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.
EMERALD FUNDS ("EMERALD")
From Post-Effective Amendment No. 23 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 April
1, 1997, as supplemented, and redated March 25, 1998.
Prospectuses for the Institutional, Retail and Service Shares of the
Emerald Prime Fund and Emerald Treasury Fund, dated April 1,
1997, as supplemented, and redated March 25, 1998.
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, as supplemented, and redated March 25, 1998.
Statement of Additional Information for the Institutional, Retail and
Service Shares of the Emerald Prime Fund and Emerald Treasury Fund,
dated April 1, 1997, as supplemented, and redated March 25, 1998.
<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 43219-3035
March 25, 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 Emerald and Barnett Capital Advisors, Inc. ("Barnett Capital") for
the period from January 9, 1998 forward (an "Interim Advisory Agreement"),
and, with respect to the Emerald International Equity Fund, to ratify and
approve an interim investment sub-advisory agreement between Barnett
Capital and 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. ("Barnett") recently
merged into a wholly-owned subsidiary of NationsBank Corporation
("NationsBank"). As a result of the merger, Barnett Capital, the investment
adviser to the Emerald Funds, became an indirect wholly-owned subsidiary of
NationsBank. This merger may have caused the Emerald Funds' then current
investment advisory agreements with Barnett Capital and, with respect to the
Emerald International Equity Fund, the then current investment sub-advisory
agreement with Brandes, to terminate automatically. To avoid any potential
disruption in the advisory and sub-advisory services provided to the Emerald
Funds as a result of these potential automatic terminations, the Board of
Trustees of Emerald approved two separate Interim Advisory Agreements with
Barnett Capital and an Interim Sub-Advisory Agreement with Brandes (relevant to
Emerald International Equity Fund shareholders only). The terms and conditions
of each Interim Advisory Agreement and the Interim Sub-Advisory Agreement
(including fee rates) are identical to those of the prior investment advisory
and sub-advisory agreements, except for the effective dates, termination dates,
and certain fee escrow provisions.
At the upcoming Meeting, you also will be asked to approve a
reorganization of your Emerald Fund into a corresponding Nations Fund. 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 in May 1998 when your Emerald Funds portfolio shares will be
exchanged for shares of the corresponding Nations Funds portfolio of equal
value.
EMERALD'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT YOU VOTE TO
APPROVE AN INTERIM ADVISORY AGREEMENT, THE INTERIM SUB-ADVISORY AGREEMENT (WITH
RESPECT TO EMERALD INTERNATIONAL EQUITY SHAREHOLDERS ONLY) 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 those funds. Each
Emerald Fund shareholder is voting on a reorganization agreement that
contemplates the reorganization of that shareholder's Fund into a corresponding
Nations Fund, and also contemplates the reorganization of Emerald as a whole.
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.
EMPROXY-NFI
<PAGE>
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.
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 Fund
shares that you held immediately before the reorganization. The reorganization
will be tax-free under federal law, and no front-end or contingent deferred
sales load will be charged in connection with the exchange of Emerald Fund
shares for Nations Fund shares.
o Operating Expense Ratios
The annual fund operating expense ratio (after voluntary waivers) for the
corresponding Nations Fund classes after the reorganization is expected, in
most, but not all, cases to be no higher than the annual fund operating
expense ratio of your Emerald Fund class. However, in some instances, with
respect to certain classes of shares, the annual fund operating expense ratio
(after voluntary waivers) for the corresponding Nations Fund classes is
expected to be higher after the reorganization than the annual fund operating
expense ratio of your Emerald Fund class. Please see the enclosed materials
for further detail.
The proposed reorganization is expected to benefit Emerald Funds shareholders
by:
o providing continuity of investment management services by affiliates of
NationsBank, Barnett's successor;
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.
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 (904) 519-8466.
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 TELEFACSIMILE AT (904) 519-8466.
The interim advisory and sub-advisory arrangements with Barnett Capital
and Brandes, the proposed reorganization and the reasons for the Emerald
Board's unanimous recommendations are discussed in detail in the enclosed
materials, which you should read carefully. If you have any questions about the
reorganization, please do not hesitate to call toll free at 1-800-422-2710.
We look forward to seeing you at the Meeting or receiving your proxy so
that your shares may be voted at the Meeting.
Sincerely,
MARSHALL M. CRISER
Chairman of the Board of Trustees
<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 Emerald and Barnett Capital Advisors, Inc.
("Barnett Capital"), 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 from 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 also 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 12, 1998 are
entitled to notice of, and to vote at, the Meeting or any adjournment(s)
thereof.
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY CARD, WHICH IS BEING SOLICITED BY THE
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 25, 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
1-888-422-2710
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 (the
"Interim Advisory Agreements") between Emerald and Barnett Capital
Advisors, Inc. ("Barnett Capital") 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") between Barnett Capital and 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 March 25, 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 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:
1
<PAGE>
TABLE I
<TABLE>
<CAPTION>
Emerald Fund/Share Class Corresponding Nations Fund/Share Class
- ------------------------------------------------ ---------------------------------------
<S> <C>
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
</TABLE>
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 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 and
redated March 25, 1998, for the Emerald Funds. Each of these documents, along
with the most recent annual and semi-annual reports 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 the Nations International Value Fund), dated August 1, 1997 and in 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 the
corresponding Nations Fund accompanies this Proxy/Prospectus.
The following summarizes the proposals to be voted on by Emerald Fund
shareholders at the Meeting:
<TABLE>
<CAPTION>
Proposal Shareholders Solicited
- ------------------------------------------------------ ----------------------------------------------------------
<S> <C>
1. To ratify and approve Interim Advisory Shareholders of each Emerald Fund voting separately on
Agreements and, with respect to the International the Interim Advisory Agreement that applies to that Fund,
Equity Fund only, an Interim Sub-Advisory and shareholders of the Emerald International Equity
Agreement, for the period from January 9, 1998 Fund voting separately on the Interim Sub-Advisory
forward. Agreement.
2. To approve a Reorganization Agreement, which Each Emerald Fund voting separately on the
provides for the transfer of the Fund Assets and Reorganization Agreement and, with respect to the
Liabilities of the Emerald Funds to corresponding reorganization of Emerald, shareholders of all series of
Nations Funds in 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.
</TABLE>
This Proxy/Prospectus is expected to be first sent to shareholders on or
about March 30, 1998.
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
2
<PAGE>
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.
3
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
FEE TABLES ............................................................................ 6
SUMMARY ............................................................................... 6
PROPOSAL 1 -- APPROVAL OF THE INTERIM AGREEMENTS ..................................... 6
Interim Agreements ................................................................. 6
Emerald Board Consideration ........................................................ 7
PROPOSAL 2 -- APPROVAL OF THE REORGANIZATION AGREEMENT ............................... 7
Proposed Reorganization ............................................................ 7
Overview of Emerald and Nations .................................................... 7
Federal Income Tax Consequences .................................................... 8
Nations and Emerald Board Consideration ............................................ 8
Principal Risk Factors ............................................................. 8
Voting Information ................................................................. 9
Management Discussion and Analysis ................................................. 9
INFORMATION RELATING TO PROPOSAL 1 -- APPROVAL OF THE INTERIM AGREEMENTS ............. 9
The Merger of Barnett Banks, Inc. into NB Holdings Corporation ..................... 9
The Interim Advisory Agreements and Interim Sub-Advisory Agreement ................. 10
Information Regarding Barnett Capital and Brandes .................................. 12
Payments to Barnett Capital or Brandes Affiliates .................................. 13
Affiliated Broker Commissions ...................................................... 13
Approval of Emerald's Board of Trustees ............................................ 13
INFORMATION RELATING TO PROPOSAL 2 -- APPROVAL OF THE REORGANIZATION AGREEMENT ........ 15
Description of the Reorganization Agreement ........................................ 15
Emerald Board Consideration ........................................................ 16
Capitalization ..................................................................... 17
Federal Income Tax Considerations .................................................. 19
Other Information .................................................................. 20
COMPARISON OF EMERALD AND NATIONS ..................................................... 20
Investment Objectives and Policies ................................................. 20
Investment Advisers and Other Service Providers .................................... 20
Emerald Funds' Advisory and Sub-Advisory Agreements ................................ 21
Nations Funds' Advisory Agreements ................................................. 21
Other Service Providers for the Emerald Funds and Nations Funds .................... 23
Share Structure .................................................................... 23
Distribution Plan and Shareholder Servicing Arrangements for the Emerald Funds ..... 24
Distribution Plan and Shareholder Servicing Arrangements for the Nations Funds ..... 24
Administration Agreements .......................................................... 25
Shareholder Transactions and Services .............................................. 25
INFORMATION RELATING TO VOTING MATTERS ................................................ 26
General Information ................................................................ 26
Shareholder and Board Approvals .................................................... 26
Quorum ............................................................................. 30
Annual Meetings and Shareholder Meetings ........................................... 30
ADDITIONAL INFORMATION ABOUT NATIONS .................................................. 31
ADDITIONAL INFORMATION ABOUT EMERALD .................................................. 31
FINANCIAL STATEMENTS .................................................................. 31
OTHER BUSINESS ........................................................................ 32
SHAREHOLDER INQUIRIES ................................................................. 32
</TABLE>
4
<PAGE>
<TABLE>
<S> <C> <C>
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
VI MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE NATIONS FUNDS
</TABLE>
5
<PAGE>
FEE TABLES
Retail Class shareholders of all five Emerald Funds, along with Service
Class 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 projected to
experience lower annualized per share total operating expense ratios after the
Reorganization. Institutional Class shareholders of the Emerald International
Equity Fund and Emerald U.S. Government Securities Fund are projected to
experience higher annualized per share total operating expense ratios after the
Reorganization. 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, 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;
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 agreements with Emerald and, with
respect to the Emerald International Equity Fund, Brandes' investment
sub-advisory agreement with Barnett Capital, 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."
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 an Interim Advisory Agreement, 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
Agreements are identical to those under the corresponding former agreements.
Pending ratification and approval of the Interim Agreements, 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 for the relevant Fund and (for the
International Equity Fund) the Interim Sub-Advisory Agreement, 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 an Interim Agreement
for an Emerald Fund is 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.
6
<PAGE>
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.
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 by 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.
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 determined pursuant to the Reorganization
Agreement.
Overview of Emerald and Nations. The investment objective, policies and
restrictions of the Emerald International Equity Fund are substantially
identical to those of the corresponding Nations International Value Fund
because it is being created as a new "shell" fund to continue the business of
the Emerald International Equity Fund. 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, 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. In addition, while the Emerald U.S. Government Securities
Fund is limited to investing in U.S. Government obligations, the Nations
Government Securities Fund is permitted, under its investment policies, to
invest up to 35% of its assets in corporate debt obligations, dollar
denominated debt obligations of foreign issuers, and money market instruments
and mortgage-backed securities of private issuers. 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. Additionally,
while the Emerald Treasury Fund, Nations Treasury Fund may invest up to 25% of
its total assets in obligations that are issued by banks. 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. The Emerald
7
<PAGE>
Funds and Nations Funds have a different administrator, distributor, transfer
agent, independent auditor and accountants and different trustees/directors.
See "Comparison of Emerald and Nations -- Investment Advisers and Other Service
Providers."
Table III, under "Comparison of Emerald and Nations -- Investment Advisers
and Other Service Providers," shows the current annualized per share total
operating expense ratios for each class of each Emerald Fund 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 the
corresponding Nations Funds. As shown in Table III and Appendix III,
Institutional shareholders of the Emerald International Equity Fund and the
Emerald U.S. Government Securities Fund will experience an increase these in
total operating expense ratios (after voluntary waivers) as a result of the
reorganization. As shown in Appendix III, shareholders of the Emerald U.S.
Government Securities Fund will experience an increase in advisory fees (after
voluntary waivers), although a reduction in other fees for Retail Class
shareholders will mean a reduction in the total operating expense ratio for
that class.
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. Nations Prime Fund and
Nations Treasury Fund will each 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 load will be imposed on any of the shareholders of
Emerald Funds in connection with the Reorganization.
Federal Income Tax Consequences. The Reorganization is not expected to
result in the recognition, for federal income tax purposes, of gain or loss by
the 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 Board Consideration. In considering the Reorganization
Agreement, the Board of Directors 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 Trustees 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
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
8
<PAGE>
those of the corresponding Emerald Fund. These investment risks, in general,
are those typically 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 the 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.
The capitalization range of the companies whose stock is purchased by the
Nations Small Company Growth Fund is smaller than that of the companies whose
stock is purchased by the Emerald Small Capitalization Fund.
An investment in the 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 the 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. In addition, because the Nations Government
Securities Fund is permitted to invest a portion of its assets in corporate
debt and other non-U.S. Government obligations, it may be subject to credit
risks that Emerald U.S. Government Securities Fund is not subject to.
An investment in the Nations Prime Fund (and its corresponding Emerald
Prime Fund) and in the Nations Treasury Fund (and its corresponding Emerald
Treasury Fund) involve 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, unlike the Emerald
Treasury Fund, Nations Treasury Fund may invest up to 25% of its total assets
in obligations that are issued by banks. 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 none of these Funds are themselves
issued or guaranteed by the U.S. Government or any of its agencies.
Because the 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.
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 12, 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."
Management Discussion and Analysis. A discussion of NBAI's management of
the Nations Funds (except Nations International Value Fund, Nations Treasury
Fund and Nations Prime Fund) and an analysis of their performance can be found
at Appendix VI to this Proxy/Prospectus.
9
<PAGE>
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 prior investment advisory agreement with respect to the Emerald
International Equity Fund, Emerald Small Capitalization Fund and Emerald U.S.
Government Securities Fund, 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 Capital 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
Emerald Small Capitalization Fund and 0.40% of the average net assets of the
Emerald U.S. Government Securities Fund. For the fiscal year ended November 30,
1997, Barnett Capital received advisory fees 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 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 prior investment advisory agreement with respect to the Emerald Prime
Fund and Emerald Treasury Fund, 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 1940 Act as well as 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. The advisory fees
payable to Barnett Capital were not subject to reduction as the assets of the
Emerald Prime Fund and Emerald Treasury Fund increased. However, Barnett
Capital reduced its rate of advisory fees for each Fund to the following rates:
0.25% of the first $600 million of each Fund's net assets; 0.23% of each Fund's
net assets over $600 million but not exceeding $1 billion; 0.21% of the next $1
billion of each Fund's net assets; and 0.19% of each Fund's net assets over $2
billion. For the fiscal year ended November 30, 1997, Barnett Capital received
advisory fees (after waivers) at the effective annual rates of 0.22% and 0.24%
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 prior investment sub-advisory agreement with respect to the Emerald
International Equity Fund, 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 at the effective annual rate of 0.50% 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 during the Interim Period. In applying for the
Order, Barnett Capital 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.
10
<PAGE>
The Interim Advisory Agreements and Interim Sub-Advisory Agreement. The
terms and conditions of the Interim Advisory Agreements and Interim
Sub-Advisory Agreement are the same as those of the prior investment advisory
agreements between Emerald and Barnett Capital, and investment sub-advisory
agreement between Barnett Capital and Brandes, respectively, except for
provisions relating to (1) the effective date (January 9, 1998), (2) the
termination date (May 19, 1998 if the particular agreement is not approved by
shareholders or November 30, 1998 if the agreement is approved by shareholders)
and (3) certain escrow provisions, that are described above.
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 Emerald 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 Emerald 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 Emerald
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
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
11
<PAGE>
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 of Trustees 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 Barnett Capital'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 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 above, 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 March 12, 1998
were $127,826,813, $146,851,435 and $187,328,126, 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 0.10% 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
0.25% 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 0.15% 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 Fund's sub-adviser.
As of on March 12, 1998, Barnett Capital had approximately $11 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 March 12, 1998 were as follows: Jack A. Ablin,
Director, President and Chief Executive Officer; Holly D. Deem, Director;
Martin E. Galt, III, Director; and Richard S. Gershin, Director and Edward J.
Stark, Secretary; and Jill B. Stewart, Treasurer. 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 March 12, 1998, had net assets equal to $112,642,942, $272,553,205
and $7,332,045, 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 1.00% of the average net assets
of the fund.
12
<PAGE>
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 ("Northstar"). 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 March 12, 1998, Brandes had approximately $18 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, Emerald'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.
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.
<TABLE>
<CAPTION>
Shareholder
Emerald Fund Distribution Fees Servicing Fees
- ----------------------------------------- ------------------- ---------------
<S> <C> <C>
International Equity Fund ...... 5,110 5,110
Prime Fund ..................... 1,431,752 5,114,171
Small Capitalization Fund ...... 25,290 27,714
Treasury Fund .................. 170,835 2,050,888
U.S. Government Securities Fund 51,022 54,946
</TABLE>
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
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 Agreement, 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 Agreements, all fees payable to
Barnett Capital and Brandes under the Interim Agreements are being held in
escrow. These escrowed fees will be received by Barnett Capital and Brandes
only if the respective Interim 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 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
13
<PAGE>
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 Agreements
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, the Emerald International Equity Fund will vote
separately. EMERALD'S BOARD OF TRUSTEES UNANIMOUSLY RECOMMENDS THAT EACH
EMERALD FUND'S SHAREHOLDERS RATIFY AND APPROVE AN INTERIM ADVISORY AGREEMENT,
AND THAT SHAREHOLDERS OF THE EMERALD INTERNATIONAL EQUITY FUND RATIFY AND
APPROVE THE INTERIM SUB-ADVISORY AGREEMENT, FOR THE PERIOD COMMENCING JANUARY
9, 1998.
14
<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 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 the reorganizations contemplated thereon 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.
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 and accountants of Emerald and
Nations, respectively, regarding various financial matters; the receipt of any
necessary exemptive relief or no-action assurances requested from the SEC or
its Staff with respect to Section 17(a) and 17(d) of the 1940 Act and Rule
17d-1 thereunder; and the parties' performance in all material respects of
their respective covenants and undertakings in the Reorganization Agreement.
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 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.
15
<PAGE>
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 Funds Family 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 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 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 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 that NBAI would assume all ordinary
expenses associated with the Reorganization. With respect to each Nations Fund,
Emerald's Trustees further noted that the per share annualized total 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. As shown in Appendix III,
after voluntary waivers and reimbursements, the pro forma post-Reorganization
per share total operating expense ratio for Primary A Shares of the Nations
International Value Fund is expected to be 0.10% higher than the comparable
ratio for Institutional Shares of the Emerald International Equity Fund, and
the pro forma post-Reorganization per share total operating expense ratio for
Primary A Shares of Nations Government Securities Fund is expected to be 0.16%
higher than the comparable ratio for Institutional Shares of the Emerald U.S.
Government Securities Fund. In considering the anticipated higher per share
expense ratios for these share classes, the Trustees reviewed the information
referred to above relating to the reasonableness of the investment advisory
fees and other expenses paid by the Nations Funds. The Trustees also considered
the benefits that were expected to result from the Reorganization, including
the continuity of investment management services after the Reorganization by
affiliates of NationsBank, Barnett's successor. In this regard, the Trustees
noted that the Funds were an integral part of other trust and institutional
services provided by NationsBank and its affiliates to their customers who have
invested in the Funds.
After consideration of the foregoing and other factors, the Emerald
Trustees unanimously determined that the 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.
16
<PAGE>
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(s) 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(s).
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
the Nations International Value Fund.
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Total Net Assets Shares Outstanding Per Share
------------------ -------------------- -------------------
<S> <C> <C> <C>
Emerald International Equity Fund ......... $ 4,259,331 324,510 $ 13.13
(Retail) (Retail) (Retail)
54,277,291 4,122,281 $ 13.17
(Institutional) (Institutional) (Institutional)
Nations International Value Fund .......... N/A N/A N/A
(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)
</TABLE>
2. The table below reflects current and pro forma capitalization
information for the combination of the Emerald Prime Fund with the Nations
Prime Fund.
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Total Net Assets Shares Outstanding Per Share
------------------ -------------------- -------------------
<S> <C> <C> <C>
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)
</TABLE>
17
<PAGE>
3. The table below reflects current and pro forma capitalization
information for the combination of the Emerald Small Capitalization Fund with
the Nations Small Company Growth Fund.
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Total Net Assets Shares Outstanding Per Share
------------------ -------------------- -------------------
<S> <C> <C> <C>
Emerald Small Capitalization Fund ......... $ 14,062,510 1,096,636 $ 12.82
(Retail) (Retail) (Retail)
$ 163,096,145 12,566,576 $ 12.98
(Institutional) (Institutional) (Institutional)
Nations Small Company Growth Fund ......... $ 5,836,036 430,592 $ 13.55
(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 21,650,578 $ 13.60
(Institutional/ (Institutional/ (Institutional/
Primary A) Primary A) Primary A)
</TABLE>
4. The table below reflects current and pro forma capitalization
information for the combination of the Emerald Treasury Fund with the Nations
Treasury Fund.
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Total Net Assets Shares Outstanding Per Share
------------------ -------------------- -------------------
<S> <C> <C> <C>
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 ......... $ 255,166,758 255,214,272 $ 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)
</TABLE>
18
<PAGE>
5. The table below reflects current and pro forma capitalization
information for the combination of the Emerald U.S. Government Securities Fund
with the Nations Government Securities Fund.
<TABLE>
<CAPTION>
Net Asset Value
-------------------
Total Net Assets Shares Outstanding Per Share
------------------ -------------------- -------------------
<S> <C> <C> <C>
Emerald U.S. Government Securities Fund ..... $ 21,614,817 2,100,708 $ 10.29
(Retail) (Retail) (Retail)
$ 49,468,965 4,821,199 $ 10.26
(Institutional) (Institutional) (Institutional)
Nations Government Securities Fund .......... $ 11,411,643 1,160,651 $ 9.83
(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)
</TABLE>
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 Fund 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 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.
19
<PAGE>
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 advisers; the voting rights of shareholders and 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 Advisers 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 ratios of the Emerald Funds before and after fee
waivers and/or expense reimbursements and (ii) the pro forma annualized total
expense ratios 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.
20
<PAGE>
TABLE III
Total Expense Information
<TABLE>
<CAPTION>
Pro Forma
Total Total Total
Operating Operating Operating
Expenses Expenses Expenses
Emerald Fund Before/After Corresponding Before/After Combined Fund/Share Before/After
Share Class Waivers Nations Fund/Share Class Waivers Class Post-Reorganization 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%
Emerald Treasury Fund Nations Treasury Fund Nations Treasury Fund
Retail Shares 0.92%/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 1.11%/1.00%
Institutional Shares 0.59%/0.59% Primary A Shares 0.91%/0.77% Primary A Shares 0.86%/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
Directors, 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.
21
<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. Brandes will
serve as investment sub-adviser to Nations International Value Fund. For
services provided and expenses assumed by Brandes, NBAI will pay, out of the
fees it receives from the Nations Funds, fees to Brandes at the annual rate of
0.50% of the average daily net assets of Nations International Value 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 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.
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.
22
<PAGE>
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
<TABLE>
<CAPTION>
Emerald Funds Nations Funds
----------------------------------------- -----------------------------------------
<S> <C> <C>
Distributor Emerald Asset Management, Inc. Stephens Inc. ("Stephens")
Administrator BISYS Fund Services Limited Partnership Stephens
Co-Administrator Not Applicable First Data Investor Services Group, Inc.
("First Data")
Not Applicable NationsBanc Advisors, Inc.
Sub-Administrator
BISYS Fund Services, Inc. First Data
Transfer Agent
Not Applicable NationsBank of Texas N.A.
Sub-Transfer Agent
The Bank of New York NationsBank of Texas N.A.
Custodian
Not Applicable The Bank of New York
Sub-Custodian
KPMG Peat Marwick LLP Price Waterhouse LLP
Independent Auditors and
Independent Accountants,
respectively
</TABLE>
Emerald Asset Management Inc. and BISYS Fund Services Limited Partnership
("BISYS") maintain offices at 3435 Stelzer Road, Columbus, Ohio 43219. Stephens
Inc. maintains offices at 111 Center Street, Little Rock, Arkansas 72201 and
First 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 objective 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 addition, shares of the Emerald Funds may not be cumulatively
voted.
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 otherwise require more than a majority
vote There is no cumulative voting in the election of Directors 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 structures and distribution channels.
23
<PAGE>
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 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 include, but are not limited to: fees
paid to NBAI, NationsBank of Texas, BONY, Stephens and First Data; interest;
directors' 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. Information about the
dividend and distribution policies of both the Emerald Funds and Nations Funds
can be found in Appendix V.
Distribution Plan and Shareholder Servicing Arrangements for the Emerald
Funds. 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-l under the 1940 Act for the Retail Class shares.
Under this 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 the
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 Class shares.
All fees payable under the Combined Amended and Restated Distribution and
Service Plan and the Shareholder Processing Plan are borne by the holders of
the Emerald Funds' Retail Class shares.
The Emerald Funds also have adopted a Shareholder and Processing Services
Plan pursuant to which Service Class shares of the Emerald Prime Fund and
Emerald Treasury Fund are sold to institutional investors which enter into
service agreements with 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 Class shares in return for payment by a Fund which may not exceed 0.35%
(on an annualized basis) of the average daily net asset value of the Service
Class shares beneficially owned by their customers. Holders of the Emerald
Prime and Emerald Treasury Funds' Service Class 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 Class shares or Retail Class shares.
Distribution Plan and Shareholder Servicing Arrangements for the Nations
Funds. Shares of the Nations Funds are distributed by Stephens, a broker-dealer
registered with the SEC 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
24
<PAGE>
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.
In addition, the Nations Funds have adopted 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 are 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 adopted an Amended and
Restated Shareholder Servicing Plan ("Servicing Plan") with respect to the
Daily Shares of the Nations Treasury Fund and Nations Prime 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
Directors, 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 Treasury Fund and Nations Prime 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. Administrative services are provided to
the Nations Funds by Stephens and First Data as co-administrators 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-administrators) are
substantially similar.
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 Funds and Nations Funds, see Appendix V to this Proxy/Prospectus.
25
<PAGE>
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 (904) 519-8466. Any shareholder giving a proxy
may revoke it at any time before it is exercised by submitting to Emerald a
written notice of revocation or a subsequently executed proxy or by attending
the Meeting and voting in person.
Any expenses incurred as a result of hiring ADP Proxy Services or any
other proxy service provider will be borne by NBAI.
Only shareholders of record at the close of business on March 12, 1998
will be entitled to vote at the Meeting. On that date, the following Emerald
Shares were outstanding and entitled to be voted.
<TABLE>
<CAPTION>
Name of Emerald Fund and Class Shares Entitled to Vote
- --------------------------------------------------- ------------------------
<S> <C>
Emerald International Equity Fund --
Retail Shares ............................ 352,882
Institutional Shares ..................... 4,457,511
Total Shares ............................. 4,810,393
Emerald Prime Fund --
Retail Shares ............................ 645,380,600
Institutional Shares ..................... 492,507,958
Service Shares ........................... 1,184,274,877
Total Shares ............................. 2,322,163,435
Emerald Small Capitalization Fund --
Retail Shares ............................ 1,161,515
Institutional Shares ..................... 12,109,469
Total Shares ............................. 13,270,984
Emerald Treasury Fund --
Retail Shares ............................ 70,548,681
Institutional Shares ..................... 351,960,860
Service Shares ........................... 497,651,143
Total Shares ............................. 920,160,684
Emerald U.S. Government Securities Fund --
Retail Shares ............................ 1,955,636
Institutional Shares ..................... 4,984,914
Total Shares ............................. 6,940,550
</TABLE>
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 applicable
Interim Advisory Agreement 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 International Equity
Fund, approval of the Interim Sub-Advisory Agreement requires the approval of a
majority of the outstanding shares of that Emerald Fund voting separately. 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
26
<PAGE>
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 all 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 lesser 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." 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 Directors of Nations at a meeting held on January 16, 1998.
As of March 12, 1998, the officers and Trustees of Emerald as a group
owned less than 1% of any of the Emerald Funds. As of March 12, 1998, the
officers and Directors of Nations as a group owned less than 1% of any of the
Nations Funds. Table IV(A) shows the name, address and share ownership of each
person known to Emerald to have beneficial or record ownership with respect to
5% or more of a class of a Emerald Fund as of March 12, 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 12, 1998.
TABLE IV(A)
<TABLE>
<CAPTION>
Class; Amount of Percentage
Name and Shares Owned; Percentage Percentage of Fund
Emerald Fund Address Type of Ownership of Class of Fund Post-Closing
- -------------- ---------------------------------- -------------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Treasury Barnett Banks Trust Company NA Institutional: 96.41% 36.88% 8.76%
Funds Management 339,325,208 Shares;
Attn: Bill Lendzian Record Holder
P.O. Box 40200
Jacksonville, FL 32203-0200
Barnett Bank, N.A., Jacksonville Service: 95.30% 51.54% 12.25%
Attn: Carolyn Pries 474,268,000 Shares;
11th Floor, 0990001116 Record Holder
50 N. Laura Street
Jacksonville, FL 32202
National Financial Services Retail: 99.89% 7.66% 1.82%
Corporation for the Exclusive 70,467,931 Shares;
Benefit of Our Customers Record Holder
P.O. Box 3752
Church Street Station
New York, NY 10008-3752
</TABLE>
27
<PAGE>
<TABLE>
<CAPTION>
Class; Amount of Percentage
Name and Shares Owned; Percentage Percentage of Fund
Emerald Fund Address Type of Ownership of Class of Fund Post-Closing
- ---------------- ---------------------------------- -------------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Prime Barnett Banks Trust Company NA Institutional: 82.34% 17.46% 5.04%
Funds Management 405,540,791 Shares;
Attn: Bill Lendzian Record Holder
P.O. Box 40200
Jacksonville, FL 32203-0200
Wilmington Trust Company Institutional: 16.67% 3.54% 1.02%
Attn: Walt Farnkopf 82,115,027 Shares;
Mutual Funds Record Holder
1100 North Market Street
Wilmington, DE 19890-0001
Barnett Bank, N.A., Jacksonville Service: 95.02% 48.46% 13.98%
Attn: Carolyn Pries 1,125,297,000
11th Floor, 0990001116 Shares;
50 N. Laura Street Record Holder
Jacksonville, FL 32202
National Financial Services Retail: 99.39% 27.62% 7.97%
Corporation for the Exclusive 641,447,799 Shares:
Benefit of Our Customers Record Holder
P.O. Box 3752
Church Street Station
New York, NY 10008-3752
Small BBTC N.A. Institutional: 34.74% 31.70% 13.89%
Capitalization Agnt Retirmt Pl & Tr of BBI & 4,207,175 Shares;
Affiliates Record Holder
Attn: Income Collections
P.O. Box 40200
Jacksonville, FL 32203-0200
Barnett Bank N.A. Institutional: 9.34% 8.52% 3.73%
Trst Barnett Employees Savings 1,130,452 Shares;
& Thrift Plan Record Holder
P.O. Box 40200
Jacksonville, FL 32203-0200
Wendel & Co. Retail: 16.17% 1.42% .61%
c/o Bank of New York Mutual FD 187,873 Shares;
Reorg Dpt. Record Holder
P.O. Box 1066 Wall Street Station
New York, NY 10268
Mountain Star Partners Retail: 6.87% 0.60% .26%
Limited Partnership 79,759 Shares;
c/o Telluride Management Corp. Record Holder
P.O. Box 5430
Incline Village, NV 89450-5430
U. S. BBTC N.A. Institutional: 5.16% 3.71% .78%
Government Trst Conveyors & Drive Inc. 257,468 Shares;
Securities Attn: Income Collections Record Holder
P.O. Box 40200
Jacksonville, FL 32203-0200
</TABLE>
28
<PAGE>
TABLE IV(B)
<TABLE>
<CAPTION>
Class; Amount of Percentage
Name and Shares Owned; Percentage Percentage of Fund
Nations Fund Address Type of Ownership of Class of Fund Post-Closing
- --------------- ------------------------------ ------------------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Prime NationsBank of Texas NA Primary A: 90.83% 48.12% 34.24%
Attn: Adrian Castillo 2,756,998,934.87
1401 Elm Street 11th Floor Shares;
Dallas, TX 75202-2911 Record Holder
National Financial for the Investor A: 7.40% 2.17% 1.55%
Exclusive Benefit of our 124,573,495.37
Customers Shares;
200 Liberty St Record Holder
1 World Financial Ctr
Attn Mutual Funds 5th Flr
New York, NY 10281
National Financial for the Daily Shares: 30.51% .45% .32%
Exclusive Benefit of our 25,508,499.60 Shares;
Customers Record Holder
200 Liberty St
1 World Financial Ctr
Attn Mutual Funds 5th Flr
New York, NY 10281
Standard Iron & Metal Co. Daily Shares: 9.48% .14% 0.00%
P.O. Box 302 7,928,825.98 Shares;
Oklahoma City, OK 73101-0302 Record Holder
Treasury NationsBank of Texas NA Primary A: 98.79% 21.65% 16.50%
Attn: Adrian Castillo 639,056,838.62 Shares;
1401 Elm Street 11th Floor Record Holder
Dallas, TX 75202-2911
Hare & Co., Bank of New York Investor A: 91.69% 48.60% 37.05%
Attn: Stif/Master Note 1,434,698,478.96
One Wall Street 2nd Fl Shares;
New York, NY 10286 Record Holder
NationsBank SWP Disbursement Daily Shares: 9.78% .59% .45%
Inc 17,400,000 Shares;
NationsBank Sweep/Autoborrow Record Holder
First Citizens Bldg
128 S. Tryon St NC1-006-08-03
Charlotte, NC 28255
Small Company NationsBank of Texas NA Primary A: 90.23% 85.39% 48.02%
Growth Attn: Adrian Castillo 13,451,632.102 Shares;
1401 Elm Street 11th Floor Record Holder
Dallas, TX 75202-2911
Janice C Moment Investor A: 5.77% .16% 0.00%
RR#3 5 Aero Place 24,919.541 Shares;
Urbana, IL 61801-9500 Record Holder
</TABLE>
29
<PAGE>
<TABLE>
<CAPTION>
Class; Amount of Percentage
Name and Shares Owned; Percentage Percentage of Fund
Nations Fund Address Type of Ownership of Class of Fund Post-Closing
- -------------- ---------------------------- -------------------- ------------ ------------ -------------
<S> <C> <C> <C> <C> <C>
Government NationsBank of Texas NA Priamary A: 99.81% 64.25% 23.28%
Securities Attn: Adrian Castillo 7,659,276.728
1401 Elm Street 11th Floor Shares;
Dallas, TX 75202-2911 Record Holder
Dodson Brothers Investor A: 16.63% 1.23% .45%
Exterminating Co Inc 146,459.493 Shares;
Attn: H P Dawson Record Holder
P.O. Box 10249
Lynchburg, VA 24506
Bankers Trust Co Cust FBO Investor A: 7.49% .55% .20%
Dimensions Health Corp 65,981.494 Shares;
9200 Basil Court Suite 500 Record Holder
Landover, MD 20745
</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 instructions from underlying beneficial holders; or by
one or more independent fiduciaries. In certain cases, NationsBank and its
affiliates may have the power to vote, as record holder of Emerald Fund shares,
50% or more of the outstanding shares of an Emerald Fund.
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 present and
voting 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 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 nor Emerald
presently intends to hold annual meetings of shareholders for the election of
directors/trustees and other business unless otherwise required by the 1940
Act. Under certain circumstances, however, holders of at least 10% of the
outstanding shares of either Emerald or Nations have the right to call a
meeting of shareholders.
30
<PAGE>
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 cover 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
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 and redated March 25, 1998, 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 cover
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 financial highlights 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.
The annual financial statements and financial highlights of the Nations
Funds which have been audited by Price Waterhouse LLP, independent accountants,
as stated in their reports thereon, also are 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 firm 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 statement of additional information in reliance upon the
reports of KPMG Peat Marwick LLP, independent auditors, which have also been
incorporated by reference herein, and upon the authority of such firm as
experts in accounting and auditing.
31
<PAGE>
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
instructions 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
32
<PAGE>
APPENDIX I
INTERIM INVESTMENT ADVISORY AGREEMENTS AND
INTERIM SUB-ADVISORY AGREEMENT
I-1
<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.
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.
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
I-2
<PAGE>
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.
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 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
I-3
<PAGE>
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.
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.
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
I-4
<PAGE>
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.)
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.
I-5
<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]
Attest: BARNETT CAPITAL ADVISORS, INC.
By /s/ JACK A. ABLIN
- --------------------------------------- ----------------------
[Seal]
I-6
<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 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,
I-7
<PAGE>
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;
(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 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.
I-8
<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 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.
I-9
<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.
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,
I-10
<PAGE>
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.)
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]
Attest: BARNETT CAPITAL ADVISORS, INC.
By /s/ JACK A. ABLIN
- --------------------------------------- ------------------
[Seal]
I-11
<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 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.
I-12
<PAGE>
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;
(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, 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.
I-13
<PAGE>
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, 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.
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
I-14
<PAGE>
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 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
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Title: Managing Partner
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APPENDIX II
AGREEMENT AND PLAN OF REORGANIZATION
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AGREEMENT AND PLAN OF REORGANIZATION
THIS AGREEMENT AND PLAN OF REORGANIZATION (this "Agreement") is made as of
this 25th day of March, 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 the Liabilities (as
defined in paragraph 1.3) of each corresponding Acquired Fund, and that such
Acquiring Fund Shares be distributed immediately after the Closing(s), as
defined in this Agreement, by each Acquired Fund to its shareholders in
liquidation of each Acquired Fund. The parties intend that 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 plan of reorganization for
each Acquired Fund within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code").
In consideration of the promises and of the covenants and agreements
hereinafter set forth, the parties hereto, intending to be legally bound
hereby, covenant and agree as follows:
1. REORGANIZATION OF ACQUIRED FUNDS
1.1. Subject to the terms and conditions herein set forth, and on the
basis of the representations and warranties contained herein, each Acquired
Fund shall assign, deliver and otherwise transfer its assets as set forth in
paragraph 1.2.a (the "Fund Assets") to its corresponding Acquiring Fund
identified in Schedule A, and such corresponding Acquiring Fund shall, as
consideration therefor, on the Closing Date (as defined in paragraph 3.1), (i)
deliver to each corresponding Acquired Fund the full and fractional number of
shares of each of its share classes calculated by dividing the value of the
Fund Assets less the Liabilities of the corresponding Acquired Fund that are so
conveyed and are attributable to each of the Acquiring Fund's respective share
classes set forth in Schedule A, computed in the manner and as of the time and
date set forth in this Agreement, by the net asset value of one Acquiring Fund
share of the particular share class that is to be delivered with respect
thereto, computed in the manner and as of the time and date set forth in this
Agreement; and (ii) assume all of such Acquired Fund's Liabilities. 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 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
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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 and obligations of the corresponding Acquired Fund,
accrued, absolute, contingent or otherwise existing, as of the Closing Date,
which liabilities and obligations shall include any obligation of the 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"). Without limiting the foregoing, each Acquired Fund
agrees that all rights to indemnification and all limitations of liability
existing in favor of the Emerald Funds' current and former Trustees and
officers, acting in their capacities as such, under Emerald Funds' Agreement
and Declaration of Trust as in effect as of the date of this Agreement shall
survive the Reorganization and shall continue in full force and effect, without
any amendment thereto, and shall constitute rights which may be asserted
against the Acquired Funds. 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 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. Subject to the conditions set forth in this Agreement, the failure of
one Acquired Fund to consummate the transactions contemplated hereby shall not
affect the consummation or validity of a Reorganization with respect to any
other Acquired Fund, and the provisions of this Agreement shall be construed to
effect this intent, including, without limitation, as the context requires,
construing the terms "Acquiring Fund" and "Acquired Fund" as meaning only those
series of Nations Fund and Emerald Funds, respectively, which are involved in a
Reorganization as of a Closing Date.
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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
Fund), either party shall have the right to postpone the Applicable Valuation
Date and Closing Date with respect to the 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) with respect to all
Acquiring Funds and their corresponding Acquired Funds, except Nations
International Value Fund and its corresponding Acquired Fund, 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"). With respect
to Nations International Value Fund and its corresponding Acquired Fund, the
Closing Date shall occur on May 22, 1998, and/or on such other date(s) as may
be mutually agreed upon in writing by the officers of the parties hereto. 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.
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
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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 has called or will call a meeting: (a) of Acquired Fund
shareholders to consider and act upon this Agreement, and to take such other
actions reasonably necessary to obtain the approval of the transactions
contemplated herein, including approval for each Acquired Fund's liquidating
distribution of the Acquiring Fund Shares contemplated hereby, and for Emerald
Funds to terminate each Acquired Fund's qualification, classification and
registration if requisite approvals are obtained with respect to each Acquired
Fund and (b) of all shareholders of Emerald Funds to consider and act upon the
reorganization of all investment portfolios of Emerald Funds with the Nations
Family of Funds. 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 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 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
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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 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 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
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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 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 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
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5.1.n. Each Acquiring Fund intends to qualify as a "regulated investment
company" under the Code, and each Acquiring Fund that has conducted
material investment operations prior to the Closing Date has elected to
qualify and has qualified as a "regulated investment company" under the
Code, as of and since its first taxable year; has been a "regulated
investment company" under the Code at all times since the end of its first
taxable year when it so qualified; and qualifies and shall continue to
qualify as a "regulated investment company" under the Code for its current
taxable year.
5.2. 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;
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);
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;
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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;
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 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.
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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 and substance 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 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, 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.
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<PAGE>
6.4. As of the Closing Date with respect to the Reorganization of each
Acquired Fund, there shall have been no material change in the investment
objective, policies and restrictions nor any material change in the investment
management fees, fee levels payable pursuant to the 12b-1 plan of distribution,
other fees payable for services provided to the Acquiring Funds, fee waiver or
expense reimbursement undertakings, or sales loads of the Acquiring Funds from
those fee amounts, undertakings and sales load amounts described in the
prospectus of each Acquiring Fund delivered to the corresponding Acquired Fund
pursuant to paragraph 4.1 and in the notice of meeting, form of proxy and
Combined Proxy/Prospectus (collectively, "Proxy Materials").
6.5. With respect to each Acquiring Fund, the Board of Directors of
Nations 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 as
comparable to the liability coverage currently applicable to the Trustees and
officers of Emerald Funds, covering the actions of the 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
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 effect of bankruptcy, insolvency, reorganization, arrangement,
moratorium and other similar laws of general applicability relating to or
affecting creditors' rights and court decisions with respect thereto, and
such counsel will express no opinion with respect to the application of
equitable principles in any proceeding, whether at law or in equity;
7.3.d. no consent, approval, authorization, filing or order of any 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
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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.
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.
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, and the reorganization of Emerald
Funds into the Nations Family of Funds shall have been approved by the
requisite vote of the holders of the outstanding shares of beneficial interest
of Emerald Funds, consistent with the provisions of Emerald Funds' Agreement
and Declaration of Trust and
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the 1940 Act, and certified copies of the resolutions evidencing such approval
shall have been delivered to each corresponding Acquiring Fund. Approval of
this Agreement by the requisite vote of the holders of the outstanding shares
of beneficial interest in an Acquired Fund shall constitute approval of all of
the transactions contemplated herein, including the reorganization of all
investment portfolios of Emerald Funds with the Nations Family of Funds.
8.2. On the Closing Date, no action, suit or other proceeding shall be
pending before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in connection with,
this Agreement or any of the transactions contemplated herein.
8.3. All consents of other parties and all other consents, orders,
approvals and permits of federal, state and local regulatory authorities
(including, without limitation, those of the SEC and of state securities
authorities) deemed necessary by Nations 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 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), the data used in the
calculation of any figure expressed numerically or in dollars or percentages
that appear in the Registration Statement as: (a) "Table II -- Pro Forma
Capitalization (as of November 30, 1997)" in the Combined Proxy
Statement/Prospectus, (b) "Table III -- Total Expense Information" in the
Combined Proxy Statement/Prospectus, (c) "Appendix III -- Expense Summaries of
Emerald Funds and the Corresponding Nations Funds" in the Combined Proxy
Statement/Prospectus, and (d) the pro forma financial statements in the
Statement of Additional Information, agree with the underlying accounting
records of the Acquiring Funds or with written estimates provided by officers
of Nations Fund having responsibility for financial and reporting matters, and
were found to be mathematically correct.
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 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;
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8.7.e. the holding period of an Acquired Fund's assets in the hands of
the corresponding Acquiring Fund will include the period for which such
assets have been held by the Acquired Fund;
8.7.f. no gain or loss will be recognized by an Acquired Fund on the
distribution to its shareholders of the Acquiring Fund Shares to be
received by the Acquired Fund in the Reorganization;
8.7.g. no gain or loss will be recognized by the shareholders of an
Acquired Fund upon their receipt of the corresponding Acquiring Fund Shares
in exchange for such shareholders' shares of the Acquired Fund;
8.7.h. the basis of the Acquiring Fund Shares received by the
shareholders of the corresponding Acquired Fund will be the same as the
basis of the Acquired Fund shares surrendered by such shareholders pursuant
to the Reorganization;
8.7.i the holding period for the Acquiring Fund Shares received by the
Acquired Fund shareholders will include the period during which such
shareholders held the Acquired Fund shares surrendered therefor, provided
that such Acquired Fund shares are held as a capital asset in the hands of
the Acquired Fund shareholders on the date of the exchange; and
8.7.j each Acquiring Fund will succeed to and take into account the tax
attributes described in Section 381(c) of the Code of the corresponding
Acquired Fund as of the Closing Date, subject to the conditions and
limitations specified in the Code.
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 by Nations 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.
8.10. Emerald Funds' agreements with each of its service contractors have
terminated before or at the Closing, and each party has received reasonable
assurance that no claim for damages (liquidated or otherwise) will arise as a
result of such termination. 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. Each party shall be responsible for the payment of all expenses
incurred by such party in connection with this Agreement and the transaction
contemplated hereby. The parties understand that NationsBanc Advisors, Inc.
and/or its affiliates shall bear the customary expenses associated with the
transactions contemplated by this Agreement.
10. ENTIRE AGREEMENT; SURVIVAL OF WARRANTIES
10.1. This Agreement constitutes the entire agreement between the parties
and supersedes any prior or contemporaneous understanding or arrangement with
respect to the subject matter hereof.
10.2. The representations, warranties and covenants contained in this
Agreement or in any document delivered pursuant hereto or in connection
herewith shall survive the consummation of the transactions contemplated
herein.
11. TERMINATION
11.1. This Agreement may be terminated and the transactions contemplated
hereby may be abandoned at any time prior to the Closing:
11.1.a. by the mutual written consent of Nations Fund and Emerald Funds;
II-14
<PAGE>
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.
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).
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
II-15
<PAGE>
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,
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" 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.
II-16
<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.
<TABLE>
<S> <C>
ATTEST: NATIONS FUND, INC.,
for itself and on behalf of each Acquiring Fund
/s/ RICHARD H. BLANK, JR. By: /s/ A. MAX WALKER
- ----------------------------------------- ------------------------------------------------
Richard H. Blank, Jr. A. Max Walker
Secretary President and Chairman of
the Board of Directors
ATTEST: EMERALD FUNDS, for itself and on behalf of
each Acquired Fund
By: /s/ JOHN G. GRIMSLEY
------------------------------------------------
----------------------------------
John G. Grimsley
President
</TABLE>
II-17
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Acquired Fund Acquiring Fund
- ----------------------------------------- -----------------------------------------
<S> <C>
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
</TABLE>
II-18
<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 the Emerald Funds will bear as
shareholders of the corresponding Nations Fund. The tables do not reflect any
charges that may be imposed by institutions directly on their customer accounts
in connection with investments in the respective Funds. 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 ................ 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 Funds 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 .................................... 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; and 1.66% 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 ........... $ 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 Funds 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 Funds 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 ................ 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 waivers and/or 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 Funds 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 .................................... 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 ............................................. -- 0.35% 0.35%
Other Expenses ......................................... 0.50% 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 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 Funds 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 ................ 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%
Other Expenses (after reimbursements)** ................ 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 and/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>
Emerald Small Nations Small
Capitalization Company Growth Combined Fund
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 Funds 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 ................ 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 and/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>
Emerald Small Nations Small
Capitalization Company Growth Combined Fund
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 Funds will bear directly
or indirectly.
III-8
<PAGE>
EMERALD TREASURY FUND -- INSTITUTIONAL SHARES
NATIONS TREASURY FUND -- PRIMARY A SHARES
<TABLE>
<CAPTION>
Emerald Treasury Nations Treasury 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)* ......................... 0.24% 0.16% 0.16%
Other Expenses (excluding interest expense)** ............ 0.16% 0.14% 0.14%
------------ ------------ ----------
Total Fund Operating Expenses:
(after waivers or reimbursements and excluding 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 (including interest expense) would be: 0.29% for the Emerald
Treasury Fund.
*** Total Fund Operating Expenses (before waivers and/or reimbursements and
excluding interest expense) 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 Treasury Nations Treasury Combined Fund
Fund 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 Funds will bear directly
or indirectly.
III-9
<PAGE>
EMERALD TREASURY FUND -- RETAIL SHARES
NATIONS TREASURY FUND -- DAILY SHARES
<TABLE>
<CAPTION>
Emerald Treasury Nations Treasury 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)* ............................. 0.24% 0.16% 0.16%
12b-1 Fees ................................................... 0.25% 0.50% 0.50%
Shareholder Processing Plan .................................. 0.25% -- --
Other Expenses (after reimbursements and excluding interest
expense)** ................................................. 0.17% 0.14% 0.14%
------------ ----- -----
Total Fund Operating Expenses:
(after waivers or reimbursements and excluding interest
expense)*** ................................................ 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 including interest expense) would
be: 0.34% for Emerald Treasury Fund.
*** Total Fund Operating Expenses (before waivers and/or reimbursements and
excluding interest expense) would be: 0.92%, 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 Treasury 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 Funds will bear directly
or indirectly.
III-10
<PAGE>
EMERALD TREASURY FUND -- SERVICE SHARES
NATIONS TREASURY FUND -- INVESTOR A SHARES
<TABLE>
<CAPTION>
Emerald Treasury Nations Treasury 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)* ......................... 0.24% 0.16% 0.16%
12b-1 Fees ............................................... -- 0.35% 0.35%
Other Expenses (excluding interest expense)** ............ 0.50% 0.14% 0.14%
----- ------------ ----------
Total Fund Operating Expenses:
(after waivers or reimbursements and excluding 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 (including interest expense) would be: 0.63% for Emerald
Treasury Fund.
*** Total Fund Operating Expenses (before waivers and excluding interest
expense) 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 Treasury Nations Treasury Combined Fund
Fund 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 Funds 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 .................................... 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 0.61% for the Combined Fund.
** Total Fund Operating Expenses (before waivers) would be: 0.91% and 0.86%,
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 U.S. Nations
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 Funds 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 0.61% for the Combined Fund.
** Other Expenses (before reimbursements) would be: 0.25% for Emerald U.S.
Government Securities Fund.
** Total Fund Operating Expenses (before waivers and/or reimbursements) would
be: 1.15%, 1.16% and 1.11%, 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 U.S. Nations
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 Funds 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% of total assets 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.
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%
of its total assets in U.S. Government securities and repurchase agreements
collateralized by such securities. Similarly, Nations Government Securities
Fund invests at least 65% of its total 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 Securities Fund 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.
IV-1
<PAGE>
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 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 each Fund's 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 each Fund's 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-2
<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 front end or contingent-deferred sales charge on either the
Retail Shares of the Emerald Funds or the Investor A Shares of the Nations
Funds.
B. Purchase Policies
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
------------------------------------ ------------------------------------
<S> <C> <C>
Minimum initial investment .............. Nations Funds $1,000 for a Emerald Funds $1,000 for a
regular account; $500 for IRA regular account**; $500 for
investors; $250 for non-working investors participating in the E-Z
spousal IRAs; $100 for investors Matic Investment Plan; $50 for
participating in the Systematic investors participating in the
Investment Plan; no minimum Periodic Investment Plan; $1,000
investment for 401(k) plans, for IRA investors; $250 for
simplified employee pension plans non-working spousal IRAs; no
("SEPs"), Savings Incentives minimum investment for 401(k)
Method Plans for Employees Plans, Qualified Retirement Plans
("SIMPLE IRAs") and salary and SEP-IRAs.
reduction-IRAs ("SAR-IRAs").*
Minimum subsequent investments .......... $100; $50 for subsequent $100 for regular accounts*** and
investments made through the investors in the E-Z Matic
Systematic Investment Plan. 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, Servicing Through Barnett Investments, Inc.,
Agents, a Nations Fund Personal Service Organizations; by mail; by
Investment Planner account; by wire; by telephone; an E-Z Matic
mail; by wire; by telephone and a Investment Plan account and
Systematic Investment Plan. Periodic Investment Plan account.
</TABLE>
* The assets of such plans must reach an asset value of $1,000 ($500 for SEPs,
SAR-SEPs and SAR-IRAs) within one year of the account open date. If the
assets of such plans do not reach the minimum asset size within one year,
Nations reserves the right to redeem the Shares held by such plans on 60
days' written notice.
V-1
<PAGE>
** 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 Barnett Capital and its affiliates qualify for a $500 minimum
initial investment.
*** Employees of Barnett Capital and its affiliates qualify for a $50 minimum
subsequent investment.
C. Redemption Procedures
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
--------------------------------- --------------------------------
<S> <C> <C>
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 account Yes (net asset value of account
must be $10,000) must be at least $5,000)
</TABLE>
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. Under unusual
circumstances, Emerald may pay redemption proceeds in readily marketable,
portfolio securities at their market value equal to the redemption price.
D. Additional Shareholder Services
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
-------------------------------- --------------------------------
<S> <C> <C>
Systematic/automatic investment plan .......... Yes (in any amount from $50 to Yes (debits shareholder's bank
$100,000) account and purchases shares
either once or twice a month in
amounts as specified by the
shareholder)
</TABLE>
E. Share Exchanges
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
--------------------------------- ------------------------------------
<S> <C> <C>
By mail ............................. Yes Yes
By telephone ........................ Yes Yes
Minimum ............................. The Investor A Shares exchanged The Retail Shares exchanged must
must have a current value of at have a current value of at least
least $1,000. $ 500.
Automatic exchange feature .......... Yes. A shareholder may No
automatically exchange at least
$25 on a monthly or quarterly
basis.
</TABLE>
Retail Shares of an Emerald Fund may be exchanged for Institutional Shares
of the same Fund that are held in a qualified trust, agency or custodial
account or for Retail Shares of another Emerald Fund.
V-2
<PAGE>
Investor A Shares of a Nations Fund may be exchanged for Investor A Shares
of any other Nations Fund. Exchanges are subject to the minimum investment
requirements imposed.
II. 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.
B. Purchase Policies
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
-------------------------------------- --------------------------------------
<S> <C> <C>
Minimum initial investment .............. $250,000 $250,000 for non-money market
funds; $5,000 for money market
funds; there is no minimum initial
investment requirement for
transfers of assets by Barnett's
customers from other banks or
financial institutions.
Minimum subsequent investments .......... None None for non-money market
funds; $100 for money market
funds.
Purchase methods ........................ Primary A Shares may be sold to Institutional Shares may be sold to
NationsBank and its affiliates Barnett and its affiliates, as well
acting on behalf of bona fide trust as Barnett's correspondent banks
customers. Primary A Shares also and other institutions acting on
may be sold to employee benefit behalf of themselves or their
plans, charitable foundations, customers who maintain qualified
endowments and to other funds in trust, agency or custodial accounts.
the Nations Fund family. All share purchases are effected
through a customer's account at
Barnett or another institution.
</TABLE>
C. Redemption Procedures
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
--------------- --------------
<S> <C> <C>
Through the transfer agent .......... Yes Yes
By telephone ........................ Yes Yes
By wire ............................. Yes Yes
Check writing feature ............... No No
</TABLE>
Due to the high cost of maintaining fund accounts with small balances,
Nations reserves the right to close a shareholder's account and send the
shareholder the proceeds if the balance falls below $500 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 involuntary redemption
of 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 60 days' written notice. With respect to the Emerald non-money
market funds, an involuntary redemption of Institutional Shares may occur if
the account
V-3
<PAGE>
balance has fallen below the minimum level due to shareholder redemptions.
Share balances also may be redeemed at the direction of an institution pursuant
to arrangements between the institution and its customer. Under unusual
circumstances Emerald may pay redemption proceeds in readily marketable
portfolio securities at their market value equal to the redemption price.
D. Additional Shareholder Services
None.
E. Share Exchanges
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
--------------- --------------
<S> <C> <C>
By mail ............... Yes Yes
By telephone .......... Yes Yes
</TABLE>
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 Retail
Shares of the same Fund in connection with the distribution of assets held in a
qualified trust, agency or custodial account maintained with the trust
department of Barnett or another bank trust company or financial institution.
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).
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
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
------------------------------------- ---------------------------------------
<S> <C> <C>
Minimum initial investment .............. $1,000 for a regular account; $500 $5,000; there is no minimum
for IRA investors; $250 for initial investment requirements for
non-working spousal IRAs; $100 transfers of assets by Barnett's
for investors participating in the customers from other banks or
Systematic Investment Plan; no financial institutions.
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 investments .......... $100; $50 for subsequent $ 100
investments made through the
Systematic Investment Plan.
Purchase methods ........................ Through Selling Agents, Servicing Sold to Barnett and its affiliates,
Agents, a Nations Fund Personal as well as Barnett's correspondent
Investment Planner account; by banks and other institutions acting
mail; by wire; by telephone and a on behalf of themselves or their
Systematic Investment Plan. customers who maintain qualified
trust, agency or custodial accounts.
All share purchases are effected
through a customer's account at
Barnett or another institution.
</TABLE>
V-4
<PAGE>
* The assets of such plans must reach an asset value of $1,000 ($500 for SEPs,
SAR-SEPs and SAR-IRAs) within one year of the account open date. If the
assets of such plans do not reach the minimum asset size within one year,
Nations reserves the right to redeem the Shares held by such plans on 60
days' written notice.
C. Redemption Procedures
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
--------------------------------- --------------
<S> <C> <C>
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 plan ......... Yes (net asset value of account No
must be $10,000)
</TABLE>
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. Under
unusual circumstances, Emerald may pay redemption proceeds in readily
marketable portfolio securities at their market value equal to the redemption
price.
D. Additional Shareholder Services
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
----------------------------------- --------------
<S> <C> <C>
Systematic/automatic investment plan .......... Yes (in any amount from $50 to No
$ 100,000).
</TABLE>
E. Share Exchanges
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
--------------------------------- --------------
<S> <C> <C>
By mail ............................. Yes No
By telephone ........................ Yes No
Minimum ............................. The Investor A Shares exchanged No
must have a current value of at
least $1,000
Automatic exchange feature .......... Yes. A shareholder may No
automatically exchange at least
$25 on a monthly or quarterly
basis.
</TABLE>
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.
Emerald does not offer currently an exchange privilege with respect to
Service Shares of the Emerald Funds.
V-5
<PAGE>
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 Retail Shares
of the Emerald Funds or the Daily Shares of the Nations Funds.
B. Purchase Policies
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
------------------------------------- ------------------------------------
<S> <C> <C>
Minimum initial investment .............. $1,000 for a regular account; $500 $1,000 for a regular account**;
for IRA investors; $250 for $500 for investors participating in
non-working spousal IRAs; $100 the E-Z Matic Investment Plan;
for investors participating in the $50 for investors participating in
Systematic Investment Plan; no the Periodic Investment Plan;
minimum investment for 401(k) $1,000 for IRA investors; $250 for
plans, simplified employee non-working spousal IRAs; no
pension plans ("SEPs"), Savings minimum investment for 401(k)
Incentives Method Plans for Plans, Qualified Retirement Plans
Employees ("SIMPLE IRAs") and and SEP-IRAs.
salary reduction-IRAs
( "SAR-IRAs").*
Minimum subsequent investments .......... $100; $50 for subsequent $100 for regular accounts*** and
investments made through the investors in the E-Z Matic
Systematic Investment Plan. 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, Servicing Through Barnett Investments, Inc.,
Agents, a Nations Fund Personal Service Organizations; by mail; by
Investment Planner account; by wire; by telephone; an E-Z Matic
mail; by wire; by telephone and a Investment Plan account and
Systematic Investment Plan. Periodic Investment Plan account.
</TABLE>
* The assets of such plans must reach an asset value of $1,000 ($500 for SEPs,
SAR-SEPs and SAR-IRAs) within one year of the account open date. If the
assets of such plans do not reach the minimum asset size within one year,
Nations reserves the right to redeem the Shares held by such plans on 60
days' written notice.
** 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 Barnett Capital and its affiliates qualify for a $500 minimum
initial investment.
*** Employees of Barnett Capital and its affiliates qualify for a $50 minimum
subsequent investment.
C. Redemption Procedures
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
----------------------------------------- ----------------------------------------
<S> <C> <C>
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 account must be Yes (net asset value of account must be
$10,000) at least $5,000)
</TABLE>
V-6
<PAGE>
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. Under unusual
circumstances, Emerald may pay redemption proceeds in readily marketable
portfolio securities at their market value equal to the redemption price.
D. Additional Shareholder Services
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
----------------------------------- --------------------------------
<S> <C> <C>
Systematic/automatic investment plan .. Yes (in any amount from $50 to Yes (debits shareholder's bank
$ 100,000). account and purchases shares
either once or twice a month in
amounts as specified by the
shareholder).
</TABLE>
E. Share Exchanges
<TABLE>
<CAPTION>
Nations Funds Emerald Funds
---------------------------------- ---------------------------------
<S> <C> <C>
By mail ............................. Yes Yes
By telephone ........................ Yes Yes
Minimum ............................. The Daily Shares exchanged must The Retail Shares exchanged must
have a current value of at least have a current value of at least
$1,000 $500
Automatic exchange feature .......... Yes. A shareholder may No
automatically exchange at least
$25 on a monthly or quarterly
basis.
</TABLE>
Retail Shares of an Emerald Fund may be exchanged for Institutional Shares
of the same Fund that are held in a qualified trust, agency or institutional
account or 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.
VI. Dividends and Distributions
A. Dividends Declared Daily/Paid Monthly
<TABLE>
<CAPTION>
Emerald Fund Nations Fund
- ------------------------------------------- -----------------------------------
<S> <C>
Emerald Prime Fund Nations Prime Fund
Emerald Treasury Fund Nations Treasury Fund
Emerald U.S. Government Securities Fund Nations Government Securities Fund
</TABLE>
B. Dividends Declared Monthly/Paid Monthly
<TABLE>
<CAPTION>
Emerald Fund Nations Fund
- -------------- ----------------------------------
<S> <C>
None Nations Small Company Growth Fund
</TABLE>
C. Dividends Declared Annually/Paid Annually
<TABLE>
<CAPTION>
Emerald Fund Nations Fund
- ------------------------------------- ---------------------------------
<S> <C>
Emerald International Equity Fund Nations International Value Fund
Emerald Small Capitalization Fund
</TABLE>
V-7
<PAGE>
APPENDIX VI
Management's Discussion and Analysis of the Nations Funds
<PAGE>
(This Page Left Blank Intentionally)
<PAGE>
NATIONS GOVERNMENT SECURITIES FUND
PERFORMANCE AND COMMENTARY
PORTFOLIO MANAGER
John Swaim is Senior Portfolio Manager of Nations Government Securities
Fund and Senior Portfolio Manager, Fixed Income Management for TradeStreet
Investment Associates, Inc., investment sub-adviser to the Fund.
INVESTMENT OBJECTIVE
The Fund seeks 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.
PERFORMANCE REVIEW*
For the one-year period ended March 31, 1997, Nations Government Securities
Fund Investor A Shares provided shareholders with a total return of 2.92%.
PORTFOLIO MANAGER COMMENTARY
In the following interview, Mr. Swaim shares his views on financial market
conditions and Fund performance for the one-year period ended March 31, 1997.
WHAT HAPPENED IN THE FIXED INCOME MARKET OVER THE LAST TWELVE MONTHS?
The bond market witnessed a strong selloff early in the reporting year as
the economy rebounded after the severe winter and government shutdown. Rates on
the benchmark 30-year U.S. Treasury bond climbed from 6.60% at the beginning of
April 1996 to 7.20% by early summer. The market then settled into a trading
range that lasted until the fall, when a rally dropped rates to 6.38% based on
continued good inflation news. The market sold off in December and January as
economic data showed persistent strength, bringing the long bond yield back to
6.95%. The yield at March 31, 1997 was 7.10%.
The predominant theme in the market was a tug of war between economic
strength on one hand and positive inflation news on the other. These two
countervailing forces held bonds in an 80-basis-point range.
HOW DID YOU POSITION THE FUND IN RESPONSE TO MARKET CONDITIONS?
Since rates held in a fairly narrow range, the Fund benefited from callable
securities, including mortgages and agency issues. These securities benefit from
stability in interest rates as the Fund picks up incremental income with little
risk of the securities being called away. Interest rate movements during the
year generally helped the Fund's performance. The Fund was short duration early
in the year, which helped performance as rates backed up. The Fund became
progressively longer through the middle of the year, allowing it to benefit from
declining rates. During the range bound period, the Fund was able to benefit
from duration adjustments at the margin. As interest rates backed up to the
range highs, we added incrementally to duration. As interest rates approached
the lows of the range, we reduced duration. This strategy was successful for
most of the year, though the Fund's performance suffered from its duration being
short in January when interest rates declined.
WHAT IS YOUR OUTLOOK GOING FORWARD AND HOW DO YOU ANTICIPATE POSITIONING THE
FUND IN RESPONSE?**
Our near-term outlook is one of caution, with the Federal Reserve Board's
(the "Fed") stated wariness concerning economic strength and wage pressure.
Consequently, the Fund's duration is shorter than its benchmark, but we are
looking for the appropriate level to lengthen duration and take advantage of
higher yield potential. We think the economy will eventually decelerate, either
by its own lack of forward momentum or with additional increases in interest
rates by the
- ---------------
* The performance shown includes the effect of fee waivers by the investment
adviser. Such fee waivers have the effect of increasing total return.
** Portfolio characteristics and outlook were current as of March 31, 1997,
are subject to change and may not be representative of current
characteristics and outlook. Also, the outlook of this Fund's portfolio
manager may differ from that of other Nations Funds' portfolio managers.
VI-1
<PAGE>
Fed. We feel mortgages are somewhat vulnerable to a spread widening, and,
therefore, are cautious about the sector in the near term. However, because the
yield offered by these securities is so attractive, the Fund will maintain a
representative position. While callable agency securities are vulnerable as
well, they are less so than mortgages. We have, therefore, added to the Fund's
holdings of callable securities.
As of March 31, 1997, the Fund's average maturity was 9.6 years and the
average effective duration was 4.8 years. Approximately 58% of the Fund was
invested in mortgages with the balance in other U.S. Government securities.
VI-2
<PAGE>
NATIONS FUNDS
Nations Government Securities Fund
- ---------------------------------------------
PORTFOLIO BREAKDOWN AS OF 3/31/97
[PIE CHART]
<TABLE>
<S> <C>
Mortgage-Backed Securities 57.7%
U.S. Government Agency Securities 7.0%
U.S. Treasury Obligations 32.9%
Repurchase Agreement and Other
Assets and Liabilities (Net) 2.4%
</TABLE>
-------------------------------------
TOP TEN PORTFOLIO HOLDINGS AS A
% OF NET ASSETS AS OF 3/31/97
<TABLE>
<C> <S> <C>
1. Federal National Mortgage Association
Certificates 35.1%
2. U.S. Treasury Bonds 20.9
3. Government National Mortgage Association
Certificates 17.2
4. U.S. Treasury Notes 12.0
5. Federal Home Loan Mortgage Corporation
Certificates 5.1
6. Federal Home Loan Mortgage Corporation,
6.280% 03/06/06 2.8
7. Federal Home Loan Bank,
7.700% 03/19/12 1.9
8. Federal Farm Credit Systems, 9.450% 11/21/03 1.5
9. Federal Home Loan Mortgage Corporation,
7.950% 07/28/04 0.7
10. Government National Mortgage Association II
Certificate, 11% 10/20/20 0.2
</TABLE>
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR A SHARES AS OF 3/31/97
<TABLE>
<CAPTION>
AVERAGE ANNUAL TOTAL RETURN
INVESTOR A SHARES
- ---------------------------------
<S> <C>
Year Ended 03/31/97 2.92%
Five Years Ended 03/31/97 4.79%
Since Inception (04/17/91)
through 03/31/97 5.61%
</TABLE>
The chart to the right shows
the growth in value of a
hypothetical $10,000
investment in Investor A
Shares of Nations Government
Securities Fund on April 17,
1991 (inception date). Figures
for the Lehman Intermediate
Treasury Index track the
market value of U.S. Treasury
securities with maturities of
3 to 10 years. The Salomon
Brothers Mortgage Index is
comprised of 30-year and
15-year GNMA, FNMA and FHLMC
securities, and FNMA and FHLMC
balloon mortgages. Both
indices are unmanaged and
include reinvestment of
dividends.
[LINE GRAPH]
<TABLE>
<CAPTION>
Growth of Investment
Measurement Period Salomon Brothers Lehman Intermediate with Distributions
(Quarterly) Mortgage Index Treasury Index Reinvested
<S> <C> <C> <C>
Apr. 17, 1991 10000 10000 10000
May 31, 1991 10097 10061 10104
10657 10541 10626
11129 11055 11149
11070 10933 10949
May 31, 1992 11517 11359 11378
11857 11866 11744
11949 11823 11716
12299 12270 12063
May 31, 1993 12560 12512 12311
12674 12777 12600
12790 12796 12607
12521 12558 12223
May 31, 1994 12453 12489 12009
12552 12584 11940
12607 12570 11936
13272 13090 12522
May 31, 1995 13959 13705 13094
14242 13913 13312
14721 14383 13726
Mar. 31, 1996 14667 14281 13444
14766 14373 13422
15076 14620 13637
15512 14956 14039
Mar. 31, 1997 15531 14945 13837
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Average annual total returns are historical in nature and measure net investment
income and capital gain or loss from portfolio investments assuming reinvestment
of dividends.
Portfolio characteristics and outlook were current as of March 31, 1997, are
subject to change and may not be representative of current characteristics and
outlook.
VI-3
<PAGE>
NATIONS FUNDS
Nations Government Securities Fund
- --------------------------------------------------------------------------------
PERFORMANCE COMPARISON - INVESTOR C, INVESTOR N, PRIMARY A AND PRIMARY B
SHARES AS OF MARCH 31, 1997
AVERAGE ANNUAL TOTAL RETURNS
<TABLE>
<CAPTION>
INVESTOR C SHARES
- ----------------------------------------------
<S> <C>
Year Ended 03/31/97 2.17%*
Year Ended 03/31/97 2.67%
Since Inception (07/06/92) through
03/31/97 3.55%
*adjusted for maximum contingent
deferred sales charge of 0.50% when
Investor C Shares are redeemed within
one year of purchase
INVESTOR N SHARES
- ----------------------------------------------
Year Ended 03/31/97 2.51%
Since Inception (06/07/93) through
03/31/97 2.88%
PRIMARY A SHARES
- ----------------------------------------------
Year Ended 03/31/97 3.18%
Five Years Ended 03/31/97 5.02%
Since Inception (04/11/91) through
03/31/97 5.84%
AGGREGATE TOTAL RETURN
PRIMARY B SHARES**
- ----------------------------------------------
Since Inception (06/28/96) through
03/31/97 2.90%
</TABLE>
The charts to the right show the growth in value of a hypothetical $10,000
investment in Investor C, Investor N, Primary A and Primary B Shares of
Nations Fund from the date each class of shares was first offered. Figures
for the Lehman Intermediate Treasury Index track the market value of U.S.
Treasury securities with maturities of 3 to 10 years. The Salomon Brothers
Mortgage Index is comprised of 30-year and 15-year GNMA, FNMA and FHLMC
securities, and FNMA and FHLMC balloon mortgages. Both indices are
unmanaged and include reinvestment of dividends.
Each chart assumes the reinvestment of all distributions.
** Please note that the performance shown for Primary B Shares includes
the performance for Primary A Shares from their date of inception
(4/11/91) through 6/28/96, plus the performance for Primary B Shares
from their date of inception (6/28/96) through 3/31/97. The expense
structures for Primary A and Primary B Shares are similar, except that
Primary B Shares are subject to a shareholder servicing fee of up to 60
basis points. This difference in expenses will result in a slight
difference in the performance of Primary A and Primary B Shares.
PERFORMANCE COMPARISONS
INVESTOR C SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH OF
SALOMON LEHMAN INVESTMENT
BROTHERS INTERMEDIATE WITH
MEASUREMENT PERIOD MORTGAGE TREASURY DISTRIBUTIONS
QUARTERLY INDEX INDEX REINVESTED
<S> <C> <C> <C>
JULY 6, 1992 10000 10000 10000
10295 10447 10223
10375 10409 10181
10679 10802 10478
MAY 31, 1993 10905 11016 10667
11005 11249 10900
11105 11265 10890
10872 11056 10543
MAY 31, 1994 10813 10995 10345
10898 11079 10273
10946 11067 10257
11523 11924 10747
MAY 31, 1995 12120 12065 11224
12365 12249 11397
12782 12663 11736
MAR. 31, 1996 12734 12573 11488
12821 12654 11462
13090 12871 11638
13468 13167 11974
MAR. 31, 1997 13485 13157 11794
</TABLE>
INVESTOR N SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH OF
SALOMON LEHMAN INVESTMENT
BROTHERS INTERMEDIATE WITH
MEASUREMENT PERIOD MORTGAGE TREASURY DISTRIBUTIONS
QUARTERLY INDEX INDEX REINVESTED
<S> <C> <C> <C>
JUNE 7, 1993 10000 10000 10000
10190 10362 10296
10282 10379 10289
10066 10184 9963
MAY 31, 1994 10012 10129 9779
10091 10206 9713
10136 10195 9700
10670 10616 10166
MAY 31, 1995 11222 11115 10620
11450 11283 10786
11835 11665 11110
MAR. 31, 1996 11791 11582 10871
11871 11657 10842
12121 11857 11005
12471 12129 11318
MAR. 31, 1997 12486 12120 11144
</TABLE>
PRIMARY A AND PRIMARY B SHARES AS OF MARCH 31, 1997
[LINE GRAPH]
<TABLE>
<CAPTION>
GROWTH GROWTH
OF OF
INVESTMENT INVESTMENT
WITH SALOMON LEHMAN WITH
MEASUREMENT DISTRIBUTIONS BROTHERS INTERMEDIATE DISTRIBUTIONS
PERIOD REINVESTED MORTGAGE TREASURY REINVESTED
QUARTERLY - B INDEX INDEX - A
<S> <C> <C> <C> <C>
APR. 11, 1991 10000 10000 10000 10000
10118 10203 10167 10118
10647 10768 10650 10647
11178 11245 11170 11178
10983 11185 11047 10983
MAY 31, 1992 11419 11637 11476 11419
11794 11980 11989 11794
11782 12074 11946 11782
12136 12427 12397 12136
MAY 31, 1993 12378 12691 12642 12378
12673 12807 12909 12673
12685 12923 12928 12685
12303 12652 12688 12303
MAY 31, 1994 12096 12583 12618 12096
12033 12663 12714 12033
12037 12739 12700 12037
12635 13410 13225 12635
MAY 31, 1995 13221 14105 13847 13221
13449 14395 14037 13449
13876 14875 14532 13876
13599 14820 14428 13599
JUN. 28, 1996 13585 14920 14522 13585
13795 15234 14771 13812
14192 15674 15110 14228
MAR. 31, 1997 13979 15693 15099 14032
</TABLE>
- --------------------------------------------------------------------------------
THE PERFORMANCE SHOWN REPRESENTS PAST PERFORMANCE AND IS NOT PREDICTIVE OF
FUTURE RESULTS. A MUTUAL FUND'S SHARE PRICE AND INVESTMENT RETURN WILL VARY WITH
MARKET CONDITIONS, AND THE PRINCIPAL VALUE OF SHARES, WHEN REDEEMED, MAY BE
WORTH MORE OR LESS THAN ORIGINAL COST.
Average annual and aggregate total returns are historical in nature and measure
net investment income and capital gain or loss from portfolio investments
assuming reinvestment of dividends.
VI-4
<PAGE>
PILOT SMALL CAPITALIZATION EQUITY FUND
PERFORMANCE AND COMMENTARY
PERFORMANCE REVIEW
The Pilot Small Capitalization Equity Fund (Pilot Shares) provided a total
return of 6.26% compared with a return of -0.35% for the Lipper Small Company
average, for the period September 1, 1996 through April 30, 1997.
COMMENTARY
The market favored larger capitalization companies and more value-oriented
stocks during this time period, with the S&P 500 Index up more than three times
as much as the Russell 2000 Index (31.00% vs. 9.60%). The Portfolio's
overweighted positions in basic materials, capital goods, consumer cyclicals,
energy and transportation sectors were rewarded by the market and contributed to
the Portfolio's relative outperformance. Due to the magnitude of their gains,
three companies stood out in particular: Innovex (disk drive components), Jabil
Circuit (contract manufacturing) and Cellstar Corp. (wholesale distributor of
cellular phones), all of which had market prices that more than tripled in price
during this period.
VI-5
<PAGE>
Pilot Small Capitalization Equity Fund
Growth of a $10,000 investment vs. a benchmark since
inception as of April 30, 1997*
(Graph appears here. See table below for plot points.)
12/12/95 Aug-96 Apr-97
Pilot Shares $10,000 $10,737 $11,409
Russell 2000 $10,000 $10,657 $11,078
Class A Shares $ 9,551 $10,209 $10,825
Class B Shares $10,000 $10,215 $10,802
The Russell 2000 Index is an unmanaged index representing 2000 small companies
and is typically used as a measure of small capitalization stocks.
* The values presented in the above graph are shown through April 30, 1997.
Information presented in the accompanying financial statements is through
May 16, 1997.
VI-6
<PAGE>
(This Page Left Blank Intentionally)
<PAGE>
(This Page Left Blank Intentionally)
<PAGE>
STATEMENT OF ADDITIONAL INFORMATION
DATED MARCH 25, 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.
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 Equity 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 Equity
Fund and Emerald U.S. Government Securities Fund, dated April 1, 1997, as
supplemented, and redated March 25, 1998.
1
<PAGE>
TABLE OF CONTENTS
General
Information................................................................4
Introductory Note to PRO FORMA Financial Information.......................5
2
<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.
3
<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. In addition, there is no
expectation of any material repositioning of the portfolio securities of
the Emerald Funds (other than the Emerald Equity Fund) after the Closing,
except in the ordinary course of business.
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.
4
<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)(b) 21,650,578
Primary B 1 n/a - 1
------------ ------------ --------- ------------
Investor A/Retail 430,592 1,096,636 (59,081)(b) 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.
(b) Reflects the difference in net asset value between the acquiring fund shares
and the acquired fund shares.
<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(a) 14,601,402
------------ ----------- ----------- ------------
Primary B 60,859 n/a - 60,859
------------ ----------- ----------- ------------
Investor A/Retail 1,160,651 2,100,708 97,683(a) 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>
(a) Reflects the difference in net asset value between the acquiring fund shares
and the acquired fund shares.
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>
[MORRISON & FOERSTER LLP LETTERHEAD]
April 7, 1998
Writers Direct Dial Number
(202) 887-8773
VIA EDGAR
Securities and Exchange Commission
450 Fifth Street, NW
Washington, DC 20549
Re: Nations Fund, Inc.
Registration Statement on Form N-14
SEC File No. 333-46725
Dear Sir or Madam:
On behalf of Nations Fund, Inc. (the "Company") and pursuant to
Rule 497(b) under the Securities Act of 1933, as amended, we are transmitting
herewith for filing the Company's definitive Proxy/Prospectus and Statement of
Additional Information, each dated March 25, 1998.
If you have any questions, please contact the undersigned at the number
indicated above.
Very truly yours,
/s/ Steven G. Cravath
Steven G. Cravath
Enclosures
cc: Robert H. Gordon
Richard H. Blank, Jr.
Edward D. Bedard
Kelly J. Simeonides
Richard S. Szafran
Robert B. Carroll
Robert M. Kurucza
Marco E. Adelfio
