently of counsel (and was formerly a shareholder) of a
law firm which has represented Barnett Capital and its affiliates within the
preceding two years. John G. Grimsley, the Trust's President and a member of the
Board, is a partner of a law firm which has represented Barnett Capital and its
affiliates within the preceding two years and also owned shares of Barnett
Banks, Inc. Albert D. Ernest, Jr., a member of the Board, owned shares of
Barnett Banks, Inc.
17
<PAGE>
Payments to Barnett Capital or Brandes Affiliates. During the fiscal year
ended November 30, 1997, affiliates of Barnett Capital have received fees
pursuant to certain distribution and/or shareholder servicing plans that have
been in effect during such year. The table below sets forth the amounts of
payments made to such affiliates by the Emerald Funds. Under these plans all of
these payments were borne by the Emerald Funds' Retail and Service Shares.
Shareholder
Emerald Fund Distribution Fees Servicing Fees
- ------------ ----------------- --------------
International Equity Fund
Prime Fund
Small Capitalization Fund
Treasury Fund
U.S. Government Securities Fund
During the fiscal year ended November 30, 1997, the Emerald Funds paid no
distribution or shareholder servicing fees to affiliates of Brandes.
Affiliated Broker Commissions. During the fiscal year ended November 30,
1997, the Emerald Funds paid no brokerage commissions in connection with
purchases and sales of portfolio securities to any party that would be treated
as an affiliated broker as defined in Item 22(a)(1)(ii) of Schedule 14A under
the Securities Exchange Act of 1934.
For the services provided and expenses assumed pursuant to the Interim
Advisory Agreements, Barnett Capital is entitled to fees from the Emerald Funds
fees which, as noted above, range from 0.25% to 1.00% of the average daily net
assets of a particular Emerald Fund. Barnett Capital, under the Interim
Sub-Advisory Agreements pays Brandes a fee equal to 0.50% of the Emerald
International Equity Fund's average daily net assets. However, pending
ratification and approval of the Interim Advisory Agreements, all fees payable
to Barnett Capital and Brandes under the Interim Advisory Agreements are being
held in escrow. These escrowed fees will be received by Barnett Capital and
Brandes only if the respective Interim Advisory Agreements are ratified and
approved by Emerald Fund shareholders entitled to vote. The fees payable to
Barnett Capital are not subject to reduction as the value of each Fund's net
assets increases. From time to time, however, Barnett Capital and/or Brandes may
waive fees or reimburse the Emerald Funds for expenses voluntarily, although
there is no guarantee that such waivers or reimbursements would continue.
Approval of Emerald's Board of Trustees. At a meeting on December 8, 1997,
the Emerald Board of Trustees, including all of the Trustees who are not
"interested persons" (as that term is defined in the 1940 Act) of Emerald (other
than as Trustees), Barnett Capital, Brandes or NationsBank, N.A.
("NationsBank"), approved the Interim Advisory Agreements and Interim
Sub-Advisory Agreement, which became effective upon the consummation of the
Holding Company Merger on January 9, 1998. In considering
18
<PAGE>
whether to approve the Interim Agreements and to submit such agreements to
shareholders for their approval, the Board of Trustees considered the following
factors: (1) Barnett Capital's representations that it would provide investment
advisory services and other services to the Emerald Funds of a scope and quality
at least equivalent, in the Board's judgment, to the scope and quality of
services previously provided to the Emerald Funds; (2) the identical terms and
conditions contained in the Interim Agreements as compared to the prior
investment advisory agreements and investment sub-advisory agreement; and (3)
Barnett Capital's representation that in the event of any material change in
personnel providing services under the Interim Advisory Agreement during the
Interim Period, the Board of Trustees of Emerald would be consulted for the
purpose of assuring themselves that the services provided would not be
diminished in scope or quality. Additionally, the Trustees considered the
benefits that would be obtained by the Emerald Funds in maintaining continuity
in investment advisory services for the Funds during the Interim Period, and
determined that continuity was advantageous to the Funds as it would serve to
minimize uncertainty and confusion, and would minimize any potential disruption
resulting from the Holding Company Merger in the advisory services provided to
the Emerald Funds.
Based upon the foregoing factors, which were considered material by the
Emerald Board of Trustees, the Trustees concluded that approval of the Interim
Agreements was in the best interests of the Emerald Fund shareholders and
Emerald. The Board of Trustees further concluded that payment of the fees under
the Interim Agreements would be appropriate and fair considering that: (1) the
fees that are payable under the Interim Agreements, and the services to be
provided therefor, would be unchanged from the fees payable under the former
agreements, (2) the fees will be maintained in an interest-bearing escrow
account until payment is approved or disapproved by shareholders of a particular
Emerald Fund, and (3) the nonpayment of fees earned during that period would
constitute an extreme inequity to Barnett Capital and Brandes in view of the
substantial services provided by Barnett Capital to the Emerald Funds and by
Brandes to the Emerald International Equity Fund during the Interim Period, and
the expenses incurred in connection with such provision of services, under the
Interim Agreements.
With respect to the approval of the Interim Advisory Agreements, each
Emerald Fund will vote separately. With respect to the approval of the Interim
Sub-Advisory Agreement, Emerald International Equity Fund will vote separately.
EMERALD'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT EMERALD FUND
SHAREHOLDERS RATIFY AND APPROVE THE INTERIM ADVISORY AGREEMENTS, AND THAT
SHAREHOLDERS OF THE EMERALD INTERNATIONAL EQUITY FUND RATIFY AND APPROVE THE
INTERIM SUB-ADVISORY AGREEMENT, FOR THE PERIOD COMMENCING JANUARY 9, 1998.
19
<PAGE>
INFORMATION RELATING TO PROPOSAL 2-
APPROVAL OF THE REORGANIZATION AGREEMENT
The terms and conditions of the Reorganization are set forth in the
Reorganization Agreement. Significant provisions of the Reorganization Agreement
are summarized below; however, this summary is qualified in its entirety by
reference to the Reorganization Agreement, a copy of which is attached as
Appendix II to this Proxy/Prospectus.
Description of the Reorganization Agreement. The Reorganization Agreement
provides that at the Closing(s) the Fund Assets and Liabilities (as those terms
are defined in the Reorganization Agreement) of the Emerald Funds will be
transferred to Nations, as shown in Table I (see page 2 of this
Proxy/Prospectus), in exchange for full and fractional Shares of the designated
classes of the corresponding Nations Funds.
The Shares issued by each Nations Fund in the Reorganization will have an
aggregate dollar value equal to the aggregate dollar value of the shares of the
respective Emerald Fund that are outstanding immediately before the Closing.
Immediately after the Closing, each Emerald Fund will distribute the Shares of
the Nations Fund received in the Reorganization to its shareholders in
liquidation of the Emerald Fund. Each shareholder owning shares of a particular
Emerald 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 Emerald Fund shares.
Nations will establish an account for each former shareholder of the Emerald
Funds reflecting the appropriate number of Nations Fund Shares distributed to
that shareholder. These accounts will be substantially identical to the accounts
currently maintained by Emerald for each shareholder. Shares of the Nations
Funds are in uncertificated form.
As indicated above, Emerald shareholders of those series of Emerald not
part of this Proxy/Prospectus are voting on similar agreements and plans of
reorganization that, in a like manner, would provide for the reorganization of
those series of Emerald into designated classes of corresponding portfolios of
Nations Fund Trust and Nations Institutional Reserves--other registered
investment companies in the Nations Funds Family. If the Reorganization
Agreement and the agreements and plans of reorganization affecting the other
series of Emerald are approved by a majority of all series of Emerald voting in
the aggregate and are consummated, Emerald will have transferred all of its
assets and liabilities as of the Closing(s), and all outstanding shares of the
Emerald Funds will be redeemed and canceled in exchange for Shares of the
Nations Funds distributed, and Emerald will wind up its affairs and apply to be
deregistered as an investment company under the 1940 Act. Emerald would
permanently close its stock transfer books as of the close of business on the
business day immediately preceding the Closing(s). Exchange or redemption
requests received after that time will be deemed to be exchange or redemption
requests for Shares of the Nations Funds.
20
<PAGE>
The Reorganization is subject to a number of conditions, including
approval of the Reorganization Agreement and the related matters described in
this Proxy/Prospectus by Emerald shareholders at the Meeting; approval by a
majority of all series of Emerald voting in the aggregate of the reorganization
of Emerald; the receipt of certain legal opinions described in the
Reorganization Agreement (which include an opinion of Nations' counsel addressed
to Emerald 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 the independent auditors of Emerald and Nations regarding
various financial matters; any necessary exemptive relief or no-action
assurances requested from the SEC or its Staff with respect to Section 17(a) and
17(d) of the 1940 Act and Rule 17d-1 thereunder; and the parties' performance in
all material respects of their respective covenants and undertakings in the
Reorganization Agreement. The Reorganization Agreement also provides that if the
difference between the per share net asset value of an Emerald Fund that is a
money market fund and its corresponding Nations Fund equals or exceeds $.0025 at
the close of business on the day preceding the time at which the Reorganization
is to be effective, as computed using the market values of each such Funds'
assets, either party may postpone the Closing with respect to such Fund until
such time as the per share difference is less than $.0025.
The Reorganization Agreement provides that Emerald and Nations will each
be responsible for its own expenses in connection with the Reorganization.
However, NBAI has undertaken that it, or its affiliates, will absorb the
customary has agreed to assume all ordinary 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 Emerald and Nations, or by either Nations or Emerald
under certain conditions; and that officers of Nations and of Emerald 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 Emerald Fund without obtaining the
Emerald Fund shareholders' further approval.
Emerald Board Consideration. At meetings held on November 13-14, 1997 and
December 8, 1997, the Emerald Board of Trustees was advised that Barnett Capital
and NBAI were considering the possibility of recommending a consolidation of
Emerald with the Nations Family of Funds following the Holding Company Merger.
The Emerald Board then met again on January 15, 1998 and on February 12, 1998 to
consider a reorganization proposal by NBAI and its affiliates. In preparation
for the meetings, the Trustees were provided with information about the
Reorganization, the Nations Funds and NationsBank. 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 Emerald Trustees received comparative information
for the Emerald Funds and their corresponding Nations Funds, as well as,
21
<PAGE>
information about NationsBank and its investment advisory organizations,
including information regarding those individuals with responsibility for each
Nations Fund.
The proposal that the Emerald Funds be reorganized into the Nations Funds
as set forth in the Reorganization Agreement, including the contemplation that
Emerald would be reorganized into the Nations Funds Family, was unanimously
approved by the Board of Trustees on February 12, 1998.
During its deliberations, Emerald's Board of Trustees (with the advice and
assistance of its counsel) reviewed, among other things: (1) the potential
effect of the Reorganization on the shareholders of the Emerald Funds; (2) the
capabilities, practices and resources of NBAI and Nations' 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 Emerald Funds and industry peer groups; (4) the expected
cost-savings for certain of the Emerald Funds, including Emerald funds not part
of this Proxy/Prospectus, as a result of the Reorganization of Emerald; (5) the
investment objectives, policies and limitations of the Nations Funds and their
relative compatibility with those of the Emerald Funds; (6) the historical
investment performance records of the Emerald Fund(s) moving into operating
Nations Funds, and the investment performance record of the Nations Funds
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 Emerald's
shareholders; (9) the anticipated tax consequences of the Reorganization for the
respective Emerald Funds and their shareholders; (10) the number of investment
portfolio options that would be available to shareholders after the
Reorganization; (11) the resolution of matters relating to the termination of
Emerald's administration and transfer agency agreements without cost to Emerald;
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.
In connection with the foregoing, Emerald's Board of Trustees noted that
the management of the Nations Funds Family had undertaken to create two new
funds that have the same investment objective and policies similar to those of
their corresponding Emerald fund, including Nations International Value Fund.
Emerald's Board of Trustees also noted NBAI would assume all ordinary expenses
associated with the Reorganization. With respect to each Nations Fund, Emerald's
Trustees further noted that the total per share annualized operating expense
ratios after the Reorganization, taking into account voluntary fee waivers,
would be equal to or lower than those of the corresponding Emerald Funds before
the Reorganization with two exceptions.
After consideration of the foregoing and other factors, the Emerald
Trustees unanimously determined that the Reorganization is in the best interests
of the shareholders
22
<PAGE>
of each class of each Emerald Fund, and that the interests such shareholders
will not be diluted as a result of the Reorganization
Capitalization. As proposed, the five Emerald Funds would be reorganized
into the five corresponding Nations Funds. The following table sets forth, as of
November 30, 1997: (1) the capitalization of each of the Emerald 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 of the foregoing Emerald Funds. The capitalization of each
Emerald Fund and Nations Fund is likely to be different at the Closing as a
result of daily share purchase and redemption activity in the Emerald Funds and
Nations Funds as well as the effects of the other ongoing operations of the
respective Funds prior to Closing.
23
<PAGE>
Table II
Capitalization (as of November 30, 1997)
1. The table below reflects current and pro forma capitalization
information for the combination of the Emerald International Equity Fund with
Nations International Value Fund.
Net Asset
Total Net Shares Value
Assets Outstanding Per Share
--------- ----------- ---------
Emerald International $4,259,331 324,510 $13.13
Equity Fund (Retail) (Retail) (Retail)
$54,277,291 4,122,281 $13.17
(Institutional) (Institutional) (Institutional)
Nations International N/A N/A N/A
Value Fund (Investor A) (Investor A) (Investor A)
N/A N/A N/A
(Primary A) (Primary A) (Primary A)
Pro Forma Combined Fund $4,259,331 324,510 $13.13
(Retail/ (Retail/ (Retail/
Investor A) Investor A) Investor A)
$54,277,291 4,122,281 $13.17
(Institutional/ (Institutional/ (Institutional/
Primary A) Primary A) Primary A)
24
<PAGE>
2. The table below reflects current and pro forma capitalization
information for the combination of the Emerald Prime Fund with Nations Prime
Fund. Total Net Assets are shown using [market values].
Net Asset
Total Net Shares Value
Assets Outstanding Per Share
--------- ----------- ---------
Emerald Prime Fund $592,247,709 592,258,101 $1.00
(Retail) (Retail) (Retail)
$581,142,127 581,152,243 $1.00
(Institutional) (Institutional) (Institutional)
$1,128,448,959 1,128,464,311 $1.00
(Service) (Service) (Service)
Nations Prime Fund $66,122,107 66,140,721 $1.00
(Daily) (Daily) (Daily)
$3,568,740,552 3,569,367,453 $1.00
(Primary A) (Primary A) (Primary A)
$1,570,477,320 1,570,753,197 $1.00
(Investor A) (Investor A) (Investor A)
Pro Forma Combined Fund $658,369,816 658,398,822 $1.00
(Retail/Daily) (Retail/Daily) (Retail/Daily)
$4,149,882,679 4,150,519,696 $1.00
(Institutional/ (Institutional/ (Institutional/
Primary A) Primary A) Primary A)
$2,698,926,279 2,699,217,508 1.00
(Service/ (Service/ (Service/
Investor A) Investor A) Investor A)
25
<PAGE>
3. The table below reflects current and pro forma capitalization
information for the combination of the Emerald Small Capitalization Fund with
Nations Small Company Growth Fund.
Net Asset
Total Net Shares Value
Assets Outstanding Per Share
--------- ----------- ---------
Emerald Small $14,062,510 1,096,636 $12.82
Capitalization Fund (Retail) (Retail) (Retail)
$163,096,145 12,566,576 $12.98
(Institutional) (Institutional) (Institutional)
Nations Small Company $5,836,036 430,592 $13.55
Growth Fund (Investor A) (Investor A) (Investor A)
$131,258,337 9,654,410 $13.60
(Primary A) (Primary A) (Primary A)
Pro Forma Combined Fund $19,898,546 1,468,147 $13.55
(Retail/ (Retail/ (Retail/
Investor A) Investor A) Investor A)
$294,354,482 21,650,577 $13.60
(Institutional/ (Institutional/ (Institutional/
Primary A) Primary A) Primary A)
26
<PAGE>
4. The table below reflects current and pro forma capitalization
information for the combination of the Emerald Treasury Fund with Nations
Treasury Fund. Total Net Assets are shown using [market values].
Net Asset
Total Net Shares Value
Assets Outstanding Per Share
--------- ----------- ---------
Emerald Treasury Fund $58,716,503 58,751,937 $1.00
(Retail) (Retail) (Retail)
$290,575,858 290,742,444 $1.00
(Institutional) (Institutional) (Institutional)
$448,765,584 449,184,467 $1.00
(Service) (Service) (Service)
Nations Treasury Fund $196,450,255 196,462,335 $1.00
(Daily) (Daily) (Daily)
$1,086,102,123 1,086,168,909 $1.00
(Primary A) (Primary A) (Primary A)
$1,362,887,305 1,362,971,110 $1.00
(Investor A) (Investor A) (Investor A)
Pro Forma Combined Fund $255,165,758 255,214,272 $1.00
(Retail/Daily) (Retail/Daily) (Retail/Daily)
$1,376,677,981 1,376,911,353 $1.00
(Institutional/ (Institutional/ (Institutional/
Primary A) Primary A) Primary A)
$1,811,652,889 1,812,155,577 1.00
(Service/ (Service/ (Service/
Investor A) Investor A) Investor A)
27
<PAGE>
5. The table below reflects current and pro forma capitalization
information for the combination of the Emerald U.S. Government Securities Fund
with Nations Government Securities Fund.
Net Asset
Total Net Shares Value
Assets Outstanding Per Share
------ ----------- ---------
Emerald U.S. Government $21,614,817 2,100,708 $10.29
Securities Fund (Retail) (Retail) (Retail)
$49,468,965 4,821,199 $10.26
(Institutional) (Institutional) (Institutional)
Nations Government $11,411,643 1,160,651 $9.83
Securities Fund (Investor A) (Investor A) (Investor A)
$94,092,799 9,570,005 $9.83
(Primary A) (Primary A) (Primary A)
Pro Forma Combined Fund $33,026,460 3,359,042 $9.83
(Retail/ (Retail/ (Retail/
Investor A) Investor A) Investor A)
$143,561,764 14,601,402 $9.83
(Institutional/ (Institutional/ (Institutional/
Primary A) Primary A) Primary A)
28
<PAGE>
Federal Income Tax Considerations. Each Nations Fund and each Emerald Fund
qualifies and intends to qualify as of the Closing(s), as a separate "regulated
investment company" under the Internal Revenue Code of 1986, as amended (the
"Code"). Accordingly, each Emerald 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 Emerald Fund and
the corresponding Nations Fund is subject to the condition that Emerald and
Nations receive an opinion from Morrison & Foerster LLP to the effect that, for
federal income tax purposes: (i) the transfer of all of the Fund Assets and
Liabilities (as each term is defined in the Reorganization Agreement) of an
Emerald 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
Emerald Fund, will constitute a "reorganization" within the meaning of Section
368(a) of the Code, and the Emerald Fund and the Nations Fund will each be a
"party to a reorganization" within the meaning of Section 368(b) of the Code;
(ii) no gain or loss will be recognized by the Emerald 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 Assets and assumption of Liabilities of the Emerald
Fund solely in exchange for the Nations Fund Shares; (iv) the basis of the
Emerald Fund's 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
Emerald Fund immediately prior to the Reorganization; (v) the holding period of
the Emerald Fund's assets in the hands of the Nations Fund will include the
period for which such assets have been held by the Emerald Fund; (vi) no gain or
loss will be recognized by the Emerald Fund on the distribution to its
shareholders of the Nations Fund Shares to be received by the Emerald Fund in
the Reorganization; (vii) no gain or loss will be recognized by the shareholders
of the Emerald Fund upon their receipt of the Nations Fund Shares in exchange
for such shareholders' shares of the Emerald Fund; (viii) the basis of the
Nations Fund Shares received by the shareholders of the Emerald Fund will be the
same as the basis of the Emerald Fund shares surrendered by such shareholders
pursuant to the Reorganization; (ix) the holding period for the Nations Fund
Shares received by the Emerald Fund shareholders will include the period during
which such shareholders held the Emerald Fund shares surrendered in exchange
therefor, provided that such Emerald Fund shares are held as a capital asset in
the hands of the Emerald 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 Emerald Fund as of the Closing
Date, subject to the conditions and limitations specified in the Code.
Shareholders of the Emerald Funds should note, however, that the sale of
securities by the Emerald Funds prior to the Closing(s) whether in the ordinary
course of business or in anticipation of the Closing(s), could result in a
taxable capital gains distribution prior to the Closing(s).
Nations and Emerald have not sought, and will not seek, a private ruling
from the Internal Revenue Service ("IRS") with respect to the tax consequences
of the
29
<PAGE>
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 Information. Information about the similarities and differences
between the Nations Funds and the Emerald Funds to which they correspond
regarding: investment objectives and policies; the identity and compensation of
the investment adviser; the voting rights of shareholders, any restrictions or
material obligations associated with ownership of Shares; the share structure;
the identity of the principal underwriter; any minimum initial or subsequent
investment; Rule 12b-1 plans, including associated fees and expenses; and
shareholder redemption, repurchase and exchange rights, is included in other
appropriately titled sections within this Proxy/Prospectus and the Appendices
hereto.
COMPARISON OF EMERALD AND NATIONS
Investment Objectives and Policies. Because the Nations International
Value Fund was created to continue the operations of the Emerald International
Equity Fund, the investment objectives, policies and restrictions of each Fund
are substantially identical. The investment objectives, policies and
restrictions of the other Emerald Funds are, in general, substantially similar
to those of their corresponding Nations Fund. There are, however, certain
differences. For example, the Emerald U.S. Government Securities Fund expects to
maintain a dollar-weighted average portfolio maturity of between five and ten
years, while the corresponding Nations Government Securities Fund expects to
maintain a maturity of between three and ten years, with an expected duration in
the range of 3.5 to six years. Additionally, while the Emerald Small
Capitalization Fund may invest up to 25% of its assets in securities of foreign
issuers, the corresponding Nations Small Company Growth Fund intends to limit
such investments to 5% of total assets.
Other differences are more fully discussed in Appendix IV to this
Proxy/Prospectus. Additional information with respect to the investment policies
and restrictions of the Nations Funds and the Emerald Funds is included in their
respective prospectuses, which have been incorporated herein by reference.
Investment Adviser and Other Service Providers. Currently, Barnett Capital
serves as investment adviser to the Emerald Funds and Brandes serves as
investment sub-adviser to the Emerald International Equity Fund. NBAI serves as
the investment adviser to the Nations Funds and TradeStreet serves as the
investment sub-adviser to the Nations Funds. Brandes will serve as investment
sub-adviser to the Nations International Value Fund after the Reorganization.
The following table shows, as of November 30, 1997, (i) the current
annualized total expense ratio of the Emerald Funds before and after fee waivers
and/or expense
30
<PAGE>
reimbursements and (ii) the pro forma annualized total expense ratio of the
corresponding Nations Funds, based upon the fee arrangements, before and after
fee waivers and/or expense reimbursements, that will be in place upon
consummation of the Reorganization. Detailed pro forma expense information for
each proposed reorganization is included in Appendix III to this
Proxy/Prospectus.
TABLE III
Total Expense Information
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------------------
Emerald Fund Total Corresponding Total Combined Fund/Share Pro Forma
Share Class Operating Nations Fund/Share Class Operating Class Post-Reorganization Total Operating
Expenses Expenses Expenses
Before/After Before/After Before/After
Waivers Waivers Waivers
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Emerald International Equity Fund Nations International Value Fund Nations International Value Fund
Retail Shares 1.93%/1.73% Investor A Shares 1.66%/1.56% Investor A Shares 1.66%/1.56%
Institutional Shares 1.21%/1.21% Primary A Shares 1.41%/1.31% Primary A Shares 1.41%/1.31%
- ----------------------------------------------------------------------------------------------------------------------------------
Emerald Prime Fund Nations Prime Fund Nations Prime Fund
Retail Shares 0.95%/0.91% Daily Shares 0.84%/0.80% Daily Shares 0.84%/0.80%
Institutional Shares 0.41%/0.38% Primary A Shares 0.34%/0.30% Primary A Shares 0.34%/0.30%
Service Shares 0.75%/0.72% Investor A Shares 0.69%/0.65% Investor A Shares 0.69%/0.65%
- ----------------------------------------------------------------------------------------------------------------------------------
Emerald Small Capitalization Fund Nations Small Company Growth Fund Nations Small Company Growth Fund
Retail Shares 1.73%/1.72% Investor A Shares 1.51%/1.20% Investor A Shares 1.45%/1.20%
Institutional Shares 1.18%/1.18% Primary A Shares 1.26%/0.95% Primary A Shares 1.20%/0.95%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
31
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------------------
Emerald Treasury Fund Nations Treasury Fund Nations Treasury Fund
Retail Shares 0.96%/0.91% Daily Shares 0.84%/0.80% Daily Shares 0.84%/0.80%
Institutional Shares 0.41%/0.40% Primary A Shares 0.34%/0.30% Primary A Shares 0.34%/0.30%
Service Shares 0.75%/0.74% Investor A Shares 0.69%/0.65% Investor A Shares 0.69%/0.65%
- ----------------------------------------------------------------------------------------------------------------------------------
Emerald U.S. Government Securities Fund Nations Government Securities Fund Nations Government Securities Fund
Retail Shares 1.15%/1.11% Investor A Shares 1.16%/1.02% Investor A Shares 1.14%/1.00%
Institutional Shares 0.59%/0.59% Primary A Shares 0.91%/0.77% Primary A Shares 0.89%/0.75%
- ----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
Emerald Funds' Advisory and Sub-Advisory Agreements. For a description of
the Interim Agreements, see "Information Relating to Proposal 1-Approval of the
Interim Agreements."
Nations Funds' Advisory Agreements. NBAI serves as investment adviser to
the Nations Funds. Subject to the general supervision of Nations' Board of
Trustees, and in accordance with the investment policies of each Nations Fund,
NBAI has discretionary authority to manage each Nations Fund. The investment
advisory agreement provides that in the absence of willful misfeasance, bad
faith, negligence or reckless disregard of obligations or duties thereunder on
the part of NBAI or any of its officers, directors, employees or agents, NBAI
shall not be subject to liability to Nations or to any shareholder of a Nations
Fund for any act or omission in the course of, or connected with, rendering
services thereunder or for any losses that may be sustained in the purchase,
holding or sale of any security. For the services provided and expenses assumed,
NBAI is entitled to a fee calculated at the annual rate of: 1.00% of the average
daily net assets of Nations International Value Fund; 0.25% of the first $250
million of the combined average daily net assets of Nations Prime Fund and
Nations Treasury Fund, plus 0.20% of the combined average daily net assets of
such Funds in excess of $250 million; 1.00% of the average daily net assets of
Nations Small Company Growth Fund; and 0.65% of the first $100 million of the
average daily net assets of Nations Government Securities Fund, plus 0.50% of
the Fund's average daily net assets in excess of $250 million. From time to
time, however, NBAI and its affiliates may waive fees or reimburse the Nations
Funds for expenses voluntarily, although there is no guarantee that such waivers
or reimbursements would continue.
32
<PAGE>
TradeStreet serves as investment sub-adviser for the Nations Funds other
than Nations International Value Fund. For the services provided and expenses
assumed by TradeStreet, NBAI pays, out of the fees it receives from the Nations
Funds, fees to TradeStreet at the annual rate of: 0.055% of the average daily
net assets of Nations Prime Fund and Nations Treasury Fund; 0.15% of the average
daily net assets of Nations Government Securities Fund; and 0.25% of the average
daily net assets of Nations Small Company Growth Fund.
For the fiscal period from April 1, 1996 to March 31, 1997, after waivers,
Nations Fund Trust paid NBAI under an investment advisory agreement at the
indicated rates of the following Funds' average daily net assets: Nations Prime
Fund--0.16%; Nations Treasury Fund--0.16%, Nations Government Securities
Fund--0.50%.
For the fiscal period from September 1, 1996 to May 16, 1997, after
waivers, the Pilot Funds paid Boatmen's Trust Company, under a previous
investment advisory agreement, advisory fees of 0.75% of Nations Small Company
Growth Fund (formerly the Pilot Small Capitalization Equity Fund).
For the fiscal period from April 1, 1996 to March 31, 1997, after waivers,
NBAI paid TradeStreet under an investment sub-advisory agreement at the
indicated rates of the following Funds' average daily net assets: Nations Prime
Fund--0.055%; Nations Treasury Fund--0.055%, Nations Government Securities
Fund--0.15%.
Both NBAI and TradeStreet are wholly owned subsidiaries of NationsBank,
which in turn is a wholly owned banking subsidiary of NationsBank Corporation, a
bank holding company organized as a North Carolina corporation. Both NBAI and
TradeStreet have their principal offices at One NationsBank Plaza, Charlotte,
North Carolina 28225.
The principal portfolio managers for certain of the Nations Funds, along
with their positions with the NBAI and/or TradeStreet and a brief summary of
their business experience and education are set forth below. Such information is
not provided for Nations Prime Fund, Nations Treasury Fund and Nations
International Value Fund.
Nations Small Company Growth Fund - Scott A. Billeadeau is a Senior
Portfolio Manager, Equity Management for TradeStreet and Senior Portfolio
Manager for Nations Emerging Growth Fund and Nations Small Company Growth Fund.
Mr. Billeadeau has been Portfolio Manager for Nations Small Company Growth Fund
since June 1997. Previously, he was Senior Analyst and Senior Portfolio Manager
for BankAmerica's Pacific Horizon Aggressive Growth Fund at Security Pacific
Corp. since 1991. Mr. Billeadeau has worked in the investment community since
1986. His past experience also includes quantitative analysis for American
Express Financial Advisors, Inc. Mr. Billeadeau received an A.B. Economics from
Princeton University. He holds the Chartered Financial Analyst designation and
is a member of the Association for Investment Management and Research, as well
as the Seattle Society of Securities Analysts.
33
<PAGE>
Nations Government Securities Fund - Christopher G. Gunster is a Portfolio
Manager, Fixed Income Management for TradeStreet and Portfolio Manager for
Nations Government Securities Fund. Mr. Gunster has been the lead Portfolio
Manager since July 1997. Prior to assuming his position with TradeStreet, he was
Assistant Vice President and Associate Portfolio Manager for the Investment
Management Group at NationsBank since 1993. Mr. Gunster has worked in the
investment community since 1987. His past experience includes investment
marketing for The Boston Company and options-trading for Shatkin Investments, a
regional broker/dealer. Mr. Gunster received a B.A. in Chemistry from Kenyon
College and an M.B.A. in Finance from Babson Graduate School of Business. He
holds the Chartered Financial Analyst designation and is a member of the
Association for Investment Management and Research as well as the North Carolina
Society of Financial Analysts, Inc.
Morrison & Foerster LLP, counsel to Nations and special counsel to
NationsBank, has advised Nations and NationsBank that NationsBank and its
affiliates may perform the services contemplated by the advisory contracts
described above and in the prospectuses for the Nations Funds without violation
of the Glass-Steagall Act or other applicable laws or regulations. Such counsel
has pointed out, however, that there are no controlling judicial or
administrative interpretations or decisions and the future judicial or
administrative interpretations of, or decisions relating to, present federal or
state statutes, including the Glass-Steagall Act, and regulations relating to
the permissible activities of banks and their subsidiaries or affiliates, as
well as future changes in such statutes, regulations and judicial or
administrative decisions or interpretations, could prevent such entities from
continuing to perform, in whole or in part, such services. If any such entity
were prohibited from performing any of such services, it is expected that the
new agreements would be proposed or entered into with another entity or entities
qualified to perform such services.
Other Service Providers. The other service providers for the Emerald Funds
and the Nations Funds are different, as forth in the table below.
Other Service Providers
for the Emerald Funds and Nations Funds
Emerald Funds Nations Funds
------------- -------------
Distributor Emerald Asset Stephens Inc.
Management, Inc. ("Stephens")
Administrator BISYS Fund Services Stephens
Limited Partnership
Co-Administrator Not Applicable First Data Investor
Services Group, Inc.
("First Data")
34
<PAGE>
Emerald Funds Nations Funds
------------- -------------
Sub-Administrator Not Applicable NationsBanc Advisors, Inc.
Transfer Agent BISYS Fund Services, First Data
Inc.
Sub-Transfer Agent Not Applicable NationsBank of Texas N.A.
Custodian The Bank of New York NationsBank of Texas N.A.
Sub-Custodian Not Applicable The Bank of New York
Independent Auditors KPMG Peat Marwick LLP Price Waterhouse LLP
and Independent
Accountants,
respectively
Emerald Asset Management Inc. and BISYS Fund Services Limited Partnerships
maintain offices at 3435 Stelzer Road, Columbus, Ohio 43219. Stephens Inc.
maintains offices at 111 Center Street, Little Rock, Arkansas 72201 and Final
Data Investor Services Group, Inc. maintains offices at One Exchange Place,
Boston, Massachusetts 02109.
Share Structure. Both Emerald and Nations are registered as open-end
management investment companies under the 1940 Act. Currently, Emerald offers
fourteen funds. The Nations Funds complex which includes several registered
investment companies, will offer over sixty funds immediately after the
Reorganization.
Emerald is organized as a Massachusetts business trust and is subject to
the provisions of its Agreement and Declaration of Trust and Code of
Regulations. Nations is organized as a Maryland Corporation and is subject to
the provisions of its Articles of Incorporation, as amended and supplemented,
and By-Laws. Shares of the Emerald Funds and Nations Funds have a par value of
$.001. Shares of both the Emerald Funds and Nations Funds are entitled to one
vote for each full share held and fractional votes for fractional Shares held.
Emerald Fund shareholders will vote in the aggregate and not by portfolio
or class subject to certain notable exceptions. In particular, when a proposal
affects less than all Emerald portfolios or classes, only the affected
portfolios or classes may vote on that proposal. Each portfolio votes separately
with respect to any proposal to approve its investment advisory agreement, to
change its fundamental investment objectives or policies, or to adopt a plan of
reorganization. Similarly, a class of a portfolio votes separately with respect
to any proposal to approve a plan of distribution for that class.
In accordance with Nations' Articles of Incorporation, Nations may
authorize any action upon the affirmative vote of the holders of a majority of
the outstanding shares of stock entitled to vote thereon, notwithstanding any
provision of Maryland law that would
35
<PAGE>
otherwise require more than a majority vote There is no cumulative voting in the
election of Trustees for Nations and shares may be voted in person or by proxy.
Shares of the Emerald Funds and Nations Funds have no pre-emptive rights
and have only such conversion and exchange rights as the Board of Trustees of
Emerald or the Board of Directors of Nations, respectively, may grant in their
discretion. When issued for payment as described in their respective
prospectuses, Nations Fund Shares and Emerald Fund Shares are fully paid and
non-assessable by either Nations or Emerald.
Both Emerald and Nations are authorized to create multiple investment
portfolios and to create multiple share classes representing interests in a
single portfolio. Currently Nations offers Investor A shares, Investor B shares,
Investor C shares, Primary A shares, Primary B shares and Daily shares. Each
share class has varying pricing and distribution structures.
Each share of a class of a Nations Fund represents an equal proportionate
interest in a particular portfolio with other shares of the same class and is
entitled to cash dividends and distributions earned on such shares as are
declared in the discretion of the Nations Board of Directors.
The accrued expenses of the Nations Funds, as well as certain expenses
attributable to each class of shares (including those that are not relevant to
this Proxy/Prospectus), are deducted from accrued income before dividends are
declared. The Nations Funds' expenses included, but are not limited to: fees
paid to NBAI, NationsBank, Stephens and First Data; interest; trustees' fees;
federal and state securities registration and qualification fees; brokerage fees
and commissions; costs of preparing and printing prospectuses for regulatory
purposes and for distribution to existing shareholders; charges of the custodian
and transfer agent; certain insurance premiums; outside auditing and legal
expenses; costs of shareholder reports and shareholder meetings; other expenses
which are not expressly assumed by NBAI, NationsBank, Stephens or First Data
under their respective agreements with Nations; and any extraordinary expenses.
Each class of Shares may bear certain class specific costs associated with
retail transfer agency, shareholder servicing, sales support and distribution.
Any general expenses of Nations that are not readily identifiable as belonging
to a particular investment portfolio are allocated among all portfolios in the
proportion that the assets of a portfolio bears to the assets of Nations or in
such other manner as the Board of Directors deems appropriate.
Additional information concerning the attributes of the shares issued by
the Emerald Funds and Nations Funds is included in their respective
prospectuses, which are incorporated herein by reference.
Distribution Plan and Shareholder Servicing Arrangements. Shares of the
Emerald Funds are distributed by Emerald Asset Management, Inc. ("EAM"), a
wholly-owned subsidiary of The BISYS Group, Inc. The Emerald Funds have adopted
a Combined Amended and Restated Distribution and Service Plan pursuant to Rule
12b-1
36
<PAGE>
under the 1940 Act for its Retail Class shares. Under the Plan, the Emerald
Funds pay service organizations (such as securities dealers, financial
institutions and other industry professionals) for distribution assistance
and/or the provision of shareholder liaison services at an annual rate not to
exceed 0.25% of the average daily net asset value of each Emerald Fund's
outstanding Retail Class shares.
The Emerald Funds also have adopted a Shareholder Processing Plan for its
Retail Class shares. Under such plan service organizations agree to provide
various shareholder processing services, such as providing necessary personnel
and facilities to establish and maintain shareholders accounts and records for
clients; assisting in aggregating and processing purchase, exchange and
redemption orders with EAM; arranging for wiring of funds; transmitting and
receiving funds in connection with client orders to purchase or redeem shares;
processing dividends payments; providing the information to the Funds necessary
for accounting or subaccounting; and providing such other similar services as
may reasonably be requested. Payments for these services may not exceed 0.25%
(on an annual basis) of the average daily net asset value of a Fund's
outstanding Retail shares.
The Emerald Funds also have adopted a Shareholder and Processing Services
Plan pursuant to which Service Shares are sold to institutional investors which
enter into service agreements with the Emerald. The service agreements require
the service organizations, which may include Barnett Capital, BISYS and their
affiliates, to provide support services to their customers who are beneficial
owners of Service shares in return for payment s by a Fund which may not exceed
0.35% (on an annualized basis) of the average daily net asset value of the
Service shares beneficially owned by their customers. Holders of the Funds'
Service shares bear all fees paid to service organizations for their services
under the plan. The plan does not cover, and the fees thereunder are not payable
to service organizations with respect to, Institutional shares or Retail shares.
Shares of the Nations Funds are distributed by Stephens, a broker-dealer
registered with the Commission under the 1934 Act, pursuant to a Distribution
Agreement.
Primary A Shares. Stephens receives no compensation in connection with the
distribution of Primary A Shares of the Nations Funds.
Investor A Shares. The Nations Funds have adopted an Amended and Restated
Shareholder Servicing and Distribution Plan (the "Investor A Plan") pursuant to
Rule 12b-1 under the 1940 Act with respect to each Fund's Investor A Shares. The
Investor A Plan provides that each Fund may pay Stephens or banks,
broker/dealers or other financial institutions that offer Shares of the Fund and
that have entered into a Sales Support Agreement with Stephens ("Selling
Agents") or a Shareholder Servicing Agreement with Nations ("Servicing Agents"),
up to 0.10% (on an annualized basis) of the average daily net asset value of
Investor A Shares of the Money Market Funds and up to 0.25% (on an annualized
basis) of the average daily net asset value of the non-money market funds in the
Nations Funds Family.
37
<PAGE>
In addition, the Directors have approved a shareholder servicing plan
("Servicing Plan") with respect to Investor A shares of Nations Prime Fund and
Nations Treasury Fund, pursuant to which the Funds may pay servicing agents that
have entered into a servicing agreement with Nations for certain shareholder
support services that are provided by the servicing agents. Payments under the
Servicing Plan calculated daily and paid monthly at a rate or rates set from
time to time by Nations, provided that the annual rate may not exceed 0.25% of
the average daily net asset value of each Fund's Investor A shares.
Daily Shares: In addition, the Nations Funds have approved an Amended and
Restated Shareholder Servicing Plan ("Servicing Plan") with respect to the Daily
Shares of the Nations Tax Exempt Fund. Pursuant to the Servicing Plan, the Fund
may compensate servicing agents for shareholder support services that are
provided by the servicing agents to their customers that own Daily Shares.
Payments under the Servicing Plan will be calculated daily and paid monthly at a
rate set from time to time by the Board of Trustees, provided that the annual
rate may not exceed 0.25% of the average daily net asset value of the Fund's
Daily Shares. The shareholder services provided by servicing agents may include
general shareholder liaison services; processing purchase, exchange and
redemption requests from customers and placing orders with Stephens or the
transfer agent; processing dividend and distribution payments; providing sales
information; arranging for bank wires and providing such other services as may
be reasonably requested.
Pursuant to Rule 12b-1 of the 1940 Act, the Trustees of Nations also have
adopted a distribution plan ("Distribution Plan") with respect to Daily Shares
of the Nations Tax Exempt Fund. Under the Distribution Plan, a Fund may
compensate or reimburse Stephens for any activities or expenses primarily
intended to result in the sale of Daily Shares. Payments to Stephens under the
Fund's Distribution Plan will be calculated daily and paid monthly at a rate or
rates set from time to time by the Board of Trustees, provided that the annual
rate may not exceed 0.45% of the average daily net asset value of the Fund's
Daily Shares. Payments to Stephens under the Distribution Plan will be used
primarily to compensate or reimburse Stephens for distribution services provided
by Stephens and related expenses incurred by Stephens, including payments by
Stephens to compensate or reimburse selling agents for sales support services
provided by such selling agents.
Administration Agreements. The Emerald Funds have entered into an
Administration Agreement with BISYS Fund Services Limited Partnership.
Administrative services are provided to the Nations Funds by Stephens and First
Data as co-administrator and NationsBank as sub-administrator to Stephens. The
types of administrative services provided to the Emerald Funds and Nations Funds
by their respective Administrators (and, in the case of the Nations Funds,
Co-Administrator) are substantially similar.
38
<PAGE>
Shareholder Transactions and Services. The Emerald Funds and the
corresponding Nations Funds offer generally similar shareholder services and
transactions. There are however, some differences. For example, the minimum
initial and subsequent investment amount for Emerald Funds' Institutional shares
is generally $5,000, while the minimum amount for the corresponding Primary A
shares of the Nations Funds is $250,000. For a detailed comparison of
shareholder transactions and services see Appendix V.
After the Reorganization, Nations will continue to honor any standing
instructions regarding the corresponding Emerald 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. For a complete description and comparison of the terms
applicable to standing instructions and other account features regarding the
Emerald and Nations Funds, see Appendix V to this Proxy/Prospectus.
INFORMATION RELATING TO VOTING MATTERS
General Information. This Proxy/Prospectus is being furnished in
connection with the solicitation of proxies for the Meeting by the Board of
Trustees of Emerald. It is expected that the solicitation of proxies will be
primarily by mail. Officers and service contractors of Emerald and Nations also
may solicit proxies by telefacsimile. In this connection, Emerald has retained
ADP Proxy Services to assist in the solicitation of proxies for the
Reorganization. Shareholders may vote by (1) mail, by marking, signing, dating
and returning the enclosed Proxy Ballot in the enclosed postage-paid envelope;
or (2) telefacsimile, by marking, signing, dating and faxing the enclosed Proxy
Ballot to ADP Proxy Services at [insert]. Any shareholder giving a proxy may
revoke it at any time before it is exercised by submitting to Emerald a written
notice or revocation or a subsequently executed proxy or by attending the
Meeting and voting in person.
If a proxy solicitation agent is hired to conduct the proxy vote, the
expenses incurred as a result will be borne by NBAI.
Only shareholders of record at the close of business on March [23], 1998
will be entitled to vote at the Meeting. On that date, the following Emerald
Shares were outstanding and entitled to be voted.
39
<PAGE>
Name of Emerald Fund and Class Shares Entitled to Vote
- ------------------------------ -----------------------
Emerald International Equity Fund --
Retail Shares
Institutional Shares
Total Shares
Emerald Prime Fund --
Retail Shares
Institutional Shares
Service Shares
Total Shares
Emerald Small Capitalization Fund --
Retail Shares
Institutional Shares
Total Shares
Emerald Treasury Fund --
Retail Shares
Institutional Shares
Service Shares
Total Shares
Emerald U.S. Government Securities Fund --
Retail Shares
Institutional Shares
Total Shares
Each whole and fractional share of an Emerald 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 Interim Advisory Agreements, the
Interim Sub-Advisory Agreement and the Reorganization Agreement are being
submitted for approval at the Meeting by Emerald's shareholders pursuant to the
Order and the provisions of Emerald's Agreement and Declaration of Trust. With
respect to each Emerald Fund, approval and ratification of the Interim Advisory
Agreements requires the approval of a majority of the outstanding shares of that
Emerald Fund voting separately on a portfolio-by-portfolio basis. With respect
to the Emerald Tax-Exempt Fund, approval of the Interim Sub-Advisory Agreement
requires the approval of a majority of the
40
<PAGE>
outstanding shares of that Emerald Fund voting separately on a
portfolio-by-portfolio basis. The Reorganization Agreement must be approved by a
majority of the outstanding shares of the Emerald Funds voting separately on a
portfolio-by-portfolio basis and the reorganization of Emerald contemplated
therein must be approved by a majority of the shares outstanding and entitled to
vote, voting in the aggregate, of all of the series of Emerald, including those
funds that are not part of this Proxy/Prospectus. A vote for the Reorganization
Agreement includes a vote for the reorganization of Emerald; correspondingly, a
vote against the Reorganization Agreement is a vote against the reorganization
of Emerald. Separate proxy solicitation materials are being mailed to the
shareholders of all other series of Emerald seeking the approval of similar
agreements and plans of reorganization and, consequently, also Emerald's
reorganization.
The Reorganization Agreement provides that in the event the Reorganization
Agreement is approved with respect to less than all of the Emerald Funds, the
failure of an Emerald 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 Emerald Funds. It is possible that a
majority of an Emerald Fund's shareholders may approve the Reorganization
Agreement while a sufficient majority of all shareholders of Emerald series
voting in the aggregate does not vote to approve the reorganization of Emerald.
In such a case, the Board of Trustees will contemplate what further action is
appropriate.
With respect to the approval of the Interim Agreements, the term "majority
of the outstanding shares" of an Emerald Fund means the lessor of (i) 67% of the
shares of the particular Fund present at the Meeting if the holders of more than
50% of the outstanding shares of such Fund are present or (ii) more than 50% of
the outstanding shares of the particular Fund. With respect to the approval of
the Reorganization Agreement and the reorganization contemplated therein, the
term "majority of the outstanding shares" of Emerald or an Emerald Fund means
more than 50% of the outstanding shares of Emerald or the particular Emerald
Fund, as applicable. The vote of the shareholders of the Nations Funds is not
being solicited, since their approval or consent is not necessary for the
Reorganization.
The approval of the Interim Advisory Agreements by the Board of Trustees
of Emerald is discussed above under "Information Relating to Proposal
1--Approval of the Interim Agreements-Emerald Board Consideration." The approval
of the Reorganization Agreement by the Board of Trustees of Emerald is discussed
above under "Information Relating to Proposal 2--Approval of the Reorganization
Agreement-Emerald Board Consideration." The Reorganization Agreement was
approved by the Board of Trustees of Nations at a meeting held on January 16,
1998.
As of March 16, 1998, the officers and Trustees of Emerald as a group
owned less than 1% of any of the Emerald Funds. As of March 16, 1998, the
officers and Trustees of Nations as a group owned less than 1% of any of the
Nations Funds. Table IV(A) shows the name, address and share ownership of each
person known to Emerald to have beneficial or record ownership with respect to
5% or more of a class of a Emerald Fund as
41
<PAGE>
of March 16, 1998. Table IV(B) shows the name, address and share ownership of
each person known to Nations to have beneficial or record ownership with respect
to 5% or more of a class of a Nations Fund as of March 16, 1998.
TABLE IV(A)
<TABLE>
<CAPTION>
Class; Amount of Percentage Percentage Percentage
Name and Shares Owned; of of of Fund
Emerald Fund Address Type of Ownership Class Fund Post-Closing
------------ -------- ----------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
</TABLE>
TABLE IV(B)
<TABLE>
<CAPTION>
Class; Amount of Percentage Percentage Percentage
Name and Shares Owned; of of of Fund
Nations Fund Address Type of Ownership Class Fund Post-Closing
------------ -------- ----------------- ---------- ---------- ------------
<S> <C> <C> <C> <C> <C>
</TABLE>
For purposes of the 1940 Act, any person who owns directly or through one
or more controlled companies more than 25% of the voting securities of a company
is presumed to "control" such company. Accordingly, to the extent that a
shareholder identified in the foregoing table is identified as the beneficial
holder 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 Emerald have been advised by NationsBank that the shares of
each Emerald Fund over which NationsBank and its affiliates have voting power
may be voted: by NationsBank itself in its capacity as fiduciary; by NationsBank
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 Interim Agreements and/or the Reorganization Agreement are not
received by one or more of the Emerald Funds, one or more adjournment(s) may be
proposed to permit further solicitation of proxies. Any adjourned session or
sessions may be held, within a reasonable time after the date set for the
original meeting. 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
Emerald Funds (but not the other Emerald Funds) on some or all matters before
any such adjournment(s) if sufficient votes have been received for approval. A
quorum is constituted with respect to Emerald or an Emerald Fund by the presence
in person or by proxy of the holders of more than 50% of the outstanding shares
of Emerald or the
42
<PAGE>
Emerald 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. 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 not be treated as shares that are present at the Meeting and,
accordingly, could make it more difficult to obtain the requisite approvals.
Annual Meetings and Shareholder Meetings. Neither Nations or Emerald
presently intends to hold annual meetings of shareholders for the election of
trustees and other business unless otherwise required by the 1940 Act. Under
certain circumstances, however, holders of at least 10% of the outstanding
shares of either Emerald 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, 1997, 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 Statement/Prospectus concerning Nations
was provided by Nations.
ADDITIONAL INFORMATION ABOUT EMERALD
43
<PAGE>
Additional information about the Emerald Funds is included in their
prospectuses and statements of additional information, dated April 1, 1997 as
supplemented through the date hereof, which have been filed with the SEC. Copies
of these prospectuses and the related statements of additional information may
be obtained without charge by writing or calling Emerald at the address and
telephone number set forth on the first page of this Proxy/Prospectus. Reports
and other information filed by Emerald 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 Emerald listed above. In addition,
these materials can be inspected and copied at the SEC's Regional Offices at 7
World Trade Center, Suite 1300, New York, New York 10048, and Northwestern
Atrium Center, 500 West Madison Street, Suite 1400, Chicago, Illinois 60661.
Copies of such materials also can be obtained from the Public Reference Branch,
Office of Consumer Affairs and Information Services, Securities and Exchange
Commission, Washington, D.C. 20549, at prescribed rates.
Information included in this Proxy Statement/Prospectus concerning Emerald
was provided by Emerald.
FINANCIAL STATEMENTS
The unaudited financial statements and condensed financial information for
shares of the Nations Funds for the semi-annual period ended September 30, 1997
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 audited financial statements and condensed financial
information for shares of the Emerald Fund for the annual period ended November
30, 1997 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 have been audited by Price Waterhouse LLP, independent accountants, to the
extent indicated in their reports thereon, also incorporated by reference or
included in such prospectuses and statements of additional information, and have
been incorporated herein by reference in reliance upon such reports given upon
the authority of such firms as experts in accounting and auditing.
The audited financial statements and financial highlights of the Nations
Funds as of and for the year ended March 31, 1997, have been incorporated by
reference herein and in the statement of additional information in reliance upon
the report of Price Waterhouse LLP, independent accountants, which is also
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
The audited financial statements and financial highlights of the Emerald
Funds for the year ended November 30, 1997, have been incorporated by reference
herein and in the
44
<PAGE>
registration statement. These financial statements have been audited by KPMG
Peat Marwick LLP, independent auditors, as stated in their reports, which have
also been incorporated by reference herein, and have been so included upon the
report of such firm given upon their authority as experts in accounting and
auditing.
The audited financial statements and financial highlights of the Pilot
Small Capitalization Equity Fund (a predecessor to the Nations Small Company
Growth Fund) for the year ended May 16, 1997, have been incorporated by
reference herein and in the statement of additional information in reliance upon
the report of Arthur Andersen LLP, independent public accountants, which is also
incorporated by reference herein, and upon the authority of said firm as experts
in accounting and auditing.
OTHER BUSINESS
Emerald's Board of Trustees 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 Emerald or to Nations in writing
at the address(es), or by phone at the phone number(s), on the cover page of
this Proxy/Prospectus.
* * *
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING ARE REQUESTED
TO MARK, SIGN AND DATE THE ENCLOSED PROXY AND RETURN IT IN THE ENCLOSED
ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE UNITED STATES. SHAREHOLDERS
ALSO MAY RETURN PROXIES BY TELEFACSIMILE.
EMERALD WILL FURNISH, WITHOUT CHARGE, COPIES OF ITS NOVEMBER 30, 1997
ANNUAL REPORTS TO ANY SHAREHOLDER UPON REQUEST ADDRESSED TO: THE EMERALD FUNDS
3435 STELZER ROAD, COLUMBUS, OHIO 43219-3035 OR BY TELEPHONE AT 1-800-637-3759
45
<PAGE>
APPENDIX I
Interim Investment Advisory Agreements and
Interim Sub-Advisory Agreement
-------------------------------
<PAGE>
INVESTMENT ADVISORY AGREEMENT
(Treasury Fund and Prime Fund)
AGREEMENT made as of January 9, 1998, between EMERALD FUNDS, a
Massachusetts business trust (herein called the "Trust"), and BARNETT CAPITAL
ADVISORS, INC., a wholly-owned indirect subsidiary of Barnett Banks, Inc.
(herein called the "Investment Adviser").
WHEREAS, the Trust is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended ("1940
Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to
furnish investment advisory and other services to the Trust for its Treasury
Fund and Prime Fund portfolios (the "Funds"), and the Investment Adviser is
willing to so furnish such services;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment.
(a) The Trust hereby appoints the Investment Adviser to act as
investment adviser to the Trust's Treasury Fund and Prime Fund for the period
and on the terms set forth in this Agreement. The Investment Adviser accepts
such appointment and agrees to furnish the services herein set forth for the
compensation herein provided.
(b) In the event that the Trust establishes one or more
portfolios other than the Treasury Fund and Prime Fund with respect to which it
desires to retain the Investment Adviser to act as investment adviser hereunder,
it shall notify the Investment Adviser in writing. If the Investment Adviser is
willing to render such services under this Agreement it shall notify the Trust
in writing whereupon such portfolio shall become a Fund hereunder and shall be
subject to the provisions of this Agreement to the same extent as the two Funds
named above in subparagraph (a) except to the extent that said provisions
(including those relating to the compensation payable by the Fund to the
Investment Adviser) are modified with respect to such Fund in writing by the
Trust and the Investment Adviser at the time.
<PAGE>
2. Delivery of Documents.
The Trust has furnished the Investment Adviser with copies
properly certified or authenticated of each of the following:
(a) The Trust's Agreement and Declaration of Trust, as filed
with the State Secretary of the Commonwealth of Massachusetts on March 16, 1988,
and any amendments thereto (such Agreement and Declaration of Trust, as
presently in effect and as it shall from time to time be amended, is herein
called the "Declaration of Trust");
(b) The Trust's Code of Regulations and any amendments
thereto;
(c) Resolutions of the Trust's Board of Trustees authorizing
the appointment of the Investment Adviser and approving this Agreement;
(d) The Trust's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange Commission on March
21, 1988 and any amendments thereto;
(e) The Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 as amended ("1933 Act") (File No. 33-20658) and under the
1940 Act as filed with the Securities and Exchange Commission on March 21, 1988
and any amendments thereto; and
(f) The most recent prospectuses of the Funds (such
prospectuses together with the related statement of additional information, as
presently in effect and all amendments and supplements thereto, are herein
called "Prospectuses").
The Trust will furnish the Investment Adviser from time to time with copies of
all amendments of or supplements to the foregoing, if any.
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<PAGE>
3. Services.
Subject to the supervision of the Trust's Board of Trustees, the
Investment Adviser will be responsible for the management of, and will provide a
continuous investment program for, the investment portfolio of each Fund,
including investment research and management with respect to all securities,
investments, cash and cash equivalents in the Funds. The Investment Adviser will
determine from time to time what securities and other investments will be
purchased, retained or sold by each of the Funds. The Investment Adviser will
provide the services rendered by it under this Agreement in accordance with each
Fund's investment objective, policies and restrictions as stated in the
Prospectus for each Fund and resolutions of the Trust's Board of Trustees.
Without limiting the generality of the foregoing, the Investment Adviser is
hereby specifically authorized to invest and reinvest the assets of a Fund, in
its discretion as investment adviser, in (i) variable amount demand notes of
corporate borrowers held by the Investment Adviser for the investment of monies
held by the Investment Adviser in its capacity as fiduciary, agent and custodian
and (ii) securities of other investment companies whether or not the same are
advised or managed by the Investment Adviser or another affiliated person of the
Trust. The Investment Adviser further agrees that it will:
(a) Establish and monitor investment criteria and policies for
each Fund;
(b) Update each Fund's cash availability throughout the day as
required;
(c) Maintain historical tax lots for each portfolio security
held by the Funds;
(d) Transmit trades to the Trust's custodian for proper
settlement;
(e) Maintain all books and records with respect to each Fund's
securities transactions;
(f) Supply the Trust and its Board of Trustees with reports,
statistical data and economic information as requested; and
(g) Prepare a quarterly broker security transaction summary
and monthly security transaction listing for each Fund.
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<PAGE>
4. Other Covenants.
The Investment Adviser agrees that it:
(a) will comply with all applicable Rules and Regulations of
the Securities and Exchange Commission and will in addition conduct its
activities under this Agreement in accordance with other applicable law;
(b) will use the same skill and care in providing such
services as it uses in providing services to fiduciary accounts for which it has
investment responsibilities;
(c) will place orders pursuant to its investment
determinations for each Fund either directly with the issuer or with any broker
or dealer. In executing portfolio transactions and selecting brokers or dealers,
the Investment Adviser will use its best efforts to seek on behalf of the Funds
the best overall terms available. In assessing the best overall terms available
for any transaction, the Investment Adviser shall consider all factors that it
deems relevant, including the breadth of the market in the security, the price
of the security, the financial condition and execution capability of the broker
or dealer, and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In evaluating the best overall
terms available, and in selecting the broker-dealer to execute a particular
transaction, the Investment Adviser may also consider the brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) provided to the Funds and other accounts over which the Investment
Adviser or an affiliate of the Investment Adviser exercises investment
discretion. The Investment Adviser is authorized, subject to the prior approval
of the Trust's Board of Trustees, to pay to a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for any of the Funds which is in excess of the amount of commission
another broker or dealer would have charged for effecting that transaction if,
but only if, the Investment Adviser determines in good faith that such
commission was reasonable in relation to the value of the brokerage and research
services provided by such broker or dealer -- viewed in terms of that particular
transaction or in terms of the overall responsibilities of the Investment
Adviser to the Funds. In addition, the Investment Adviser is authorized to take
into account the sale of shares of the Trust in allocating purchase and sale
orders for portfolio securities to brokers or dealers (including brokers and
dealers that are affiliated with the Investment Adviser or the Trust's principal
underwriter), provided that the Investment Adviser believes that
-4-
<PAGE>
the quality of the transaction and the commission are comparable to what they
would be with other qualified firms. In no instance, however, will portfolio
securities be purchased from or sold to the Investment Adviser, the Trust's
principal underwriter, or any affiliated person of either the Trust, the
Investment Adviser, or the principal underwriter, acting as principal in the
transaction, except to the extent permitted by the Securities and Exchange
Commission; and
(d) will maintain a policy and practice of conducting its
investment advisory services hereunder independently of the commercial banking
operations of its affiliates. When the Investment Adviser makes investment
recommendations for a Fund, its investment advisory personnel will not inquire
or take into consideration whether the issuer of securities proposed for
purchase or sale for the Fund's account are customers of the commercial
department of any of the Investment Adviser's affiliates. In dealing with
commercial customers, the Investment Adviser's affiliates will not inquire or
take into consideration whether securities of those customers are held by the
Funds.
5. Services Not Exclusive.
The services furnished by the Investment Adviser hereunder are
deemed not to be exclusive, and the Investment Adviser shall be free to furnish
similar services to others so long as its services under this Agreement are not
impaired thereby. To the extent that the purchase or sale of securities or other
investments of the same issuer may be deemed by the Investment Adviser to be
suitable for two or more accounts managed by the Investment Adviser, the
available securities or investments may be allocated in a manner believed by the
Investment Adviser to be equitable to each account. It is recognized that in
some cases this procedure may adversely affect the price paid or received by a
Fund or the size of the position obtainable for or disposed of by a Fund.
6. Books and Records.
In compliance with the requirements of Rule 31a-3 under the 1940
Act, the Investment Adviser hereby agrees that all records which it maintains
for each Fund are the property of the Trust and further agrees to surrender
promptly to the Trust any of such records upon the Trust's request. The
Investment Adviser further agrees to preserve for the periods prescribed by Rule
31a-2 under the 1940 Act the records required to be maintained by Rule 31a-1
under the 1940 Act.
-5-
<PAGE>
7. Expenses.
During the term of this Agreement, the Investment Adviser will pay
all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including brokerage commissions and other transaction charges, if any)
purchased or sold for the Funds. In addition, if in any fiscal year the
aggregate expenses of any Fund (as defined under the securities regulations of
any state having jurisdiction over such Fund) exceed the expense limitations of
any such state, the Trust may deduct from the fees to be paid hereunder, or the
Investment Adviser will bear, to the extent required by state law, that portion
of the excess which bears the same relation to the total of such excess as the
Investment Adviser's fee hereunder bears to the total fee otherwise payable for
the fiscal year by the Trust pursuant to this Agreement and the administration
agreement between the Trust and its administrator with respect to such Fund. The
Investment Adviser's obligation is not limited to the amount of its fees
hereunder. Such deduction or payment, if any, will be estimated and accrued
daily and paid on a monthly basis.
8. Compensation.
For the services provided and the expenses assumed pursuant to this
Agreement, the Trust will pay the Investment Adviser, and the Investment Adviser
will accept as full compensation therefor from the Trust, a fee, computed daily
and payable monthly, at the annual rate of .25% of the average daily net assets
of each of the Funds. Such fee as is attributable to each Fund shall be a
separate charge to such Fund and shall be the several (and not joint or joint
and several) obligation of each such Fund. The fees payable under this Section 8
by a Fund for the period beginning on the date of this Agreement and ending on
the date the shareholders of the Fund approve this Agreement shall be maintained
in an interest-bearing escrow account until such Fund's shareholder's approve
the payment of such fees to the Investment Adviser. If a Fund's shareholders do
not approve the payment to the Investment Adviser of such fees for such period,
the balance in the escrow account shall be paid to such Fund.
-6-
<PAGE>
9. Limitation of Liability.
The Investment Adviser shall not be liable for any error of judgment
or mistake of law or for any loss suffered by the Trust in connection with the
performance of this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or negligence on the part of
the Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
10. Duration and Termination.
This Agreement shall become effective as of the date hereof with
respect to the Funds listed in Section 1(a) hereof, and with respect to any
additional Fund, on the date of receipt by the Trust of notice from the
Investment Adviser in accordance with Section 1(b) hereof that the Investment
Adviser is willing to serve as investment adviser with respect to such Fund,
provided that this Agreement (as supplemented by the terms specified in any
notice and agreement pursuant to Section 1(b) hereof) shall have been approved
by the shareholders of such additional Fund in accordance with the requirements
of the 1940 Act. Unless sooner terminated as provided herein, this Agreement
shall continue in effect until May 9, 1998 and, if approved by the shareholders
of a Fund on or before such date, shall continue in effect as to that Fund for
an additional period ending on November 30, 1998. Thereafter, if not terminated,
this Agreement shall automatically continue in effect as to a particular Fund
for successive annual periods ending on November 30, provided such continuance
is specifically approved at least annually (a) by the vote of a majority of
those members of the Trust's Board of Trustees who are not interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting such approval, and (b) by the Trust's Board of Trustees or by vote of
a majority of the outstanding voting securities of such Fund. Notwithstanding
the foregoing, this Agreement may be terminated as to any Fund at any time,
without the payment of any penalty, by the Trust (by vote of the Trust's Board
of Trustees or by vote of a majority of the outstanding voting securities of
such Fund), or by the Investment Adviser, on sixty days' written notice. This
Agreement will immediately terminate in the event of its assignment. (As used in
this Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meaning as such terms
have in the 1940 Act.)
-7-
<PAGE>
11. Amendment of This Agreement.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. No amendment of this Agreement shall be effective as to a particular
Fund until approved by vote of a majority of the outstanding voting securities
of such Fund.
12. Miscellaneous.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by New York law.
13. Names.
The names "Emerald Funds" and "Trustees of Emerald Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated March 15, 1988, which is hereby referred to and a
copy of which is on file at the office of the State Secretary of the
Commonwealth of Massachusetts and at the principal office of the Trust. The
obligations of "Emerald Funds" entered into in the name or on behalf thereof by
any of the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the Trust Property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust Property belonging to such class for the enforcement of any claims
against the Trust.
-8-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
EMERALD FUNDS
Attest: (a Massachusetts business trust)
/s/ Jeffrey A. Dalke By /s/ John G. Grimsley
- -------------------------- ---------------------------------
[Seal]
BARNETT CAPITAL ADVISORS, INC.
Attest:
___________________________ By /s/ Jack A. Ablin
[Seal] ---------------------------------
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<PAGE>
INVESTMENT ADVISORY AGREEMENT
(Equity Fund, Short-Term Fixed Income
Fund, U.S. Government Securities Fund, Florida
Tax-Exempt Fund, Small Capitalization Fund, Balanced Fund
Managed Bond Fund, International Equity Fund,
Equity Value Fund, Prime Advantage Institutional Fund
and Treasury Advantage Institutional Fund)
AGREEMENT made as of January 9, 1998 between EMERALD FUNDS, a
Massachusetts business trust (herein called the "Trust"), and BARNETT CAPITAL
ADVISORS, INC., a wholly-owned indirect subsidiary of Barnett Banks, Inc.
(herein called the "Investment Adviser").
WHEREAS, the Trust is registered as an open-end, management
investment company under the Investment Company Act of 1940, as amended ("1940
Act"); and
WHEREAS, the Trust desires to retain the Investment Adviser to
furnish investment advisory and other services to the Trust for certain of the
Trust's portfolios, including its Equity Fund, Short-Term Fixed Income Fund,
U.S. Government Securities Fund, Florida Tax-Exempt Fund, Small Capitalization
Fund, Balanced Fund, Managed Bond Fund, International Equity Fund, Equity Value
Fund, Prime Advantage Institutional Fund and Treasury Advantage Institutional
Fund ("the Funds") and the Investment Adviser is willing to so furnish such
services;
NOW, THEREFORE, in consideration of the mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment.
(a) The Trust hereby appoints the Investment Adviser to act as
investment adviser to the Trust's Equity Fund, Short-Term Fixed Income Fund,
U.S. Government Securities Fund, Florida Tax-Exempt Fund, Small Capitalization
Fund, Balanced Fund, Managed Bond Fund, International Equity Fund, Equity Value
Fund, Prime Advantage Institutional Fund and Treasury Advantage Institutional
Fund, for the period and on the terms set forth in this Agreement. The
Investment Adviser accepts such appointment and agrees to furnish the services
herein set forth for the compensation herein provided.
(b) In the event that the Trust establishes one or more
portfolios other than the Funds with respect to which it desires to retain the
Investment Adviser to act as investment adviser hereunder, it shall notify the
Investment Adviser in writing. If the Investment Adviser is willing to render
such services under this Agreement it shall notify the Trust in writing
whereupon such portfolio shall become a Fund hereunder and shall be subject to
the provisions of this Agreement to the same extent as the Funds named above in
subparagraph (a) except to the
<PAGE>
extent that said provisions (including those relating to the compensation
payable by the Fund to the Investment Adviser) are modified with respect to such
Fund in writing by the Trust and the Investment Adviser at the time.
(c) It is understood that the Investment Adviser may from time
to time employ or associate with such person or persons as the Investment
Adviser may believe to be particularly fitted to assist it in the performance of
this Agreement with respect to the International Equity Fund, Equity Value Fund,
Prime Advantage Institutional Fund and Treasury Advantage Institutional Fund;
provided, however, that the compensation of such person or persons shall be paid
by the Investment Adviser. In addition, notwithstanding any such employment or
association, the Investment Adviser shall itself (i) in the case of all such
Funds (A) establish and monitor general investment criteria and policies for
such Funds, (B) review and analyze on a periodic basis such Funds' portfolio
holdings and transactions in order to determine their appropriateness in light
of such Funds' shareholder base, and (C) review and analyze on a periodic basis
the policies established by any sub-adviser for such Funds with respect to the
placement of orders for the purchase and sale of portfolio securities; and (ii)
in the case of the International Equity Fund and Equity Value Fund (D) provide
for the investment of such Funds' cash balances to the extent not provided for
by any sub-adviser, (E) review, monitor, analyze and report to the Board of
Trustees on the performance of any sub-adviser, (F) recommend, either in its
sole discretion or in conjunction with any sub-adviser, potential changes in
investment policy, (G) furnish to the Board of Trustees or any sub-adviser
reports, statistics and economic information as may be requested, (H) review
investments in such Funds on a periodic basis for compliance with such Funds'
investment objectives, policies and restrictions as stated in their
Prospectuses; and (I) review jointly with any sub-adviser country and regional
investment allocation guidelines for such Funds, as well as investment hedging
guidelines, if any. Subject to the foregoing, it is agreed that investment
advisory services to the International Equity Fund, Equity Value Fund, Prime
Advantage Institutional Fund or Treasury Advantage Institutional Fund may be
provided by a sub-investment adviser (the "Sub-Adviser") pursuant to a
sub-advisory agreement agreeable to the Trust and approved in accordance with
the provisions of the 1940 Act (the "Sub-Advisory Agreement").
2. Delivery of Documents.
The Trust has furnished the Investment Adviser with copies
properly certified or authenticated of each of the following:
(a) The Trust's Agreement and Declaration of Trust, as filed
with the State Secretary of the Commonwealth of Massachusetts on
March 16, 1988, and any amendments thereto (such Agreement and
Declaration of Trust, as presently in effect and as it shall from
time to time be amended, is herein called the "Declaration of
Trust");
(b) The Trust's Code of Regulations and any amendments
thereto;
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<PAGE>
(c) Resolutions of the Trust's Board of Trustees authorizing
the appointment of the Investment Adviser and approving this
Agreement;
(d) The Trust's Notification of Registration on Form N-8A
under the 1940 Act as filed with the Securities and Exchange
Commission on March 21, 1988 and any amendments thereto;
(e) The Trust's Registration Statement on Form N-1A under the
Securities Act of 1933 as amended ("1933 Act") (File No. 33-20658)
and under the 1940 Act as filed with the Securities and Exchange
Commission on March 21, 1988 and any amendments thereto; and
(f) The most recent prospectuses of the Funds (such
prospectuses together with the related statement of additional
information, as presently filed with the Securities and Exchange
Commission and all amendments and supplements thereto, are herein
called "Prospectuses").
The Trust will furnish the Investment Adviser from time to time with copies of
all amendments of or supplements to the foregoing, if any.
3. Services.
Subject to the supervision of the Trust's Board of Trustees, the
Investment Adviser will be responsible for the management of, and will provide a
continuous investment program for, the investment portfolio of each Fund,
including investment research and management with respect to all securities,
investments, cash and cash equivalents in the Funds. The Investment Adviser will
determine from time to time what securities and other investments will be
purchased, retained or sold by each of the Funds. The Investment Adviser will
provide the services rendered by it under this Agreement in accordance with each
Fund's investment objective, policies and restrictions as stated in the
Prospectus for each Fund and resolutions of the Trust's Board of Trustees.
Without limiting the generality of the foregoing, the Investment Adviser is
hereby specifically authorized to invest and reinvest the assets of a Fund, in
its discretion as investment adviser, in (i) variable amount demand notes of
corporate borrowers held by the Investment Adviser for the investment of monies
held by the Investment Adviser in its capacity as fiduciary, agent and custodian
and (ii) securities of other investment companies whether or not the same are
advised or managed by the Investment Adviser or another affiliated person of the
Trust. The Investment Adviser further agrees that it will:
(a) Establish and monitor investment criteria and policies for
each Fund;
(b) Update each Fund's cash availability throughout the day as
-3-
<PAGE>
required;
(c) Maintain historical tax lots for each portfolio security
held by the Funds;
(d) Transmit trades to the Trust's custodian for proper
settlement;
(e) Maintain all books and records with respect to each Fund's
securities transactions;
(f) Supply the Trust and its Board of Trustees with reports,
statistical data and economic information as requested; and
(g) Prepare a quarterly broker security transaction summary
and monthly security transaction listing for each Fund.
4. Other Covenants.
The Investment Adviser agrees that it:
(a) will comply with all applicable Rules and Regulations of
the Securities and Exchange Commission and will in addition conduct its
activities under this Agreement in accordance with other applicable law;
(b) will use the same skill and care in providing such
services as it uses in providing services to fiduciary accounts for which it has
investment responsibilities;
(c) will place orders pursuant to its investment
determinations for each Fund either directly with the issuer or with any broker
or dealer. In executing portfolio transactions and selecting brokers or dealers,
the Investment Adviser will use its best efforts to seek on behalf of the Funds
the best overall terms available. In assessing the best overall terms available
for any transaction, the Investment Adviser shall consider all factors that it
deems relevant, including the breadth of the market in the security, the price
of the security, the financial condition and execution capability of the broker
or dealer, and the reasonableness of the commission, if any, both for the
specific transaction and on a continuing basis. In evaluating the best overall
terms available, and in selecting the broker-dealer to execute a particular
transaction, the Investment Adviser may also consider the brokerage and research
services (as those terms are defined in Section 28(e) of the Securities Exchange
Act of 1934) provided to the Funds and other accounts over which the Investment
Adviser or an affiliate of the Investment Adviser exercises investment
discretion. The Investment Adviser is authorized, subject to the prior approval
of the Trust's Board of Trustees, to pay to a broker or dealer who provides such
brokerage and research services a commission for executing a portfolio
transaction for any of the Funds which is in excess of the amount of commission
another broker or dealer would have charged for effecting that
-4-
<PAGE>
transaction if, but only if, the Investment Adviser determines in good faith
that such commission was reasonable in relation to the value of the brokerage
and research services provided by such broker or dealer -- viewed in terms of
that particular transaction or in terms of the overall responsibilities of the
Investment Adviser to the Funds. In addition, the Investment Adviser is
authorized to take into account the sale of shares of the Trust in allocating
purchase and sale orders for portfolio securities to brokers or dealers
(including brokers and dealers that are affiliated with the Investment Adviser
or the Trust's principal underwriter), provided that the Investment Adviser
believes that the quality of the transaction and the commission are comparable
to what they would be with other qualified firms. In no instance, however, will
portfolio securities be purchased from or sold to the Investment Adviser, the
Trust's principal underwriter, or any affiliated person of either the Trust, the
Investment Adviser, or the principal underwriter, acting as principal in the
transaction, except to the extent permitted by the Securities and Exchange
Commission; and
(d) will maintain a policy and practice of conducting its
investment advisory services hereunder independently of the commercial banking
operations of its affiliates. When the Investment Adviser makes investment
recommendations for a Fund, its investment advisory personnel will not inquire
or take into consideration whether the issuer of securities proposed for
purchase or sale for the Fund's account are customers of the commercial
department of any of the Investment Adviser's affiliates. In dealing with
commercial customers, the Investment Adviser's affiliates will not inquire or
take into consideration whether securities of those customers are held by the
Funds.
5. Services Not Exclusive.
The services furnished by the Investment Adviser hereunder are
deemed not to be exclusive, and the Investment Adviser shall be free to furnish
similar services to others so long as its services under this Agreement are not
impaired thereby. To the extent that the purchase or sale of securities or other
investments of the same issuer may be deemed by the Investment Adviser to be
suitable for two or more accounts managed by the Investment Adviser, the
available securities or investments may be allocated in a manner believed by the
Investment Adviser to be equitable to each account. It is recognized that in
some cases this procedure may adversely affect the price paid or received by a
Fund or the size of the position obtainable for or disposed of by a Fund.
6. Books and Records.
In compliance with the requirements of Rule 31a-3 under the
1940 Act, the Investment Adviser hereby agrees that all records which it
maintains for each Fund are the property of the Trust and further agrees to
surrender promptly to the Trust any of such records upon the Trust's request.
The Investment Adviser further agrees to preserve for the periods prescribed by
Rule 31a-2 under the 1940 Act the records required to be maintained by Rule
31a-1 under the 1940 Act.
-5-
<PAGE>
7. Expenses.
During the term of this Agreement, the Investment Adviser will
pay all expenses incurred by it in connection with its activities under this
Agreement other than the cost of securities, commodities and other investments
(including brokerage commissions and other transaction charges, if any)
purchased or sold for the Funds. In addition, if in any fiscal year the
aggregate expenses of the Equity Fund, U.S. Government Securities Fund or
Florida Tax-Exempt Fund (as defined under the securities regulations of any
state having jurisdiction over such Fund) exceed the expense limitations of any
such state, the Trust may deduct from the fees to be paid hereunder, or the
Investment Adviser will bear, to the extent required by state law, that portion
of the excess which bears the same relation to the total of such excess as the
Investment Adviser's fee hereunder with respect to such Fund bears to the total
fee otherwise payable for the fiscal year by the Trust pursuant to this
Agreement and the administration agreement between the Trust and its
administrator with respect to such Fund. With respect to the other Funds, if in
any fiscal year the aggregate expenses of any Fund (as defined under the
securities regulations of any state having jurisdiction over such Fund) exceed
the expense limitation of any such state, the Trust may deduct from the fees to
be paid hereunder, or the Investment Adviser will bear, to the extent required
by state law, that portion of the excess which bears the same relation to the
total of such excess as the Investment Adviser's fees hereunder with respect to
the Fund bears to the total fees otherwise payable with respect to such Fund for
the fiscal year by the Trust hereunder and under the administration agreement
between the Trust and its administrator. The Investment Adviser's obligation is
not limited to the amount of its fees hereunder. Such deduction or payment, if
any, will be estimated and accrued daily and paid on a monthly basis.
8. Compensation.
For the services provided and the expenses assumed pursuant to
this Agreement, the Trust will pay the Investment Adviser, and the Investment
Adviser will accept as full compensation therefor from the Trust, a fee,
computed daily and payable monthly, at the following annual rates of the average
daily net assets of each respective Fund as follows: Equity Fund -- 0.60%;
Short-Term Fixed Income Fund -- 0.40%; U.S. Government Securities Fund -- 0.40%;
Florida Tax-Exempt Fund -- 0.40%; Small Capitalization Fund -- 1.00%; Balanced
Fund -- 0.60%; Managed Bond Fund -- 0.40%; International Equity Fund - 1.00%;
Equity Value Fund - 0.60%; Prime Advantage Institutional Fund - 0.10%; and
Treasury Advantage Institutional Fund - 0.10%. Such respective fee as is
attributable to each Fund shall be a separate charge to such Fund and shall be
the several (and not joint or joint and several) obligation of each such Fund.
The fees payable by a Fund under this Section 8 for the period beginning on the
date of this Agreement and ending on the date the shareholders of the Fund
approve this Agreement shall be maintained in an interest-bearing escrow account
until such time as such Fund's shareholders approve the payment to the
Investment Adviser. If a Fund's shareholders do not approve the payment to the
Investment Adviser of such fees for such period, the balance in the escrow
account shall be paid to the Fund.
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<PAGE>
9. Limitation of Liability.
The Investment Adviser shall not be liable for any error of
judgment or mistake of law or for any loss suffered by the Trust in connection
with the performance of this Agreement, except a loss resulting from a breach of
fiduciary duty with respect to the receipt of compensation for services or a
loss resulting from willful misfeasance, bad faith or negligence on the part of
the Investment Adviser in the performance of its duties or from reckless
disregard by it of its obligations and duties under this Agreement.
10. Duration and Termination.
This Agreement shall become effective as of the date hereof
with respect to the Funds listed in Section 1(a) hereof, and with respect to any
additional Fund, on the date of receipt by the Trust of notice from the
Investment Adviser in accordance with Section 1(b) hereof that the Investment
Adviser is willing to serve as investment adviser with respect to such Fund,
provided that this Agreement (as supplemented by the terms specified in any
notice and agreement pursuant to Section 1(b) hereof) shall have been approved
by the shareholders of such additional Fund in accordance with the requirements
of the 1940 Act. Unless sooner terminated as provided herein, this Agreement
shall continue in effect until May 9, 1998 and, if approved by the shareholders
of a Fund on or before such date, shall continue in effect as to that Fund for
an additional period ending on November 30, 1998. Thereafter, if not terminated,
this Agreement shall automatically continue in effect as to a particular Fund
for successive annual periods ending on November 30, provided such continuance
is specifically approved at least annually (a) by the vote of a majority of
those members of the Trust's Board of Trustees who are not interested persons of
any party to this Agreement, cast in person at a meeting called for the purpose
of voting such approval, and (b) by the Trust's Board of Trustees or by vote of
a majority of the outstanding voting securities of such Fund. Notwithstanding
the foregoing, this Agreement may be terminated as to any Fund at any time,
without the payment of any penalty, by the Trust (by vote of the Trust's Board
of Trustees or by vote of a majority of the outstanding voting securities of
such Fund), or by the Investment Adviser, on sixty days' written notice. This
Agreement will immediately terminate in the event of its assignment. (As used in
this Agreement, the terms "majority of the outstanding voting securities,"
"interested persons" and "assignment" shall have the same meaning as such terms
have in the 1940 Act.)
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<PAGE>
11. Amendment of This Agreement.
No provision of this Agreement may be changed, waived,
discharged or terminated orally, but only by an instrument in writing signed by
the party against which enforcement of the change, waiver, discharge or
termination is sought. No amendment of this Agreement shall be effective as to a
particular Fund (in the case of the International Equity Fund, Equity Value
Fund, Prime Advantage Institutional Fund and Treasury Advantage Institutional
Fund, only to the extent required by the 1940 Act) until approved by vote of a
majority of the outstanding voting securities of such Fund.
12. Miscellaneous.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction or effect. If any provision of this
Agreement shall be held or made invalid by a court decision, statute, rule or
otherwise, the remainder of this Agreement shall not be affected thereby. This
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto and their respective successors and shall be governed by New York law.
13. Names.
The names "Emerald Funds" and "Trustees of Emerald Funds"
refer respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated March 15, 1988, which is hereby referred to and a
copy of which is on file at the office of the State Secretary of the
Commonwealth of Massachusetts and at the principal office of the Trust. The
obligations of "Emerald Funds" entered into in the name or on behalf thereof by
any of the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the Trust Property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust Property belonging to such class for the enforcement of any claims
against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
EMERALD FUNDS
Attest: (a Massachusetts business trust)
/s/ Jeffrey A. Dalke By /s/ John G. Grimsley
- -------------------------- ------------------------------
[Seal]
-8-
<PAGE>
BARNETT CAPITAL ADVISORS, INC.
Attest:
_________________________ By /s/ Jack A. Ablin
[Seal] -----------------------------
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<PAGE>
SUB-INVESTMENT ADVISORY AGREEMENT
(International Equity Fund)
AGREEMENT made as of January 9, 1998 between BARNETT CAPITAL
ADVISORS, INC. (herein called the "Adviser"), and BRANDES INVESTMENT PARTNERS,
L.P., a California limited partnership (herein called the "Sub-Adviser").
WHEREAS, EMERALD FUNDS, a Massachusetts business trust (herein
called the "Trust"), is registered as an open-end, management investment company
under the Investment Company Act of 1940, as amended ("1940 Act"); and
WHEREAS, pursuant to an Investment Advisory Agreement by and between
the Trust and the Adviser (herein called the "Investment Advisory Agreement"),
the Adviser has agreed to furnish investment advisory services to the Trust with
respect to its International Equity Fund investment portfolio (the "Fund"); and
WHEREAS, the Investment Advisory Agreement authorizes the Adviser to
sub-contract investment advisory services with respect to the International
Equity Fund to the Sub-Adviser pursuant to a sub-advisory agreement agreeable to
the Trust and approved in accordance with the provisions of the 1940 Act; and
WHEREAS, this Agreement has been so approved, and the Sub-Adviser is
willing to furnish sub-advisory services to the Fund upon the terms and
conditions herein set forth;
NOW, THEREFORE, in consideration of the premises and mutual
covenants herein contained, it is agreed between the parties hereto as follows:
1. Appointment.
The Adviser hereby appoints the Sub-Adviser to act as sub-investment
adviser to the Trust's International Equity Fund for the period and on the terms
set forth in this Agreement. The Sub-Adviser accepts such appointment and agrees
to furnish the services herein set forth for the compensation herein provided.
2. Services of Sub-Adviser.
Subject to the oversight and supervision of the Adviser and the
Trust's Board of Trustees, the Sub-Adviser will provide a continuous investment
program for the Fund, including investment
<PAGE>
research and management with respect to all securities and investments, except
for such cash balances of the Fund as are managed by the Adviser. Pursuant to
the foregoing, the Sub-Adviser will determine from time to time what securities
and other investments will be purchased, retained or sold by the Fund. The
Sub-Adviser will provide the services rendered by it under this Agreement in
accordance with the investment criteria and policies established from time to
time for the Fund by the Adviser, the Fund's investment objective, policies and
restrictions as stated in the Trust's Prospectus and Statement of Additional
Information for the Fund, and resolutions of the Trust's Board of Trustees.
The Sub-Adviser further agrees that it will:
(a) Provide information to the Fund's accountant for the purpose of
updating the Fund's cash availability throughout the day as required;
(b) Maintain historical tax lots for each portfolio security held by
the Fund;
(c) Transmit trades to the Trust's custodian for proper settlement;
(d) Maintain all books and records with respect to the Fund that are
required to be maintained under Rule 31a-1(f) under the 1940 Act;
(e) Supply the Adviser, the Trust and the Trust's Board of Trustees
with reports, statistical data and economic information as requested; and
(f) Prepare a quarterly broker security transaction summary and, if
requested in advance, monthly security transaction listing for the Fund.
3. Other Covenants.
The Sub-Adviser agrees that it:
(a) will comply with all applicable Rules and Regulations of the
Securities and Exchange Commission and will in addition conduct its activities
under this Agreement in accordance with other applicable law;
(b) will use the same skill and care in providing such services as
it uses in providing services to fiduciary accounts for which it has investment
responsibilities;
-2-
<PAGE>
(c) will place orders pursuant to its investment determinations for
the Fund either directly with the issuer or with any broker or dealer. In
executing portfolio transactions and selecting brokers or dealers, the
Sub-Adviser will use its best efforts to seek on behalf of the Fund the best
overall terms available. In assessing the best overall terms available for any
transaction, the Sub-Adviser shall consider all factors that it deems relevant,
including the breadth of the market in the security, the price of the security,
the financial condition and execution capability of the broker or dealer, and
the reasonableness of the commission, if any, both for the specific transaction
and on a continuing basis. In evaluating the best overall terms available, and
in selecting the broker-dealer to execute a particular transaction, the
Sub-Adviser may also consider the brokerage and research services (as those
terms are defined in Section 28(e) of the Securities Exchange Act of 1934)
provided to the Fund or other accounts over which the Sub-Adviser or an
affiliate of the Sub-Adviser exercises investment discretion. The Sub-Adviser is
authorized, subject to the prior approval of the Adviser and the Trust's Board
of Trustees, to pay to a broker or dealer who provides such brokerage and
research services a commission for executing a portfolio transaction for the
Fund which is in excess of the amount of commission another broker or dealer
would have charged for effecting that transaction if, but only if, the
Sub-Adviser determines in good faith that such commission was reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer -- viewed in terms of that particular transaction or in terms
of the overall responsibilities of the Sub-Adviser to the Fund. In addition, the
Sub-Adviser is authorized to take into account the sale of shares of the Trust
in allocating purchase and sale orders for portfolio securities to brokers or
dealers (including brokers and dealers that are affiliated with the Adviser,
Sub-Adviser or the Trust's principal underwriter), provided that the Sub-Adviser
believes that the quality of the transaction and the commission are comparable
to what they would be with other qualified firms. In no instance, however, will
portfolio securities be purchased from or sold to the Adviser, Sub-Adviser, the
Trust's principal underwriter or any affiliated person of either the Trust, the
Adviser, Sub-Adviser, or the principal underwriter, acting as principal in the
transaction, except to the extent permitted by the Securities and Exchange
Commission; and
(d) will treat confidentially and as proprietary information of the
Trust all records and other information relative to the Trust maintained by the
Sub-Adviser, and will not use such records and information for any purpose other
than performance of its responsibilities and duties hereunder, except after
prior notification to and approval in writing by the Trust,
-3-
<PAGE>
which approval shall not be unreasonably withheld and may not be withheld where
the Sub-Adviser may be exposed to civil or criminal contempt proceeding for
failure to comply, when requested to divulge such information by duly
constituted authorities, or when so requested by the Trust.
(e) will maintain a policy and practice of conducting its
sub-investment advisory services hereunder independently of its, and any of its
affiliates', commercial banking operations. When the Sub-Adviser makes
investment recommendations for the Fund, its investment advisory personnel will
not inquire or take into consideration whether the issuers of securities
proposed for purchase or sale for the Fund's account are customers of its, or
any of its affiliates', commercial department. In dealing with commercial
customers, the commercial department of the Sub-Adviser, or any of its
affiliates, will not inquire or take into consideration whether securities of
those customers are held by the Fund.
4. Services Not Exclusive.
The services furnished by the Sub-Adviser hereunder are deemed not
to be exclusive, and the Sub-Adviser shall be free to furnish similar services
to others so long as its services under this Agreement are not impaired thereby.
To the extent that the purchase or sale of securities or other investments of
the same issuer may be deemed by the Sub-Adviser to be suitable for two or more
accounts managed by the Sub-Adviser, the available securities or investments may
be allocated in a manner believed by the Sub-Adviser to be equitable to each
account. It is recognized that in some cases this procedure may adversely affect
the price paid or received by the Fund or the size of the position obtainable
for or disposed of by the Fund.
5. Books and Records.
In compliance with the requirements of Rule 31a-3 under the 1940
Act, the Sub-Adviser hereby agrees that all records which it maintains for the
Fund are the property of the Trust and further agrees to surrender promptly to
the Trust any of such records upon the Trust's request. The Sub-Adviser further
agrees to preserve for the periods prescribed by Rule 31a-2 under the 1940 Act
the records required to be maintained by it under this Agreement.
6. Expenses.
During the term of this Agreement, the Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities,
-4-
<PAGE>
commodities and other investments (including brokerage commissions, custodial
charges and other transaction costs, if any) purchased or sold for the Fund.
7. Compensation.
For the services provided and the expenses assumed pursuant to this
Agreement, the Adviser will pay the Sub-Adviser, and the Sub-Adviser will accept
as full compensation therefor, a fee, computed daily and payable monthly, at the
annual rate of .50% of the average daily net assets of the Fund. Such fee shall
be a separate charge to the Fund and shall be the several (and not joint or
joint and several) obligation of the Fund. The fees payable by the Adviser under
this Section 7 for the period beginning on the date of this Agreement and ending
on the date the shareholders of the Fund approve this Agreement shall be
maintained in an interest-bearing escrow account until such time as the Fund's
shareholders approve the payment of such fees to the Sub-Adviser. If the Fund's
shareholders do not approve the payment to the Sub-Adviser of such fees for such
period, the balance of the escrow account shall be paid to the Fund. The
Sub-Adviser acknowledges that it shall not be entitled to any further
compensation from either the Adviser or the Trust in respect of the services
provided and expenses assumed by it under this Agreement.
8. Limitation of Liability.
The Sub-Adviser shall not be liable for any error of judgment or
mistake of law or for any loss suffered by the Trust in connection with the
performance of this Agreement, except that the Sub-Adviser shall be liable to
the Trust for any loss resulting from a breach of fiduciary duty with respect to
the receipt of compensation for services or any loss resulting from willful
misfeasance, bad faith or negligence on the part of the Sub-Adviser in the
performance of its duties or from reckless disregard by it of its obligations
and duties under this Agreement.
-5-
<PAGE>
9. Duration and Termination.
This Agreement will become effective as of the date first above
written. Unless sooner terminated as provided herein this Agreement shall
continue in effect until May 9, 1998 and, if approved by the shareholders of the
Fund on or before such date, shall continue in effect for an additional period
ending on November 30, 1998. Thereafter, if not terminated, this Agreement shall
automatically continue in effect for successive annual periods ending on
November 30, provided such continuance is specifically approved at least
annually (a) by the vote of a majority of those members of the Trust's Board of
Trustees who are not interested persons of any party to this Agreement, cast in
person at a meeting called for the purpose of voting such approval, and (b) by
the Trust's Board of Trustees or by vote of a majority of the outstanding voting
securities of the Fund. Notwithstanding the foregoing, this Agreement may be
terminated as to the Fund at any time, without the payment of any penalty, by
the Adviser or by the Trust (by vote of the Trust's Board of Trustees or by vote
of a majority of the outstanding voting securities of the Fund), on sixty days'
written notice to the Sub-Adviser, or by the Sub-Adviser, on sixty days' written
notice to the Trust, provided that in each such case, notice shall be given
simultaneously to the Adviser. In addition, notwithstanding anything herein to
the contrary, in the event of the termination of the Investment Advisory
Agreement with respect to the Fund for any reason (whether by the Trust, by the
Adviser or by operation of law) this Agreement shall terminate upon the
effective date of such termination of the Investment Advisory Agreement. This
Agreement will also immediately terminate in the event of its assignment. (As
used in this Agreement, the terms "majority of the outstanding voting
securities," "interested persons" and "assignment" shall have the same meaning
as such terms have in the 1940 Act.)
10. Amendment of This Agreement.
No provision of this Agreement may be changed, waived, discharged or
terminated orally, but only by an instrument in writing signed by the party
against which enforcement of the change, waiver, discharge or termination is
sought. To the extent required by the 1940 Act, no amendment of this Agreement
shall be effective until approved by vote of a majority of the outstanding
voting securities of the Fund.
11. Miscellaneous.
The captions in this Agreement are included for convenience of
reference only and in no way define or delimit any of the provisions hereof or
otherwise affect their construction
-6-
<PAGE>
or effect. If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of this Agreement
shall not be affected thereby. This Agreement shall be binding upon and shall
inure to the benefit of the parties hereto and their respective successors and
shall be governed by Delaware law.
12. Names.
The names "Emerald Funds" and "Trustees of Emerald Funds" refer
respectively to the Trust created and the Trustees, as trustees but not
individually or personally, acting from time to time under an Agreement and
Declaration of Trust dated March 15, 1988, which is hereby referred to and a
copy of which is on file at the office of the State Secretary of the
Commonwealth of Massachusetts and at the principal office of the Trust. The
obligations of "Emerald Funds" entered into in the name or on behalf thereof by
any of the Trustees, representatives or agents are made not individually, but in
such capacities, and are not binding upon any of the Trustees, shareholders, or
representatives of the Trust personally, but bind only the Trust Property, and
all persons dealing with any class of shares of the Trust must look solely to
the Trust Property belonging to such class for the enforcement of any claims
against the Trust.
IN WITNESS WHEREOF, the parties hereto have caused this instrument
to be executed by their officers designated below as of the day and year first
above written.
BARNETT CAPITAL ADVISORS, INC.
BY: /s/ Jack A. Ablin
----------------------------------
TITLE: President
BRANDES INVESTMENT PARTNERS, L.P.
BY: /s/ Jeff Busby
----------------------------------
TITLE: Managing Partner
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<PAGE>
APPENDIX II
Agreement and Plan of Reorganization
----------------------------
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made
as of this _____ day of February, 1998, by and between Nations Fund, Inc.
("Nations Fund"), a Maryland corporation, for itself and on behalf of Nations
Government Securities Fund, Nations International Value Fund (Shell), Nations
Prime Fund, Nations Small Company Growth Fund and Nations Treasury Fund (each an
"Acquiring Fund" and collectively the "Acquiring Funds"), all portfolios of
Nations Fund, and Emerald Funds, a Massachusetts business trust, for itself and
on behalf of the Emerald International Equity Fund, Emerald Prime Fund, Emerald
Small Capitalization Fund, Emerald Treasury Fund and Emerald U.S. Government
Securities Fund (each an "Acquired Fund" and collectively the "Acquired Funds"),
all portfolios of Emerald 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
Liabilities (as defined in paragraph 1.3) of each corresponding Acquired Fund
("Liabilities"), 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 the
following Acquiring Fund -- Nations International Value Fund -- shall have
nominal assets and liabilities before the Reorganization(s), as defined in this
Agreement, and shall continue the investment operations of the following
corresponding Acquired Fund -- Emerald International Equity Fund -- thereafter,
and that in this regard certain actions should be taken as described in this
Agreement. This Agreement is intended to be and is adopted as a reorganization
for each Acquired Fund within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code").
In consideration of the promises and of the covenants and agreements
hereinafter set forth, the parties hereto, intending to be legally bound hereby,
covenant and agree as follows:
1. REORGANIZATION OF ACQUIRED FUNDS
1.1. Subject to the terms and conditions herein set forth, and on the
basis of the representations and warranties contained herein, each
Acquired
1
<PAGE>
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 of the corresponding Acquired Fund, net of the Acquired
Fund's Liabilities, 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. Such transfer, delivery and assumption
shall take place at the closing(s) provided for in paragraph 3.1
(hereinafter sometimes referred to as the "Closing(s)"). Promptly
after the Closing(s), each Acquired Fund shall distribute the
Acquiring Fund Shares to the shareholders of the Acquired Fund in
liquidation of the Acquired Fund as provided in paragraph 1.4
hereof. Such transaction(s) are hereinafter sometimes collectively
referred to as the "Reorganization(s)."
1.2.a. With respect to each Acquired Fund, the Fund Assets shall consist
of all property and assets of any nature whatsoever, including,
without limitation, all cash, cash equivalents, securities, claims
and receivables (including dividend and interest receivables) owned
by each Acquired Fund, and any prepaid expenses shown as an asset on
each Acquired Fund's books on the Closing Date.
1.2.b. At least fifteen (15) business days prior to the Closing Date, each
Acquired Fund will provide the corresponding Acquiring Fund with a
schedule of its securities and other assets and 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
2
<PAGE>
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.
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 of the corresponding
Acquired Fund, accrued, absolute, contingent or otherwise existing,
as of the Closing Date, which liabilities shall include any
obligation of the Emerald Funds to indemnify Emerald Funds Trustees
and officers, acting in their capacity as such, to the fullest
extent permitted by law and the Emerald Funds Agreement and
Declaration of Trust, as in effect as of the date of this Agreement
("Liabilities"). The Liabilities assumed by Nations Fund 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. 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 Emerald Funds, to transfer the
Acquiring Fund Shares then credited to the Acquired Fund's account
on the books of
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the Acquiring Fund to open accounts on the books of the Acquiring
Fund established and maintained by the Acquiring Fund's transfer
agent in the names of record of the Acquired Fund Investors and
representing the respective 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 beneficial
interest of the Acquired Fund will be redeemed and canceled
simultaneously therewith on the Acquired Fund's books; any
outstanding share certificates representing interests in the
Acquired Fund thereafter will represent the right to receive such
number of Acquiring Fund Shares after the Closing(s) as determined
in accordance with Section 1.1.
1.5. 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.
1.6. 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, Emerald 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 Emerald Funds shall remain the
exclusive responsibility of Emerald 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.
1.7. The failure of one Acquired Fund to consummate the transactions
contemplated hereby shall not affect the consummation or validity
of a Reorganization with respect to any other Acquired Fund, and
the provisions of this Agreement shall be construed to effect
this intent,
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including, without limitation, as the context requires, construing
the terms "Acquiring Fund" and "Acquired Fund" as meaning only those
series of Nations Fund and Emerald 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 Emerald Funds and shall be subject to
adjustment by the amount, if any, agreed to by Nations Fund 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 Emerald Funds, provided that
such determination shall be subject to the approval of Nations Fund.
Emerald Funds and Nations Fund 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 Emerald Funds and those
determined in accordance with the pricing policies and procedures of
the Acquiring Funds prior to the Applicable Valuation Date.
2.1.b. It is understood and agreed that the net asset value of the Fund
Assets of the Emerald Prime Fund and Emerald Treasury Fund shall be
based on the amortized cost valuation procedures that have been
adopted by the Board of Trustees of Emerald Funds; provided that if
the difference between the per share net asset values of the Emerald
Prime Fund and Emerald Treasury Fund and the corresponding Acquiring
Funds equal or exceed $.0025 on the Applicable Valuation Date, as
computed by using market values in accordance with the policies and
procedures established by Nations Fund (or as otherwise mutually
determined by the Boards of Trustees/Directors of Emerald Funds and
Nations Funds), either party shall have the right to postpone the
Applicable Valuation Date and Closing Date with respect to the
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Emerald Fund until such time as the per share difference is less
than $.0025.
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. The Closing(s) for the Reorganization(s) shall occur on May 15,
1998, 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' Sub-Custodian, Custodian in the case of the Nations
International Value Fund, pursuant to instruction to be delivered
prior to the Closing(s).
3.3. Notwithstanding anything herein to the contrary, in the event that
on the Applicable Valuation Date (a) the New York Stock Exchange
shall be closed to trading or trading thereon shall be restricted or
(b) trading or the reporting of trading on such exchange or
elsewhere shall be disrupted so that, in the judgment of Nations
Fund and Emerald 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.
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3.4. With respect to each Acquired Fund, Emerald Funds shall provide
Nations Fund and its transfer agents with immediate access from and
after the Closing Date to (a) the computer, electronic or such other
forms of records containing the names, addresses and taxpayer
identification numbers of all of the Acquired Fund Investors 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 Emerald 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 thirty (30) days after the Closing Date, each Acquired Fund
shall deliver, in accordance with Article 1 hereof, to the
corresponding Acquiring Fund a statement of the Fund Assets and
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 Emerald Funds.
4. COVENANTS WITH RESPECT TO THE ACQUIRING FUNDS AND THE ACQUIRED FUNDS
4.1. Emerald Funds, with respect to the Acquired Funds, has called or
will call a meeting of Emerald 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 Emerald Funds to terminate each Acquired Fund's qualification,
classification and registration if requisite approvals are obtained
with respect to each
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Acquired Fund. Nations Fund and Emerald Funds will jointly prepare
the notice of meeting, form of proxy and proxy statement
(collectively, "Proxy Materials") to be used in connection with such
meeting; provided that Nations Fund has furnished or will furnish
Emerald Funds with a current, effective prospectus, including any
supplements, relating to the class of shares of each Acquiring Fund
corresponding to the class of shares of each Acquired Fund then
outstanding for incorporation within and/or distribution with the
Proxy Materials, and with such other information relating to the
Acquiring Funds as is reasonably necessary for the preparation of
the Proxy Materials.
4.2. Emerald 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. Emerald 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 Fund, on its own behalf
and on behalf of each Acquiring Fund, and Emerald 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. Emerald Funds, on behalf of each Acquired Fund, shall furnish to its
corresponding Acquiring Fund on the Closing Date, a final statement
of the total amount of each Acquired Fund's assets and Liabilities
as of the Closing Date, which statement shall be certified by an
appropriate officer of Emerald 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, Emerald Funds, on
behalf of each Acquired Fund, shall furnish its corresponding
Acquiring Fund, in such form as is reasonably satisfactory to
Nations Fund, on behalf of each Acquiring Fund, a statement
certified by an officer of Emerald Funds of such Acquired Fund's
federal income tax attributes and the tax bases in its assets that
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<PAGE>
will be carried over to the corresponding Acquiring Fund in the
reorganization pursuant to Section 381 of the Code.
4.6. Nations Funds has prepared and filed, or will prepare and file, with
the Securities and Exchange Commission ("SEC") and the appropriate
state securities commissions a post-effective amendment (the "N-1A
Post-Effective Amendment") to its registration statement on Form
N-1A (File Nos. 33-04038; 811-04614), 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 Fund, on behalf of each
Acquiring Fund, has prepared and filed, or will prepare and file
with the SEC a registration statement on Form N-14 under the 1933
Act, relating to the Acquiring Fund Shares, which, without
limitation, shall include a proxy statement of Emerald Funds and the
prospectuses of the Acquiring Funds of Nations Fund relating to the
transactions contemplated by this Agreement (the "Registration
Statement"). Emerald 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, Emerald
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 Fund agrees to use all
reasonable efforts to operate in accordance with its then current
prospectus and statement of additional information prepared in
accordance with Form N-1A, including qualifying as a "regulated
investment company" under the Code, for at least one (1) year
following the Closing Date.
4.9. Following the transfer of assets by each Acquired Fund to the
corresponding Acquiring Fund in exchange for Acquiring Fund Shares
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<PAGE>
and the assumption of all Liabilities of the Acquired Fund as
contemplated herein, Emerald Funds will file any final regulatory
reports, including but not limited to any Form N-SAR and Rule 24f-2
filings with respect to such Acquired Fund(s), promptly after the
Closing Date and also will take all other steps as are necessary and
proper to effect the termination or declassification of such
Acquired Funds of Emerald Funds in accordance with the laws of the
Commonwealth of Massachusetts and other applicable requirements.
5. REPRESENTATIONS AND WARRANTIES
5.1. Nations Fund, on behalf of itself and each Acquiring Fund,
represents and warrants to the Emerald Funds as follows:
5.1.a. Nations Fund was duly created pursuant to its Articles of
Incorporation by the Directors for the purpose of acting as
a management investment company under the 1940 Act and is
validly existing under the laws of the state of Maryland,
and the Articles of Incorporation directs the Directors to
manage the affairs of Nations Fund and grants them all
powers necessary or desirable to carry out such
responsibility, including administering Nations Fund
business as currently conducted by Nations Fund and as
described in the current prospectuses of Nations Fund;
Nations Fund is registered as an investment company
classified as an open-end management company, under the 1940
Act and its registration with the SEC as an investment
company is in full force and effect;
5.1.b. The Registration Statement, including the current
prospectuses and statement of additional information of each
Acquiring Fund, conform or will conform, at all times up to
and including the Closing Date, in all material respects to
the applicable requirements of the 1933 Act and the 1940 Act
and the regulations thereunder and do not include or will
not include any untrue statement of a material fact or omit
to state any material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading;
5.1.c. Each Acquiring Fund is not in violation of, and the
execution, delivery and performance of this Agreement by
Nations Fund for itself and on behalf of each Acquiring Fund
does not and will not (i) violate Nations Fund's Articles of
Incorporation or
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By-Laws, or (ii) result in a breach or violation of, or
constitute a default under any material agreement or
material instrument, to which Nations Fund is a party or by
which its properties or assets are bound;
5.1.d. Except as previously disclosed in writing to the Emerald
Funds, no litigation or administrative proceeding or
investigation of or before any court or governmental body is
presently pending or, to Nations Fund's knowledge,
threatened against Nations Fund or its business, the
Acquiring Funds or any of their properties or assets, which,
if adversely determined, would materially and adversely
affect Nations Fund or an Acquiring Fund's financial
condition or the conduct of their business, and Nations Fund
knows of no facts that might form the basis for the
institution of any such proceeding or investigation, and no
Acquiring Fund is a party to or subject to the provisions of
any order, decree or judgment of any court or governmental
body which materially and adversely affects, or is
reasonably likely to materially and adversely affect, its
business or its ability to consummate the transactions
contemplated herein;
5.1.e. All issued and outstanding shares, including shares to be
issued in connection with the Reorganization, of 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 Fund and the Acquiring Fund
does not have outstanding any option, warrants or other
rights to subscribe for or purchase any of its shares;
5.1.f. The execution, delivery and performance of this Agreement on
behalf of each Acquiring Fund will have been duly authorized
prior to the Closing Date by all necessary action on the
part of Nations Fund and the Directors, and this Agreement
constitutes a valid and binding obligation of Nations Fund
and 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
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<PAGE>
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 Fund with respect to an
Acquiring Fund for use in the Proxy Materials, the
Registration Statement or any other materials provided in
connection with the Reorganization does not and will not
contain any untrue statement of a material fact or omit to
state a material fact necessary to make the information
provided not misleading;
5.1.i. No governmental consents, approvals, authorizations or
filings are required under the 1933 Act, the Securities
Exchange Act of 1934 (the "1934 Act"), the 1940 Act or
Maryland law for the execution of this Agreement by Nations
Fund, for itself and on behalf of each Acquiring Fund, or
the performance of the Agreement by Nations Fund, for itself
and on behalf of each Acquiring Fund, except for the
effectiveness of the Registration Statement, any necessary
exemptive relief or no-action assurances requested from the
SEC or its Staff with respect to Sections 17(a) and 17(d) of
the 1940 Act and Rule 17d-1 thereunder, and such other
consents, approvals, authorizations and filings as have been
made or received, and except for such consents, approvals,
authorizations and filings as may be required subsequent to
the Closing Date;
5.1.j. The Statement of Assets and Liabilities, Statement of
Operations and Statement of Changes in Net Assets of each
Acquiring Fund as of and for the year ended March 31, 1997,
audited by Price Waterhouse LLP, and the unaudited Statement
of Assets and Liabilities, Statement of Operations and
Statement of Changes in Net Assets of each Acquiring
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Fund, except Nations International Value Fund, as of and for
the six-month period ended September 30, 1997 (copies of
which have been or will be furnished to the corresponding
Acquired Fund), present fairly, in all material respects,
the financial position of each Acquiring 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 any
Acquiring Fund known to Nations Fund that were not disclosed
therein but that would be required to be disclosed therein
in accordance with generally accepted accounting principles;
5.1.k. Since the date of the most recent audited financial
statements, there has not been any material adverse change
in any Acquiring Fund's financial position, assets,
liabilities or business, other than changes occurring in the
ordinary course of business, or any incurrence by an
Acquiring Fund of indebtedness maturing more than one year
from the date such indebtedness was incurred, except as
otherwise disclosed in writing to and accepted by the
corresponding Acquired Fund, prior to the Closing Date (for
the purposes of this subparagraph (k), neither a decline in
an Acquiring Fund's net asset value per share nor a decrease
in an Acquiring Fund's size due to redemptions shall be
deemed to constitute a material adverse change);
5.1.l. All federal and other tax returns and reports of Nations
Fund and each Acquiring Fund required by law to be filed on
or before the Closing Date have been or will be filed, and
all federal and other taxes owed by Nations Fund on behalf
of the Acquiring Funds have been or will be paid so far as
due, and to the best of Nations Fund's knowledge, no such
return is currently under audit and no assessment has been
asserted with respect to any such return;
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
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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. Emerald Funds, on behalf of itself and each Acquired Fund,
represents and warrants to Nations Fund as follows:
5.2.a. Emerald Funds was duly created pursuant to its Agreement and
Declaration of Trust by the Trustees for the purpose of
acting as a management investment company under the 1940 Act
and is validly existing under the laws of the Commonwealth
of Massachusetts, and the Agreement and Declaration of Trust
provides that the affairs of Emerald Funds shall be managed
by the Trustees and grants them all powers necessary or
desirable to carry out such responsibility, including
administering Emerald Funds business as currently conducted
by Emerald Funds and as described in the current
prospectuses of Emerald Funds; Emerald Funds is registered
as an investment company classified as an open-end
management company, under the 1940 Act and its registration
with the SEC as an investment company is in full force and
effect;
5.2.b. All of the issued and outstanding shares representing units
of beneficial interest of each Acquired Fund have been
offered and sold in compliance in all material respects with
applicable registration requirements of the 1933 Act and
state securities laws;
5.2.c. The Acquired Funds are not in violation of, and the
execution, delivery and performance of this Agreement by
Emerald Funds for itself and on behalf of each Acquired Fund
does not and will not (i) violate Emerald Funds' Agreement
and Declaration of Trust or Code of Regulations, or (ii)
result in a breach or violation of, or constitute a default
under any material agreement or material instrument, to
which Emerald Funds is a party or by which its properties or
assets are bound, except as otherwise previously disclosed
in writing to the Acquiring Funds;
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5.2.d. Except as previously disclosed in writing to Nations Fund,
no litigation or administrative proceeding or investigation
of or before any court or governmental body is presently
pending or, to Emerald 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 Emerald 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 November 30,
1997, audited by KPMG Peat Marwick LLP (copies of which have
been or will be furnished to the corresponding Acquiring
Fund) fairly present, in all material respects, the
financial condition of each Acquired Fund as of such date
and its results of operations for such period in accordance
with generally accepted accounting principles consistently
applied, and as of such date there were no Liabilities of
any Acquired Fund known to Emerald 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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5.2.g. All federal and other tax returns and reports of Emerald
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 Emerald Funds on behalf
of the Acquired Funds, have been or will be paid so far as
due, and to the best of Emerald 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
Emerald Funds, and all such shares will, at the time of the
Closing(s), be held by the persons and in the amounts set
forth in the list of Acquired Fund Investors provided to
each corresponding Acquiring Fund, pursuant to paragraph
3.4, and no Acquired Fund has outstanding any options,
warrants or other rights to subscribe for or purchase any of
its shares, nor is there outstanding any security
convertible into any of its shares;
5.2.j. At the Closing Date, each Acquired Fund will have good and
marketable title to its Fund Assets and full right, power
and authority to assign, deliver and otherwise transfer such
Fund Assets hereunder, and upon delivery and payment for
such Fund Assets as contemplated herein, the corresponding
Acquiring Fund will acquire good and marketable title
thereto, subject to no restrictions on the ownership or
transfer thereof 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 other
than such restrictions as might arise under the 1933 Act or
securities laws, and except for any liens or transfer tax
liens arising in connection with the transfer of Fund Assets
pursuant to this Agreement;
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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 Emerald Funds and the Trustees, and this Agreement
constitutes a valid and binding obligation of Emerald Funds
and each Acquired Fund enforceable in accordance with its
terms, subject as to enforcement, to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar
laws of general applicability relating to or affecting
creditors' rights and to general equity principles;
5.2.l. From the effective date of the Registration Statement,
through the time of the meeting of the Emerald Funds
shareholders, and on the Closing Date, the Registration
Statement insofar as it relates to materials provided by
Emerald 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
Emerald Funds, on behalf of the Acquired Funds, for use in
the Registration Statement or in any other manner that may
be necessary in connection with the transactions
contemplated hereby does not contain any untrue statement of
a material fact or omit to state a material fact necessary
to make the information provided not misleading; and
5.2.m. No governmental consents, approvals, authorizations or
filings are required under the 1933 Act, the 1934 Act, the
1940 Act or Massachusetts law for the execution of this
Agreement by Emerald Funds, for itself and on behalf of each
Acquired Fund, or the performance of the Agreement by
Emerald 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 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
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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 Emerald Funds to consummate the Reorganization
with respect to each Acquired Fund shall be subject to the performance by
Nations Fund, for itself and on behalf of each Acquiring Fund, of all the
obligations to be performed by it hereunder on or before the Closing Date and,
in addition thereto, the following conditions with respect to each corresponding
Acquiring Fund:
6.1. All representations and warranties of Nations Fund with respect to
each Acquiring Fund contained herein shall be true and correct in
all material respects as of the date hereof and, except as they may
be affected by the transactions contemplated herein, as of the
Closing Date with the same force and effect as if made on and as of
the Closing Date.
6.2. Nations Fund, on behalf of each Acquiring Fund, shall have delivered
to Emerald Funds at the Closing(s) a certificate executed on behalf
of each corresponding Acquiring Fund by Nations Fund's President,
Secretary, Assistant Secretary, or other authorized officer, in a
form reasonably satisfactory to Emerald Funds and dated as of the
Closing Date, to the effect that the representations and warranties
of Nations Fund with respect to each Acquiring Fund made herein are
true and correct at and as of the Closing Date, except as they may
be affected by the transactions contemplated herein, and as to such
other matters as such Acquired Fund shall reasonably request.
6.3. Each Acquired Fund shall have received at the Closing(s) a favorable
opinion of Morrison & Foerster LLP, counsel to Nations Fund (based
upon or subject to such representations, assumptions, limitations or
opinions of local counsel as such counsel may deem appropriate or
necessary), dated as of the Closing Date, in a form (including the
representations, assumptions, limitations or opinions of local
counsel upon which it is based or to which it is subject) reasonably
satisfactory to each Acquired Fund, substantially to the effect
that:
6.3.a. Nations Fund is a duly registered, open-end, management
investment company, and its registration with the SEC as an
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investment company under the 1940 Act is in full force and
effect;
6.3.b. each Acquiring Fund is a portfolio of Nations Fund, which is
a company duly created pursuant to its Articles of
Incorporation, is validly existing and in good standing
under the laws of the state of Maryland, and the Articles of
Incorporation directs the Directors to manage the affairs of
Nations Fund and grants them all powers necessary or
desirable to carry out such responsibility, including
administering Nations Fund's business as described in the
current prospectuses of Nations Fund;
6.3.c. this Agreement has been duly authorized, executed and
delivered on behalf of Nations Fund and each Acquiring Fund
and, assuming due authorization, execution and delivery of
this Agreement on behalf of the Acquired Funds, is a valid
and binding obligation of Nations Fund enforceable against
Nations Fund in accordance with its terms, subject as to
enforcement, to bankruptcy, insolvency, reorganization,
arrangement, moratorium and other similar laws of general
applicability relating to or affecting creditors' rights and
to general equity principles;
6.3.d. the Acquiring Fund Shares to be issued to the Acquired Funds
Investors pursuant to this Agreement are duly registered
under the 1933 Act on the appropriate form, and are duly
authorized and upon such issuance will be validly issued and
outstanding and fully paid and non-assessable, and no
shareholder of an Acquiring Fund has any preemptive rights
to subscription or purchase in respect thereof;
6.3.e. the N-1A Post-Effective Amendment and the Registration
Statement have become effective with the SEC and, to the
best of such counsel's knowledge, no stop order suspending
the effectiveness thereof has been issued and no proceedings
for that purpose have been instituted or are pending or
threatened;
6.3.f. no consent, approval, authorization, filing or order of any
court or governmental authority of the United States or any
state is required for the consummation by Nations Fund of
the Reorganization with respect to each Acquiring Fund;
6.3.g. to such counsel's knowledge, the execution and delivery of
the Agreement and the performance of its terms by Nations
Fund,
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and each Acquiring Fund, do not violate or result in a
violation of the Nations Fund Articles of Incorporation or
By-Laws, or any judgment, order or decree known to such
counsel, of any court or arbiter, to which Nations Fund is a
party, and, to such counsel's knowledge, will not constitute
a material breach of the terms, conditions or provisions of,
or constitute a default under, any contract, undertaking,
indenture or other agreement by which Nations Fund is now
bound or to which it is now a party;
6.3.h. to such counsel's knowledge, (a) no legal or governmental
proceedings existing on or before the date of mailing the
combined proxy statement/prospectus ("Combined
Proxy/Prospectus"), involving Nations Fund 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 Fund
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 Fund or an Acquiring Fund or any
of their properties or assets and neither Nations Fund nor
any Acquiring Fund is a party to or subject to the
provisions of any order, decree or judgment of any court or
governmental body that materially and adversely affects, or
would materially and adversely affect, its business.
6.4. 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,
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form of proxy and Combined Proxy/Prospectus (collectively, "Proxy
Materials").
6.5. With respect to each Acquiring Fund, the Board of Directors of
Nations Fund, including a majority of the "non-interested"
Directors, has determined that the Reorganization is in the best
interests of each Acquiring Fund and that the interests of the
existing shareholders of each Acquiring Fund would not be diluted as
a result of the Reorganization.
6.6. For the period beginning at the Closing Date of the last
Reorganization to occur and ending not less than six years
thereafter, Nations Fund shall provide, or cause to be provided,
liability coverage at least comparable to the liability coverage
currently applicable to the Trustees and officers of Emerald Funds,
covering the actions of the current Trustees and officers of Emerald
Funds for the period they served as such.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF ACQUIRING FUNDS
The obligations of Nations Fund to consummate the Reorganization
with respect to each Acquiring Fund shall be subject to the performance by
Emerald 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 Emerald 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. Emerald 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 Emerald 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 Emerald 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
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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 Emerald
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. Emerald 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 Emerald Funds, Emerald
Funds is a business trust duly created pursuant to its
Agreement and Declaration of Trust, is validly existing and
in good standing under the laws of the Commonwealth of
Massachusetts, and the Agreement and Declaration of Trust
provides that the affairs of Emerald Funds shall be managed
by the Trustees and grants them all powers necessary or
desirable to carry out such responsibility, including
administering Emerald Funds' business as described in the
current prospectuses of Emerald Funds;
7.3.c. this Agreement has been duly authorized, executed and
delivered by Emerald 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 Emerald Funds,
enforceable against Emerald Funds in accordance with its
terms, subject to the affect 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
court or governmental authority of the United States or any
state is required for the consummation of the Reorganization
by Emerald 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 Emerald
Funds, and each Acquired Fund, do not violate or result in a
violation of the Emerald Funds' Agreement and Declaration of
Trust or Code of Regulations, or any judgment, order or
decree known to such counsel, of any court or arbiter, to
which Emerald 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 Emerald 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 Emerald 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 Emerald
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 Emerald Funds or an Acquired Fund or any
of their properties or assets and neither Emerald 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 Fund, on behalf of each Acquiring Fund, shall have received
from KPMG Peat Marwick LLP a letter addressed to Nations Fund, on
behalf of each Acquiring Fund, and dated as of the Closing Date with
respect to the Acquired Funds, in form and substance satisfactory to
Nations Fund, to the effect that:
7.4.a. they are independent accountants with respect to Emerald
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
Fund, on behalf of the Acquiring Funds and Emerald Funds, on
behalf of the Acquired Funds, and described in such letter
(but not an examination in accordance with generally
accepted auditing standards), the information relating to
the Acquired Funds appearing in the Registration Statement
that is expressed in dollars or percentages of dollars (with
the exception of performance comparisons) has been obtained
from the accounting records of the Acquired Funds or from
schedules prepared by officers of Emerald Funds having
responsibility for financial and reporting matters and such
information is in agreement with such records, schedules or
computations made therefrom.
7.5. Emerald Funds shall have delivered to the Acquiring Funds, pursuant
to paragraph 5.2(e), copies of financial statements of each Acquired
Fund as of and for the period ended November 30, 1997, audited by
KPMG Peat Marwick LLP.
7.6. With respect to each Acquired Fund, the Board of Trustees of Emerald
Funds, including a majority of "non-interested" Trustees, has
determined that the Reorganization is in the best interests of each
Acquired Fund and that the interests of the existing investors in
each Acquired Fund would not be diluted as a result of the
Reorganization.
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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 beneficial interest in each Acquired Fund in
accordance with the provisions of Emerald Funds' Agreement and
Declaration of Trust and the 1940 Act, and certified copies of the
resolutions evidencing such approval shall have been delivered to
each corresponding Acquiring Fund.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is
sought to restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or any of the transactions
contemplated herein.
8.3. All consents of other parties and all other consents, orders,
approvals and permits of federal, state and local regulatory
authorities (including, without limitation, those of the SEC and of
state securities authorities) deemed necessary by Nations Fund, on
behalf of the Acquiring Funds or by Emerald 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
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<PAGE>
Applicable Valuation Date, which, together with all previous
dividends, shall have the effect of distributing to each Acquired
Fund's shareholders substantially all of its net investment company
taxable income, if any, for all taxable periods or years ending on
or prior to the Closing Date (computed without regard to any
deduction for dividends paid) and substantially all of its net
capital gain, if any, realized for all taxable periods or years
ending on or prior to the Closing Date (after reduction for any
capital loss carry forward.)
8.6. Nations Fund, on behalf of each Acquiring Fund, and Emerald Funds,
on behalf of each Acquired Fund, shall have received from Price
Waterhouse LLP a letter dated as of the Closing Date, in form and
substance satisfactory to Nations Fund and to Emerald Funds, to the
effect that on the basis of limited procedures agreed upon by
Nations Fund, on behalf of the Acquiring Funds and Emerald Funds, on
behalf of the Acquired Funds (but not an examination in accordance
with generally accepted auditing standards): (a) nothing came to
their attention that caused them to believe that the unaudited pro
forma financial statements included in the Registration Statement do
not comply as to form in all material respects with the applicable
accounting requirements of Rule 11-02 of Regulation S-X or that the
pro forma adjustments have not properly been applied to the
historical amounts in the compilation of those amounts, (b) the data
used in the calculation of the current and pro forma expense ratios
of the Acquiring Funds appearing in the Registration Statement agree
with underlying records of the Acquiring Funds or to written
estimates provided by officers of Nations Fund having responsibility
for financial and reporting matters and were found to be
mathematically correct, and (c) the calculation of the net value of
the Acquired Fund Assets and the net asset value of the Acquiring
Fund shares, in each case as of the Applicable Valuation Date, were
determined in accordance with the pricing policies and procedures of
the Acquiring Funds as described in their then current prospectuses
and statements of additional information.
8.7. Nations Fund and Emerald Funds shall have received an opinion of
Morrison & Foerster LLP addressed to both Nations Fund and Emerald
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
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Fund and the corresponding Acquired Fund will each be a
"party to a reorganization" within the meaning of Section
368(b) of the Code;
8.7.b. no gain or loss will be recognized by an Acquired Fund upon
the transfer of its assets and Liabilities to the
corresponding Acquiring Fund solely in exchange for the
Acquiring Fund Shares;
8.7.c. no gain or loss will be recognized by an Acquiring Fund upon
the receipt of the assets and assumption of Liabilities of
the corresponding Acquired Fund solely in exchange for the
Acquiring Fund Shares;
8.7.d. the basis of an Acquired Fund's assets received by the
corresponding Acquiring Fund pursuant to the Reorganization
will be the same as the basis of those assets in the hands
of the Acquired Fund immediately prior to the
Reorganization;
8.7.e. the holding period of an Acquired Fund's assets in the hands
of the corresponding Acquiring Fund will include the period
for which such assets have been held by the Acquired Fund;
8.7.f. no gain or loss will be recognized by an Acquired Fund on
the distribution to its shareholders of the Acquiring Fund
Shares to be received by the Acquired Fund in the
Reorganization;
8.7.g. no gain or loss will be recognized by the shareholders of an
Acquired Fund upon their receipt of the corresponding
Acquiring Fund Shares in exchange for such shareholders'
shares of the Acquired Fund;
8.7.h. the basis of the Acquiring Fund Shares received by the
shareholders of the corresponding Acquired Fund will be the
same as the basis of the Acquired Fund shares surrendered by
such shareholders pursuant to the Reorganization;
8.7.i the holding period for the Acquiring Fund Shares received by
the Acquired Fund shareholders will include the period
during which such shareholders held the Acquired Fund shares
surrendered therefor, provided that such Acquired Fund
shares are held as a capital asset in the hands of the
Acquired Fund shareholders on the date of the exchange; and
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<PAGE>
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.
8.8. Nations Fund and Emerald Funds shall have received (a) a memorandum
addressed to Nations Fund and the Emerald 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 byNations Fund
pursuant to this Agreement under applicable state securities laws or
the exemption from such filing and payment requirements under such
laws, and (b) assurance reasonably satisfactory to each of them that
all permits and other authorizations necessary under state
securities laws to consummate the transactions contemplated by this
Agreement have been obtained.
8.9. The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act.
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 Fund
and Emerald 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.
9. BROKERAGE FEES AND EXPENSES
9.1. Nations Fund, for itself and on behalf of the Acquiring Funds and
Emerald 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. and/or its affiliates shall bear the
customary expenses associated with the transactions contemplated by
this Agreement.
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10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. This Agreement constitutes the entire agreement between the parties
and supersedes any prior or contemporaneous understanding or
arrangement with respect to the subject matter hereof.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in
connection herewith shall survive the consummation of the
transactions contemplated herein.
11. TERMINATION
11.1. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
11.1.a. by the mutual written consent of Nations Fund and Emerald
Funds;
11.1.b. by either Nations Fund or Emerald 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, 1998, or such other date as may be
agreed to by the parties; or
11.1.c. by either of Nations Fund or the Emerald 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.
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<PAGE>
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 Fund and Emerald Funds, as
the case may be, and there shall be no liability for damages on the
part of Nations Fund or Emerald Funds or the Directors/Trustees or
officers of Nations Fund or Emerald 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 either party of its respective
obligations pursuant to Section 9.2 hereof.
12. AMENDMENTS
This Agreement may be amended, modified or supplemented in such
manner as may be mutually agreed upon in writing by the authorized officers of
Nations Fund, acting on behalf of each Acquiring Fund and the authorized
officers of Emerald Funds, acting on behalf of the shareholders of each Acquired
Fund; provided, however, that following the meeting of the shareholders of the
Acquired Funds, no such amendment may have the effect of changing the provisions
for determining the number of shares of the corresponding Acquiring Funds to be
issued to the Acquired Fund Investors under this Agreement to the detriment of
such Acquired Fund Investors, or otherwise materially and adversely affecting
such Acquired Fund, without the Acquired Fund obtaining the Emerald Fund(s)'
shareholders further approval except that nothing in this paragraph 12 shall be
construed to prohibit any Acquiring Fund and the corresponding Acquired Fund
from amending this Agreement to change the Closing Date or Applicable Valuation
Date by mutual agreement.
At any time prior to or (to the fullest extent permitted by law)
after approval of this Agreement by the shareholders of Emerald 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/Trustees of the waiving party, or any appropriate
officer of either party, with or without the approval of such party's
shareholders).
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13. NOTICES
Any notice, report, statement or demand required or permitted by any
provision of this Agreement shall be in writing and shall be given by prepaid
telegraph, telecopy, certified mail or overnight express courier addressed to:
For Nations Fund, on behalf of itself and each Acquiring Fund:
Richard H. Blank, Jr.
Secretary
c/o Stephens Inc.
111 Center Street
Little Rock, Arkansas 72201
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 Emerald Funds, on behalf of itself and each Acquired Fund:
Marshall M. Criser
McGuire, Woods, Battle & Boothe LLP
3300 Barnett Center
50 N. Laura Street, Suite 3400
Jacksonville, FL 32203
with copies to:
Jeffrey A. Dalke
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, PA 19107-2700
14. HEADINGS; COUNTERPARTS; GOVERNING LAW; ASSIGNMENT; LIMITATION OF LIABILITY
14.1. The article and paragraph headings contained herein are for
reference purposes only and shall not affect in any way the meaning
or interpretation of this Agreement. All references herein to
articles,
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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.
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 Fund
hereunder shall not be binding upon any of the Directors,
shareholders, nominees, officers, agents, or employees of Nations
Fund personally, but shall bind only the assets and the property of
the respective Acquiring Fund of Nations Fund, as provided in its
Articles of Incorporation. The execution and delivery by such
officers shall not be deemed to have been made by any of them
individually or to impose any liability on any of them personally,
but shall bind only the assets and the property of the respective
Acquiring Fund of Nations Fund as provided in its Articles of
Incorporation.
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 "Emerald Funds" and "Trustees of Emerald Funds" refer
respectively to the trust created and the Trustees, as trustees but
not individually or personally, acting from time to time under an
Agreement and Declaration of Trust dated March 15, 1988, which is
hereby referred to and a copy of which is on file at the Office of
the State Secretary of the Commonwealth of Massachusetts and at the
principal office of the Trust. The obligations of "Emerald Funds"
32
<PAGE>
entered into in the name or on behalf thereof by any of the
Trustees, representatives or agents are made not individually, but
in such capacities, and are not binding upon any of the Trustees,
shareholders, or representatives of the Trust personally, but bind
only the trust property, and all persons dealing with any class of
shares of the Trust must look solely to the trust property belonging
to such class for the enforcement of any claims against the Trust.
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.
33
<PAGE>
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: _________________________
Richard H. Blank, Jr. A. Max Walker
Secretary President and Chairman of the Board
of Directors
EMERALD FUNDS, for itself and on
ATTEST: behalf of each Acquired Fund
_______________________________ By: _________________________
34
<PAGE>
SCHEDULE A
Acquired Fund Acquiring Fund
- ------------- --------------
Emerald International Equity Fund Nations International Value Fund (Shell)
Institutional Shares Primary A Shares
Retail Shares Investor A Shares
Emerald Prime Fund Nations Prime Fund
Institutional Shares Primary A Shares
Retail Shares Daily Shares
Service Shares Investor A Shares
Emerald Treasury Fund Nations Treasury Fund
Institutional Shares Primary A Shares
Retail Shares Daily Shares
Service Shares Investor A Shares
Emerald Small Capitalization Fund Nations Small Company Growth Fund
Institutional Shares Primary A Shares
Retail Shares Investor A Shares
Emerald U.S. Government Securities Fund Nations Government Securities Fund
Institutional Shares Primary A Shares
Retail Shares Investor A Shares
35
<PAGE>
APPENDIX III
Expense Summaries of Emerald Funds
and the Corresponding Nations Funds
-----------------------------------------------
The following tables (a) compare the fees and expenses as of November 30,
1997, for the respective Emerald Funds and their corresponding Nations Funds and
(b) show the estimated fees and expenses for the corresponding Nations Funds on
a pro forma basis after giving effect to the reorganization. The purpose of
these tables is to assist shareholders in understanding the various costs and
expenses that investors in these portfolios will bear as shareholders. The
tables do not reflect any charges that may be imposed by institutions directly
on their customer accounts in connection with investments in the portfolios. 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.
III-1
<PAGE>
EMERALD INTERNATIONAL EQUITY FUND - INSTITUTIONAL SHARES
NATIONS INTERNATIONAL VALUE FUND - PRIMARY A SHARES
<TABLE>
<CAPTION>
Emerald Nations
International International Combined Fund
Equity Fund Value Fund Pro Forma
----------- ---------- ---------
<S> <C> <C> <C>
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
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees (after waivers)* ................... 1.00% 0.90% 0.90%
Other Expenses...................................... 0.21% 0.41% 0.41%
---- ---- ----
Total Fund Operating Expenses:........................... 1.21% 1.31% 1.31%
==== ==== ====
</TABLE>
- ----------
* Management Fees (before waivers) would be: 1.00% for Nations International
Value Fund and the Combined Fund
** Total Fund Operating Expenses(before waivers) would be 1.41% for Nations
International Value Fund and the Combined Fund.
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Emerald Nations
International International Combined Fund
Equity Fund Value Fund Pro Forma
----------- ---------- ---------
<S> <C> <C> <C>
1 year ............................................ $12 $13 $13
3 years ........................................... 38 42 42
5 years ........................................... 66 72 72
10 years .......................................... 147 158 158
</TABLE>
- ----------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount. 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 Fund will bear directly
or indirectly.
III-2
<PAGE>
EMERALD INTERNATIONAL EQUITY FUND - RETAIL SHARES
NATIONS INTERNATIONAL VALUE FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
Emerald Nations
International International Combined Fund
Equity Fund Value Fund Pro Forma
----------- ---------- ---------
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None None
Deferred Sales Load(as a percentage of redemption
proceeds) ...................................... None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees (after waivers)*.................... 1.00% 0.90% 0.90%
12b-1 Fees.......................................... 0.25% 0.25% 0.25%
Shareholder Processing Plan ....................... 0.25% None None
Other Expenses (after reimbursements)** ........... 0.23% 0.41% 0.41%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)***................ 1.73% 1.56% 1.56%
==== ==== ====
</TABLE>
- ----------
* Management Fees (before waivers) would be: 1.00% for Nations International
Value Fund and the Combined Fund.
** Other Expenses (before reimbursements) would be: 0.43% for Emerald
International Equity Fund.
*** Total Fund Operating Expenses (before reimbursements) would be: 1.93% for
Emerald International Equity Fund.
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Emerald Nations
International International Combined Fund
Equity Fund Value Fund Pro Forma
----------- ---------- ---------
<S> <C> <C> <C>
1 year ............................................ $18 $16 $16
3 years ........................................... 54 49 49
5 years ........................................... 94 85 85
10 years .......................................... 204 186 186
</TABLE>
- ----------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount. 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 Fund will bear directly
or indirectly.
III-3
<PAGE>
EMERALD PRIME FUND - INSTITUTIONAL SHARES
NATIONS PRIME FUND- PRIMARY A SHARES
<TABLE>
<CAPTION>
Emerald Prime Nations Prime Combined Fund
Fund Fund Pro Forma
---- ---- ---------
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None None
Deferred Sales Load................................. None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers)*..................... 0.22% 0.16% 0.16%
Other Expenses .................................... 0.16% 0.14% 0.14%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.38% 0.30% 0.30%
==== ==== ====
</TABLE>
* Management Fees (before waivers) would be: 0.25%, 0.20% and 0.20%,
respectively.
** Total Fund Operating Expenses (before waivers) would be: 0.41%, 0.34% and
0.34%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Emerald Prime Nations Prime Combined Fund
Fund Fund Pro Forma
---- ---- ---------
<S> <C> <C> <C>
1 year ............................................ $4 $3 $3
3 years ........................................... 12 10 10
5 years ........................................... 21 17 17
10 years .......................................... 48 38 38
</TABLE>
- ----------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount. 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 Fund will bear directly
or indirectly.
III-4
<PAGE>
EMERALD PRIME FUND - RETAIL SHARES
NATIONS PRIME FUND - DAILY SHARES
<TABLE>
<CAPTION>
Emerald Prime Nations Prime Combined Fund
Fund Fund Pro Forma
---- ---- ---------
<S> <C> <C> <C>
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
Deferred Sales Load ............................... None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees (after waivers) *................... 0.22% 0.16% 0.16%
12b-1 Fees.......................................... 0.25% 0.50% 0.50%
Shareholder Processing Fee.......................... 0.25% -- --
Other Expenses (after reimbursements)**............. 0.19% 0.14% 0.14%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)***................ 0.91% 0.80% 0.80%
==== ==== =====
</TABLE>
- ----------
* Management Fees (before waivers) would be: 0.25%, 0.20% and 0.20%,
respectively.
** Other Expenses (before reimbursements) would be: 0.20% for Emerald Prime
Fund.
*** Total Fund Operating Expenses (before reimbursements) would be: 0.95%,
0.84% and 0.84%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Emerald Prime Nations Prime Combined Fund
Fund Fund Pro Forma
---- ---- ---------
<S> <C> <C> <C>
1 year ............................................ $9 $8 $8
3 years ........................................... 29 26 26
5 years ........................................... 50 44 44
10 years .......................................... 112 99 99
</TABLE>
- ----------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount. 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 Fund will bear directly
or indirectly.
III-5
<PAGE>
EMERALD PRIME FUND - SERVICE SHARES
NATIONS PRIME FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
Emerald Prime Nations Prime Combined Fund
Fund Fund Pro Forma
---- ---- ---------
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None None
Deferred Sales Load (as a percentage of redemption None None None
proceeds) ......................................
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers)*..................... 0.22% 0.16% 0.16%
12b-1 Fees.......................................... 0.35% 0.35% 0.35%
Other Expenses...................................... 0.15% 0.14% 0.14%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.72% 0.65% 0.65%
==== ==== =====
</TABLE>
- ----------
* Management Fees (before waivers) would be: 0.25%, 0.20% and 0.20%,
respectively.
** Total Fund Operating Expenses (before waivers) would be: 0.75%, 0.69% and
0.69%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming
(1) 5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Emerald Prime Nations Prime Combined Fund
Fund II Fund Pro Forma
---- ------- ---------
<S> <C> <C> <C>
1 year ............................................ $7 $7 $7
3 years ........................................... 23 21 21
5 years ........................................... 40 36 36
10 years .......................................... 89 81 81
</TABLE>
- ----------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount. 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 Fund will bear directly
or indirectly.
III-6
<PAGE>
EMERALD SMALL CAPITALIZATION FUND - INSTITUTIONAL SHARES
NATIONS SMALL COMPANY GROWTH FUND - PRIMARY A SHARES
<TABLE>
<CAPTION>
Emerald Small Nations Small
Capitalization Company Growth Combined Fund
Fund Fund Pro Forma
---- ---- ---------
<S> <C> <C> <C>
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 (as a
percentage of offering price) .................. None None None
Deferred Sales Load (as a percentage of redemption None None None
proceeds) ......................................
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees (after waivers)*.................... 1.00% 0.75% 0.75%
Other Expenses (after reimbursement)** ............. 0.18% 0.20% 0.20%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)***................ 1.18% 0.95% 0.95%
==== ==== ====
</TABLE>
- ----------
* Management Fees (before waivers) would be: 1.00% for Nations Small Company
Growth Fund and the Combined Fund.
** Other Expenses (before reimbursements) would be: 0.26% for Nations Small
Company Growth Fund.
** Total Fund Operating Expenses (before waivers or reimbursements) would be:
1.26% and 1.20%, respectively, for Nations Small Company Growth Fund and
the Combined Fund.
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Nations Small
Emerald Small Company Growth Combined Fund
Capitalization Fund Fund Pro Forma
------------------- ---- ---------
<S> <C> <C> <C>
1 year ............................................ $12 $10 $10
3 years ........................................... 37 30 30
5 years ........................................... 65 53 53
10 years .......................................... 143 117 117
</TABLE>
- ----------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount. 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 Fund will bear directly
or indirectly.
III-7
<PAGE>
EMERALD SMALL CAPITALIZATION FUND - RETAIL SHARES
NATIONS SMALL COMPANY GROWTH FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
Emerald Small Nations Small
Capitalization Company Growth Combined Fund
Fund Fund Pro Forma
---- ---- ---------
<S> <C> <C> <C>
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
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers)*..................... 1.00% 0.75% 0.75%
12b-1 Fees ......................................... 0.25% 0.25% 0.25%
Shareholder Processing Plan ....................... 0.25% -- --
Other Expenses (after reimbursements)** ........... 0.22% 0.20% 0.20%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)***................ 1.72% 1.20% 1.20%
==== ==== ====
</TABLE>
- ----------
* Management Fees (before waivers) would be: 1.00% for Nations Small Company
Growth Fund and the Combined Fund.
** Other Expenses (before reimbursements) would be: 0.23% and 0.26%,
respectively, for Emerald Small Capitalization Fund and Nations Small
Company Growth Fund.
*** Total Fund Operating Expenses (before waivers or reimbursements) would be:
1.73% , 1.51% and 1.45%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Nations Small
Emerald Small Company Growth Combined Fund
Capitalization Fund Fund Pro Forma
------------------- ---- ---------
<S> <C> <C> <C>
1 year ............................................ $17 $12 $12
3 years ........................................... 54 38 38
5 years ........................................... 93 66 66
10 years .......................................... 203 145 145
</TABLE>
- ----------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount. 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 Fund will bear directly
or indirectly.
III-8
<PAGE>
EMERALD TREASURY FUND - INSTITUTIONAL SHARES
NATIONS TREASURY FUND - PRIMARY A SHARES
<TABLE>
<CAPTION>
Emerald Nations Combined Fund
Treasury Fund Treasury Fund Pro Forma
------------- ------------- ---------
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends............................ None None None
Deferred Sales Load (as a percentage of redemption
proceeds) ...................................... None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers)*..................... 0.24% 0.16% 0.16%
Other Expenses (after interest expenses)............ 0.16% 0.14% 0.14%
----- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements and interest
expense)**........................................ 0.40% 0.30% 0.30%
==== ==== ====
</TABLE>
* Management Fees (before waivers) would be: 0.25%, 0.20% and 0.20%,
respectively.
** Other Expenses (before interest expense) would be: 0.29% for Emerald
Treasury Fund.
*** Total Fund Operating Expenses (before waivers or reimbursements and
interest expense) would be: 0.54%, 0.34% and 0.34%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Emerald Treasury Nations Combined Fund
Fund Treasury Fund Pro Forma
---- ------------- ---------
<S> <C> <C> <C>
1 year ............................................ $4 $3 $3
3 years ........................................... 13 10 10
5 years ........................................... 22 17 17
10 years .......................................... 51 38 38
</TABLE>
- ----------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount. 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 Fund will bear directly
or indirectly.
III-9
<PAGE>
EMERALD TREASURY FUND - RETAIL SHARES
NATIONS TREASURY FUND - DAILY SHARES
<TABLE>
<CAPTION>
Emerald Nations Combined Fund
Treasury Fund Treasury Fund Pro Forma
------------- ------------- ---------
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends ........................... None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers)*..................... 0.24% 0.16% 0.16%
12b-1 Fees ......................................... 0.25% 0.50% 0.50%
Shareholder Processing Plan ........................ 0.25% -- --
Other Expenses (after reimbursements and interest
expense)**........................................ 0.17% 0.14% 0.14%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)***................ 0.91% 0.80% 0.80%
==== ==== ====
</TABLE>
- ----------
* Management Fees (before waivers) would be: 0.25%, 0.20% and 0.20%,
respectively.
** Other Expenses (before reimbursements and interest expense) would be:
0.34% for Emerald Treasury Fund.
** Total Fund Operating Expenses (before waivers or reimbursements) would be:
1.09%, 0.84% and 0.84%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Emerald Treasury Nations Combined Fund
Fund Treasury Fund Pro Forma
---- ------------- ---------
<S> <C> <C> <C>
1 year ............................................ $9 $8 $8
3 years ........................................... 29 26 26
5 years ........................................... 50 44 44
10 years .......................................... 112 99 99
</TABLE>
- ----------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount. 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 Fund will bear directly
or indirectly.
III-10
<PAGE>
EMERALD TREASURY FUND - SERVICE SHARES
NATIONS TREASURY FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
Emerald Nations Combined Fund
Treasury Fund Treasury Fund Pro Forma
------------- ------------- ---------
<S> <C> <C> <C>
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
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers)*..................... 0.24% 0.16% 0.16%
12b-1 Fees ......................................... 0.35% 0.35% 035%
Other Expenses (after interest expense)............. 0.15% 0.14% 0.14%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements and interest
expense)**....................................... 0.74% 0.65% 0.65%
==== ==== ====
</TABLE>
- ----------
* Management Fees (before waivers) would be: 0.25%, 0.20% and 0.20%,
respectively.
** Other Expenses (before interest expense) would be: 0.28% for Emerald
Treasury Fund.
*** Total Fund Operating Expenses (before waivers and interest expense) would
be: 0.88%, 0.69% and 0.69%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Emerald Treasury Nations Combined Fund
Fund Treasury Fund Pro Forma
---- ------------- ---------
<S> <C> <C> <C>
1 year ............................................ $8 $7 $7
3 years ........................................... 24 21 21
5 years ........................................... 41 36 36
10 years .......................................... 92 81 81
</TABLE>
- ----------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount. 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 Fund will bear directly
or indirectly.
III-11
<PAGE>
EMERALD U.S. GOVERNMENT SECURITIES FUND - INSTITUTIONAL SHARES
NATIONS GOVERNMENT SECURITIES FUND - PRIMARY A SHARES
<TABLE>
<CAPTION>
Emerald U.S. Nations
Government Government Combined Fund
Securities Fund Securities Fund Pro Forma
--------------- --------------- ---------
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ........... None None None
Maximum Sales Load Imposed on
Reinvested Dividends ........................... None None None
Deferred Sales Load (as a percentage of redemption
proceeds) ...................................... None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees (after waivers)*.................... 0.40% 0.50% 0.50%
Other Expenses ..................................... 0.19% 0.27% 0.25%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 0.59% 0.77% 0.75%
==== ==== ====
</TABLE>
- ----------
* Management Fees (before waivers) would be: 0.64% for Nations Government
Securities Fund and the Combined Fund.
** Total Fund Operating Expenses (before waivers) would be: 0.91% and 0.89%,
respectively, for Nations Government Securities Fund and the Combined
Fund.
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Emerald Nations
U.S. Government Government Combined Fund
Securities Fund Securities Fund Pro Forma
--------------- --------------- ---------
<S> <C> <C> <C>
1 year ............................................ $6 $8 $8
3 years ........................................... 19 25 24
5 years ........................................... 33 43 42
10 years .......................................... 74 95 93
</TABLE>
- ----------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount. 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 Fund will bear directly
or indirectly.
III-12
<PAGE>
EMERALD U.S. GOVERNMENT SECURITIES FUND - RETAIL SHARES
NATIONS GOVERNMENT SECURITIES FUND - INVESTOR A SHARES
<TABLE>
<CAPTION>
Emerald U.S. Nations
Government Government Combined Fund
Securities Fund Securities Fund Pro Forma
--------------- --------------- ---------
<S> <C> <C> <C>
Shareholder Transaction Expenses:
Maximum Sales Load Imposed on Purchases ............ None None None
Maximum Sales Load Imposed on
Reinvested Dividends ........................... None None None
Deferred Sales Load ................................ None None None
Redemption Fees .................................... None None None
Exchange Fee ....................................... None None None
Annual Fund Operating Expenses:
(as a percentage of average net assets)
Management Fees(after waivers)*..................... 0.40% 0.50% 0.50%
12b-1 Fees.......................................... 0.25% 0.25% 0.25%
Shareholder Processing Plan......................... 0.25% -- --
Other Expenses (after reimbursements)** ........... 0.21% 0.27% 0.25%
---- ---- ----
Total Fund Operating Expenses:
(after waivers or reimbursements)**................. 1.11% 1.02% 1.00%
==== ==== ====
</TABLE>
- ----------
* Management Fees (before waivers) would be: 0.64% for Nations Government
Securities Fund and the Combined Fund.
** Other Expenses (before reimbursements) would be: 0.25% for Emerald U.S.
Government Securities Fund.
** Total Fund Operating Expenses (before waivers or reimbursements) would be:
1.15%, 1.16% and 1.14%, respectively.
Example:*
You would pay the following expenses on a $1,000 investment, assuming (1)
5% gross annual return and (2) redemption at the end of each time period:
<TABLE>
<CAPTION>
Emerald Nations
U.S. Government Government Combined Fund
Securities Fund Securities Fund Pro Forma
--------------- --------------- ---------
<S> <C> <C> <C>
1 year ............................................ $11 $10 $10
3 years ........................................... 35 32 32
5 years ........................................... 61 56 55
10 years .......................................... 135 125 122
</TABLE>
- ----------
* This example should not be considered a representation of future expenses
which may be more or less than those shown. The assumed 5% annual return is
hypothetical and should not be considered a representation of past or
future annual return; actual return may be greater or less than the assumed
amount. 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 Fund will bear directly
or indirectly.
III-13
<PAGE>
APPENDIX IV
Investment Objectives, Limitations and Certain Significant Investment
Policies of the Operating Nations Funds and the Corresponding Emerald Funds
This Appendix sets forth the investment objectives, fundamental and certain
non-fundamental limitations and significant investment policies of four of
the Emerald Funds that will be reorganized into four of the operating Nations
Funds, as well as the investment objectives, fundamental and non-fundamental
limitations and significant investment policies of such 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
Emerald Funds and the corresponding Nations Funds which are incorporated by
reference in this Proxy/Prospectus.
I. EMERALD SMALL CAPITALIZATION FUND/NATIONS SMALL COMPANY GROWTH FUND
Investment Objectives.
1. Emerald Small Capitalization Fund: to provide long-term capital
appreciation.
2. Nations Small Company Growth Fund: to seek long-term capital growth
by investing primarily in equity securities.
Comment: Generally, the Emerald Small Capitalization Fund invests at
least 65% of total assets in companies with market capitalizations between $50
million and $2 billion. The Nations Small Company Growth Fund invests at least
65% of total assets in companies with market capitalizations of $1 billion or
less and may invest up to 35% of total assets in companies that have market
capitalization greater than $1 billion. Nations Small Company Growth Fund also
may invest up to 10% in debt securities rated AA or above by S&P or Aa or above
by Moody's.
The Emerald Small Capitalization Fund considers smaller companies as
those companies with capitalizations that are less than the capitalization of
companies which predominate the major market indices. The Nations Small
Company Growth Fund classifies companies quarterly by market value and
eliminates the largest 20% to establish the Fund's small-capitalization
universe.
The Emerald Small Capitalization Fund may invest up to 25% of total
assets in foreign securities utilizing ADRs, EDRs, and GDRs. Conversely,
Nations Small Company Growth Fund may only invest up to 5% of total assets in
foreign securities.
IV-1
<PAGE>
II. EMERALD U.S. GOVERNMENT SECURITIES FUND/NATIONS GOVERNMENT SECURITIES FUND
Investment Objectives.
1. Emerald U.S. Government Securities Fund: to seek consistently
positive income by investing principally in U.S. Government
securities and repurchase agreements collateralized by such
securities.
2. Nations Government Securities Fund: to seek high current income
consistent with moderate fluctuation of principal. The Fund invests
primarily in intermediate term securities issued or guaranteed by
the U.S. Government, its agencies or instrumentalities.
Comment: The Emerald U.S. Government Securities Fund invests at
least 65% in U.S. Government securities and repurchase agreements collateralized
by such securities. Similarly, Nations Government Securities Fund invests at
least 65% of its assets in U.S. Government Obligations.
The Emerald U.S. Government Securities Fund has no minimum or
maximum maturity for securities held, although it is expected that the dollar
weighted average portfolio maturity will be between five and ten years. The
Nations Government Securities Fund is expected to have an average dollar
weighted portfolio maturity between three and ten years and the Fund's duration
is expected to range between 3.5 to 6 years.
The Emerald U.S. Government may invest in securities issued or
guaranteed by the U.S. Government, its agencies or instrumentalities. The
Nations Government Securities Fund may also invest in corporate debt
obligations, dollar-denominated debt obligations of foreign issuers, money
market instruments and mortgaged-related securities of both governmental and
private issuers. Debt obligations acquired by the Nations Government Securities
Fund will be rated investment grade at the time of purchase.
III. EMERALD TREASURY FUND/NATIONS TREASURY FUND
Investment Objectives.
1. Emerald Treasury Fund: to seek to provide a high level of current
income consistent with liquidity, the preservation of capital and a stable
net asset value.
2. Nations Treasury Fund: to maximize current income to the extent
consistent with the preservation of capital and maintenance of liquidity.
Comment: Each of these Funds is a money market fund and seeks to maintain
a net asset value of $1.00 per share, although there is no assurance that they
will be able to do so. Both
IV-2
<PAGE>
Funds invest in obligations that the U.S. Treasury has issued or to which the
U.S. Government has pledged its full faith and credit to guarantee the payment
of principal and interest.
Both Funds, under normal market conditions, will invest 65% or more of
their respective total assets in U.S. Treasury obligations and repurchase
agreements for which such obligations serve as collateral. Each Fund also may
lend its portfolio securities and may invest in shares of other investment
companies. Nations Treasury Fund also may invest up to 25% of its total assets
in obligations that are issued by banks.
Each Fund is a money market fund and, in accordance with Rule 2a-7 under
the 1940 Act, will invest in instruments with remaining maturities not exceeding
397 days, and the Funds' dollar-weighted average portfolio maturity may not
exceed 90 days. Both Funds limit their investments to "First Tier Securities" as
defined by Rule 2a-7.
IV. EMERALD PRIME FUND/NATIONS PRIME FUND
A. Investment Objectives.
1. Emerald Prime Fund: to seek to provide a high level of current
income consistent with liquidity, the preservation of capital
and a stable net asset value.
2. Nations Prime Fund: to maximize current income to the extent
consistent with the preservation of capital and maintenance of
liquidity.
Comment: Each of these Funds is a money market fund and seeks
to maintain a net asset value of $1.00 per share, although there is no
assurance that they will be able to do so. Both Funds invest in a broad
range of short-term government, bank and corporate obligations.
Nations Prime Fund also may invest up to 100% of its total
assets in obligations that are issued by banks.
Each Fund is a money market fund and, in accordance with Rule
2a-7 under the 1940 Act, will invest in instruments with remaining
maturities not exceeding 397 days, and the Funds' dollar-weighted average
portfolio maturity may not exceed 90 days. Both Funds limit their
investments to "First Tier Securities" as defined by Rule 2a-7.
IV-3
<PAGE>
APPENDIX V
Shareholder Transactions and Services of the Nations Funds and the
Corresponding Emerald Funds
-----------------------------------------------
This Appendix compares the shareholder transactions and services of the
Emerald Funds and the corresponding Nations Funds. The following is qualified in
its entirety by the more detailed information included in the prospectuses for
the Emerald 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 Emerald 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. Emerald Funds - Retail Shares (Emerald International Equity Fund, Emerald
Small Capitalization Fund and Emerald U.S. Government Securities Fund).
Corresponding Nations Funds - Investor A Shares (Nations International
Value Fund, Nations Small Company Growth Fund and Nations Government Securities
Fund).
A. Sales Charges and Exemptions
There is no sales charge on either the Retail Shares of the Emerald Funds
or the Investor A Shares of the Nations Funds.
V-1
<PAGE>
B. Purchase Policies
Nations Funds Emerald Funds
------------- -------------
Minimum initial $1,000 for a regular $1,000 for a regular
investment account; $500 for IRA account**; $500 for
investors; $250 for investors participating
non-working spousal IRAs; in the E-Z Matic
$100 for investors Investment Plan; $50 for
participating in the investors participating
Systematic Investment in the Periodic
Plan; no minimum Investment Plan; $1,000
investment for 401(k) for IRA investors; $250
plans, simplified for non-working spousal
employee pension plans IRAs; no minimum
("SEPs"), Savings investment for 401(k)
Incentives Method Plans Plans, Qualified
for Employees ("SIMPLE Retirement Plans and
IRAs") and salary SEP-IRAs.
reduction-IRAs
("SAR-IRAs").*
Minimum subsequent $100; $50 for subsequent $100 for regular
investments investments made through accounts*** and
the Systematic Investment investors in the E-Z
Plan. Matic Investment Plan;
$50 for investors in the
Periodic Investment Plan;
no minimum investment for
IRAs, 401(k) Plans,
Qualified Retirement Plans
and SEP-IRAs.
Purchase methods Through Selling Agents, Through Barnett
Servicing Agents, a Investments, Inc.,
Nations Fund Personal Service Organizations;
Investment Planner by mail; by wire; by
account; by mail; by telephone; an E-Z Matic
wire; by telephone and a Investment account and
Systematic Investment Periodic Investment
Plan. schedule account.
* 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.
** If the investment is made through a qualified account at a Service
Organization whose clients have made total investments of at least
$1,000,000 the investor qualifies for a $100 minimum initial investment;
employees of the Adviser and its affiliates qualify for a $500 minimum
initial investment.
*** Employees of the Adviser and its affiliates qualify for a $50 minimum
subsequent investment.
V-2
<PAGE>
C. Redemption Procedures
Nations Funds Emerald Funds
------------- -------------
Through an authorized
selling or servicing agent Yes Yes
By mail Yes Yes
By telephone Yes Yes
By wire Yes Yes
Check writing feature No No
By automatic withdrawal plan Yes (net asset value of Yes (net asset
account must be $10,000) value of account
must be at least
$5,000)
Due to the high cost of maintaining fund accounts with small balances,
Nations Funds may redeem Investor 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 also may
redeem shares of the Nations Funds involuntarily or make payment for redemption
in readily marketable securities or other property under certain circumstances
in accordance with the 1940 Act.
Emerald may redeem Retail Shares involuntarily if the balance of an
account (other than an IRA or Qualified Retirement Plan account) decreases to a
value below $1,000 due to shareholder redemptions, and the shareholder does not
increase such balance to $1,000 upon 30 days' written notice. Share balances
also may be redeemed at the direction of an institution pursuant to arrangements
between the institution and its customer.
D. Additional Shareholder Services
Nations Funds Emerald Funds
------------- -------------
Systematic/automatic Yes (in any amount from Yes (debits
investment plan $50 to $100,000). shareholder's bank
account and purchases
shares either once or
twice a month in amounts
as specified by the
shareholder).
V-3
<PAGE>
E. Share Exchanges
Nations Funds Emerald Funds
------------- -------------
By mail Yes Yes
By telephone Yes Yes
Minimum The Investor A Shares The Retail Shares
exchanged must have a exchanged must have a
current value of at least current value of at
$1,000 least $500
Automatic exchange
feature Yes. A shareholder may No
automatically exchange
at least $25 on a
monthly or quarterly
basis.
Retail Shares of a Fund may be exchanged for Retail Shares of another
Emerald Fund.
Investor A Shares of a Nations Fund may be exchanged for Investor A Shares
of any other Nations Fund. Exchanges are subject to the minimum investment
requirements imposed.
II. Emerald Funds - Institutional Shares (Emerald International Value Fund,
Emerald Small Capitalization Fund, Emerald U.S. Government Securities Fund,
Emerald Prime Fund and Emerald Treasury Fund).
Corresponding Nations Funds - Primary A Shares (Nations International
Value Fund, Nations Small Company Growth Fund, Nations Government Securities
Fund, Nations Prime Fund and Nations Treasury Fund).
A. Sales Charges and Exemptions
There is no front-end or contingent-deferred sales charge on the
Institutional Shares of the Emerald Funds or the Primary A Shares of the Nations
Funds.
V-4
<PAGE>
B. Purchase Policies
Nations Funds Emerald Funds
------------- -------------
Minimum initial $250,000 $250,000 for non-money
investment market funds; $5,000 for
money market funds; there
is no minimum initial
investment requirements
for transfers of assets by
Barnett's customers from
other banks or financial
institutions.
Minimum subsequent None None for non-money
investments market funds; $100 for
money market funds.
Purchase methods Primary A Shares may be Sold to Barnett Bank,
sold to NationsBank and N.A. ("Barnett") and its
its affiliates acting on affiliates, as well as
behalf of bona fide trust Barnett's correspondent
customers. Primary A banks and other
Shares also may be sold institutions acting on
to employee benefit behalf of themselves or
plans, charitable their customers who
foundations, endowments maintain qualified
and to other funds in the trust, agency or
Nations Fund family. custodial accounts. All
share purchases are
effected through a
customer's account at
Barnett or another
institution.
C. Redemption Procedures
Nations Funds Emerald Funds
------------- -------------
Through the transfer agent Yes Yes
By telephone Yes Yes
By wire Yes Yes
Check writing Not Applicable Not Applicable
Due to the high cost of maintaining fund accounts with small balances,
Nations reserves the right to close a shareholder's account and send the
shareholder the proceeds
V-5
<PAGE>
if the balance falls 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 customers. Nations also may redeem Shares
of the Nations Funds involuntarily or make payment for redemption in readily
marketable securities or other property under certain circumstances in
accordance with the 1940 Act.
With respect to the Emerald money market funds, an involuntarily
redemption on Institutional shares may occur if the balance of an account (other
than an IRA or Qualified Retirement Plan account) decreases to a value below
$4,000 due to shareholder redemptions, and the shareholder does not increase
such balance to $4,000 upon 30 days' written notice. Share balances also may be
redeemed at the direction of an institution pursuant to arrangements between the
institution and its customer.
D. Additional Shareholder Services
None.
E. Share Exchanges
Nations Funds Emerald Funds
------------- -------------
By mail Yes Yes
By telephone Yes Yes
Primary A Shares of a Nations Fund may be exchanged for Primary A Shares
of any other Nations Fund. Exchanges are subject to the minimum investment
requirements imposed.
Institutional Shares of the Emerald Funds may be exchanged for
Institutional Shares of any other Emerald. Non-money market fund and money
market fund exchanges are subject to the $250,000 and $5,000 respective minimum
investment requirements imposed.
III. Emerald Funds - Service Shares (Emerald Prime Fund and Emerald Treasury
Fund).
Nations Funds - Investor A Shares (Nations Prime Fund and Nations Treasury
Fund).
V-6
<PAGE>
A. Sales Charges and Exemptions
There is no front-end or contingent-deferred sales charge on the Service
Shares of the Emerald Funds or the Investor A Shares of the Nations Funds.
B. Purchase Policies
Nations Funds Emerald Funds
------------- -------------
Minimum initial $1,000 for a regular $5,000; there is no
investment account; $500 for IRA minimum initial
investors; $250 for investment requirements
non-working spousal IRAs; for transfers of assets
$100 for investors by Barnett's customers
participating in the from other banks or
Systematic Investment financial institutions.
Plan; no minimum
investment for 401(k)
plans, simplified
employee pension plans
("SEPs"), Savings
Incentives Method Plans
for Employees ("SIMPLE
IRAs") and salary
reduction-IRAs
("SAR-IRAs").*
Minimum subsequent $100; $50 for subsequent $100
investments investments made through
the Systematic Investment
Plan.
Purchase methods Through Selling Agents, Sold to Barnett Bank,
Servicing Agents, a N.A. ("Barnett") and its
Nations Fund Personal affiliates, as well as
Investment Planner Barnett's correspondent
account; by mail; by banks and other
wire; by telephone and a institutions acting on
Systematic Investment behalf of themselves or
Plan. their customers who
maintain qualified trust,
agency or custodial
accounts. All share
purchases are effected
through a customer's
account at Barnett or
another institution.
* 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.
V-7
<PAGE>
C. Redemption Procedures
Nations Funds Emerald Funds
------------- -------------
Through an authorized
selling or servicing agent Yes Yes
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 No
plan account must be $10,000)
Due to the high cost of maintaining fund accounts with small balances,
Nations Funds may redeem Investor 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 also may
redeem shares of the Nations Funds involuntarily or make payment for redemption
in readily marketable securities or other property under certain circumstances
in accordance with the 1940 Act.
Emerald may redeem Service Shares involuntarily if the balance of an
account decreases to a value below $4,000 due to shareholder redemptions, and
the shareholder does not increase such balance to $4,000 upon 60 days' written
notice. Share balances also may be redeemed at the direction of an institution
pursuant to arrangements between the institution and its customer.
D. Additional Shareholder Services
Nations Funds Emerald Funds
------------- -------------
Systematic/automatic Yes (in any amount from No
investment plan $50 to $100,000).
V-8
<PAGE>
E. Share Exchanges
Nations Funds Emerald Funds
------------- -------------
By mail Yes Yes
By telephone Yes Yes
Minimum The Investor A Shares The Service Shares
exchanged must have a exchanged must have a
current value of at least current value of at
$1,000 least $5,000.
Automatic exchange
feature Yes. A shareholder may No
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. Exchanges are subject to the minimum investment
requirements imposed.
Service Shares of an Emerald Fund may be exchanged for Service Shares of
any other Emerald Fund. Exchanges are subject to the minimum investment
requirements imposed.
IV. Emerald Funds - Retail Shares (Emerald Prime Fund and Emerald Treasury
Fund).
Corresponding Nations Funds - Daily Shares (Nations Prime Fund
and Nations Treasury Fund).
A. Sales Charges and Exemptions
There is no front-end or contingent-deferred sales charge on the Administration
Shares of the Emerald Funds or the Daily Shares of the Nations Funds.
V-9
<PAGE>
B. Purchase Policies
Nations Funds Emerald Funds
------------- -------------
Minimum initial $1,000 for a regular $1,000 for a regular
investment account; $500 for IRA account**; $500 for
investors; $250 for investors participating
non-working spousal IRAs; in the E-Z Matic
$100 for investors Investment Plan; $50 for
participating in the investors participating
Systematic Investment in the Periodic
Plan; no minimum Investment Plan; $1,000
investment for 401(k) for IRA investors; $250
plans, simplified for non-working spousal
employee pension plans IRAs; no minimum
("SEPs"), Savings investment for 401(k)
Incentives Method Plans Plans, Qualified
for Employees ("SIMPLE Retirement Plans and
IRAs") and salary SEP-IRAs.
reduction-IRAs
("SAR-IRAs").*
Minimum subsequent $100; $50 for subsequent $100 for regular
investments investments made through accounts*** and
the Systematic Investment investors in the E-Z
Plan. Matic Investment Plan;
$50 for investors in the
Periodic Investment Plan;
no minimum investment for
IRAs, 401(k) Plans,
Qualified Retirement Plans
and SEP-IRAs.
Purchase methods Through Selling Agents, Through Barnett
Servicing Agents, a Investments, Inc.,
Nations Fund Personal Service Organizations;
Investment Planner by mail; by wire; by
account; by mail; by telephone; an E-Z Matic
wire; by telephone and a Investment account and
Systematic Investment Periodic Investment
Plan. schedule account.
* 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.
** If the investment is made through a qualified account at a Service
Organization whose clients have made total investments of at least
$1,000,000 the investor qualifies for a $100 minimum initial investment;
employees of the Adviser and its affiliates qualify for a $500 minimum
initial investment.
*** Employees of the Adviser and its affiliates qualify for a $50 minimum
subsequent investment.
V-10
<PAGE>
C. Redemption Procedures
Nations Funds Emerald Funds
------------- -------------
Through an authorized
selling or servicing agent Yes Yes
By mail Yes Yes
By telephone Yes Yes
By wire Yes Yes
Check writing feature No No
By automatic withdrawal
plan Yes (net asset value of Yes (net asset value of
account must be $10,000) account must be at least
$5,000)
Due to the high cost of maintaining fund accounts with small balances,
Nations Funds may redeem Daily 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 also may redeem shares
of the Nations Funds involuntarily or make payment for redemption in readily
marketable securities or other property under certain circumstances in
accordance with the 1940 Act.
Emerald may redeem Retail Shares involuntarily if the balance of an
account (other than an IRA or Qualified Retirement Plan account) decreases to a
value below $1,000 due to shareholder redemptions, and the shareholder does not
increase such balance to $1,000 upon 30 days' written notice. Share balances
also may be redeemed at the direction of an institution pursuant to arrangements
between the institution and its customer.
D. Additional Shareholder Services
Nations Funds Emerald Funds
------------- -------------
Systematic/automatic Yes (in any amount from Yes (debits
investment plan $50 to $100,000). shareholder's bank
account and purchases
shares either once or
twice a month in amounts
as specified by the
shareholder).
V-11
<PAGE>
E. Share Exchanges
Nations Funds Emerald Funds
------------- -------------
By mail Yes Yes
By telephone Yes Yes
Minimum The Daily Shares The Retail Shares
exchanged must have a exchanged must have a
current value of at least current value of at
$1,000 least $500
Automatic exchange
feature Yes. A shareholder may No
automatically exchange
at least $25 on a monthly
or quarterly basis.
Retail Shares of a Fund may be exchanged for Retail Shares of another
Emerald Fund.
Daily Shares of a Nations Fund may be exchanged for Investor C Shares of
any other Nations non-money market fund and Daily Shares of any Nations money
market fund. Exchanges are subject to the minimum investment requirements
imposed.
V-12
<PAGE>
VI. Dividends and Distributions
A. Dividends Declared Daily/Paid Monthly
Emerald Fund Nations Fund
- ------------ ------------
Emerald Prime Fund Nations Prime Fund
Emerald Treasury Fund Nations Treasury Fund
Emerald U.S. Government Securities Fund Nations Government Securities Fund
B. Dividends Declared Monthly/Paid Monthly
Emerald Fund Nations Fund
- ------------ ------------
None Nations Small Company Growth Fund
C. Dividends Declared Annually/Paid Annually
Emerald Fund Nations Fund
- ------------ ------------
Emerald International Equity Fund Nations International Value Fund
Emerald Small Capitalization Fund
V-13
<PAGE>
Statement of Additional Information
Dated March 30, 1998
Emerald Funds
3435 Stelzer Road
Columbus, Ohio 43219
(800) 637-3759
Nations Fund, Inc.
One NationsBank Plaza
Charlotte, NC 28255
(800) 626-2275
(May 4, 1998 Special Meeting of Shareholders of Emerald 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 Emerald to be held on May 4, 1998. Copies of
the Proxy/Prospectus may be obtained at no charge by writing or calling Emerald
or Nations at the addresses or telephone numbers set forth above. Unless
otherwise indicated, capitalized terms used herein and not otherwise defined
have the same meanings as are given to them in the Proxy/Prospectus.
Incorporation of Documents by Reference in Statement of Additional Information
Further information about the Investor A and Primary A Shares of the
Nations Prime Fund, Nations Small Company Growth Fund, Nations Treasury Fund and
Nations Government Securities Fund, and about the Daily Shares of Nations Prime
Fund and Nations Treasury Fund, is contained in and incorporated herein by
reference to the statement of additional information for Investor A and Primary
A Shares of the Nations Prime Fund, Nations Small Company Growth Fund, Nations
Treasury Fund and Nations Government Securities Fund, and for the Daily Shares
of Nations Prime Fund and Nations Treasury Fund, dated August 1, 1997.
The audited financial statements and related Report of Independent
Accountants for Nations Prime Fund, Nations Treasury Fund and Nations Government
Securities Fund contained in the Annual Report(s) for Nations Prime Fund,
Nations Treasury Fund and Nations Government Securities Fund for the year ended
March 31, 1997 are hereby incorporated herein by reference. No other parts of
the Annual Report(s) are incorporated herein by reference.
The audited financial statements and related Report of Independent Public
Accountants for Pilot Small Capitalization Equity Fund (predecessor to Nations
Small Company Growth Fund) contained in the Annual Report for the fiscal year
ended May 16, 1997 are hereby incorporated by reference.
The unaudited financial statements for Nations Prime Fund, Nations Small
Company Growth Fund, Nations Treasury Fund and Nations Government Securities
Fund contained in the Semi-Annual Report(s) for Nations Prime Fund, Nations
Small Company Growth Fund, Nations
1
<PAGE>
Treasury Fund and Nations Government Securities Fund for the six-month period
ended September 30, 1997 are hereby incorporated by reference. No other part of
the Semi-Annual Report(s) are incorporated herein by reference.
Further information about the Retail, Institutional and Service Shares of
the Emerald Prime Fund and Emerald Treasury Fund and the Retail and
Institutional Shares of Emerald International Equity Fund, Emerald Small
Capitalization Fund and Emerald U.S. Government Securities Fund is contained in
and incorporated herein by reference to the statement(s) of additional
information for the Retail, Institutional and Service Shares of the Emerald
Prime Fund and Emerald Treasury Fund and the Retail and Institutional Shares of
Emerald International Equity Fund, Emerald Small Capitalization Fund and Emerald
U.S. Government Securities Fund, dated April 1, 1997.
The audited financial statements and related Report of Independent
Auditors for Emerald International Equity Fund, Emerald Prime Fund, Emerald
Small Capitalization Fund, Emerald Treasury Fund and Emerald U.S. Government
Securities Fund contained in the Annual Report(s) for the Emerald International
Equity Fund, Emerald Prime Fund, Emerald Small Capitalization Fund, Emerald
Treasury Fund and Emerald U.S. Government Securities Fund for the year ended
November 30, 1997 are hereby incorporated herein by reference. No other parts of
the Annual Report(s) 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 Fund Assets and
Liabilities (as those terms are defined in the Reorganization Agreement) of each
Emerald Fund to a corresponding Nations Fund in exchange for Capital Class
shares 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 Emerald Funds that were
outstanding immediately before the Closing.
After the transfer of their Fund Assets and Liabilities in exchange for
Shares of the Nations Funds, the Emerald Funds will distribute the Shares of the
Nations Funds to their shareholders in liquidation of the Emerald Funds. Each
shareholder owning shares of a particular Emerald 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 Emerald Funds. Nations will establish an account for
each former shareholder of the Emerald Funds reflecting the appropriate number
of Nations Fund Shares distributed to the shareholder. These accounts will be
substantially identical to the accounts maintained by Emerald for each
shareholder. Upon completion of the reorganization with respect to all Emerald
funds, all outstanding shares of the Emerald Funds will be redeemed and
cancelled in exchange for Shares of the Nations Funds distributed, and Emerald
will wind up its affairs and be deregistered as an investment company under the
1940 Act.
4
<PAGE>
Introductory Note to Pro Forma Financial Information
The following unaudited pro forma information gives effect to the proposed
transfer of the Fund Assets and Liabilities (as those terms are defined in the
Reorganization Agreement) of the Emerald Funds to the Nations Funds, accounted
for as if such transfer had occurred as of November 30, 1997 and as if the
Nations Funds had operated for the year then ended. However, it is possible that
one of the Emerald Funds will not approve the merger, in which case the
resulting fund or funds will be comprised of only that Emerald Fund that
approves the merger. In addition, each pro forma combining statement has been
prepared based upon the structure of the proposed fee and expense structure of
the applicable surviving Nations Fund.
The pro forma financial information should be read in conjunction with the
historical financial statements and notes thereto of the Emerald Funds and
Nations Treasury Reserves included or incorporated herein by reference into this
Statement of Additional Information. Each combination of the above Emerald Funds
and Nations Funds will be accounted for as a tax-free reorganization. For more
information concerning this aspect of the Reorganization, see "Information
Relating to Proposal 2-Approval of the Reorganization Agreement-Federal Income
Tax Considerations" in the Proxy/Prospectus.
5
<PAGE>
NATIONS FUNDS
Nations Treasury Fund/Emerald Treasury Fund
Combining Schedule of Investments
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Maturity
PRINCIPAL AMOUNT DESCRIPTION Date VALUE
- -------------------------------------------------------------------------------------------------------------------------------
Nations Emerald Nations Emerald
Treasury Treasury Treasury Treasury
Fund Fund Combined Fund Fund Combined
- -------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C> <C>
U.S. TREASURY OBLIGATIONS - 22.3%
U.S. Treasury Bills - 3.3%
$50,000,000 $0 $50,000,000 Discount note ## ............01/08/98 $49,720,278 $0 $49,720,278
0 50,000,000 50,000,000 Discount note ...............01/22/98 0 49,624,806 49,624,806
40,000,000 0 40,000,000 Discount note ## ............02/05/98 39,609,866 0 39,609,866
-------------------------------------
89,330,144 49,624,806 138,954,950
-------------------------------------
U.S. Treasury Notes - 17.6%
0 50,000,000 50,000,000 7.875% . ....................01/15/98 0 50,145,782 50,145,782
0 50,000,000 50,000,000 5.000% . ....................01/31/98 0 49,957,201 49,957,201
0 50,000,000 50,000,000 7.250% . ....................02/15/98 0 50,162,134 50,162,134
55,000,000 50,000,000 105,000,000 6.125% ## . .................03/31/98 55,027,282 50,120,425 105,147,707
40,000,000 50,000,000 90,000,000 5.875% ## ...................04/30/98 40,037,746 50,087,404 90,125,150
15,000,000 0 15,000,000 8.250% ## ...................07/15/98 15,228,454 0 15,228,454
195,000,000 0 195,000,000 6.250% ## ...................07/31/98 195,682,101 0 195,682,101
40,000,000 0 40,000,000 4.750% ## ...................09/30/98 39,714,049 0 39,714,049
65,000,000 0 65,000,000 6.000% ## ...................09/30/98 65,181,237 0 65,181,237
75,000,000 0 75,000,000 5.875% ## ...................10/31/98 75,135,704 0 75,135,704
-------------------------------------
486,006,573 250,472,946 736,479,519
-------------------------------------
U.S. Treasury Strip - 1.4%
0 60,000,000 60,000,000 Principal Only. .............02/15/98 0 59,317,656 59,317,656
-------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS 575,336,717 359,415,408 934,752,125
=====================================
REPURCHASE AGREEMENTS - 88.2%
Repurchase Agreements - Fixed Rate - 0.0%
840,000,000 0 840,000,000 Agreement with Bankers Trust N.Y. Corporation,
5.740% dated 11/28/97 to be repurchased at
$840,401,800 on 12/01/97. 840,000,000 0 840,000,000
168,000,000 0 168,000,000 Agreement with Bear Stearns, 5.750% dated
11/28/97 to be repurchased at $168,080,500 on
12/01/97. 168,000,000 0 168,000,000
168,000,000 0 168,000,000 Agreement with BZW Securities Corporation,
5.730% dated 11/28/97 to be repurchased at
$168,080,220 on 12/01/97. 168,000,000 0 168,000,000
506,292,000 0 506,292,000 Agreement with CS First Boston Corporation,
Interest is payable monthly. The agreement
is terminable by the fund daily. 506,292,000 0 506,292,000
The final maturity date of the agreement is
07/01/98.
168,000,000 0 168,000,000 Agreement with Dresdner Bank Inc., 5.750%
dated 11/28/97 to be repurchased at
$168,080,500 on 12/01/97. 168,000,000 0 168,000,000
0 76,418,625 76,418,625 Agreement with First Boston, 5.380% dated
11/06/97 to be repurchased at $76,704,133
on 12/01/97. 0 76,418,625 76,418,625
168,000,000 0 168,000,000 Agreement with First Union Corporation, 5.730%
dated 11/28/97 to be repurchased at
$168,080,220 on 12/01/97. 168,000,000 0 168,000,000
0 35,000,000 35,000,000 Agreement with Goldman Sachs, 5.500% dated
11/25/97 to be repurchased at $35,032,083 on
12/01/97. 0 35,000,000 35,000,000
168,000,000 0 168,000,000 Agreement with HSBC Securities, 5.730% dated
11/28/97 to be repurchased at $168,080,220 on
12/01/97. 168,000,000 0 168,000,000
150,000,000 0 150,000,000 Agreement with Merrill Lynch Securities, 5.540%
dated 11/28/97 to be repurchased at
$150,069,250 on 12/01/97. 150,000,000 0 150,000,000
35,000,000 0 35,000,000 Agreement with Morgan (J.P.) Securities Inc.,
5.740% dated 11/28/97 to be repurchased at
$35,016,742 on 12/01/97. 35,000,000 0 35,000,000
295,000,000 0 295,000,000 Agreement with Morgan (J.P.) Securities Inc.,
5.630% dated 11/28/97 to be repurchased at
$295,138,404 on 12/01/97. 295,000,000 0 295,000,000
0 125,000,000 125,000,000 Agreement with Morgan (J.P.) Securities Inc.,
5.530%% dated 11/25/97 to be repurchased at
$125,115,208 on 12/01/97. 0 125,000,000 125,000,000
90,000,000 0 90,000,000 Agreement with Morgan Stanley Group Inc., 5.750%
dated 11/28/97 to be repurchased at $90,043,125
on 12/01/97. 90,000,000 0 90,000,000
1,280,000 0 1,280,000 Agreement with Morgan Stanley Group Inc., 5.500%
dated 11/28/97 to be repurchased at $1,280,587
on 12/01/97. 1,280,000 0 1,280,000
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
NATIONS FUNDS
Nations Treasury Fund/Emerald Treasury Fund
Combining Schedule of Investments (continued)
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
Maturity
PRINCIPAL AMOUNT DESCRIPTION Date VALUE
- --------------------------------------------------------------------------------------------------------------------------
Nations Emerald Nations Emerald
Treasury Treasury Treasury Treasury
Fund Fund Combined Fund Fund
- --------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S> <C> <C> <C>
REPURCHASE AGREEMENTS (continued)
Repurchase Agreements - Fixed Rate (continued)
$0 $80,878,207 $80,878,207 Agreement with Morgan Stanley Group Inc., 5.700%
dated 11/28/97 to be repurchased at $80,916,624
on 12/01/97. $0 $80,878,207
0 35,000,000 35,000,000 Agreement with Prudential Bache, 5.500% dated
11/25/97 to be repurchased at $35,032,083 on
12/01/97. 0 35,000,000
168,000,000 0 168,000,000 Agreement with Smith Barney, Inc., 5.750% dated
11/28/97 to be repurchased at $168,080,500 on
12/01/97. 168,000,000 0
0 85,000,000 85,000,000 Agreement with Smith Barney, Inc., 5.700% dated
11/28/97 to be repurchased at $85,040,375 on
12/01/97. 0 85,000,000
168,000,000 0 168,000,000 Agreement with UBS Securities , Inc., 5.740%
dated 11/28/97 to be repurchased at $168,080,360
on 12/01/97. 168,000,000 0
------------------------------
TOTAL REPURCHASE AGREEMENTS FIXED RATE 3,093,572,000 437,296,832
------------------------------
Repurchase Agreements - Term - 4.0%
50,000,000 0 50,000,000 Agreement with Deutsche Morgan, 5.520% with a
final maturity date of 12/01/1997. 50,000,000 0
120,000,000 0 120,000,000 Agreement with Lehman Brothers Inc., 5.670%, with
a final maturity date of 1/20/98. 120,000,000 0
------------------------------
TOTAL REPURCHASE AGREEMENTS-TERM 170,000,000 0
------------------------------
TOTAL REPURCHASE AGREEMENTS 3,263,572,000 437,296,832
==============================
SHARES
- -------------------------
MONEY MARKET FUNDS - 1.6%
30,025,000 0 30,025,000 AIM Treasury Fund. ............................... 30,025,000 0
24,684,000 0 24,684,000 Dreyfus Treasury Cash Management Fund. ........... 24,684,000 0
11,167,000 0 11,167,000 Fidelity Institutional Cash Portfolio ............ 11,167,000 0
------------------------------
TOTAL MONEY MARKET FUNDS 65,876,000 0
==============================
TOTAL INVESTMENTS (Cost $3,904,784,717, $796,712,240 and $4,701,496,957) .... 112.1% 3,904,784,717 796,712,240
OTHER ASSETS AND LIABILITIES (Net) .......................................... (12.1) (506,978,487) 1,345,705
-------------------------------------------
NET ASSETS .................................................................. 100.0% $3,397,806,230 $798,057,945
===========================================
</TABLE>
Maturity
DESCRIPTION Date
- --------------------------------------------------------------------
Combined
- --------------------------------------------------------------------
Repurchase Agreements - Fixed Rate (continued)
Agreement with Morgan Stanley Group Inc., 5.700%
dated 11/28/97 to be repurchased at $80,916,624
on 12/01/97. $80,878,207
Agreement with Prudential Bache, 5.500% dated
11/25/97 to be repurchased at $35,032,083 on
12/01/97. 35,000,000
Agreement with Smith Barney, Inc., 5.750% dated
11/28/97 to be repurchased at $168,080,500 on
12/01/97. 168,000,000
Agreement with Smith Barney, Inc., 5.700% dated
11/28/97 to be repurchased at $85,040,375 on
12/01/97. 85,000,000
Agreement with UBS Securities , Inc., 5.740%
dated 11/28/97 to be repurchased at $168,080,360
on 12/01/97. 168,000,000
----------------
TOTAL REPURCHASE AGREEMENTS FIXED RATE 3,530,868,832
----------------
Repurchase Agreements - Term - 4.0%
Agreement with Deutsche Morgan, 5.520% with a
final maturity date of 12/01/1997. 50,000,000
Agreement with Lehman Brothers Inc., 5.670%, with
a final maturity date of 1/20/98. 120,000,000
----------------
TOTAL REPURCHASE AGREEMENTS-TERM 170,000,000
----------------
TOTAL REPURCHASE AGREEMENTS 3,700,868,832
================
AIM Treasury Fund. ............................... 30,025,000
Dreyfus Treasury Cash Management Fund. ........... 24,684,000
Fidelity Institutional Cash Portfolio ............ 11,167,000
----------------
TOTAL MONEY MARKET FUNDS 65,876,000
================
$796,712,240 and $4,701,496,957) .... 112.1% 4,701,496,957
..................................... (12.1) (505,632,782)
----------------------------
..................................... 100.0% $4,195,864,175
============================
- ----------
##Security segregated as collateral for reverse repurchase agreement.
See Notes to Pro Forma Financial Statements.
<PAGE>
NATIONS TREASURY FUND
EMERALD TREASURY FUND
Pro Forma Combining Statement of Assets and Liabilities (unaudited)
November 30, 1997
<TABLE>
<CAPTION>
Nations Treasury Emerald Treasury Adjustments to Pro Forma
Fund Fund Pro Forma Combined (Note 1)
---- ---- --------- -----------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at Amortized Cost $641,212,717 $359,415,410 - $1,000,628,127
Repurchase Agreements at amortized cost 3,263,572,000 437,296,830 - 3,700,868,830
Cash 1,951 - - 1,951
Receivable for Securities on Loan - 77,005,106 - 77,005,106
Income Receivable 9,277,207 5,049,845 - 14,327,052
Prepaid and Other Assets 199,131 49,947 - 249,078
-------------- ------------ ---------- --------------
Total Assets 3,914,263,006 878,817,138 0 4,793,080,144
-------------- ------------ ---------- --------------
LIABILITIES:
Income Distribution Payable 8,702,202 3,257,393 - 11,959,595
Payable for Reverse Repurchase Agreement 506,292,000 - 506,292,000
Payable for Collateral from Securities on Loan - 76,418,625 - 76,418,625
Accrued Expenses and other payables 1,462,574 1,083,175 - 2,545,749
-------------- ------------ ---------- --------------
Total Liabilities 516,456,776 80,759,193 0 597,215,969
-------------- ------------ ---------- --------------
Net Assets Applicable to Shares Outstanding $3,397,806,230 $798,057,945 $0 $4,195,864,175
-------------- ------------ ---------- --------------
Net Assets by Class:
Primary A/Institutional $1,086,102,123 $290,575,858 - $1,376,677,981
-------------- ------------ ---------- --------------
Primary B $25,365,546 n/a - $25,365,546
-------------- ------------ ---------- --------------
Investor A/Service $1,362,887,305 $448,765,584 - $1,811,652,889
-------------- ------------ ---------- --------------
Investor B $718,393,360 n/a - $718,393,360
-------------- ------------ ---------- --------------
Investor C $8,607,641 n/a - $8,607,641
-------------- ------------ ---------- --------------
Investor Daily/Retail $196,450,255 $58,716,503 - $255,166,758
-------------- ------------ ---------- --------------
Shares Outstanding by Class:
Primary A/Institutional 1,086,168,909 290,742,444 - 1,376,911,353
-------------- ------------ ---------- --------------
Primary B 25,367,105 n/a - 25,367,105
-------------- ------------ ---------- --------------
Investor A/Service 1,362,971,110 449,184,467 - 1,812,155,577
-------------- ------------ ---------- --------------
Investor B 718,437,534 n/a - 718,437,534
-------------- ------------ ---------- --------------
Investor C 8,608,171 n/a - 8,608,171
-------------- ------------ ---------- --------------
Investor Daily/Retail 196,462,335 58,751,937 - 255,214,272
-------------- ------------ ---------- --------------
Primary A Shares:
Net Asset Value per Share $1.00 $1.00 $1.00
-------------- ------------ --------------
Primary B Shares:
Net Asset Value per Share $1.00 n/a $1.00
-------------- ------------ --------------
Investor A Shares:
Net Asset Value per Share $1.00 $1.00 $1.00
-------------- ------------ --------------
Investor B Shares:
Net Asset Value per Share $1.00 n/a $1.00
-------------- ------------ --------------
Investor C Shares:
Net Asset Value per Share $1.00 n/a $1.00
-------------- ------------ --------------
Investor Daily Shares:
Net Asset Value per Share $1.00 $1.00 $1.00
-------------- ------------ --------------
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
NATIONS TREASURY FUND
EMERALD TREASURY FUND
Pro Forma Combining Statement of Operations (Unaudited)
For the Twelve Month Period Ending November 30, 1997
<TABLE>
<CAPTION>
Nations Treasury Emerald Treasury Adjustments to Pro Forma
Fund Fund Pro Forma Combined (Note 1)
---- ---- --------- -----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $177,209,514 $51,505,306 - $228,714,820
------------ ----------- -------- ------------
Total Investment Income 177,209,514 51,505,306 - 228,714,820
------------ ----------- -------- ------------
EXPENSES:
Investment Advisory 6,402,662 2,311,626 (449,126)(a) 8,265,162
Administration 3,179,078 716,897 207,882 (a) 4,103,856
Transfer Agent 523,206 219,389 (100,000)(b) 642,595
Custodian (d) 219,924 88,733 (40,657)(b) 268,000
Legal and Audit Fees 204,121 51,249 (40,000)(b) 215,370
Trustees' Fees 28,622 45,218 (20,000)(b) 53,840
Other expenses 168,915 325,078 (60,000)(b) 433,993
Subtotal 10,726,528 3,758,190 (501,902) 13,982,816
Shareholder servicing and distribution fees
Primary B 97,169 - N/A 97,169
Investor A/Service 2,791,231 1,877,378 N/A 4,668,609
Investor B 2,416,577 - N/A 2,416,577
Investor C 28,009 - N/A 28,009
Daily/Retail 479,016 347,020 - 826,036
Fees waived and/or reimbursed by
investment advisor and administrator (1,186,544) (102,989) (381,719)(c) (1,671,252)
------------ ----------- -------- ------------
Total Expenses before interest expense 15,351,986 5,879,599 (883,621) 20,347,964
Interest Expense - 1,227,534 - 1,227,534
Total Expenses 15,351,986 7,107,133 (883,621) 21,575,498
------------ ----------- -------- ------------
NET INVESTMENT INCOME 161,857,528 44,398,173 883,621 207,139,322
------------ ----------- -------- ------------
Net Realized Gain/(Loss)
on Investments (32,029) (92,801) - (124,830)
Net Increase/(Decrease) in net assets
resulting from operations $161,825,499 $44,305,372 $883,621 $207,014,492
------------ ----------- -------- ------------
</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.
(d) Net of expense offset arrangements amounts to less than .01% of average net
assets.
See Notes to Pro Forma Financial Statements
<PAGE>
Nations Treasury Fund
Emerald Treasury 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 November 30, 1997 the Company offers eight separate portfolios. The unaudited
Pro Forma Combining Portfolio of Investments and the unaudited Pro Forma
Combining Statement of Assets and Liabilities assumes the exchange described in
the next paragraph occurred as of November 30, 1997 and the unaudited Pro Forma
Combining Statement of Operations assumes the exchange occurred as of December
1, 1996. These statements have been derived from books and records utilized in
calculating daily net asset value of each fund at November 30, 1997 and for the
twelve month period then ended.
The pro forma statements give effect to the proposed transfer of the assets and
stated liabilities of the Emerald Treasury Fund in exchange for shares of
Nations Treasury Fund. Under generally accepted accounting principles, the
historical cost of investment securities will be carried forward to the
surviving entity and the results of operations of the Emerald Treasury Fund for
pre-combination periods will not be restated. The pro forma statements do not
reflect the expenses of either fund in carrying out its obligations under the
proposed Agreement and Plan of Reorganization.
The 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.
<PAGE>
Nations Treasury Fund
Emerald Treasury Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
For the twelve month period ended November 30, 1997, the Nations Prime Fund and
the Nations Treasury Fund's investment advisory fee were computed based on the
annual rates multiplied by the combined daily average net assets of such funds,
of 0.25% of average daily net assets up to $250 million and 0.20% of average
daily net assets exceeding $250 million. The administration fee was computed
based on the annual rate of 0.10% of average daily net assets of the Company and
the investment portfolios of Nations Fund Trust and Nations Fund Portfolios,
Inc. (two other registered open-end investment companies which are part of the
Nations Fund family) on a combined basis.
The Company has adopted a shareholder administration plan ("Administration
Plan") for the Primary B Shares of the Nations Treasury Fund. Under the
Administration Plan, aggregate payments may not exceed 0.25%, on an annualized
basis, of the average daily net assets of the Fund's Primary B Shares.
The Company has also adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act with respect to Investor A Shares, ("Investor A Distribution Plan")
and Investor Daily Shares ("Investor Daily Distribution Plan") of the Nations
Treasury Fund. Under the Investor A Distribution Plan and Investor Daily
Distribution Plan, aggregate payments may not exceed 0.10% and 0.25%, on an
annualized basis, of the average daily net assets of the Investor A Shares and
Investor Daily Shares respectively, of the Fund.
The Company has also adopted a shareholder servicing plan with respect to
Investor A Shares ("Investor A Servicing Plan"), Investor B Shares ("Investor B
Servicing Plan"), Investor C Shares ("Investor C Servicing Plan") and Investor
Daily Shares ("Investor Daily Servicing Plan") of the
2
<PAGE>
Nations Treasury Fund
Emerald Treasury Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
Nations Treasury Fund. Under the Investor A Servicing Plan, Investor B Servicing
Plan, Investor C Servicing Plan and Investor Daily Servicing Plan aggregate
payments may not exceed 0.25% on an annualized basis of the average daily net
assets of the Investor A Shares, Investor B Shares, Investor C Shares and
Investor Daily Shares of the Fund.
2. Portfolio Valuation
Securities of Nations Treasury Fund are valued on the basis of amortized cost,
which approximates market value. Amortized cost valuation involves initially
valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, as long as the effect of
the fluctuating interest rates on the market value of the instrument is not
significant. Restricted securities and other assets are valued by the Fund's
investment adviser under the supervision of the Board of Directors. Emerald
Treasury Fund uses similar rules for determining portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of Nations Treasury Fund which would have been issued at November 30,
1997 in connection with the proposed reorganization. The pro forma number of
shares outstanding of 4,196,694,012 consists of 798,678,848 shares assumed
issued in the reorganization plus 3,398,015,164 shares of Nations Treasury Fund
at November 30, 1997.
3
<PAGE>
NATIONS FUNDS
Nations Small Company Growth Fund/Emerald Small Capitalization Fund
Pro Forma Combining Schedule of Investments
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
====================================================================================================================================
Nations Emerald Nations Emerald
Small Company Small Pro Forma Small Company Small Pro Forma
Growth Capitalization Combining Growth Capitalization Combining
Fund Fund Portfolios Fund Fund Portfolios
====================================================================================================================================
<C> <C> <C> <S> <C> <C> <C>
COMMON STOCKS - 93.5%
Advertising Sales - 1.6%
41,125 0 41,125 HA-LO Industries, Inc.+ ............... $ 1,046,117 $ 0 $ 1,046,117
0 139,000 139,000 Valassis Communications, Inc. + ....... 0 4,178,688 4,178,688
-------------------------------------------
1,046,117 4,178,688 5,224,805
-------------------------------------------
Aerospace and Defense - 2.2%
0 98,300 98,300 Be Aerospace, Inc. + .................. 0 3,108,738 3,108,738
62,900 0 62,900 GenCorp, Inc........................... 1,576,430 0 1,576,430
98,000 0 98,000 Remec, Inc. +.......................... 2,290,750 0 2,290,750
-------------------------------------------
3,867,180 3,108,738 6,975,918
-------------------------------------------
Apparel and Textiles - 2.4%
52,678 0 52,678 Culp, Inc.............................. 981,128 0 981,128
109,200 0 109,200 Delta Woodside Industries, Inc ........ 641,550 0 641,550
0 46,600 46,600 Dress Barn + .......................... 0 1,199,950 1,199,950
66,600 0 66,600 Galey & Lord, Inc.+ ................... 1,198,800 0 1,198,800
63,200 0 63,200 Quicksilver, Inc.+ .................... 1,666,900 0 1,666,900
0 70,950 70,950 Tuesday Morning Corporation+ .......... 0 1,764,881 1,764,881
-------------------------------------------
4,488,378 2,964,831 7,453,209
-------------------------------------------
Banks - 2.5%
42,554 0 42,554 Brenton Banks, Inc..................... 1,394,973 0 1,394,973
54,600 0 54,600 City National Corporation ............. 1,774,500 0 1,774,500
0 69,235 69,235 Imperial Bancorp + .................... 0 3,232,409 3,232,409
24,800 0 24,800 USBANCORP, Inc......................... 1,604,250 0 1,604,250
-------------------------------------------
4,773,723 3,232,409 8,006,132
-------------------------------------------
Building Materials - 1.8%
39,600 0 39,600 Centex Construction Products, Inc...... 1,212,750 0 1,212,750
0 39,000 39,000 Centex Corporation..................... 0 2,471,625 2,471,625
12,400 0 12,400 Southdown, Inc......................... 715,325 0 715,325
52,400 0 52,400 TJ International, Inc.................. 1,303,450 0 1,303,450
-------------------------------------------
3,231,525 2,471,625 5,703,150
-------------------------------------------
Coal, Gas and Pipeline - 0.4%
34,400 0 34,400 Kinder Morgan Energy Partners, L.P... . 1,178,200 0 1,178,200
-------------------------------------------
Commercial Services - 2.4%
0 57,900 57,900 Analysts International................. 0 2,757,488 2,757,488
53,000 0 53,000 Lason Holdings, Inc.+ ................. 1,484,000 0 1,484,000
50,000 0 50,000 PMT Services, Inc. + ................. 787,500 0 787,500
0 65,800 65,800 Prepaid Legal Services + .............. 0 1,862,963 1,862,963
0 43,350 43,350 Source Services Corporation+ .......... 0 904,931 904,931
-------------------------------------------
2,271,500 5,525,382 7,796,882
-------------------------------------------
Communications Software - 0.2%
23,900 0 23,900 Avid Technology, Inc.+ ................ 699,075 0 699,075
-------------------------------------------
Computer Services - 0.8%
97,200 0 97,200 Cybex Computer Products Corporation+ .. 2,527,200 0 2,527,200
-------------------------------------------
Computer Software - 4.8%
12,000 0 12,000 Barra Inc. +........................... 334,500 0 334,500
0 54,300 54,300 Computer Horizon Corporation+ ......... 0 1,791,900 1,791,900
46,300 0 46,300 Exabyte Corporation+ .................. 451,425 0 451,425
0 64,500 64,500 Hyperion Software Corporation+ ........ 0 2,779,547 2,779,547
39,600 0 39,600 Progress Software Corporation+ ........ 816,750 0 816,750
128,700 0 128,700 Rogue Wave Software+ .................. 1,689,187 0 1,689,187
0 188,900 188,900 Symantec Corporation + ................ 0 4,722,499 4,722,499
0 61,100 61,100 Systems & Computer Technology Corporation+ 0 2,856,425 2,856,425
-------------------------------------------
3,291,862 12,150,371 15,442,233
-------------------------------------------
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
NATIONS FUNDS
Nations Small Company Growth Fund/Emerald Small Capitalization Fund
Pro Forma Combining Schedule of Investments (continued)
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
====================================================================================================================================
Nations Emerald Nations Emerald
Small Company Small Pro Forma Small Company Small Pro Forma
Growth Capitalization Combining Growth Capitalization Combining
Fund Fund Portfolios Fund Fund Portfolios
====================================================================================================================================
<C> <C> <C> <S> <C> <C> <C>
COMMON STOCKS - (continued)
Construction - 3.2%
38,400 0 38,400 Champion Enterprises, Inc.+ ........... $ 739,200 $ 0 $ 739,200
78,400 168,900 247,300 Kaufman & Broad Home Corporation ...... 1,700,300 3,663,019 5,363,319
29,500 0 29,500 Oakwood Homes Corporation ............. 885,000 0 885,000
41,500 0 41,500 Pulte Corporation ..................... 1,683,344 0 1,683,344
43,800 0 43,800 Zurn Industries, Inc................... 1,500,150 0 1,500,150
-------------------------------------------
6,507,994 3,663,019 10,171,013
-------------------------------------------
Consumer Products - 0.8%
0 135,600 135,600 Helen of Troy Limited + ............... 0 1,932,300 1,932,300
24,500 0 24,500 Russ Berrie & Company, Inc............. 731,938 0 731,938
-------------------------------------------
731,938 1,932,300 2,664,238
-------------------------------------------
Cosmetics and Toiletry - 0.4%
39,600 0 39,600 Alberto-Culver Company ................ 1,235,025 0 1,235,025
-------------------------------------------
Electrical Products - 0.3%
44,960 0 44,960 Wyman-Gordon Company+ ................. 961,020 0 961,020
-------------------------------------------
Electronics - 3.3%
52,500 0 52,500 Anaren Microwave, Inc. + .............. 1,050,000 0 1,050,000
41,100 0 41,100 Electro Scientific Industries, Inc.+ .. 1,708,219 0 1,708,219
0 15,900 15,900 Encore Wire Corporation+ .............. 0 546,563 546,563
39,200 0 39,200 Esterline Technologies Corporation+ ... 1,386,700 0 1,386,700
51,900 0 51,900 Sawtek, Inc. +......................... 1,511,588 0 1,511,588
0 22,600 22,600 Smart Modular Technologies+ ........... 0 1,401,200 1,401,200
0 123,800 123,800 Windmere Durable Holdings ............. 0 2,986,675 2,986,675
-------------------------------------------
5,656,507 4,934,438 10,590,945
-------------------------------------------
Electronics - Semiconductor - 1.7%
0 56,800 56,800 Adflex Solutions, Inc. + .............. 0 1,095,175 1,095,175
23,600 0 23,600 Electroglas, Inc.+ .................... 448,400 0 448,400
23,400 0 23,400 Fusion Systems Corporation - CVR+...... 26,325 0 26,325
42,000 0 42,000 Plexus Corporation+ ................... 1,118,250 0 1,118,250
92,000 0 92,000 SDL, Inc. + ........................... 1,529,500 0 1,529,500
36,700 0 36,700 Watkins-Johnson Company ............... 1,146,875 0 1,146,875
-------------------------------------------
4,269,350 1,095,175 5,364,525
-------------------------------------------
Exploration and Drilling - 4.4%
35,000 66,800 101,800 Cliffs Drilling Company+ .............. 1,942,500 3,707,399 5,649,899
0 83,000 83,000 Falcon Drilling Co., Inc. + ........... 0 2,676,750 2,676,750
43,946 0 43,946 Forest Oil Corporation+ ............... 784,161 0 784,161
98,700 63,400 162,100 Parker Drilling Company+ .............. 1,301,606 836,088 2,137,694
40,370 0 40,370 Swift Energy Company+ ................. 878,048 0 878,048
17,900 0 17,900 Varco International, Inc.+ ............ 916,256 0 916,256
32,800 0 32,800 Vintage Petroleum, Inc................. 635,500 0 635,500
26,900 0 26,900 Wiser Oil Company ..................... 410,225 0 410,225
-------------------------------------------
6,868,296 7,220,237 14,088,533
-------------------------------------------
Financial Services - 3.0%
0 143,100 143,100 Americredit Corporation+ .............. 0 3,953,137 3,953,137
0 30,400 30,400 Firstplus Finiancial Group+ ........... 0 1,159,000 1,159,000
95,000 0 95,000 IMC Mortgage Company+ ................. 1,270,625 0 1,270,625
74,470 0 74,470 Southwest Securities Group, Inc........ 1,759,354 0 1,759,354
63,000 0 63,000 Trammell Crow Company+ ................ 1,386,000 0 1,386,000
-------------------------------------------
4,415,979 5,112,137 9,528,116
-------------------------------------------
Food - 4.4%
30,000 0 30,000 American Italian Pasta Co - Class A+ .. 708,750 0 708,750
0 70,100 70,100 Earthgrains Company ................... 0 3,031,825 3,031,825
18,300 0 18,300 Quality Food Centers, Inc.+ ........... 1,149,469 0 1,149,469
0 79,560 79,560 Suiza Foods Corporation+ .............. 0 4,629,397 4,629,397
0 100,500 100,500 Whole Foods Market, Inc. +............. 0 4,610,437 4,610,437
-------------------------------------------
1,858,219 12,271,659 14,129,878
-------------------------------------------
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
NATIONS FUNDS
Nations Small Company Growth Fund/Emerald Small Capitalization Fund
Pro Forma Combining Schedule of Investments (continued)
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
====================================================================================================================================
Nations Emerald Nations Emerald
Small Company Small Pro Forma Small Company Small Pro Forma
Growth Capitalization Combining Growth Capitalization Combining
Fund Fund Portfolios Fund Fund Portfolios
====================================================================================================================================
<C> <C> <C> <S> <C> <C> <C>
COMMON STOCKS - (continued)
Furniture and Appliances - 1.0%
29,300 0 29,300 Bush Industries, Inc., Class A ........ $ 772,788 $ 0 $ 772,788
30,200 0 30,200 Ethan Allen Interiors Inc.............. 1,162,700 0 1,162,700
92,900 0 92,900 O'Sullivan Industries Holdings, Inc.+ . 1,184,475 0 1,184,475
-------------------------------------------
3,119,963 0 3,119,963
-------------------------------------------
Instruments-Scientific - 0.4%
28,000 0 28,000 Dionex Corporation+ ................... 1,401,750 0 1,401,750
-------------------------------------------
Insurance - 3.8%
64,000 0 64,000 AHL Services Inc.+ .................... 1,328,000 0 1,328,000
35,313 0 35,313 Delphi Financial Group, Inc., Class A+ 1,416,934 0 1,416,934
0 53,900 53,900 Everest Reinsurance Holdings .......... 0 2,044,831 2,044,831
23,000 0 23,000 Executive Risk Inc..................... 1,495,000 0 1,495,000
65,580 0 65,580 Frontier Insurance Group, Inc ......... 1,578,019 0 1,578,019
0 67,000 67,000 Lennar Corporation..................... 0 1,398,625 1,398,625
0 160,300 160,300 Reliance Group Holdings................ 0 2,043,825 2,043,825
29,400 0 29,400 Triad Guaranty, Inc.+ ................. 867,300 0 867,300
-------------------------------------------
6,685,253 5,487,281 12,172,534
-------------------------------------------
Machinery - 0.5%
69,300 0 69,300 MagneTek, Inc.+ ....................... 1,446,638 0 1,446,638
-------------------------------------------
Machinery and Equipment - 1.9%
17,700 0 17,700 Applied Power, Inc., Class A .......... 1,079,700 0 1,079,700
56,400 0 56,400 Gardner Denver Machinery Inc.+ ........ 2,115,000 0 2,115,000
0 100,350 100,350 Halter Marine Group, Inc. + ........... 0 2,797,256 2,797,256
-------------------------------------------
3,194,700 2,797,256 5,991,956
-------------------------------------------
Major Pharmaceuticals - 3.1%
0 36,400 36,400 Agouron Pharmaceuticals, Inc. + ....... 0 1,396,850 1,396,850
0 104,200 104,200 Alpharma, Inc., Class A................ 0 2,383,575 2,383,575
43,100 0 43,100 Core Laboratories+ .................... 1,562,375 0 1,562,375
0 189,400 189,400 Rexall Sundown, Inc. + ................ 0 4,498,249 4,498,249
-------------------------------------------
1,562,375 8,278,674 9,841,049
-------------------------------------------
Manufacturing Industries - 1.8%
0 169,800 169,800 Coltec Industries+ .................... 0 3,958,463 3,958,463
50,600 0 50,600 Kaydon Corporation .................... 1,666,638 0 1,666,638
-------------------------------------------
1,666,638 3,958,463 5,625,101
-------------------------------------------
Medical Biotechnology - 1.0%
28,700 0 28,700 Human Genome Sciences, Inc.+ .......... 1,176,700 0 1,176,700
70,700 0 70,700 Molecular Dynamics, Inc.+ ............. 1,422,838 0 1,422,838
42,900 0 42,900 Vical, Inc.+ .......................... 595,238 0 595,238
-------------------------------------------
3,194,776 0 3,194,776
-------------------------------------------
Medical Products - 1.5%
38,294 0 38,294 Henry Schein, Inc. +................... 1,349,846 0 1,349,846
0 78,900 78,900 Gulf South Medical Supply, Inc. +...... 0 2,574,112 2,574,112
68,000 0 68,000 Somnus Medical Technologies ........... 782,000 0 782,000
-------------------------------------------
2,131,846 2,574,112 4,705,958
-------------------------------------------
Medical Services - 3.6%
46,100 0 46,100 Acuson Corporation+ ................... 878,781 0 878,781
0 81,800 81,800 Datascope+ ............................ 0 2,091,013 2,091,013
0 103,000 103,000 Healthdyne Technologies, Inc. + ....... 0 1,976,313 1,976,313
43,150 0 43,150 Invacare Corporation+ ................. 997,844 0 997,844
0 19,000 19,000 Medical Resources, Inc. + ............. 0 172,188 172,188
0 247,000 247,000 Nova Care+ ............................ 0 3,056,625 3,056,625
129,200 0 129,200 Orthodontic Centers of America+........ 2,341,750 0 2,341,750
-------------------------------------------
4,218,375 7,296,139 11,514,514
-------------------------------------------
Metals and Mining - 0.5%
69,900 0 69,900 AMCOL International Corporation ....... 1,677,600 0 1,677,600
-------------------------------------------
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
NATIONS FUNDS
Nations Small Company Growth Fund/Emerald Small Capitalization Fund
Pro Forma Combining Schedule of Investments (continued)
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
====================================================================================================================================
Nations Emerald Nations Emerald
Small Company Small Pro Forma Small Company Small Pro Forma
Growth Capitalization Combining Growth Capitalization Combining
Fund Fund Portfolios Fund Fund Portfolios
====================================================================================================================================
<C> <C> <C> <S> <C> <C> <C>
COMMON STOCKS - (continued)
Motor Vehicles - 1.8%
0 57,400 57,400 Federal Mogul Corporation.............. $ 0 $ 2,360,575 $ 2,360,575
0 123,800 123,800 Wabash National Corporation............ 0 3,505,087 3,505,087
-------------------------------------------
0 5,865,662 5,865,662
-------------------------------------------
Multimedia - 0.4%
26,166 0 26,166 Pulitizer Publishing Company .......... 1,427,682 0 1,427,682
0 672 672 Score Board, Inc. +................... 0 756 756
-------------------------------------------
1,427,682 756 1,428,438
-------------------------------------------
Office Supplies - 1.1%
25,300 0 25,300 American Business Products, Inc... .... 528,138 0 528,138
0 103,500 103,500 Interface, Inc... ..................... 0 3,105,000 3,105,000
-------------------------------------------
528,138 3,105,000 3,633,138
-------------------------------------------
Oil Services - 1.3%
0 76,400 76,400 Key Energy Group, Inc. + .............. 0 1,857,475 1,857,475
0 62,200 62,200 Newpark Resources, Inc. +.............. 0 1,240,113 1,240,113
16,200 0 16,200 SECOR SMIT Inc.+ ...................... 902,137 0 902,137
-------------------------------------------
902,137 3,097,588 3,999,725
-------------------------------------------
Paper and Forest Products - 0.2%
18,800 0 18,800 Chesapeake Corporation ................ 643,900 0 643,900
-------------------------------------------
Photo and Optical - 0.3%
36,400 0 36,400 Innovex, Inc........................... 837,200 0 837,200
-------------------------------------------
Printing and Publishing - 0.2%
26,350 0 26,350 McClatchy Newspapers, Inc., Class A ... 757,562 0 757,562
-------------------------------------------
Professional Services - 1.0%
34,500 0 34,500 Best Software, Inc.+................... 357,937 0 357,937
35,700 0 35,700 Inacom Corporation+ ................... 1,012,988 0 1,012,988
91,500 0 91,500 SCB Computer Technology, Inc.+ ........ 1,692,750 0 1,692,750
-------------------------------------------
3,063,675 0 3,063,675
-------------------------------------------
Restaurants and Lodging - 0.5%
40,400 0 40,400 Foodmaker, Inc.+ ...................... 626,200 0 626,200
68,700 0 68,700 NPC International Inc ................. 914,569 0 914,569
-------------------------------------------
1,540,769 0 1,540,769
-------------------------------------------
Retail - Discount - 0.7%
32,500 0 32,500 BJ'S Wholesale Club, Inc.+ ............ 946,562 0 946,562
63,500 0 63,500 ShopKo Stores, Inc.+ .................. 1,333,500 0 1,333,500
-------------------------------------------
2,280,062 0 2,280,062
-------------------------------------------
Retail - General - 0.8%
36,600 0 36,600 Neiman Marcus Group, Inc.+ ............ 1,205,512 0 1,205,512
36,400 0 36,400 Ross Stores, Inc... ................... 1,419,600 0 1,419,600
-------------------------------------------
2,625,112 0 2,625,112
-------------------------------------------
Retail - Specialty - 4.7%
35,370 0 35,370 Eagle Hardware & Garden, Inc.+ ........ 601,290 0 601,290
58,700 0 58,700 Fabri-Centers of America, Class A+ .... 1,229,031 0 1,229,031
0 159,600 159,600 Fingerhut Companies, Inc............... 0 3,311,699 3,311,699
99,900 0 99,900 Fossil, Inc.+ ......................... 2,222,775 0 2,222,775
0 82,500 82,500 General Nutrition Companies (GNC)+ .... 0 2,815,313 2,815,313
27,375 90,900 118,275 Pacific Sunwear of California+ ........ 893,109 2,965,613 3,858,722
21,700 0 21,700 Williams-Sonoma, Inc.+ ................ 827,312 0 827,312
-------------------------------------------
5,773,517 9,092,625 14,866,142
-------------------------------------------
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
NATIONS FUNDS
Nations Small Company Growth Fund/Emerald Small Capitalization Fund
Pro Forma Combining Schedule of Investments (continued)
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
====================================================================================================================================
Nations Emerald Nations Emerald
Small Company Small Pro Forma Small Company Small Pro Forma
Growth Capitalization Combining Growth Capitalization Combining
Fund Fund Portfolios Fund Fund Portfolios
====================================================================================================================================
<C> <C> <C> <S> <C> <C> <C>
COMMON STOCKS - (continued)
Savings and Loans - 5.0%
0 37,900 37,900 Albank Financial Corporation .......... $ 0 $ 1,752,875 $ 1,752,875
0 45,900 45,900 Bank United Corp., Class A............. 0 1,927,800 1,927,800
0 62,300 62,300 Firstfed Financial Corporation+........ 0 2,273,950 2,273,950
52,300 0 52,300 First Republic Bank+ .................. 1,444,788 0 1,444,788
0 146,200 146,200 Golden State Bancorp+ ................. 0 4,870,287 4,870,287
0 106,500 106,500 St. Paul Bancorp, Inc ................. 0 2,609,250 2,609,250
16,300 0 16,300 ONBANcorp, Inc ........................ 1,096,175 0 1,096,175
-------------------------------------------
2,540,963 13,434,162 15,975,125
-------------------------------------------
Steel - 0.2%
43,670 0 43,670 Steel Technologies Inc ................ 491,288 0 491,288
-------------------------------------------
Telecommunications - 3.3%
114,500 0 114,500 Allen Telecom Inc.+ ................... 2,325,781 0 2,325,781
51,600 0 51,600 CellStar Corporation+ ................. 1,335,150 0 1,335,150
33,200 0 33,200 CommNet Cellular, Inc.+ ............... 1,172,375 0 1,172,375
58,500 0 58,500 Electromagnetic Sciences, Inc.+ ....... 1,060,313 0 1,060,313
82,400 0 82,400 Harmonic Lightwaves, Inc.+ ............ 1,071,200 0 1,071,200
55,000 0 55,000 Metromedia Fiber Network - Class A+.... 928,125 0 928,125
26,000 0 26,000 Spectrian Corporation+ ................ 533,000 0 533,000
87,500 0 87,500 Stanford Telecommunications, Inc.+ .... 1,968,750 0 1,968,750
-------------------------------------------
10,394,694 0 10,394,694
-------------------------------------------
Telecommunications Equipment - 1.3%
107,000 0 107,000 ANTEC Corporation+ .................... 1,631,750 0 1,631,750
0 61,000 61,000 Digital Microwave Corporation+......... 0 960,750 960,750
132,000 0 132,000 Proxim, Inc.+ ......................... 1,584,000 0 1,584,000
-------------------------------------------
3,215,750 960,750 4,176,500
-------------------------------------------
Transportation - Airlines - 1.1%
42,600 0 42,600 Air Express International Corporation . 1,222,087 0 1,222,087
35,500 0 35,500 Airborne Freight Corporation........... 2,260,906 0 2,260,906
9,000 0 9,000 Virgin Express Hldgs - SP ADR+......... 148,500 0 148,500
-------------------------------------------
3,631,493 0 3,631,493
-------------------------------------------
Transportation - Trucking - 2.0%
0 173,100 173,100 Consolidated Freightways Corporation+ . 0 2,704,687 2,704,687
4,000 0 4,000 Jevic Transportations, Inc. + ........ 66,000 0 66,000
0 136,700 136,700 Yellow Corporation+.................... 0 3,605,462 3,605,462
-------------------------------------------
66,000 6,310,149 6,376,149
-------------------------------------------
Transportation - Marine - 0.8%
0 88,000 88,000 Hvide Marine, Inc., Class A+ .......... 0 2,491,500 2,491,500
-------------------------------------------
Vitamins and Nutritional Products - 0.6%
88,300 0 88,300 NBTY, Inc .+ .......................... 1,920,525 0 1,920,525
-------------------------------------------
Other - 6.5%
47,500 0 47,500 Aehr Test Systems+ .................... 433,437 0 433,437
0 225,200 225,200 Allied Waste Industries+ .............. 0 4,926,250 4,926,250
0 59,100 59,100 American Disposal Services+............ 0 2,105,438 2,105,438
65,800 0 65,800 Calgon Carbon Corporation ............. 723,800 0 723,800
0 105,900 105,900 Canandaigua Wine Co., Class A (Winea)+ 0 5,069,963 5,069,963
29,000 0 29,000 Coherent, Inc+ ........................ 1,087,500 0 1,087,500
24,800 0 24,800 DT Industries, Inc..................... 688,200 0 688,200
64,000 0 64,000 Group Maintenance Amer. Corporation.... 896,000 0 896,000
0 101,500 101,500 Lo-Jack Corporation+................... 0 1,408,313 1,408,313
0 115,800 115,800 Medquist, Inc. +....................... 0 3,010,800 3,010,800
22,200 0 22,200 Tefron Ltd ............................ 466,200 0 466,200
-------------------------------------------
4,295,137 16,520,764 20,815,901
-------------------------------------------
TOTAL COMMON STOCKS.................... 137,114,606 161,131,890 298,246,496
===========================================
TOTAL COMMON STOCKS.................... 137,114,606 161,131,890 298,246,496
===========================================
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
NATIONS FUNDS
Nations Small Company Growth Fund/Emerald Small Capitalization Fund
Pro Forma Combining Schedule of Investments (continued)
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT DESCRIPTION VALUE
====================================================================================================================================
Nations Emerald Nations Emerald
Small Company Small Pro Forma Small Company Small Pro Forma
Growth Capitalization Combining Growth Capitalization Combining
Fund Fund Portfolios Fund Fund Portfolios
====================================================================================================================================
<C> <C> <C> <S> <C> <C> <C>
CASH SWEEP ACCOUNT - 5.1%
$0 $16,203,578 $16,203,578 Bank of New York $ 0 $ 16,203,578 $ 16,203,578
===========================================
REPURCHASE AGREEMENT - 1.2%
3,934,000 0 3,934,000 Agreement with Smith Barney, 5.680%
dated 11/28/97, to be repurchased
at $3,935,862 on 12/01/97. 3,934,000 0 3,934,000
===========================================
TOTAL INVESTMENTS
(Cost $116,618,684, $156,847,417 and $273,466,101) ....................... 99.8% 141,048,606 177,335,468 318,384,074
OTHER ASSETS AND LIABILITIES (Net) ......................................... 0.2 711,484 (176,813) 534,671
----- -------------------------------------------
NET ASSETS ................................................................. 100.0% $141,760,090 $177,158,655 $318,918,745
===== ===========================================
</TABLE>
- ----------
+ Non-income producing security.
See Notes to Pro Forma Financial Statements
<PAGE>
NATIONS SMALL COMPANY GROWTH FUND
EMERALD SMALL CAPITALIZATION FUND
Pro Forma Combining Statement of Assets and Liabilities (unaudited)
November 30, 1997
<TABLE>
<CAPTION>
Nations Small Company Emerald Small Adjustments to Pro Forma
Growth Fund Capitalization Fund Pro Forma Combined (Note 1)
----------- ------------------- --------- -----------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at Value (cost $116,618,684, $156,847,417 $141,048,606 $177,335,468 - $318,384,074
and $273,466,101)
Cash 661 - - 661
Income Receivable - 58,890 - 58,890
Receivable for investments sold 1,676,897 - - 1,676,897
Receivable for fund shares sold - 253 - 253
Receivable due from Investment Advisor - - 13,519 (a) 13,519
Prepaid and Other Assets 81,306 10,569 - 91,875
Unamortized Organization Costs - 13,519 (13,519)(a) -
Total Assets 142,807,470 177,418,699 0 320,226,169
------------ ------------ --------- ------------
LIABILITIES:
Payable for investments purchased 931,700 - - 931,700
Payable for fund shares redeemed 314 68,463 - 68,777
Accrued Expenses and other payables 115,366 191,581 - 306,947
------------ ------------ --------- ------------
Total Liabilities 1,047,380 260,044 0 1,307,424
------------ ------------ --------- ------------
Net Assets Applicable to Shares Outstanding $141,760,090 $177,158,655 $0 $318,918,745
------------ ------------ --------- ------------
Net Assets by Class:
Primary A/Institutional $131,258,337 $163,096,145 - $294,354,482
------------ ------------ --------- ------------
Primary B $14 n/a - $14
------------ ------------ --------- ------------
Investor A/Retail $5,836,036 $14,062,510 - $19,898,546
------------ ------------ --------- ------------
Investor B $1,560,172 n/a - $1,560,172
------------ ------------ --------- ------------
Investor C $3,105,531 n/a - $3,105,531
------------ ------------ --------- ------------
Shares Outstanding by Class:
Primary A/Institutional 9,654,410 12,566,576 (570,408) 21,650,578
Primary B 1 n/a - 1
------------ ------------ --------- ------------
Investor A/Retail 430,592 1,096,636 (59,081) 1,468,147
------------ ------------ --------- ------------
Investor B 115,920 n/a - 115,920
------------ ------------ --------- ------------
Investor C 228,687 n/a - 228,687
------------ ------------ --------- ------------
Primary A Shares:
Net Asset Value per Share $13.60 $12.98 $13.60
------------ ------------ ------------
Primary B Shares:
Net Asset Value per Share $13.60 n/a $13.60
------------ ------------ ------------
Investor A Shares:
Net Asset Value per Share $13.55 $12.82 $13.55
------------ ------------ ------------
Investor B Shares:
Net Asset Value per Share $13.46 n/a $13.46
------------ ------------ ------------
Investor C Shares:
Net Asset Value per Share $13.58 n/a $13.58
------------ ------------ ------------
</TABLE>
See Notes to Pro Forma Financial Statements
(a) Unamortized Organization Costs of the acquired fund will be borne by the
Advisor.
<PAGE>
NATIONS SMALL COMPANY GROWTH FUND
EMERALD SMALL CAPITALIZATION FUND
Pro Forma Statement of Operations (Unaudited)
For the Twelve Month Period Ending November 30, 1997
<TABLE>
<CAPTION>
Nations Small Company Emerald Small Adjustments to Pro Forma
Growth Fund Capitalization Fund Pro Forma Combined (Note 1)
----------- ------------------- --------- -----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends $1,186,284 $780,596 - $1,966,880
Interest 386,017 0 - 386,017
----------- ----------- -------- -----------
Total Investment Income 1,572,301 780,596 - 2,352,897
----------- ----------- -------- -----------
EXPENSES:
Investment Advisory 1,143,750 1,549,153 - 2,692,903
Administration 114,375 120,060 34,882 (a) 269,317
Transfer Agent 90,036 38,270 - 128,306
Custodian (e) 18,262 31,473 (10,000)(b) 39,735
Legal and Audit Fees 36,833 11,670 (11,670)(b) 36,833
Trustees' Fees 2,871 8,058 (7,000)(b) 3,929
Amortization of organization costs - 12,410 (12,410)(c) -
Other expenses 104,680 66,726 (60,000)(b) 111,406
----------- ----------- -------- -----------
Subtotal 1,510,807 1,837,820 (66,198) 3,282,429
Shareholder servicing and distribution fees
Investor A/Retail 10,196 55,428 (27,714)(a) 37,910
Investor C 4,613 - N/A 4,613
Investor B 22,351 - N/A 22,351
Fees waived and/or reimbursed by
investment advisor (423,188) (1,321) (299,405)(d) (723,914)
----------- ----------- -------- -----------
Total Expenses 1,124,779 1,891,927 (393,317) 2,623,389
----------- ----------- -------- -----------
NET INVESTMENT INCOME 447,522 (1,111,331) 393,317 (270,492)
----------- ----------- -------- -----------
Net Realized and Unrealized Gain/(Loss)
on Investments:
Realized Gain/(Loss) on securities and future transactions 9,744,978 4,933,513 - 14,678,491
Change in unrealized appreciation/
(depreciation) on securities and futures 15,391,383 13,104,533 - 28,495,916
----------- ----------- -------- -----------
Net Realized and Unrealized gain/(loss)
on investments and futures 25,136,361 18,038,046 - 43,174,407
----------- ----------- -------- -----------
Net Increase/(Decrease) in net assets
resulting from operations $25,583,883 $16,926,715 $393,317 $42,903,915
----------- ----------- -------- -----------
</TABLE>
Legend:
(a) Reflects adjustment to the acquiring fund contractual fee obligation.
(b) Adjustment reflects expected savings when the two funds become one.
(c) Organization expense of the acquired fund is not an expense of the combined
fund.
(d) Reflects adjustment to the level of the acquiring fund's voluntary expense
reimbursement.
(e) Net of expense offset arrangements amounts to less than .01% of average net
assets.
See Notes to Pro Forma Financial Statements.
<PAGE>
Nations Small Company Growth Fund
Emerald Small Capitalization 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 November 30, 1997 the Company offers eight separate portfolios. The unaudited
Pro Forma Combining Portfolio of Investments and the unaudited Pro Forma
Combining Statement of Assets and Liabilities assumes the exchange described in
the next paragraph occurred as of Novemebr 30, 1997 and the unaudited Pro Forma
Combining Statement of Operations assumes the exchange occurred as of December
1, 1996. Prior toOn May 23, 1997, the Nations Small Company Growth Fund was
known as Pilot Small Capitalization Equity Fund . These statements have been
derived from books and records utilized in calculating daily net asset value of
each fund at November 30, 1997 and for the twelve month period then ended.
The pro forma statements give effect to the proposed transfer of the assets and
stated liabilities of the Emerald Small Capitalization 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 surviving entity and the results of operations of the Emerald Small
Capitalization 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.
<PAGE>
Nations Small Company Growth Fund
Emerald Small Capitalization Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
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.
For the twelve month period ended November 30, 1997, the Nations Small Company
Growth Fund's investment advisory fee was computed based on the annual rate of
1.00% of average daily net assets. The administration fee was computed based on
the annual rate of 0.10% of average daily net assets of the Company and the
investment portfolios of Nations Fund Trust and Nations Fund Portfolios, Inc.
(two other registered open-end investment companies which are part of the
Nations Fund family) on a combined basis.
The Company has also adopted a shareholder servicing and distribution plan
("Investor A Plan") pursuant to Rule 12b-1 under the 1940 Act for the Investor A
Shares of the Nations Small Company Growth Fund. Under the Investor A Plan,
aggregate payments may not exceed 0.25%, on an annualized basis, of the average
daily net assets of the Fund's Investor A Shares.
The Company has also adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act with respect to Investor B Shares ("Investor B Distribution Plan")
and Investor C Shares ("Investor C Distribution Plan") of the Nations Small
Company Growth Fund. Under the Investor B Distribution Plan and Investor C
Distribution Plan, aggregate payments may not exceed 0.75% and 0.75%, on an
annualized basis, of the average daily net assets of the Investor B Shares and
Investor C Shares respectively, of the Fund.
2
<PAGE>
Nations Small Company Growth Fund
Emerald Small Capitalization Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
The Company has also adopted a shareholder servicing plan with respect to
Investor B Shares ("Investor B Servicing Plan") and Investor C Shares ("Investor
C Servicing Plan") of the Nations Small Company Growth Fund. Under the Investor
B Servicing Plan and Investor C Servicing Plan, aggregate payments may not
exceed 0.25% on an annualized basis of the average daily net assets of the
Investor B Shares and Investor C Shares of the Fund.
2. Portfolio Valuation
Securities of Nations Small Company Growth Fund which are traded on a recognized
stock exchange are valued at the last sale price on the securities exchange on
which such securities are primarily traded or at the last sale price on the
national securities market. Securities traded only on over-the-counter markets
(but not including securities reported on the NASDAQ National Market System) are
valued on the basis of the closing over-the-counter bid prices or, if no sale
occurred on such day, at the mean of the current bid and asked prices. Certain
securities may be valued by one or more principal market makers. Securities
reported on the NASDAQ National Market System are valued at the last sale price
on the valuation date. Restricted securities, if any, securities for which
market quotations are not readily available and other assets are valued at fair
market value under the supervision of the Board of Directors. Short-term
investments that mature in 60 days or less are valued at amortized cost. Emerald
Small Capitalization Fund uses similar rules for determining portfolio
valuation.
3. Capital Shares
3
<PAGE>
Nations Small Company Growth Fund
Emerald Small Capitalization Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
The pro forma net asset value per share assumes the issuance of additional
shares of Nations Small Company Growth Fund which would have been issued at
November 30, 1997 in connection with the proposed reorganization. The pro forma
number of shares outstanding of 23,463,333 consists of 13,033,723 shares assumed
issued in the reorganization plus 10,429,610 shares of Nations Small Company
Growth Fund at November 30, 1997.
4
<PAGE>
NATIONS FUNDS
Nations Government Securities Fund/Emerald U.S. Government Securities Fund
Pro Forma Combining Schedule of Investments
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT DESCRIPTION
========================================================================================================================
Nations Emerald
Government U.S. Government Pro Forma
Securities Securities Combining
Fund Fund Portfolios
========================================================================================================================
ASSET-BACKED SECURITIES - 0.0%
<C> <C> <C> <S>
$0 $1,716,138 $1,716,138 Export Funding Trust, Series 95-A, 8.210% 12/29/06
MORTGAGE-BACKED SECURITIES - 39.4%
Federal Home Loan Mortgage Corporation (FHLMC) Certificates - 12.4%
0 2,375,000 2,375,000 6.200% 09/08/08 ..............................................
0 1,000,606 1,000,606 7.000% 07/01/03 ..............................................
253,686 0 253,686 7.500% 08/01/08 - 06/01/09 ...................................
2,627,501 0 2,627,501 8.000% 08/01/07 - 05/01/17 ...................................
567,401 0 567,401 8.500% 02/01/08 - 06/01/17 ...................................
528,864 0 528,864 9.000% 05/01/09 - 12/01/16 ...................................
587,220 0 587,220 9.500% 04/01/18 - 06/01/21 ...................................
69,705 89,432 159,137 10.000% 07/01/01 - 09/01/18 ...................................
0 493,834 493,834 REMIC, Series 1212, ClassCA, 6.500% 07/15/16 ...................
0 3,000,000 3,000,000 REMIC, Series 1388, 3.500% 06/15/07.............................
0 5,000,000 5,000,000 Series 1388, Class H, 7.440% 09/20/06...........................
2,955,571 0 2,955,571 15 Year Standard Giant, (New Gold), FGCI, 7.000% 07/01/11 ......
Gold:
0 1,950,897 1,950,897 5.500% 04/01/09 - 12/01/13 ...................................
0 1,199,626 1,199,626 6.500% 03/01/00 - 01/01/09 ...................................
0 1,091,930 1,091,930 8.500% 09/01/01...............................................
0 622,486 622,486 9.000% 02/01/02...............................................
0 1,907,736 1,907,736 9.250% 06/01/18...............................................
Federal Housing Authority (FHA) Certificate - 1.4%
2,971,464 0 2,971,464 Carrollon Manner,
7.375% 04/01/21 ..............................................
Federal National Mortgage Association (FNMA) Certificates - 19.8%
0 682,388 682,388 6.000% 08/01/99 ..............................................
0 2,965,889 2,965,889 6.500% 01/01/09 - 07/01/09 ...................................
3,000,000 0 3,000,000 6.800% 01/10/03 ..............................................
1,954,132 0 1,954,132 7.050% 10/01/12 ..............................................
15,305,944 0 15,305,944 7.500% 06/01/12 - 03/01/27 ...................................
4,383,936 2,511,062 6,894,998 8.000% 08/01/99 - 09/01/11 ...................................
172,985 0 172,985 8.250% 04/01/09 . ............................................
588,739 815,265 1,404,004 8.500% 01/01/98 - 07/01/21 ...................................
0 268,900 268,900 9.000% 12/01/16. .............................................
0 999,505 999,505 CMO, Series 1993-54, Class VB, 7.000% 02/25/04 .................
0 2,549,302 2,549,302 REMIC, Series 1997-55, Class B, 7.000% 02/18/27.................
5,000,000 0 5,000,000 REMIC, Series X-188A, Class G, 5.800% 08/25/06..................
Government National Mortgage Association (GNMA) Certificates - 5.8%
354,515 0 354,515 7.000% 06/15/23 ...............................................
8,993,031 0 8,993,031 7.500% 02/15/04 - 03/15/24 ....................................
0 1,088,896 1,088,896 8.000% 02/15/23 ...............................................
0 50,924 50,924 9.000% 06/15/18 ...............................................
312,623 200,643 513,266 9.500% 04/15/16 - 08/15/21 ....................................
584,704 22,599 607,303 10.000% 11/15/09 - 08/15/20 ....................................
131,139 0 131,139 10.500% 12/15/20 ...............................................
0 25,356 25,356 11.000% 03/15/01 ...............................................
120,913 0 120,913 11.750% 09/15/00 - 12/15/00 ....................................
421 0 421 12.750% 12/15/97................................................
0 83,315 83,315 13.000% 01/15/01 - 04/15/11 ....................................
Government National Mortgage Association II (GNMA II) Certificate - 0.0%
67,179 0 67,179 11.000% 10/20/20 ..............................................
TOTAL MORTGAGE-BACKED SECURITIES. ..............................
<CAPTION>
DESCRIPTION VALUE
=====================================================================================================================
Nations Emerald
Government U.S. Government Pro Forma
Securities Securities Combining
Fund Fund Portfolios
=====================================================================================================================
<S> <C> <C> <C>
Export Funding Trust,Series 95-A, 8.210% 12/29/06 ...................... $ 0 $ 1,846,256 $ 1,846,256
===========================================
Federal Home Loan Mortgage Corporation (FHLMC) Certificates - 12.4%
6.200% 09/08/08 ...................................................... 0 2,305,284 2,305,284
7.000% 07/01/03 ...................................................... 0 1,015,755 1,015,755
7.500% 08/01/08 - 06/01/09 ........................................... 261,010 0 261,010
8.000% 08/01/07 - 05/01/17 ........................................... 2,715,040 0 2,715,040
8.500% 02/01/08 - 06/01/17 ........................................... 593,241 0 593,241
9.000% 05/01/09 - 12/01/16 ........................................... 563,056 0 563,056
9.500% 04/01/18 - 06/01/21 ........................................... 634,831 0 634,831
10.000% 07/01/01 - 09/01/18 ........................................... 73,626 97,677 171,303
REMIC, Series 1212, ClassCA, 6.500% 07/15/16 ........................... 0 493,878 493,878
REMIC, Series 1388, 3.500% 06/15/07 .................................... 0 2,582,490 2,582,490
Series 1388, Class H, 7.440% 09/20/06 ................................. 0 5,190,630 5,190,630
15 Year Standard Giant, (New Gold), FGCI, 7.000% 07/01/11 .............. 2,994,969 0 2,994,969
Gold: .................................................................. 0
5.500% 04/01/09 - 12/01/13 ........................................... 0 1,887,687 1,887,687
6.500% 03/01/00 - 01/01/09 ........................................... 0 1,202,424 1,202,424
8.500% 09/01/01 ..................................................... 0 1,118,759 1,118,759
9.000% 02/01/02 ..................................................... 0 646,507 646,507
9.250% 06/01/18 ..................................................... 0 2,019,186 2,019,186
-------------------------------------------
7,835,773 18,560,277 26,396,050
-------------------------------------------
Federal Housing Authority (FHA) Certificate - 1.4%
Carrollon Manner,
7.375% 04/01/21 ...................................................... 3,050,394 0 3,050,394
-------------------------------------------
Federal National Mortgage Association (FNMA) Certificates - 19.8%
6.000% 08/01/99 ...................................................... 0 676,970 676,970
6.500% 01/01/09 - 07/01/09 ........................................... 0 2,969,992 2,969,992
6.800% 01/10/03 ...................................................... 3,091,410 0 3,091,410
7.050% 10/01/12 ...................................................... 2,025,580 0 2,025,580
7.500% 06/01/12 - 03/01/27 ........................................... 15,630,777 0 15,630,777
8.000% 08/01/99 - 09/01/11 ........................................... 4,531,579 2,563,945 7,095,524
8.250% 04/01/09 ...................................................... 180,366 0 180,366
8.500% 01/01/98 - 07/01/21 ........................................... 615,289 826,540 1,441,829
9.000% 12/01/16 ..................................................... 0 282,799 282,799
CMO, Series 1993-54, Class VB, 7.000% 02/25/04 ......................... 0 1,016,141 1,016,141
REMIC, Series 1997-55, Class B, 7.000% 02/18/27 ....................... 0 2,571,862 2,571,862
REMIC, Series X-188A, Class G, 5.800% 08/25/06 ........................ 4,959,350 0 4,959,350
-------------------------------------------
31,034,351 10,908,249 41,942,600
-------------------------------------------
Government National Mortgage Association (GNMA) Certificates - 5.8%
7.000% 06/15/23 ....................................................... 356,617 0 356,617
7.500% 02/15/04 - 03/15/24 ............................................ 9,195,372 0 9,195,372
8.000% 02/15/23 ....................................................... 0 1,132,158 1,132,158
9.000% 06/15/18 ....................................................... 0 55,148 55,148
9.500% 04/15/16 - 08/15/21 ............................................ 339,556 211,136 550,692
10.000% 11/15/09 - 08/15/20 ............................................ 651,235 24,836 676,071
10.500% 12/15/20 ....................................................... 147,805 0 147,805
11.000% 03/15/01 ....................................................... 0 27,059 27,059
11.750% 09/15/00 - 12/15/00 ............................................ 127,158 0 127,158
12.750% 12/15/97 ...................................................... 423 0 423
13.000% 01/15/01 - 04/15/11 ............................................ 0 98,595 98,595
-------------------------------------------
10,818,166 1,548,932 12,367,098
-------------------------------------------
Government National Mortgage Association II (GNMA II) Certificate - 0.0%
11.000% 10/20/20 ...................................................... 76,671 0 76,671
-------------------------------------------
TOTAL MORTGAGE-BACKED SECURITIES ....................................... 52,815,355 31,017,458 83,832,813
===========================================
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
NATIONS FUNDS
Nations Government Securities Fund/Emerald U.S. Government Securities Fund
Pro Forma Combining Schedule of Investments (continued)
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT DESCRIPTION
========================================================================================================================
Nations Emerald
Government U.S. Government Pro Forma
Securities Securities Combining
Fund Fund Portfolios
========================================================================================================================
MUNICIPAL BONDS - 7.1%
<C> <C> <C> <S>
$7,060,000 $0 $7,060,000 Chicago, Illinois Public Building Commission,
Special Obligation Bonds, (Taxable-Refunding),
7.000% 01/01/07 ..............................................
7,500,000 0 7,500,000 Texas State Department of Housing and Community Affairs,
Single Family Revenue, (Teams-Taxable-Mortgage), Series C,
(MBIA Insured),
6.800% 09/01/29 ..............................................
TOTAL MUNICIPAL BONDS ..........................................
U.S. GOVERNMENT AGENCY SECURITIES - 20.1%
Federal Agricultural Mortgage Corporation:
0 2,500,000 2,500,000 7.080% 03/25/02 ...............................................
Federal Home Loan Mortgage Corporation:
0 2,500,000 2,500,000 5.780% 10/22/03 ...............................................
0 2,200,000 2,200,000 6.080% 10/29/08 ...............................................
0 2,000,000 2,000,000 6.880% 11/22/06 ...............................................
0 2,000,000 2,000,000 7.290% 01/27/04 ...............................................
Federal National Mortgage Association, Discount Notes:
0 2,500,000 2,500,000 7.550% 06/10/04 ...............................................
Federal National Mortgage Association:
0 1,000,000 1,000,000 5.930% 09/26/03 ...............................................
0 1,500,000 1,500,000 5.970% 09/03/03 ...............................................
0 1,000,000 1,000,000 6.210% 11/07/07 ...............................................
0 2,000,000 2,000,000 6.310% 03/14/01 ...............................................
5,000,000 0 5,000,000 6.410% 11/13/12 ...............................................
5,000,000 0 5,000,000 6.460% 06/29/12 ...............................................
0 1,000,000 1,000,000 6.720% 08/01/05 ...............................................
5,000,000 0 5,000,000 6.940% 03/19/07 ...............................................
0 2,000,000 2,000,000 6.960% 09/05/12 ...............................................
0 1,500,000 1,500,000 7.180% 10/01/03 ...............................................
Navy Federal Credit Union:
0 1,735,927 1,735,927 7.000% 06/01/04 ...............................................
Tennesse Valley Authority;
0 1,500,000 1,500,000 8.630% 11/15/29 ...............................................
0 500,000 500,000 8.250% 09/15/34 ...............................................
TOTAL U.S. GOVERNMENT AGENCY SECURITIES ........................
U.S. TREASURY OBLIGATIONS - 26.6%
U.S. Treasury Bonds - 12.3%
0 1,000,000 1,000,000 5.750% 11/15/00 ...............................................
0 2,500,000 2,500,000 12.750% 11/15/10 ...............................................
18,000,000 0 18,000,000 7.250% 08/15/22 ...............................................
0 1,000,000 1,000,000 6.000% 02/15/26 ...............................................
U.S. Treasury Notes - 14.3%
6,000,000 0 6,000,000 6.250% 08/31/02 ...............................................
0 4,500,000 4,500,000 7.000% 07/15/06 ...............................................
4,000,000 0 4,000,000 6.500% 10/15/06 ...............................................
15,050,000 0 15,050,000 6.125% 08/15/07 ...............................................
TOTAL U.S. TREASURY OBLIGATIONS ................................
TOTAL SECURITIES ...............................................
REPURCHASE AGREEMENT - 5.2%
11,098,000 0 11,098,000 Agreement with Smith Barney, 5.680% dated 11/28/97, to be
repurchased at $11,103,253 on 12/01/97........................
CASH SWEEP ACCOUNT - 0.1%
0 203,461 203,461 Bank of New York Cash Sweep Account.............................
<CAPTION>
DESCRIPTION VALUE
==========================================================================================================
Nations Emerald
Government U.S. Government Pro Forma
Securities Securities Combining
Fund Fund Portfolios
==========================================================================================================
<S> <C> <C> <C>
Chicago, Illinois Public Building Commission,
Special Obligation Bonds, (Taxable-Refunding),
7.000% 01/01/07 ........................................ $ 7,432,486 $ 0 $ 7,432,486
----------------------------------------------
Texas State Department of Housing and Community Affairs,
Single Family Revenue, (Teams-Taxable-Mortgage), Series C,
(MBIA Insured),
6.800% 09/01/29 ........................................ 7,592,775 0 7,592,775
----------------------------------------------
TOTAL MUNICIPAL BONDS .................................... 15,025,261 0 15,025,261
==============================================
Federal Agricultural Mortgage Corporation:
7.080% 03/25/02 ......................................... 0 2,524,212 2,524,212
Federal Home Loan Mortgage Corporation:
5.780% 10/22/03 ......................................... 0 2,433,085 2,433,085
6.080% 10/29/08 ......................................... 0 2,122,318 2,122,318
6.880% 11/22/06 ......................................... 0 2,023,416 2,023,416
7.290% 01/27/04 ......................................... 0 2,000,910 2,000,910
Federal National Mortgage Association, Discount Notes:
7.550% 06/10/04 ......................................... 0 2,290,523 2,290,523
Federal National Mortgage Association:
5.930% 09/26/03 ......................................... 0 977,579 977,579
5.970% 09/03/03 ......................................... 0 1,462,434 1,462,434
6.210% 11/07/07 ......................................... 0 1,002,731 1,002,731
6.310% 03/14/01 ......................................... 0 1,994,172 1,994,172
6.410% 11/13/12 ......................................... 5,050,000 0 5,050,000
6.460% 06/29/12 ......................................... 5,071,140 0 5,071,140
6.720% 08/01/05 ......................................... 0 1,036,116 1,036,116
6.940% 03/19/07 ......................................... 5,083,600 0 5,083,600
6.960% 09/05/12 ......................................... 0 2,075,324 2,075,324
7.180% 10/01/03 ......................................... 0 1,520,517 1,520,517
Navy Federal Credit Union:
7.000% 06/01/04 ......................................... 0 1,758,303 1,758,303
Tennesse Valley Authority;
8.630% 11/15/29 ......................................... 0 1,618,707 1,618,707
8.250% 09/15/34 ......................................... 0 512,031 512,031
----------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY SECURITIES .................. 15,204,740 27,352,378 42,557,118
==============================================
U.S. Treasury Bonds - 12.3%
5.750% 11/15/00 ......................................... 0 998,438 998,438
12.750% 11/15/10 ......................................... 0 3,551,565 3,551,565
7.250% 08/15/22 ......................................... 20,525,580 0 20,525,580
6.000% 02/15/26 ......................................... 0 982,188 982,188
----------------------------------------------
20,525,580 5,532,191 26,057,771
----------------------------------------------
U.S. Treasury Notes - 14.3%
6.250% 08/31/02 ......................................... 6,093,720 0 6,093,720
7.000% 07/15/06 ......................................... 0 4,820,630 4,820,630
6.500% 10/15/06 ......................................... 4,159,360 0 4,159,360
6.125% 08/15/07 ......................................... 15,339,259 0 15,339,259
----------------------------------------------
25,592,339 4,820,630 30,412,969
----------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS .......................... 46,117,919 10,352,821 56,470,740
==============================================
TOTAL SECURITIES ......................................... 129,163,275 70,568,913 199,732,188
==============================================
Agreement with Smith Barney, 5.680% dated 11/28/97, to be
repurchased at $11,103,253 on 12/01/97 ................ 11,098,000 0 11,098,000
----------------------------------------------
Bank of New York Cash Sweep Account ...................... 0 203,461 203,461
----------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
TOTAL INVESTMENTS (Cost $138,580,532, $69,351,690 and $207,932,222) ... 99.4% 140,261,275 70,772,374 211,033,649
OTHER ASSETS AND LIABILITIES (Net) .................................... 0.6 1,015,779 311,408 1,327,187
----- -------------------------------------------
NET ASSETS ............................................................ 100.0% $ 141,277,054 71,083,782 212,360,836
===== ===========================================
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
NATIONS GOVERNMENT SECURITIES FUND
EMERALD U.S. GOVERNMENT SECURITIES FUND
Pro Forma Combining Statement of Assets and Liabilities (unaudited)
November 30, 1997
<TABLE>
<CAPTION>
Emerald U.S.
Nations Government Government Adjustments to Pro Forma
Securities Fund Securities Fund Pro Forma Combined (Note 1)
--------------- --------------- --------- -----------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at Value (cost $138,580,532,$69,351,690
and $207,932,222) $140,261,275 $70,772,374 - $211,033,649
Cash 507 - - 507
Income Receivable 1,737,860 719,822 - 2,457,682
Receivable for Fund Shares Sold 15,000 7,500 - 22,500
Prepaid and Other Assets 28,833 3,086 - 31,919
Total Assets 142,043,475 71,502,782 0 213,546,257
------------ ----------- ----------- ------------
LIABILITIES:
Income Distribution Payable 603,204 352,655 - 955,859
Payable for fund shares repurchased - 9,861 - 9,861
Accrued Expenses and other payables 163,217 56,484 - 219,701
------------ ----------- ----------- ------------
Total Liabilities 766,421 419,000 0 1,185,421
------------ ----------- ----------- ------------
Net Assets Applicable to Shares Outstanding $141,277,054 $71,083,782 $0 $212,360,836
------------ ----------- ----------- ------------
Net Assets by Class:
Primary A/Institutional $94,092,799 $49,468,965 - $143,561,764
------------ ----------- ----------- ------------
Primary B $598,373 n/a - $598,373
------------ ----------- ----------- ------------
Investor A/Retail $11,411,643 $21,614,817 - $33,026,460
------------ ----------- ----------- ------------
Investor B $34,030,357 n/a - $34,030,357
------------ ----------- ----------- ------------
Investor C $1,143,882 n/a - $1,143,882
Shares Outstanding by Class:
Primary A/Institutional 9,570,005 4,821,199 210,198 14,601,402
------------ ----------- ----------- ------------
Primary B 60,859 n/a - 60,859
------------ ----------- ----------- ------------
Investor A/Retail 1,160,651 2,100,708 97,683 3,359,042
------------ ----------- ----------- ------------
Investor B 3,461,181 n/a - 3,461,181
------------ ----------- ----------- ------------
Investor C 116,342 n/a - 116,342
------------ ----------- ----------- ------------
Primary A Shares:
Net Asset Value per Share $9.83 $10.26 $9.83
------------ ----------- ------------
Primary B Shares:
Net Asset Value per Share $9.83 n/a $9.83
------------ ----------- ------------
Investor A Shares:
Net Asset Value per Share $9.83 $10.29 $9.83
------------ ----------- ------------
Investor B Shares:
Net Asset Value per Share $9.83 n/a $9.83
------------ ----------- ------------
Investor C Shares:
Net Asset Value per Share $9.83 n/a $9.83
------------ ----------- ------------
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
NATIONS GOVERNMENT SECURITIES FUND
EMERALD U.S. GOVERNMENT SECURITIES FUND
Pro Forma Statement of Operations (Unaudited)
For the Twelve Month Period Ending November 30, 1997
<TABLE>
<CAPTION>
Emerald U.S.
Nations Government Government Adjustments to Pro Forma
Securities Fund Securities Fund Pro Forma Combined (Note 1)
--------------- --------------- --------- -----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest and Dividends $7,982,811 $4,560,764 - $12,543,575
---------- ---------- --------- -----------
Total Investment Income 7,982,811 4,560,764 - 12,543,575
---------- ---------- --------- -----------
EXPENSES:
Investment Advisory 736,996 265,439 99,667 (a) 1,102,102
Administration 115,825 51,429 14,946 (a) 182,200
Transfer Agent 80,396 13,419 - 93,815
Custodian (d) 27,307 13,688 (3,000)(b) 37,995
Legal and Audit Fees 41,530 5,139 (5,139)(b) 41,530
Trustees' Fees 2,109 3,314 (3,314)(b) 2,109
Other expenses 113,690 51,767 (65,000)(b) 100,457
---------- ---------- --------- -----------
Subtotal 1,117,853 404,195 38,160 1,560,208
Shareholder servicing and distribution fees
Primary B 3,680 - N/A 3,680
Investor A 26,008 109,892 (54,946)(a) 80,954
Investor C 268,938 - N/A 268,938
Investor B 10,633 - N/A 10,633
Fees waived and/or reimbursed by
investment advisor (157,870) (8,291) (24,939)(c) (191,100)
---------- ---------- --------- -----------
Total Expenses 1,269,242 505,796 (41,726) 1,733,313
---------- ---------- --------- -----------
NET INVESTMENT INCOME 6,713,569 4,054,968 41,726 10,810,262
---------- ---------- --------- -----------
Net Realized and Unrealized Gain/(Loss)
on Investments:
Realized Gain/(Loss) on securities (7,557,461) 476,128 - (7,081,333)
Change in unrealized appreciation/
(depreciation) on securities (993,269) (382,725) - (1,375,994)
---------- ---------- --------- -----------
Net Realized and Unrealized gain/(loss)
on investments (8,550,730) 93,403 (8,457,327)
---------- ---------- -----------
Net Increase/(Decrease) in net assets
resulting from operations ($1,837,161) $4,148,371 $41,726 $2,352,935
---------- ---------- --------- -----------
</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.
(d) Net of expense offset arrangements amounts to less than .01% of average net
assets.
See Notes to Pro Forma Financial Statements
<PAGE>
Nations Government Securities Fund
Emerald 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 November 30, 1997 the Company offers eight separate portfolios. The unaudited
Pro Forma Combining Portfolio of Investments and the unaudited Pro Forma
Combining Statement of Assets and Liabilities assumes the exchange described in
the next paragraph occurred as of November 30, 1997 and the unaudited Pro Forma
Combining Statement of Operations assumes the exchange occurred as of December
1, 1996. These statements have been derived from books and records utilized in
calculating daily net asset value of each fund at November 30, 1997 and for the
twelve month period then ended.
The pro forma statements give effect to the proposed transfer of the assets and
stated liabilities of the Emerald 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
Emerald 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.
<PAGE>
Nations Government Securities Fund
Emerald U.S. Government Securities Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
For the twelve month period ended November 30, 1997, the Nations Government
Securities Fund's investment advisory fee was computed based on the annual rate
of 0.65% of average daily net assets up to $100 million, 0.55% of average daily
net assets between $100 million and $250 million and 0.50% of average daily net
assets exceeding $250 million. The administration fee was computed based on the
annual rate of 0.10% of average daily net assets of the Company and the
investment portfolios of Nations Fund Trust and Nations Fund Portfolios, Inc.
(two other registered open-end investment companies which are part of the
Nations Fund family) on a combined basis.
The Company has adopted a shareholder administration plan ("Administration
Plan") for the Primary B Shares of the Nations Government Securities Fund. Under
the Administration Plan, aggregate payments may not exceed 0.50%, on an
annualized basis, of the average daily net assets of the Fund's Primary B
Shares.
The Company has also adopted a shareholder servicing and distribution plan
("Investor A Plan") pursuant to Rule 12b-1 under the 1940 Act for the Investor A
Shares of the Nations Government Securities Fund. Under the Investor A Plan,
aggregate payments may not exceed 0.25%, on an annualized basis, of the average
daily net assets of the Fund's Investor A Shares.
The Company has also adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act with respect to Investor C Shares ("Investor C Distribution Plan")
of the Nations Government Securities Fund. Under the Investor C Distribution
Plan, aggregate payments may not exceed 0.60%, on an annualized basis, of the
average daily net assets of the Investor C Shares of the Fund.
2
<PAGE>
Nations Government Securities Fund
Emerald U.S. Government Securities Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
The Company has also adopted a shareholder servicing plan with respect to
Investor B Shares ("Investor B Servicing Plan") and Investor C Shares ("Investor
C Servicing Plan") of the Nations Government Securities Fund. Under the Investor
B Servicing Plan and Investor C Servicing Plan, aggregate payments may not
exceed 0.25% on an annualized basis of the average daily net assets of the
Investor B Shares and Investor C Shares of the Fund.
2. Portfolio Valuation
Certain securities are valued by an independent pricing service approved by the
Board of Directors. Valuations are based upon a matrix system and/or appraisals
provided by the pricing service which takes into consideration such factors as
yields, prices, maturities, redemption features and credit ratings on comparable
securities. Certain securities may be valued by one or more principal market
makers. Restricted securities, if any, securities for which market quotations
are not readily available and other assets are valued at fair market value under
the supervision of the Board of Directors. Short-term investments that mature in
60 days or less are valued at amortized cost. Emerald U.S. Government Securities
Fund uses similar rules for determining portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of Nations Government Securities Fund which would have been issued at
November 30, 1997 in connection with the proposed reorganization. The pro forma
number of shares outstanding of 21,598,826 consists of 7,229,788 shares assumed
issued in the reorganization plus
3
<PAGE>
Nations Government Securities Fund
Emerald U.S. Government Securities Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
14,369,038 shares of Nations Government Securities Fund at November 30, 1997.
4
<PAGE>
NATIONS FUNDS
Nations International Value Fund/Emerald International Equity Fund
Pro Forma Combining Schedule of Investments
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
===================================================================================================================================
Nations Emerald Pro Forma Nations Emerald Pro Forma
International International Combining International International Combining
Value Fund Equity Fund Portfolios Value Fund Equity Fund Portfolios
===================================================================================================================================
<C> <C> <C> <S> <C> <C> <C>
COMMON STOCKS - 96.4%
Argentina - 2.3%
Energy Sources - 2.3%
0 40,150 40,150 YPF Sociedad Anonima, Class D, ADR ..... $0 $ 1,347,534 $ 1,347,534
--------------------------------------------
Austria - 1.1%
Utilities - Electric and Gas - 1.1%
0 24,860 24,860 EVN Energic - Versorgung Nied., ADR..... 0 640,819 640,819
--------------------------------------------
Brazil - 4.7%
Soft Drinks - 0.6%
0 25,000 25,000 Compania Cervejaria Brahma.............. 0 332,813 332,813
--------------------------------------------
Telecommunications - 1.3%
0 7,300 7,300 Telebras, Preferred Shares, ADR ........ 0 761,938 761,938
--------------------------------------------
Utilities - Electric and Gas - 2.8%
0 69,450 69,450 Electrobras, ADR ....................... 0 1,621,476 1,621,476
--------------------------------------------
0 2,716,227 2,716,227
--------------------------------------------
Denmark - 7.6%
Banking - 3.3%
0 16,310 16,310 Den Danske Bank, Unsponsored ADR........ 0 1,936,018 1,936,018
--------------------------------------------
Telecommunications - 4.3%
0 84,950 84,950 Tele Danmark AS, Class B, ADR .......... 0 2,537,881 2,537,881
--------------------------------------------
0 4,473,899 4,473,899
--------------------------------------------
France - 17.9%
Automobiles - 2.3%
0 47,300 47,300 PSA Peugeot Citroen, ADR................ 0 1,336,036 1,336,036
--------------------------------------------
Banking - 2.3%
0 10,500 10,500 Cie Financiere De Paribus SA 0 758,577 758,577
0 21,600 21,600 Societe Generale, ADR................... 0 567,853 567,853
--------------------------------------------
0 1,326,430 1,326,430
--------------------------------------------
Electrical and Electronics - 4.0%
0 94,400 94,400 Aleatel Alsthom, ADR.................... 0 2,336,400 2,336,400
--------------------------------------------
Energy Sources - 1.7%
0 17,800 17,800 Elf Aquitane, ADR ...................... 0 1,019,050 1,019,050
--------------------------------------------
Food and Houshold Products - 4.4%
0 80,500 80,500 Groupe Danone. ADR...................... 0 2,575,999 2,575,999
--------------------------------------------
Insurance - 3.2%
0 33,000 33,000 AGF Assurances Generales de France ORD.. 0 1,878,211 1,878,211
--------------------------------------------
0 10,472,126 10,472,126
--------------------------------------------
Germany - 4.5%
Automobiles - 4.5%
0 37,630 37,630 Daimler-Benz, ADR ...................... 0 2,657,619 2,657,619
--------------------------------------------
Israel - 0.1%
Data Processing and Reproduction - 0.1%
0 3,100 3,100 Scitex Corporation, Ltd. ............... 0 38,363 38,363
--------------------------------------------
Italy - 11.6%
Banking - 5.2%
0 367,000 367,000 Banca Commerciale Italiana.............. 0 1,051,271 1,051,271
0 65,057 65,057 Istituto Mobiliare Italiano, SPA, ADR .. 0 2,020,833 2,020,833
--------------------------------------------
0 3,072,104 3,072,104
--------------------------------------------
Insurance - 2.0%
0 66,200 66,200 Istit. Nazionale Assic., ADR............ 0 1,150,225 1,150,225
--------------------------------------------
Telecommunications - 4.4%
0 41,410 41,410 Telecom Intalia Spa-Ap ADR.............. 0 2,572,596 2,572,596
--------------------------------------------
0 6,794,925 6,794,925
--------------------------------------------
Japan - 7.0%
Electrical and Electronics - 3.1%
0 24,900 24,900 Hitachi Ltd., ADR....................... 0 1,788,131 1,788,131
--------------------------------------------
Financial Services - 0.9%
0 14,500 14,500 Daiwa Securities - Unsponsored ADR...... 0 505,582 505,582
0 499,000 499,000 Yen Yamaichi Secs Ltd Japanese Ord...... 0 7,820 7,820
--------------------------------------------
0 513,402 513,402
--------------------------------------------
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
NATIONS FUNDS
Nations International Value Fund/Emerald International Equity Fund
Pro Forma Combining Schedule of Investments (continued)
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
===================================================================================================================================
Nations Emerald Pro Forma Nations Emerald Pro Forma
International International Combining International International Combining
Value Fund Equity Fund Portfolios Value Fund Equity Fund Portfolios
===================================================================================================================================
<C> <C> <C> <S> <C> <C> <C>
COMMON STOCKS - (continued)
Japan - (continued)
Insurance - 2.5%
0 30,800 30,800 Tokio Marine & Fire Insurance Co., ADR.. $0 $ 1,466,850 $ 1,466,850
--------------------------------------------
Oil and Gas Production - 0.5%
0 90,000 90,000 Yen Nippon Oil Company, Ltd ............ 0 313,810 313,810
--------------------------------------------
0 4,082,193 4,082,193
--------------------------------------------
Mexico - 2.5%
Telecommunications - 2.5%
0 29,425 29,425 Telefonos de Mexico, Class L, ADR ...... 0 1,456,538 1,456,538
--------------------------------------------
Netherlands - 4.6%
Insurance - 2.3%
0 33,580 33,580 ING Groep N.V., ADR .................... 0 1,368,385 1,368,385
--------------------------------------------
Telecommunications - 2.3%
0 33,290 33,290 KPN - Konin, PTT Nederland, ADR ........ 0 1,342,003 1,342,003
--------------------------------------------
0 2,710,388 2,710,388
--------------------------------------------
Portugal - 1.9%
Electrical Products - 1.9%
0 60,000 60,000 Esc Electricidade De Port+.............. 0 1,084,401 1,084,401
--------------------------------------------
Singapore - 3.4%
Banking - 1.2%
0 18,800 18,800 Develop Bank Singapore - Sp Adr ........ 0 700,300 700,300
--------------------------------------------
Multi-Industry - 2.2%
0 240,200 240,200 Jardine Matheson Holdings Ltd., ADR .... 0 1,273,060 1,273,060
--------------------------------------------
0 1,973,360 1,973,360
--------------------------------------------
South Africa - 2.6%
Metals and Steel - 1.0%
0 131,700 131,700 Iscor, Ltd., ADR........................ 0 574,897 574,897
--------------------------------------------
Misc Materials and Commodities - 1.6%
0 45,000 45,000 DeBeers Cons. Mines. Unsponsored ADR ... 0 939,375 939,375
--------------------------------------------
0 1,514,272 1,514,272
--------------------------------------------
South Korea - 0.7%
Utilities - Electrical and Gas - 0.7%
0 44,000 44,000 Korea Electric Power Corporation, ADR .. 0 398,750 398,750
--------------------------------------------
Spain - 3.4%
Banking - 1.2%
0 23,400 23,400 Corp. Bancaria de Espana
(Argentaria), ADR ...................... 0 707,850 707,850
--------------------------------------------
Telecommunications - 2.2%
0 15,020 15,020 Telefonica de Espana S.A., ADR.......... 0 1,299,230 1,299,230
--------------------------------------------
0 2,007,080 2,007,080
--------------------------------------------
Switzerland - 7.3%
Food and Houshold Products - 5.1%
0 41,200 41,200 Nestle S.A. Registered ADR.............. 0 3,031,435 3,031,435
--------------------------------------------
Technology Services - 2.2%
0 710 710 Sfr Baloise Holdings+ .................. 0 1,264,933 1,264,933
--------------------------------------------
0 4,296,368 4,296,368
--------------------------------------------
United Kingdom - 13.2%
Beverages and Tobacco - 5.6%
0 83,200 83,200 B.A.T. Industries PLC, ADR ............. 0 1,513,200 1,513,200
--------------------------------------------
0 40,270 40,270 Guiness PLC, ADR ....................... 0 1,823,386 1,823,386
--------------------------------------------
0 3,336,586 3,336,586
--------------------------------------------
Chemicals - 1.9%
0 18,400 18,400 Imperial Chemical, ADR.................. 0 1,093,650 1,093,650
--------------------------------------------
Misc Materials and Commodities - 1.1%
0 20,000 20,000 Tate & Lyle PLC-Sponsored ADR........... 0 634,158 634,158
--------------------------------------------
Multi-Industry - 3.1%
0 132,440 132,440 BTR PLC, ADR............................ 0 1,831,937 1,831,937
--------------------------------------------
</TABLE>
See Notes to Pro Forma Financial Statements.
<PAGE>
NATIONS FUNDS
Nations International Value Fund/Emerald International Equity Fund
Pro Forma Combining Schedule of Investments (continued)
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
===================================================================================================================================
Nations Emerald Pro Forma Nations Emerald Pro Forma
International International Combining International International Combining
Value Fund Equity Fund Portfolios Value Fund Equity Fund Portfolios
===================================================================================================================================
<C> <C> <C> <S> <C> <C> <C>
COMMON STOCKS - (continued)
United Kingdom - (continued)
Textiles - 1.5%
0 166,140 166,140 Coats Viyella .......................... $0 $ 852,331 $ 852,331
--------------------------------------------
0 7,748,662 7,748,662
--------------------------------------------
TOTAL COMMON STOCKS 0 56,413,524 56,413,524
============================================
CASH SWEEP ACCOUNT - 5.5%
0 3,223,153 3,223,153 Bank of New York........................ 0 3,223,153 3,223,153
============================================
TOTAL INVESTMENTS (Cost $0, $56,145,727 and $56,145,727). .................. 101.9% 0 59,636,677 59,636,677
OTHER ASSETS AND LIABILITIES (Net). ........................................ (1.9) 0 (1,100,055) (1,100,055)
----- --------------------------------------------
NET ASSETS ................................................................. 100.0% $ 0 58,536,622 58,536,622
===== ============================================
</TABLE>
- ----------
+ Non-income producing security
ABBREVIATION
ADR American Depositary Receipt
At November 30, 1997, the Emerald International Equity Fund's open forward
currency contracts were as follows:
<TABLE>
<CAPTION>
Unrealized
Delivery Contract Contract Contract Market Appreciation
Currency Date Price** Amount** Value Value (Depreciation)
- -------- ---- ------- -------------------------- ----- --------------
<S> <C> <C> <C> <C> <C> <C>
Short Contracts:
Italian Lire........... 12/01/97 1704.8696 (933,885,487) ($547,775) ($540,427) $7,348
Long Contracts:
Italian Lire........... 12/05/97 1729.1763 204,066,134 118,013 118,090 77
------------------------------
Total ................. (729,819,353) ($429,762) ($422,337) $7,425
============================== ======== ======
</TABLE>
- ----------
** In local currency
See Notes to Pro Forma Financial Statements.
<PAGE>
NATIONS INTERNATIONAL VALUE FUND
EMERALD INTERNATIONAL EQUITY FUND
Pro Forma Combining Statement of Assets and Liabilities (unaudited)
November 30, 1997
<TABLE>
<CAPTION>
Nations Emerald
International International Adjustments to Pro Forma
Value Fund Equity Fund Pro Forma Combined (Note 1)
---------- ----------- --------- -----------------
<S> <C> <C> <C>
ASSETS:
Investments at Value (cost $56,145,727) - $59,636,677 - $59,636,677
Income Receivable - 98,468 - 98,468
Receivable for investment securities sold - 540,427 - 540,427
Tax reclaim receivable - 36,841 - 36,841
Receivable for Foreign Currency Contracts - 7,425 - 7,425
Unamortized Organizational Costs - 7,735 ($7,735)(a) 0
Receivable due from Advisor - 0 $7,735 (a) 7,735
Prepaid and Other Assets - 19,081 - 19,081
-- ----------- -----------
Total Assets 0 60,346,654 - 60,346,654
-- ----------- -----------
LIABILITIES:
Dividends Payable - 412,756 - 412,756
Payable for capital shares redeemed - 12,217 - 12,217
Payable for investment securitiies purchased - 1,273,859 - 1,273,859
Accrued Expenses and Other Liabilities - 111,200 - 111,200
-- ----------- -----------
Total Liabilities 0 1,810,032 1,810,032
-- ----------- -----------
Net Assets Applicable to Shares Outstanding $0 $58,536,622 $58,536,622
-- ----------- -----------
Net Assets by Class:
Primary A/Institutional - $54,277,291 - $54,277,291
-- ----------- -- -----------
Primary B - - - -
-- ----------- -- -----------
Investor A/Retail - $4,259,331 - $4,259,331
-- ----------- -- -----------
Investor B - - - -
-- ----------- -- -----------
Investor C - -
-- ----------- -----------
Shares Outstanding by Class:
Primary A/Institutional - 4,122,281 - 4,122,281
-- ----------- -- -----------
Primary B - - - -
-- ----------- -- -----------
Investor A/Retail - 324,510 - 324,510
-- ----------- -- -----------
Investor B - - - -
-- ----------- -- -----------
Investor C - -
-- -----------
Primary A Shares:
Net Asset Value per Share - $13.17 $13.17
-- ----------- -----------
Primary B Shares:
Net Asset Value per Share - n/a n/a
-- ----------- -----------
Investor A Shares:
Net Asset Value per Share - $13.13 $13.13
-- ----------- -----------
Investor B Shares:
Net Asset Value per Share - n/a n/a
-- ----------- -----------
Investor C Shares:
Net Asset Value per Share - n/a n/a
-- ----------- -----------
</TABLE>
See Notes to Pro Forma Financial Statements
(a) Unamortized Organization Costs of the acquired fund will be borne by the
Advisor.
<PAGE>
NATIONS INTERNATIONAL VALUE FUND
EMERALD INTERNATIONAL EQUITY FUND
Pro Forma Combining Statement of Operations (Unaudited)
For the Twelve Month Period Ending November 30, 1997
<TABLE>
<CAPTION>
Nations Emerald
International International Adjustments to Pro Forma
Value Fund Equity Fund Pro Forma Combined (Note 1)
---------- ----------- --------- -----------------
<S> <C> <C> <C>
INVESTMENT INCOME:
Dividends - $913,577 $- $913,577
Interest - 0 - 0
Foreign withholding taxes - (76,820) - (76,820)
-- ---------- -------- ----------
Total Investment Income - 836,757 - 836,757
-- ---------- -------- ----------
EXPENSES:
Investment Advisory - 400,141 (39,768)(a) 360,373
Administration - 31,013 9,028 (a) 40,041
Transfer Agent - 8,063 20,000 (b) 28,063
Custodian (e) - 2,961 15,000 (b) 17,961
Legal and Audit Fees - 5,500 35,000 (b) 40,500
Trustees' Fees - 1,782 - 1,782
Amortization of organization costs - 2,422 (2,422)(c) 0
Other expenses - 36,010 216 (b) 36,226
-- ---------- -------- ----------
Subtotal - 487,892 37,054 524,946
Shareholder servicing and distribution fees
Primary B - N/A N/A 0
Investor A/Retail - 10,220 (5,110)(a) 5,110
Investor C - N/A N/A 0
Fees waived and/or reimbursed by
investment advisor - (4,304) 4,304 (d) 0
-- ---------- -------- ----------
Total Expenses - 493,808 36,248 530,056
-- ---------- -------- ----------
NET INVESTMENT INCOME - 342,949 (36,248) 306,701
-- ---------- -------- ----------
Net Realized and Unrealized Gain/(Loss)
on Investments:
Realized Gain/(Loss) on securities and
transactions - 1,541,113 - 1,541,113
Net Realized Gains/(Losses) from foreign
security transactions - (11,468) - (11,468)
Change in unrealized appreciation/
(depreciation) on investments - 2,556,440 - 2,556,440
-- ---------- -------- ----------
Net Realized and Unrealized gain/(loss)
on investments - 4,086,085 - 4,086,085
-- ---------- -------- ----------
Net Increase/(Decrease) in net assets
resulting from operations - $4,429,034 ($36,248) $4,392,786
-- ---------- -------- ----------
</TABLE>
Legend:
(a) Reflects adjustment to the acquiring fund contractual fee obligation.
(b) Adjustment reflects differences in expense structures.
(c) Organization expense of the acquired fund is not an expense of the combined
fund.
(d) Reflects adjustment to the level of the acquiring fund's voluntary expense
reimbursement.
(e) Net of expense offset arrangements amounts to less than .01% of average net
assets.
See Notes to Pro Forma Financial Statements
<PAGE>
Nations International Value Fund
Emerald International Equity 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 November 30, 1997 the Company offers eight separate portfolios. The unaudited
Pro Forma Combining Portfolio of Investments and the unaudited Pro Forma
Combining Statement of Assets and Liabilities assumes the exchange described in
the next paragraph occurred as of November 30, 1997 and the unaudited Pro Forma
Combining Statement of Operations assumes the exchange occurred as of December
1, 1996 . These statements have been derived from books and records utilized in
calculating daily net asset value of each fund at November 30, 1997 and for the
twelve month period then ended.
The pro forma statements give effect to the proposed transfer of the assets and
stated liabilities of the Emerald International Equity Fund in exchange for
shares of Nations International Value Fund. Under generally accepted accounting
principles, the historical cost of investment securities will be carried forward
and the results of operations of the Emerald International Equity Fund for
pre-combination periods will be carried forward under the new name of Nations
International Value Fund. 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 fund incorporated by
reference in the Statement of Additional Information.
<PAGE>
Nations International Value Fund
Emerald International Equity Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
For the twelve month period ended November 30, 1997, the Nations International
Value Fund's investment advisory fee was computed based on the annual rate of
0.90% of average daily net assets. The administration fee was computed based on
the annual rate of 0.10% of average daily net assets of the Company and the
investment portfolios of Nations Fund Trust and Nations Fund Portfolios, Inc.
(two other registered open-end investment companies which are part of the
Nations Fund family) on a combined basis.
The Company has adopted a shareholder administration plan ("Administration
Plan") for the Primary B Shares of the Nations International Value Fund. Under
the Administration Plan, aggregate payments may not exceed 0.50%, on an
annualized basis, of the average daily net assets of the Fund's Primary B
Shares.
The Company has also adopted a shareholder servicing and distribution plan
("Investor A Plan") pursuant to Rule 12b-1 under the 1940 Act for the Investor A
Shares of the Nations International Value Fund. Under the Investor A Plan,
aggregate payments may not exceed 0.25%, on an annualized basis, of the average
daily net assets of the Fund's Investor A Shares.
The Company has also adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act with respect to Investor B Shares ("Investor B Distribution Plan")
and Investor C Shares ("Investor C Distribution Plan") of the Nations
International Value Fund. Under the Investor B Distribution Plan and Investor C
Distribution Plan, aggregate payments may not exceed 0.75% and 0.25%, on an
annualized basis, of the average daily net assets of the Investor B Shares and
Investor C Shares respectively, of the Fund.
2
<PAGE>
Nations International Value Fund
Emerald International Equity Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
The Company has also adopted a shareholder servicing plan with respect to
Investor B Shares ("Investor B Servicing Plan") and Investor C Shares ("Investor
C Servicing Plan") of the Nations International Value Fund. Under the Investor B
Servicing Plan and Investor C Servicing Plan, aggregate payments may not exceed
0.25% on an annualized basis of the average daily net assets of the Investor B
Shares and Investor C Shares of the Fund.
2. Portfolio Valuation
Securities of Nations International Value Fund which are traded on a recognized
stock exchange are valued at the last sales price on the securities exchange on
which such securities are primarily traded or at the last sales price on a
national securities market. Securities traded only on over-the-counter markets
(but not including securities reported on the NASDAQ National Market System) are
valued on the basis of the closing over-the -counter bid prices or, if no sale
occurred on such day, at the mean of the current bid and asked prices. Certain
securities may be valued by one or more principal market makers. Each security
reported on the NASDAQ National Market System is valued at the last sales price
on the valuation date. The valuation of international securities which trade on
foreign exchanges are provided by an independent pricing service approved by the
Board of Directors of each Fund. market Securities for which market quotations
are not readily available and certain other assets are valued by the investment
adviser under the supervision of the Board of Directors. Short-term investments
that mature in 60 days or less are valued at amortized cost. Emerald
International Equity Fund uses similar rules for determining portfolio
valuation.
3. Capital Shares
3
<PAGE>
Nations International Value Fund
Emerald International Equity Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
The pro forma net asset value per share assumes the issuance of additional
shares of Nations International Value Fund which would have been issued at
November 30, 1997 in connection with the proposed reorganization. The pro forma
number of shares outstanding of 4,446,791 consists of 4,446,791 shares assumed
issued in the reorganization plus 0 shares of Nations International Value Fund
at November 30, 1997.
4
<PAGE>
NATIONS FUNDS
Nations Prime Fund/Emerald Prime Fund
Pro Forma Combining Schedule of Investments
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------------
Nations Emerald Pro Forma
Prime Prime Combining
Fund Fund Portfolios
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S>
BANK OBLIGATIONS - 21.9%
Bank Notes - Domestic - 3.7%
$0 $50,000,000 $50,000,000 First USA Bank:
Variable Rate Bank Note 5.740% .........................
0 22,000,000 22,000,000 Amex Centurian:
Variable Rate Bank Note 5.710% .........................
0 44,000,000 44,000,000 Bank of New York:
Bank Note 5.800% .......................................
0 39,000,000 39,000,000 Compass Bank:
Variable Rate Bank Note 5.640% .........................
0 40,000,000 40,000,000 J.P. Morgan Securities:
Bank Note 5.900% .......................................
0 37,000,000 37,000,000 Morgan Stanley:
Variable Rate Bank Note 5.830% .........................
0 45,000,000 45,000,000 Northern Trust:
Bank Note 5.750% .......................................
0 33,000,000 33,000,000 PNC Bank NA.:
Variable Rate Bank Note 5.600% .........................
Bank Notes - Yankee - 1.1%
0 52,000,000 52,000,000 Abbey National PLC:
Variable Rate Treasury Note 5.570% .....................
0 40,000,000 40,000,000 Berliner Handels - Und Frankfurter Bank:
Variable Rate Bank Note 5.700% .........................
Certificates of Deposit - Domestic - 5.3%
0 35,000,000 35,000,000 Amex Centurian Bank:
5.540% .................................................
Bankers Trust Company of New York:
35,000,000 0 35,000,000 5.910% .................................................
40,000,000 0 40,000,000 6.000% .................................................
5,000,000 0 5,000,000 5.990% .................................................
0 50,000,000 50,000,000 Compass Bank:
5.560% .................................................
0 46,000,000 46,000,000 CS First Boston:
5.890% .................................................
50,000,000 0 50,000,000 First Allamerica Financial:
5.950% .................................................
0 25,000,000 25,000,000 Old Kent Bank, Grand Rapids:
5.650% .................................................
0 46,000,000 46,000,000 Regions Bank:
5.600% .................................................
0 75,000,000 75,000,000 South Bank Trust:
5.650% .................................................
0 40,000,000 40,000,000 Union Bank of California:
5.570% .................................................
Certificates of Deposit - Yankee - 11.8%
0 50,000,000 50,000,000 Abbey National Treasury PLC, (New York):
5.650% .................................................
0 11,000,000 11,000,000 Bank of Scotland, (New York):
5.550% .................................................
Bank of Tokyo Mitsubishi, (New York):
50,000,000 0 50,000,000 5.920% ..................................................
30,000,000 0 30,000,000 5.840% ..................................................
50,000,000 0 50,000,000 5.840% ..................................................
45,000,000 0 45,000,000 5.800% ..................................................
25,000,000 0 25,000,000 5.790% ..................................................
0 35,000,000 35,000,000 Banque Paribas, (New York):
5.590% ..................................................
0 35,000,000 35,000,000 Bayerische Hypo-Bank, (New York):
5.600% ..................................................
30,000,000 0 30,000,000 Bayerische Landersbank:
5.729% ..................................................
BANK OBLIGATIONS (continued) Certificates of Deposit - Yankee - (continued)
$0 $89,000,000 $89,000,000 Canadian Imperial Bank, (New York):
5.580% ..................................................
<CAPTION>
SECURITY DESCRIPTION VALUE
- --------------------------------------------------------------------------------------------------------------------------------
Nations Emerald Pro Forma
Maturity Prime Prime Combining
Date Fund Fund Portfolios
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Bank Notes - Domestic - 3.7%
First USA Bank:
Variable Rate Bank Note 5.740% ......................... 12/17/97 $0 $50,019,084 $50,019,084
Amex Centurian:
Variable Rate Bank Note 5.710% ......................... 12/11/97 0 22,018,361 22,018,361
Bank of New York:
Bank Note 5.800% ....................................... 03/03/98 0 43,994,689 43,994,689
Compass Bank:
Variable Rate Bank Note 5.640% ......................... 12/01/97 0 38,987,014 38,987,014
J.P. Morgan Securities:
Bank Note 5.900% ....................................... 04/01/98 0 39,253,546 39,253,546
Morgan Stanley:
Variable Rate Bank Note 5.830% ......................... 02/18/98 0 37,000,000 37,000,000
Northern Trust:
Bank Note 5.750% ....................................... 03/04/98 0 44,988,993 44,988,993
PNC Bank NA.:
Variable Rate Bank Note 5.600% ......................... 12/01/97 0 32,983,150 32,983,150
--------------------------------------------------
0 309,244,837 309,244,837
--------------------------------------------------
Bank Notes - Yankee - 1.1%
Abbey National PLC:
Variable Rate Treasury Note 5.570% ..................... 12/15/97 0 51,978,107 51,978,107
Berliner Handels - Und Frankfurter Bank:
Variable Rate Bank Note 5.700% ......................... 12/01/97 0 39,999,251 39,999,251
--------------------------------------------------
0 91,977,358 91,977,358
--------------------------------------------------
Certificates of Deposit - Domestic - 5.3%
Amex Centurian Bank:
5.540% ................................................. 12/01/97 0 35,000,000 35,000,000
Bankers Trust Company of New York:
5.910% ................................................. 03/12/98 34,997,222 0 34,997,222
6.000% ................................................. 03/24/98 39,985,223 0 39,985,223
5.990% ................................................. 06/25/98 4,998,922 0 4,998,922
Compass Bank:
5.560% ................................................. 12/29/97 0 50,000,000 50,000,000
CS First Boston:
5.890% ................................................. 12/02/97 0 46,000,000 46,000,000
First Allamerica Financial:
5.950% ................................................. 11/24/98 50,000,000 0 50,000,000
Old Kent Bank, Grand Rapids:
5.650% ................................................. 12/01/97 0 25,000,000 25,000,000
Regions Bank:
5.600% ................................................. 12/17/97 0 46,000,000 46,000,000
South Bank Trust:
5.650% ................................................. 12/01/97 0 74,991,774 74,991,774
Union Bank of California:
5.570% ................................................. 12/18/97 0 40,000,000 40,000,000
--------------------------------------------------
129,981,367 316,991,774 446,973,141
--------------------------------------------------
Certificates of Deposit - Yankee - 11.8%
Abbey National Treasury PLC, (New York):
5.650% ................................................. 12/01/97 0 49,991,049 49,991,049
Bank of Scotland, (New York):
5.550% ................................................. 12/30/97 0 11,000,000 11,000,000
Bank of Tokyo Mitsubishi, (New York):
5.920% .................................................. 12/08/97 50,000,000 0 50,000,000
5.840% .................................................. 01/15/98 30,001,024 0 30,001,024
5.840% .................................................. 01/22/98 50,000,000 0 50,000,000
5.800% .................................................. 03/02/98 45,000,000 0 45,000,000
5.790% .................................................. 03/19/98 25,000,000 0 25,000,000
Banque Paribas, (New York):
5.590% .................................................. 12/18/97 0 35,000,000 35,000,000
Bayerische Hypo-Bank, (New York):
5.600% .................................................. 12/18/97 0 35,000,000 35,000,000
Bayerische Landersbank:
5.729% .................................................. 10/06/98 29,992,701 0 29,992,701
Certificates of Deposit - Yankee - (continued)
Canadian Imperial Bank, (New York):
5.580% .................................................. 12/31/97 $0 $89,001,054 $89,001,054
</TABLE>
<PAGE>
NATIONS FUNDS
Nations Prime Fund/Emerald Prime Fund
Pro Forma Combining Schedule of Investments
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------------
Nations Emerald Pro Forma
Prime Prime Combining
Fund Fund Portfolios
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S>
10,000,000 0 10,000,000 Credit Suisse First Boston:
5.800% ..................................................
Deutsche Bank, (New York),
0 35,000,000 35,000,000 5.570% ..................................................
0 30,000,000 30,000,000 5.570% ..................................................
0 35,000,000 35,000,000 5.570% ..................................................
20,000,000 0 20,000,000 5.860% ..................................................
60,000,000 0 60,000,000 5.920% ..................................................
National Bank of Canada, (New York):
20,000,000 0 20,000,000 5.85% ...................................................
20,000,000 0 20,000,000 5.94% ...................................................
30,000,000 0 30,000,000 6.03% ...................................................
30,000,000 0 30,000,000 6.14% ...................................................
0 10,000,000 10,000,000 Royal Bank of Canada, (New York):
5.58% ...................................................
Sanwa Bank Ltd. of New York:
40,000,000 0 40,000,000 5.93% ...................................................
65,000,000 0 65,000,000 5.92% ...................................................
Societe Generale, (New York):
0 25,000,000 25,000,000 5.61% ...................................................
40,000,000 0 40,000,000 5.65% ...................................................
30,000,000 0 30,000,000 5.88% ...................................................
30,000,000 0 30,000,000 5.95% ...................................................
TOTAL BANK OBLIGATIONS
CORPORATE OBLIGATIONS - 52.8%
Commercial Paper - Domestic - 30.4%
0 25,000,000 25,000,000 American Honda Finance Corporation:
5.57% ...................................................
AON Corporation:
20,364,000 0 20,364,000 Discount note ...........................................
10,551,000 0 10,551,000 Discount note ...........................................
0 30,000,000 30,000,000 Barton Capital Corporation :
5.520%(b) ...............................................
30,000,000 0 30,000,000 Bradford & Bingley Building Society:
Discount note ...........................................
0 12,000,000 12,000,000 BTM Capital Corporation :
5.590%(b) ...............................................
20,000,000 0 20,000,000 Burmah Castrol Financial:
Discount note ...........................................
0 30,000,000 30,000,000 Countrywide Funding Corporation:
5.55% ...................................................
Countrywide Home Loans:
30,000,000 0 30,000,000 Discount note ...........................................
43,800,000 0 43,800,000 Discount note ...........................................
75,000,000 0 75,000,000 Discount note ...........................................
Dakota Finance:
0 25,000,000 25,000,000 5.520%(b) ...............................................
0 30,000,000 30,000,000 5.530%(b) ...............................................
0 35,000,000 35,000,000 5.540%(b) ...............................................
Deer Park Refining LP:
0 13,000,000 13,000,000 5.650%(b) ...............................................
0 10,000,000 10,000,000 5.660%(b) ...............................................
Dynamic Funding Corporation:
21,053,000 0 21,053,000 Discount note ...........................................
19,700,000 0 19,700,000 Discount note ...........................................
30,000,000 0 30,000,000 Discount note ...........................................
35,000,000 0 35,000,000 Discount note ...........................................
44,611,000 0 44,611,000 Discount note ...........................................
10,551,000 0 10,551,000 Discount note ...........................................
21,084,000 0 21,084,000 Discount note ...........................................
Commercial Paper - Domestic - (continued)
Finova Capital Corporation:
$30,000,000 $0 $30,000,000 Discount note ...........................................
25,000,000 0 25,000,000 Discount note ...........................................
Galicia Funding Corporation:
0 18,800,000 18,800,000 5.530%(b) ...............................................
<CAPTION>
SECURITY DESCRIPTION VALUE
- --------------------------------------------------------------------------------------------------------------------------------
Nations Emerald Pro Forma
Maturity Prime Prime Combining
Date Fund Fund Portfolios
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Credit Suisse First Boston:
5.800% .................................................. 10/13/98 10,000,000 0 10,000,000
Deutsche Bank, (New York),
5.570% .................................................. 12/22/97 0 34,999,596 34,999,596
5.570% .................................................. 12/31/97 0 29,999,992 29,999,992
5.570% .................................................. 12/31/97 0 34,999,323 34,999,323
5.860% .................................................. 03/10/98 19,997,924 0 19,997,924
5.920% .................................................. 11/17/98 60,000,000 0 60,000,000
National Bank of Canada, (New York):
5.85% ................................................... 02/27/98 20,000,000 0 20,000,000
5.94% ................................................... 03/06/98 20,000,000 0 20,000,000
6.03% ................................................... 03/18/98 29,999,159 0 29,999,159
6.14% ................................................... 06/05/98 29,996,928 0 29,996,928
Royal Bank of Canada, (New York):
5.58% ................................................... 12/11/97 0 9,999,345 9,999,345
Sanwa Bank Ltd. of New York:
5.93% ................................................... 12/09/97 40,000,086 0 40,000,086
5.92% ................................................... 12/16/97 65,000,526 0 65,000,526
Societe Generale, (New York):
5.61% ................................................... 12/03/97 0 25,000,013 25,000,013
5.65% ................................................... 04/07/98 40,000,000 0 40,000,000
5.88% ................................................... 07/22/98 29,992,673 0 29,992,673
5.95% ................................................... 10/21/98 29,987,274 0 29,987,274
--------------------------------------------------
624,968,295 354,990,372 979,958,667
--------------------------------------------------
TOTAL BANK OBLIGATIONS 754,949,662 1,073,204,341 1,828,154,003
==================================================
Commercial Paper - Domestic - 30.4%
American Honda Finance Corporation:
5.57% ................................................... 12/09/97 0 24,969,056 24,969,056
AON Corporation:
Discount note ........................................... 02/19/98 20,104,246 0 20,104,246
Discount note ........................................... 02/23/98 10,409,687 0 10,409,687
Barton Capital Corporation :
5.520%(b) ............................................... 12/04/97 0 29,986,200 29,986,200
Bradford & Bingley Building Society:
Discount note ........................................... 03/10/98 29,539,650 0 29,539,650
BTM Capital Corporation :
5.590%(b) ............................................... 12/11/97 0 11,981,367 11,981,367
Burmah Castrol Financial:
Discount note ........................................... 05/18/98 19,471,733 0 19,471,733
Countrywide Funding Corporation:
5.55% ................................................... 12/01/97 0 30,000,000 30,000,000
Countrywide Home Loans:
Discount note ........................................... 01/13/98 29,795,750 0 29,795,750
Discount note ........................................... 01/23/98 43,429,221 0 43,429,221
Discount note ........................................... 02/10/98 74,153,917 0 74,153,917
Dakota Finance:
5.520%(b) ............................................... 12/10/97 0 24,965,500 24,965,500
5.530%(b) ............................................... 12/16/97 0 29,930,875 29,930,875
5.540%(b) ............................................... 12/19/97 0 34,903,050 34,903,050
Deer Park Refining LP:
5.650%(b) ............................................... 12/09/97 0 13,000,000 13,000,000
5.660%(b) ............................................... 12/19/97 0 10,000,000 10,000,000
Dynamic Funding Corporation:
Discount note ........................................... 12/02/97 21,049,678 0 21,049,678
Discount note ........................................... 12/05/97 19,687,304 0 19,687,304
Discount note ........................................... 12/08/97 29,966,867 0 29,966,867
Discount note ........................................... 12/10/97 34,950,738 0 34,950,738
Discount note ........................................... 12/12/97 44,534,666 0 44,534,666
Discount note ........................................... 12/15/97 10,527,817 0 10,527,817
Discount note ........................................... 01/05/98 20,967,774 0 20,967,774
Commercial Paper - Domestic - (continued)
Finova Capital Corporation:
Discount note ........................................... 01/30/98 $29,713,000 $0 $29,713,000
Discount note ........................................... 02/09/98 24,721,458 0 24,721,458
Galicia Funding Corporation:
5.530%(b) ............................................... 12/02/97 0 18,797,112 18,797,112
</TABLE>
<PAGE>
NATIONS FUNDS
Nations Prime Fund/Emerald Prime Fund
Pro Forma Combining Schedule of Investments
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------------
Nations Emerald Pro Forma
Prime Prime Combining
Fund Fund Portfolios
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S>
0 12,465,000 12,465,000 5.530%(b) ...............................................
General Motors Acceptance Corporation:
30,000,000 0 30,000,000 Discount note ...........................................
110,000,000 0 110,000,000 Discount note ...........................................
35,000,000 0 35,000,000 Discount note ...........................................
30,000,000 0 30,000,000 Discount note ...........................................
19,000,000 0 19,000,000 Hitachi America
Discount note ...........................................
0 30,000,000 30,000,000 International Nederlanden (US) Funding Group:
5.57% ...................................................
International Securitization Corporation:
60,000,000 0 60,000,000 Discount note (a) .......................................
126,130,000 0 126,130,000 Discount note (a) .......................................
25,000,000 0 25,000,000 Discount note (a) .......................................
50,000,000 0 50,000,000 Koch Industries:
Discount note. ..........................................
Lehman Brothers Holdings Inc.:
50,000,000 0 50,000,000 Discount note ...........................................
30,000,000 0 30,000,000 Discount note ...........................................
6,000,000 0 6,000,000 Discount note ...........................................
Mitsubishi Electric:
31,000,000 0 31,000,000 Discount note ...........................................
19,800,000 0 19,800,000 Discount note ...........................................
Mitsubishi International:
35,000,000 0 35,000,000 Discount note ...........................................
50,000,000 0 50,000,000 Discount note ...........................................
ODC Capital Corporation:
35,000,000 0 35,000,000 Discount note (b) .......................................
37,002,000 0 37,002,000 Discount note (b) .......................................
Orix America Inc.:
30,000,000 0 30,000,000 Discount note ...........................................
10,500,000 0 10,500,000 Discount note ...........................................
Republic Industrial Fund:
45,000,000 0 45,000,000 Discount note ...........................................
30,000,000 0 30,000,000 Discount note ...........................................
Safeco Corporation,
17,365,000 0 17,365,000 Discount note ...........................................
30,000,000 0 30,000,000 Discount note ...........................................
20,000,000 0 20,000,000 Discount note ...........................................
20,000,000 0 20,000,000 Discount note ...........................................
9,885,000 0 9,885,000 Discount note ...........................................
50,000,000 0 50,000,000 Discount note ...........................................
23,000,000 0 23,000,000 Discount note ...........................................
Sanwa Business Credit, Inc.:
0 40,000,000 40,000,000 5.62% ...................................................
0 25,000,000 25,000,000 5.56% ...................................................
0 30,000,000 30,000,000 5.72% ...................................................
Sumitomo Corporation of America:
30,000,000 0 30,000,000 Discount note. ..........................................
20,000,000 0 20,000,000 Discount note. ..........................................
20,000,000 0 20,000,000 Discount note. ..........................................
20,000,000 0 20,000,000 Discount note. ..........................................
75,000,000 0 75,000,000 Discount note. ..........................................
23,000,000 0 23,000,000 Discount note. ..........................................
20,000,000 0 20,000,000 Discount note. ..........................................
22,500,000 0 22,500,000 Discount note. ..........................................
37,000,000 0 37,000,000 Discount note. ..........................................
20,000,000 0 20,000,000 Discount note. ..........................................
0 30,000,000 30,000,000 Transamerica Finance Corporation:
5.53% ...................................................
Commercial Paper - Domestic - (continued)
Tri-Lateral Capital (USA) Inc.:
$15,000,000 $0 $15,000,000 Discount note (b) .......................................
43,530,000 0 43,530,000 Discount note (b) .......................................
39,767,000 0 39,767,000 Discount note (b) .......................................
21,040,000 0 21,040,000 Discount note (b) .......................................
21,041,000 0 21,041,000 Discount note (b) .......................................
10,147,000 0 10,147,000 Discount note (b) .......................................
20,000,000 0 20,000,000 Discount note (b) .......................................
<CAPTION>
SECURITY DESCRIPTION VALUE
- --------------------------------------------------------------------------------------------------------------------------------
Nations Emerald Pro Forma
Maturity Prime Prime Combining
Date Fund Fund Portfolios
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5.530%(b) ............................................... 12/04/97 0 12,459,256 12,459,256
General Motors Acceptance Corporation:
Discount note ........................................... 12/01/97 30,000,000 0 30,000,000
Discount note ........................................... 01/30/98 109,640,665 0 109,640,665
Discount note ........................................... 03/02/98 34,505,440 0 34,505,440
Discount note ........................................... 04/20/98 29,340,833 0 29,340,833
Hitachi America
Discount note ........................................... 07/17/98 18,317,710 0 18,317,710
International Nederlanden (US) Funding Group:
5.57% ................................................... 12/05/97 0 29,981,433 29,981,433
International Securitization Corporation:
Discount note (a) ....................................... 12/01/97 60,000,000 0 60,000,000
Discount note (a) ....................................... 12/30/97 125,564,062 0 125,564,062
Discount note (a) ....................................... 01/22/98 24,792,722 0 24,792,722
Koch Industries:
Discount note. .......................................... 12/01/97 50,000,000 0 50,000,000
Lehman Brothers Holdings Inc.:
Discount note ........................................... 12/03/97 49,984,028 0 49,984,028
Discount note ........................................... 05/01/98 29,289,042 0 29,289,042
Discount note ........................................... 06/29/98 6,009,240 0 6,009,240
Mitsubishi Electric:
Discount note ........................................... 01/21/98 30,745,283 0 30,745,283
Discount note ........................................... 02/11/98 19,570,320 0 19,570,320
Mitsubishi International:
Discount note ........................................... 01/16/98 34,741,506 0 34,741,506
Discount note ........................................... 01/28/98 49,534,389 0 49,534,389
ODC Capital Corporation:
Discount note (b) ....................................... 12/18/97 34,906,618 0 34,906,618
Discount note (b) ....................................... 12/17/97 36,909,084 0 36,909,084
Orix America Inc.:
Discount note ........................................... 01/05/98 29,833,750 0 29,833,750
Discount note ........................................... 01/09/98 10,435,504 0 10,435,504
Republic Industrial Fund:
Discount note ........................................... 12/01/97 45,000,000 0 45,000,000
Discount note ........................................... 01/14/98 29,789,167 0 29,789,167
Safeco Corporation,
Discount note ........................................... 12/05/97 17,354,292 0 17,354,292
Discount note ........................................... 12/10/97 29,958,300 0 29,958,300
Discount note ........................................... 12/17/97 19,950,667 0 19,950,667
Discount note ........................................... 01/28/98 19,817,944 0 19,817,944
Discount note ........................................... 02/25/98 9,751,108 0 9,751,108
Discount note ........................................... 02/26/98 49,307,625 0 49,307,625
Discount note ........................................... 02/27/98 22,677,847 0 22,677,847
Sanwa Business Credit, Inc.:
5.62% ................................................... 12/12/97 0 39,931,310 39,931,310
5.56% ................................................... 12/16/97 0 24,942,083 24,942,083
5.72% ................................................... 12/23/97 0 29,895,133 29,895,133
Sumitomo Corporation of America:
Discount note. .......................................... 02/25/98 29,581,467 0 29,581,467
Discount note. .......................................... 05/06/98 19,514,667 0 19,514,667
Discount note. .......................................... 05/26/98 19,432,889 0 19,432,889
Discount note. .......................................... 12/10/97 19,971,750 0 19,971,750
Discount note. .......................................... 12/17/97 74,811,555 0 74,811,555
Discount note. .......................................... 12/18/97 22,938,743 0 22,938,743
Discount note. .......................................... 12/22/97 19,934,900 0 19,934,900
Discount note. .......................................... 12/29/97 22,401,125 0 22,401,125
Discount note. .......................................... 02/11/98 36,583,640 0 36,583,640
Discount note. .......................................... 03/11/98 19,688,889 0 19,688,889
Transamerica Finance Corporation:
5.53% ................................................... 12/03/97 0 29,990,783 29,990,783
Commercial Paper - Domestic - (continued)
Tri-Lateral Capital (USA) Inc.:
Discount note (b) ....................................... 12/17/97 $14,961,467 $0 $14,961,467
Discount note (b) ....................................... 01/13/98 43,238,833 0 43,238,833
Discount note (b) ....................................... 01/22/98 39,443,606 0 39,443,606
Discount note (b) ....................................... 01/27/98 20,849,115 0 20,849,115
Discount note (b) ....................................... 01/28/98 20,846,078 0 20,846,078
Discount note (b) ....................................... 02/02/98 10,044,896 0 10,044,896
Discount note (b) ....................................... 02/12/98 19,760,722 0 19,760,722
</TABLE>
<PAGE>
NATIONS FUNDS
Nations Prime Fund/Emerald Prime Fund
Pro Forma Combining Schedule of Investments
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------------
Nations Emerald Pro Forma
Prime Prime Combining
Fund Fund Portfolios
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S>
Toshiba International:
10,000,000 0 10,000,000 Discount note ...........................................
23,000,000 0 23,000,000 Discount note ...........................................
5,000,000 0 5,000,000 Discount note ...........................................
25,000,000 0 25,000,000 Toshiba America, Inc.:
Discount note ...........................................
80,000,000 0 80,000,000 UBS Finance, Inc.:
Discount note ...........................................
20,906,000 0 20,906,000 Xerox:
Discount note ...........................................
Commercial Paper - Yankee - 0.8%
Alliance & Leicester Building Society:
0 25,000,000 25,000,000 5.53% ...................................................
0 25,000,000 25,000,000 5.60% ...................................................
0 19,400,000 19,400,000 Pearson, Inc.:
5.58% ...................................................
Corporate Bonds & Notes - Domestic - 21.0%
50,000,000 0 50,000,000 Anchor National Life Insurance,
5.870%+ .................................................
Bankers Trust Company of New York:
30,000,000 0 30,000,000 5.720%+ (b) .............................................
20,000,000 0 20,000,000 5.730%+ (b) .............................................
126,000,000 0 126,000,000 5.730%+ (b) .............................................
40,000,000 0 40,000,000 5.730%+ (b) .............................................
Bear Stearns & Company, Inc.:
60,000,000 0 60,000,000 5.730%+ .................................................
38,000,000 0 38,000,000 5.688%+ .................................................
50,000,000 0 50,000,000 5.668%+ .................................................
25,000,000 0 25,000,000 5.731%+ .................................................
20,000,000 0 20,000,000 Beta Finance Inc.,
5.800% (b). .............................................
30,000,000 0 30,000,000 CIT Group Holdings,
6.500% ..................................................
14,000,000 0 14,000,000 Chrysler Financial Corporation:
6.210% ..................................................
60,000,000 0 60,000,000 Comerica Bank:
5.823% ..................................................
CS First Boston,
0 35,000,000 35,000,000 5.820%+(b)(c). ..........................................
0 15,000,000 15,000,000 5.820%+(b)(c). ..........................................
285,000,000 0 285,000,000 5.973%+ .................................................
0 42,000,000 42,000,000 Dean Witter Discover:
5.770%+ .................................................
0 15,812,000 15,812,000 Ford Motor Credit Co.:
7.13% ...................................................
50,000,000 0 50,000,000 General American Life Insurance Company,
5.850%+ .................................................
14,000,000 0 14,000,000 Goldman Sachs Group L.P.,
6.100% ...................................................
International Business Machines Credit Corporation:
35,000,000 0 35,000,000 5.770%+ .................................................
30,000,000 0 30,000,000 5.770%+ .................................................
10,350,000 0 10,350,000 Lehman Brothers Holdings Inc.:
6.375% ..................................................
Corporate Bonds & Notes - Domestic - (continued)
Merrill Lynch & Company Inc.,
$0 $30,000,000 $30,000,000 5.640%+ .................................................
25,000,000 0 25,000,000 5.710%+ .................................................
0 65,000,000 65,000,000 5.880%+ .................................................
30,000,000 0 30,000,000 5.883%+ .................................................
65,000,000 0 65,000,000 Morgan Guaranty Trust Company,
5.965% ..................................................
0 50,000,000 50,000,000 Morgan Stanley:
5.820%+ .................................................
PHH Corporation:
70,000,000 0 70,000,000 5.986% ..................................................
<CAPTION>
SECURITY DESCRIPTION VALUE
- --------------------------------------------------------------------------------------------------------------------------------
Nations Emerald Pro Forma
Maturity Prime Prime Combining
Date Fund Fund Portfolios
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Toshiba International:
Discount note ........................................... 01/05/98 9,942,639 0 9,942,639
Discount note ........................................... 01/28/98 22,781,372 0 22,781,372
Discount note ........................................... 03/13/98 4,917,125 0 4,917,125
Toshiba America, Inc.:
Discount note ........................................... 12/22/97 24,918,625 0 24,918,625
UBS Finance, Inc.:
Discount note ........................................... 12/17/97 79,802,667 0 79,802,667
Xerox:
Discount note ........................................... 12/01/97 20,906,000 0 20,906,000
----------------------------------------------------
2,138,023,422 395,733,158 2,533,756,580
----------------------------------------------------
Commercial Paper - Yankee - 0.8%
Alliance & Leicester Building Society:
5.53% ................................................... 12/02/97 0 24,996,160 24,996,160
5.60% ................................................... 12/10/97 0 24,965,000 24,965,000
Pearson, Inc.:
5.58% ................................................... 12/10/97 0 19,372,937 19,372,937
----------------------------------------------------
0 69,334,097 69,334,097
----------------------------------------------------
Corporate Bonds & Notes - Domestic - 21.0%
Anchor National Life Insurance,
5.870%+ ................................................. 12/01/97+++ 50,000,000 0 50,000,000
Bankers Trust Company of New York:
5.720%+ (b) ............................................. 12/01/97+++ 30,000,000 0 30,000,000
5.730%+ (b) ............................................. 12/01/97+++ 20,000,000 0 20,000,000
5.730%+ (b) ............................................. 12/01/97+++ 125,999,890 0 125,999,890
5.730%+ (b) ............................................. 12/01/97+++ 39,999,816 0 39,999,816
Bear Stearns & Company, Inc.:
5.730%+ ................................................. 12/01/97+++ 60,000,000 0 60,000,000
5.688%+ ................................................. 12/01/97+++ 38,000,000 0 38,000,000
5.668%+ ................................................. 12/01/97+++ 50,000,000 0 50,000,000
5.731%+ ................................................. 12/01/97+++ 25,000,000 0 25,000,000
Beta Finance Inc.,
5.800% (b). ............................................. 03/03/98 20,000,000 0 20,000,000
CIT Group Holdings,
6.500% .................................................. 07/13/98 30,091,462 0 30,091,462
Chrysler Financial Corporation:
6.210% .................................................. 06/29/98 14,001,511 0 14,001,511
Comerica Bank:
5.823% .................................................. 10/06/98 59,990,171 0 59,990,171
CS First Boston,
5.820%+(b)(c). .......................................... 12/22/97 0 35,000,000 35,000,000
5.820%+(b)(c). .......................................... 12/22/97 0 15,000,000 15,000,000
5.973%+ ................................................. 01/01/98+++ 285,000,000 0 285,000,000
Dean Witter Discover:
5.770%+ ................................................. 12/17/97 0 42,009,388 42,009,388
Ford Motor Credit Co.:
7.13% ................................................... 12/01/97 0 15,812,000 15,812,000
General American Life Insurance Company,
5.850%+ ................................................. 12/01/97+++ 50,000,000 0 50,000,000
Goldman Sachs Group L.P.,
6.100% ................................................... 04/15/98 13,993,784 0 13,993,784
International Business Machines Credit Corporation:
5.770%+ ................................................. 12/01/97+++ 35,000,000 0 35,000,000
5.770%+ ................................................. 12/01/97+++ 30,000,000 0 30,000,000
Lehman Brothers Holdings Inc.:
6.375% .................................................. 06/01/98 10,367,119 0 10,367,119
Corporate Bonds & Notes - Domestic - (continued)
Merrill Lynch & Company Inc.,
5.640%+ ................................................. 12/26/97 $0 $30,000,000 $30,000,000
5.710%+ ................................................. 12/01/97+++ 25,000,000 0 25,000,000
5.880%+ ................................................. 12/02/97 0 65,000,000 65,000,000
5.883%+ ................................................. 12/01/97+++ 30,000,000 0 30,000,000
Morgan Guaranty Trust Company,
5.965% .................................................. 06/22/98 64,987,911 0 64,987,911
Morgan Stanley:
5.820%+ ................................................. 12/15/97 0 50,000,000 50,000,000
PHH Corporation:
5.986% .................................................. 08/12/98 69,993,180 0 69,993,180
</TABLE>
<PAGE>
NATIONS FUNDS
Nations Prime Fund/Emerald Prime Fund
Pro Forma Combining Schedule of Investments
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------------
Nations Emerald Pro Forma
Prime Prime Combining
Fund Fund Portfolios
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S>
40,000,000 0 40,000,000 5.883%+ .................................................
50,000,000 0 50,000,000 5.660%+ .................................................
0 43,000,000 43,000,000 Sigma Finance, Inc.:
5.800%(b). ..............................................
Societe Generale:
75,000,000 0 75,000,000 5.655%+ .................................................
50,000,000 0 50,000,000 5.655%+ .................................................
25,000,000 0 25,000,000 Travelers Life Insurance Company,
5.770%+ .................................................
0 30,000,000 30,000,000 USL Capital Corporation:
5.840%+ .................................................
Corporate Bonds & Notes - Yankee - 0.6%
0 50,000,000 50,000,000 Lehman Brother PLC, Foreign Master Note:
5.700%(b). ..............................................
TOTAL CORPORATE OBLIGATIONS
MEDIUM TERM NOTES - PRIVATE PLACEMENT - 2.7%
0 45,000,000 45,000,000 Absit, Series 1997 - A:
5.740%+(b). .............................................
0 41,000,000 41,000,000 CTN Trust, Series 1:
5.990%+(b). .............................................
0 50,000,000 50,000,000 Goldman Sachs Promissory Note:
5.660%+(b). .............................................
0 46,000,000 46,000,000 Household Credit Card Master Trust 1995 -1A:
5.690%+(b). .............................................
0 40,000,000 40,000,000 Sigma Finance, Inc.:
5.900%+(b). .............................................
TOTAL MEDIUM TERM NOTES - PRIVATE PLACEMENT
GUARANTEED INVESTMENT CONTRACTS - 6.9%
Allstate Life Insurance Company:
25,000,000 0 25,000,000 5.800%**+ ...............................................
25,000,000 0 25,000,000 5.800%**+ ...............................................
Anchor National Life Insurance Company,
25,000,000 0 25,000,000 5.837%**+ ...............................................
50,000,000 0 50,000,000 5.870%**+ ...............................................
Commonwealth Life Insurance Company, Inc.:
62,000,000 0 62,000,000 5.880%**+ ...............................................
10,000,000 0 10,000,000 5.880%**+ ...............................................
50,000,000 0 50,000,000 General American Life Insurance Company,
5.850%**+ ...............................................
60,000,000 0 60,000,000 Life Insurance Company of Georgia,
5.877%**+ ...............................................
Life Insurance Company of Virginia:
50,000,000 0 50,000,000 5.597%**+ ...............................................
25,000,000 0 25,000,000 5.621%**+ ...............................................
25,000,000 0 25,000,000 5.621%**+ ...............................................
50,000,000 0 50,000,000 New York Life Insurance Company,
5.855%**+ ...............................................
GUARANTEED INVESTMENT CONTRACTS - (continued)
Peoples Security Life Insurance Company,
$20,000,000 $0 $20,000,000 5.910%**+ ...............................................
20,000,000 0 20,000,000 5.880%**+ ...............................................
50,000,000 0 50,000,000 Sun Life Insurance Company of America,
5.867%**+ ...............................................
25,000,000 0 25,000,000 Travelers Life Insurance Company,
5.736%**+ ...............................................
TOTAL GUARANTEED INVESTMENT CONTRACTS
MUNICIPAL BONDS - 2.1%
28,800,000 0 28,800,000 Illinois (State of), Student Assistance Commission,
First National Bank of Chicago LOC,
5.610%+ .................................................
<CAPTION>
SECURITY DESCRIPTION VALUE
- --------------------------------------------------------------------------------------------------------------------------------
Nations Emerald Pro Forma
Maturity Prime Prime Combining
Date Fund Fund Portfolios
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
5.883%+ ................................................. 10/27/98 40,000,000 0 40,000,000
5.660%+ ................................................. 12/01/97+++ 49,985,066 0 49,985,066
Sigma Finance, Inc.:
5.800%(b). .............................................. 03/03/98 0 43,000,000 43,000,000
Societe Generale:
5.655%+ ................................................. 12/01/97+++ 74,963,263 0 74,963,263
5.655%+ ................................................. 12/01/97+++ 49,975,323 0 49,975,323
Travelers Life Insurance Company,
5.770%+ ................................................. 12/01/97+++ 25,000,000 0 25,000,000
USL Capital Corporation:
5.840%+ ................................................. 12/18/97 0 30,002,656 30,002,656
----------------------------------------------------
1,417,348,496 325,824,044 1,743,172,540
----------------------------------------------------
Corporate Bonds & Notes - Yankee - 0.6%
Lehman Brother PLC, Foreign Master Note:
5.700%(b). .............................................. 12/03/97 0 50,000,000 50,000,000
----------------------------------------------------
TOTAL CORPORATE OBLIGATIONS 3,555,371,918 840,891,299 4,396,263,217
====================================================
Absit, Series 1997 - A:
5.740%+(b). ............................................. 12/15/97 0 45,003,265 45,003,265
CTN Trust, Series 1:
5.990%+(b). ............................................. 12/02/97 0 41,107,284 41,107,284
Goldman Sachs Promissory Note:
5.660%+(b). ............................................. 12/01/97 0 50,000,000 50,000,000
Household Credit Card Master Trust 1995 -1A:
5.690%+(b). ............................................. 12/15/97 0 46,000,000 46,000,000
Sigma Finance, Inc.:
5.900%+(b). ............................................. 12/02/97 0 40,000,000 40,000,000
----------------------------------------------------
TOTAL MEDIUM TERM NOTES - PRIVATE PLACEMENT 0 222,110,549 222,110,549
====================================================
Allstate Life Insurance Company:
5.800%**+ ............................................... 12/29/97# 25,000,000 0 25,000,000
5.800%**+ ............................................... 12/29/97# 25,000,000 0 25,000,000
Anchor National Life Insurance Company,
5.837%**+ ............................................... 12/29/97# 25,000,000 0 25,000,000
5.870%**+ ............................................... 12/29/97# 50,000,000 0 50,000,000
Commonwealth Life Insurance Company, Inc.:
5.880%**+ ............................................... 03/27/98# 62,000,000 0 62,000,000
5.880%**+ ............................................... 03/27/98# 10,000,000 0 10,000,000
General American Life Insurance Company,
5.850%**+ ............................................... 12/01/97# 50,000,000 0 50,000,000
Life Insurance Company of Georgia,
5.877%**+ ............................................... 03/27/98# 60,000,000 0 60,000,000
Life Insurance Company of Virginia:
5.597%**+ ............................................... 12/01/97# 50,000,000 0 50,000,000
5.621%**+ ............................................... 12/01/97# 25,000,000 0 25,000,000
5.621%**+ ............................................... 12/01/97# 25,000,000 0 25,000,000
New York Life Insurance Company,
5.855%**+ ............................................... 12/31/97+++ 50,000,000 0 50,000,000
GUARANTEED INVESTMENT CONTRACTS - (continued)
Peoples Security Life Insurance Company,
5.910%**+ ............................................... 12/04/97+++ $20,000,000 $0 $20,000,000
5.880%**+ ............................................... 03/27/98# 20,000,000 0 20,000,000
Sun Life Insurance Company of America,
5.867%**+ ............................................... 03/27/98# 50,000,000 0 50,000,000
Travelers Life Insurance Company,
5.736%**+ ............................................... 01/31/98+++ 25,000,000 0 25,000,000
----------------------------------------------------
TOTAL GUARANTEED INVESTMENT CONTRACTS 572,000,000 0 572,000,000
====================================================
Illinois (State of), Student Assistance Commission,
First National Bank of Chicago LOC,
5.610%+ ................................................. 12/03/97+++ 28,800,000 0 28,800,000
</TABLE>
<PAGE>
NATIONS FUNDS
Nations Prime Fund/Emerald Prime Fund
Pro Forma Combining Schedule of Investments
November 30, 1997 (unaudited)
<TABLE>
<CAPTION>
PRINCIPAL AMOUNT SECURITY DESCRIPTION
- -----------------------------------------------------------------------------------------------------------------------
Nations Emerald Pro Forma
Prime Prime Combining
Fund Fund Portfolios
- -----------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <S>
24,800,000 0 24,800,000 Indiana (State of), Financing Authority, Economic
Development Revenue, Qualitech Steel, National City
Bank, Indiana LOC,
5.590%+ .................................................
22,600,000 0 22,600,000 Missouri (State of), Economic Development Revenue, Export and
Infrastructure Board, (Biocraft Laboratories Inc. Project),
PNC Bank LOC,
5.650%+ .................................................
100,000,000 0 100,000,000 Virginia (State of), Housing Development Authority,
5.450%+ .................................................
TOTAL MUNICIPAL BONDS
U.S. GOVERNMENT OBLIGATIONS - 2.0%
18,000,000 0 18,000,000 Federal Home Loan Bank,
4.704%++ ................................................
Student Loan Marketing Association Floating Rate Notes:
12,000,000 0 12,000,000 5.473%+ .................................................
11,600,000 0 11,600,000 5.473%+ .................................................
47,500,000 0 47,500,000 5.493%+ .................................................
76,697,000 0 76,697,000 5.583%+ .................................................
TOTAL U.S. GOVERNMENT OBLIGATIONS
TIME DEPOSITS - EURO - 1.4%
100,000,000 0 100,000,000 First National Bank of Chicago,
5.75% ..................................................
16,141,000 0 16,141,000 Westdeutsche Landesbanken:
5.38% ..................................................
TOTAL TIME DEPOSITS - EURO
REPURCHASE AGREEMENTS - 9.0%
425,000,000 0 425,000,000 Agreement with C.S. First Boston 5.760% dated 11/28/97
to be repurchased at $425,204,000 on 12/01/97. ...........
0 80,300,270 80,300,270 Agreement with Fuji Securities Tri Party Agreement, 5.780% dated
11/28/97 to be repurchased at $80,338,948 on 12/01/97. ...
165,000,000 0 165,000,000 Agreement with J.P. Morgan 5.700% dated 11/28/97
to be repurchased at $165,078,375 on 12/01/97. ...........
0 80,300,270 80,300,270 Agreement with Salomon Brothers Tri Party Agreement, 5.730%
dated 11/28/97 to be repurchased at $80,338,948 on 12/01/97
TOTAL REPURCHASE AGREEMENTS ................................
SHARES
MONEY MARKET FUNDS - 1.0%
60,817,000 0 60,817,000 AIM Liquid Asset Portfolio. ................................
15,597,000 0 15,597,000 AIM Prime Fund .............................................
7,804,000 0 7,804,000 Dreyfus Cash Management Plus Fund ..........................
39,000 0 39,000 Fidelity Institutional Cash Portfolio ......................
TOTAL MONEY MARKET FUNDS ...................................
TOTAL INVESTMENTS (Cost $6,014,619,791, $2,296,806,729 and $8,311,426,520) ............................................
OTHER ASSETS AND LIABILITIES (Net) ....................................................................................
NET ASSETS ............................................................................................................
<CAPTION>
SECURITY DESCRIPTION VALUE
- --------------------------------------------------------------------------------------------------------------------------------
Nations Emerald Pro Forma
Maturity Prime Prime Combining
Date Fund Fund Portfolios
- --------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Indiana (State of), Financing Authority, Economic
Development Revenue, Qualitech Steel, National City
Bank, Indiana LOC,
5.590%+ ................................................. 12/03/97+++ 24,800,000 0 24,800,000
Missouri (State of), Economic Development Revenue, Export and
Infrastructure Board, (Biocraft Laboratories Inc. Project),
PNC Bank LOC,
5.650%+ ................................................. 12/03/97+++ 22,600,000 0 22,600,000
Virginia (State of), Housing Development Authority,
5.450%+ ................................................. 12/03/97+++ 100,000,000 0 100,000,000
----------------------------------------------------
TOTAL MUNICIPAL BONDS 176,200,000 0 176,200,000
====================================================
Federal Home Loan Bank,
4.704%++ ................................................ 12/02/97+++ 18,000,000 0 18,000,000
Student Loan Marketing Association Floating Rate Notes:
5.473%+ ................................................. 12/02/97+++ 12,000,000 0 12,000,000
5.473%+ ................................................. 12/02/97+++ 11,583,802 0 11,583,802
5.493%+ ................................................. 12/02/97+++ 47,419,409 0 47,419,409
5.583%+ ................................................. 12/02/97+++ 76,697,000 0 76,697,000
----------------------------------------------------
TOTAL U.S. GOVERNMENT OBLIGATIONS 165,700,211 0 165,700,211
====================================================
First National Bank of Chicago,
5.75% .................................................. 12/01/97 100,000,000 0 100,000,000
Westdeutsche Landesbanken:
5.38% .................................................. 12/01/97 16,141,000 0 16,141,000
----------------------------------------------------
TOTAL TIME DEPOSITS - EURO 116,141,000 0 116,141,000
====================================================
Agreement with C.S. First Boston 5.760% dated 11/28/97
to be repurchased at $425,204,000 on 12/01/97. ........... 425,000,000 0 425,000,000
Agreement with Fuji Securities Tri Party Agreement, 5.780% dated
11/28/97 to be repurchased at $80,338,948 on 12/01/97. ... 0 80,300,270 80,300,270
Agreement with J.P. Morgan 5.700% dated 11/28/97
to be repurchased at $165,078,375 on 12/01/97. ........... 165,000,000 0 165,000,000
Agreement with Salomon Brothers Tri Party Agreement, 5.730%
dated 11/28/97 to be repurchased at $80,338,948 on 12/01/97 0 80,300,270 80,300,270
----------------------------------------------------
TOTAL REPURCHASE AGREEMENTS ................................ 590,000,000 160,600,540 750,600,540
====================================================
AIM Liquid Asset Portfolio. ................................ 60,817,000 0 60,817,000
AIM Prime Fund ............................................. 15,597,000 0 15,597,000
Dreyfus Cash Management Plus Fund .......................... 7,804,000 0 7,804,000
Fidelity Institutional Cash Portfolio ...................... 39,000 0 39,000
----------------------------------------------------
TOTAL MONEY MARKET FUNDS ................................... $84,257,000 $0 $84,257,000
====================================================
TOTAL INVESTMENTS (Cost $6,014,619,791, $2,296,806,729 and
$8,311,426,520) .......................................... 99.8% 6,014,619,791 2,296,806,729 8,311,426,520
OTHER ASSETS AND LIABILITIES (Net) ......................... 0.2 15,589,220 5,032,066 20,621,286
----- -------------- -------------- --------------
NET ASSETS ................................................. 100.0% $6,030,209,011 $2,301,838,795 $8,332,047,806
===== ============== ============== ==============
</TABLE>
- ----------
** Restricted security.
+ Floating / variable rate note. The interest rate shown reflects the rate
in effect at November 30, 1997.
++ Variable rate security. The interest rate shown is tied to the Cost of
Funds Index and resets on a delayed basis.
+++ Reset date. Interest rates reset either daily, weekly, monthly, quarterly
or semi-annually.
# Security subject to a demand feature which allows the Fund to put the
security back to the issuer from 7 to 180 calendar days.
<PAGE>
NATIONS PRIME FUND
EMERALD PRIME FUND
Pro Forma Combining Statement of Assets and Liabilities (unaudited)
November 30, 1997
<TABLE>
<CAPTION>
Nations Emerald Adjustments to Pro Forma
Prime Fund Prime Fund Pro Forma Combined (Note 1)
---------- ---------- --------- -----------------
<S> <C> <C> <C> <C>
ASSETS:
Investments at Amortized Cost $6,014,619,791 $2,296,806,729 - $8,311,426,520
Cash 369 - - 369
Income Receivable 37,803,657 16,023,361 - 53,827,018
Receivable for Fund Shares Sold 7,000 - - 7,000
Prepaid and Other Assets 404,705 55,668 - 460,373
-------------- -------------- ------------ --------------
Total Assets 6,052,835,522 2,312,885,758 - 8,365,721,280
-------------- -------------- ------------ --------------
LIABILITIES:
Income Distribution Payable 19,270,840 9,578,031 - 28,848,871
Accrued Expenses and other payables 3,355,671 1,468,932 - 4,824,603
-------------- -------------- ------------ --------------
Total Liabilities 22,626,511 11,046,963 33,673,474
-------------- -------------- ------------ --------------
Net Assets Applicable to Shares Outstanding $6,030,209,011 $2,301,838,795 $8,332,047,806
-------------- -------------- ------------ --------------
Net Assets by Class:
Primary A/Institutional $3,568,740,552 $581,142,127 - $4,149,882,679
-------------- -------------- ------------ --------------
Primary B $28,288,167 n/a $28,288,167
-------------- -------------- ------------ --------------
Investor A/Service $1,570,477,320 $1,128,448,959 - $2,698,926,279
-------------- -------------- ------------ --------------
Investor B $713,426,878 n/a - $713,426,878
-------------- -------------- ------------ --------------
Investor C $83,153,987 n/a - $83,153,987
-------------- -------------- ------------ --------------
Investor Daily /Retail $66,122,107 $592,247,709 $658,369,816
-------------- -------------- ------------ --------------
Shares Outstanding by Class:
Primary A/Institutional 3,569,367,453 581,152,243 - 4,150,519,696
-------------- -------------- ------------ --------------
Primary B 28,293,136 n/a - 28,293,136
-------------- -------------- ------------ --------------
Investor A/Service 1,570,753,197 1,128,464,311 - 2,699,217,508
-------------- -------------- ------------ --------------
Investor B 713,552,202 n/a - 713,552,202
-------------- -------------- ------------ --------------
Investor C 83,168,594 0 - 83,168,594
-------------- -------------- ------------ --------------
Investor Daily /Retail 66,140,721 592,258,101 - 658,398,822
-------------- -------------- ------------ --------------
Primary A Shares:
Net Asset Value per Share $1.00 $1.00 $1.00
-------------- -------------- --------------
Primary B Shares:
Net Asset Value per Share $1.00 n/a $1.00
-------------- -------------- --------------
Investor A Shares:
Net Asset Value per Share $1.00 $1.00 $1.00
-------------- -------------- --------------
Investor B Shares:
Net Asset Value per Share $1.00 n/a $1.00
-------------- -------------- --------------
Investor C Shares:
Net Asset Value per Share $1.00 n/a $1.00
-------------- -------------- --------------
Investor Daily/Retail Class Shares:
Net Asset Value per Share $1.00 $1.00 $1.00
-------------- -------------- --------------
</TABLE>
See Notes to Pro Forma Financial Statements
<PAGE>
NATIONS PRIME FUND
EMERALD PRIME FUND
Pro Forma Combining Statement of Operations (Unaudited)
For the Twelve Month Period Ending November 30, 1997
<TABLE>
<CAPTION>
Nations Emerald Adjustments to Pro Forma
Prime Fund Prime Fund Pro Forma Combined (Note 1)
---------- ---------- --------- -----------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Interest $292,021,923 $125,537,558 - $417,559,481
------------ ------------ ---------- ------------
Total Investment Income 292,021,923 125,537,558 - 417,559,481
------------ ------------ ---------- ------------
EXPENSES:
Investment Advisory 10,330,121 5,563,480 (1,081,541)(a) 14,812,060
Administration 5,129,156 1,724,349 501,043 (a) 7,354,548
Transfer Agent 689,446 525,637 (100,000)(b) 1,115,083
Custodian (d) 430,541 185,605 (70,000)(b) 546,146
Legal and Audit Fees 342,178 231,803 (130,000)(b) 443,981
Trustees' Fees 188,422 113,584 (113,584)(b) 188,422
Other expenses 172,788 915,626 (300,000)(b) 788,414
------------ ------------ ---------- ------------
Subtotal 17,282,652 9,260,084 (1,294,082) 25,248,654
Shareholder servicing and distribution fees
Primary B 293,629 - - 293,629
Investor A/Service 4,325,002 3,677,418 - 8,002,420
Investor B 221,727 - N/A 221,727
Investor C 1,273,549 - N/A 1,273,549
Daily/Retail 253,117 2,873,506 - 3,126,623
Fees waived and/or reimbursed by
investment advisor and administrator (1,890,576) (708,748) (585,685)(c) (3,185,009)
------------ ------------ ---------- ------------
Total Expenses 21,759,100 15,102,260 (1,879,767) 34,981,594
------------ ------------ ---------- ------------
NET INVESTMENT INCOME 270,262,823 110,435,298 1,879,767 382,577,887
------------ ------------ ---------- ------------
Net Realized Gain/(Loss)
on Investments (16,328) (30,724) (47,052)
------------ ------------ ---------- ------------
Net Increase/(Decrease) in net assets
resulting from operations $270,246,495 $110,404,574 $1,879,767 $382,530,835
------------ ------------ ---------- ------------
</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.
(d) Net of expense offset arrangements amounts to less than .01% of average net
assets.
See Notes to Pro Forma Financial Statements
<PAGE>
NATIONS FUNDS
Nations Prime Fund/Emerald Prime Fund
Pro Forma Combining Schedule of Investments
November 30, 1997 (unaudited)
(a) Securities are not registered under the Securities Act of 1933. These
securities may be resold in in transactions exempt from registration to
qualified institutional buyers.
(b) Security exempt from registration under Rule 144A of the Securities Act of
1933. These securities may be resold in transactions exempt from
registration to qualified institutional buyers.
(c) Security is restricted.
ABBREVIATION:
LOC Letter of Credit
<PAGE>
Nations Prime Fund
Emerald Prime 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 November 30, 1997 the Company offers eight separate portfolios. The unaudited
Pro Forma Combining Portfolio of Investments and the unaudited Pro Forma
Combining Statement of Assets and Liabilities assumes the exchange described in
the next paragraph occurred as of November 30, 1997 and the unaudited Pro Forma
Combining Statement of Operations assumes the exchange occurred as of December
1, 1996. These statements have been derived from books and records utilized in
calculating daily net asset value of each fund at November 30, 1997 and for the
twelve month period then ended.
The pro forma statements give effect to the proposed transfer of the assets and
stated liabilities of the Emerald Prime Fund in exchange for shares of Nations
Prime Fund. Under generally accepted accounting principles, the historical cost
of investment securities will be carried forward to the surviving entity and the
results of operations of the Emerald Prime 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.
<PAGE>
Nations Prime Fund
Emerald Prime Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
For the twelve month period ended November 30, 1997, the Nations Prime Fund and
the Nations Treasury Fund's investment advisory fee were computed based on the
annual rates multiplied by the combined daily average net assets of such funds,
of 0.25% of average daily net assets up to $250 million and 0.20% of average
daily net assets exceeding $250 million. The administration fee was computed
based on the annual rate of 0.10% of average daily net assets of the Company and
the investment portfolios of Nations Fund Trust and Nations Fund Portfolios,
Inc. (two other registered open-end investment companies which are part of the
Nations Fund family) on a combined basis.
The Company has adopted a shareholder administration plan ("Administration
Plan") for the Primary B Shares of the Nations Prime Fund. Under the
Administration Plan, aggregate payments may not exceed 0.25%, on an annualized
basis, of the average daily net assets of the Fund's Primary B Shares.
The Company has also adopted a distribution plan pursuant to Rule 12b-1 under
the 1940 Act with respect to Investor A Shares, ("Investor A Distribution Plan")
and Investor Daily Shares ("Investor Daily Distribution Plan") of the Nations
Prime Fund. Under the Investor A Distribution Plan and Investor Daily
Distribution Plan, aggregate payments may not exceed 0.10% and 0.25%, on an
annualized basis, of the average daily net assets of the Investor A Shares and
Investor Daily Shares respectively, of the Fund.
The Company has also adopted a shareholder servicing plan with respect to
Investor A Shares ("Investor A Servicing Plan"), Investor B Shares ("Investor B
Servicing Plan"), Investor C Shares ("Investor C Servicing Plan") and Investor
Daily ("Investor Daily Servicing Plan") of the Nations Prime Fund. Under the
Investor A Servicing Plan, Investor B Servicing
2
<PAGE>
Nations Prime Fund
Emerald Prime Fund
Notes to Pro Forma Combining Financial Statements (unaudited)
Plan, Investor C Servicing Plan and Investor Daily Servicing Plan aggregate
payments may not exceed 0.25% on an annualized basis of the average daily net
assets of the Investor A Shares, Investor B Shares, Investor C Shares and
Investor Daily Shares of the Fund.
2. Portfolio Valuation
Securities of Nations Prime Fund are valued on the basis of amortized cost,
which approximates market value. Amortized cost valuation involves initially
valuing an instrument at its cost and thereafter assuming a constant
amortization to maturity of any discount or premium, as long as the effect of
the fluctuating interest rates on the market value of the instrument is not
significant. Restricted securities and other assets are valued by the Fund's
investment adviser under the supervision of the Board of Directors. Emerald
Prime Fund uses similar rules for determining portfolio valuation.
3. Capital Shares
The pro forma net asset value per share assumes the issuance of additional
shares of Nations Prime Fund which would have been issued at November 30, 1997
in connection with the proposed reorganization. The pro forma number of shares
outstanding of 8,333,149276,958 consists of 2,301,874,655 shares assumed issued
in the reorganization plus 6,031,275,303 shares of Nations Prime Fund at
November 30, 1997.
3
<PAGE>
NATIONS FUND, INC.
ONE NATIONSBANK PLAZA
33rd Floor
Charlotte, NC 28255
1-800-626-2275
FORM N-14
PART C
OTHER INFORMATION
Item 15. Indemnification.
Under the terms of the Maryland Corporation Law and 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. Mutual Fund Custody and Sub-Custody Agreement with NationsBank of
Texas N.A. ("NationsBank Texas") and The Bank of New York;
5. Custody Agreement with The Bank of New York;
6. Transfer Agency Agreement with NationsBank Texas; and
7. Transfer Agency and Registrar Agreement with First Data Investors
Services Group, Inc.
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
C-1
<PAGE>
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
C-2
<PAGE>
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 "Emerald's Registration Statement" in the
following list of Exhibits refer to Emerald Funds' ("Emerald") Registration
Statement on Form N-1A (File Nos. 33-20658; 811-5515).
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.
C-3
<PAGE>
Exhibit Number Description
(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.
(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)(l) 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 to be filed by amendment.
(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.
C-4
<PAGE>
Exhibit Number Description
(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.
(6)(d) Form of Sub-Advisory Agreement between Boatmen's Trust
Company and Nations shall be filed by amendment.
(6)(e) Form of Sub-Advisory Agreement between Brandes and Nations
shall be filed by amendment.
(7) Distribution Agreement between Nations and Stephens dated
March 31, 1993, is incorporated by reference to
Post-Effective Amendment No. 18, filed March 26, 1993.
(8) Not Applicable.
(9)(a) Mutual Fund Custody and Sub-Custody Agreement among Nations,
NationsBank Texas and The Bank of New York dated, October
18, 1996, shall be filed by amendment.
(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.
13, filed April 30, 1992.
(l0)(b) Form of Shareholder Servicing Agreement, relating to the
Primary B Shares, is incorporated by reference to
Post-Effective Amendment No. 19 to its Registration
Statement, filed May 27, 1993.
C-5
<PAGE>
Exhibit Number Description
(l0)(c) Shareholder Servicing Plan for Investor A Shares
incorporated by reference to Post-Effective Amendment No.
21, filed March 29, 1994.
(l0)(d) Forms of Shareholder Servicing Agreement for Investor A
Shares are incorporated by reference to Post-Effective
Amendment No. 21, filed March 29, 1994.
(l0)(e) Amended and Restated Shareholder Servicing Plan for Investor
B Shares of the Money Market Funds and Investor C Shares
(formerly Investor B Shares) of the Non-Money Market Funds
is incorporated by reference to Post-Effective Amendment No.
21, filed March 29, 1994.
(l0)(f) Forms of Shareholder Servicing Agreement for Investor B
Shares of the Money Market Funds and Investor C Shares
(formerly Investor B Shares) of the Non-Money Market Funds
are incorporated by reference to Post-Effective Amendment
No. 21, filed March 29, 1994.
(l0)(g) Shareholder Servicing Plan for Investor C Shares of the
Money Market Funds and Investor N Shares (formerly Investor
C Shares) of the Non-Money Market Funds is incorporated by
reference to Post-Effective Amendment No. 21, filed March
29, 1994.
(10)(h) Forms of Shareholder Servicing Agreement for Investor C
Shares of the Money Market Funds and Investor N Shares
(formerly Investor C Shares) of the Non-Money Market Funds
are incorporated by reference to Post-Effective Amendment
No. 21, filed March 29, 1994.
(l0)(i) Shareholder Administration Agreement for Primary B Shares is
incorporated by reference to Post-Effective Amendment No.
28, filed January 29, 1996.
(10)(j) Amended and Restated Shareholder Servicing and Distribution
Plan pursuant to Rule 12b-1, relating to Investor A Shares,
is incorporated by reference to Post-Effective Amendment No.
21, filed March 29, 1994.
(10)(k) Form of Sales Support Agreement, relating to Investor A
Shares is incorporated by reference to Post-Effective
Amendment No. 21, filed March 29, 1994.
C-6
<PAGE>
(10)(l) Amended and Restated Distribution Plan, relating to Investor
B Shares of the Money Market Funds and Investor C Shares
(formerly Investor B Shares) of the Non-Money Market Funds
is incorporated by reference to Post-Effective Amendment No.
21, filed March 29, 1994.
(10)(m) Form of Sales Support Agreement relating to Investor B
Shares of the Money Market Funds and Investor C Shares
(formerly Investor B Shares) of the Non-Money Market Funds
is incorporated by reference to Post-Effective Amendment No.
21, filed March 29, 1994.
(10)(n) Distribution Plan relating to the Non-Money Market Funds'
Investor N Shares (formerly Investor C Shares) is
incorporated by reference to Post-Effective Amendment No.
21, filed March 29, 1994.
(10)(o) Form of Sales Support Agreement, relating to Non-Money
Market Funds' Investor N Shares (formerly Investor C Shares)
is incorporated by reference to Post-Effective Amendment No.
21, filed March 29, 1994.
(10)(p) Shareholder Administration Plan for Primary B Shares is
incorporated by reference to Post-Effective Amendment No.
28, filed January 29, 1996.
(l0)(q) Transfer Agency Agreement between Registrant and NCNB Texas
National Bank, dated October 1, 1991, relating to
institutional classes (currently known as Primary Shares),
is incorporated by reference to Post-Effective Amendment No.
14, filed July 30, 1992.
(10)(r) Transfer Agency and Registrar Agreement, dated June 1, 1992,
between Nations and The Shareholder Servicing Group, Inc.,
relating to Investor Shares, is incorporated by reference to
Post-Effective Amendment No. 14, filed July 30, 1992.
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. 20, filed March 26, 1993.
(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.
26, filed June 30, 1995.
(11) Opinion and Consent of Morrison & Foerster LLP, filed
herewith.
(12) See Item 17(3) of this Part C.
(13)(a) Prototype Individual Retirement Account Plan, is
incorporated by reference to Amendment No. 20, filed March
26, 1993.
(13)(b) Administration Agreement between Stephens 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 Auditors - Price Waterhouse LLP,
filed herewith.
14(b) Consent of Independent Auditors - Price Waterhouse LLP,
filed herewith.
C-8
<PAGE>
Exhibit Number Description
14(c) Consent of Independent Auditors - KPMG Peat Marwick LLP,
filed herewith.
14(d) Consent of Independent Auditors - Arthur Andersen LLP, filed
herewith.
15 Not Applicable
16 Powers of Attorney, filed herewith.
17(a) Declaration, pursuant to Rule 24f-2 under the Investment
Company Act of 1940, of the Registrant, filed herewith.
17(b) Forms of Proxy Ballot, filed herewith.
17(c)(i) Prospectuses and Statements of Additional Information
for Primary A and Investor A Shares for Nations Government
Securities Fund and Nations Small Company Growth Fund, and
prospectuses for Primary A, Investor A and Daily Class
Shares of Nations Prime Fund and Nations Treasury Fund,
dated August 1, 1997, incorporated by reference to
Post-Effective Amendment No. 34 to the Registration
Statement, as filed on July 31, 1997.
17(c)(ii) Prospectuses for Institutional and Retail Shares for Emerald
International Equity Fund, Emerald Small Capitalization Fund
and Emerald U.S. Government Securities Fund, and
Institutional, Retail and Service Shares of Emerald Prime
Fund and Emerald Treasury Fund, dated April 1, 1997,
incorporated by reference to Post-Effective Amendment No. 21
to the Emerald Registration Statement, as filed on March 31,
1997.
17(c)(iii) Prospectuses for Institutional and Retail Shares for Emerald
International Equity Fund, Emerald Small Capitalization Fund
and Emerald U.S. Government Securities Fund, and
Institutional, Retail and Service Shares of Emerald Prime
Fund and Emerald Treasury Fund, dated ____________,
incorporated by reference to Post-Effective Amendment No. 22
to the Emerald Registration Statement, as filed on January
30, 1998.
17(c)(iv) Annual Reports for Nations Government Securities Fund,
Nations Prime Fund, and Nations Treasury Fund for the fiscal
year ended
C-9
<PAGE>
Exhibit Number Description
March 31, 1997, filed on __________, 1997.
17(c)(v) Annual Reports for Emerald International Equity Fund,
Emerald Prime Fund, Emerald Small Capitalization Fund,
Emerald Treasury Fund and Emerald U.S. Government Securities
Fund for the fiscal year ended November 30, 1997, filed on
__________, 1998.
17(c)(vi) Semi-Annual Reports for Nations Government Securities Fund,
Nations Prime Fund, Nations Small Company Growth Fund and
Nations Treasury Fund for the period ended September 30,
1997, 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 5th day of February, 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 February 5, 1998
- ----------------------------- of the Board of Directors
(A. Max Walker) (Principal Executive Officer)
* Treasurer February 5, 1998
- ----------------------------- Vice President
(Richard H. Rose) (Principal Financial and
Accounting Officer)
* Director February 5, 1998
- -----------------------------
(Edmund L. Benson, III)
* Director February 5, 1998
- -----------------------------
(James Ermer)
* Director February 5, 1998
- -----------------------------
(William H. Grigg)
* Director February 5, 1998
- -----------------------------
(Thomas F. Keller)
* Director February 5, 1998
- -----------------------------
(Carl E. Mundy, Jr.)
* Director February 5, 1998
- -----------------------------
(Charles B. Walker)
* Director February 5, 1998
- -----------------------------
(Thomas S. Word)
* Director February 5, 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) Opinion and Consent of Auditors - Price
Waterhouse LLP
Ex-99.14(b) Opinion and Consent of Auditors - Price
Waterhouse LLP
Ex-99.14(c) Opinion and Consent of Auditors - KPMG Peat
Marwick LLP
Ex-99.14(d) Opinion and Consent of Auditors - Arthur
Andersen LLP
Ex-99.16 Powers of Attorney
Ex-99.17(a) Declaration pursuant to Rule 24f-2 under the
Investment Company Act of 1940 of the Registrant
Ex-99.17(b) Form of Proxy Ballot
Ex-99.11
[MORRISON & FOERSTER LLP LETTERHEAD]
February 23, 1998
Nations Fund Trust
One NationsBank Plaza
Charlotte, NC 28255
Re: Units of Beneficial Interest of Nations Fund Trust
Ladies/Gentlemen:
We refer to the Registration Statement on Form N-14 (the
"Registration Statement") of Nations Fund Trust ("Trust")
relating to the registration of an indefinite number of units of
beneficial interest (the "Shares"), of certain Funds of the Trust (the
"Funds").
We have been requested by the Trust to furnish this opinion as
Exhibit 11 to the Registration Statement.
We have examined documents relating to the organization of
the Trust and the authorization and issuance of the Shares. We have also
made such inquiries of the Trust and examined such questions of law as we
have deemed necessary for the purpose of rendering the opinion set forth
herein. We have assumed the genuineness of all signatures and the
authenticity of all items submitted to us as originals and the
conformity with originals of all items submitted to us as copies.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance of the Shares by the Trust has been duly and
validly authorized by all appropriate action and, assuming delivery in
accordance with the description set forth in the Combined Proxy
Statement/Prospectus included in the Registration Statement, the Shares
will be legally issued, fully paid and nonassessable by the Trust.
<PAGE>
Nations Fund Trust
February 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
"Information Relating to Proposal 2--Approval of the Reorganization
Agreement--Federal Income Tax Considerations" and "Comparison of Nations
and Emerald--Nations Funds' Advisory Contracts" 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 and Statement of Additional Information constituting parts
of this Registration Statement on Form N-14 (the "Registration Statement") of
our report dated May 15, 1997, relating to the financial statements and
financial highlights of Nations Prime Fund, Nations Treasury Fund and Nations
Government Securities Fund appearing in the March 31, 1997 Annual Report 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 heading "Financial Statements" 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 Prospectus of Nations Prime Fund, Nations Treasury Fund and
Nations Government Securities Fund dated August 1, 1997 and under the heading
"Independent Accountants and Reports" in the Statement of Additional Information
of Nations Prime Fund, Nations Treasury Fund and Nations Government Securities
Fund dated August 1, 1997 which are incorporated by reference into the
Registration Statement.
/s/ PRICE WATERHOUSE LLP
Boston, Massachusetts
February 17, 1998
EXH. 99.14(B)
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Prospectuses and
Statements of Additional Information constituting parts of Post-Effective
Amendment No. 21 to the registration statement on Form N-1A (the "Registration
Statement") dated April 1, 1997, of our report dated January 22, 1997, relating
to the financial statements and financial highlights appearing in the November
30, 1996 Annual Report to Shareholders of the Emerald Funds, which are also
incorporated by reference into the Registration Statement and into the Combined
Proxy Statement/Prospectus and Statement of Additional Information constituting
parts of the registration statement on Form N-14 for Nations Fund, Inc. We also
consent to the references to us under the heading "Financial Highlights" in the
Prospectuses dated April 1, 1997 and under the heading "Financial Statements" in
the Statements of Additional Information dated April 1, 1997.
/s/ PRICE WATERHOUSE LLP
1177 Avenue of the Americas
New York, New York 10036
February 19, 1998
Exhibit 99.14(C)
Independent Auditors' Consent
The Board of Trustees of
Emerald Funds,
Nations Institutional Reserves,
Nations Fund Trust and
The Board of Directors of
Nations Fund, Inc.:
We consent to the use of our reports dated January 21, 1998 and addressed to the
Shareholders and Board of Trustees of the Emerald Funds which are incorporated
by reference herein and to the reference to our firm under the headings "Other
Service Providers for the Emerald Funds and Nations Funds" and Financial
Statements" in the combined Proxy Statement/Prospectuses for the Nations
Institutional Reserves, Nations Fund Trust and Nations Fund, Inc. (collectively,
Nations) and "Incorporation of Documents by Reference in Statement of Additional
Information" in the Statements of Additional Information for Nations.
/s/ KPMG Peat Marwick LLP
Columbus, Ohio
February 20, 1998
EXH. 99.14(D)
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of and
incorporation by reference in this registration statement on Form N-14 of our
report dated June 20, 1997, on the financial statements of the Pilot Small
Capitalization Fund (predecessor to the Nations Small Company Growth Fund) as of
May 16, 1997; incorporated by reference in the Nations Fund, Inc.'s registration
statement on Form N-14 (File nos. 33-4038 and 811-4614) and to all references to
our Firm included in this registration statement.
/s/ Arthur Andersen LLP
Boston, Massachusetts
February 18, 1998
EXH. 99.16
POWER OF ATTORNEY
Edmund L. Benson, III, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund, Inc. (the "Company") to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "1933 Act"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of the Company's Registration Statement(s) on Form
N-14 pursuant to the 1933 Act, and to qualify or register for sale any
securities in any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in the name and on
behalf of the undersigned as a director of the Company, such Registration
Statement(s), and any and all amendments thereto, filed with the Securities and
Exchange Commission under the 1933 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: February 6, 1998
/s/ Edmund L. Benson, III
------------------------------------------
Edmund L. Benson, III
<PAGE>
EXH. 99.16
POWER OF ATTORNEY
James Ermer, whose signature appears below, does hereby constitute and
appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M. Kurucza, Marco E.
Adelfio and Steven G. Cravath, each individually, his true and lawful attorneys
and agents, with power of substitution or resubstitution, to do any and all acts
and things and to execute any and all instruments which said attorneys and
agents, each individually, may deem necessary or advisable or which may be
required to enable Nations Fund, Inc. (the "Company") to comply with the
Investment Company Act of 1940, as amended, and the Securities Act of 1933, as
amended (the "1933 Act"), and any rules, regulations or requirements of the
Securities and Exchange Commission in respect thereof, in connection with the
filing and effectiveness of the Company's Registration Statement(s) on Form N-14
pursuant to the 1933 Act, and to qualify or register for sale any securities in
any state including specifically, but without limiting the generality of the
foregoing, the power and authority to sign, in the name and on behalf of the
undersigned as a director of the Company, such Registration Statement(s), and
any and all amendments thereto, filed with the Securities and Exchange
Commission under the 1933 Act, and any other instruments or documents related
thereto, and the undersigned does hereby ratify and confirm all that said
attorneys and agents, individually or collectively, shall do or cause to be done
by virtue thereof.
Dated: February 6, 1998
/s/ James Ermer
------------------------------------------
James Ermer
<PAGE>
EXH. 99.16
POWER OF ATTORNEY
William H. Grigg, whose signature appears below, does hereby constitute
and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M. Kurucza, Marco
E. Adelfio and Steven G. Cravath, each individually, his true and lawful
attorneys and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund, Inc. (the "Company") to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "1933 Act"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of the Company's Registration Statement(s) on Form
N-14 pursuant to the 1933 Act, and to qualify or register for sale any
securities in any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in the name and on
behalf of the undersigned as a director of the Company, such Registration
Statement(s), and any and all amendments thereto, filed with the Securities and
Exchange Commission under the 1933 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: February 10, 1998
/s/ William H. Grigg
------------------------------------------
William H. Grigg
<PAGE>
EXH. 99.16
POWER OF ATTORNEY
Thomas F. Keller, whose signature appears below, does hereby constitute
and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M. Kurucza, Marco
E. Adelfio and Steven G. Cravath, each individually, his true and lawful
attorneys and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund, Inc. (the "Company") to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "1933 Act"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of the Company's Registration Statement(s) on Form
N-14 pursuant to the 1933 Act, and to qualify or register for sale any
securities in any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in the name and on
behalf of the undersigned as a director of the Company, such Registration
Statement(s), and any and all amendments thereto, filed with the Securities and
Exchange Commission under the 1933 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: February 6, 1998
/s/ Thomas F. Keller
------------------------------------------
Thomas F. Keller
<PAGE>
EXH. 99.16
POWER OF ATTORNEY
A. Max Walker, whose signature appears below, does hereby constitute
and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M. Kurucza, Marco
E. Adelfio and Steven G. Cravath, each individually, his true and lawful
attorneys and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund, Inc. (the "Company") to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "1933 Act"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of the Company's Registration Statement(s) on Form
N-14 pursuant to the 1933 Act, and to qualify or register for sale any
securities in any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in the name and on
behalf of the undersigned as an officer of the Company, such Registration
Statement(s), and any and all amendments thereto, filed with the Securities and
Exchange Commission under the 1933 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: February 6, 1998
/s/ A. Max Walker
------------------------------------------
A. Max Walker
<PAGE>
EXH. 99.16
POWER OF ATTORNEY
Charles B. Walker, whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund, Inc. (the "Company") to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "1933 Act"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of the Company's Registration Statement(s) on Form
N-14 pursuant to the 1933 Act, and to qualify or register for sale any
securities in any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in the name and on
behalf of the undersigned as a director of the Company, such Registration
Statement(s), and any and all amendments thereto, filed with the Securities and
Exchange Commission under the 1933 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: February 6, 1998
/s/ Charles B. Walker
------------------------------------------
Charles B. Walker
<PAGE>
EXH. 99.16
POWER OF ATTORNEY
Thomas S. Word, Jr., whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio, and Steven G. Cravath, each individually, his true
and lawful attorneys and agents, with power of substitution or resubstitution,
to do any and all acts and things and to execute any and all instruments which
said attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund, Inc. (the "Company") to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "1933 Act"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of the Company's Registration Statement(s) on Form
N-14 pursuant to the 1933 Act, and to qualify or register for sale any
securities in any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in the name and on
behalf of the undersigned as a director of the Company, such Registration
Statement(s), and any and all amendments thereto, filed with the Securities and
Exchange Commission under the 1933 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: February 6, 1998
/s/ Thomas S. Word, Jr.
------------------------------------------
Thomas S. Word, Jr.
<PAGE>
EXH. 99.16
POWER OF ATTORNEY
Richard H. Rose, whose signature appears below, does hereby constitute
and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M. Kurucza, Marco
E. Adelfio and Steven G. Cravath, each individually, his true and lawful
attorneys and agents, with power of substitution or resubstitution, to do any
and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund, Inc. (the "Company") to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "1933 Act"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of the Company's Registration Statement(s) on Form
N-14 pursuant to the 1933 Act, and to qualify or register for sale any
securities in any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in the name and on
behalf of the undersigned as an officer of the Company, such Registration
Statement(s), and any and all amendments thereto, filed with the Securities and
Exchange Commission under the 1933 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: February 6, 1998
/s/ Richard H. Rose
------------------------------------------
Richard H. Rose
<PAGE>
EXH. 99.16
POWER OF ATTORNEY
Carl E. Mundy, Jr., whose signature appears below, does hereby
constitute and appoint R. Gregory Feltus, Richard H. Blank, Jr., Robert M.
Kurucza, Marco E. Adelfio and Steven G. Cravath, each individually, his true and
lawful attorneys and agents, with power of substitution or resubstitution, to do
any and all acts and things and to execute any and all instruments which said
attorneys and agents, each individually, may deem necessary or advisable or
which may be required to enable Nations Fund, Inc. (the "Company") to comply
with the Investment Company Act of 1940, as amended, and the Securities Act of
1933, as amended (the "1933 Act"), and any rules, regulations or requirements of
the Securities and Exchange Commission in respect thereof, in connection with
the filing and effectiveness of the Company's Registration Statement(s) on Form
N-14 pursuant to the 1933 Act, and to qualify or register for sale any
securities in any state including specifically, but without limiting the
generality of the foregoing, the power and authority to sign, in the name and on
behalf of the undersigned as a director of the Company, such Registration
Statement(s), and any and all amendments thereto, filed with the Securities and
Exchange Commission under the 1933 Act, and any other instruments or documents
related thereto, and the undersigned does hereby ratify and confirm all that
said attorneys and agents, individually or collectively, shall do or cause to be
done by virtue thereof.
Dated: February 9, 1998
/s/ Carl E. Mundy, Jr.
------------------------------------------
Carl E. Mundy, Jr.
<PAGE>
EXH. 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: February 7, 1998
/s/ James B. Sommers
------------------------------------------
James B. Sommers
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington D. C. 20549
FORM 24F-2: ANNUAL NOTICE OF SECURITIES SOLD, PURSUANT TO
RULE 24F-2
READ INSTRUCTIONS AT END OF FORM BEFORE PREPARING FORM.
PLEASE PRINT OR TYPE.
1. NAME AND ADDRESS OF ISSUER:
Nations Fund, Inc.
111 Center Street
Little Rock, AR 72201
2. NAME OF EACH SERIES OR CLASS OF FUNDS FOR WHICH THIS NOTICE IS FILED:
Nations Equity Income Fund-Primary A Shares. Nations Equity Income Fund-Primary
B Shares. Nations Equity Income Fund-Investor A Shares. Nations Equity Income
Fund-Investor C Shares. Nations Equity Income Fund-Investor N Shares. Nations
Government Securities Fund-Primary A Shares. Nations Government Securities
Fund-Primary B Shares. Nations Government Securities Fund-Investor A Shares.
Nations Government Securities Fund-Investor C Shares. Nations Government
Securities Fund-Investor N Shares. Nations International Equity Fund-Primary A
Shares. Nations International Equity Fund-Primary B Shares. Nations
International Equity Fund-Investor A Shares. Nations International Equity
Fund-Investor C Shares. Nations International Equity Fund-Investor N Shares.
Nations Prime Fund-Primary A Shares. Nations Prime Fund-Primary B Shares.
Nations Prime Fund-Investor A Shares. Nations Prime Fund-Investor B Shares.
Nations Prime Fund-Investor C Shares. Nations Prime Fund-Daily Shares. Nations
Treasury Fund-Primary A Shares. Nations Treasury Fund-Primary B Shares. Nations
Treasury Fund-Investor A Shares. Nations Treasury Fund-Investor B Shares.
Nations Treasury Fund-Investor C Shares. Nations Treasury Fund-Daily Shares.
3. INVESTMENT COMPANY ACT FILE NUMBER: 811-4614
SECURITIES ACT FILE NUMBER: 33-4038
4. LAST DAY OF FISCAL YEAR FOR WHICH THIS NOTICE IS FILED:
MARCH 31, 1997
5. CHECK BOX IF THIS NOTICE IS BEING FILED MORE THAN 180 DAYS AFTER THE CLOSE OF
THE ISSUER'S FISCAL YEAR END FOR PURPOSES OF REPORTING SECURITIES SOLD AFTER THE
CLOSE OF THE FISCAL YEAR BUT BEFORE TERMINATION OF THE ISSUER'S 24F-2
DECLARATION: [ ]
6. DATE OF TERMINATION OF ISSUER'S DECLARATION UNDER RULE 24F-2(A)(1), IF
APPLICABLE (SEE INSTRUCTION A.6):
<PAGE>
N/A
7. NUMBER AND AMOUNT OF SECURITIES OF THE SAME CLASS OR SERIES WHICH HAD BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 OTHER THAN PURSUANT TO RULE 24F-2 IN
A PRIOR FISCAL YEAR, BUT WHICH REMAINED UNSOLD AT THE BEGINNING OF THE FISCAL
YEAR:
N/A
8. NUMBER AND AMOUNT OF SECURITIES REGISTERED DURING THE FISCAL YEAR OTHER THAN
PURSUANT TO RULE 24F-2:
$301,192,337
9. NUMBER AND AGGREGATE SALE PRICE OF SECURITIES SOLD DURING THE FISCAL YEAR:
NUMBER: 22,834,731,643 SHARES
SALE PRICE: $23,287,772,021.00
10. NUMBER AND AGGREGATE SALE PRICE OF SECURITIES SOLD DURING THE FISCAL YEAR IN
RELIANCE UPON REGISTRATION PURSUANT TO RULE 24F-2:
NUMBER: 22,533,539,306 SHARES
SALE PRICE: $22,986,579,684.00
2
<PAGE>
11. NUMBER AND AGGREGATE SALE PRICE OF SECURITIES ISSUED DURING THE FISCAL YEAR
IN CONNECTION WITH DIVIDEND REINVESTMENT PLANS, IF APPLICABLE (SEE INSTRUCTION
B.7):
NUMBER: 85,941,077 SHARES
SALE PRICE: $149,634,907.00
12. CALCULATION OF REGISTRATION FEE:
(i) Aggregate sale price of securities sold during the fiscal year
in reliance on Rule 24f-2 (from Item 10):
$22,986,579,684.00
(ii) Aggregate price of shares issued in connection with
dividend reinvestment plans (from Item 11, if applicable):
+149,634,907.00
(iii) Aggregate price of shares redeemed or repurchased during
the fiscal year (if applicable):
-22,448,404,330.00
(iv) Aggregate price of shares redeemed or repurchased and previously
applied as a reduction to filing fees pursuant to Rule 24e-2 (if applicable):
$0.00
(v) Net aggregate price of securities sold and issued during
the fiscal year in reliance on Rule 24f-2 [line (i), plus line (ii),
less line (iii), plus line (iv)] (if applicable):
$687,810,261.00
(vi) Multiplier prescribed by Section 6(b) of the Securities
Act of 1933 or other applicable law or regulation (see Instruction C.6):
X 1/33 OF 1%
(vii) Fee due [line (i) or line (v) multiplied by line (vi)]:
$208,427.35
INSTRUCTION: ISSUERS SHOULD COMPLETE LINES (II), (III), (IV) AND (V) ONLY IF THE
FORM IS BEING FILED WITHIN 60 DAYS AFTER THE CLOSE OF THE ISSUER'S FISCAL YEAR.
See Instruction C.3.
Check box if fees are being remitted to the
Commission's lockbox depository as described
in Section 3a of the Commission's Rule of
Informal and Other Procedures (17 CFR 202.3a). [X]
3
<PAGE>
Date of mailing or wire transfer of filing fees to the Commission's lockbox
depository:
MAY 21, 1997
SIGNATURES
This report has been signed below by the following persons on behalf of the
issuer and in the capacities and on the dates indicated.
By: \s\ JAMES EDWARD BANKS, JR.
ASSISTANT SECRETARY
Date: MAY 21, 1997
<PAGE>
[MORRISON & FOERSTER LLP LETTERHEAD]
May 19, 1997
Nations Fund, Inc.
111 Center Street
Little Rock, Arkansas 72201
Re: Issuance and Sale of Shares of Nations Fund, Inc.;
Registration on Form N-1A Pursuant to Rule 24f-2
Ladies and Gentlemen:
Nations Fund, Inc. (the "Company") has requested our opinion in connection
with the sale or issuance by the Company of 22,920,672,720 shares of common
stock (the "Shares"), in the aggregate, of all classes of Shares of all
portfolios of the Company (collectively, the "Funds").
We have examined documents relating to the organization of the Company and
the authorization for registration and sale of Shares of each of the Funds. The
opinion given below only relates to the law of the State of Maryland, the state
of incorporation of the Company, and is subject to the condition that the
Company is in compliance with the provisions of any applicable laws, regulations
and permits of any state or foreign country in which any Shares of any of the
Funds are sold.
Based upon and subject to the foregoing, we are of the opinion that:
The issuance and sale of the Shares by the Company have been duly and
validly authorized by all appropriate action and, assuming delivery by sale or
in accord with the Funds' dividend reinvestment plan was in accordance with the
description set forth in the Company's current prospectuses under the Securities
Act of 1933, the Shares have been legally issued, fully paid and are
non-assessable.
We consent to the submission of a copy of this opinion to the Securities
and Exchange Commission in connection with the filing of the Company's Rule
24f-2 Notice under the Investment Company Act of 1940, as amended.
Very truly yours,
/S/ MORRISON & FOERSTER LLP
MORRISON & FOERSTER LLP
PROXY CARD
EMERALD FUNDS
EMERALD INTERNATIONAL EQUITY FUND
Special Meeting of Shareholders -- May 4, 1998
The undersigned hereby appoints Martin R. Dean and Hugh J. Fanning
(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 Emerald Funds ("Emerald")
to be held at the offices of Emerald, 3435 Stelzer Road, Columbus, Ohio 43219,
at 10:00 a.m. (Eastern time), on Monday, May 4, 1998, and at any adjournment or
adjournments thereof. The proxies will cast votes according to the number of
shares of the Emerald 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 MARCH 30,
1998.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF EMERALD, WHICH UNANIMOUSLY
RECOMMENDS THAT YOU VOTE IN FAVOR OF BOTH PROPOSALS. YOU MAY VOTE BY FAXING THE
PROXY BALLOT TO A.D.P. PROXY SERVICES AT (____) __________ OR BY MAILING IT IN
THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE
YOUR PROXY CARD.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSALS. PROXIES RETURNED WITHOUT ANY SPECIFICATION
WILL BE VOTED IN FAVOR OF THE PROPOSALS.
(1) To ratify and approve an interim investment advisory agreement with
Barnett Capital Advisors, Inc., and an interim investment sub-advisory
agreement with Brandes Investment Partners L.P., for the period from
January 9, 1998 forward.
|_|YES |_|NO |_|ABSTAIN
(2) To approve an Agreement and Plan of Reorganization, attached to the
Combined Proxy Statement/Prospectus for the Meeting, that provides for
the transfer of all of the assets and liabilities of the Fund to a
corresponding fund of Nations Fund Trust in exchange for shares of a
designated class of such Nations fund, and which contemplates the
reorganization of Emerald.
|_|YES |_|NO |_|ABSTAIN
THESE PROPOSALS HAVE BEEN PROPOSED BY EMERALD.
<PAGE>
In their discretion, the Proxies, and either of them, are authorized
to vote upon any other business that may properly come before the meeting, or
any adjournment(s) thereof, including any adjournment(s) necessary to obtain
requisite quorums and/or approvals.
_____________________________
_____________________________, 1998
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
EMERALD FUNDS
EMERALD PRIME FUND
Special Meeting of Shareholders -- May 4, 1998
The undersigned hereby appoints Martin R. Dean and Hugh J. Fanning (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 Emerald Funds ("Emerald")
to be held at the offices of Emerald, 3435 Stelzer Road, Columbus, Ohio 43219,
at 10:00 a.m. (Eastern time), on Monday, May 4, 1998, and at any adjournment or
adjournments thereof. The proxies will cast votes according to the number of
shares of the Emerald Prime 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 MARCH 30,
1998.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF EMERALD, WHICH UNANIMOUSLY
RECOMMENDS THAT YOU VOTE IN FAVOR OF BOTH PROPOSALS. YOU MAY VOTE BY FAXING THE
PROXY BALLOT TO A.D.P. PROXY SERVICES AT (____) __________ OR BY MAILING IT IN
THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE
YOUR PROXY CARD.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSALS. PROXIES RETURNED WITHOUT ANY SPECIFICATION
WILL BE VOTED IN FAVOR OF THE PROPOSALS.
(1) To ratify and approve an interim investment advisory agreement with
Barnett Capital Advisors, Inc., for the period from January 9, 1998
forward.
|_|YES |_|NO |_|ABSTAIN
(2) To approve an Agreement and Plan of Reorganization, attached to the
Combined Proxy Statement/Prospectus for the Meeting, that provides for
the transfer of all of the assets and liabilities of the Fund to a
corresponding fund of Nations Fund Trust in exchange for shares of a
designated class of such Nations fund, and which contemplates the
reorganization of Emerald.
|_|YES |_|NO |_|ABSTAIN
THESE PROPOSALS HAVE BEEN PROPOSED BY EMERALD.
<PAGE>
In their discretion, the Proxies, and either of them, are authorized
to vote upon any other business that may properly come before the meeting, or
any adjournment(s) thereof, including any adjournment(s) necessary to obtain
requisite quorums and/or approvals.
_____________________________
_____________________________, 1998
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
EMERALD FUNDS
EMERALD TREASURY FUND
Special Meeting of Shareholders -- May 4, 1998
The undersigned hereby appoints Martin R. Dean and Hugh J. Fanning (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 Emerald Funds ("Emerald")
to be held at the offices of Emerald, 3435 Stelzer Road, Columbus, Ohio 43219,
at 10:00 a.m. (Eastern time), on Monday, May 4, 1998, and at any adjournment or
adjournments thereof. The proxies will cast votes according to the number of
shares of the Emerald Treasury 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 MARCH 30,
1998.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF EMERALD, WHICH UNANIMOUSLY
RECOMMENDS THAT YOU VOTE IN FAVOR OF BOTH PROPOSALS. YOU MAY VOTE BY FAXING THE
PROXY BALLOT TO A.D.P. PROXY SERVICES AT (____) __________ OR BY MAILING IT IN
THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE
YOUR PROXY CARD.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSALS. PROXIES RETURNED WITHOUT ANY SPECIFICATION
WILL BE VOTED IN FAVOR OF THE PROPOSALS.
(1) To ratify and approve an interim investment advisory agreement with
Barnett Capital Advisors, Inc., for the period from January 9, 1998
forward.
|_|YES |_|NO |_|ABSTAIN
(2) To approve an Agreement and Plan of Reorganization, attached to the
Combined Proxy Statement/Prospectus for the Meeting, that provides for
the transfer of all of the assets and liabilities of the Fund to a
corresponding fund of Nations Fund Trust in exchange for shares of a
designated class of such Nations fund, and which contemplates the
reorganization of Emerald.
|_|YES |_|NO |_|ABSTAIN
THESE PROPOSALS HAVE BEEN PROPOSED BY EMERALD.
<PAGE>
In their discretion, the Proxies, and either of them, are authorized
to vote upon any other business that may properly come before the meeting, or
any adjournment(s) thereof, including any adjournment(s) necessary to obtain
requisite quorums and/or approvals.
_____________________________
_____________________________, 1998
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
EMERALD FUNDS
EMERALD U.S. GOVERNMENT SECURITIES FUND
Special Meeting of Shareholders -- May 4, 1998
The undersigned hereby appoints Martin R. Dean and Hugh J. Fanning (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 Emerald Funds ("Emerald")
to be held at the offices of Emerald, 3435 Stelzer Road, Columbus, Ohio 43219,
at 10:00 a.m. (Eastern time), on Monday, May 4, 1998, and at any adjournment or
adjournments thereof. The proxies will cast votes according to the number of
shares of the Emerald 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 MARCH 30,
1998.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF EMERALD, WHICH UNANIMOUSLY
RECOMMENDS THAT YOU VOTE IN FAVOR OF BOTH PROPOSALS. YOU MAY VOTE BY FAXING THE
PROXY BALLOT TO A.D.P. PROXY SERVICES AT (____) __________ OR BY MAILING IT IN
THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE
YOUR PROXY CARD.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSALS. PROXIES RETURNED WITHOUT ANY SPECIFICATION
WILL BE VOTED IN FAVOR OF THE PROPOSALS.
(1) To ratify and approve an interim investment advisory agreement with
Barnett Capital Advisors, Inc., for the period from January 9, 1998
forward.
|_|YES |_|NO |_|ABSTAIN
(2) To approve an Agreement and Plan of Reorganization, attached to the
Combined Proxy Statement/Prospectus for the Meeting, that provides for
the transfer of all of the assets and liabilities of the Fund to a
corresponding fund of Nations Fund Trust in exchange for shares of a
designated class of such Nations fund, and which contemplates the
reorganization of Emerald.
|_|YES |_|NO |_|ABSTAIN
THESE PROPOSALS HAVE BEEN PROPOSED BY EMERALD.
<PAGE>
In their discretion, the Proxies, and either of them, are authorized
to vote upon any other business that may properly come before the meeting, or
any adjournment(s) thereof, including any adjournment(s) necessary to obtain
requisite quorums and/or approvals.
_____________________________
_____________________________, 1998
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
EMERALD FUNDS
EMERALD SMALL CAPITALIZATION FUND
Special Meeting of Shareholders -- May 4, 1998
The undersigned hereby appoints Martin R. Dean and Hugh J. Fanning (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 Emerald Funds ("Emerald")
to be held at the offices of Emerald, 3435 Stelzer Road, Columbus, Ohio 43219,
at 10:00 a.m. (Eastern time), on Monday, May 4, 1998, and at any adjournment or
adjournments thereof. The proxies will cast votes according to the number of
shares of the Emerald Small Capitalization 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 MARCH 30,
1998.
THIS PROXY IS SOLICITED BY THE BOARD OF TRUSTEES OF EMERALD, WHICH UNANIMOUSLY
RECOMMENDS THAT YOU VOTE IN FAVOR OF BOTH PROPOSALS. YOU MAY VOTE BY FAXING THE
PROXY BALLOT TO A.D.P. PROXY SERVICES AT (____) __________ OR BY MAILING IT IN
THE ENCLOSED POSTAGE PAID ENVELOPE. PLEASE MAKE SURE YOU MARK, SIGN AND DATE
YOUR PROXY CARD.
THIS PROXY WILL BE VOTED AS SPECIFIED BELOW WITH RESPECT TO THE ACTION TO BE
TAKEN ON THE FOLLOWING PROPOSALS. PROXIES RETURNED WITHOUT ANY SPECIFICATION
WILL BE VOTED IN FAVOR OF THE PROPOSALS.
(1) To ratify and approve an interim investment advisory agreement with
Barnett Capital Advisors, Inc., for the period from January 9, 1998
forward.
|_|YES |_|NO |_|ABSTAIN
(2) To approve an Agreement and Plan of Reorganization, attached to the
Combined Proxy Statement/Prospectus for the Meeting, that provides for
the transfer of all of the assets and liabilities of the Fund to a
corresponding fund of Nations Fund Trust in exchange for shares of a
designated class of such Nations fund, and which contemplates the
reorganization of Emerald.
|_|YES |_|NO |_|ABSTAIN
THESE PROPOSALS HAVE BEEN PROPOSED BY EMERALD.
<PAGE>
In their discretion, the Proxies, and either of them, are authorized
to vote upon any other business that may properly come before the meeting, or
any adjournment(s) thereof, including any adjournment(s) necessary to obtain
requisite quorums and/or approvals.
_____________________________
_____________________________, 1998
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)
