SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE DEF14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE
SECURITIES EXCHANGE ACT OF 1934
Filed by the registrant |X|
Filed by a Party other than the Registrant |_|
Check the appropriate box:
|_| Preliminary Proxy Statement |_| Confidential, for use
of the Commission Only
(as permitted by Rule
14a-6(e)(2))
|X| Definitive Proxy Statement
|_| Definitive additional materials
|_| Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
NATIONS FUND, INC.
(Name of Registrant as Specified in Its Charter)
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
|X| No fee required.
|_| Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11.
(1) Title of each class of securities to which transaction applies:
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(2) Aggregate number of securities to which transaction applies:
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(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is
calculated and state how it was determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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|_| Fee paid previously with preliminary materials:
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|_| Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number,
or the form or schedule and the date of its filing.
(1) Amount Previously Paid:
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(2) Form, Schedule or Registration Statement No.:
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(3) Filing Party:
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(4) Date Filed:
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NATIONS FUND, INC.
One Bank of America Plaza
101 South Tryon Street
Charlotte, North Carolina 28255
TELEPHONE: 800-790-6347
June 28, 1999
Dear Shareholder:
On behalf of the Board of Directors of Nations Fund, Inc. (the "Company"),
we are pleased to invite you to a special meeting of shareholders of the
Company's Nations International Equity Fund and Nations International Value Fund
(each a "Fund" and together the "Funds") to be held at 10:00 a.m. (Eastern time)
on August 13, 1999, at One Bank of America Plaza, 33rd Floor, Charlotte, North
Carolina (the "Meeting"). At the Meeting, you will be asked to approve the
proposed reorganization (the "Reorganization") of your Fund into a successor
mutual fund in Nations Institutional Reserves, another registered investment
company within the Nations Funds family.
YOUR NEW MUTUAL FUND (A "SUCCESSOR FUND") WILL HAVE THE SAME NAME,
INVESTMENT OBJECTIVE, PRINCIPAL INVESTMENT STRATEGIES AND INVESTMENT RISKS AS
THOSE OF YOUR CURRENT FUND, and the Reorganization will not result in any change
to the investment adviser or sub-adviser(s) who currently manage your Fund. In
addition, the Reorganization will not result in any change to the total
operating expense ratios (before or after waivers and/or reimbursements) of the
various classes of shares. Similarly, the features and services that are
available to you today will continue to be available to you as a Successor Fund
shareholder after the Reorganization. In addition, the Nations International
Equity Fund's Successor will be a "feeder" fund in a master/feeder structure,
which simply means that it will invest all of its assets in a master portfolio
that has an identical investment objective and principal investment strategy.
More details about the master/feeder structure are provided in the accompanying
Proxy Statement.
The Reorganization offers several benefits. First, by establishing a
master/feeder structure for Nations International Equity Fund's Successor Fund,
Nations Master Investment Trust ("NMIT"), which is the registered investment
company in the Nations Funds family that would "house" the master portfolio,
would have the potential to attract other feeders and access additional
distribution channels that would not otherwise be available if the Successor
Fund operated on a stand-alone basis. This could result in higher asset levels,
which, in turn, may lead to economies of scale for NMIT investors, including
Nations International Equity Fund's Successor Fund. Nations International Value
Fund's Successor Fund has reserved the right to convert to a master/feeder
structure, which if adopted in the future, would allow it to combine its assets
with those of other similar funds, thereby potentially achieving economies of
scale and other benefits that come from greater asset size. Second, the
Reorganization is part of a broader initiative to streamline the operations of
the Nations Funds family, which currently consists of several registered
investment companies. Over time, management expects to reduce the number of
registered investment companies in the fund family without necessarily impacting
investment alternatives. Streamlining the Nations Funds family may allow it to
achieve cost savings by reducing accounting, legal and securities registration
costs. Third, the Successor Funds will be part of a Massachusetts business
trust, which generally has more flexibility in its operations than a Maryland
corporation like the Company.
If shareholder approval is obtained and the other conditions to the
Reorganization are satisfied, it is anticipated that your Fund would be
reorganized into a corresponding Successor Fund on or about August 20, 1999,
when your Fund shares would be exchanged for shares of the same class of shares
of that corresponding Successor Fund of equal dollar value. The Reorganization
is expected to be tax-free under federal law.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT YOU VOTE
TO APPROVE THE PROPOSED REORGANIZATION.
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The formal Notice of Special Meeting, a Proxy Statement and a Proxy Ballot
are enclosed. The proposed Reorganization and the reasons for the unanimous
recommendation of the Company's Board are discussed in more detail in the
enclosed materials, which you should read carefully. If you have any questions
about the Reorganization, please do not hesitate to contact the Company at the
toll-free number set forth above.
We look forward to your attendance at the Meeting or receiving your Proxy
Ballot(s) so that your shares may be voted at the Meeting.
Sincerely,
A. Max Walker
President and Chairman of the Board of Directors
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 (704) 388-2641. YOU MAY ALSO SUBMIT
YOUR PROXY BY A TOLL-FREE PHONE CALL OR BY VOTING ON-LINE, AS INDICATED BELOW.
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TWO QUICK AND EASY WAYS TO SUBMIT YOUR PROXY
As a valued Fund shareholder, your proxy vote is important to us. That's why
we've made it faster and easier to submit your proxy at YOUR convenience, 24
hours a day. After reviewing the enclosed PROXY STATEMENT, select one of the
following quick and easy methods to submit your proxy - ACCURATELY and QUICKLY.
ON-LINE BY TOLL-FREE PHONE CALL
1. Read the enclosed PROXY STATEMENT 1. Read the enclosed PROXY STATEMENT
and have your PROXY BALLOT(S)* at and have your PROXY BALLOT(S)* at
hand. hand.
2. Go to Web site WWW.PROXYVOTE.COM 2. Call toll-free 1-800-690-6903.
3. Enter the 12-digit Control Number 3. Enter the 12-digit Control Number
found on your PROXY BALLOT(S). found on your PROXY BALLOT(S).
4. Submit your proxy using the 4. Submit your proxy using the
easy-to-follow instructions. easy-to-follow instructions.
* DO NOT MAIL THE PROXY BALLOT(S) IF SUBMITTING YOUR PROXY BY INTERNET OR
TELEPHONE.
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NATIONS FUND, INC.
One Bank of America Plaza
101 South Tryon Street
Charlotte, North Carolina 28255
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
TO BE HELD ON AUGUST 13, 1999
To Nations International Equity Fund and Nations International Value Fund
Shareholders:
PLEASE TAKE NOTE THAT a special meeting of the shareholders (the
"Meeting") of Nations International Equity Fund and Nations International Value
Fund (the "Funds") of Nations Fund, Inc. (the "Company") will be held at 10:00
a.m., Eastern time, on August 13, 1999, at One Bank of America Plaza, 33rd
Floor, Charlotte, North Carolina, for purpose of considering and voting upon:
ITEM 1. A proposed Agreement and Plan of Reorganization, dated as of June
15, 1999 (the "Reorganization Agreement"), by and between the Company, on
behalf of the Funds, and Nations Institutional Reserves, on behalf of
corresponding mutual funds (the "Successor Funds"). The Reorganization
Agreement provides for the transfer of the assets and liabilities of the
Funds to the Successor Funds, in exchange for shares of equal value of
designated classes of the Successor Funds.
ITEM 2. Such other business as may properly come before the Meeting or any
adjournment(s).
Item 1 is described in the attached Proxy Statement.
YOUR DIRECTORS UNANIMOUSLY RECOMMEND THAT YOU VOTE IN FAVOR OF THE
PROPOSAL.
Shareholders of record as of the close of business on May 13, 1999 are
entitled to notice of, and to vote at, the Meeting or any adjournment(s)
thereof.
SHAREHOLDERS ARE REQUESTED TO MARK, DATE, SIGN AND RETURN PROMPTLY IN THE
ENCLOSED ENVELOPE EACH ACCOMPANYING PROXY BALLOT, WHICH IS BEING SOLICITED BY
THE COMPANY'S BOARD OF DIRECTORS. THIS IS IMPORTANT TO ENSURE A QUORUM AT THE
MEETING. SHAREHOLDERS ALSO MAY SUBMIT PROXIES: 1) BY FACSIMILE AT (704)
388-2641; 2) BY DIALING (800) 690-6903; OR 3) ON-LINE AT WEBSITE
WWW.PROXYVOTE.COM. PROXIES MAY BE REVOKED AT ANY TIME BEFORE THEY ARE EXERCISED
BY SUBMITTING TO THE COMPANY A WRITTEN NOTICE OF REVOCATION OR A SUBSEQUENTLY
DATED PROXY OR BY ATTENDING THE MEETING AND VOTING IN PERSON.
By Order of the Board of Directors,
Richard H. Blank, Jr.
Secretary and Treasurer
June 28, 1999
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PROXY STATEMENT
Dated June 28, 1999
NATIONS FUND, INC.
One Bank of America Plaza
101 South Tryon Street
Charlotte, North Carolina 28255
1-800-790-6347
This proxy statement (the "Proxy") is furnished in connection with the
solicitation of proxies by the Board of Directors of Nations Fund, Inc. (the
"Company") at a Special Meeting of Shareholders of the Company's Nations
International Equity Fund and Nations International Value Fund (the "Funds") to
be held August 13, 1999 at 10:00 a.m. (Eastern time) at One Bank of America
Plaza, 101 South Tryon Street, 33rd Floor, Charlotte, North Carolina. This
Special Meeting and any adjournment(s) are referred to as the "Meeting." The
Meeting has been called to consider the following proposal:
A proposed Agreement and Plan of Reorganization, dated as of June
15, 1999 (the "Reorganization Agreement"), by and between the
Company, on behalf of the Funds, and Nations Institutional Reserves,
on behalf of corresponding mutual funds (the "Successor Funds"). The
Reorganization Agreement provides for the transfer of the assets and
liabilities of the Funds to the Successor Funds, in exchange for
shares of equal value of designated classes of the Successor Funds
(the "Reorganization").
The Successor Funds are referred to as "successors" because they were
created to receive the assets and liabilities and to continue the operations of
the Funds. While there are some differences between the Funds and their
corresponding Successor Funds, which are discussed below, an investment in the
Successor Fund is considered substantially the same as an investment in the
Funds.
Additional information about the Fund is available in the:
o Prospectuses for the Funds;
o Statement of Additional Information, or SAI, for the Funds; and
o The Funds' annual report to shareholders, including audited financial
statements.
All of this information is in documents filed with the Securities and
Exchange Commission. The financial statements contained in the annual reports
are legally deemed to be part of this Proxy and are incorporated by reference.
The annual reports to shareholders for the fiscal year ended March 31, 1999 have
previously been mailed to shareholders. Additional copies are available without
charge by writing the address given above or by calling 1-800-321-7854. These
documents also are available on the website of the Securities and Exchange
Commission (the "SEC") at www.sec.gov.
The Successor Funds are not yet operating mutual funds and do not yet have
a prospectus that has been declared effective by the SEC. Copies of the
effective prospectus will be provided to shareholders at the time the
Reorganization is consummated. Shareholders may, after the Reorganization,
obtain a copy of the Statement of Additional Information relating to the
Successor Funds without charge by calling 1-800-321-7854 or by writing Nations
Institutional Reserves at: Nations Institutional Reserves, c/o Stephens Inc.,
One Bank of America Plaza, 33rd Floor, Charlotte, North Carolina 28255.
It is expected that this Proxy will be mailed to shareholders on or about
June 28, 1999.
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I. DESCRIPTION OF THE REORGANIZATION
The Company's Board of Directors has called the Meeting to ask
shareholders to consider and vote on one proposal -- approval of the
Reorganization Agreement. Please be sure to read the entire Proxy to determine
how the Reorganization will affect your investment before casting your vote.
DESCRIPTION OF THE PROPOSAL
At meetings held in March and May 1999, the Company's Board of Directors
(including a majority of the independent Board members, meaning those who are
not "interested persons" under the Investment Company Act of 1940 (the "1940
Act")), voted to approve the Reorganization. At the Meeting, the shareholders of
the Fund will be asked to approve the Reorganization. If shareholder approval is
obtained, and the other conditions to the closing of the Reorganization (the
"Closing") are met, Fund shareholders will receive shares of a corresponding
Successor Fund equal in value to their holdings of Fund shares immediately
before the Reorganization. Each Fund will then be terminated and liquidated.
The dollar value and class of the Successor Fund shares received by Fund
shareholders in the Reorganization will be identical to the dollar value and
class of the Fund shares owned by each Fund shareholder immediately before the
Reorganization. EACH SUCCESSOR FUND WILL HAVE THE SAME INVESTMENT OBJECTIVE,
PRINCIPAL INVESTMENT STRATEGIES AND INVESTMENT RISKS AS ITS CORRESPONDING FUND,
AND THE REORGANIZATION WILL NOT RESULT IN ANY CHANGE TO THE INVESTMENT ADVISER
AND INVESTMENT SUB-ADVISER(S) WHO CURRENTLY MANAGE THE FUNDS. Similarly, the
features and services that are available to Fund shareholders today will
continue to be available to Successor Fund shareholders after the
Reorganization. However, the Successor Fund differs in some respects from the
Fund, and these differences are described in more detail below.
It is possible that a majority of a Fund's shareholders entitled to vote
do not approve the Reorganization. In such a case, shareholders will retain
their shares in the Fund and the Board of Directors of the Company will
contemplate what further action is appropriate.
The Meeting is scheduled for August 13, 1999, and the Reorganization, if
approved, is expected to occur on or about August 20, 1999.
DESCRIPTION OF THE REORGANIZATION AGREEMENT
The Reorganization Agreement is the governing document of the
Reorganization. Among other things, it provides for (i) the transfer of all of
the assets and liabilities of the Fund to the Successor Fund in exchange for
shares of equal value of designated classes of the Successor Fund; and (ii) the
distribution of such Successor Fund shares to shareholders of the Fund in
liquidation of the Fund. The completion of the Reorganization is conditioned
upon the Company and Nations Institutional Reserves receiving an opinion from
counsel that the exchange contemplated by the Reorganization will be tax-free
under federal law. The Reorganization Agreement includes a number of other
conditions to completion of the Reorganization, sets forth representations and
warranties of the parties and describes the mechanics of the transaction.
As is discussed in more detail below, the Nations International Equity
Fund's Successor Fund will be a "feeder" in a master/feeder structure, which
simply means that it will invest all of its assets in a master portfolio that
has an identical investment objective and principal investment strategies. In
exchange for investing its assets in a master portfolio, Nations Master
Investment Trust ("NMIT"), which is the registered investment company in the
Nations Funds family that would "house" the master portfolio, will issue an
"interest" in such master portfolio (similar to a share) to the Fund.
Operationally, this exchange--i.e., an interest in a master portfolio in return
for the assets and liabilities of the Fund--is expected to occur simultaneously
with the Closing and will be governed by separate agreement. Nations
International Value Fund's Successor Fund has reserved the right to convert to
such a master/feeder structure in the future, and it is management's current
intention to seek to obtain necessary Board approval to convert it to a "feeder"
in a master/feeder structure within the next year.
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The Reorganization Agreement also provides that Fund shareholders will
bear the expenses associated with the Reorganization on a pro rata basis,
including the cost of soliciting proxies to obtain shareholder approval.
However, Nations International Equity Fund's investment adviser (and/or its
affiliates) may effectively bear the PRO RATA portion of the Reorganization
expenses attributable to that Fund, depending upon the Fund's asset levels,
because of a total operating expense ratio commitment in place. Shareholder
Communications Corp. and A.D.P. Proxy Services, Inc. have been hired to conduct
the proxy solicitation, and provide proxy mailing and recordkeeping services,
including vote tabulation. The cost of employing these entities in connection
with the Reorganization is expected to be approximately $10,080.
The Reorganization may be abandoned at any time before the Closing upon
the mutual consent of the Company and Nations Institutional Reserves. At any
time before or after approval (to the extent permitted by law) of the agreement
by the shareholders of the Funds (i) the parties may, by written agreement
authorized by the Company's Board of Directors and Nations Institutional
Reserves' Board of Trustees, amend any of the provisions of the Reorganization
Agreement; and (ii) either party may waive any default by the other party or the
failure to satisfy any of the conditions to its obligations (the waiver to be in
writing and authorized by an appropriate officer of the relevant party).
The Reorganization Agreement must be approved by a vote of a majority of
all of the shareholders of each Fund who are present at the meeting, either in
person or by proxy. Copies of the Reorganization Agreement are available upon
request by writing or calling the Company at the toll-free number listed above
or at the SEC's website (www.sec.gov).
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT FUND
SHAREHOLDERS VOTE FOR THE REORGANIZATION AGREEMENT.
II. THE PURPOSE OF THE REORGANIZATION
The Reorganization offers several benefits to Fund shareholders:
o By establishing a master/feeder structure for Nations International
Equity Fund's Successor, NMIT would have the potential to attract other
feeders and access additional distribution channels that would not
otherwise be available if such Successor operated on a stand-alone
basis. This could result in higher asset levels, which, in turn, may
lead to economies of scale for NMIT investors, including Nations
International Equity Fund's Successor Fund. As discussed above, Nations
International Value Fund's Successor Fund has reserved the right to
convert to a master/feeder structure, which if adopted in the future,
would allow it to combine its assets with those of other similar funds,
thereby potentially achieving economies of scale and other benefits
that come from greater asset size.
o The Reorganization is one part of a broader initiative to streamline
the operations of the Nations Funds family, which consists of several
registered investment companies. Over time, management expects to
reduce the number of registered investment companies in the fund family
without necessarily impacting investment alternatives. Management
believes that if it were permitted operate the same number of mutual
funds with fewer registered investment companies, certain efficiencies
and benefits to shareholders in the Nations Funds family should accrue
over the long term. These benefits may include, among other things,
cost savings relating to the reduction of certain accounting, legal and
securities registration costs.
o The Successor Funds will have more flexibility in their investment
policies, including policies that permit them to adopt a
"master/feeder" structure. A master/feeder structure, if adopted in the
future, would allow a Successor Fund to combine its assets with those
of other similar funds, thereby potentially achieving economies of
scale and other benefits that come from greater asset size.
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o The Successor Funds will be part of a Massachusetts business trust,
which generally has more flexibility in its operations than a Maryland
corporation like the Company.
The Reorganization will not result in any change to the investment adviser
or sub-adviser(s) who currently manage either Fund. In addition, the
Reorganization will not result in any change to the total operating expense
ratios (before or after waivers and/or reimbursements) of the various classes.
For more information about fees and expenses, see "IV. Other Information About
the Reorganization--Comparison of Fees and Expenses." Similarly, the features
and services that are available to Fund shareholders today will also be
available to Successor Fund shareholders after the Reorganization. The exchange
of shares in the Reorganization is expected to be tax-free under federal law. In
addition, the Reorganization Agreement provides that Fund shareholders will bear
the expenses associated with the Reorganization on a pro rata basis, including
the cost of soliciting proxies to obtain shareholder approval. However, Nations
International Equity Fund's investment adviser (and/or its affiliates) may
effectively bear the pro rata portion of the Reorganization expenses
attributable to that Fund, depending upon the Fund's asset levels, because of a
total operating expense ratio commitment in place.
III. THE EFFECTS OF THE REORGANIZATION
As noted above, there are some differences between each Fund and its
Successor Fund, which are summarized below:
o After the Reorganization, Fund shareholders will hold shares in a
series of Nations Institutional Reserves, a registered investment
company in the Nations Funds family. Unlike the Company, which is a
Maryland corporation, Nations Institutional Reserves is a Massachusetts
business trust.
o The Nations International Equity Fund's Successor is a "feeder" in a
master/feeder structure, and Nations International Value Fund's
Successor has reserved the right to convert to a feeder in such a
structure.
o Each Fund and its Successor Fund will have somewhat different
fundamental and non-fundamental investment policies. For example, the
Successor Funds will have the ability under their fundamental policies
to invest all of their assets in master portfolios rather than in
individual securities.
A DIFFERENT REGISTERED INVESTMENT COMPANY
Federal securities laws largely govern the way that mutual funds operate,
but they do not cover every aspect of a fund's existence and operation. State
law and each fund's governing documents fill in most of the gaps and can create
additional operational rules and restrictions that funds must follow. The
Company is a Maryland corporation. The proposed Reorganization would reorganize
each Fund into a series of Nations Institutional Reserves, which is a
Massachusetts business trust. For Fund shareholders the "move" to Massachusetts
would be largely on paper; each Successor Fund would continue to be advised by
the same investment adviser and investment sub-adviser(s), and have its shares
distributed by the same distributor , as each Fund is currently. The Funds'
other service providers would also be unchanged after the Reorganization.
Generally, under Massachusetts business trust law, a mutual fund's
governing instrument, called a Declaration of Trust, may establish the way it
will operate with few state law requirements or prohibitions. Thus, mutual funds
generally have more flexibility in their operations and certainty about any
operational restrictions because the restrictions are written in the fund's
declaration of trust. The following discussion outlines some of the differences
between the state law and documents currently governing the Company's Funds and
that which will apply to the Successor Fund as a series of Nations Institutional
Reserves.
o THE BOARD OF TRUSTEES. Maryland corporations are governed by a Board of
Directors. The Successor Funds, as part of a business trust, instead
will be governed by a Board of Trustees. The
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Board of Nations Institutional Reserves will have ten Trustees, all ten
of whom currently serve as Directors of the Company.
o GOVERNING DOCUMENTS. Maryland corporations are governed by
organizational documents called Articles of Incorporation (or sometimes
called a Charter) and By-Laws. Massachusetts business trusts are
governed by a Declaration of Trust and By-Laws. These governing
documents are generally similar, although there are some differences.
For example, in order for the Company to dissolve under Maryland law,
its Articles of Incorporation and By-Laws provide (and Maryland law
requires) that a majority of all outstanding shares of the Company must
approve such a dissolution. The Declaration of Trust and By-Laws of
Nations Institutional Reserves provides that only a majority of the
shares voted at a meeting is needed to approve a similar dissolution.
In general, however, the attributes of a share of common stock are
comparable to those of a share of beneficial interest, I.E., shares of
both are entitled to one vote per share held and fractional votes for
fractional shares held, and will vote in the aggregate and not by
portfolio or class except as otherwise required by law or when class
voting is permitted by its Board.
o SHAREHOLDER LIABILITY. Under Maryland law, shareholders are not
personally liable for the debts of the Fund. By contrast, under
Massachusetts law, interestholders of a Massachusetts business trust
like Nations Institutional Reserves could, under certain circumstances,
be held personally liable for the obligations of the trust. However,
Nations Institutional Reserves has provisions in its Declarations of
Trust that are intended to protect shareholders from such liability.
Thus, the risk of an interestholder incurring a financial loss on
account of interestholder liability is limited to circumstances in
which the trust itself is unable to meet its obligations (e.g., in the
event its liabilities exceed its assets). This is a highly unlikely
event.
THE MASTER/FEEDER STRUCTURE
Nations International Equity Fund's Successor is a feeder fund in a
master/feeder structure, which means simply that it invests all of its assets in
a master portfolio with identical investment objectives and principal investment
strategies. The master portfolio is a series of NMIT--a registered investment
company in the Nations Funds family. The Successor Fund would be, therefore, an
interestholder in the corresponding master portfolio. One advantage of a
master/feeder structure is that feeder funds investing in the same master
portfolio can reduce their expenses through sharing the costs of managing a
large pool of assets. Another advantage of such a structure is that the master
portfolios will have opportunities to pursue other distribution channels--such
as offshore fund investors--that would not otherwise be available to stand-alone
mutual funds. While no other feeder funds currently invest in the master
portfolio, such feeders may so invest in the future.
All feeders in the master portfolio will invest on the same terms and
conditions as the Successor Fund and will pay a proportionate share of the
master portfolio's expenses. However, other investors in the master portfolio
are not required to sell their shares at the same offering price as the
Successor Fund and could be sold with different sales loads and on-going
administrative and other expenses. Therefore, Successor Fund shareholders may
have different returns than other shareholders that invest in the master
portfolio. In addition, the Successor Fund may withdraw its entire investment
from the master portfolio if the Board of Trustees of Nations Institutional
Reserves determines that it is in the best interests of such Successor Fund to
do so. Also other investors in a master portfolio may similarly withdraw their
investment at any time. The Successor Fund might withdraw, for example, if the
master portfolio changed its investment objective, policies and limitations in a
manner unacceptable to the Board of Trustees of Nations Institutional Reserves.
A withdrawal could result in a distribution in kind of portfolio securities (as
opposed to a cash distribution) by a master portfolio to the Successor Fund.
That distribution could result in a less diversified portfolio of investments
for the Successor Fund and could adversely affect the liquidity of the Successor
Fund's investment portfolio. In addition, if securities were distributed, the
Successor Fund generally would incur brokerage commissions, capital gains or
losses, and/or other charges in converting the securities to cash. This could
result in a lower net asset value of a shareholder's shares and/or certain tax
consequences for a shareholder.
MODERNIZED AND STREAMLINED INVESTMENT POLICIES AND RESTRICTIONS
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The Funds' investment objectives, principal investment strategies and
investment risks will not change as a result of the Reorganization.
However, the Successor Funds will have a more modernized and streamlined
set of fundamental and non-fundamental investment policies and restrictions.
Some of the Funds' current investment policies and restrictions may limit their
portfolio managers from investing in a security that is both consistent with the
investment objective of the Funds and also a good investment. One reason for
changing some of these investment policies is to remove restrictions that
unnecessarily hamper the portfolio managers' investment discretion. Many of
these restrictions were put in place by the Funds as a result of the directives
of various state securities commissions. Recent changes to federal securities
laws have superseded these directives. Another reason is the desire to migrate
towards uniform investment policies for similarly managed funds in the Nations
Funds family.
One of the differences between the Successor Funds' fundamental policies
and those of the Funds is that the Successor Funds will have the ability under
its fundamental policies to invest all of its assets in a master portfolio
rather than in individual securities.
For a detailed comparison of the fundamental investment policies and
limitations of the Funds and the Successor Funds see Appendix I to this Proxy.
IV. OTHER INFORMATION ABOUT THE REORGANIZATION
COMPARISON OF FEES AND EXPENSES. The Reorganization will not result in any
change to the total operating expense ratios (before or after waivers and/or
reimbursements) of the various classes. As noted above, one Successor
Fund--Nations International Equity Fund--will become a "feeder" in a
master/feeder structure. It is expected that one or more additional mutual funds
or collective investment vehicles will become additional feeders to its master
portfolio. With respect to the other Successor Fund--Nations International Value
Fund--it is management's current intention to seek necessary Board approval to
convert the Successor Fund to a "feeder" in a master/feeder structure within the
next year. Nations International Value Fund would only be converted to a feeder
if one or more additional mutual funds or collective investment vehicles were
expected to become additional feeders to the corresponding master portfolio. In
each case, where additional feeders are expected to be established, the
resulting higher asset levels in a master portfolio could lead to various
benefits, including economies of scale (and possibly cost savings), for
investors in such master portfolios, including the Successor Funds. However, if
one or more additional feeders were not established for either master portfolio,
and a Successor Fund remained the sole investor in a master/feeder structure,
expenses could be higher than they would be for a fund that invests directly in
securities. If this were to occur, the Board of Trustees of Reserves would most
likely consider what further action would be appropriate, including converting a
Successor Fund back into a fund that invests directly in securities.
INVESTMENT ADVISER AND OTHER SERVICE PROVIDERS. The Funds and Successor
Funds have the same service providers except that certain of the service
providers for the Nations International Equity Fund's Successor Fund will
provide their services indirectly through the corresponding master portfolio.
Upon the Closing of the Reorganization, these service providers will continue to
serve the Successor Funds in the capacities indicated below.
6
<PAGE>
SERVICE PROVIDERS FOR THE FUNDS AND THE SUCCESSOR FUNDS
-------------------------------------------------------
Investment Adviser: NationsBanc Advisors, Inc.
Investment Sub-Adviser(s): Gartmore Global Partners (for
Nations International Value
Fund and its Successor);
Gartmore Global Partners,
INVESCO Global Asset
Management (N.A.), Inc. and
Putnam Investment
Management, Inc. (for Nations
International Equity Fund and
its Successor)
Distributor: Stephens Inc.
Co-Administrator: NationsBanc Advisors, Inc.
Co-Administrator: Stephens Inc.
Sub-Administrator: The Bank of New York
Custodian: The Bank of New York
Transfer Agent: First Data Investor Services
Group, Inc.
Sub-Transfer Agent: NationsBank, N.A. (for Primary
A and B shares only)
Independent Auditors: PricewaterhouseCoopers LLP
SALES LOADS, SHAREHOLDER TRANSACTIONS AND SERVICES. Shares of the Funds
and corresponding Successor Funds have both identical front-end or contingent
deferred sales charges, if any, and identical dividend policies. Other features,
such as exchange and redemption policies, of the classes of the Funds and
corresponding Successor Funds are substantially similar.
ACCOUNTING TREATMENT OF THE REORGANIZATION. The Successor Funds will
become the accounting successor of their corresponding funds as of the Closing,
which means that the financial statements and performance history of the Funds'
and their classes will become those of the Successor Funds and classes as though
such financial statements and performance history were the Successor Funds' own.
FEDERAL INCOME TAX CONSEQUENCES. The Funds and Successor Funds each intend
to qualify, as of the Closing, as a separate "regulated investment company"
under the Internal Revenue Code of 1986, as amended (the "Code"). Accordingly,
the Funds and the Successor Funds have been, and expect to continue to be,
relieved of federal income tax liability.
Consummation of the Reorganization with respect to the Funds and the
Successor Funds is subject to the condition that the Company and Nations
Institutional Reserves receive an opinion from Morrison & Foerster LLP
substantially to the effect that, for federal income tax purposes: (i) the
transfer of all of the assets and liabilities of the Funds to the Successor
Funds in exchange for shares of the Successor Funds, and the distribution of
those shares to shareholders of the Funds, will constitute a "reorganization"
within the meaning of Section 368(a) of the Code, and the Funds and the
Successor Funds will each be a "party to a reorganization" within the meaning of
Section 368(b) of the Code in respect of the Reorganization; (ii) no gain or
loss will be recognized by the Funds upon the transfer of their assets and
liabilities to the Successor Funds solely in exchange for the shares of the
Successor Funds; (iii) no gain or loss will be recognized by the Successor Funds
upon the receipt of the assets and assumption of liabilities of the Funds solely
in exchange for the shares of the Successor Funds; (iv) the basis of the Funds'
assets received by the Successor Funds pursuant to the Reorganization will be
the same as the basis of those assets in the hands of the Funds immediately
prior to the
7
<PAGE>
Reorganization; (v) the holding period of the Funds' assets in the hands of the
Successor Funds will include the period for which such assets have been held by
the Funds; (vi) no gain or loss will be recognized by the Funds on the
distribution to its shareholders of the shares of the Successor Funds; (vii) no
gain or loss will be recognized by the shareholders of the Funds upon their
receipt of the shares of the Successor Funds in exchange for such shareholders'
shares of the Funds; (viii) the basis of the shares of the Successor Funds
received by the shareholders of the Funds will be the same as the basis of the
shares of the Funds surrendered by such shareholders pursuant to the
Reorganization; (ix) the holding period for the shares of the Successor Funds
received by shareholders of the Funds will include the period during which such
shareholders held Fund shares surrendered in exchange therefor, provided that
such Fund shares are held as capital assets in the hands of the Funds
shareholders on the date of the exchange; and (x) each Successor Fund will
succeed to and take into account the tax attributes, described in Section 381(c)
of the Code, of the corresponding Funds as of the date of the Closing, subject
to the conditions and limitations specified in the Code. Shareholders of the
Funds should note, however, that the sale of securities by the Funds prior to
the Closing whether in the ordinary course of business or in anticipation of the
Closing, could result in a taxable capital gains distribution prior to the
closing.
The opinion of Morrison & Foerster LLP with respect to federal income tax
consequences described above will be based upon facts, representations and
assumptions set forth or referred to in the opinion. These representations
include factual representations to be made in certificates delivered to Morrison
& Foerster LLP by the management of the Company and Reserves. Morrison &
Foerster LLP will neither verify, audit or otherwise confirm the validity of
such facts, representations and assumptions and its opinion may be jeopardized
if any of these facts, representations and assumptions are incorrect in any
material respect. In addition, the Company and Reserves have not sought and will
not seek, a private ruling from the Internal Revenue Service ("IRS") with
respect to the federal income tax consequences of the Reorganization. The
opinion of Morrison & Foerster LLP is not binding on the IRS and does not
preclude the IRS from adopting a contrary position. Such a contrary position
could be sustained by a court. If the opinion of Morrison & Foerster LLP cannot
be relied upon or the IRS adopts a contrary position which is sustained, the
Fund and its shareholders might have adverse tax consequences, including the
taxable receipt of shares of the Successor Fund and a new holding period in such
shares. However, the Company and Reserves believe that this possibility is
remote and that the exchange of the Successor Fund's shares for Fund shares is
expected to be tax-free under federal income tax law. Shareholders of the Fund
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.
BOARD CONSIDERATION. The Company's Board of Directors unanimously voted to
approve the Reorganization Agreement at meetings held in March and May 1999. In
reviewing the proposed Reorganization, the Board considered the potential impact
of the Reorganization on the Funds' shareholders. The Board (with the advice and
assistance of independent counsel) reviewed and took into account, among other
things: (1) the Reorganization as part of a broader initiative to streamline the
operations of the Nations Funds family; (2) the fact that Nations International
Equity Fund's Successor is a feeder in a master/feeder structure; (3) the
investment objective, principal investment strategies, investment risks, and
policies and limitations of each Fund, and their compatibility with those of
each corresponding Successor Fund; (4) the anticipated tax-free nature of the
exchange contemplated by the Reorganization; (5) the fact that total operating
expense ratios (before and after waivers and/or reimbursements) would be the
same for each class of each Fund and the corresponding class of the
corresponding Successor Fund, including the fact that Nations International
Equity Fund's Successor Fund's aggregate master and feeder level fees and
expenses would be the same, as of the Reorganization, as if each corresponding
Successor Fund invested directly in securities; (6) the fact that a pro rata
share of the expenses associated with the Reorganization would be borne by
Nations International Value Fund shareholders; (7) the fact that Nations
International Equity Fund shareholders would not be bearing any Reorganization
expenses due to total operating expense ratio commitments; and (8) that
shareholders would remain invested in the Funds if shareholders did not approve
the Reorganization. Based upon its evaluation of these factors, and its
consideration of the expected benefits of the Reorganization (discussed under
"II--The Purpose of the Reorganization"), and in light of their fiduciary duties
under federal and state law, the Company's Board of Directors, including all of
the non-interested members of the Board, determined that the proposed
Reorganization is in the best interests of the shareholders of the Funds and
that the interests of the shareholders of the Funds will not be diluted as a
result of the Reorganization.
THE COMPANY'S BOARD OF DIRECTORS UNANIMOUSLY RECOMMENDS THAT SHAREHOLDERS
VOTE FOR THE REORGANIZATION AGREEMENT.
8
<PAGE>
V. VOTING INFORMATION
GENERAL INFORMATION. This Proxy is being furnished in connection with the
solicitation of proxies for the Meeting by the Company's Board of Directors. It
is expected that the solicitation of proxies will be primarily by mail. Officers
and agents of the Company also may solicit proxies by telephone, telegraph or
personal interview. The expenses of the Reorganization, including any expenses
associated with retaining a third party, to assist in the solicitation of
proxies, will be borne by Fund shareholders. However, after giving effect to
total operating expense ratio commitments, the Fund's investment adviser (and/or
its affiliates) effectively will bear the pro rata portion of the expenses
attributable to Nations International Equity Fund shareholders. Any shareholder
giving a proxy may revoke it at any time before it is exercised (i) by
submitting to the Company a written notice of revocation, (ii) by submitting to
the Company a subsequently dated proxy or by attending the Meeting and voting in
person.
Only shareholders of record at the close of business on May 13, 1999,
will be entitled to vote at the Meeting. On that date, the following number
of shares of each Fund were outstanding and entitled to be voted: Nations
International Equity Fund--56,139,400 and Nations International Value
Fund--11,028,112.
Each whole and fractional share is entitled to a whole or fractional vote.
If the accompanying proxy ballot 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.
Significant Shareholders. As of May 13, 1999, the officers and Directors
of the Company as a group owned less than 1% of either Fund. The tables below
show the name, address and share ownership of each person known to each Company
to have beneficial or record ownership with respect to 5% or more of a class of
the Funds as of May 13, 1999.
<TABLE>
<CAPTION>
CLASS; AMOUNT PERCENTAGE
NAME AND OF SHARES OWNED; PERCENTAGE PERCENTAGE OF FUND
FUND ADDRESS TYPE OF OWNERSHIP OF CLASS OF FUND POST-CLOSING
- ---- ------- ----------------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Nations International NationsBank, NA Primary A 93.92% 87.98% 87.98%
Equity Fund Attn: Tony Farrer 49,393,620.38;
1401 Elm Street, 11th Floor record
Dallas, TX 75202-2911
Stephens Inc. Primary B 100% 0.00% 0.00%
Attn: Cindy Cole 0.89; record
111 Center Street
Little Rock, AR 72201
Bear Stearns Securities Corp. Investor A 21.67% 0.53% 0.53%
FBO 101-42060-21 297,282.61;
1 Metrotech Center North record
Brooklyn, NY 11201-3859
Merrill Lynch, Pierce, Fenner & Investor A 16.02% 0.39% 0.39%
Smith Inc. For The Sole Benefit 219,814.67;
of its Customers record
Attn: Service Team
4800 Deer Lake Drive East,
3rd Floor
Jacksonville, FL 32246
H. Grayson Mitchell Jr. and Investor C 11.09% 0.01% 0.01%
John Rawls TTEE FBO 6,908.46;
Grayson Mitchell Inc. 401 K Plan record
PO Box 128
Emporia, VA 23847
C.A. Porterfield & Rosalee Investor C 10.66% 0.01% 0.01%
Moxley & Frank Minton TTEE 6,639.49;
Starmount Company record
</TABLE>
9
<PAGE>
<TABLE>
<CAPTION>
CLASS; AMOUNT PERCENTAGE
NAME AND OF SHARES OWNED; PERCENTAGE PERCENTAGE OF FUND
FUND ADDRESS TYPE OF OWNERSHIP OF CLASS OF FUND POST-CLOSING
- ---- ------- ----------------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Capital
Accumulation Plan
PO Box 10349
Greensboro, NC
27404
C.A. Porterfield & Rosalee Investor C 10.39% 0.01% 0.01%
Moxley & Frank Minton TTEE 6,474.77;
Starmount Company record
Tax Deferred Savings Plan
PO Box 10349
Greensboro, NC 27404
E. Larry Fonts TTEE FBO Investor C 9.35% 0.01% 0.01%
Central Dallas Association 5,821.37;
Profit Sharing Plan record
1201 Elm Street, Suite 5310
Dallas, TX 75270
Tatsushi T. Kubo, Max W. Investor C 8.99% 0.01% 0.01%
Dahlgren, & John Dahlgren 5,597.15;
TTEES FBO record
Epic Products International Corp.
401(K) Plan
2801 East Randol Mill Road
Arlington, TX 76011
NFSC FEBO #W17-662682 Investor C 6.43% 0.01% 0.01%
NFSC/FMTC IRA Rollover 4,003.75;
FBO Linda G. Walker record
7 Sally Street
Spartanburg, SC 29301
James B. Ford and Joanne W. Investor C 6.38% 0.01% 0.01%
Ford JTT 3,974.55;
25 Century Blvd., Suite 605 record
Nashville, TN 37214
Donald R. Atkins and Investor C 5.56% 0.01% 0.01%
David R. Morgan TTEES 3,462.56;
Lyndon Steel 401(K) Profit record
Sharing Plan
1947 Union Cross Road
Winston, Salem, NC 27107
Nations International NationsBank, NA Primary A 89.71% 82.78% 82.78%
Value Fund Attn: Tony Farrer 9,129,180.08;
1401 Elm Street, record
11th Floor
Dallas, TX 75202
Charles Schwab & Company, Inc. Primary A 6.23% 5.75% 5.75%
Special Custody Account 634,069.75;
For Benefit of Custody Account record
Attn: Mutual Funds
101 Montgomery Street
San Francisco, CA 94104
Stephens Inc. Primary B 100% 0.00% 0.00%
Attn: Cindy Cole 1.07; record
111 Center Street
Little Rock, AR 72201
Mercantile Safe Deposit & Trust Investor A 5.80% 0.20% 0.20%
TTEE 21,700.27;
FBO Carteret General Hosp record
MPPP TRS
U/A Dated 10/08/98
766 Old Hammonds Ferry Road
</TABLE>
10
<PAGE>
<TABLE>
<CAPTION>
CLASS; AMOUNT PERCENTAGE
NAME AND OF SHARES OWNED; PERCENTAGE PERCENTAGE OF FUND
FUND ADDRESS TYPE OF OWNERSHIP OF CLASS OF FUND POST-CLOSING
- ---- ------- ----------------- -------- ------- ------------
<S> <C> <C> <C> <C> <C>
Linthicum, MD 21090
State Street Bank & Trust Co. Investor C 39.52% 0.15% 0.15%
TTEE 16,474.35;
FBO Coastgear & Company record
Attn: Kevin Smith
105 Rosemont Avenue
Westwood, MA 02090
Merrill Lynch, Pierce, Fenner & Investor C 26.02% 0.10% 0.10%
Smith, Inc. for the Sole Benefit of 10,832.70;
Its Customers record
Attn: Service Team
4800 Deer Lake Drive East
3rd Floor
Jacksonville, FL 32246
Summerville Pediatrics PA Investor C 24.18% 0.09% 0.09%
Profit Sharing Plan 10.065.56;
312 Midland Parkway record
Summerville, SC 29485-8114
</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.
QUORUM. In the event that a quorum is not present at the Meeting, or in
the event that a quorum is present at the Meeting but sufficient votes to
approve the Reorganization Agreement are not received, one or more
adjournment(s) may be proposed to permit further solicitation of proxies. Any
adjourned session or sessions may be held, after the date set for the original
Meeting without notice except announcement at the Meeting, but, under Maryland
law, no more than 120 days after the record date. If any adjournment is
proposed, the persons named as proxies will vote those proxies in their sole
discretion.
A quorum is constituted with respect to the Funds by the presence in
person or by proxy of the holders of more than one-half of the outstanding
shares of the Fund entitled to vote at the Meeting. For purposes of determining
the presence of a quorum for transacting business at the Meeting, abstentions
will be treated as shares that are present at the Meeting but which have not
been voted. Abstentions will have the effect of a "no" vote for purposes of
obtaining the requisite approvals of the Reorganization Agreement. Broker
"non-votes" (that is, proxies from brokers or nominees indicating that such
persons have not received instructions from the beneficial owners or other
persons entitled to vote shares on a particular matter with respect to which the
brokers or nominees do not have discretionary power) will be treated the same
way as abstentions.
ANNUAL MEETINGS AND SHAREHOLDER MEETINGS. Because the Company does not
hold annual meetings, there is no stated deadline for submitting shareholder
proposals for inclusion in any future proxy statement of the Company. Subject to
certain conditions, which are set forth in the Company's Articles of
Incorporation and By-Laws, holders of at least 10% of the outstanding shares of
either Fund may have the right to call a meeting of shareholders for the purpose
of voting upon the question of removal of Directors. In such a case,
shareholders will be assisted by the Company in shareholder communications.
SHAREHOLDER APPROVAL. The Reorganization Agreement is being submitted for
approval at the Meeting by the Funds' shareholders pursuant to the Company's
Articles of Incorporation and By-Laws, and was unanimously approved by the
Company's Board of Directors. The Reorganization Agreement must be approved by a
majority of the shares present at the Meeting in person or by proxy.
11
<PAGE>
A vote of the shareholders of the Successor Funds is not being solicited,
since their approval or consent is not necessary for the Reorganization.
OTHER BUSINESS. The Company's Board knows of no other business to be
brought before the Meeting. However, if any other matters come before the
Meeting, it is the intention that proxies which do not contain specific
restrictions to the contrary will be voted on such matters in accordance with
the judgment of the persons named in the enclosed form of proxy.
HOW TO OBTAIN ADDITIONAL INFORMATION ABOUT THE FUNDS. Additional
information about the Funds is included in its most recent prospectuses and
statement of additional information. You may obtain a prospectus or statement of
additional information without charge by calling 1-800-321-7854 or by writing
the Company at: Nations Fund, Inc., c/o Stephens Inc., One Bank of America
Plaza, 33rd Floor, Charlotte, North Carolina 28255.
Reports and other information filed by the Company 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.
In addition, the SEC maintains a web site (www.sec.gov) that contains reports,
other information and proxy statements filed by the Company.
FINANCIAL STATEMENTS. The audited financial statements and financial
highlights for the Funds for the fiscal year ended March 31, 1999, and the
independent accountants report thereon, are incorporated by reference into this
Proxy.
SHAREHOLDER INQUIRIES. For additional information call 1-800-321-7854
or write to the Company at the address on the cover page of this Proxy.
* * *
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 (704) 388-2641. YOU MAY ALSO SUBMIT
YOUR PROXY BY A TOLL-FREE PHONE CALL OR BY VOTING ON-LINE, AS INDICATED BELOW.
12
<PAGE>
- --------------------------------------------------------------------------------
TWO QUICK AND EASY WAYS TO SUBMIT YOUR PROXY
As a valued Fund shareholder, your proxy vote is important to us. That's why
we've made it faster and easier to submit your proxy at YOUR convenience, 24
hours a day. After reviewing the enclosed PROXY STATEMENT, select one of the
following quick and easy methods to submit your proxy - ACCURATELY and QUICKLY.
ON-LINE BY TOLL-FREE PHONE CALL
1. Read the enclosed PROXY STATEMENT 1. Read the enclosed PROXY STATEMENT
and have your PROXY BALLOT(S)* at and have your PROXY BALLOT(S)* at
hand. hand.
2. Go to Web site WWW.PROXYVOTE.COM 2. Call toll-free 1-800-690-6903.
3. Enter the 12-digit Control Number 3. Enter the 12-digit Control Number
found on your PROXY BALLOT(S). found on your PROXY BALLOT(S).
4. Submit your proxy using the 4. Submit your proxy using the
easy-to-follow instructions. easy-to-follow instructions.
* DO NOT MAIL THE PROXY BALLOT(S) IF SUBMITTING YOUR PROXY BY INTERNET OR
TELEPHONE.
- --------------------------------------------------------------------------------
13
<PAGE>
APPENDIX I
COMPARISON OF FUNDAMENTAL INVESTMENT POLICIES AND LIMITATIONS
OF THE FUNDS AND THE SUCCESSOR FUNDS
FUNDAMENTAL INVESTMENT POLICIES AND
LIMITATIONS
The Fund may not: The Successor Fund may not:
1. Underwrite securities issued by any 1. Underwrite any issue of securities
other person, except to the extent within the meaning of the 1933 Act
that the purchase of securities and except when it might technically
the later disposition of such be deemed to be an underwriter
securities in accordance with the either (a) in connection with the
Fund's investment program may be disposition of a portfolio
deemed an underwriting. This security, or (b) in connection
restriction shall not limit the with the purchase of securities
Fund's ability to invest in directly from the issuer thereof
securities issued by other in accordance with its investment
registered investment companies. objective. This restriction shall
not limit the Fund's ability to
invest in securities issued by other
registered investment companies.
2. Invest in real estate or real 2. Purchase or sell real estate,
estate limited partnership except a Fund may purchase
interests. (A Fund may, however, securities of issuers which deal
purchase and sell securities or invest in real estate and may
secured by real estate or interests purchase securities which are
therein or issued by issuers which secured by real estate or
invest in real estate or interests interests in real estate.
therein.) This restriction does
not apply to real estate limited
partnerships listed on a national
stock exchange (E.G., the New York
Stock Exchange).
3. Purchase or sell commodity 3. Purchase or sell commodities,
contracts except that each Fund except that a Fund may to the
may, to the extent appropriate extent consistent with its
under its investment policies, investment objective, invest in
purchase publicly traded securities securities of companies that
of companies engaging in whole or purchase or sell commodities or
in part in such activities, may which invest in such programs, and
enter into futures contracts and purchase and sell options, forward
related options, may engage in contracts, futures contracts, and
transactions on a when-issued or options on futures contracts.
forward commitment basis, and may This limitation does not apply to
enter into forward currency foreign currency transactions
contracts in accordance with its including without limitation
investment policies. forward currency contracts.
I-1
<PAGE>
(Except for Nations International 4. Purchase any securities which
Value Fund) Purchase any securities would cause 25% or more of the
which would cause 25% or more of value of its total assets at the
the value of the Fund's total time of purchase to be invested in
assets at the time of such purchase the securities of one or more
to be invested in the securities of issuers conducting their principal
one or more issuers conducting business activities in the same
their principal activities in the industry, provided that: (a) there
same industry, provided that this is no limitation with respect to
limitation does not apply to obligations issued or guaranteed
investments in U.S. Government by the U.S. government, any state
Obligations. Nations or territory of the United States,
International Value Fund may not or any of their agencies,
invest 25% or more of its total instrumentalities or political
assets in one or more issuers subdivisions, and (b)
conducting their principal business notwithstanding this limitation or
activities in the same industry any other fundamental investment
(with certain exceptions). limitation, assets may be invested
in the securities of one or more
diversified management investment
companies to the extent permitted by
the 1940 Act and the rules and
regulations thereunder.
4. (Except for Nations International 5. Make loans, except to the extent
Value Fund) make loans, except that permitted by the 1940 Act.
a Fund may purchase and hold debt
instruments (whether such
instruments are part of a public
offering or privately placed), may
enter into repurchase agreements and
may lend portfolio securities in
accordance with its investment
policies.
I-2
<PAGE>
5. (Except for Nations International 6. Borrow money, issue senior
Value Fund) borrow money or issue securities or mortgage, pledge or
senior securities as defined in the hypothecate its assets except to
Investment Company Act of 1940, as the extent permitted under the
amended (the "1940 Act") except 1940 Act.
that (a) a Fund may borrow money
from banks for temporary purposes
in amounts up to one-third of the
value of such Fund's total assets
at the time of borrowing, provided
that borrowings in excess of 5% of
the value of such Fund's total
assets will be repaid prior to the
purchase of additional portfolio
securities by such Fund, (b) a Fund
may enter into commitments to
purchase securities in accordance
with the Fund's investment program,
including delayed delivery and
when-issued securities, which
commitments may be considered the
issuance of senior securities, and
(c) a Fund may issue multiple
classes of shares in accordance
with SEC regulations or exemptions
under the 1940 Act. The purchase
or sale of futures contracts and
related options shall not be
considered to involve the borrowing
of money or issuance of senior
securities. Each Fund may enter
into reverse repurchase agreements
or dollar roll transactions. The
purchase or sale of futures
contracts and related options shall
not be considered to involve the
borrowing of money or issuance of
senior securities. Nations
International Value Fund may not
borrow money except for temporary
purposes in amounts up to one-third
of the value of its total assets at
the time of such borrowing.
Whenever borrowings exceed 5% of
the Fund's total assets, the Fund
will not make any investments.
6. (Except for the Nations 7. purchase securities (except
International Value Fund) purchase securities issued or guaranteed by
securities of any one issuer (other the U.S. Government, its agencies
than U.S. Government Obligations) or instrumentalities) of any one
if, immediately after such issuer if, as a result, more than
purchase, more than 5% of the value 5% of its total assets will be
of such Fund's total assets would invested in the securities of such
be invested in the securities of issuer or it would own more than
such issuer, except that up to 25% 10% of the voting securities of
of the value of the Fund's total such issuer, except that (a) up to
assets may be invested without 25% of its total assets may be
regard to these limitations and invested without regard to these
with respect to 75% of such Fund's limitations and (b) a Fund's
assets, such Fund will not hold assets may be invested in the
more than 10% of the voting securities of one or more
securities of any issuer. The diversified management investment
Nations International Value Fund companies to the extent permitted
may not purchase securities of any by the 1940 Act.
one issuer (with certain
exceptions, including U.S.
Government securities) if more than
5% of the Fund's total assets will
be invested in the securities of
any one issuer, except that up to
25% of the value of the Fund's
total assets may be invested
without regard to the 5%
limitation. The Fund may not
purchase more than 10% of the
outstanding voting securities of
any issuer subject, however, to the
foregoing 25% exception.
I-3
<PAGE>
7. Purchase any securities on margin
(except for such short-term credits
as are necessary for the clearance
of purchases and sales of portfolio
securities) or sell any securities
short (except against the box.) For
purposes of this restriction, the
deposit or payment by the Fund of
initial or maintenance margin
connection with futures contracts
and related options and options on
securities is not considered to be
the purchase of a security on
margin.
I-4
<PAGE>
EX-2
This AGREEMENT AND PLAN OF REORGANIZATION (the "Agreement") is made as of
this 28th day of June, 1999 by and between Nations Fund, Inc. (the "Company"), a
Maryland corporation, for itself and on behalf of its Nations International
Value Fund and Nations International Equity Fund, and Nations Institutional
Reserves ("Reserves"), a Massachusetts business trust, for itself and on behalf
of its Nations International Value Fund and Nations International Equity Fund.
WHEREAS, the Company and Reserves are open-end management investment
companies registered with the Securities and Exchange Commission (the "SEC")
under the Investment Company Act of 1940, as amended (the "1940 Act");
WHEREAS, the parties desire that the Fund Assets and Liabilities (as
defined below) of the Company's Nations International Value Fund and Nations
International Equity Fund (collectively, the "Acquired Funds") be conveyed to
and be acquired and assumed, respectively, by Reserves' Nations International
Value Fund and Nations International Equity Fund (collectively, the "Acquiring
Funds") in exchange for shares of equal U.S. dollar value of such Acquiring
Funds which shall thereafter promptly be distributed to the shareholders of the
corresponding Acquired Funds in connection with its liquidation as described in
this Agreement and set forth in Schedule A attached hereto (the
"Reorganization"); and
WHEREAS, the parties intend that the Reorganization qualify as a
"reorganization," within the meaning of Section 368(a) of the Internal Revenue
Code of 1986, as amended (the "Code"), and that the Acquiring Funds and the
Acquired Funds will each be a "party to a reorganization," within the meaning of
Section 368(b) of the Code, with respect to the Reorganization.
NOW, THEREFORE, in accordance with the terms and conditions described
herein, the Acquired Funds and Acquiring Funds shall be consolidated as follows:
1. Conveyance of Fund Assets and Liabilities of the Acquired Funds.
(a)Except as provided below, at the Effective Time of the
Reorganization (as defined in Section 8) all assets of every kind,
and all interests, rights, privileges and powers of the Acquired
Funds (the "Fund Assets"), subject to all liabilities of the
Acquired Funds existing as of the Effective Time of the
Reorganization (the "Liabilities"), shall be transferred by each
Acquired Fund to each corresponding Acquiring Fund and shall be
accepted and assumed by such Acquiring Fund, as more particularly
set forth in this Agreement, such that at and after the Effective
Time of the Reorganization: (i) all Fund Assets of the Acquired
Funds shall become the assets of the Acquiring Funds; and (ii) all
Liabilities of the Acquired Funds shall attach to the Acquiring
Funds, enforceable against the Acquiring Funds to the same extent as
if originally incurred by it.
(b)It is understood and agreed that the Fund Assets shall include all
property and assets of any nature whatsoever, including, without
limitation, all cash, cash equivalents, securities, claims (whether
absolute or contingent, known or unknown, accrued or unaccrued) and
receivables (including dividend and interest receivables) owned or
exercisable by the Acquired Funds, and any deferred or prepaid
expenses shown as an asset on the Acquired Funds' books, that the
Liabilities of the Acquired Funds shall include all liabilities,
whether known or unknown, accrued or unaccrued, absolute or
contingent, in all cases, existing at the Effective Time of the
Reorganization.
(c)At least fifteen (15) business days prior to the Closing Date (as
defined in Section 8), the Acquired Funds will provide to, or cause
to be provided to, the Acquiring Funds, a schedule of its
securities, other assets and its known liabilities. It is understood
and agreed that the Acquired Funds may sell any of the securities or
other assets shown on such schedule prior to the Effective Time of
the Reorganization but will not, without the prior approval of the
Acquiring Funds, acquire any additional securities other than
securities that the Acquiring Funds is not permitted to purchase in
accordance with its stated investment objective and policies. At
least ten (10) business days prior to the
<PAGE>
Closing Date, the Acquiring Funds will advise the Acquired Funds of
any investments of the Acquired Funds shown on such schedule that
the Acquiring Funds would not be permitted to hold, pursuant to its
stated investment objective and policies or otherwise. The Acquired
Funds, if requested by the Acquiring Funds, will dispose of any such
securities prior to the Closing Date to the extent practicable and
consistent with applicable legal requirements. In addition, if it is
determined that the investment portfolios of the Acquired Funds and
Acquiring Funds, when aggregated, would contain investments
exceeding certain percentage limitations applicable to the Acquiring
Funds, the Acquired Funds, if requested by the Acquiring Funds, will
dispose of a sufficient amount of such investments as may be
necessary to avoid violating such limitations as of the Effective
Time of the Reorganization.
(d)The Fund Assets shall be transferred and conveyed to the Acquiring
Funds on the following basis:
(1)In exchange for the transfer of the Fund Assets, the Acquiring
Funds shall simultaneously issue to the Acquired Funds at the
Effective Time of the Reorganization full and fractional Shares
of the Acquiring Funds, as set forth in Schedule A attached
hereto, having an aggregate net asset value equal to the net
value of the Fund Assets minus Liabilities so conveyed and
assumed, all determined in accordance with this Agreement. In
this regard, the number of full and fractional shares of the
Acquiring Funds delivered to the Acquired Funds shall be
determined by dividing the value of the Fund Assets minus
Liabilities, computed in the manner and as of the time and date
set forth in this Agreement, by the net asset value of one
Acquiring Funds share of such designated class, computed in the
manner and as of the time and date set forth in this Agreement.
(2)The net asset value of shares to be delivered by the Acquiring
Funds, and the net value of the Fund Assets minus Liabilities to
be conveyed by the Acquired Funds and assumed by the Acquiring
Funds, shall, in each case, be determined as of the Valuation
Time as defined in Section 3. The net asset value of Shares of
the Acquiring Funds shall be computed in accordance with its then
current valuation procedures. In determining the value of the
Fund Assets, each security to be included in the Fund Assets
shall be priced in accordance with the Acquiring Funds' then
current valuation procedures.
2. Liquidation of the Acquired Funds. At the Effective Time of the
Reorganization, the Acquired Funds shall make a liquidating
distribution to their shareholders as follows: Shareholders of record
of the Acquired Funds shall be credited with full and fractional shares
of the respective Shares that are issued by the Acquiring Funds in
connection with the Reorganization corresponding to the Acquired Funds
shares that are held of record by the shareholder at the Effective Time
of the Reorganization. Each such shareholder also shall have the right
to receive any unpaid dividends or other distributions which were
declared before the Effective Time of the Reorganization with respect
to the Acquired Funds shares that are held of record by the shareholder
at the Effective Time of the Reorganization, and Reserves shall record
on its books the ownership of the respective Acquiring Funds shares by
such shareholders (the "Transferor Record Holders"). All of the issued
and outstanding shares of the Acquired Funds at the Effective Time of
the Reorganization shall be redeemed and canceled on the books of
Reserves at such time. As soon as reasonably possible after the
Effective Time of the Reorganization, the Company shall wind up the
affairs of the Acquired Funds and shall file any final regulatory
reports, including but not limited to any Form N-SAR and Rule 24f-2
filings, with respect to the Acquired Funds, and also shall take all
other steps as are necessary and proper to effect the termination or
declassification of the Acquired Funds in accordance with all
applicable laws.
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<PAGE>
3. Valuation Time. The "Valuation Time" shall be the time as of which the
net asset value of each class of shares of each of the Acquired Funds
and the Acquiring Funds is determined pursuant to their respective
valuation procedures on the Closing Date or such earlier or later time
as may be mutually agreed to in writing by the parties hereto.
4. Certain Representations, Warranties and Agreements of the Company on
behalf of its Acquired Funds. The Company, on behalf of itself and,
where appropriate, its Acquired Funds, represents and warrants to, and
agrees with, Reserves on behalf of the corresponding Acquiring Funds as
follows, with such representations, warranties and agreements made on
behalf of the Acquired Funds on a several (and not joint, or joint and
several) basis:
(a)The Company is a business trust, duly created, validly existing and
in good standing under the laws of the state of Maryland. The
Company is registered with the SEC as an open-end management
investment company under the 1940 Act, and such registration is in
full force and effect.
(b)The Company has the power to own all of its properties and assets
and to consummate the transactions contemplated herein, and has all
necessary federal, state and local authorizations to carry on its
business as now being conducted and to consummate the transactions
contemplated by this Agreement.
(c)This Agreement has been duly authorized by the Board of Trustees of
the Company on behalf of its Acquiring Funds, and has been executed
and delivered by duly authorized officers of the Company, and
represents a valid and binding contract, enforceable in accordance
with its terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium, and other similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles. The execution and delivery of this
Agreement does not, and, subject to the approval of shareholders
referred to in Section 6, the consummation of the transactions
contemplated by this Agreement will not, violate the Articles of
Incorporation or the By-Laws of the Company, or any material
agreement or arrangement to which the Company is a party or by which
it is bound.
(d)The Company's Acquired Funds have elected to qualify and have
qualified as regulated investment companies under Part I of
Subchapter M of Subtitle A, Chapter 1, of the Code, as of and since
their first taxable year; have been regulated investment companies
under such Part of the Code at all times since the end of their
first taxable year when they so qualified; and qualify and shall
continue to qualify as regulated investment companies for their
taxable year ending upon its liquidation.
(e)The Company has valued, and will continue to value, the portfolio
securities and other assets of its Acquired Funds in accordance with
applicable legal requirements.
(f)The proxy statement and form of proxy (the "Proxy Statement") from
its effective date with the SEC, through the time of the
shareholders meeting referred to in Section 6 and the Effective Time
of the Reorganization, insofar as they relate to the Company, (i)
shall comply in all material respects with the provisions of the
Securities Exchange Act of 1934 as amended (the "1934 Act") and the
1940 Act, the rules and regulations thereunder, and state securities
laws, and (ii) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein not misleading.
(g)All of the issued and outstanding shares of the Company's Acquired
Funds have been validly issued and are fully paid and
non-assessable, and were offered for sale and sold in
3
<PAGE>
conformity with the registration requirements of all applicable
federal and state securities laws.
(h)The Company shall operate the business of its Acquired Funds in the
ordinary course between the date hereof and the Effective Time of
the Reorganization, it being agreed that such ordinary course of
business will include the declaration and payment of customary
dividends and distributions and any other dividends and
distributions deemed advisable in anticipation of the
Reorganization. Notwithstanding anything herein to the contrary, the
Company may take all appropriate action necessary in order for the
Company to receive the opinion provided for in Sections 9(e) and
10(g).
(i)At the Effective Time of the Reorganization, the Company's Acquired
Funds will have good and marketable title to the Fund Assets and
full right, power and authority to assign, deliver and otherwise
transfer such assets.
(j)At the Effective Time of the Reorganization, all federal and other
tax returns and reports of the Acquired Funds required by law to
have been filed by such time shall have been filed, and all federal
and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof and, to the best
knowledge of management of the Company, no such return or report
shall be currently under audit and no assessment shall have been
asserted with respect to such returns or reports.
5. Certain Representations, Warranties and Agreements of Reserves on
behalf of the Acquiring Funds. Reserves, on behalf of itself and
where appropriate, the Acquiring Funds, represents and warrants to,
and agrees with each of the Company on behalf of the Acquired Funds
as follows, with such representations, warranties and agreements
made on behalf of the Acquiring Funds on a several (and not joint,
or joint and several) basis:
(a)Reserves is a business trust duly created, validly existing and in
good standing under the laws of the Commonwealth or Massachusetts
and is registered with the SEC as an open-end management investment
company under the 1940 Act and such registration is in full force
and effect.
(b)Reserves has the power to own all of its properties and assets and
to consummate the transactions contemplated herein, and has all
necessary federal, state and local authorizations to carry on its
business as now being conducted and to consummate the transactions
contemplated by this Agreement.
(c)This Agreement has been duly authorized by the Board of Trustees of
Reserves on behalf of the Acquiring Funds, and executed and
delivered by duly authorized officers of Reserves, and represents a
valid and binding contract, enforceable in accordance with its
terms, subject as to enforcement to bankruptcy, insolvency,
reorganization, arrangement, moratorium and other similar laws of
general applicability relating to or affecting creditors' rights and
to general equity principles. The execution and delivery of this
Agreement does not, and the consummation of the transactions
contemplated by this Agreement will not, violate the Declaration of
Trust or By-Laws of Reserves or any material agreement or
arrangement to which it is a party or by which it is bound.
(d)The Acquiring Funds has elected to qualify and has qualified as a
regulated investment company under Part I of Subchapter M of
Subtitle A, Chapter 1, of the Code, as of and since its first
taxable year; has been a regulated investment company under such
Part of 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 for its current taxable
year.
4
<PAGE>
(e)Reserves has valued, and will continue to value, the portfolio
securities and other assets of the Acquiring Funds in accordance
with applicable legal requirements.
(f)The Proxy Statement, from its effective date with the SEC through
the time of the shareholders meeting referred to in Section 6 and at
the Effective Time of the Reorganization, insofar as it relates to
Reserves, or the Acquiring Funds, or the Primary A Shares, Primary B
Shares, Investor A Shares, Investor B Shares or Investor C Shares of
the Acquiring Funds to be issued pursuant thereto (i) shall comply
in all material respects with the provisions of the Securities Act
of 1933, as amended, (the "1933 Act"), the 1934 Act and the 1940
Act, the rules and regulations thereunder, and state securities
laws, and (ii) shall not contain any untrue statement of a material
fact or omit to state a material fact required to be stated therein
or necessary to make the statements made therein not misleading.
(g)The shares of the Acquiring Funds to be issued and delivered to the
Acquired Funds for the account of the shareholders of the Acquired
Funds, pursuant to the terms hereof, shall have been duly authorized
as of the Effective Time of the Reorganization and, when so issued
and delivered, shall be duly and validly issued, fully paid and
non-assessable, and no shareholder of the Acquiring Funds shall have
any preemptive right of subscription or purchase in respect thereto.
(h)All of the issued and outstanding shares of the Acquiring Funds
have been validly issued and are fully paid and non-assessable, and
were offered for sale and sold in conformity with the registration
requirements of all applicable federal and state securities laws.
(i)Reserves shall operate the business of the Acquiring Funds in the
ordinary course between the date hereof and the Effective Time of
the Reorganization, except that Reserves shall complete all measures
in respect of the Acquiring Funds prior to the Effective Time of the
Reorganization to ensure that the Reorganization does not qualify as
a "reorganization" within the meaning of Section 368 of the Code,
regardless of whether such measures are in the ordinary course. It
is understood that such ordinary course of business will include the
declaration and payment of customary dividends and distributions and
any other dividends and distributions deemed advisable in
anticipation of the Reorganization.
(j)At the Effective Time of the Reorganization, all federal and other
tax returns and reports of the Acquiring Funds required by law to
have been filed by such time shall have been filed, and all federal
and other taxes shall have been paid so far as due, or provision
shall have been made for the payment thereof and, to the best
knowledge of management of Reserves, no such return or report shall
be currently under audit and no assessment shall have been asserted
with respect to such returns or reports.
7. Shareholder Action. As soon as practicable after the effective date of
the Proxy Statement each the Company shall hold a meeting(s) of the
shareholders of the Acquired Funds for the purpose of considering and
voting upon:
(a) approval of this Agreement and the Reorganization
contemplated hereby; and
(b) such other matters as may be determined by the Board of
Trustees of the Company.
8. Regulatory Filings. As soon as practicable, the Company shall file a
Proxy Statement with the SEC, and, where required, with appropriate
state securities regulatory authorities.
9. Closing Date, Effective Time of the Reorganization. The "Closing Date"
shall be August 20, 1999, or such earlier or later date as may be
mutually agreed in writing by the parties hereto. Delivery of the Fund
Assets and the shares of the Acquiring Funds to be issued pursuant to
5
<PAGE>
Section 1 and the liquidation of the Acquired Funds pursuant to Section
2 shall occur on the day following the Closing Date, whether or not
such day is a business day, or on such other date, and at such place
and time, as may be mutually agreed in writing, by the parties hereto.
The date and time at which such actions are taken are referred to
herein as the "Effective Time of the Reorganization." To the extent any
Fund Assets are, for any reason, not transferred at the Effective Time
of the Reorganization, the Company shall cause such Fund Assets to be
transferred in accordance with this Agreement at the earliest
practicable date thereafter.
10.Conditions to the Company's Obligations on Behalf of its Acquired
Funds. The obligations of the Company hereunder shall be subject to the
following conditions precedent:
(a)This Agreement and the Reorganization shall have been approved by
the Board of Trustees of the Company and by a majority of the
shareholders of its Acquired Funds in the manner required by
applicable law and this Agreement.
(b)All representations and warranties of the Company made in this
Agreement shall be true and correct in all material respects as if
made at and as of the Valuation Time and the Effective Time of the
Reorganization.
(c)The Company shall have delivered a certificate executed in its name
by its President or Vice President and its Treasurer or Assistant
Treasurer, in a form reasonably satisfactory and dated as of the
Closing Date, to the effect that the representations and warranties
of the Acquiring Funds made in this Agreement are true and correct
at and as of the Valuation Time and that, to the best of its
knowledge, the Fund Assets include only assets which the Company's
Acquiring Funds may properly acquire under its investment
objectives, policies and limitations and may otherwise be lawfully
acquired by such Acquiring Funds.
(d)The Company shall have received an opinion of Morrison & Foerster
LLP, as counsel to the Company in form reasonably satisfactory to
Reserves and dated the Closing Date, substantially to the effect
that (i) the Company is a corporation duly established and validly
existing under the laws of the state of Maryland; (ii) the shares of
the corresponding Acquiring Funds to be delivered to the Company's
Acquired Funds as provided for by this Agreement are duly authorized
and upon delivery will be validly issued, fully paid and
non-assessable by the Company; (iii) this Agreement has been duly
authorized, executed and delivered by the Company, and represents a
legal, valid and binding contract, enforceable in accordance with
its terms, subject to the effect of bankruptcy, insolvency,
moratorium, fraudulent conveyance and similar laws relating to or
affecting creditors' rights generally and court decisions with
respect thereto, and such counsel shall express no opinion with
respect to the application of equitable principles in any proceeding
whether at law or in equity; (iv) the execution and delivery of this
Agreement did not, and the consummation of the transactions
contemplated by this Agreement will not, violate the Articles of
Incorporation or the By-Laws of the Company or any material contract
known to such counsel to which the Company is a party or by which it
is bound; and (v) no consent, approval, authorization or order of
any court or governmental authority is required for the consummation
by the Company of the transactions contemplated by this Agreement,
except such as have been obtained under the 1933 Act, the 1934 Act,
the 1940 Act, the rules and regulations under those Acts and such as
may be required by state securities laws or such as may be required
subsequent to the Effective Time of the Reorganization. Such opinion
may rely on the opinion of other counsel to the extent set forth in
such opinion, provided such other counsel is reasonably acceptable
to Reserves.
(e)The Company shall have received an opinion of Morrison & Foerster
LLP, based upon reasonable representations made in certificates
provided by the Company, its affiliates
6
<PAGE>
and/or principal shareholders of the Company's Acquired Funds and/or
the corresponding Acquiring Funds, addressed to the Company in a
form reasonably satisfactory to them, and dated the Closing Date,
with respect to the matters specified in Subsection 11(g).
(f)The Company shall have received (i) a memorandum addressed to the
Company, in a form reasonably satisfactory to them, prepared by
Morrison & Foerster LLP, or another person approved by the parties,
concerning the registration of shares to be issued by Company
pursuant to this Agreement under applicable state securities laws or
the exemption from registration under such laws, and (ii) assurance
reasonably satisfactory to it that all permits and other
authorizations necessary under state securities laws to consummate
the transactions contemplated by this Agreement have been obtained.
(g)The Proxy Statement shall have become effective under the 1933 Act
and no stop order suspending the effectiveness shall have been
instituted, or to the knowledge of the Company, contemplated by the
SEC.
(h)No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to
restrain or prohibit, or obtain damages or other relief in
connection with, this Agreement or the transactions contemplated
herein.
(i)The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act.
(j)The Company on behalf of the Acquired Funds shall have performed
and complied in all material respects with each of its agreements
and covenants required by this Agreement to be performed or complied
with by it prior to or at the Valuation Time and the Effective Time
of the Reorganization.
(k)The Company shall have received a duly executed instrument whereby
the corresponding Acquiring Funds assume all of the liabilities of
the Company's Acquired Funds.
11.Conditions to Reserves's Obligations on behalf of the Acquiring Funds.
The obligations of Reserves hereunder shall be subject to the following
conditions precedent:
(a)This Agreement and the Reorganization shall have been approved by
the Board of Trustees of Reserves on behalf of the Acquiring Funds
and by a majority of the shareholders of the Acquired Funds in the
manner required by applicable law and this Agreement.
(b)Reserves shall have delivered to the Company a statement of assets
and liabilities of the Acquired Funds, showing the tax costs of such
securities by lot and the holding periods of such securities, as of
the Valuation Time, certified by the Treasurer or Assistant
Treasurer of Reserves as having been prepared in accordance with
generally accepted accounting principles consistently applied.
(c)Reserves shall have duly executed and delivered to the Company such
bills of sale, assignments, certificates and other instruments of
transfer ("Transfer Documents") as the Company may deem necessary or
desirable to transfer all of the Acquired Funds' right, title and
interest in and to the Fund Assets.
(d)All representations and warranties of Reserves made in this
Agreement shall be true and correct in all material respects as if
made at and as of the Valuation Time and the Effective Time of the
Reorganization.
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<PAGE>
(e)Reserves shall have delivered a certificate executed in its name by
its President or Vice President and its Treasurer or Assistant
Treasurer, in a form reasonably satisfactory to each of the Company
and dated as of the Closing Date, to the effect that the
representations and warranties of the Acquired Funds made in this
Agreement are true and correct at and as of the Valuation Time.
(f)Reserves shall have received an opinion of Morrison & Foerster LLP,
as counsel to Reserves, in a form reasonably satisfactory to the
Company and dated the Closing Date, substantially to the effect that
(i) Reserves is a business trust duly established and validly
existing under the laws of the Commonwealth of Massachusetts; (ii)
this Agreement has been duly authorized, executed and delivered by
Reserves and represents a legal, valid and binding contract,
enforceable in accordance with its terms, subject to the effect of
bankruptcy, insolvency, moratorium, fraudulent conveyance and
similar laws relating to or affecting creditors' rights generally
and court decisions with respect thereto, and such counsel shall
express no opinion with respect to the application of equitable
principles in any proceeding, whether at law or in equity; (iii) the
execution and delivery of this Agreement did not, and the
consummation of the transactions contemplated by this Agreement will
not, violate the Declaration of Trust or By-Laws of Reserves or any
material contract known to such counsel to which Reserves is a party
or by which it is bound; and (iv) no consent, approval,
authorization or order of any court or governmental authority is
required for the consummation by Reserves of the transactions
contemplated by this Agreement, except such as have been obtained
under the 1933 Act, the 1934 Act, the 1940 Act, the rules and
regulations under those Acts and such as may be required under the
state securities laws or such as may be required subsequent to the
Effective Time of the Reorganization. Such opinion may rely on the
opinion of other counsel to the extent set forth in such opinion,
provided such other counsel is reasonably acceptable to Reserves.
(g)Reserves shall have received an opinion of Morrison & Foerster LLP,
based upon reasonable representations made in certificates provided
by Reserves, its affiliates and/or principal shareholders of the
Acquired Funds and/or the Acquiring Funds, addressed to Reserves in
a form reasonably satisfactory to the Company, and dated the Closing
Date, substantially to the effect that, for federal income tax
purposes, the Reorganization will qualify as a "reorganization,"
within the meaning of Section 368(a) of the Code, and the Acquired
Funds and the Acquiring Funds will each be a "party to a
reorganization," within the meaning of Section 368(b) of the Code,
with respect to the Reorganization.
(h)The Fund Assets to be transferred to the Acquiring Funds under this
Agreement shall include no assets which the Acquiring Funds may not
properly acquire pursuant to its investment objectives, policies or
restrictions or may not otherwise lawfully acquire.
(i)The Proxy Statement shall have become effective under the 1933 Act
and no stop order suspending such effectiveness shall have been
instituted or, to the knowledge of Reserves, contemplated by the
SEC.
(j)No action, suit or other proceeding shall be threatened or pending
before any court or governmental agency in which it is sought to
restrain or prohibit or obtain damages or other relief in connection
with this Agreement or the transactions contemplated herein.
(k)The SEC shall not have issued any unfavorable advisory report under
Section 25(b) of the 1940 Act nor instituted any proceeding seeking
to enjoin consummation of the transactions contemplated by this
Agreement under Section 25(c) of the 1940 Act.
(l)Reserves on behalf of the Acquiring Funds shall have performed and
complied in all material respects with each of its agreements and
covenants required by this Agreement
8
<PAGE>
to be performed or complied with by it prior to or at the Valuation
Time and the Effective Time of the Reorganization.
12. Survival of Representations and Warranties. The representations and
warranties of Reserves on behalf of the Acquiring Funds set forth in
this Agreement shall survive the delivery of the Fund Assets to the
Acquiring Funds and the issuance of the shares of the Acquiring
Funds at the Effective Time of the Reorganization.
13. Termination of Agreement. This Agreement may be terminated by a
party at or, in the case of Subsection 12(c), below, at any time
prior to, the Effective Time of the Reorganization by a vote of a
majority of its Board members as provided below:
(a)By Reserves on behalf of the Acquiring Funds if the conditions set
forth in Section 10 are not satisfied as specified in said Section;
(b)By the Company on behalf of its Acquired Funds if the conditions
set forth in Section 11 are not satisfied as specified in said
Section;
(c)By mutual written consent of Reserves and the Company.
14. Governing Law. This Agreement and the transactions contemplated
hereby shall be governed, construed and enforced in accordance with
the laws of the State of Maryland, except to the extent preempted by
federal law.
15. Brokerage Fees and Expenses.
(a)Reserves represents and warrants that there are no brokers or
finders entitled to receive any payments in connection with the
transactions provided for herein.
(b)The Company and Reserves will be each be responsible, on a PRO RATA
basis, for the expenses related to entering into and carrying out
the provisions of this Agreement, whether or not the transactions
contemplated hereby are consummated.
16. Amendments
This Agreement may be amended, modified or supplemented in such manner
as may be mutually agreed upon in writing by the authorized officers of
the Company, acting on behalf of its Acquired Funds or Reserves, acting
on behalf of the Acquiring Funds; provided, however, that following the
meetings of the shareholders of the Acquired Funds, no such amendment
may have the effect of changing the provisions for determining the
number of shares of the Acquiring Funds to be issued to the Transferor
Record Holders under this Agreement to the detriment of such Transferor
Record Holders, or otherwise materially and adversely affecting the
Acquired Funds, without the Acquired Funds obtaining its shareholders'
further approval.
At any time prior to or (to the fullest extent permitted by law) after
approval of this Agreement by the shareholders of the Acquired Funds,
the Company on behalf of its Acquired Funds, may waive any breach by
Reserves, on behalf of the Acquiring Funds, or the failure to satisfy
any of the conditions to its obligations (such waiver to be in writing
and signed by an officer of such registered investment companies).
At any time prior to or (to the fullest extent permitted by law) after
approval of this Agreement by the shareholders of the Acquired Funds,
Reserves, on behalf of the Acquiring Funds, may waive any breach by the
Company on behalf of its Acquired Funds, or the failure to satisfy any
of the conditions to either of their obligations (such waiver to be in
writing and signed by an officer of such registered investment
companies).
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17. Counterparts
This Agreement may be executed in any number of counterparts, each of
which shall be deemed an original.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers designated below as of the date first
written above.
NATIONS FUND, INC.
On behalf of its Acquired Funds
identified on Schedule A
By: /s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
Secretary and Treasurer
NATIONS INSTITUTIONAL RESERVES
On behalf of its Acquiring Funds
identified on Schedule A
By: /s/ Richard H. Blank, Jr.
Richard H. Blank, Jr.
Secretary and Treasurer
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SCHEDULE A
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SHAREHOLDERS OWNING SHARES WOULD RECEIVE SHARES OF
OF THE FOLLOWING COMPANY'S THE FOLLOWING RESERVES
ACQUIRED FUNDS AND CLASSES: ACQUIRING FUNDS AND
CLASSES:
Nations International Nations International
Equity Fund Equity Fund
Primary A Shares Company Shares
Primary B Shares Investor Shares
Investor A Shares Market Shares
Investor B Shares Investor Shares
Investor C Shares Investor Shares
Nations International Value Nations International
Fund Value Fund
Primary A Shares Company Shares
Primary B Shares Investor Shares
Investor A Shares Market Shares
Investor B Shares Investor Shares
Investor C Shares Investor Shares
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